Auburn to revisit commercial cannabis policy

Auburn City Council taking another look at marijuana policy

Auburn, Calif. – The Auburn City Council is revisiting whether to continue developing additional local policy recommendations regarding commercial cannabis activities. To date, Placer County communities have resisted efforts to allow marijuana dispensaries and commercial activity.

In 2016, Placer County residents voted against Prop 64, which provided adults freedom to possess, grow, and consume marijuana for personal use along with provisions on regulation, licensing, and taxation of legalized use. Prop 64 went on to easily pass statewide by a 56 to 44 percent margin and legalized marijuana. Under Prop 64, local communities still retained the ability to restrict commercially related activities.

Local Revenue

Restrictions on local dispensaries sends revenue that would be otherwise levied and collected locally to other jurisdictions. For example, Sacramento dispensaries and home weed delivery gladly provide these services daily to South Placer County residents while Nevada dispensaries serve Tahoe area residents and tourists. In the process, taking local Placer County taxpayer money with them.

Pragmatic approach needed

Questions remain, what are the benefits and risks of well regulated dispensaries and commercial cannabis industry in Placer County. There are many personal opinions on the pros and cons of cannabis, however, it’s critical to operate on facts over myths and dogma. What’s the smartest and most pragmatic approach for Placer County communities moving forward?

Have your voice heard

Regular meetings of the Auburn City Council are on the 2nd and 4th Monday of each month, at 6pm, in the City Council Chambers at City Hall, 1225 Lincoln Way.

Public Comment

Submitting public comment to the City Clerk via email is the best way to get a public comment in for an upcoming City Council Meeting. Your subject line must state “Public Comment for….”. It needs to be clear that you are aware that your statement will be made public, including anything in your email: your name, your email address, and any other information you provide. The email address is:
[email protected]

January 2024 Auburn City Council Agenda

Action Requested

Staff recommends the City Council discuss and provide direction to staff regarding commercial cannabis activities under the 2015 Medical Cannabis Regulation and Safety Act (“MCRSA”), the 2016 Adult Use of Marijuana Act (“AUMA”), and the 2017 Medicinal and Adult-Use Cannabis Regulation and Safety ACT (“MAUCRSA”).

Specifically, at this initial meeting, staff recommends the City Council focus the discussion on whether or not Council would like Staff to continue developing additional policy recommendations as discussed later in this report.

Background

This report analyzes the City of Auburn’s current cannabis-related land use regulations and its regulatory options in light of the MCRSA, AUMA, and MAUCRSA. These laws and subsequent Department of Cannabis Control regulations create a unified licensing program for commercial cannabis cultivation, manufacturing, distribution, testing labs, retail, and microbusinesses. Under these state laws, a variety of medical and non-medical cannabis businesses may legally operate if authorized by local jurisdictions, subject to local ordinances. In addition, individuals may cultivate cannabis for their own personal medical or recreational uses, provided they comply with local regulations and meet applicable state limits.

1.  California State Law

Before 1996, state law criminalized all cannabis activities. In 1996, California voters approved Proposition 215, enacting the Compassionate Use Act (“CUA”), to protect patients and primary caregivers from criminal prosecution and sanction if they obtain and use medicinal cannabis upon a physician’s recommendation. In 2003, the State Legislature adopted the Medical Marijuana Program Act (“MMPA”) to implement a confidential medical marijuana identification card program and expand protections for specified medicinal cannabis activities.

The 2015 MCRSA supplements the CUA and MMPA by providing a regulatory framework for the cultivation, possession, manufacture, processing, storing, laboratory testing, labeling, transporting, distribution, or sale of medical cannabis or a medical cannabis product. Under MCRSA, as later modified by 2017’s MAUCRSA, all medical cannabis businesses, or commercial cannabis activities, must have a state license and a local permit, license, or other authorization in order to operate lawfully within California. The state of California Bureau of Medical Cannabis Regulation (now renamed the Department of Cannabis Control) began issuing licenses to medical cannabis businesses in January 2018 under MAUCRSA.

In 2016, California voters approved Proposition 64, enacting the AUMA, which now allows individuals to possess, use, and cultivate recreational cannabis in certain amounts. In addition, an individual may cultivate up to six marijuana plants at his or her private residence provided that no more than six plants are being cultivated on the property at one time. The AUMA also established a regulatory system for commercial businesses that is very similar to the medical cannabis regulatory system under MCRSA and MAUCRSA. Under the AUMA, recreational cannabis cultivators, manufacturers, distributors, retailers, and testing laboratories may operate lawfully, if they obtain a state license and comply with local ordinances. The State began issuing licenses for commercial cannabis activities under the AUMA starting January 2018.

Cities may still completely prohibit commercial cannabis businesses from operating if they so choose, including prohibiting deliveries of cannabis products within their jurisdiction. If cities choose to allow such businesses, they have the authority to restrict the number that may operate within the city, as well as the location of such businesses, and impose other reasonable regulations, such as security requirements, signage restrictions, or other operating rules. Cities may also, with voter approval, establish taxes related to commercial cannabis sales and deliveries.

The Auburn Municipal Code currently prohibits:

1. the operation of any marijuana dispensary, processing facility, or testing laboratory in any zoning district (except as expressly authorized under Health & Safety Code, § 11362.1 for persons 21 years and older under the AUMA) (AMC § 159.019(B));
2. the delivery of marijuana, marijuana products, or devices for the use of marijuana to or from any person, business, or location in the city (except for the delivery of medical marijuana by primary caregivers as expressly authorized under Health & Safety Code, § 11362) (AMC § 159.019(C));
3. the outdoor cultivation of marijuana plants on any parcel, property, and/or private residence in any zoning district (AMC § 159.019(D));
4. the creation of any public nuisance in the course of cultivating and/or using marijuana or marijuana products (AMC § 159.019(B)(7)); and
5. a social host from permitting or allowing minors to consume marijuana on premises they own or control when the host knew or reasonably should have known that a minor possessed or consumed marijuana on the premises (AMC § 130.082)

Violators are subject to revocation of a cultivation permit, administrative fines and penalties, or other enforcement action subject to the state law protections discussed above.

The Auburn Municipal Code authorizes:

1. the indoor cultivation of no more than 6 marijuana plants, in compliance with the AUMA, at a private, primary residence in either an accessory building or primary residence (not both), with no exterior evidence of cultivation from the public right-of-way and provided the primary residence maintains a kitchen, bathrooms, and primary bedrooms for their intended use. An “authorized grower” must secure a cultivation permit in advance from the Chief of Policy, which is valid for one year and may be extended thereafter in one year increments by the Chief of Police. (AMC § 159.019 (E), (F), (G)).

Violators are subject to revocation or suspension of a cultivation permit, administrative fines and penalties, or other enforcement action subject to the state law protections discussed above.

•  Local Example: Grass Valley

The City of Grass Valley sets limits on the type and number of cannabis businesses allowed in city limits.¹ To select which businesses are authorized to operate within these limits, Grass Valley created a Commercial Cannabis Selection Committee and a two-step application process to evaluate, rank, and select which businesses may apply for the necessary permits and land use entitlements.

In step one, the Committee reviews and scores screening applications based on specific review criteria approved by the City Council. The applications are scored based on three tiers: (1) lacking detail and missing some information; (2) missing substantial information; and (3) much less detailed. The Committee then compares the level of responses provided by each applicant and ranks their scores accordingly. In step two, the highest ranked applicant is then invited to conduct an interview with the Committee, who may then be allowed to submit an application for a commercial cannabis permit.

Among other requirements, Grass Valley requires all cannabis businesses have an approved site security plan, display a valid local permit in a conspicuous location, and not be located within 500 feet of any residential use or within 600 feet of any K-12 school. Cannabis or cannabis products are not permitted to be consumed within 50 feet of the businesses, or visible from a public right-of-way, the surrounding premises, or the business’s entrance. (Grass Valley Municipal Code, § 5.60.050)

Discussion/Analysis

1.  Regulatory Options for Consideration

As a first step, the City Council should determine whether it wants to allow commercial cannabis businesses, and if so, how it wants to regulate commercial cannabis businesses. State law includes several provisions that protect local police power authority over medical cannabis establishments, including the authority to prohibit such businesses.

1 Grass Valley allows up to 2 retail dispensaries (with delivery); up to 3 delivery-only services; up to 2 cannabis testing laboratories; up to 2 cannabis nurseries; and up to 5 cannabis distribution businesses. Because the first two permit types are based on population size, only 1 of each permit type is currently allowed.

Business and Professions Code section 26200, which is part of AUMA, provides that cities may “completely prohibit the establishment or operation of one or more types of businesses licensed under” AUMA. Relatedly, beginning January 1, 2024, AB 1684 amended Government Code section 53069.4 to allow cities to adopt and immediately impose fines or penalties for violations of local zoning and building codes or health and safety requirements related to the unlicensed commercial cannabis activities.

The City Council could allow all or some of the cannabis business types recognized under state law and regulations (i.e., cultivators, manufacturers, testing laboratories, retailers, distributors, microbusinesses, cannabis event organizers, and processors).

To aid the discussion at this initial meeting, staff recommends the City Council first provide direction on the following topic:

1. Allow or not Allow Cannabis Businesses. As stated above, the City currently prohibits all forms of commercial land uses related to cannabis. Does the City want to allow cannabis businesses? Furthermore, does the City want to allow only medical cannabis businesses, or both medical and adult use cannabis businesses?

Based on the direction provided on the topic above and if the City Council wishes to proceed, staff recommends further discussion at a later meeting on the following topics:

• Type of Cannabis Businesses to Allow. Which types of cannabis businesses does the City want to allow? For example, the California Department of Cannabis Control issues licenses for cultivators, manufacturers, testing laboratories, (storefront or non-storefront) retailers, distributors, microbusinesses, cannabis event organizers, and processors. The City can choose to authorize one or more of the above mentioned license types.

• Number of Allowed Businesses. How many cannabis businesses does the City want to allow? Under AUMA, the City can choose to limit the total number of allowed businesses within its jurisdiction.
• Location and Zoning/Operating Standards. What type of restrictions should apply to cannabis land uses? Some possible restrictions include: locational restrictions (e.g., designating certain zoning districts; establishing a cannabis overlay zone; separation requirements to avoid clustering of cannabis land uses or proximity to schools, parks, or residential uses) and security and operating requirements (e.g., the use of licensed security guards, designated hours of operation, prohibition against on-site consumption, installation of adequate odor control devices and ventilation systems, and limitations on access to minors).

Note that state law provides for a minimum 600’ buffer from any school, day care center, or youth center that is in existence at the time the license is issued. The City can increase the buffer distance and expand the entities subject to the buffer, including requiring a minimum distance from parks or residentially zoned properties.

• Types of Permits. What type of permit(s) will be required? Some cities have imposed conditional use permit requirements for cannabis land uses, while others have required annual renewable regulatory permits. Some cities require both a land use permit and an annual renewable regulatory permit.

A conditional use permit is a one-time discretionary land use permit that requires a Planning Commission decision at a public hearing. Conditional use permits are entitlements that run with the land, not the operator, and would transfer with ownership of the property unless abandoned or revoked. A regulatory permit is renewed annually and is not a land use entitlement that “runs with the land.” Furthermore, the City Council could designate the approval authority for annual regulatory permits to be staff, the Planning Commission, or the Council. Any decisions made by staff would be subject to appeal to the Planning Commission, and in turn any decisions made by the Planning Commission would be subject to appeal to the City Council.

• Permit Processing/Procedures. How will the City process cannabis land use applications? The City could take a number of approaches: (1) first come, first served; (2) lottery; and/or (3) scoring system. Under a lottery system, pre-qualified applicants meeting applicable standards would be selected at random to apply for the required cannabis land use permit and/or regulatory permit. Under a scoring system model, applicants would receive a score based on a review of their applications. Those applicants who receive the highest scores would then be recommended for approval to the decision making authority. If this selection method is used, it is important to ensure that objective scoring criteria be developed and used.

• Deliveries. Will the City allow cannabis delivery services? Although the City retains the authority to regulate or completely prohibit commercial cannabis operations within the City’s boundaries, the City cannot prevent a delivery service from using public roads to simply pass through its jurisdiction from a licensed dispensary to a delivery location outside of its boundaries. (Bus. & Prof. Code, § 26090(f)). State regulations, subject to an on-going dispute, also protect medical cannabis deliveries within a City, regardless of local rules. (Bus. & Prof. Code, § 26322) Thus, it is recommended that the City Council decide whether it wants to prohibit or allow cannabis deliveries, and whether it wants to impose any regulations on cannabis deliveries if allowed. Under state law, cannabis deliveries may only be made by licensed businesses, although enforcement of delivery regulations can be challenging given their nature.
• Revenue. How will the City recover its regulatory costs and/or generate revenue from commercial cannabis activity? The City could do so through a regulatory fee, a tax, community benefit agreements, or development agreements.

If the City requires a regulatory permit to conduct commercial cannabis operations, it can establish a regulatory fee by resolution of the City Council to recover the costs of administering that program. This would include costs incurred by the City in processing, issuing, renewing, monitoring, and enforcing regulatory permits. A regulatory fee that exceeds the costs of regulation is considered a tax.

State law imposes an excise tax of 15% of gross receipts from the retail sale of cannabis or cannabis products, on top of generally applicable sales and use taxes. The City may impose an additional sales and use tax on nonmedical cannabis, but may not impose a sales and use tax on medical cannabis. Alternatively, the City may impose a business license tax for the privilege of conducting commercial cannabis operations in its jurisdiction. Any tax will require voter approval, and may be levied for either general revenue raising purposes (i.e., a general tax requiring approval from a simple majority of voters) or for specific purposes (i.e., a special tax requiring approval from 2/3rds of voters). Any subsequent increases to an adopted tax would require additional voter approval. Given the existing state taxes, any additional local tax could make product prices quite high and could be potentially cost prohibitive.

Some cities require commercial cannabis businesses enter into a community benefit agreement with the city, in which the business agrees to pay certain fees, provide public outreach and education, or other community services.

Lastly, the City could negotiate fees on a case-by-case basis through development agreements with cannabis businesses. Through this sort of arrangement, the City could require payments or credit fees against any future taxes.

Fiscal Impact

There is no fiscal impact to the discussion of these issues. However, if the City determines to allow some type of cannabis businesses in the City, a fee schedule should be established for cost recovery of staff time needed to process applications and administer any related program. Revenues from taxing commercial cannabis activities will depend on the percentage of tax approved by voters and established by the City Council.

Read or download the entire report below.