City of Santa Clarita

City Council Agenda Item

PROPOSITION 64 MORATORIUM EXTENSION AND A RECOMMENDATION TO DIRECT STAFF TO PREPARE DOCUMENTS NECESSARY FOR THE PROHIBITION OF COMMERCIAL MARIJUANA-RELATED LAND USES

Information

Department:Community DevelopmentSponsors:
Category:AdoptSub-Categorys:Resolution

Fiscal Impact

There is no direct fiscal impact as a result of staff's recommendation. However, it is anticipated that there will be an increase in the level of enforcement associated with illegal recreational marijuana land uses and illegal home growth operations.

Recommended Action

City Council:

 

1.      Conduct a public hearing and adopt an Ordinance entitled “AN URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA, CALIFORNIA, EXTENDING A TEMPORARY MORATORIUM PERTAINING TO PRIVATE MARIJUANA CULTIVATION AND NON-MEDICAL MARIJUANA FACILITIES;and

 

2.      Direct staff to prepare an Ordinance prohibiting all commercial land uses associated with recreational marijuana and restricting personal growth of marijuana in a manner consistent with Proposition 64.

Background/Alt Actions

BACKGROUND

 

On November 8, 2016, California voters approved Proposition 64 (Prop 64), the “Control, Regulate and Tax Adult Use of Marijuana Act.” Prop 64 allows individuals age 21 years old   and over to possess, use, and cultivate recreational (non-medicinal) marijuana at their residence in specific amounts. Prop 64 also establishes a regulatory system for commercial businesses    and defines specific business categories including sales, distribution, cultivation, manufacturing, and testing of marijuana. Under Prop 64, recreational marijuana cultivators, manufacturers, distributors, retailers, and testing laboratories may operate lawfully if they obtain a state license to operate and if they comply with local ordinances. 

 

At the City Council meeting on December 13, 2016, the City Council adopted an Urgency Ordinance implementing a temporary moratorium on all commercial recreational marijuana land uses. The moratorium allowed staff time to research implementation issues associated with Prop 64. The moratorium was extended by the City Council via Urgency Ordinance at their meeting on January 24, 2017, and is set to expire on December 12, 2017. The moratorium can be extended by an additional year with an action of the City Council.

 

Summary of Prop 64:

Prop 64 addresses both the personal use and commercial use of recreational marijuana.

 

For personal use of recreational marijuana, Prop 64 allows adults age 21 years old and over to do the following:

 

·              Possess, process, purchase, obtain, transport, or give away specific amounts of recreational marijuana;

·              Smoke or ingest recreational marijuana products; and

·              Possess, plant, cultivate, harvest, dry, or process up to six recreational marijuana plants per residence. Prop 64 allows local jurisdictions to “reasonably regulate” but not prohibit the residential growth of up to six recreational marijuana plants.

 

For personal use of recreational marijuana, Prop 64 prohibits any individual from doing the following:

 

·              Smoking recreational marijuana in a public place;

·              Smoking recreational marijuana where tobacco smoking is prohibited;

·              Smoking recreational marijuana within 1,000 feet of a school, day care, or youth facility; and

·              Smoking recreational marijuana while driving or riding in a vehicle.

 

For commercial use of recreational marijuana, Prop 64 allows local jurisdictions to retain land use authority over all commercial use types. These include the cultivation, manufacturing, testing, delivery, and retail sales of recreational marijuana. This enables every city and county within the State of California to independently determine whether these commercial use types should be prohibited or allowed via a licensing and/or entitlement process within their individual jurisdiction. Local jurisdictions may prohibit or allow any or all recreational marijuana commercial use types in any combination.

 

Commercial use types are generally described as follows:

 

·              Cultivators grow and harvest marijuana plants. Under Prop 64, cultivators under 10,000 square feet may also have a retail sales component on the premises;

·              Manufacturers take cultivated plant material and produce other products including oils, extracts, and edibles;

·              Testing facilities test recreational marijuana for compliance with established standards identified by the State of California;

·              Delivery of recreational marijuana includes the delivery by a licensed retailer to customers within the City. Prop 64 does not allow jurisdictions to prohibit transportation of recreational marijuana through its boundaries, but does allow cities to prohibit the delivery of recreational marijuana to addresses within its jurisdiction; and

·              Retail sales of recreational marijuana include the direct retail sale of products, including edibles and manufactured products, to the general public. Because they are not licensed retailers, restaurants would not be able to sell edibles and convenience stores would be prohibited from selling recreational marijuana.

 

Prop 64 is only related to the recreational use of marijuana and has no impact on medicinal marijuana. All commercial medicinal marijuana land uses are currently prohibited by the City’s Municipal Code. 

 

Prop 64 creates a new state excise tax of 15% on all retail purchases of recreational marijuana and recreational marijuana products. Another excise tax has been created for cultivation of flowers and leaves, and is charged on a per-ounce basis in the amount of $9.25 and $2.75 respectively. Taxes are in addition to any existing state and local sales tax. Local jurisdictions may also elect to impose additional excise taxes via the ballot initiative process. 

 

ANALYSIS:

 

Conflict with Federal Law

Although passed by voter initiative, Prop 64 is in violation of the Federal Controlled Substance Act (CSA). Marijuana is still identified by the CSA as a Schedule 1 drug. In 2013, the United States Department of Justice (DOJ) issued a memo indicating its resources are best directed to the enforcement of marijuana cases regarding sales to minors, preventing revenue from criminal organizations, and preventing the interstate sale of marijuana. The memo concludes, however, that neither the guidance within the memo “…nor any state or local law provides a legal defense to a violation of federal law, including any civil or criminal violation of the CSA.”

 

Other Communities

Staff contacted eight other jurisdictions in southern California and made inquiries regarding      the direction each of them are taking or intend to take regarding the implementation of Prop 64. The eight jurisdictions contacted were the cities of Fillmore, Glendale, Lancaster, Palmdale, Pasadena, Santa Monica, Ventura, and the County of Los Angeles. Table 1 briefly summarizes the status of each jurisdiction:

Table 1:

Action by Other Jurisdictions

 

Jurisdiction

Status

City of Fillmore

Prohibits commercial land uses.

City of Lancaster

Prohibits commercial land uses.

City of Ventura

Prohibits commercial land uses.

City of Pasadena

Prohibits commercial land uses, but may allow them in the future pending ongoing research.

County of Los Angeles

Prohibits commercial land uses, but may allow them in the future pending ongoing research.

City of Santa Monica

Prohibits commercial land uses, with the exception of manufacturing.

City of Glendale

No action. Conducting research.

City Palmdale

No action. Conducting research.

 

Research in Colorado

A ballot initiative, Amendment 64, was passed by voters in the State of Colorado in 2012 legalizing the adult use of recreational marijuana. Amendment 64 is very similar to California’s Prop 64. In August 2017, a staff team from the City traveled to Colorado and interviewed staff and elected officials from three cities in the Denver area, as well as a representative from the Denver County District Attorney’s Office (DA). Table 2 summarizes the cities that were visited and their regulatory status:

Table 2:

Colorado Cities Visited by Santa Clarita Staff

 

Name

City Information

Regulatory Status

City of Aurora

Size: 154 square miles Population: 361,000

Allows all commercial marijuana-related uses.

City of Fort Collins

Size: 57 square miles Population: 167,000

Allows all commercial marijuana-related uses.

City of Centennial

Size: 29 square miles Population: 109,000

Prohibits all commercial marijuana-related uses.

 

Because no jurisdictions in California have any practical experience with recreational marijuana due to the recent passage of Prop 64, meeting with representatives from cities that have experience with commercial marijuana programs as well as regulation of personal growth provided City staff with a unique perspective on the implementation of recreational marijuana programs and associated impacts on their communities. Staff chose the selected cities based on their relative similarity to the City of Santa Clarita. The team also met with the DA to identify trends their office has observed regarding impacts the legalization of marijuana has had on the region and the state.

 

The following is a summary of the statements and observations provided by the DA:

 

·              Marijuana retailers have proliferated in the City of Denver. There are now more marijuana retailers in Denver than all Starbucks, McDonalds, and 7-Elevens combined;

·              Marijuana has not been a significant revenue generator for the state or local jurisdictions when weighed against the costs associated with implementation and enforcement;

·              The number of marijuana-related vehicle fatalities increased by 145% between 2013 and 2016 (from 47 to 115 cases);

·              The marijuana industry is an all cash business. No bank underwritten by the Federal Deposit Insurance Corporation (FDIC) can accept deposits from marijuana-related businesses because marijuana is still defined as a Schedule 1 drug by the CSA;

·              Because marijuana is still defined as a Schedule 1 drug by the CSA, marijuana related business cannot claim federal tax exemptions, and pay between 40% and 60% federal tax;

·              The marijuana market is beginning to be dominated by larger, better funded companies.  There are few remaining “mom and pop” operations that are successful;

·              Cultivation facilities have a very high energy demand. Small facilities can pay as much as $10,000 per month in electric utility bills. Larger facilities pay significantly more;

·              Colorado has significant safety concerns regarding edibles, their dosage, and labelling standards; and

·              Legalization of marijuana use has resulted in an increase in the homeless population.

 

The following is a summary of the statements and observations provided by staff from the cities of Aurora and Fort Collins. Both of these cities allow all types of commercial marijuana-related land uses via a license and entitlement process:

 

·              Marijuana programs have not been revenue-positive. In both cities, the cost of administration and enforcement exceeds the amount of revenue generated;

·              Both cities began these programs because residents in their jurisdictions voted in favor of Amendment 64;

·              Recreational sales began in 2014. Aurora has 45 locations and Fort Collins has 11;

·              The marijuana industry has increased local warehouse lease rates between two and three times. Marijuana uses pay leases in cash. This has led to concentrations of marijuana land uses and, in some cases, resulted in forcing previously existing businesses out;

·              Odor complaints and illegal home growth operations are the most common enforcement issues. Aurora averages three-to-five illegal home growth investigations per week;

·              Administration and enforcement requires significant staffing. Both cities created informal marijuana divisions to oversee their programs. Generally, their staff teams consist of a Licensing Officer, City Planner, Building Inspector, Code Enforcement Officer, Accounting Clerk, Police or Sheriff’s Field Officer (including vehicle) and, in the case   of Fort Collins, a Staff Attorney; and

·              The legalization of marijuana has resulted in an increase in the local homeless populations.

 

The following is a summary of the statements and observations provided by the staff and elected officials of the City of Centennial. Centennial prohibits all types of commercial land uses:

 

·              Centennial chose to prohibit marijuana-related land uses because they believe that allowing them would send the wrong message to youth and is contrary to their existing anti-drug programs;

·              Local law enforcement strongly recommended against allowing commercial marijuana-related land uses;

·              Centennial recommends requiring all home-growth be conducted within a residence for purposes of public health and safety. Home-growth should not be allowed outside or in an accessary structure;

·              The local business community feared negative impacts to local businesses from marijuana-related commercial land uses; and

·              Centennial maintains a 35% General Fund operating reserve, and did not identify any potential revenue generated by marijuana-related land uses as a compelling reason to implement a regulatory program.

 

The City of Aurora Police Department (APD) maintains detailed statistics regarding marijuana within its jurisdiction. Table 3 contains statistics regarding illegal home growth of marijuana between 2012 and 2016.

Table 3:

Illegal Home Growth Investigations by Year (2012-2016) in Aurora, Colorado

 

2012

109

2013

107

2014 (Marijuana sales begin)

144

2015

172

2016

166

TOTAL

678

 

The number of illegal home growth investigations increased by 58% between 2012 and 2016.  Notably, the number of investigations increased by 34% between 2013 and 2014, the year the City of Aurora began permitting the sale of recreational marijuana. The City of Aurora and the APD indicated that their staff responds to between three and five illegal growth operations per week and have a Building Inspector, Code Enforcement Officer and Police Officer dedicated to enforcement. The 678 total investigations have resulted in the seizure of approximately 27,000 marijuana plants and over $160,000 of fines. 

 

The APD has identified an increase in the number of traffic cases related to driving under the influence of marijuana between 2014 and 2016. Table 4 reflects this data.

 

Table 4:

Driving Under the Influence of Marijuana Traffic Cases by Year (2014-2016)

in Aurora, Colorado

 

2014

60

2015

72

2016

178

TOTAL

310

 

During the reporting period, traffic cases related to driving under the influence of marijuana have increased by 197%. Although no current sobriety test exists for marijuana use that is similar to testing for blood alcohol content, officers in Aurora have received training to identify drivers that are under the influence of marijuana. The APD anticipates that the number of marijuana-related traffic incidents will increase over time. 

 

As indicated earlier in this staff report, the number of marijuana-related automobile fatalities increased in the State of Colorado between 2013 and 2016. The total number of all fatal crashes in Colorado increased during that time frame from 627 to 880. Of those incidents, the number of marijuana-related fatalities increased from 47 in 2013 to 115 in 2016, an increase of 145%.

 

Other Agency Responses

To date, staff has received letters from the Los Angeles County Sheriff’s Department and the William S. Hart Union High School District supporting staff’s recommendation for prohibition of marijuana-related commercial land uses. These letters are attached as Exhibit A. The Los Angeles County Fire Department has not expressed a position, but indicated they will partner with the City for additional services as required. Southern California Edison (Edison) has also not expressed a position, but contemplates additional stress on the existing power network and electrical panels. 

 

Moratorium Extension

Under Ordinance Nos. 16-12 and 17-01, the City Council enacted a temporary moratorium pertaining to private, recreational marijuana cultivation and recreational marijuana facilities. This moratorium will expire on December 12, 2017. For reference, previous staff reports associated with the existing moratorium are attached as Exhibit B.

 

California’s marijuana laws have undergone significant changes in the past two years, including further legislative amendments that were adopted subsequent to the City’s enactment of its moratorium. These changes have included the following:

 

·              On October 9, 2015, Assembly Bills 243 and 266 and Senate Bill 643 (collectively, the “Medical Cannabis Regulation and Safety Act” or “MCRSA”) were enacted to create a state regulatory and licensing system governing the cultivation, testing, and distribution of medical marijuana, the manufacturing of medical marijuana products, and physician recommendations for medical marijuana. MCRSA expressly preserved local control over medical marijuana facilities and land uses, including the authority to prohibit medical marijuana facilities and cultivation completely.

·              On June 27, 2017, the Governor signed Senate Bill 94, which repealed MCRSA and included provisions from MCRSA regarding medical marijuana in the Adult Use of Marijuana Act (AUMA), so that the regulations governing both medical and non-medical marijuana were contained under one regulatory structure. Senate Bill 94 renamed the AUMA as the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”). In addition to consolidating state laws regarding medical marijuana and adult-use marijuana, Senate Bill 94 introduced more uniform terminology. Senate Bill 94 revised references in the existing law to “marijuana” or “medical marijuana” to instead refer to “cannabis” or “medicinal cannabis, and revised references to “nonmedical” to “adult-use.”

·              On September 16, 2017, the Governor signed Assembly Bill 133, which further revised MAUCRSA’s provisions regarding marijuana deliveries, the state licensing of marijuana businesses, and marijuana taxation.

 

Since the extension of the moratorium in January 2017, as detailed in this staff report, the City has studied the issues related to the regulation and control of marijuana businesses. A moratorium extension will allow time for the City Council to provide direction to staff on how to proceed, and allow time for staff to prepare the appropriate documents related to implementing the City Council’s direction. These documents will be presented to the Planning Commission and, ultimately, the City Council for adoption. Once adopted, the moratorium would be superseded by the permanent ordinance. 

             

Government Code section 65858 authorizes the adoption and extension of an Urgency Ordinance to protect the public health, safety, and welfare, and to prohibit land uses that may conflict with land use regulations that a city’s legislative bodies are considering, studying, or intending to study within a reasonable time. Here, the extension will allow the City more time   to protect public health, safety, and welfare while the City Council evaluates its options for permanent marijuana regulations. The law requires jurisdictions to generate a 10-day report when preparing an Urgency Ordinance. The 10-day report is attached as Exhibit C

 

The proposed Urgency Ordinance to extend the moratorium for one year continues the following three temporary restrictions:

1.              All commercial non-medical marijuana businesses that require a license under Proposition 64 will be prohibited while the Urgency Ordinance is in effect. This temporary prohibition will apply to recreational marijuana cultivation, manufacturing, distribution, testing, and retail sales.

2.              All private marijuana cultivation will be prohibited, except that an individual may cultivate no more than six living marijuana plants inside his or her private residence or inside an accessory structure to his or her private residence located upon the grounds      of that private residence that is fully enclosed and secured against unauthorized entry, provided that: 1) the owner of the property provides written consent expressly allowing the marijuana cultivation to occur; 2) the person conducting the marijuana cultivation complies with all applicable Building Code requirements set forth in Chapter 16 of this code; 3) there is no use of gas products (CO2, butane, propane, natural gas, etc.) on the property for purposes of marijuana cultivation; and 4) the marijuana cultivation complies with Health and Safety Code section 11362.2(a)(3). Health and Safety Code section 11362.2(a)(3) provides that no more than six marijuana plants may be cultivated at or upon the grounds of a private residence at one time.

3.              Non-medical marijuana businesses, including nonprofit businesses, are prohibited from delivering marijuana to people in the City, except in accordance with Business and Professions Code §26054.

 

This Urgency Ordinance requires a four-fifths vote for adoption. If approved by a four-fifths vote, the moratorium adopted on December 13, 2016, and extended on January 24, 2017, will be extended for another year, until December 12, 2018. The Urgency Ordinance is attached.

 

DISCUSSION

 

Home Growth

Prop 64 allows the home growth of up to six marijuana plants per residence. This applies to all types of residential units, regardless of square footage. The maximum number of plants per residence is always six, regardless of how many individuals live within the residence. Prop 64 does not allow local jurisdictions to prohibit home growth operations, but does allow home growth to be reasonably regulated.

 

The primary life-safety issue associated with illegal home growth operations is fire from illegally installed electrical equipment. Edison maintains energy demand profiles for homes that do not grow marijuana and for homes that legally grow up to six marijuana plants. Table 5 summarizes their data:

 

 


Table 5:

Southern California Edison Energy Use Statistics

 

Home With No Marijuana Growth

Home With Growth of Six Marijuana Plants

Highest Monthly Energy Use: 1.77 kW

Highest Monthly Energy Use: 5.87 kW

Lowest Monthly Energy Use: .83 kW

Lowest Monthly Energy Use: 1.92 kW

 

As demonstrated by the data, a home that legally grows up to six marijuana plants uses approximately three times the electricity as a home that does not grow any plants. Edison acknowledges that the legalizations of home growth operations, along with the potential increase in illegal home growth operations, will place an increased demand on the existing power network. In addition, home growth operations, legal and illegal, are anticipated to result in an increase in the number of electrical panel failures which, in turn, increases the risk of fire and personal injury. Photographs of electrical systems associated with illegal home growth operations in Aurora, Colorado, are attached as Exhibit D.

 

Based on feedback and research, staff recommends prohibiting the home growth of recreational marijuana to within private residences. Home growth operations that result in the need to improve or alter the residence would be subject to a permit from the Building & Safety Division.

 

ENVIRONMENTAL

 

The Urgency Ordinance is not subject to the California Environmental Quality Act (CEQA) pursuant to the State CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, sections: 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment); 15060(c)(3) (the activity is not a project as defined in section 15378); and 15061(b)(3), because the activity is covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment. The proposed Ordinance maintains the status quo and prevents changes in the environment pending the completion of the contemplated Municipal Code review. Because there is no possibility that this Ordinance may have a significant adverse effect on the environment, the adoption of this Ordinance is exempt from CEQA.

 

PUBLIC NOTICING

 

All public noticing required by law has been completed, including:

 

·              Placement of an advertisement in The Signal Newspaper on November 18, 2017; and

·              Posting of the 10-day report at the City Clerk’s Office within the City Hall building, and on the City’s website www.santa-clarita.com.

 

ALTERNATIVE ACTION

Other action as identified by the City Council.

 

Meeting History

Nov 28, 2017 6:00 PM Video City Council Regular Meeting

Mayor Pro Tem Weste returned to the dais.

Mayor Smyth opened the public hearing.

City Clerk Administrator Mary Cusick reported that all notices required by law have been provided.

Associate Planner David Peterson presented information regarding staff's research on potential impacts from the Control, Regulate and Tax Adult Use of Marijuana Act.

Addressing the Council in support of the recommended action was Joseph Jasik.

Addressing the Council in opposition of the recommended action was Christopher Hickok; Bart Joseph; Josh Eisenberg; and Steve Petzold.

Mayor Smyth closed the public hearing.

Council requested that Sheriff Captain Robert Lewis give input on this subject matter. Captain Lewis and Deputy Bill Velek of the Juvenile Intervention Team (J-Team) commented that not having a moratorium on would have a negative impact on youth and the community; while the J-Team has seen positive enforcement results in previous years, since the passage of Prop 64 there has been an increase in marijuana arrests. Council inquired if the moratorium would impact residents receiving medical marijuana through deliveries and Mr. Peterson responded that the ordinance does not impact medicinal marijuana; inquired regarding medical marijuana retail facilities and City Attorney Joseph Montes responded that current municipal law prohibits the facilities in Santa Clarita; and discussed public outreach on this subject and benefits to medicinal marijuana for the community.

RESULT:APPROVED [UNANIMOUS]
MOVER:Laurene Weste, Mayor Pro Tem
SECONDER:Bob Kellar, Councilmember
AYES:Cameron Smyth, Laurene Weste, Bob Kellar, Marsha McLean, Bill Miranda