CITY OF PACIFICA COUNCIL AGENDA SUMMARY REPORT 6/26/2017

CITY OF PACIFICA COUNCIL AGENDA SUMMARY REPORT 6/26/2017 SUBJECT: Introduction of an Ordinance Amending Title 4 of the Pacifica Municipal Code Establishing Regulations Related to Marijuana Public Safety Licenses; Introduction of an Ordinance Amending Title 9 of the Pacifica Municipal Code Establishing Regulations Related to Marijuana Operations and Related Activities and Amending the Zoning Maps by Establishing Marijuana Overlay Districts; and Consideration of a Resolution of the City Council of the City of Pacifica Ordering the Submission of a Marijuana Tax Measure to the Voters at the Election to be Held on November 7, 2017. The Planning Commission Recommended Adoption of the Ordinance Amending Title 9 and Modifying the Zoning Map by a Vote of 5-1 on June 5, 2017. RECOMMENDED ACTION: 1. Move to waive the first reading and introduce an ordinance of the City Council adding Chapter 16 to Title 4 of the Pacifica Municipal Code by establishing regulations related to marijuana public safety licenses. 2. Move to waive the first reading and introduce an ordinance of the City Council amending Title 9, Chapter 4 of the Zoning Code by establishing regulations related to marijuana operations and amending the zoning maps by establishing Marijuana Overlay Districts. 3. Move to approve, by at least a 2/3 vote, a resolution of the City Council ordering submission to the qualified electors of the City a measure to establish a tax on marijuana operations, at the consolidated municipal, school and special district election to be held on Tuesday, November 7, 2017. (Note: Because the City Council has five members, a 2/3 vote requires four councilmembers to vote for approval of the resolution.) STAFF CONTACTS: Lorenzo Hines, Assistant City Manager - (650) 738-7305 hinesl@ci.pacifica.ca.us Dan Steidle, Chief of Police - (650) 738-7314 steidled@pacificapolice.org Christian Murdock, Associate Planner - (650) 738-7444 murdockc@ci.pacifica.ca.us BACKGROUND/DISCUSSION: I. OVERVIEW Staff has prepared for City Council review a comprehensive package of ordinances to address regulation and taxation of marijuana operations and related activities. The proposed regulations are divided into three action items. 1

The first ordinance addresses creation of a new Marijuana Public Safety License which would govern operations of commercial marijuana businesses and require a background check of the individual owners, operators, and employees of such businesses (Attachment 1). The Police Department would administer the Marijuana Public Safety License program. The second ordinance would establish a new Marijuana Use Permit and related zoning regulations, as well as create new zoning districts, to govern the location and operation of commercial marijuana operations and residential cultivation of marijuana for personal use (Attachments 2 and 3). The Planning Department would administer the zoning regulations. The resolution would authorize submission to the qualified electors of the City a third ordinance, a measure to establish a tax on marijuana operations, at the Tuesday, November 7, 2017 election (Attachments 4 and 5). The measure would create an excise tax on commercial marijuana operations. The excise tax is a general tax requiring a simple majority vote of the voters of the City. Revenue from the tax would accrue to the General Fund and be available for any lawful purpose authorized by the City Council. If adopted by the voters, the Administrative Services Department would administer collection of the tax. Each ordinance is discussed in greater detail in subsequent sections of the staff report. II. MARIJUANA PUBLIC SAFETY LICENSE ORDINANCE (ADDITION OF A NEW CHAPTER 16 TO TITLE 4 - MARIJUANA PUBLIC SAFETY LICENSES) A. Background: The California Legislature enacted the Medical Cannabis Regulation and Safety Act (MCRSA) in 2015, and California voters, with passage of Proposition 64, enacted the Adult Use of Marijuana Act (AUMA) in 2016. Both MCRSA and AUMA provide for local control of medical and non-medical marijuana businesses and certain related activities through licensing and land use regulations. The laws allow local jurisdictions to prohibit marijuana businesses and activities or to impose reasonable regulations. The laws further restrict the state from issuing a license to a marijuana business that would violate a local ordinance. However, in the absence of a local ordinance prohibiting or specifically regulating marijuana businesses, the state may issue a license to an operator for any type of marijuana business contemplated by the AUMA. To regulate marijuana businesses in a manner that promotes public health and safety in Pacifica, staff has prepared a Marijuana Public Safety License Ordinance (Attachment 1). Council has expressed desire for marijuana operations to be conducted in a manner that is safe and healthy for the public. The Council goal of Maintaining a Safe Community was also taken into consideration while drafting this ordinance. Under the ordinance, a marijuana business must obtain a Marijuana Public Safety License (MPSL) prior to operation. A MPSL shall be required as a condition for the continued operation of any marijuana business. B. Marijuana Public Safety License Procedure: It is the intent of this ordinance to set licensing standards to ensure the health, safety and welfare of the residents of the City of Pacifica. Staff has designed the MPSL procedure set forth in this ordinance to ensure that the criminal history and background of owners and operators of marijuana businesses would not compromise public health, safety or welfare. In addition, the ordinance ensures applicants have a security plan in place and operate in a manner that protects owners/operators, neighbors, community members and customers of the marijuana operation. The proposed Marijuana Public Safety License procedure is as follows: 2

1. Owner/operator of a marijuana operation will apply with the Chief of Police for a MPSL. 2. The Chief of Police will cause a criminal history check to be conducted on the owner/operator and all employees to include searches of Department of Justice (DOJ) and Federal Bureau of Investigation (FBI) records. 3. A check of the local records of any police department of a jurisdiction where the owner/operator has owned or operated a marijuana business. 4. Submission to the Chief of Police a security plan addressing adequate security of the premises of the marijuana operation to ensure the safety of persons and protect the business from theft. The security plan will incorporate the placement of a video camera/recording system that includes both interior and exterior of the business. 5. Tentative approval of the MPSL will be reported to the Planning Department, where the applicant will seek a Marijuana Use Permit. 6. Upon approval of the Marijuana Use Permit, the Chief of Police will approve and issue the MPSL to the applicant. The criminal background check will consist of a Live Scan fingerprint query into both DOJ and FBI databases. Some potential disqualifying convictions are as follows: A violent felony conviction (defined in section 667.5(c) of the Penal Code) A serious felony conviction (defined in 1192.7(c) of the Penal Code) A felony conviction involving fraud, deceit, or embezzlement A felony conviction for using a minor to commit controlled substance offenses, or furnishing a minor a controlled substance A felony conviction for drug trafficking A fine, citation, or enjoinment for any controlled substance felony subsequent to licensure A fine, citation, or enjoinment for cultivation or production of a controlled substance on private or public lands As part of the background check, Police Department staff will determine if the applicant has been cited or sanctioned by a State licensing authority, city or county for unauthorized commercial marijuana activity. The MPSL shall be valid one year. A marijuana operation must apply for renewal, at which time compliance with operating conditions will be reviewed by the Chief of Police. Should the Chief of Police deny the MPSL or application for renewal, this decision may be appealed by the applicant/licensee to the City Council. A fee in an amount established by the City Council to recover the City s full cost of reviewing, issuing and administering a MPSL shall accompany an application for a MPSL. 3

D. Conditions of Operation: Conditions of operation for marijuana operations have been created to ensure the safety of the owner/operator as well as the customers of the business. Further, conditions set forth in this ordinance assist in deterring quality of life issues for surrounding residences and businesses. The following are conditions of operation that must be maintained by licensees: Marijuana operations shall be monitored at all times by interior and exterior by a video surveillance system capable of producing video of adequate quality. The video shall be maintained for no less than 30 days and shall be provided to the Pacifica Police Department within 24 hours with written notice. Licensees shall report diversion, loss, theft or any criminal activity involving the commercial marijuana operation. Window and door areas of marijuana operations shall not be covered, tinted or obscured. Marijuana operations shall take reasonable measures to reduce loitering, and correct objectionable conditions that constitute a nuisance on any sidewalk or public space abutting the premises. Calling the Pacifica Police Department as a reasonable step to abate these conditions shall not be construed as evidence of objectionable conditions. No licensee or any other person shall refuse, impede, obstruct, or interfere with an inspection of the premises by law enforcement officers. Marijuana operations shall have a State license at all times during operation. An MPSL shall be suspended or revoked by the Chief of Police for failure to maintain operating conditions required to receive a MPSL. Further, operating in a manner which creates a nuisance, ceasing to operate for 30 days or more, or the conviction of the licensee, owner(s), operator(s), and/or employees of any of the violations listed in the MPSL Procedure portion of this report shall also result in the suspension or revocation of the MPSL. A suspension or revocation of a MPSL by the Chief of Police may be appealed to the City Council. III. MARIJUANA ZONING REGULATIONS (AMENDMENTS TO TITLE 9, CHAPTER 4, ARTICLES 3, 4, 5, 6, 6.5, 7, 10, 11, 19, 22, 23, 27; AMENDMENTS TO THE CITY S ZONING MAP; AND ADDITION OF A NEW ARTICLE 17.5 (MARIJUANA OPERATION OVERLAY DISTRICT) AND A NEW ARTICLE 48 (MARIJUANA REGULATIONS)) A. Background: Staff has sought direction from the City Council and/or Planning Commission regarding which marijuana businesses and activities to prohibit or to regulate at study sessions on March 6 and May 1, 2017, and at public hearings on May 15 and June 5, 2017. The Council and Commission indicated their desire to regulate certain types of marijuana businesses and activities, including outdoor cultivation for personal use in residential areas, and 4

provided clear direction only to prohibit commercial cultivation businesses and manufacturing businesses conducting extraction processes. There was general support to allow marijuana testing facilities within the C-2 (Community Commercial) zoning district, marijuana manufacturing (non-extraction) facilities within the C-3 (Service Commercial) zoning district, and medical and non-medical dispensaries and retailers within a newly created overlay zoning district. Both bodies wanted to require all marijuana-related businesses to be subject to approval of a discretionary permit prior to operation. Outdoor cultivation for personal use in residential areas would be permissible without a permit subject to basic security, screening, and buffering requirements which include a solid six-foot tall fence, lockable gate, and prohibition of cultivation on properties immediately abutting a school property. Staff has prepared the attached ordinance on the basis of its understanding of the feedback and guidance it received from the City Council and Planning Commission, and based on applicable requirements or limitations contained in state law. The Planning Commission recommended approval of the ordinance as drafted by a vote of 5-1 at a public hearing on June 5, 2017 (Resolution No. 973, included as Attachment 6). The ordinance would create new marijuanaspecific zoning regulations and Marijuana Use Permit requirements, would amend various existing zoning regulations to ensure consistency with the new marijuana zoning regulations, and would create a new Marijuana Operations Overlay District (MO) wherein certain marijuana operations could be located. While the proposed ordinance has undergone an involved public process already, the City Council retains broad discretion to amend the proposed ordinance to further tailor it to the needs of the community. The text of the draft zoning ordinance is included as Attachment 2. Section maps depicting the areas proposed for inclusion within the new Marijuana Operations Overlay District (MO) are included as Attachment 3. Additional information on the proposed ordinance s provisions and the Planning Commission s deliberations and rationale for its recommendation to the City Council are contained in the Planning Commission staff report included as Attachment 7 (the attachments to the Planning Commission staff report have been omitted for brevity). Key elements of the proposed zoning ordinance are briefly described in the following sections. B. Uses Allowed: The ordinance would allow personal cultivation in residential areas subject to certain standards without a permit. The ordinance would allow a Marijuana Retail Operation, Marijuana Manufacturing Operation, and Marijuana Testing Operation in certain locations within the City subject to locational standards and approval of a discretionary permit (i.e., marijuana use permit). All other uses not explicitly allowed within the ordinance would be expressly prohibited. C. Location Standards: Standards governing the location of marijuana businesses and activities would rely on a combination of provisions currently in state law, regulations to be developed by state licensing authorities, and standards contained in the ordinance. 1. Residential Marijuana Cultivation The ordinance would allow cultivation of not more than six plants in total, whether indoors, outdoors, or some combination thereof, for personal use in residential areas. Outdoor cultivation would be required to occur in the rear yard subject to five-foot minimum setbacks from the side and rear property lines. Outdoor cultivation would require a six-foot tall solid fence and lockable gate, would require that outdoor cultivation not be visible from a public place, and 5

would prohibit outdoor cultivation from utilizing artificial light. Outdoor cultivation would be prohibited on any residential property immediately abutting property containing a school, day care center, or youth center. 2. Marijuana Operations (i.e., non-residential marijuana activities) a. State Standards There are two provisions in state law both from Section 26054 of the Health and Safety Code which establish a baseline from which the ordinance will further regulate the location of marijuana operations: A marijuana operation shall not also be licensed as a retailer of alcoholic beverages or of tobacco products. A marijuana business may not be located within a 600-foot radius of any of the following uses in existence at the time the license is issued, unless a licensing authority or a local jurisdiction specifies a different radius: i) a school providing instruction in kindergarten or any grades 1 through 12; ii) a day care center; or, iii) a youth center. Refer to the map in Attachment 8 for the state buffer areas. As noted later in this report, based on feedback from the public hearing on May 15, 2017, the Planning Commission directed a reduction in the buffer surrounding day care centers to 200 feet from 600 feet. The proposed ordinance retains the 600-foot buffer surrounding K-12 schools and youth centers. The reference map in Attachment 3 reflects the reduced buffer. The above provisions in Section 26054 would be generally applicable to all marijuana operations in the City. The ordinance would prohibit a marijuana operation on a parcel, any portion of which is located within a buffer area. Consistent with state law, the distance between parcels and buffers is measured in a straight line as the crow flies without consideration for travel distance or any other factors. b. City Standards The ordinance addresses each of the three allowable types of marijuana operations by requiring approval of a discretionary permit and restricting their locations as follows: Retail Operations (includes Medical Dispensaries and Non-medical Retailers) Allowable within the newly-created Marijuana Operation Overlay District (MO), which is proposed outside of the buffers described above. The maps in Attachment 3 demonstrate the locations where the overlay zones are proposed. The ordinance would allow up to two retail operations within each overlay zone, but limit the total number of retail operations in Pacifica to six. Manufacturing Operations 6

Allowable within the C-3 (Service Commercial) zoning district, except those areas within the buffers described above. Testing Operations Allowable within the C-2 (Community Commercial) and C-3 (Service Commercial) zoning districts, except those areas within the buffers described above. The map in Attachment 8 shows areas of the City subject to C-2 and C-3 zoning district standards. D. Marijuana Use Permit Requirement and Procedures: Any marijuana operation would be required to obtain a Marijuana Use Permit (MUP) in order to operate (except cultivation for personal use in a residential area, which is not considered a marijuana operation ). The MUP would be a discretionary permit subject to review and approval by the Planning Commission at a noticed public hearing. The MUP would be subject to appeal to the City Council. A Marijuana Public Safety License (MPSL) would also be required as a companion to the MUP. Both the MPSL and MUP would be contingent upon the continued validity of the other. Details of the MUP application and review processes are contained in the Planning Commission staff report (Attachment 7). Two elements of the MUP regulations warrant specific mention. First, the ordinance would provide that an MUP is non-transferrable to any other operator. The effect of this restriction would be to eliminate an aftermarket for sale of MUPs, and to require every prospective marijuana operator to undergo the City permitting process. Additionally, the ordinance would require an applicant to annually renew the MPSL. Second, the ordinance would provide that any MUP would be subject to a revocation procedure conducted by the Planning Commission. Potential causes for initiation of a revocation procedure could include, but not be limited to, the following: Failure to comply with any condition of operation or condition of approval Causing a public nuisance Additionally, the ordinance would provide that revocation of a MPSL would automatically constitute revocation of an MUP, without requiring an MUP revocation hearing. E. Existing Marijuana Businesses: There would be no vested right under the ordinance to continued operation or issuance of a MUP to any marijuana activity which commenced operation in violation of the Pacifica Municipal Code prior to the effective date of this ordinance. Therefore, based on the provisions in the ordinance and in state law, it is possible that some or all existing marijuana dispensaries within Pacifica may be unable to continue their operation once the ordinance takes effect. F. Areas Affected by the Ordinance: The areas of the City affected by the ordinance would include the following: All residential zoning districts (personal cultivation) 7

C-2 (Community Commercial) and C-3 (Service Commercial) zoning districts (testing operations) C-3 (Service Commercial) zoning district (manufacturing operations) Newly-created Marijuana Operation Overlay District MO (retail operations medical and non-medical) G. Previous Public Hearing: The Planning Commission held public hearings on Text Amendment TA-106-17 and Rezoning RZ-197-17 on May 15 and June 5, 2017. The Commission received public comment and deliberated on the proposed land use regulations. Its discussion focused on the following topics: Appropriate locations for marijuana retail operations (i.e., medical dispensaries and nonmedical retailers); Appropriate buffer distances between marijuana retail operations and potentially sensitive uses such as schools, day care centers, and youth centers; and Whether edible marijuana products should be sold only at medical dispensaries or prohibited entirely. 1. Buffer Distances There was extensive discussion among the Commission on the subject of marijuana retail operation locations, including minimum buffer distances from sensitive uses and the locations of areas proposed for inclusion in a new Marijuana Operation Overlay District (MO). Based on public testimony received by the Commission and its own deliberations, the Commission appeared concerned that the default 600-foot buffers around K-12 schools, day care centers, and youth centers would unduly restrict the availability of suitably-zoned locations for potential marijuana operations. The Commission also seemed concerned that the hesitancy of many property owners to lease to marijuana operations would further compound the challenge of locating in Pacifica. Accordingly, the Commission directed staff to evaluate a reduction in the buffer surrounding day care centers to 200 feet while maintaining the buffer around K-12 schools and youth centers at 600 feet, and to include additional locations within the Marijuana Operation Overlay District (MO) that would become eligible on the basis of the reduced buffer. The result was the addition of the Fairmont Shopping Center, Park Mall Shopping Center, and several additional properties along Palmetto Avenue in the Sharp Park neighborhood. The maps presented for City Council consideration (Attachment 3) reflect the reduced day care buffer and addition of more locations within the proposed overlay district. Additional information on the Planning Commission s deliberations and rationale for reducing the buffer are contained in the attached Planning Commission staff report packet (Attachment 7). 8

2. Edible Marijuana Products The Commission also discussed whether to allow the sale of edible marijuana products in Pacifica, or whether to allow such sales for medical purposes only. Some Commissioners expressed concern about the potential for misuse or accidental consumption of edible marijuana products by children. After extensive deliberation, the Commission felt that safeguards in State operating standards and packaging requirements would adequately address consumption concerns to the extent feasible. Direction from a majority of the Commission was to permit sales of edible marijuana products in both medical dispensaries and non-medical retailers. IV. MARIJUANA TAX MEASURE The proposed measure for the approval of an ordinance establishing an excise tax on marijuana operations would be placed on the November 7, 2017 ballot (Attachments 4 and 5). The City Council would adopt a resolution placing the attached ordinance on the ballot. Pursuant to Article 13C, Section 2 1 of the California Constitution, a general tax placed on the ballot would require approval by a simple majority of voters of the City due to the fact that the City Council has declared a fiscal emergency. The question to appear on the ballot for voter consideration would be as follows: Shall an ordinance establishing a Marijuana Operations Tax at the rate of 6% of a Marijuana Operation s gross receipts, which may be decreased or increased after two years to a maximum of 10% by the City Council, to help fund municipal services, including police and fire protection services, emergency medical services, park, recreation, and street maintenance services, with no sunset date and estimated to generate $360,000 annually in tax revenue, be adopted? YES NO The measure would impose a 6% excise tax on gross receipts of retail sales of marijuana within the City for a period of two years. Upon or after that two year period, the tax may be decreased or may be increased to an amount not to exceed 10%, by a majority vote of the total City Council membership. Under the measure, marijuana operations would be subject to the excise tax in addition to the City s general business tax. Marijuana operations, whether existing, newly established, licensed, or unlicensed would be required to pay the full tax imposed by the measure. However, payment of the excise tax would not authorize the sale of marijuana by any illegal, unlicensed business. The measure would provide the City the right to audit all books and records of the marijuana 1 Article 13C, Section 2 of the California Constitution provides that for a local government to impose a general tax, the election must be consolidated with a regularly scheduled general election for members of the governing body of the local government, unless the Council unanimously declares there is an emergency at the time the vote is taken to place the measure on the ballot. 9

operation, impose penalties and interest for failure to pay the tax, and provide enforcement mechanisms for the City. ALTERNATIVE ACTION: The City Council may consider several alternative actions. The Council may amend the provisions of the draft ordinances, or determine not to adopt either or both draft ordinances. Or, it may refer the ordinance pertaining to Text Amendment TA-106-17 and Rezoning RZ-197-17 to the Planning Commission for further consideration. The Council may also determine not to place a tax measure on the ballot. RELATION TO CITY COUNCIL GOALS AND WORK PLAN: Regulating and taxing marijuana operations and related activities related to the following items in the City Council's adopted goals and work plan: Work Plan Council Priority No. 5: Develop and implement marijuana policy and appropriate regulations. Goals Fiscal Sustainability includes investing in economic development to increase revenues, funding a reserve/emergency fund, and being well prepared for grant opportunities. A Healthy and Compassionate Community includes addressing affordable housing and mental health services, investigating strategies related to homelessness, and supporting youth services. Maintaining a Safe Community includes supporting our first responders (police, fire, public works), responding to storm emergencies, protecting our infrastructure (streets, sidewalks, water), and engaging in emergency preparedness activities. FISCAL IMPACT: The fiscal impact from adoption of these ordinances would generally be three-fold. First, processing of MPSL, MUP, and City Business License applications, along with ongoing inspection and administration of the licenses and permits, will incur expenses in City staff time. Staff from the Police Department, Planning Department, Administrative Services Department, Fire Department, and City Attorney s Office will work on various parts of application processing. Staff proposes the recommended fee structure in order to recover the expenses associated with these administrative functions: Department Activity Initial Application Fee Police Department Marijuana Public Safety License processing Ongoing Renewal Fee $1,000 $450 10

Administrative Services Planning Department North County Fire Authority Business License processing Marijuana Use Permit processing/inspections/ Code Enforcement Inspections/Code Enforcement $500 $500 Addressed within current fee structure Addressed within current fee structure Addressed within current fee structure Addressed within current fee structure Second, the City will incur expenses associated with placement of the ordinance containing the tax measure on the ballot. Because the City Council already called a special election on November 7, 2017, and placed on the ballot another measure, the cost of adding the tax measure would be relatively low. Staff estimates the incremental cost of placing the tax measure on the ballot to be $17,000, with a total estimated elections cost of $102,000 (or $51,000 per ballot measure), payable to the San Mateo County Elections Office. These expenditures are already incorporated in the 2017-2018 Proposed Budget considered earlier on this City Council meeting agenda. Third, if the tax measure is adopted by the voters, staff, with the assistance of outside consultants, has estimated the potential revenues generated in the first two fiscal years would be as follows: 2017-2018 Projected 2018-2019 Projected REVENUE Cannabis 6% Excise Tax (April 2018 implementation) $90,000 $360,000 Sales Tax Cannabis (April 2018 implementation) $15,000 $60,000 Total Revenues $105,000 $420,000 Staff estimates that each marijuana retailer will generate annual sales of $1,000,000 and that the City will permit six dispensaries. Based on these assumptions, a 6% excise tax and 1% (city share) sales tax would generate $360,000, and $60,000, respectively, per year. Figures for 2017-2018 have been pro-rated to reflect the actual collections of receipts to begin in April 2018, thereby only receiving 25% of the projected annual receipts for Fiscal Year 2017-2018. ORIGINATED BY: Planning Department Administrative Services Police ATTACHMENT LIST: 11

Attachment 1 - Draft Ordinance - Marijuana Public Safety License (DOCX) Attachment 2 - Draft Ordinance - Marijuana Zoning Regulations (DOCX) Attachment 3 - Exhibit A to Attachment 2 - Map of Marijuana Operation Overlay Zones Attachment 4 - Resolution Placing a Marijuana Excise Tax on the Ballot (DOCX) Attachment 5 - Exhibit A to Attachment 4 - Marijuana Tax Draft Ordinance (DOC) Attachment 6 - Planning Commission Resolution No. 973 (PDF) Attachment 7 - Planning Commission Agenda Packet (6/5/2017) (PDF) Attachment 8 - Map of State Buffers and C-2/C-3 Zoning Districts (PDF) (PDF) 12