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20 - NB-4 - Consideration of City Initiative Petitio - 4/19/2016
CITY COUNCIL AGENDA REPORT MEETING DATE: April 19, 2016 ITEM NUMBER: NB -4 SUBJECT: CONSIDERATION OF A CITY INITIATIVE PETITION REGARDING MEDICAL MARIJUANA DISPENSARIES DATE: MARCH 24, 2016 FROM: CITY CLERK'S OFFICE; CITY ATTORNEY'S OFFICE PRESENTATION BY: BRENDA GREEN, CITY CLERK; TARQUIN PREZIOSI, DEPUTY CITY ATTORNEY FOR FURTHER INFORMATION CONTACT: BRENDA GREEN, CITY CLERK, 714-754-5688 RECOMMENDATION: Staff recommends that the City Council provide direction to City staff concerning preparation of an initiative to be placed on the November 2016 ballot regulating medical marijuana dispensaries within the City. BACKGROUND: Marijuana dispensaries and the cultivation are currently prohibited throughout the City. Two initiatives regulating medical marijuana will be on the November 8, 2016 ballot. The City Council retains the power to place a proposition for the adoption of an ordinance directly on the ballot pursuant to Elections Code section 9222 ["Proposition for repeal, amendment, or enactment of ordinance; Time of election"]. This section provides that the City Council may submit to the voters without a petition a proposition for the enactment of any ordinance, to be voted upon at any succeeding regular or special city election; and, that the election shall be held not less than 88 days after the date of the order of election. The City Council by resolution may thus place a competing medical marijuana ballot measure before the voters at the same election when the two citizen initiative measures are to be considered by the voters. Election Code section 9221 ["Conflicting provisions in two or more ordinances"] provides in full that "[i]f the provisions of two or more ordinances adopted at the same election conflict, the ordinance receiving the highest number of affirmative votes shall control." Both of the citizen initiative petitions also provide that if two or more competing medical marijuana measures are approved by the voters, then only the measure with the greatest number of affirmative votes shall become the new law. Thus, if the City places its own medical marijuana measure on the ballot with the two citizen backed measures, the one receiving the most votes (if more than one passes) 1 shall become the local law (the City should also place a similar "only one measure wins" section in any City backed measure). Qualifying Initiatives An initiative titled "Allow Operation of Up to Eight Medical Marijuana (Cannabis) Businesses in the City of Costa Mesa" (Ordinance No. 1) was designed to require background checks for medical marijuana workers and limit the number of dispensaries in the city to eight. An initiative titled "Allow Operation of Up to Four Medical Marijuana Businesses in the City of Costa Mesa" (Ordinance No. 2) was designed to allow four medical marijuana collectives to operate in the city. Both ordinances each propose a six percent tax on medical marijuana businesses. These initiatives and their tax components are discussed in greater detail in the attached November 18, 2014 Agenda Report. Previously Introduced Measure On August 5, 2014, Councilmember Monahan introduced resolution 14-52, a "Measure to Establish Regulation of Medical Marijuana Dispensaries and Regulation of Medical Marijuana Cultivation" (Ordinance No. 3). This measure would have placed Ordinance No. 3 on the ballot for the November 4, 2014 general election. However, resolution 14- 52 did not receive a second. Ordinance No. 3 was also discussed at the December 16, 2014 Council Meeting. Various amendments to the Ordinance were suggested, but did not receive a majority vote. Ordinance No. 3 as written provides for a comprehensive regulatory scheme for both medical marijuana dispensaries as well as the cultivation of medical marijuana for a dispensary. This ordinance would limit dispensaries to Commercial zones, Industrial zones, Planned Development Commercial zones and Planned Development Industrial zones. The ordinance is drafted to be expressly subject to amendment by the Council. Significant differences between the proposed City's Ordinance and the two citizen backed ordinances include the following requirements in the proposed City's Ordinance not contained in the other two: 1. Security. Requires 24/7 security camera recordings which are accessible to law enforcement and the City. 2. Record keeping. Requires maintenance of a substantially greater amount of records detailing the operation (business, transaction, delivery, employee, etc.) 3. Priority to Old Businesses. Does not provide priority registration to old businesses. 4. Inspections. City CEO authorized to conduct reasonable inspections. 5. Taxes. Does not propose new taxes. 6. On -Site Recommendations. Does not allow on-site recommendations. 7. Employee Training. Required. 8. Limit Sales to Medical Mariivana Related Items. Yes. 9. Non -Concentration of Stores. No. 2 Please refer to the chart which compares Ordinance No. 3 with the two citizen -backed ordinances. Ordinance No. 3 is also discussed in greater detail in the attached August 5, 2014 Agenda Report, and in the attached December 4, 2014 Elections Code section 9212 report. STATE LAW GOVERNING MARIJUANA CULTIVATION The laws governing medical marijuana cultivation, sale, and use in California have evolved rapidly, and are presently in flux at the state level. The State of California has created a new statewide framework to regulate medical marijuana cultivation, sale, and use (see AB 243 (Wood), AB 266 (Bonta, Cooley, Jones -Sawyer, Lackey, and Wood), and SB 643 (McGuire)). All three of these bills have been passed by the Legislature and were signed by Governor Brown on October 9, 2015. Under this new statewide framework, cities retain the ability to regulate dispensaries, as well as the ability to impose taxes. A marijuana initiative to amend the State Constitution ("The Control, Regulate and Tax Cannabis Act of 2016") was submitted to the state Attorney General on October 5th and would likewise impact local regulation. Although many marijuana legalization initiatives were proposed and circulated, this initiative is considered the clear leader and the most likely to reach the ballot in November 2016. While there is no way of predicting whether any of these initiatives (or another that has not yet surfaced) might pass, it is certain the City will need to continue to monitor and revise regulations governing marijuana. For example, if the Control, Regulate and Tax Cannabis Act of 2016 passes, the City would likely be preempted from taxing medical marijuana, and could only impose a ban on dispensaries via a vote of the electorate. Options The following are three optional actions that the City Council may consider: OPTION NO. 1 The City could place Ordinance No. 3 on the ballot as written, or direct staff to revise the ordinance in some manner, such as those suggested at the December 16, 2014 Council Meeting. OPTION NO. 2 The City Council can direct staff to prepare a new ordinance to be placed on the ballot that incorporates elements from other cities that are not found in Ordinance No. 3. For example, a "minimalist" or "skeleton" medical marijuana ordinance which would provide for a basic outline for authorizing and regulating dispensaries, yet leaving significant details subject to future City Council action. Such outline could include, for example, the imposition of a tax on gross receipts, limiting the number of dispensaries, restricting the location to certain geographical areas and/or further restricting the permitted zones to industrial only. The ability to place such a "minimalist" measure on the ballot is only subject to the precise enabling language of the ordinance placed before the voters. 3 OPTION NO. 3 The City could place a measure on the ballot which amounts to a "no" vote on medical marijuana dispensaries. This measure would take the form of reaffirming the current prohibition on medical marijuana dispensaries from locating in any zones within the City. RECOMMENDATIONS FOR OPTIONAL ADDITIONAL ACTIONS: The recommendation for the proposed City Medical Marijuana Ordinance, previously considered by the City Council (Option No. 1): 1. Order the City Medical Marijuana Ordinance be sent to the voters at the same election at which the two initiative petitions are sent to the voters, with accompanying resolutions calling for written arguments, rebuttals and the drafting by the City Attorney's Office of an impartial analysis; 2. Provide direction to the City Attorney's Office for revisions to the proposed City Medical Marijuana Ordinance to be brought back to the City Council for consideration for it to be sent to the voters at the same election at which the two initiative petitions are sent to the voters; 3. Take no action on the proposed City Medical Marijuana Ordinance. The recommendation for the City Council in regards to drafting a new City Medical Marijuana Ordinance is to take one of the following actions (Option No. 2): 1. Provide direction to the City Attorney's Office to draft a new City Medical Marijuana Ordinance to be brought back to the City Council for consideration for it to be sent to the voters at the same election at which the two initiative petitions are sent to the voters 2. Take no action regarding preparation of a new City Medical Marijuana Ordinance. The recommendation for the City Council in regards to drafting a measure that would take the form of reaffirming the current prohibition on medical marijuana dispensaries is to take one of the following actions (Option No. 3): 1. Provide direction to staff to draft a measure which amounts to a "no" vote on medical marijuana dispensaries to be brought back to the City Council for consideration for it to be sent to the voters at the same election at which the two initiative petitions are sent to the voters. 2. Take no action regarding in regards to drafting a measure reaffirming the current prohibition on medical marijuana dispensaries. 12 FISCAL REVIEW: The fiscal impact of placing the two medical marijuana initiatives on the ballot is multifold. There are the costs of consolidation with a general election, as well as the cost of implementing the proposed ordinances. Furthermore, there is the potential revenue generated by the taxes in each ordinance. 1. Estimated general election costs to the City of Costa Mesa are as follows: a. Consolidated General Election for One Ballot Measure: $10,000. b. Consolidated General Election for Up to Four Ballot Measures: $40,000 - $60,000. 2. At present the estimated costs of implementing either of the ordinances is indeterminate. LEGAL REVIEW: The City Attorney's office has reviewed this report for legal content and approves it as to form. TARQUIN PREZIOSI Deputy City Attorney BRENDA GREEN City Clerk RICK FRANCIS Assistant CEO ATTACHMENTS: 1. Ballot Titles & Summary 2. August 5, 2014 Agenda Report 3. November 18, 2014 Agenda Report 4. Proposed Ordinance 14-12 5. December 4, 2014 EC 9212 Report 6. Matrix Comparison Chart for Four Ordinances 7. SuDDlemental Memo 5 ATTACHMENT 1 TITLE: Allow Operation of up to Eight Medical Marijuana (Cannabis) Businesses in City of Costa Mesa SUMMARY: The Initiative amends the City of Costa Mesa Municipal Code to authorize establishment of up to eight medical marijuana (cannabis) businesses within City boundaries. Medical marijuana businesses may engage in retail sales, planting, cultivation, harvesting, transporting, manufacturing, processing, preparing, storing, packaging, and provision of medical marijuana, provided such activities are not in conflict with state and federal law. Medical marijuana businesses are exempt from the need to obtain any and all special use permits, conditional use permits, or any other permits. Medical marijuana businesses are exempt from any requirements outside the Initiative requiring special site plans, variances, or any other permit or certificate otherwise requiring by law. Operational requirements are limited to only those provided in the Initiative. These include: authority to cultivate a reasonable amount of marijuana consistent with member patient needs; no operations within 600 feet of a public school; no operations within 1000 feet from another medical marijuana business; during hours of operation no minors allowed; hours of operation limited to 9 a.m. to 10 p.m. seven days a week; no alcohol or marijuana to be consumed on, or within 50 feet of, the premises; employees/volunteers must annually pass a criminal background check; security guard patrol provided for the premises during all hours of operation; warning labels and packaging restrictions; odor restrictions; minimum client records are only the medical marijuana identification card number issued by the State or County; and possession of a commercial general liability insurance policy. Medical marijuana businesses are subject to a six percent sales tax on the distribution, sale or transfer of medical marijuana products, and a one percent sales tax on all other tangible personal property at retail. Medical marijuana businesses may operate in certain commercial and industrial areas, but not in residential areas. If certain conditions are met, the first eight applicants for a medical marijuana business license shall be granted a business license pursuant to "priority registration" status. If less than eight applicants qualify for "priority registration" status, the City may continue to issue business licenses until eight have been issued. City Council may increase number of business licenses available to more than eight, but cannot decrease number below eight. Certain operations shall not be considered medical marijuana businesses, including residences where three or fewer people cultivate marijuana, and certain health care facilities, hospices, residential care facilities, and clinics. Other than provided for in the specific sections of the Initiative, the new regulations cannot be amended or repealed unless such amendment or repeal is approved by a majority of the voters at another City-wide election. The Initiative calls for a special or regular election at the earliest time allowed by law. If competing medical marijuana measures appear on the same ballot, then in the event multiple measures pass, and this Initiative receives the most affirmative votes, then this Initiative provides that the competing measure(s) shall be null and void. TITLE: Allow Operation of up to Four Licensed Medical Marijuana Businesses in City of Costa Mesa SUMMARY: The Initiative amends the City of Costa Mesa Municipal Code to authorize the establishment of up to four medical marijuana businesses within City boundaries subject to an annual licensing procedure. Medical marijuana businesses may engage in the cultivation, distribution or transfer of medical marijuana. Operation of medical marijuana business requires license which must be renewed annually, and operation managers require individual operator permit which must be renewed annually. Medical marijuana licenses issued if license application meets certain conditions which include: no false statements of material fact; no revocation by any public entity of a medical marijuana license in last two years; no felony convictions in last ten years. License will be automatically issued if not processed within thirty days. Medical marijuana operator permits issued if operator permit application meets certain conditions which include: no false statements of material fact; applicant at least 21 years of age; applicant has not been convicted of a felony in the last ten years. Permit will be automatically issued if not processed within fifteen days. Licenses and operator permits may be suspended and/or revoked for unlawful distribution of marijuana, failure to follow the provisions of this Initiative, or failure to abide by any disciplinary action previously imposed by an appropriate City of Costa Mesa official. Operational requirements include: at least one person with medical marijuana operator permit during hours of operation; no operations abutting residential area; no operations 1,000 feet from any school; no operations 600 feet from public park, public library or licensed child care facility; no operations 1000 feet from another medical marijuana business; no observable marijuana from outside location; parking lot lighting; hours of operation 8 a.m. to 10 p.m.; no minors; no alcohol to be purchased/consumed during hours of operation. Operations violating Initiative provisions are subject to closure as public nuisance. Medical marijuana businesses are subject to six percent sales tax, and they may operate in certain commercial and industrial areas, but not in residential areas. If certain conditions are met, first four applications for a license shall be granted pursuant to "priority registration" status. If less than four applicants qualify for "priority registration" status, City may continue to issue licenses until four have been issued. City Council may increase number of licenses available to more than four, but cannot decrease number below four. Certain operations shall not be considered medical marijuana businesses, including certain health care facilities, hospices, and residential care facilities. To further the purposes of this Initiative, City Council may amend Initiative provisions. Repeal of any Initiative provision must be approved by majority of voters at another City-wide election. Initiative calls for special or regular election at earliest time allowed by law. If competing medical marijuana measures appear on same ballot, then in the event multiple measures pass, and this Initiative receives the most affirmative votes, then this Initiative provides that the competing measure(s) shall be null and void. CITY COUNCIL AGENDA REPORT MEETING DATE: August 5, 2014 ATTACHMENT 2 SUBJECT: MEASURE TO ESTABLISH REGULATION OF MEDICAL MARIJUANA DISPENSARIES AND REGULATION OF MEDICAL MARIJUANA CULTIVATION ("MEASURE") DATE: July 30, 2014 FROM: Tom Duarte, City Attorney PRESENTATION BY: Council Member Gary Monahan FOR FURTHER INFORMATION CONTACT: Brenda Green, City Clerk, 714-754-5221 RECOMMENDATION: The recommendation is for the City Council to: Consider adopting the following resolutions submitting to the voters at the November 4, 2014 general municipal election a Measure to Establish Regulation of Medical Marijuana Dispensaries and Regulation of Medical Marijuana Cultivation ("Measure"): A. Resolution No. 14 - 52, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA ORDERING THE SUBMISSION TO THE VOTERS OF THE CITY OF COSTA MESA, CALIFORNIA A MEASURE RELATING TO A PROPOSED ORDINANCE TO ESTABLISH REGULATION OF MEDICAL MARIJUANA DISPENSARIES AND REGULATION OF MEDICAL MARIJUANA CULTIVATION, AS CALLED BY RESOLUTION NO. 14-26; and B. Resolution No. 14 - 53, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA SETTING PRIORITIES FOR FILING WRITTEN ARGUMENTS REGARDING A CITY MEASURE RELATING TO A PROPOSED ORDINANCE TO ESTABLISH REGULATION OF MEDICAL MARIJUANA DISPENSARIES AND REGULATION OF MEDICAL MARIJUANA CULTIVATION; AND, DIRECTING THE CITY ATTORNEY TO PREPARE AN IMPARTIAL ANALYSIS FOR THE SAME CITY MEASURE; and C. Resolution No. 14 - 54, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA PROVIDING FOR THE FILING OF REBUTTAL ARGUMENTS FOR CITY MEASURES SUBMITTED AT MUNICIPAL ELECTIONS. BACKGROUND In 1996 the California voters approved Proposition 215 (known as the Compassionate Use Act (the "CUA") and codified as Health and Safety Code Section 11362.5, et seq.) to exempt certain patients and their primary caregivers from criminal liability under state law for the possession and cultivation of marijuana for medical purposes. In 2003 the California legislature enacted Senate Bill 420 (known as the Medical Marijuana Program Act (the "MMPA") and codified as Health and Safety Code Section 11362.7 et seq.), as later amended, to clarify the scope of the Compassionate Use Act relating to the possession and cultivation of marijuana for medical purpose, and to authorize local governing bodies to adopt and enforce laws consistent with its provisions. Recently, California court decisions have affirmed the authority of local governments to prohibit both dispensaries and cultivation pursuant to local control. Likewise, local governments can regulate dispensaries and cultivation. Scores of cities throughout California have both banned medical marijuana operations in their cities as well as authorized and taxed medical marijuana operations in their cities. The heaviest concentration of cities which have authorized medical marijuana operation remains in Northern California. Notable exceptions are the City of Los Angeles, and as of March 2014 the City of San Diego. As of May, 2014 City Hall has been served notice of intent to circulate two citizen sponsored initiatives to authorize, regulate and tax medical marijuana. At the present it is unknown whether the petitions will qualify for the November ballot. The City of Santa Ana has two medical marijuana initiatives on the November ballot, one a voter sponsored initiative, and the other a city council sponsored initiative. SB 1262 is pending in Sacramento. This legislation is co-sponsored by the League of California Cities and the California Police Chiefs Association. This legislation requires the Department of Consumer Affairs to license dispensaries, cultivation sites, and processing facilities. Such licenses are subject to local restrictions, meaning that if the City adopts a local ordinance to authorize and regulate medical marijuana, SB 1262 would work with such a local law. Further security regulations are provided by SB 1262, as well as provisions related to the transportation, testing and distribution of marijuana. State licensing of medical marijuana dispensaries would be dependent on local permitting approval and other regulations. Local authority to ban dispensaries remains intact. And, a statewide ballot initiative to legalize recreational use may also be on the California 2016 ballot. This proposed initiative is the California Control, Regulate and Tax Marijuana Initiative, which was approved for signature circulation for the 2014 ballot. Although it failed to qualify for 2014, it appears that the proponents are focused on 2016. The initiative proposes to legalize limited amounts of marijuana for personal use; have the state regulate and license commercial marijuana cultivation, transportation, sales and testing; impose a 25% tax on nonmedical marijuana retail sales; and maintain authority of local governments to ban/limit the number of marijuana businesses. E 1 The City of Costa Mesa presently prohibits medical marijuana dispensaries as well as the cultivation of medical marijuana. The proposed Measure, if adopted by the voters, would add Chapter VI ["Medical Marijuana Dispensaries and Cultivation"] to Title 9 of the Costa Mesa Municipal Code to establish regulation of both medical marijuana dispensaries as well as regulation of medical marijuana cultivation. PROPOSED MEDICAL MARIJUANA LAW The proposed ordinance provides for a comprehensive regulatory scheme for both medical marijuana dispensaries as well as the cultivation of medical marijuana for a dispensary. These operations would be prohibited without the issuance of a City permit. Although voter approval is being sought for THE Measure, the proposed ordinance is drafted to be expressly subject to amendment by the Council to further the purposes of the ordinance as allowed by Cal Const, Art. II § 10(c). The proposed ordinance has regulations governing security, maintenance of written records, background checks, odor, edibles, delivery and labeling. Notable among these are continuous 24 hours a day security camera monitoring and a mandatory security guard. No physician recommendations can be made on site. A new City Office of Cultivation Standards and Quality Control is authorized (though not required) to be established, whose purpose will be to inspect cultivation sites as well as test medical marijuana. The City is authorized to make unannounced inspections of medical marijuana businesses to insure compliance with the law. FISCAL IMPACT OF PLACING MEASURE ON BALLOT If the proposed Measure is placed on the November 2014 ballot, the additional cost is estimated at $12,880.00. ATTACHMENTS t CITY COUNCIL AGENDA REPORT MEETING DATE: November 18, 2014 ATTACHMENT 3 SUBJECT: TWO MEDICAL MARIJUANA INITIATIVE PETITIONS QUALIFYING FOR BALLOT; CONSIDERATION OF ADOPTING NEW ORDINANCE, ORDERING ELECTION OR ORDERING REPORT; CONSIDERATION OF CITY MEDICAL MARIJUANA MEASURE(S) DATE: NOVEMBER 11, 2014 FROM: CITY ATTORNEY'S OFFICE; CITY CLERK'S OFFICE PRESENTATION BY: CHRIS F. NEUMEYER, DEPUTY CITY ATTORNEY; BRENDA GREEN, CITY CLERK FOR FURTHER INFORMATION CONTACT: RICK FRANCIS, ASSISTANT CEO, 714-754-5688 RECOMMENDATION: A. It is recommended that the City Council: 1. Accept the Certificate of Sufficiency issued by the County of Orange Registrar of Voters regarding: An Initiative to Allow Operation of Up to Eight Medical Marijuana (Cannabis) Businesses in the City of Costa Mesa; and 2. Accept the Certificate of Sufficiency issued by the County of Orange Registrar of Voters regarding: An Initiative to Allow Operation of up to Four Licensed Medical Marijuana Businesses in City of Costa Mesa. B. Further, it is recommended that the City Council approve (for each initiative) one of the following options: 1. Adopt the ordinance (for either initiative), without alteration, at the regular meeting at which the certification of the petition is presented, or within 10 days after it is presented (authorized by the Election Code, yet not recommended, see "Taxation Issues" below); or 2. Order a special election (for either initiative), to be held pursuant to subdivision (a) of Election Code § 1405 (which states that the election for a municipal initiative that qualifies shall be held not less than 88 nor more than 103 days after the date of the order of election], at which the ordinance, without alteration, shall be submitted to a vote of the voters of the city; or 3. Order a regular election (for either initiative), to be consolidated with the next "regularly scheduled general election for members of the governing body of the local government," pursuant to Art XIII C § 2(b) of the California Constitution, which would be November 8, 2016; or 4. Order a report pursuant to Election Code § 9212 (for either initiative) at the regular meeting at which the certification of the petition is presented. 1 OPTIONAL ADDITIONAL ACTION: The City Council may consider taking action on the City Measure to Establish Regulation of Medical Marijuana Dispensaries and Regulation of Medical Marijuana Cultivation as proposed on August 5, 2014, or an amended version of that prior Measure. BACKGROUND: Two initiative petitions, each with the intent of authorizing the operation of medical marijuana businesses within the City of Costa Mesa, have been recently gathering signatures for placement on the local ballot. Pursuant to the Election Code, both of these initiatives have now qualified for placement on the local ballot at a special election. Elections Code § 9215 provides that an initiative petition qualifies for placement on the local ballot at a regular election if not less than 10% of the registered voters of the City have signed the petition. Elections Code § 9214 provides that an initiative petition qualifies for placement on the local ballot at a special election if not less than 15% of the registered voters of the City have signed the petition and the initiative petition itself asks for a special election. Both of the medical marijuana initiative petitions requested a special election. The number of registered voters in the City of Costa Mesa last reported by the County of Orange election official to the Secretary of State was 49,237 registered voters. Fifteen percent of this total number of registered voters is 7,385, thus being the number of verified signatures required for one of these initiative petitions to qualify for a special election. The first initiative, "Allow Operation of Up to Eight Medical Marijuana (Cannabis) Businesses in the City of Costa Mesa", was entitled by the City Attorney's Office (and named "Medical Cannabis Control Act" by its proponents) was submitted by proponents Robert Taft, Jr. and Kevin Gardner (with the counsel of attorney Randall T. Longwith) to the City Clerk's Office on September 16, 2014 with 11,080 signatures (hereinafter referred to as "Ordinance No. 1"). This initiative was promptly delivered to the Orange County Registrar of Voters for verification of the signatures. Refer to Attachment No. 1 for the full text of the proposed Ordinance No. 1. The second initiative, "Allow Operation of Up to Four Licensed Medical Marijuana Businesses in the City of Costa Mesa", was entitled by the City Attorney's Office (and named "An Initiative to Provide Revenue to Costa Mesa Citizens" by its proponents) was submitted by proponents Taylor Webster and Michael Levesque (with the counsel of attorney David Welch) to the City Clerk's Office on October 9, 2014 with 10,904 signatures (hereinafter referred to as "Ordinance No. 2"). This initiative was promptly delivered to the Orange County Registrar of Voters for verification of the signatures. Refer to Attachment No. 2 for the full text of the proposed Ordinance No. 2. The Orange County Registrar of Voters has examined the records of voter registration for the City of Costa Mesa and has determined that both of the initiative petitions have been signed by no less than fifteen percent of City of Costa Mesa registered voters. Therefore both of the initiative petitions are sufficient to be certified to the City Council. The Election Code requires the City Clerk to certify to the City Council any initiative petition which qualifies for an election. (Elections Code §§ 9211, 9114). Refer to Attachments Nos. 3 & 4 for Certifications. 2 ANALYSIS: Pursuant to Elections Code § 9214, ["Duty of legislative body regarding initiative petition signed by certain percent of voters with request to submit ordinance to vote at special election"] if an initiative petition is signed by not less than 15 percent of the registered voters of a city, and contains a request that the ordinance be submitted immediately to a vote of the people at a special election, the legislative body shall do one of the following: a) Adopt the ordinance, without alteration, at the regular meeting at which the certification of the petition is presented, or within 10 days after it is presented; or b) Immediately order a special election, to be held pursuant to subdivision (a) of Section1405 [which states that the election for a municipal initiative that qualifies shall be held not less than 88 nor more than 103 days after the date of the order of election], at which the ordinance, without alteration, shall be submitted to a vote of the voters of the city; or c) Order a report pursuant to Section 9212 at the regular meeting at which the certification of the petition is presented. When the report is presented to the legislative body, the legislative body shall either adopt the ordinance within 10 days or order an election pursuant to subdivision (b). Elections Code § 9212 ["Referral of proposed initiative measure to city agency for report"] provides that the City Council may refer the proposed initiative measure to any city agency or agencies for a report on any matter the City Council requests to be in the report, including but not limited to: 1. Its fiscal impact; and/or 2. Its effect on the internal consistency of the city's general and specific plans, including the housing element, the consistency between planning and zoning, and the limitations on city actions under Section 65008 of the Government Code and Chapters 4.2 (commencing with Section 65913) and 4.3 (commencing with Section 65915) of Division 1 of Title 7 of the Government Code; and/or 3. Its effect on the use of land, the impact on the availability and location of housing, and the ability of the city to meet its regional housing needs; and/or 4. Its impact on funding for infrastructure of all types, including, but not limited to, transportation, schools, parks, and open space. The report may also discuss whether the measure would be likely to result in increased infrastructure costs or savings, including the costs of infrastructure maintenance, to current residents and businesses; and/or 5. Its impact on the community's ability to attract and retain business and employment; and/or 6. Its impact on the uses of vacant parcels of land; and/or 7. Its impact on agricultural lands, open space, traffic congestion, existing business districts, and developed areas designated for revitalization. The report(s) shall be presented to the City Council no later than 30 days after the elections official certifies to the legislative body the sufficiency of the initiative petitions. Because the November 18, 2014 meeting is when certification of the initiative petitions will occur, any reports requested shall be returned to the City Council no later than December 18, 2014. 3 Given the upcoming schedule of regular City Council meetings, the reports would need to be returned at the December 2, 2014 meeting. At the subsequent City Council meeting when the report(s) are presented, the City Council shall then pursuant to Elections Code § 9214 either, as previously stated, adopt the ordinances or order a special election. BRIEF SUMMARY OF TWO PROPOSED ORDINANCES The two initiative petitions differ in the details on how they each propose to authorize and regulate medical marijuana businesses within the City of Costa Mesa. Some key differences to note include: 1. Amendment — Although both measures cannot be repealed except by another vote of the electorate, Ordinance No. 1 furthermore cannot be amended at all except by a vote of the electorate, whereas Ordinance No. 2 allows amendment by the City Council to further the purposes of the ordinance. 2. Application Fees — Ordinance No. 1 caps application fees for cost recovery at $500, whereas Ordinance No. 2 allows the City Council to pass a fee resolution for cost recovery. 3. Permits — Ordinance No. 1 requires only a business license, whereas Ordinance No. 2 requires in addition to a business license both a separate dispensary permit as well as operator permits. 4. Minimum Number of Dispensaries — Ordinance No. 1 authorizes a minimum of eight dispensaries, whereas Ordinance No. 2 authorizes a minimum of four dispensaries. 5. See attached matrix (Attachment No. 5) that further compares Ordinances No. 1 and 2 along with a proposed City Medical Marijuana Ordinance, previously considered by the City Council on August 5, 2014. TAXATION ISSUES Both of the initiative petitions include new taxes. Ordinance No. 1 and Ordinance No. 2 each propose a six percent tax on medical marijuana businesses. Ordinance No. 1 proposes a sales tax of one percent "on the sale of all other tangible personal property at retail." Presently the City already has a one percent local sales tax. Raising the local sales tax above one percent likely will lead to sales tax collection issues with the Board of Equalization, which will not collect a locally mandated sales tax above one percent. Other issues may present themselves with collection of these taxes. Significant and atypical election issues also present themselves because of the proposed tax increases. The California Constitution in Art XIII C § 2(b), as amended by Proposition 218 in 1996, provides in full that "No local government may impose, extend, or increase any general tax unless and until that tax is submitted to the electorate and approved by a majority vote. A general tax shall not be deemed to have been increased if it is imposed at a rate not higher than the maximum rate so approved. The election required by this subdivision shall be consolidated with a regularly scheduled general election for members of the governing body of the local government, except in cases of emergency declared by a unanimous vote of the governing body." (Emphasis added). O 1. Voter Approval for New General Taxes As required by the California Constitution in Art XIII C § 2(b), new general taxes imposed by a local government must be approved by the voters. (The tax measures in the two initiatives are general taxes and are not special taxes.) Even if the City Council were to adopt one of the ordinances (which normally is an option under Elections Code § 9214 when an initiative petition qualifies for a special election), there would remain the matter of voter approval of the new general taxes being imposed. California law in Elections Code § 9214 also prohibits the City Council from altering an ordinance proposed by initiative petition. Thus, the City Council may not split up the proposed ordinances by adopting the non -tax provisions and then separately sending just the tax provisions to the voters. Government Code section 53723 (added by Proposition 62 in 1986) further provides in full that "No local government, or district, whether or not authorized to levy a property tax, may impose any general tax unless and until such general tax is submitted to the electorate of the local government, or district and approved by a majority vote of the voters voting in an election on the issue." 2. Regular Election (Not Special Election) for Voter Approval for New General Taxes As referenced above, Art XIII C § 2(b) of the California Constitution provides that an election on general tax increases "shall be consolidated with a regularly scheduled general election for members of the governing body of the local government, except in cases of emergency declared by a unanimous vote of the governing body." Thus, new general taxes imposed by a local government which are to be sent to the voters, should not be presented at a special election, unless the City Council unanimously declares a fiscal emergency. Rather, new general taxes imposed by a local government should be presented to the voters at "a regularly scheduled general election for members of the governing body of the local government." The next such election which meets those conditions is November 8, 2016 ELECTION DATES Elections Code § 1405, pursuant to Election Code § 9214, provides that the election for a municipal initiative that qualifies for a special election shall be held not less than 88 nor more than 103 days after the date of the order of election. Thus, if the City Council orders a special election at the November 18, 2014 meeting, then the window during which a special election would need to be held is between February 14, 2015 and March 1, 2015. If the City Council requests reports from City agencies/departments on the ordinances, the reports would need to be returned at the only regularly scheduled City Council meeting for the month of December, being December 2, 2014. If the City Council orders a special election at the December 2, 2014 meeting, then the window during which a special election would need to be held is between February 28, 2015 and March 14, 2015 5 If the City Council orders pursuant to the California Constitution in Art XIII C § 2(b), as amended by Proposition 218 in 1996, that the initiative petitions be sent to the voters at the next "regularly scheduled general election for members of the governing body of the local government," then the election would be held on November 8, 2016. OPTIONAL ADDITIONAL ACTION TO CONSIDER: At the August 5, 2014 City Council meeting consideration was given to submitting to the voters a Measure to Establish Regulation of Medical Marijuana Dispensaries and Regulation of Medical Marijuana Cultivation ("Measure") which would add a new Chapter VI to Title 9. At the October 21, 2014 City Council meeting the City Attorney's Office received direction to bring back the proposed City's Medical Marijuana Ordinance for the City Council to address for review and possible revisions. Please refer to attachments for the language of the proposed Chapter VI (Attachment No. 6), an outline of the proposed Chapter VI (Attachment No. 7), and a chart (Attachment No. 5) which compares the proposed City's Ordinance (also referred to as Ordinance No. 3) with the two citizen -backed ordinances. Election Code section 9222 ["Proposition for repeal, amendment, or enactment of ordinance; Time of election"] provides that the City Council may submit to the voters without a petition, a proposition for the enactment of any ordinance, to be voted upon at any succeeding regular or special city election; and, that the election shall be held not less than 88 days after the date of the order of election. The City Council by resolution may thus place a competing medical marijuana ballot measure before the voters at the same election when the two citizen initiative measures are to be considered by the voters. Election Code section 9221 ["Conflicting provisions in two or more ordinances"] provides in full that "[i]f the provisions of two or more ordinances adopted at the same election conflict, the ordinance receiving the highest number of affirmative votes shall control." Both of the citizen initiative petitions also provide that if two or more competing medical marijuana measures are approved by the voters, then only the measure with the greatest number of affirmative votes shall become the new law. Thus, if the City places its own medical marijuana measure on the ballot with the two citizen backed measures, the one receiving the most votes (if more than one passes) shall become the local law (the City should also place a similar "only one measure wins" section in any City backed measure). At the outset, it must be noted that the anticipated passage of SB 1262 (which would have imposed statewide regulations related to health and safety, oversight, security and local control) has failed to materialize. On August 14, 2014 the Assembly Appropriations Committee failed to pass SB 1262, effectively killing the bill for this year. In January there may or may not be a resurrection of SB 1262. Significant differences between the proposed City's Ordinance and the two citizen -backed ordinances include the following requirements in the proposed City's Ordinance not contained in the other two: I . Securitv. Requires 24/7 security camera tapes which are accessible to law enforcement and the City. 2. Record keeping. Requires maintenance of a substantially greater amount of records detailing the operation (business, transaction, delivery, employee, etc.) 3. Priority to Old Businesses. Does not provide priority registration to old businesses. 4. Inspections. City CEO authorized to conduct reasonable inspections. 5. Taxes. Does not propose new taxes. 6. On -Site Recommendations. Does not allow on-site recommendations. 7. Employee Training. Required. 8. Limit Sales to Medical Mariivana Related Items. Yes. 9. Non -Concentration of Stores. No. The following are significant issues that may warrant further discussion concerning details in the City Medical Marijuana Ordinance based upon comments at the August 5, 2014 City Council meeting: 1. Number of dispensaries. No limit to the number of dispensaries. 2. Hours/Days of Operations. 7:00 am to 10:00 p.m. any day of the week. Section 9-500(q) 3. City Office of Cultivation Standards and Qualify Control. New optional City department created to conduct regular inspection of cultivation practices and procedures, as well as to test medical marijuana. Section 9-501 4. Sunset Clause. Does not contain one (though allows amendment by Council to further purposes). 5. Background checks. Felonies substantially related to qualifications, functions or duties of an employee of a medical marijuana business (such as felony conviction for distribution of controlled substances, money laundering, racketeering, etc.). Section 9- 500(d)(ii) 6. Securitv Guards. Prohibited from carrying firearms. Section 9-500(a)(i) 7. Non -Concentration of Stores. No restrictions on locating near other dispensaries. 8. Labeling. Does not require warning about not operating heavy machinery. 9. Smoking restrictions. Prohibited within 20 feet of dispensary. Section 9-500(r) 10. Liability Insurance. $1 million general policy minimum. Section 9-500(u) 11. Fire Sprinklers. Does not have requirements specific to medical marijuana industry. 12. Edibles. Products requiring refrigeration or hot -holding shall not be manufactured for sale or distribution at dispensary. Section 9-500(m)(i) 7 FISCAL REVIEW: The fiscal impact of placing the two medical marijuana initiatives on the ballot is multifold. There are the costs of a special election (or consolidation with a general election, see "Taxation Issues" in this Report) as well as the cost of implementing the proposed ordinances. Furthermore, there is the potential revenue generated by the taxes in each ordinance. 1. Estimated special election costs to the City of Costa Mesa are as follows: a. Stand Alone Special Election for One Ballot Measure: $234,067 - $261,790. b. Stand Alone Special Election for Up to Four Ballot Measures: $252,980 - $280, 703. c. Consolidated General Election for One Ballot Measure: $15,000. d. Consolidated General Election for Up to Four Ballot Measures: $15,000 - $60,000. 2. At present the estimated costs of implementing either of the ordinances is indeterminate. LEGAL REVIEW: The City Attorney's office has prepared this report with its legal analysis, and the City Attorney's Office has reviewed the attached resolutions. RECOMMENDATIONS FOR OPTIONAL ADDITIONAL ACTION: It is recommended in regards to the proposed City Medical Marijuana Ordinance previously considered by the City Council: 1. Order the City Medical Marijuana Ordinance be sent to the voters at the same election at which the two initiative petitions are sent to the voters, with accompanying resolutions calling for written arguments, rebuttals and the drafting by the City Attorney's Office of an impartial analysis; or 2. Provide direction to the City Attorney's Office for revisions to the proposed City Medical Marijuana Ordinance to be brought back to the City Council; or 3. Take no action on the proposed City Medical Marijuana Ordinance. THOMAS P. DUARTE City Attorney RICK FRANCIS Assistant CEO ATTACHMENTS: refer to List BRENDA GREEN City Clerk ATTACHMENT 4 ORDINANCE NO, 14-12 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF COSTA MESA ADDING CHAPTER VI (MEDICAL MARIJUANA DISPENSARIES AND CULTIVATION) TO TITLE 9 (LICENSES AND BUSINESS REGULATIONS) OF THE COSTA MESA MUNICIPAL CODE, REPEALING AND REPLACING SECTION 13-16 (ENFORCEMENT) OF ARTICLE 4 (ENFORCEMENT) OF CHAPTER I (GENERAL) OF TITLE 13 (PLANNING, ZONING AND DEVELOPMENT), AND REPEALING AND REPLACING LINE 31A OF TABLE 13-30 (CITY OF COSTA MESA LAND USE MATRIX) OF CHAPTER IV (CITYWIDE LANDUSE MATRIX) OF TITLE 13 (PLANNING, ZONING AND DEVELOPMENT), RELATING TO THE REGULATION OF MEDICAL MARIJUANA DISPENSARIES AND CULTIVATION. WHEREAS, in 1996 the California voters approved Proposition 215 (known as the Compassionate Use Act (the "CUA") and codified as Health and Safety Code Section 11362.5, et seq.) to exempt certain patients and their primary caregivers from criminal liability under state law for the possession and cultivation of marijuana for medical purposes; and WHEREAS, in 2003 the California legislature enacted Senate Bill 420 (known as the Medical Marijuana Program Act (the "MMPA") and codified as Health and Safety Code Section 11362.7 at seq.), as later amended, to clarify the scope of the Compassionate Use Act relating to the possession and cultivation of marijuana for medical purpose, and to authorize local governing bodies to adopt and enforce laws consistent with its provisions; and WHEREAS, in 2005 the California Board of Equalization began issuing seller's permits for sales consisting only of medical marijuana; and WHEREAS, in 2008 the California Attorney General issued guidelines for the security and non -diversion of marijuana grown for medical use; and OrdinaaceNo. 14-12 Page 1 of 40 WHEREAS, in 2014 the U.S. House of Representatives voted to stop federal law enforcement from interfering with medical marijuana operations in the various states which have decriminalized and/or authorized such operations; and WHEREAS, Health & Safety Code Section 11362.83 provides that cities are free to adopt and enforce local ordinances that regulate the location, operation, or establishment of medical marijuana dispensaries and cultivation; and WHEREAS, the City Council of the City of Costa Mesa intends that nothing in this Ordinance shall be deemed to conflict with federal law as contained in the Controlled Substances Act, nor to otherwise permit any activity that is prohibited under that Act or other applicable law; and WHEREAS, the City Council of the City of Costa Mesa intends that nothing in this Ordinance shall be construed to allow persons to engage in conduct that endangers others or causes a public nuisance, allow the use of marijuana for non-medical purposes, or allow any activity relating to the cultivation, distribution or consumption of marijuana that is otherwise illegal; and WHEREAS, the operation of medical marijuana dispensaries and the cultivation of medical marijuana within the City of Costa Mesa presently remain prohibited; and WHEREAS, the City Council of the City of Costa Mesa finds that medical marijuana operations and cultivation require careful consideration as well as the regulation of the location and manner in which dispensaries operate and cultivation occurs so as to prevent negative impacts on nearby residents and businesses; and WHEREAS, the City Council of the City of Costa Mesa finds that the City of Costa Mesa has a compelling interest in protecting the public health, safety and welfare of its residents and businesses by regulating the location and operation of medical marijuana dispensaries and medical marijuana cultivation, in preserving the peace and Ordinance No. 14-12 Page 2 of 40 quiet of the neighborhoods in which medical marijuana dispensaries operate and medical marijuana is cultivated, and in providing compassionate access to medical marijuana to its seriously ill residents; and WHEREAS, the California Constitution grants local governments in Article XI, Section 7 the authority under their police powers to regulate land use; and WHEREAS, the proposed ordinance has been reviewed by City staff in accordance with the Environmental Checklist Form (Appendix G of the CEQA Guidelines) to determine if there would be any possibility that the proposed ordinance would have the possibility of creating any environmental impacts, and City staff has determined that the establishment of regulations for medical marijuana businesses does not meet any of the thresholds contained in the Checklist that would trigger an environmental impact, and thus according to the "general rule exemption" (Section 15061(b)(3)) of the CEQA Guidelines, projects which have no potential for causing a significant effect on the environment are not subject to CEQA, no further environmental analysis is required, and a notice of exemption will be filed. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF COSTA MESA DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. Chapter VI (Medical Marijuana Dispensaries and Cultivation) of Title 9 (of the Costa Mesa Municipal Code is hereby added as follows: CHAPTER VI. MEDICAL MARIJUANA DISPENSARIES AND CULTIVATION Sec. 9-491, Purpose The purpose of this chapter is to establish a comprehensive set of regulations with attendant regulatory permits applicable to the operation of medical marijuana dispensaries, as well as the cultivation of medical marijuana. The regulations are Ordinance No. 14-12 Page 3 of 40 intended to ensure such operations and cultivation are consistent with the overall health, welfare and safety of the city and its populace, and that such operations are in compliance with California's Compassionate Use Act of 1996 as well as California's Medical Marijuana Program Act of 2003. The chapter is not intended to permit activities that are otherwise illegal under federal, state or local law. This chapter is not intended to conflict with federal or state law. Sec. 9-492. Operation Prohibited Without Permit It shall be unlawful to own, establish, operate, use, or permit the establishment or operation of a medical marijuana business, or to participate as an employee, contractor, agent, volunteer, or in any manner or capacity other than as provided in this chapter. The general prohibition contained in this section shall include renting, leasing, or otherwise permitting a medical marijuana business to occupy or use a location, vehicle, or other mode of transportation. Sec. 9-493. Definitions The following definitions shall apply to this chapter unless the context clearly denotes otherwise. a) "Applicant" means a person who is required to file an application for a permit or a license under this chapter. b) "Attending physician" has the same definition as set forth in Health and Safety Code section 11362.7. c) "Attorney General Guidelines" shall refer to the California Attorney General Guidelines for the Security and Non -diversion of Marijuana Grown for Medical Use, issued by the Attorney General's Office in August, 2008, as amended from Ordinance No. 14-12 Page 4 of 40 time to time, which sets regulations intended to ensure the security and non - diversion of marijuana grown for medical use by qualified patients or primary caregivers. d) "City CEO" has the same meaning as "city manager" in Section 2-97 of this code and shall include his or her designee. e) "Cultivation" means the growing of medical marijuana for medical purposes as defined in strict accordance with Health and Safety Code sections 11362.5 and 11362.7 et seq. f) "Cultivator" means a person who engages in the cultivation of medical marijuana. g) "Delivery" means the act of taking something to a person or place. h) "Dispense" means the selection, measuring, packaging, labeling, delivery, or distribution or sale of medical marijuana to a qualified patient or a primary caregiver. i) "Edible" has the same definition as "food" as set forth in Health and Safety Code section 109935. j) "Employee" means any person (whether paid or unpaid) who provides regular labor or regular services for a medical marijuana business, including but not limited to at the location of a medical marijuana business. k) "Identification card" has the same definition as set forth in Health and Safety Code section 11362.7, and as may be amended, and which provides that "Identification card" means a document issued by the State Department of Health Services that document identifies a person authorized to engage in the medical use of marijuana and the person's designated primary caregiver, if any. Ordinance No. 14-12 Page 5 of 40 1) "Labeling" means all labels and other written, printed, or graphic matter (a) upon any marijuana intended for medical use, or (b) accompanying such marijuana intended for medical use. m) "Location" means any parcel of land, whether vacant or occupied by a building, group of buildings, or accessory buildings, and includes the buildings, structures, yards, open spaces, lot width, and lot area. n) "Lighting" means the act of illuminating as well as the effect achieved by the arrangement of fights. o) "Live scan" means a system for inkless electronic fingerprinting and the automated background check developed by the California Department of Justice (DOJ) which involves digitizing fingerprints and electronically transmitting the fingerprint image data along with personal descriptor information to computers at the DOJ for completion of a criminal record check; or such other comparable inkless electronic fingerprinting and automated background check process as determined by the city council. P) "Manager" means an employee responsible for management and/or supervision of a medical marijuana business. q) "Marijuana" has the same definition as set forth in Health and Safety Code section 11018, and as may be amended. r) "Medical marijuana" means marijuana used for medical purposes in accordance with the Compassionate Use Act (Health and Safety Code section 11362.5) and the Medical Marijuana Program Act (Health and Safety Code sections 11362.7 et seq.). Ordinnee No. 14-12 Page 6 of 40 s) "Medical marijuana business" means a medical marijuana dispensary and/or a medical marijuana cultivation site. t) "Medical marijuana cultivation site" means a location where the cultivation of medical marijuana occurs. u) "Medical marijuana dispensary" has the same meaning as Section 13-6 of the Costa Mesa Municipal Code. v) "Member" means either a qualified patient, a person with an identification card, or a primary caregiver. w) "Non-profit" means to use surplus revenue to achieve the goals of an organization rather than distributing surplus revenue as profit or dividends. x) "Owner" means the owner of a medical marijuana dispensary and/or a medical marijuana cultivation site. y) `Permit" means the various regulatory licenses issued pursuant to this chapter, including but not limited to a license for a medical marijuana business. z) 'Person" means any natural person, firm, corporation, partnership, club, or any association or combination of natural persons, whether acting by themselves or through any servant, agent or employee, aa)"Person with an identification card" has the same definition as set forth in Health and Safety Code section 11362.7, and as may be amended, and which provides that `Person with an identification card" means an individual who is a qualified patient who has applied for and received a valid identification card pursuant to this article [being Article 2.5 of Chapter 6 of Division 14 of the Health and Safety Code]. Ordinanoo No. 14-12 Page 7 of 40 bb)"Physician's referral" means a written recommendation for a patient from a licensed medical doctor indicating that marijuana would be a beneficial treatment for a serious medical condition of the patient. cc) "Police Department" means the Police Department of the City of Costa Mesa. dd)"Primary caregiver" has the same definition as set forth in Health and Safety Code section 11362.7(d), (e), and as may be amended. ee)"Qualified Patient" has the same definition as set forth in Health and Safety Code section 11362.7(f). ff) "Reasonable Compensation" means compensation commensurate with wages and benefits paid to officers and employees of other not-for-profit organizations who have similar job descriptions and duties, required level of education and experience, prior individual earnings history, and number of hours worked. gg)"Serious Medical Condition" has the same definition as set forth in Health and Safety Code section 11362.7(h), and as may be amended. Sec. 9-494. Medical Marijuana Dispensary Permit Prior to initiating operations as a medical marijuana dispensary and as a continuing requisite to conducting operations, the owner of a medical marijuana dispensary shall obtain a regulatory permit from the City CEO or his/her designee under the terms and conditions set forth in this chapter. Conditions necessary for the continuing validity of any and all regulatory permits issued for the operation of a medical marijuana dispensary include: a) Strict adherence to each and every requirement of this chapter. Ordinance No. 14-12 Page 8 of d0 b) Allowing the City CEO or his/her designee and the Police Department to conduct reasonable inspections of the location of the medical marijuana business at the discretion of the city, including but not limited to inspection of security, inventory, and written records and files pertaining to the medical marijuana business, for the purposes of ensuring compliance with local and state law. c) Maintaining with the city current and valid contact information of the owner(s) of the medical marijuana dispensary. d) Maintaining with the city current and valid contact information of a legal representative of the medical marijuana dispensary. e) Transferable only if transferee successfully completes all of the requirements that a new applicant would otherwise need to meet, Sec. 9-495. Medical Marijuana Cultivation Permit Prior to initiating operations as a medical marijuana cultivator and as a continuing requisite to conducting operations, the persons intending to cultivate medical marijuana shall obtain a regulatory permit from the City CEO or his/her designee under the terms and conditions set forth in this Section. Conditions necessary for the continuing validity of any and all regulatory permits issued for the operation of a medical marijuana cultivation site include: a) Strict adherence to each and every requirement of this chapter, b) Allowing the City CEO or his/her designee, as well as the Police Department, to conduct reasonable inspections of the location of the medical marijuana business at the discretion of the city, including but not limited to inspection of security, inventory, and written records and files pertaining to the medical marijuana Ordinance No. 14-12 Page 9 of 40 business, for the purposes of ensuring compliance with local and state law. c) Maintaining with the city current and valid contact information of the owner(s) of the medical marijuana cultivation site. d) Maintaining with the city current and valid contact information of a legal representative of the medical marijuana cultivation site. e) Transferable only if transferee successfully completes all of the requirements that a new applicant would otherwise need to meet. Sec. 9-496. Applications for Medical Marijuana Dispensary and Cultivation Permits The owner of a proposed medical marijuana dispensary and/or a medical marijuana cultivation site shall file an application with the City CEO or his/her designee upon a form provided by the city and shall pay a filing fee as established by resolution adopted by the city council as amended from time to time. An application for a regulatory permit for a medical marijuana dispensary permit and/or a medical marijuana cultivation permit shall include, but shall not be limited to, the following information: a) Address of the location where the medical marijuana business will be located. b) A site plan and floor plan of the premises denoting all the use of areas on the premises of the medical marijuana business, including storage, cultivation areas, exterior lighting, restrooms, and signage. c) A security plan including the following measures: Ordinance No. 14-12 Page 10 of 40 i. Security cameras shall be installed and maintained in good condition, and used in an on-going manner with at least 30 days of digitally recorded documentation in a format approved by the Police Department. The cameras shall be in use 24 hours per day, 7 days per week. The areas to be covered by the security cameras include, but are not limited to, the storage areas, cultivation areas, all doors and windows, and any other areas as determined by the Police Department. H. The lease/business space/cultivation site shall be alarmed with a centrally - monitored fire and burglar alarm system,,and monitored by an alarm company properly licensed by the State of California Department of Consumer Affairs Bureau of Security and Investigative Services in accordance with California Business & Professions Code section 7590 et seq. and whose agents are properly licensed and registered under applicable law. iii. Entrance to the dispensing area, cultivation site and any storage areas shall be locked at all times, and under the control of employees with current and valid employee permits, iv. Interior Lighting. The premises within which the medical marijuana business is operated shall be equipped with and, at all times during which is open to the public or any portion thereof, shall remain illuminated with overhead lighting fixtures of sufficient intensity to illuminate every place to which members of the public or portions thereof are permitted access with an illumination of not less than two foot-candles as measured at the floor level. V. Exterior Lighting. The exterior of the premises upon which the medical marijuana business is operated shall be equipped with and, at all times between sunset and sunrise, shall remain illuminated with fixtures of Ordinance No. 14-12 Page I1 of 40 sufficient intensity and number to illuminate every portion of the property with an illumination level of not less than one foot-candle as measured at the ground level, including, but not limited to, landscaped areas, parking lots, driveways, walkways, entry areas, and refuse storage areas. A. All windows on the building that houses the dispensary and/or cultivation site shall be appropriately secured and all marijuana securely stored, and a reliable, commercial alarm system shall be installed and maintained. d) The name and address of any person who is managing or responsible for the medical marijuana business' activities. e) The name and address of the owner and lessor of the real property upon which the medical marijuana business is to be conducted. In the event the applicant is not the legal owner of the property, the application must be accompanied with a notarized acknowledgement from the owner of the property that a medical marijuana business will be operated on his/her property. f) Authorization for the City CEO or his/her designee to seek verification of the information contained within the application. g) Evidence that the medical marijuana business is organized as a bona fide non- profit cooperative, affiliation, association, or collective of persons comprised exclusively and entirely of qualified patients and the primary caregivers of those patients in strict accordance with California's Compassionate Use Act. h) A statement in writing by the applicant that he or she certifies under penalty of perjury that all the information contained in the application is true and correct, i) Any such additional and further information as is deemed necessary by the City CEO or his/her designee to administer this chapter. Ordinance No. 14-12 Page 12 of 40 Sec. 9-497. Obligation of Medical Marijuana Dispensary and/or Cultivation Operation The obligations of the medical marijuana dispensary and/or cultivator, including all on- going and continuing obligations required pursuant to any provision of this chapter or as may be provided in any conditional approval of the City CEO or his/her designee or the city council, shall be set forth in a written agreement, approved as to form by the city attorney, and enforceable by the city. Such written agreement shall also provide that the medical marijuana dispensary and/or cultivator shall annually provide to the City CEO or his/her designee an updated application containing the information provided in the granted application for a medical marijuana dispensary permit and/or medical marijuana cultivation site permit Upon receiving possession of a regulatory permit as provided in this chapter, the medical marijuana dispensary and/or cultivator shall: a) Provide written authorization to the City CEO or his/her designee as well as the Police Department, to conduct reasonable inspections of the location of the medical marijuana business at the discretion of the city, including but not limited to inspection of security, inventory, and written records and files pertaining to the medical marijuana business, for the purposes of ensuring compliance with local and state law. b) Execute an agreement indemnifying the city, its elected officials, employees, agents, officers, and representatives, and each and all of them individually, from all liability in connection with all claims, damages, attorney's fees, costs and allegations arising from or in any way related to the operation of the medical marijuana business. c) Carry insurance in the amounts and of the types that are acceptable to the City Ordinance No. 14-12 Page 13 of 40 CEO or his/her designee, with minimal coverage provided of comprehensive commercial general liability insurance and comprehensive automotive liability insurance (if automobiles are used by the medical marijuana business for any purpose) protecting the medical marijuana business in an amount of not less than one million dollars ($1,000,000.00) per occurrence, combined single limit, including bodily injury and property damage and not less than one million dollars ($1,000,000.00) aggregate for each personal injury liability, products liability and each accident. Such insurance shall name the city, its council members, officers, employees, agents and contractors as additional insured as respects to any liability arising out of the operation of the medical marijuana business. d) Agree to defend at its sole expense, any action against the city, its elected officials, employees, agents, officers, and representatives, and each and all of them individually, which arises from the application and/or use of this chapter by an applicant. e) Agree to reimburse the city for any court costs and attorney fees that the city may be required to pay as a result of such action. The city may, at its sole discretion, participate at its own expense in the defense of any such action. Failure to perform the aforementioned actions shall render the operation of a medical marijuana business unlawful. Sec. 9-498. Review of Permit Applications The City CEO or his/her designee shall conduct a review of any applicant for any permit authorized under this chapter, and shall prepare a report on the acceptability of the application. Upon completing the review process, the permit shall be deemed a qualified application, unless the City CEO or his/her designee finds: a) The applicant has made one or more false or misleading statements, or Orduiance No. 14-12 Page 14 of 40 omissions on the application or during the application process; or b) A proposed location for a medical marijuana business is not allowed by state or local law, statue, ordinance, or regulation, including this code, at a particular location; or c) The applicant is not a primary caregiver or qualified patient or the legal representative of the medical marijuana business; or d) The applicant or any person who is managing or is otherwise responsible for the activities of the cooperative or collective has engaged in unlawful, fraudulent, unfair, or deceptive business acts or practices; or e) The applicant has not satisfied each and every requirement of this chapter. Based on the information set forth in the application and the City CEO or his/her designee's review, the City CEO or his/her designee may impose reasonable terms and conditions on the use of the permit in addition to those specified in this chapter to ensure the safe operation of the business, and to ensure the health, safety and welfare of the citizens and visitors of the City of Costa Mesa. Sec. 9-499. Action on Applications for Permits This section shall govern action on all applications for all permits provided for in this chapter. a) Upon receipt of a completed application and payment of the application and license fees, the City CEO or his/her designee shall investigate the information contained in the application to determine whether the applicant shall be issued the requested permit. Ordinance No. 14-12 Page 15 of 40 b) If the City CEO or his/her designee determines that the applicant has completed the application improperly, the City CEO or his/her designee shall notify the applicant of such fact within thirty (30) days of receipt of the application. The incomplete application upon return as incomplete shall be deemed abandoned. The applicant may then resubmit a new application for a new review pursuant to the requirements of this section. c) Within sixty (60) days of receipt of the completed application, the City CEO or his/her designee shall complete the investigation, grant or deny the application in accordance with the provisions of this chapter, and so notify the applicant as follows: I. If the application is denied, the City CEO or his/her designee shall attach to the application a statement of the reasons for denial. ii. If the application is granted, the City CEO or his/her designee shall attach to the application the requested permit. iii. The application as granted or denied and the permit, if any, shall be placed in the United States mail, first class postage prepaid, addressed to the applicant at the address stated in the application. d) The City CEO or his/her designee shall grant the application and issue the requested permit upon findings that the proposed permit meets all of the requirements of this chapter, unless the application is denied for one (1) or more of the reasons set forth in section 9-498. e) If the City CEO or his/her designee neither grants nor denies a complete application within sixty (60) days after it is received (except as provided in section 9-499(b)), the application shall be forwarded to the city council at its next regularly scheduled meeting for consideration in strict conformance with the Ordinance No. 14-12 Page 16 of 40 requirements of this chapter. Sec. 9-500. General Operating Standards and Restrictions A medical marijuana business shall operate in conformance with the following minimum standards, and such standards shall be deemed to be part of the conditions of approval on the permit for a medical marijuana business to ensure that its operation is in compliance with California law, the Attorney General Guidelines, and the Costa Mesa Municipal Code, and to mitigate any potential adverse impacts of the medical marijuana business on the public health, safety or welfare. a) Security. One security guard who is licensed by the State of California shall be present at the location of the medical marijuana business during ail business hours, The security guard shall only be engaged in activities related to providing security for the medical marijuana business, except on an incidental basis. Each security guard shall possess a "Security Guard Card" at all times, and shall not possess firearms. The duties of the security guard shall include but are not limited to: a. Ensuring no person smokes any substance within twenty feet (20') of any building entrance, exit, window and air intake vent. b. Monitoring of the outside of the premises for loitering and unlawful sale of medical marijuana by members. Security guards shall be directed to report to the medical marijuana business all unlawful sales of medical marijuana by members, and the medical marijuana business shall make a report within twenty-four (24) hours to the Costa Mesa Chief of Police. Ordinance No. 14-12 Page 17 of 40 H. Security cameras shall be installed and maintained in good condition, and used in an on-going manner with at least 30 days of digitally recorded documentation in a format approved by the City CEO or his/her designee. The cameras shall be in use 24 hours per day, 7 days per week. The areas to be covered by the security cameras include, but are not limited to, the storage areas, cultivation areas, all doors and windows, and any other areas as determined by the City CEO or his/her designee. M. The location of the medical marijuana business shall be alarmed with a centrally -monitored fire and burglar alarm system, and monitored by an alarm company properly licensed by the State of California Department of Consumer Affairs Bureau of Security and Investigative Services in accordance with California Business & Professions Code section 7590 et seq. and whose agents are properly licensed and registered under applicable law. iv. All entrances into the building housing a medical marijuana business shall be locked from the exterior at all times with entry controlled by employees, b) Authorizations. i. The City CEO or his/her designee shall have the right to enter the medical marijuana dispensary and/or cultivation site from time to time unannounced for the purpose of making reasonable inspections to observe and enforce compliance with this chapter and all laws of the city and State of California. H. Recordings made by security cameras required pursuant to this chapter shall be made available to the City CEO or his/her designee or the Police Department upon verbal request; no search warrant or subpoena shall be needed to view the recorded materials. Ordinance No, 14-12 Page 18 of 40 c) Records. i. Medical marijuana businesses shall maintain records reflecting: a. The full name, address, and telephone number(s) of the owner and/or lessee of the property. b. The full name, address, and telephone number(s) of all employees. c. Results of annual live scans of all employees. d. The full name, address, and telephone number(s) of all members who participate in cultivation of marijuana. e. The state issued identification card number of all members to whom the medical marijuana business provides medical marijuana. If a member does not have a state issued identification card, then the medical marijuana business shall assign the member a unique identifying number for the use of the medical marijuana business, and maintain a written copy of the physician's referral for the member. f. The full name, address, and telephone number(s) of all members to whom the medical marijuana business provides medical marijuana. This specific identifying information of names, addresses and telephone numbers of members is considered to be conditionally privileged by the City and shall be deemed confidential and not subject to City inspection unless such inspection has been authorized by the City of Costa Mesa Police Chief or his/her designee in writing pursuant to a reasonable justification. Ordinance No. 14-12 Page 19 of 40 g. The designation, by qualified patient(s) and person(s) with identification cards, of any and all primary caregivers who participate in the collective cultivation of marijuana. h. The dates upon which all members are dispensed medical marijuana, the amount dispensed, and the name of the recipient. i. The delivery of medical marijuana, from the medical marijuana business to a member located outside of the medical marijuana business location, including but not limited to the identity of the recipient, the amount delivered, the date of the delivery, the address of the delivery, the name of the employee making the delivery, and a written receipt from the member confirming the delivery. j. A written accounting of all cash and In-kind contributions, reimbursements, and reasonable compensation provided by the management members and members to the medical marijuana business, and all expenditures and costs incurred by the medical marijuana business. k. A copy of the medical marijuana business' commercial general liability insurance policy and all other insurance policies related to the operation of the medical marijuana business. I. An inventory record documenting the dates and amounts of medical marijuana received at the medical marijuana business, the amounts of medical marijuana being cultivated at the location of the medical marijuana business, the daily amounts of medical marijuana stored at the location of the medical marijuana business, and the daily Ordinance No. 14-12 Page 20 of 40 amounts distributed to members. m. Proof of a valid and current permit issued by the city in accordance with this chapter. Every medical marijuana business shall display at all times during business hours the permit issued pursuant to the provisions of this chapter in a conspicuous place so that it may be readily seen by all persons entering the location of the medical marijuana business. fl. Records shall be maintained on-site, either in paper or electronic form, and secured and verified by the City CEO or his/her designee as needed (consistent with requirements pertaining to patient confidentiality pursuant to applicable State and Federal law), and at least every 12 months by the qualified patient's attending physician. iii. All records required to be maintained by the medical marijuana business for no less than 3 years and are subject to immediate inspection upon written request by the City CEO or his/her designee. d) Employees i. A medical marijuana business shall maintain results of live scans conducted annually by the medical marijuana business on all employees, the written results of such live scans being maintained at the location of the medical marijuana business. ii. No employee convicted within the last ten years of a felony substantially related to the qualifications, functions or duties of an employee of a medical marijuana business (such as a felony conviction for distribution of controlled substances, money laundering, racketeering, etc.) shall be employed by a medical marijuana business, unless such employee has Ordinance No. 14-12 Page 21 of 40 obtained a certificate of rehabilitation (expungement of felony record) under California law or under a similar federal statute or state law where the expungement was granted. At the request of the medical marijuana business, the City CEO shall determine the applicability of this section to a potential employee within a reasonable period of time after a written request has been made to the City CEO for such determination. iii. All employees must possess a valid government issued (or equivalent) form of identification containing an identifying photograph of the employee, the name of the employee, the date of birth of the employee, and the residential address of the employee. Color copies of such identification shall be maintained at the location of the medical marijuana business. A valid California Driver's license will satisfy this requirement. iv. All owners and managers must have a current and valid identification card. e) Volume. A medical marijuana business shall only cultivate, dispense, store or transport medical marijuana in aggregate amounts tied to its members' needs. To that end a medical marijuana business shall ensure compliance with state law limits on amount of dried marijuana and amount of marijuana plants allowed per qualified patients and persons with identification cards and/or primary caregivers f) Only Medical Marijuana. Medical marijuana businesses shall dispense, offer for sale or provide only products which are closely associated with medical marijuana, such as pipes, rolling papers, etc. Ordinance No, 14-12 Page 22 of 40 g) No Recommendations On-site. A medical marijuana business shall not have a physician or an attending physician at the location of the medical marijuana business to evaluate patients or provide a recommendation for medical marijuana. h) Signage. The following signs in measurements of not less than eight by ten inches shall be clearly and legibly posted in a conspicuous location inside the medical marijuana business where they will be visible to members in the normal course of a transaction, staffing: L "Smoking, ingesting or consuming marijuana on this property or within 20 feet of the medical marijuana business is prohibited." ii. "Minors are prohibited from entering this property unless they are a qualified patient or a primary caregiver and they are in the presence of their parent or legal guardian." in. "Neither the City of Costa Mesa, County of Orange, nor any other governmental agency has tested or inspected any marijuana product for pesticides, or other regulated contaminants, distributed at this location." iv. 'The sale of marijuana and the diversion of marijuana for non-medical purposes are violations of state law." i) No Alcohol. Medical marijuana businesses shall not hold or maintain a license from the State Department of Alcoholic Beverage Control to sell alcoholic beverages, or operate Ordinance No. 14-12 Page 23 of 40 a business that sells alcoholic beverages, j) No Lounge or Cafe. Medical marijuana businesses shall not operate as a lounge, cafe or restaurant serving food or drinks for consumption on-site. There shall be no seating area, tables, couches, or chairs for the gathering or congregating of members. k) Quality control. Medical marijuana businesses shall disclose the percentage level of specified compounds, as designated from time to time by the City CEO or his/her designee, which are present in medical marijuana to members before providing medical marijuana. 1) Labeling. 1. Any medical marijuana provided to members shall be properly labeled in strict compliance with state and local laws, regulations and policies, including but not limited to those established by the City Office of Cultivation Standards and Quality Control. H. A distinct and clearly legible label must be affixed onto all medical marijuana items provided by a medical marijuana business which states: a. This item contains medical marijuana b. Warning that the item is a medication and not a food c. Warning that the item is to be kept away from children. d. Warning if nuts or other known allergens are used. e. Date of manufacture. f. Total weight (in ounces or grams) of marijuana in the item. Ordinance No. 14-12 Page 24 of 40 iii. Packaging that makes the product attractive to children or imitates candy is not allowed. iv. Any edible cannabis product that is made to resemble a typical food product (i.e. brownie, cake) must be in a properly labeled opaque (non see-through) package before it leaves the medical marijuana business. V. The City Office of Cultivation Standards and Quality Control shall establish additional minimum requirements as deemed necessary for labeling of medical marijuana products, which shall be strictly adhered to by all medical marijuana businesses. m) Edibles All medical marijuana edibles shall comply with the California Sherman Food, Drug, and Cosmetic Law, as codified in section 109875, et seq. of Part 5 of Division 104 of the Health and Safety Code, and as amended from time to time. Further minimum requirements for all medical marijuana edibles include: i. No edible medical marijuana products requiring refrigeration or hot -holding shall be manufactured for sale or distribution at a medical marijuana business, due to the potential for food -borne illness. Baked medicinal products (i.e, brownies, bars, cookies, cakes), tinctures and other non - refrigerated type items are acceptable for manufacture and sale at a medical marijuana business. ii. Edible medical marijuana products for sale or distribution at a medical marijuana business must have been prepared by a member of that medical marijuana business. No non-member medical marijuana products are allowed for sale or distribution at a medical marijuana business. Ordinance No. 14-12 Page 25 of 40 n) Signage. i. Signs on the premises shall not obstruct the entrance or the video surveillance system. The size, location, and design of any signage must conform to the sign provisions in the Costa Mesa Municipal Code. fl. Business identification signage shall be limited to that needed for identification only, consisting of a single window sign or wall sign that shall comply with the appropriate sign requirements with the applicable zoning district. o) Employee Training. All employees of a medical marijuana business shall receive appropriate training for their intended duties to ensure understanding of rules and procedures regarding maintaining compliance by the operation with State and local law. ii. The medical marijuana business shall take those steps necessary to assure that the persons assigned to provide security are properly trained or employed by a private security service in good standing with all supervisory or regulatory bodies exercising jurisdiction over such services. P) Supply. A medical marijuana dispensary shall only acquire its supply of medical marijuana from its members. q) Operating Hours for Medical Marijuana Dispensary. Ordinance No. 14-12 Page 26 of 40 The maximum hours of operation for a medical marijuana dispensary shall be daily from 7:00 a.m. to 10:00 p.m. r) Use Restrictions. Smoking, ingesting or consuming marijuana at the location of the medical marijuana business or within 20 feet of the medical marijuana business is prohibited. s) No Minors. I. Minors are prohibited from entering the location of the medical marijuana business unless they are a qualified patient or a primary caregiver and they are in the presence of their parent or legal guardian. H. No minor shall operate a medical marijuana dispensary in any capacity, including but not limited to, as a management member, employee, contractor or volunteer. t) Odors. A medical marijuana business shall have an air treatment system that ensures off-site odors shall not result from its operations. This requirement at a minimum means that the medical marijuana business shall be designed to provide sufficient odor absorbing ventilation and exhaust systems so that any odor generated inside the location of the medical marijuana business is not detected outside the building, on adjacent properties or public rights-of-way, or within any other unit located within the same building as the medical marijuana business, if the use only occupies a portion of a building. u) Insurance. Ordinance No, 14-12 Page 27 of 40 A medical marijuana business shall carry insurance in the amounts and of the types that are acceptable to the City CEO or his/her designee, with minimal coverage provided of comprehensive commercial general liability insurance and comprehensive automotive liability insurance (if automobiles are used by the medical marijuana business for any purpose) protecting the medical marijuana business in an amount of not less than one million dollars ($1,000,000.00) per occurrence, combined single limit, including bodily injury and property damage and not less than one million dollars ($1,000,000.00) aggregate for each personal injury liability, products liability and each accident. Such insurance shall name the city, its council members, officers, employees, agents and contractors as additional insured as respects to any liability arising out of the operation of the medical marijuana business. v) Site management. The medical marijuana business permit holder shall take all reasonable steps to discourage and correct conditions that constitute a nuisance in parking areas, sidewalks, alleys and areas surrounding the premises and adjacent properties during business hours if related to the members of the subject medical marijuana business. a. 'Reasonable steps" shall include immediately calling the police upon observation of the activity, and requesting that those engaging in activities that constitute a nuisance or are otherwise illegal to cease those activities, unless personal safety would be threatened in making the request. b. "Nuisance" includes but is not limited to disturbances of peace, open public consumption of medical marijuana or alcohol, excessive pedestrian or vehicular traffic, including the formation of Ordinance No. 14-12 Page 28 of 40 any pedestrian lines outside the building, illegal drug activity, harassment of passersby, excessive littering, excessive loitering, illegal parking, excessive loud noises, especially late at night or early in the morning hours, lewd conduct or police detentions and arrests. fl. The medical marijuana business permit holder shall make available to members who are dispensed medical marijuana a list of the rules and regulations governing medical marijuana use and consumption within the city and recommendations on sensible medical marijuana etiquette. w) Non-profit. A medical marijuana business shall operate on a non-profit basis. A medical marijuana business shall not profit from the sale or distribution of marijuana. Any monetary reimbursement that members provide to the medical marijuana business should only be an amount necessary to cover overhead costs and operating expenses. Retail sales of medical marijuana that violate California law or this chapter are expressly prohibited. H. Reasonable proof (as determined to the satisfaction of the City CEO or his/her designee) of compliance with these non-profit requirements shall be providing annually to the City CEO or his/her designee in writing along with supporting documentation. x) Delivery of Medical Marijuana to Members i. All employees who provide delivery of medical marijuana from a medical marijuana business to a member located outside the medical marijuana business location must have a valid identification card at all times with the employee while the delivery is being made. Ordinance No. 14-12 Page 29 of 40 ii. All deliveries must be recorded by the medical marijuana business and maintained in the regular records of the medical marijuana business. These records shall include but not be limited to the identity of the recipient, the amount delivered, the date of the delivery, the address of the delivery, and the name of the employee making the delivery. ill. Upon receipt of a delivery outside of the location of the medical marijuana business, a member must sign for the delivery on a written identifiable receipt to be kept in the regular records of the medical marijuana business. iv. All deliveries must leave the medical marijuana business in sealed containers whose seals will not be broken until receipt of the delivery by the member. y) Exemptions The regulations contained in this Chapter shall not apply to a medical marijuana business engaged in the following uses: a clinic permitted pursuant to Chapter 1 of Division 2 of the Health and Safety Code; a health care facility permitted pursuant to Chapter 2 of the Division 2 of the Health and Safety Code; a residential care facility for persons with chronic life-threatening illness permitted pursuant to Chapter 3.01 of Division 2 of the Health and Safety Code; a residential care facility for the elderly licensed pursuant to Chapter 3.2 of Division 2 of the Health and Safety Code; a residential hospice or a home health agency permitted pursuant to Chapter 8 of Division 2 of the Health and Safety Code, as long as such use complies strictly with applicable law regulating such use and the location of such use, including, but not limited to, Health and Safety Code sections 11362.6 and 11362.7 et. seq. Ordinance No, 14-12 Page 30 of 40 Sec. 9-501. Medical Marijuana Cultivation Standards and Quality Control A medical marijuana cultivation site shall operate in conformance with the following standards, and such standards shall be deemed to be part of the conditions of approval on the medical marijuana cultivation site's permit to ensure that its operation is in compliance with California law and this Code, and to mitigate any potential adverse impacts of the cultivation of medical marijuana on the public health, safety or welfare. To this end the City CEO or his/her designee is authorized (but not required) to establish a City Office of Cultivation Standards and Quality Control whose purpose will be to conduct regular inspection of cultivation practices and procedures at medical marijuana cultivation sites, as well as to test medical marijuana cultivated at medical marijuana cultivation sites. a) Cultivation Standards. The City Office of Cultivation Standards and Quality Control may: Establish model guidelines for recommended best practices and procedures -for the cultivation of medical marijuana. H. Determine whether the model guidelines are being adhered to by a permit holder for a medical marijuana cultivation site, and make available to the public the results. b) Quality Control. The City Office of Cultivation Standards and Quality Control may: i. Establish testing standards for the quality of medical marijuana dispensed at medical marijuana businesses. Ordinance No. 14-12 Page 31 of 40 ill. Apply the testing standards to medical marijuana dispensed at medical marijuana businesses, and make available to the public the results. c) Labeling. The City Office of Cultivation Standards and Quality Control may establish labeling standards for all medical marijuana products consistent with both the results of inspections and testing pursuant to this section as well as deemed appropriate and necessary by the City CEO or his/her designee. d) Pesticides and Contaminants. i. Representative samples of all strains of medical marijuana distributed by a medical marijuana business shall be analyzed by the medical marijuana business or an independent laboratory (if and when such is available) to ensure it is free of harmful pesticides and other contaminants regulated by local, state or federal regulatory statutory standards. ii. Any medical marijuana from which the representative sample tested positive for a harmful pesticide or other contaminant at a level that exceeds the local, state or federal regulatory or statutory standards shall be destroyed forthwith. ill. The City Office of Cultivation Standards and Quality Control shall have the authority to enforce this section. Sec. 9-502. Fees a) Fees. Ordinance No. 14-12 Page 32 of 40 An application fee set by resolution of the city council shall be required for formal processing of every application made under this chapter. ii. The City Council is authorized to pass resolutions to recover any and all fees and costs incurred by the implementation of this chapter through an appropriate fee recovery mechanism to be imposed upon medical marijuana businesses and their operations. b) State Board of Equalization Seller's Permit Required. The State Board of Equalization has determined that medical marijuana transactions are subject to sales tax, regardless of whether the individual or group makes a profit, and those engaging in transactions involving medical marijuana must obtain a Seller's Permit from the State Board of Equalization. Such permit shall be conspicuously displayed at the Medical Marijuana Business. Failure to maintain the Seller's Permit is grounds for revocation of a medical marijuana dispensary permit and/or medical marijuana cultivation site permit. Sec. 9-503. Location Restrictions a) Medical marijuana businesses shall not be located within one thousand feet of a public or private school, public library or youth center (serving youth ages eighteen (18) and under). b) Medical marijuana businesses shall not be located within two hundred (200) feet of a residential zone except pursuant to the issuance of a minor conditional use permit as determined by the director of development services. c) Medical marijuana businesses may only be located in commercial, manufacturing or industrial zones as designated in Row 31 a, Table 13-30, of Section 13-30 of chapter 4 of Title 13 of the Costa Mesa Municipal Code. Ordinance No. 14-12 Page 33 of 40 d) No medical marijuana business can be located within one thousand (1000') feet of any other medical marijuana business, irrespective of ownership. Sec. 9-504. Suspension and Revocation. The City CEO or his/her designee is authorized to suspend and/or revoke any and all permits issued pursuant to this chapter upon the determination through written findings of a failure to comply with any provision of this chapter, any condition of approval, or any agreement or covenant as required pursuant to this chapter. The City CEO or his/her designee may revoke a medical marijuana regulatory permit if any of the following, singularly or in combination, occur: a) The City CEO or his/her designee determines that the medical marijuana dispensary or cultivation site has failed to comply with any aspect of this chapter, any condition or approval, or any agreement or covenant as required pursuant to this chapter; or b) Operations cease for more than 180 calendar days (including during any change of ownership, if applicable); or c) Ownership is changed without securing a new regulatory permit; or d) The medical marijuana dispensary and/or cultivation site fails to maintain required security camera recordings; or e) The medical marijuana dispensary and/or cultivation site fails to allow inspection of the security recordings, the activity logs, or of the premise by authorized city officials. Sec. 9-505. Violations and Penalties. Ordinance No. 14-12 Page 34 of 40 Any person, whether as principal, employee, agent, partner, director, officer, stockholder, or trustee or otherwise, violating or causing the violation of any of the provisions of this chapter shall be guilty of a misdemeanor, and any conviction thereof shall be punishable by a fine of not more than one thousand dollars ($1,000.00) or by imprisonment for not more than six (6) months, or by both such fine and imprisonment. Any violation of the provisions of this chapter shall constitute a separate offense for each and every day during which such violation is committed or continued. Sec. 9-506. Public Nuisance. In addition to the penalties set forth in this chapter, any medical marijuana business which is operating in violation of any provisions of this chapter is hereby declared to constitute a public nuisance and, as such, may be abated or enjoined from further operation. All costs to abate such public nuisance, including attorneys' fees and court costs, shall be paid by the permit holder of the medical marijuana business pursuant to Chapter III (Public Nuisance Abatement) of Title 20 (Property Maintenance) of the Costa Mesa Municipal Code. Any appeals to a determination that a medical marijuana business is operating as a public nuisance shall be pursuant to the provisions in the same chapter. Sec. 9-507. Appeals Any decision regarding approval, conditional approval, denial, suspension or revocation may be appealed to the city council in accordance with the provisions of Chapter IX of the Costa Mesa Municipal Code. Sec. 9.508. Prohibited Operations and Nonconforming Use Ordinance No. 14-12 Page 35 of 4 0 All medical marijuana businesses in violation of Health and Safety Code Section 11362.7 et seq. and 11362.5 et seq., this chapter, or any other applicable State law are expressly prohibited. It is unlawful for any medical marijuana business in the city, or any agent, employee or representative of such medical marijuana business, to permit any breach of peace therein or any disturbance of public order or decorum by any tumultuous, riotous or disorderly conduct on the premises of the medical marijuana business, or to violate any State law, or this chapter. No use which purports to have distributed marijuana prior to the enactment of this chapter shall be deemed to have been a legally established use under the provisions of the Costa Mesa Zoning Code, the Costa Mesa Municipal Code, or any other local ordinance, rule or regulation, and such use shall not be entitled to claim legal nonconforming status. Sec. 9-509. Severability If any section, subsection, subdivision, sentence, clause, phrase, word, or portion of this Ordinance is, for any reason, held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The People of the City of Costa Mesa hereby declare that they would have adopted this Ordinance and each section, subsection, subdivision, sentence, clause, phrase, word, or portion thereof, irrespective of the fact that any one or more sections, subsections, subdivisions, sentences, clauses, phrases, words or portions thereof be declared invalid or unconstitutional. Sec. 9.510. Amendment Provisions of this chapter may be amended to further their purposes by ordinance passed by a majority vote of the city council. Ordinance No. 14-12 Page 36 of 40 Sec. 9.513. Consistency with Statewide Regulation of Marijuana This chapter shall be read consistent with any statewide regulation of medical marijuana that is promulgated by the California legislature or by voter approval in the future. In the event statewide regulation is passed pursuant to the decriminalization or legalization of marijuana for recreational use, this chapter shall govern the conduct of those business allowed to distribute marijuana under such provisions to the fullest extent possible consistent with such statewide regulation. SECTION 2. Section 13-16 (Enforcement) of Article 4 (Enforcement) of Chapter I (General) of Title 13 (Planning, Zoning and Development) is hereby repealed and replaced with the following: Sec. 13.16. Enforcement. (a) Criminal prosecution. Any person, whether as principal, agent, or employee, violating the terms of this zoning code may be prosecuted as provided in section 1-33 of this Municipal Code. (b) Criminal citation. For the purposes of this zoning code, a violation of the terms of this zoning code may be cited as either an infraction or misdemeanor pursuant to State Government Code Sections 36900 and 36901 and as provided in section 1-33 of this Municipal Code. (c) Civil action. As an alternative to prosecution or citation, or as an additional action, the city attorney may, at the request of the development services director, institute an action in any court of competent jurisdiction to restrain, enjoin, or abate the condition(s) or activity(ies) found to be in violation of the provisions of this zoning code. Ordinance No. 14-12 Page 37 of 40 (d) Nuisance. Any use, structure, or property that is altered, enlarged, erected, established, maintained, moved, or operated contrary to the provisions of this title or any condition of approval, is hereby declared to be unlawful and a public nuisance and may be abated by the city through civil proceedings by means of a restraining order, preliminary or permanent injunction, or in any other manner provided by law for the abatement of such nuisances. SECTION 3. Line 31 a of Table 13-30 (City of Costa Mesa Land Use Matrix) of Chapter IV (Citywide Landuse Matrix) of Title 13 (Planning, Zoning and Development) is hereby repealed and replaced with the following: Ordinance No. 14-12 Page 38 of 40 a um ami m 0� ci) M E ao_ a 0 O U CL 0.D0'ZU� daaxca . 2a 2� c7 a F- U Urtn a N 0�M 1. N Sc 0 I . � � um ami m M E SECTION 4. Effective Date. This Chapter, if approved by the electorate of the City of Costa Mesa at the General Municipal Election of November 4, 2014 shall become effective immediately upon the declaration of the results of that election by the City Council of the City of Costa Mesa. SECTION 5. Severability. If any section, subsection, sentence, clause, phrase, or portion of this Ordinance is for any reason held to be invalid or unenforceable by a court of competent jurisdiction, the remaining portions of this Ordinance shall nonetheless remain in full force and effect. The People hereby declare that they would have adopted each section, subsection, sentence, clause, phrase, or portion of this Ordinance, irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases, or portions of this Ordinance be declared invalid or unenforceable. SECTION 6„ Execution. The Mayor is hereby authorized to attest to the adoption of the Ordinance by the voters of the City of Costa Mesa by signing where indicated below. I hereby certify that the foregoing Ordinance was PASSED, APPROVED and ADOPTED by the People of the City of Costa Mesa, California voting on the 4th day of November, 2014. Mayor ATTEST: City Clerk APPROVED AS TO FORM: City Attorney Ordinance No, 14-12 Page 40 of 40 ATTACHMENT 5 BALLOT INITIATIVES FOR TWO SEPARATE MEDICAL MARIJUANA ORDINANCES CITY OF COSTA MESA PROPOSED MEDICAL MARIJUANA ORDINANCE CITY OF SANTA ANA MEDICAL MARIJUANA ORDINANCE Prepared by City Departments Pursuant to Election Code § 9212 and at Request of City Council Assistant CEO Richard L. Francis Deputy City Attorney Chris F. Neumeyer December 4, 2014 TABLE OF CONTENTS CHAPTER 1 INTRODUCTION (PAGE 1) SECTION 1.1 INTRODUCTION 1. SUBSECTION 1.1.A (ORDINANCE No. 1) 1, SUBSECTION 1,1.13 (ORDINANCE N0. 2) 2. CHAPTER 2 CITY ATTORNEY REPORT (PAGE 41 SUBSECTION 2.2.A INTRODUCTION 4. SUBSECTION 2.2.B SUMMARY OF FOUR ORDINANCES 4, SUBSECTION 2.2.0 APPLICATION OF FEDERAL AND STATE LAW 6, SUBSECTION 2.2.0 1. (FEDERAL LAW) 6. SUBSECTION 2.2 C-2 (CALIFORNIA LAW) 7. SUBSECTION 2.2 C-3 (FEDERAL LAW/MUNICIPAL REGULATION) 7. SUBSECTION 2.2 D CONSTITUTIONAL ISSUES CONCERNING "PRIORITY REGISTRATION" 9. SUBSECTION 2.2E LOCAL SALES TAXES AND CALIFORNIA LAW 9. SUBSECTION 22 F ELECTION DATE: PROPOSITION 218 & ELECTION CODE 9214 10. CHAPTER 3 POLICE DEPARTMENT REPORT (PAGE 12) SUBSECTION 3.3.A INTRODUCTION 12. SUBSECTION 3.3.B BACKGROUND 12. SUBSECTION 3.3.0 (ORDINANCE N0,1) 13. SUBSECTION 3.3. D (ORDINANCE NO. 2)14, SUBSECTION 3.3. E (ORDINANCE N0. 3) 14, SUBSECTION 3.3. F (OTHER CITIES) 14. SUBSECTION 3.3, G COLORADO & WASHINGTON 15. SUBSECTION 3.3. H IMPACT ON THE POLICE DEPARTMENT 15. SUBSECTION 3.3. 1 CONCLUSION 16. CHAPTER 4 FINANCE DEPARTMENT REPORT WAGE 18 SUBSECTION 4.4.A INTRODUCTION 18. SUBSECTION 4.4.8 POTENTIAL FISCAL IMPACT 18. SUBSECTION 4.4.0 BRIEF SUMMARIES OF POTENTIAL FISCAL IMPACTS - EACH DOCUMENT 19. SUBSECTION 4.4. C-1 (ORDINANCE NO. 1) 19, SUBSECTION 4.4. C-2 (ORDINANCE NO. 2) 20. SUBSECTION 4.4. C-3 (ORDINANCE NO. 3 "CITY DRAFTY) 21. SUBSECTION 4.4.D CONCLUSION 22. (FINANCE DEPT.-AITACHMENT,#1)23(PG.1-3) (FINANCE DEPT. - ATTACHMENT #2)23(PG.4-7) (FINANCE DEPT. -ATTACHMENT#3)23(PG.8-11 (FINANCE DEPT. -ATTACHMENT #4)23(PG.12-14) CHAPTER 5 HUMAN RESQURCES/RISK, MANAGEMENT REPORT (PAGE 24 SUBSECTION 5.5.A INTRODUCTION 24. SUBSECTION 5.5.13 ANALYSIS/IMPACT ON HR/RISK MANAGEMENT DIVISION 24, SUBSECTION 5.5.0 CONCLUSION 25. CHAPTER 6 FIRE DEPARTMENT REPORT PAGE 26 SUBSECTION 6.6 A. SUBSECTION 6.6.B INTRODUCTION 26. IMPACT ON THE FIRE DEPARTMENT 26. SUBSECTION 6.6.0 PROLIFERATION OF ILLEGAL OR NON -APPROVED MARIJUANA SITES/LOCATIONS 27. SUBSECTION 6.6.) CONCLUSION 27. (FIRE DEPT. -ATTACHMENT #1) 27(PG.1-4) (FIRE DEPT. - ATTACHMENT #2) 27(PG.5) (FIRE DEPT. -ATTACHMENT#3) 27(PG.6-7) CHAPTER 9 DEVELOPMENT SERVICES DEPARTMENT PAGE 28 SUBSECTION 7J.A SUBSECTION 7.7.B SUBSECTION 7.7.0 INTRODUCTION 28. IMPACT ON THE DEVELOPMENT SERVICES DEPARTMENT 28. CONCLUSION 29. CHAPTER 8 INFORMATION TECHNOLOGY DEPARTMENT REPORT (PAGE 30� SUBSECTION 8.8 A SUBSECTION 8.8.B SUBSECTION 8.8.0 INTRODUCTION 30. IMPACT ON THE I.T. DEPARTMENT 30. CONCLUSION 30. CHAPTER 9 PUBLIC SERVICES DEPARTMENT REPORT PAGE 31 SUBSECTION 9.9.A SUBSECTION 9.9.B SUBSECTION 9.9.C. INTRODUCTION 31, IMPACT ON THE PUBLIC SERVICES DEPARTMENT 31, CONCLUSION 31. CHAPTER 1 INTRODUCTION BY RICK FRANCIS, ASSISTANT CEO Two separate and competing initiative proposals seeking a special election and adoption of new ordinances have been filed with the Costa Mesa City Clerk's Office. They both seek to modify the Costa Mesa Municipal Code (CMMC) and allow medical marijuana businesses to "legally" operate within the city limits. Both initiatives have been certified as having been signed by fifteen percent of City of Costa Mesa registered voters, Council Member Gary Monahan also presented an initiative proposal ("City Draft") which failed to pass due to lack of support at the August 5, 2014• City Council meeting. By City Council action on November 18, 2014, each department has been asked to submit an impact report of the two citizen -backed initiatives prior to the December 9, 2014 City Council meeting. Staff was also asked to review the "City Draft" submitted on August 5, 2014 and include that review in the impact reports. In addition, staff was asked to prepare an analysis of the ordinance adopted by the City of Santa Ana on November 4, 2014 that allows medical marijuana businesses to exist in that city under certain guidelines. The Finance Department, Police Department, Development Services Department, Human Resources Division and the City Attorney's Office will provide the analyses for the "City Draft". The Finance Department and the City Attorney will provide the analyses for the Santa Ana Ordinance. The City Attorney was also asked to respond to concerns related to potential staff liability for issuing permits for medical marijuana businesses for use that is in conflict with federal law, as well as other significant legal issues. Below are key provisions of each citizen -sponsored initiative proposing a new City ordinance. A. Ordinance No. 1- "Allow Operation of Up to Eight Medical Marijuana (Cannabis) Businesses_ In the City of Costa Mesa" The first proposal was submitted by proponents Robert Taft, Jr. and Kevin Gardner (with the counsel of attorney Randall T. Longwith), and they named their ordinance the "Medical Cannabis Control Act." The key features of this proposal are as follows: 1. The city shall issue no more than eight business licenses. The City Council has the discretion to increase, but not decrease the number of business licenses. 2. Priority registration for the limited number of licenses is provided to entities which performed certain "preliminary steps" on or before May 30, 2014. 3. Only a business license shall be required to operate a collective/cooperative. The City shall issue licenses if application meets minimum requirements in new law; valid fortwo years regardless of whether or not to operate business; automatic renewal upon application if meets same minimum requirements. 4. Failure of City to act on application for license within 45 days results in automatic issuance. 5. Under this proposal, businesses may engage in all aspects of marijuana production, packaging and sales, provided that these activities are not in conflict with state and federal law. 6. Medical marijuana businesses are exempt from the need to obtain special use permits, conditional use permits, or any other permits. They will not require any special site plans, variances or any other permits outside this Initiative. 7. Application fees for cost recovery are capped at $500. 8. Medical marijuana businesses can cultivate a reasonable amount of marijuana consistent with patient needs (no specific quantity is mentioned). 9. They must not operate within 600 feet of a public school; they may not operate within 1000 feet of another medical marijuana business. 10. The proposal calls For a 6% business tax, and a 1% sales tax on the sale of all other tangible personal property at retail. 11. Medical marijuana businesses may only operate in certain commercial and industrial areas, but not in residential areas. 12. The provisions of the CMMC created by this proposal cannot be repealed or changed except by another majorityvote of the electorate. 13. Regulation as to where the businesses can and cannot operate, as well as hours they can operate. 14. Other regulations include insurance requirement, employee background checks, security provisions, child proof containers and odor restrictions. B. Ordinance No, 2 — "Allow Operation of Up to Four Licensed Medical Marijuana Businesses in the City of Costa Mesa" The second initiative proposal was submitted by proponents Taylor Webster and Michael Levesque (with the counsel of attorney David Welch), and they named their ordinance "An Initiative to Provide Revenue to Costa Mesa Citizens." The key features of this proposal are as follows: 1. Up to four medical cooperative permits are to be issued. The city can increase, but not decrease the number of permits issued. 2, Medical marijuana businesses will require a city business license as well as a city -issued medical cooperative permit that is to be renewed annually; operators will require separate individual operator permits. 2 3. Priority registration for the limited number of permits is provided to entities which performed certain "preliminary steps" prior to May 22, 2014, 4. Police Chief shall issue permits If applications meets minimum requirements in new law; valid for one year; automatic renewal upon application if meet same minimum requirements. 5. Failure of Police Chief to act on business permits within 30 days, and operator permits within 15 days, results in automatic issuance. 6. Procedure for revocation of permits with gradually increasing penalties after administrative hearings, beginning with warning, six month suspension, then revocation of permit. 7. Medical marijuana businesses can cultivate, distribute or transfer medical marijuana. 8. Authorizes City Council to pass a fee resolution for cost recovery through license application fees. 9. No operations abutting a residential area (although there is an exception in Section 9-495 (i) that states this subsection shall not prohibit a cooperative from locating across a street from any land zoned residential if the residential zone and the cooperative are separated by a public roadway that is at least 80 feet wide). 10. No operations within 1000 feet of a school or another medical marijuana business; no operations within 600 feet of public park, library or licensed child-care facility. 11. This proposal calls for a 6% tax on gross receipts of the business. 12. This proposal exempts medical cooperative from City's 1% sales tax. 13. The City Council may amend Initiative provisions to further its purpose. However, any repeal of an Initiative provision must be approved by a majority of voters in a city-wide election. 14. Regulation as to where the businesses can and cannot operate, as well as hours they can operate. 11 CHAPTER 2 CITY ATTORNEY REPORT BY CHRIS F. NEUMEYER, DEPUTY CITY ATTORNEY A. Introduction Pursuant to request by the City Council, the City Attorney's Office has prepared the following report on legal issues concerning four medical marijuana ordinances. The four ordinances consist of the following: the two citizen sponsored initiative measures which were certified to the City Council on November 18, 2014 as qualifying for an election (being Ordinance No. 1 from proponents Robert Taft Jr. and Kevin Gardner, and Ordinance No. 2 from proponents Taylor Webster and Michael Levesque); the previously considered City drafted ordinance which was reviewed by the City Council on August 8, 2014 (Ordinance No. 3); and the Santa Ana ordinance drafted by the City of Santa Ana which was recently approved by Santa Ana's voters at the November 4, 2014 general election and which will now become local law in Santa Ana (Ordinance No 4). Below, please find a brief summary of the four ordinances through a comparison matrix, and then a discussion of federal law, constitutional issues regarding "priority registration," local sales tax issues and election dates. B. Summary of Four Ordinances 4 Ordinance No. 1 Ordinance No. 2 Ordinance No. Ordinance No. 4 REGULATION Taft & Gardner Webster & _q Proposed City's New Santa Ana (Atty Longwith) Levesque (Atty Ordinance Ordinance Welch) Alarm system Yes No Yes Yes Security guard Yes No Yes Yes Security cameras No No Yes Yes Priorityto old stores Yes Yes No No Number of stores Eight (minimum) Four (minimum) No limit Twenty City Council may No Yes Yes Yes (and may amend (not repeal) repeal) Inspections No No Yes Yes Authorized Tax Yes Yes No Yes 4 Limit sales to No medical marijuana and related Items No Yes No Business indemnify Yes City if legal problems No Yes No Childproof Yes containers No Yes No Pesticide testing No No Yes No Active ingredients No testing No Yes No On-site Yes prescriptions Yes No No Business license Yes Yes Yes Yes Business permit No Yes Yes Yes Operator permit No Yes No No Cultivation permit No No Yes No Lawful zones Commercial / industrial Commercial / industrial Commercial / industrial Industrial Location restrictions Yes Yes Yes Yes Non -concentration Yes of stores Yes Yes **mistakenly said "No" in 11/18 report** Yes Hours gam to 10pm 8am to 10pm lam to 10pm 10 to 8 Mon -Sat 11 to 7 Sun Quality control No No Yes No Cultivation No standards No Yes No Background checks Yes Yes Yes Yes Patient Yes confidentiality Yes Yes No Business records No No Yes Yes Transaction records No No Yes Yes Delivery records No No Yes No Employee records No No Yes Yes Employee training No No Yes No General insurance Yes No Yes No Delivery insurance Yes No Yes No No Minors Yes Yes Yes Yes Labeling Yes No Yes No Outdoor lighting No Yes Yes No Signage restrictions Yes No Yes Yes Odor restrictions Yes No Yes Yes Edible regulations Yes No Yes Yes C. Application of Federal and State Law All four of the medical marijuana ordinances under review are similarly subject to both federal and state law. Under federal law the use of marijuana (both medical and recreational) remains illegal. However, at present the U.S. Department of Justice has advised federal prosecutors that enforcement of federal marijuana law is a low priority in states where marijuana is allowed for medical or recreational use, California law has decriminalized the medical cultivation and medical use of marijuana, while the general use of marijuana remains illegal. I. Federal Law Pursuant to the Controlled Substances Act of 1970 ("CSA"), federal law generally prohibits the manufacture, distribution or possession of marijuana. 21 U.S.C. §§ 801 et seq. "The CSA designates marijuana as contraband for any purpose; in fact, by characterizing marijuana as a Schedule I drug, Congress expressly found that the drug has no acceptable medical uses." Gonzales v. Raich 545 U.S. 1, 27 (U.S. 2005), In 2013, the United States Department of Justice, through the Office of the Deputy Attorney General, issued a memorandum to all U,S. Attorneys entitled "Guidance Regarding Marijuana Enforcement," These guidelines provide that in states which have relaxed their marijuana laws through the implementation of "strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale and possession of marijuana," federal prosecutors are advised not to consider enforcement of the CSA to be a priority. Rather, the regulation and/or criminal prosecution of marijuana (whether medical or recreational) is for now to be left to the discretion of those states which have either decriminalized or legalized marijuana, However, the CSA remains the law of the land, this prioritization of federal resources remains subject to change, and the manufacture, distribution or possession of medical marijuana in California remains illegal under federal law. California's medical marijuana laws "have no effect on the federal enforceability of the CSA in California. The CSA's prohibitions on the possession, distribution, or manufacture of marijuana remain fully enforceable in [California]." City of Riverside v Inland Empire Patients Health & Wellness Center, Inc., 56 Cal. 4th 729, 740 (2013). 2. California Law In 1996 California voters passed Proposition 215, known as the Compassionate Use Act ("CUA"). The CUA decriminalized the cultivation of and use of marijuana by seriously ill Californians who received a recommendation from a physician for such medical use. However, the CUA did not legalize marijuana. Under California Health & Safety Code §§ 11357 et seq., the possession, sale, cultivation or transportation of marijuana remains illegal. Instead, the CUA provides an affirmative defense to criminal prosecution under state law for individuals who cultivate or use marijuana for medical purposes. In 2004, Senate Bill 420, known as the Medical Marijuana Program Act ("MMP"), became state law. The MMP added some regulatory details to the CUA, including the establishment of voluntary identification cards for qualifying medical marijuana users, and recognition of a qualified right to collective and cooperative cultivation of medical marijuana. In 2008, the California Attorney General's Office recommended in light of the removal of "the use and cultivation of physician recommended marijuana from the scope of the state's drug laws" by the CUA and MMP "that state and local law enforcement officers not arrest individuals or seize marijuana under federal law when the officer determines from the facts available that the cultivation, possession, or transportation is permitted under California's medical marijuana laws." In 2013, the California Supreme Court in City of Riverside v. Inland Empire Patients Health & Wellness Center, Inc., 56 Cal, 4th 729, 752 (2013) affirmed the authority of a local government to prohibit the operation of medical marijuana dispensaries within its jurisdiction through land use laws. 3. Federal Law Might be Violated by the Issuance of Medical Marijuana Dispensary Licenses and Permits and/or Municipal Regulation of Medical Marijuana Dispensaries At present there is an unsettled issue of law as to whether a local government's issuance of licenses and/or permits to medical marijuana dispensaries along with regulation of the shops constitutes a violation of federal law. The issue is whether the local government and/or the government employee issuing such a license or permit, and/or regulatingthe distribution of medical marijuana, are affirmatively "aiding and abetting" a violation of federal law. The decision in Conant v. Walters, 309 F.3d 629, 635 (9th Cir. 2002) is illustrative. In Conant the Ninth Circuit Court of Appeals held that simply recommending (but not prescribing) the use of medical marijuana was not prohibited by federal law. The court held that the "conviction of aiding and abetting requires proof that the defendant 'associated himself with the venture, that he participated in it as something that he wished to bring about, that he [sought] by his actions to make it succeed'." Conant, 7 309 F.3d at 635. These elements are not present when a doctor recommends (as opposed to prescribes) medical marijuana. Likewise, other courts have found no violation of federal law in this context when a police officer has to return seized medical marijuana to a qualified patient, or when a county issues a medical marijuana identification card as required by the MMP. See City of Garden Grove v Superior Court 157 Cal. App. 4th 355 (2007); County of San Diego v San Diego NORML, 165 Cal. App. 4th 798 (2008). (Significantly, these are state - as opposed to federal - court decisions) However, in the depublished decision of Pack v. Superior Court, 199 Cal. App. 4th 1070 (2011), a court held that a medical marijuana ordinance in the City of Long Beach which "goes beyond simply decriminalization" by enacting "a comprehensive regulatory scheme by which medical marijuana collectives within the City are governed" was preempted by federal law, Under that ordinance, Long Beach "charges application fees ... holds a lottery, and issues a limited number of permits. Permitted collectives, which must then pay an annual fee, are highly regulated, and subject to numerous restrictions on their operation [including restrictions on] the location of medical marijuana collectives..." Pack, 199 Cal. App. 4th at 1076-1082. The Pack court further stated in a footnote that "[t]here may also be an issue of whether the ordinance requires certain City officials to violate federal law by aiding and abetting (or facilitating (21 U.S.C. § 843(b))) a violation of the federal CSA. For example, the ordinance requires the City's director of financial management to approve and issue a permit if certain facts are demonstrated." Pack, 199 Cal. App. 4th 1070, 1091 fn. 27. Although the Pack decision has been depublished, the reasoning behind that court's decision could be applied in a similar challenge to any of the numerous local Ordinances throughout California which permit and/or license medical marijuana dispensaries, including any such prospective Costa Mesa ordinance. Likely any municipal law that affirmatively authorizes (i.e., "aids and abets") the possession, distribution and manufacture of marijuana is in conflict with the federal Controlled Substances Act. California Government Code section 37100 ["Ordinances"] authorizes cities to "pass ordinances not in conflict with the Constitution and laws of the State or the United States." (Emphasis added). When cities do not comply with federal law, the consequences can be dire - local governmental agencies and their officers, and employees, can be subject to liability for violations of federal law. See 42 U.S.C. § 1983 et seq. Nevertheless, the CSA has neither expressly preempted state law, nor does it indicate that Congress intended to occupy the entire field of regulation. The question remains as to whether California's medical marijuana laws definitively create a positive conflict with the CSA and are therefore preempted by the CSA. A City ordinance which authorizes medical marijuana businesses potentially places City employees in the untenable position of having to choose between a state law, authorizing certain conduct, and federal law, prohibiting the same conduct. "[A]n employer's authority over its employee does not include the right to demand that the employee commit a criminal act..." Tamenv v. Atlantic Richfield Co.. 27 Cal. 3d 167, 178 (Cal. 1980). California Labor Code section 2856 also provides in full that "An employee shall substantially comply with all the Ey directions of his employer concerning the service on which he is engaged, except where such obedience is impossible or unlawful, or would impose new and unreasonable burdens upon the employee." Federal law may prohibit the issuance of municipal medical marijuana permits and licenses, as well as the local authorization and regulation of medical marijuana businesses. If so, the City cannot require its employees to issue permits and licenses, or otherwise comply with the proposed ordinances, without running afoul of federal law. D. Constltutional Issues Concerning "Priority Re_ ie stration" The Fourteenth Amendment to the U.S. Constitution provides for the equal protection of the laws. Similarly situated parties must be treated the same under the law. Both Ordinance No, 1 and Ordinance No. 2 establish priority registration, for operational licenses, to certain specified medical marijuana businesses that meet certain criteria. Each of these ordinances provide for a maximum number of businesses (with authority provided to the City Council to increase, but not decrease, the number of dispensaries in the City). Ordinance No. 1 allows for eight businesses and Ordinance No. 2 allows for four businesses. Thus, reasonably the only businesses which would be permitted under either of these ordinances would be the ones which qualify for "priority registration." The priority registration clauses in Ordinance No. 1 and Ordinance No. 2 may be subject to being stricken from those ordinances on the basis of denial of equal protection. Because the preferential clauses in the two ordinances impact neither fundamental rights nor suspect classes, the "priority registration" provisions "must be upheld against equal protection challenge if there is any reasonably conceivable state of facts that could provide a rational basis for the classification." FCC v. Beach Communications, 508 U.S. 307, 313 (U.S. 1993) (overruled on other grounds). The discrimination need only be "rationally related to a reasonably conceivable legitimate public purpose" to be upheld vis-a-vis the right of equal protection. Warden v. State Bar, 21 Cal. 4th 628, 650 (Cal. 1999). However, this relatively light burden is arguably not met by the two ordinances. Both of the proposed ordinances provide preferential treatment to entities which completed specified actions within the City before June, 2014 related to prospectively opening a medical marijuana business in the City. At that time, the operation of medical marijuana businesses in the City was prohibited in all zones of the City. To prefer businesses - which took initial steps to establish (then) unlawful businesses - likely has no legitimate public purpose. The priority registration clauses arguably reward entities which took preliminary steps to open up medical marijuana businesses when those businesses were unlawful. Elevating the rights of illegal businesses above legal ones violates public policy. Prioritizing illegal activity, over and above legal activity, undermines local government's police power, depriving local government of the ability to determine whether allowing dispensaries would or would not benefit the public health, safety and welfare. E. Local Sales Taxes and California Law 9 Ordinance No. 1 proposes a sales tax of one percent "on the sale of all other tangible personal property at retail." Presently the City already has a one percent local sales tax. According to the California Attorney General, the Bradley -Burns Uniform Local Sales and Use Tax Law "prevents cities from imposing additional sales and use taxes in excess of the 1 percent rate permitted by the Bradley -Burns Law... [and] general law cities do not have the authority to impose separately administered local sales and use taxes which do not conform to the Bradley -Burns Uniform Local Sales and Use Tax Law." 53 Ops. Cal. Atty. Gen, 292, 296-297(Cal. AG 1970). State law appears to preempt a City from raising its local sales tax above one percent. However, if a municipal government ignores the Bradley -Burns law and increases its local sales tax above one percent, the State Board of Equalization ("BOE") will terminate its contract to collect such a local sales tax with a city. Cal Revenue & Taxation Code § 7203.5 ["Termination of state administration"]. The consequence to the City of raising a local sales tax above one percent was addressed on November 4, 2014 by a BOE representative, who advised in writing that raising the local sales tax above Bradley - Burns limits means "cities have the risk of jeopardizing the 1% sales tax that they currently receive." F. Election Date: Proposition 218 and Election Code § 9214 Three of the four ordinances under review contain new taxes: 1. Ordinance No. 1: proposes a sales tax of one percent "on the sale of all other tangible personal property at retail." 2. Ordinance No. 1 and Ordinance No. 2: both propose a six percent business tax on medical marijuana businesses. 3. Ordinance No. 3: does not propose any new taxes, 4. Ordinance No. 4: proposes a maximum ten percent tax on "gross receipts" of medical marijuana businesses, to be set initially at five percent. The California Constitution in Art XIII C § 2(b), as amended by Proposition 218 in 1996, provides in full that "No local government may impose, extend, or increase any general tax unless and until that tax is submitted to the electorate and approved by a majority vote. A general tax shall not be deemed to have been increased if it is imposed at a rate not higher than the maximum rate so approved. The election required by this subdivision shall be consolidated with a regularly scheduled general election for members of the governing body of the local government, except in cases of emergency declared by a unanimous vote of the governing body." Therefore, according to the California Constitution the three ordinances which impose taxes can only be sent to the City's voters at "a regularly scheduled general election for members of the governing body of the local government." The next such election which meets those conditions is November 8, 2016. 10 However, two of the ordinances (being the citizen sponsored measures which prompted this report, i.e., Ordinances Nos. 1 & 2) have simultaneously qualified under Election Code § 9214 for a special election, which would need to be held 88 to 103 days from the date of the City Council meeting when such election is ordered. As to what election date the two citizen -sponsored medical marijuana ballot measures should be sent to'the voters, there is a conflict between the California Constitution, and the California Election Codes which have been passed by the California legislature. The "California Constitution is a limitation or restriction on the powers of the Legislature..." California State Personnel Bd. v. California State Employees Assn., Local 1000, SEED, AFL-CIO, 36 Cal. 4th 758, 769 (Cal. 2005). II CHAPTER 3 POLICE DEPARTMENT REPORT BY MATHEW SELINSKI, OFFICER/FIELD TRAINING OFFICER A. Introduction This preliminary report briefly summarizes the potential impacts on the Police Department related services and resources that may be associated with the addition of medical marijuana businesses in Costa Mesa, including but not limited to impacts on crime rates, enforcement challenges, complaints from the community, the role of known criminal offenders in this enterprise, minimal regulatory restrictions, and potential legal issues concerning the collection of taxes. The proposals are very similar in nature in many respects, but differ significantly in others. The purpose of this memorandum is to update and explore the possible impacts on the community from a law enforcement perspective should one of the ballot measures be approved by Costa Mesa voters. B. Background Proposition 215, commonly referred to as the Compassionate Use Act (CUA), was passed by California voters in 1996. The act allowed a defense to state charges of possession of marijuana or cultivation of marijuana by qualified patients and primary caregivers. The act did not address distribution to these persons. Further, there have been no legislative or initiative amendments to the CUA, or case law decisions affecting the legality of medical marijuana distribution. In August 2008, then California Attorney General Jerry Brown issued "Guidelines for the Security and Non -diversion of Marijuana Grown for Medical Use." Among other provisions cited by Attorney General Brown was the idea that nothing allows individuals, collectives, or cooperatives to profit from the sale or distribution of marijuana. Attorney General Brown further stated nothing in the CUA, nor Senate Bill 420 (commonly known as the "Medical Marijuana Program"), expressly allows for the storefront sales of marijuana. In other words, any exchange of marijuana for any form of compensation is still illegal under state and federal laws. The only possible legal manner in which to distribute marijuana is under a "cooperative" similar to communal living of the Hippie era in the 1960's. This involves every member contributing something to the arrangement relatively equally. One may plant the seeds, another may water, and yet another may harvest. Anything beyond this is considered illegal. In 2012, a group attempted to qualify a ballot proposal in Costa Mesa to allow medical marijuana dispensaries to operate under the CMMC. At •that time, dispensaries had already operated illegally in Costa Mesa and other cities, which experienced an increase in crime. In Los Angeles for example, Part I crime increased 17% in the areas immediately surrounding dispensaries. Increases in Part II crime and nuisance complaints were also noted. 12 In Costa Mesa from 2009 to 2011, the Special Enforcement Detail (SED) received numerous complaints from residents and business owners regarding the presence of dispensaries. Business owners were concerned for the safety of their valuable inventory, which forced Fed Ex and UPS drivers to park away from their delivery destinations out of fear of persons associated with dispensaries stealing their deliveries. Another business owner lost a tenant and had difficulty leasing a suite at his property because of the heavy odor of marijuana and dispensary clientele. Several dispensary employees were discovered to be convicted felons with criminal histories which included armed" robbery, criminal threats while armed with a loaded firearm, and illegal marijuana trafficking. The supply source was determined to not be any form of cooperative. Rather, the supply source was determined to be highly organized marijuana cultivation operations in Northern California and Canada. The Los Angeles Police Department (LAPD) and the Orange County Sheriff's Department (OCSD) discovered many dispensaries were diverting their supply of marijuana for more profitable, illicit markets outside California. This was also discovered in Costa Mesa when a local dispensary owner was arrested and convicted for illegal marijuana trafficking in Pennsylvania with marijuana from his dispensary. Each submitted initiative proposal is quite lengthy. The following is a brief synopsis of each initiative from a law enforcement perspective. C. Ordinance No. 1- "Allow Operation of Up to Eight Medical Marijuana (Cannabis) Businesses in the City of Costa Mesa" The initiative begins with a statement that the operation of a medical marijuana business is not a detriment to the health, safety, welfare, or moral standards of the city and the city shall not require a special permit to operate one, The city shall issue no more than eight business licenses. The City Council has the discretion to increase, but not decrease the number of business licenses. Under this proposal, businesses are allowed to possess and cultivate a reasonable quantity of marijuana, but no definition of a reasonable amount is given. Persons with felony convictions can work at medical marijuana businesses if their conviction(s) were somehow dismissed or set aside. The proposal calls for a 6% tax on gross receipts. Finally, the provisions of the CMMC created by this proposal cannot be repealed or changed except by another majority vote of the electorate. There is also some regulation as to where the businesses can and cannot operate, hours they can operate, etc. 13 D. Ordinance No. 2 — "Allow Operation of Up to Four Licensed Medical Marijuana Businesses in the City of Costa Mesa" This proposal allows up to four medical cooperative licenses to be issued. The city can increase, but not decrease the number of licenses issued. Administration of licensing •For the collective and collective operators is by the Chief of Police and sets strict guidelines and timeframes for license review. This includes an annual renewal for all collectives and collective operators. The licensing and renewal function is dependent upon dedicated personnel to handle this ongoing task. A licensee may be subject to suspension or revocation by the Chief of Police if they have engaged in any unlawful act of marijuana while on the premises of a medical collective. The provisions of the initiative can only be repealed by petition and a majority vote of the electorate. There is also some regulation as to where the businesses can and cannot operate, hours they can operate, etc. E. Ordinance No. 3 — "City Draft" In early 2014, Council Member Monahan worked with the City Attorney's Office to draft his own proposal to allow medical marijuana businesses to operate in Costa Mesa. The proposal was presented at the August 5, 2014 city council meeting and it failed to garner support for passage. Monahan stated during the October 21, 2014 city council meeting that he intended to revise his previous proposal and bring it back to council for consideration at a later date. At the time of this report, the status of the revised proposal is unknown. F. Other Cities Currently, in Orange County only the community of Laguna Woods expressly allows dispensaries to operate. The overwhelming majority of Orange County cities and the County of Orange itself, prohibit the operation of dispensaries either directly through municipal codes or through zoning regulations. Three cities (Los Alamitos, La Palma, and Westminster) have nothing in their municipal codes or zoning regulations allowing or disallowing dispensaries to operate. The Santa Ana City Council recently approved, via a 4-3 vote, to put its own city sponsored initiative proposal on the November 2014 ballot. This was to compete with a separate ballot measure already submitted and qualified for the ballot. The city sponsored proposal has a 500 foot separation regulation similar to the Costa Mesa proposals and allows dispensaries in only two industrial zones within the city. The city sponsored measure calls for a 5% tax that can be raised to 10%. The city sponsored measure also allows 'the city to make future changes without voter approval. The city sponsored measure (Measure BB) passed with the most votes. Measure BB employs a lottery system for the ability to run a collective underthe new law. Interested parties must submit an application to be placed on the qualified I4 list. A lottery will be held on February 5th, 2015 in a public location to select locations from the qualified registration list. The City of San Bernardino recently formed a city committee to studythe possibility of regulating medical marijuana dispensaries within its jurisdiction. San Bernardino believes they may be able to charge up to $60,000 a year in fees alone, along with collecting tax revenue over and above the standard sales tax. The Cityof Anaheim has recently begun to shut down'the known dispensaries operating therein violation of Anaheim Municipal Codes (AMC) by shutting off their city utility services. Several dispensaries responded by operating off industrial generators in further violation of the AMC, This has led Anaheim Code Enforcement Officers to issue citations and impound generators. Nine of the known twenty dispensaries have been completely shut down thus far. G. Colorado & Washington Voters in Colorado and Washington passed laws allowingthe recreational use and retail sale of marijuana and marijuana products in their states. The State of Colorado developed 144 pages of regulations for retail marijuana cultivation operations and retail marijuana stores. The regulations cover everything from licensing of the facilities, business records, labeling/packaging, and product safety. Additionally, it addresses inspections by fire department officials, local health department officers, and code enforcement officers. The regulations also established sanitary conditions for each facility, training requirements for owners and employees, an extensive disciplinary process covering suspension and revocation of licenses, and an appeal process. Since the passage of their law, Colorado has seen a surge in their homeless population and many believe it is due to the legalization of marijuana. One homeless shelter spotlighted in a news report has seen an increase of 50-75 persons per night seeking their services. The shelter operator believes it is due directly to marijuana legalization. The same report detailed a 19 -year-old homeless man who relocated from Arizona to Colorado in order to legally use marijuana. The man is now utilizing public and private homeless services in Colorado. The State of Washington implemented tight regulation in response to the citizen approved initiative of 2012. The initiative placed the burden of developing the tight regulations into the hands of the Washington State Liquor Control Board. The first retail stores as a result of this initiative were to begin in July 2014. The rules developed are listed as "fluid" on the Washington State Legislature website and were updated as recently as April 30, 2014. H. Impact on the Police Department The available evidence in Southern California is quite clear that dispensaries have had a negative impact on the communities where they operate. The relative low amount of regulation contained in the citizen sponsored proposals would almost guarantee these negative impacts would occur in Costa Mesa as well. The four to eight business licenses called for in the citizen backed proposals for such facilities equates to approximately one per two square miles. When the scant regulatory guidelines are factored in, it would appear some areas will end up with more per square mile than other areas of the city. The ability of the 15 city council to reduce that number is prohibited by the proposal even if the city determines the number is too high or some areas are more adversely affected than others. The concept of a reasonable quantity of marijuana is too vague to define and accurately track. As already witnessed in Costa Mesa, the temptation of the profits contained in the illicit market would likely cause some to store marijuana over and above what would be a reasonable amount, This, along with the storage of large sums of cash at the dispensaries, would make them prime targets for burglaries and robberies. Prior convicted felons can work in the dispensaries if their convictions have been somehow set aside by a court. The temptation for illicit profits could prove too much to ignore. The tax revenue could be in jeopardy at this point due to a lawsuit filed in Colorado, where recreational sales and use of marijuana is legal. The lawsuit states marijuana sales are still illegal under federal law and requiring those involved to pay taxes to local governments incriminates them in federal drug trafficking. If successful, the lawsuit would seem to preclude Costa Mesa from collecting the taxes contained in the citizen sponsored proposal. At the very least, it would provide guidance for a similar lawsuit in California should a Colorado legal holding not have precedence in California. The US House of Representatives recently passed legislation allowing banks to conduct financial transactions with state legal marijuana dispensaries and stores. The US Senate has yet to take up the issue, This would appearto eliminate the need to store large sums of cash in the dispensaries, which has been the custom to date. The elimination of the need to pay local taxes could reverse this development and once again cause dispensaries to store large sums of cash making them prime targets of robberies and burglaries. The second proposal states that employees can only be suspended or removed from employment ifthey engage in illegal marijuana sales on the premises. Involvement in a 1,000 pound marijuana deal at Costa Mesa High School (CMHS) is not grounds for removal. Again, given the tremendous incentive to divert marijuana from the business for more profitable markets would not be grounds for removal. The business owner convicted in Pennsylvania for marijuana trafficking with marijuana from his Costa Mesa medical marijuana would be free to nm his business in Costa Mesa under this proposal. I. Conclusion The collective experience in Southern California with medical marijuana dispensaries thus far has been mixed at best. Los Angeles is the best example of city sponsored regulation to deal with the proliferation in their jurisdiction. The dispensaries there are still associated with negative consequences for the surrounding communities including robberies and murder. Since the "black market" for marijuana still exists, no amount of regulation appears sufficient at this point to eliminate or seriously reduce these issues. The increase in Colorado's homeless population directly attributed to marijuana legalization should be a red flag for Costa Mesa due to its current homeless issues and established homeless services. As the City of Anaheim moves to shut down their known dispensaries, marijuana using clientele and negative impacts may transfer to Costa Mesa. The possibility of an increase in the homeless population appears to be a reasonable inference to make against the backdrop of the news report in Colorado. 16 The City of San Bernardino appears to have the best approach to this issue. By forming a committee to study it, they should be able to devise an approach that should suit their community. Costa Mesa is a unique community that is different from San Bernardino, Los Angeles, Colorado, and Washington. Since regulation is currently left to each municipality in California, Costa Mesa should consider following a similar model. A committee could be formed bringing together all interested parties, including but not limited to residents, business owners and medical marijuana supporters. The collective experience already seen in Costa Mesa, Orange County, and Los Angeles should be used as a basis from which to develop an approach 'to address the major concerns of each group. Guidance could also be found in the legal recreational marijuana use states of Colorado and Washington. Until California passes legislation regulating medical marijuana distribution statewide, Costa Mesa should consider forming a committee of interested parties to take a step-by-step approach to this complex, fluid, and ever changing issue. 17 CHAPTER 4 FINANCE DEPARTMENT REPORT BY STEPHEN DUNIVENT, INTERIM FINANCE DIRECTOR A. Introduction This preliminary report briefly summarizes the potential impacts on citywide operations, costs, impacts to related services and resources that may be associated with the addition of medical marijuana businesses in Costa Mesa, including but not limited to election expenses, and costs for staff time and ongoing revenue audits. The purpose of this memorandum is to update and explore the possible impacts to the city's elections expenses, staff costs and costs for ongoing revenue audits should one of the measures be approved by Costa Mesa voters. A more detailed analysis of the provisions of each initiative is contained in Attachments 1- 4. B. Potential Fiscal Impact 1. Direct Costs and Staff Time Direct costs associated with the adoption of any of the proposed ordinance will revolve around the need to: i. Place the measures on the ballot ii. Fulfill functional administrative and ministerial duties to implement programs, set fees by resolution, approve new taxes by election, and issue licenses and permits, etc. iii. Coordinate enforcement efforts and maintain an adequate program to mitigate secondary effects in connection with approved medical marijuana businesses ("businesses") iv. Administer, audit, and collect taxes At this time, it is difficult to predict operational costs to implement and maintain programs to address all elements in the proposed ordinances. Significant staff time will be required, especially during the firstyear, and additional resources may be needed to comply with requirements setforth. Some other direct costs are: Costs to place measures on the ballot are estimated to range from $234,000 to $280,000 for stand-alone special elections and from $15,000 to $60,000 for general elections, depending on the number of measures placed on the ballot. The City bears the cost of all measures placed on the ballot, including those brought forward by citizens and those approved by City Council. Is H. Since medical marijuana businesses are by their nature primarily cash businesses, tax revenues should be audited at least bi-annually by an external auditing firm to ensure that the City is receiving appropriate funds. Costs ofthese audits could be in the range from $5,000 to $15,000 per audit. 2. Revenues Each of the ordinances being analyzed will result in additional tax, license, and permit revenues. Per Proposition 218, new taxes must be approved in elections in which Council Members are also on the ballot. Any new license and permit fees would require resolutions approved by City Council. In order to be able to estimate additional tax revenues, it is necessary to calculate a reasonable citywide gross medical marijuana sales figure. Since the City has no reliable source for providing this figure directly, staff has utilized information from two sources (1) information obtained from City of Santa Ana staff based on recent estimates; (2) an analysis from the. City's sales tax consultant. On November 4, 2014, a ballot measure presented by the City of Santa Ana was approved by the voters. Analysis has been performed by staff to attempt to estimate potential gross receipts per business. This analysis estimates annual gross receipts per business ranging from $1 million to $2.8 million with an average of $1.9 million. The City's sales tax consultant, HdL Companies ("HdL"), performed an analysis based on their statewide client database, estimating annual gross sales per medical marijuana business ranging from $10,000 to $2 million with an average of $100,000. HdL noted that the State Board of Equalization does not categorize medical marijuana businesses separately and that these businesses typically end up in several different categories. HdL has endeavored to add a category into their database for known medical marijuana businesses, which is obviously not a complete sample as many of these establishments operate outside of regulations and registration with the State Board of Equalization. As is noted above, estimates vary widely as there is little reliable information available. Over time as historical revenue data accumulates, better estimates will be able to be made, C. Brief summaries of the potential fiscal impacts of each document are provided below. 1. Ordinance No. 1 This measure allows a maximum of eight medical marijuana businesses unless more are approved by City Council. Direct costs in addition to those noted above are primarily related to expansion of the business license process and includes completion of a lengthy list of requirements. Under the current municipal code, business licenses renew annually, while this measure sets a two-year renewal period. If a business license is not approved within 45 days, it will be considered to be automatically approved. Staff estimates the following costs relating to the issuance of all licenses and permits for a medical marijuana business: 1. Business license issuance costs from $1,000 to $2,000 19 ii. Permitting software update costs a minimum of $1,700 iii. Standard permit fees from $1,500 depending on a variety of factors Since eight medical marijuana businesses will be allowed, annual audit costs per year could be from $20,000 to $60,000 if each business is audited every other year. In addition, there are many operational requirements that will need to be monitored and verified on an ongoing basis. More information in regard to detailed requirements of this measure can be found in Finance Department Attachment 1. This measure allows fora 6%taxon marijuana businesses and a 1% sales tax for non -marijuana related sales. The 1% sales tax is problematic since it conflicts with State sales tax law. It has been reported that the City could potentially be at risk to lose all sales taxes due to this conflict with State law. Regardless, assuming all sales being subject to the 6% rate, rough estimates could range from $6,000 to $114,000 per medical marijuana business, using HdL and Santa Ana estimated average gross sales, respectively. With eight medical marijuana businesses, annual tax revenues could be from $48,000 to $912,000. License and permit revenues are not expected to be significant as this measure exempts medical marijuana businesses from any special use permits, conditional use permits, special site plans, variances, etc. In addition, any changes to the current business license ordinance to allow for the stated maximum of $500 would require separate voter approval in an election in which City Council Members are on the ballot. Finance staff believes that the $500 fee would be significantly below actual costs incurred. 2. Ordinance No. 2 This measure allows a maximum of four medical marijuana businesses unless more are approved by City Council. Direct costs in addition to those noted above are primarily related to a new medical cooperative license and operator permits for each medical marijuana business manager. Both the license and the permit require completion of lengthy lists of requirements. If a license is not approved within 30 days, it is considered to be automatically approved. Staff estimates the following costs relating to the issuance of all licenses and permits for a medical marijuana business: I. Medical cooperative license issuance costs from $2,000 to $5,000 H. Operator permit issuance costs from $300 to $1,000 Ill. Permitting software update costs a minimum of $3,400 iv. Standard permit fees from $1,500 depending on a variety of factors 20 Since four medical marijuana businesses will be allowed, annual audit costs per year could be from $10,000 to $30,000 if each business is audited every other year. In addition, there is a list of operational requirements that will need to be monitored and verified on an ongoing basis. More information in regard to detailed requirements of this measure can be found in Finance Department Attachment 2. This measure allows for a 6% gross receipts tax and exemption from the 1% sales tax. The 1% exemption from sales tax is problematic since it conflicts with State sales tax law. As noted in the analysis of the first ballot measure, it has been reported that the City could potentially be at risk to lose all sales taxes due to this conflict with State law. Regardless, assuming all sales being subject to the 6% rate, rough estimates could range from $6,000 to $114,000 per medical marijuana business, using HdL and the Santa Ana survey average gross sales, respectively. With four medical marijuana businesses, annual sales tax revenues could be from $24,000 to $456,000. License and permit revenues are not expected to be significant and any fees for new medical cooperative license and operator permits would require resolutions approved by the City Council. 3. Ordinance No. 3 — "City Draft" This proposed ordinance does not set a maximum number of medical marijuana businesses, although indirect limitations will exist related to eligible locations within the City. Information Technology and Development Services staff have estimated that under the initially imposed constraints in the City Draft, there could be approximately 83 business locations. Direct costs in addition to those noted above are primarily related to the optional establishment of a new City Office of Cultivation Standards and Quality Control ("City Office") and medical marijuana business and medical marijuana cultivation permits. The City Office would be authorized by this proposed ordinance but not required and the new permits require applicants to complete lengthy lists of requirements. If a license is not approved within 60 days, it will be presented for City Council review at the next regularly scheduled meeting. Staff estimates the following costs relating to the issuance of all licenses and permits for a medical marijuana business: Medical marijuana business permit issuance costs from $2,000 to $5,000 ii. Medical marijuana cultivation permit issuance costs from $1,000 to $5,000 iii. Permitting software update costs a minimum of $13,000 (one-time cost regardless of the number of businesses) iv. Standard permit fees from $1,500 depending on a variety of factors Since there is not a specific limitation on the number of medical marijuana businesses allowed, audit costs per year cannot be estimated at this time. As noted above, individual business audits could cost 21 from $5,000 to $15,000. In addition, there is a list of operational requirements that will need to be monitored and verified on an ongoing basis. More information in regard to detailed requirements of this measure can be found in Finance Department Attachment 3. This measure creates no new taxes in addition to the existing 1% sales tax allocated to the City. Consistent with information above, rough sales tax estimates could range from $1,000 to $19,000 per business, using HdL and the Santa Ana survey average gross sales, respectively. With no formal limitation on medical marijuana businesses, annual sales tax revenues cannot be estimated at this time. License and permit revenues could be sizable but not significant depending on the number of businesses receiving permits and new permit fees set by resolution by the City Council to recover costs. 4. Ordinance No. 4 -City of Santa Ana Ordinance This ordinance was approved by the voters on November 4, 2014 and it allows a maximum of twenty collectives/cooperatives permits, although Santa Ana staff believes the actual number could be less due to limitations related to eligible locations within the City. Santa Ana staff is currently assuming a minimum of 12 successfully permitted collectives/cooperatives. Direct costs in addition to those noted above are primarily related to a new cooperative/collective regulatory safety permit for each site and expansion of the business license tax program. These permits require completion of sizable lists of requirements and approval of each cooperative/collective regulatory safety permit is required within 60 days. In addition, there is a list of operational requirements that will need to be monitored and verified on an ongoing basis. More information in regard to detailed requirements of this measure can be found in Finance Department Attachment 4. Santa Ana plans to budget $175,000 for a forensic auditor to monitor/audit tax receipts. This ordinance allows for a maximum 10% gross receipts business license tax assessment (initially imposed at a 5% rate and adjustable thereafter by simple ordinance as needed) with a minimum of $2,000 per year basic tax amount in addition to the 1% allocation of sales taxes collected by the State. Assuming the business license tax assessment of 5% and the sales tax allocation of 1%, Santa Ana estimates that additional annual tax revenues could be approximately $116,000 per collective/cooperative. Assuming twelve collectives/cooperatives, annual tax revenues could be as much as $1.39 million. Permit revenues are expected to be approximately $14,000 per business for combined estimated General Fund revenues of over $1.5 million. D. Conclusion Regardless of the outcome of the two ballot measures allowing medical marijuana businesses, which were recently certified by the Orange County Registrar of Voters, there are many issues that will need to be addressed by the City. Some of the more notable issues are as follows: 22 1. Significant citywide staff time will be required and costs will be incurred for implementation, ongoing operations, and enforcement efforts resulting in potentially high one-time and startup costs 2. Legal issues and conflicts with Federal law and State Board of Equalization requirements exist in each of the ballot measures 3. Insufficient historical revenue and cost information exist to reasonably estimate revenue generation and costs to be incurred and thus, it is too early to know with so much uncertainty and too little experience to be able to determine net fiscal impact As requested, Finance Department staff has provided very preliminary information to the City Council to attempt to address potential citywide financial/staff impacts and issues relating to the two certified ballot measures, the City Draft measure, and the City of Santa Ana's approved ordinance. At this time, much uncertainty exists in regard to allowing and regulating medical marijuana businesses as this is an evolving industry. FINANCE DEPT Attachment #1: Taft/Gardner Ballot Measure Analysis FINANCE DEPT Attachment #2: Webster/Levesque Ballot Measure Analysis FINANCE DEPT Attachment #3: Proposed Ordinance in City Draft Analysis FINANCE DEPT Attachment #4: City of Santa Ana Ordinance Analysis 23 Finance Dept. -Attachment 1 TAFT/GARDNER BALLOT MEASURE ANALYSIS OPERATIONAL IMPACT, INCONSISTENCIES, AND LEGAL ISSUES General: Maximum of eight medical cannabis businesses allowed City Council can increase but not decrease the maximum medical cannabis businesses allowed Amendment/repeal only through citywide election Amendment of municipal code Allows cultivation of marijuana on premises Planning/Building Safetv (required services prior to opening of business)• Exempt from special use permits, conditional use permits, any other permits as a condition to obtaining a business license Exempt from special site plans, variances or any other permit or certificate as a condition to obtaining a business license Determination that proposed business/location meets requirements: • Exempt entities: residences cultivating marijuana, clinics, health care facilities, residential care facilities, hospice, and home health agencies • 600 foot radius from public schools • 1,000 foot radius from other licensed medical cannabis businesses • Permitted in use districts or zones AP, CL, C2, C1 -S, MG, MP, PDC, PDI, C1, and TC • Outdoor signs in accordance with City restrictions with no pictorial representations of cannabis • Legal notice posted inside • Air treatment filtration or ventilation system to control odors • Alarm system Operational Requirements (ongoing monitoring and verification): Live Scan criminal background checks prior to employment for all employees/volunteers Annual Live Scan criminal background checks by December 31st for all employees/volunteers Managers must be registered members of the dispensary Employees/volunteers must have no felonies in the last seven years Employees/volunteers must not be on probation or parole for drug sales/distribution Reasonable compensation of employees comparable to IRS qualified non-profit organizations No minors allowed to be employees or to be on the premises during business hours 23-1 Commercial general liability insurance including coverage for medical cannabis Maintains Insurance for all who deliver marijuana within the City and has location in City with a business license Business hours allowed from gam to 10pm seven days a week Seller's permit valid and current Licensed and uniformed security guard patrols during business hours Alarm system must be functioning and in use Warning labels and packaging requirements Legal notice posted inside Packaging/warning label requirements Signs in accordance with City rules and no pictures related to cannabis allowed No cannabis can be visible from the exterior of the business No alcohol and use of cannabis in business, parking area, or within 50 feet Cultivation concealed from public view with no exterior evidence or odors/other impacts Cultivating, manufacturing, and processing cannabis from California only and has not left the state Cultivation by and provided to verified members in a closed circuit of production and consumption Inventory reasonable to meet needs of members only No manufacturing of concentrated cannabis Edible cannabis products must comply with State and local laws Air treatment filtration or ventilation system to control odors must be functioning and in use Taxes: 6% sales tax on marijuana related items 1% sales tax on non -marijuana related items Business licenses (initial setup, processing monitoring tracking, verification, user fee creation, permit issuance If not approved/denied in 45 days, permit is automatically approved License is valid for two years and renewals are due 30 days before expiration and not prior to sixty days License transfers require that new owners must meet all requirements License fee can't exceed $500 Managers must be registered members of the dispensary 23-2 First eight medical cannabis businesses approved get licenses Priority registration status (first eight applicants): • Begins thirty days after ordinance effective date plus ten days • Requirements: • Has never operated a medical cannabis business within the City • Has not been convicted of operating a medical cannabis business within the City • Has never been civilly adjudicated for operating a medical cannabis business without a business license • Has applied, has been issued a business license, or received a denial letter • Has filed proper documents with the State for as a non-profit incorporation • Has or has applied for a seller's permit • Has or has applied for a license to sell nursery stock from the Department of Food & Agriculture • Has applied for a Live Scan background check • Hasa physician's recommendation • Has or has applied for a medical marijuana identification card • Has or has applied for general liability insurance with coverage for medical cannabis or medical marijuana • Has notarized, signed, and dated authorization for fingerprinting, photographing, and release of information for a background check • Has notarized, signed, and dated statement to hold the City harmless Non-priority registration status has same requirements as for priority registration (for all applicants after the first eight) Ballot Measure Inconsistencies: Summary states that activities should not be in conflict with State and Federal law Section 2 states that activities should not be in conflict with State and local law Section 9-487(A) (4) states maximums of eight and nine medical cannabis businesses Section 9-487(A) (5) states a maximum of nine medical cannabis businesses Section 9.487.1 (25) states that sales and use taxes are imposed Section 9-487.1 (25i) states that a 6% business tax is imposed Ballot Measure Legal Issues: 6% sales tax on marijuana related items conflicts with State Board of Equalization ("SBOE") regulations 1% sales tax on non -marijuana related items is not in conflict with SBOE regulations Current business license ordinance does not accommodate requirements of this ballot measure 23-3 Finance Dept. - Attachment 2 WEBSTER/LEVESQUE BALLOT MEASURE ANALYSIS OPERATIONAL IMPACT, INCONSISTENCIES, AND LEGAL ISSUES General: Maximum of four medical marijuana businesses allowed City Council can increase but not decrease the maximum medical marijuana businesses allowed Amendment with City Council approval/repeal only by citywide election Amendment of municipal code Allows cultivation of marijuana on the premises Planning/Building Safety (required services prior to opening of business): Determination that proposed business/location meets requirements: • Exempt entities: health care facilities, residential care facilities, hospice, and home health agencies • 1,000 foot radius from any schools • 600 foot radius from public parks • 600 foot radius from public libraries • 600 foot radius from child care facilities • 1,000 foot radius from other licensed medical marijuana businesses • Not allowed in, abutting, or across the street from residential areas • Permitted in use districts or zones AP, CL, C2, C1 -S, MG, MP, PDC, PDI, C1, and TC • Parking lot lighting required Operational Requirements (ongoing monitoring and verification): At least one person with an operator permit must be on the premises during business hours Managers must have valid Operator Permits Must provide information to the City on changes in managers within 30 days Seller's permit must be valid and current Business hours allowed from Sam to 10pm seven days a week No cannabis can be visible from the exterior of the business No alcohol use or purchases in business and parking area No one under age 18 allowed on the premises Any violations are misdemeanors with maximum fines of $1,000 and six months in jail 23- dl Taxes: 6% gross receipts tax Medical cooperatives exempt from the 1% sales tax Medical Cooperative License• finitial setup processing monitoring, tracking verification user fee creation, permit issuance) Limited to four licenses unless City Council approves a higher limit License is valid until revoked Allows a non-refundable fee approved by resolution by the City Council to cover costs If not approved/denied in 30 days, permit is automatically approved Application form provided by the Chief of Police requires: • Entity must be incorporated in California and be either a non-profit mutual benefit corporation or a statutory agricultural or consumer cooperative • Name, date of incorporation, and evidence that corporation is in good standing • Name and capacity of all officers and directors • Registered corporate agent and address for service process • Type of cooperative, proposed site address, property owner/lessor information • Names of managers who will require Individual Operator Permits and successful Live Scan background checks • Must provide information to the City on changes in managers within 30 days • Certificate or drawing to be provided within 30 days of proposed property lines, showing if within limits of other cooperatives, schools, public parks, and residential areas • If Police Chief determines that the application is not completed correctly, a 10 day extension will be granted by the Finance Director • Application must be stamped upon receipt and investigation should be concluded within 30 days by either granting or denying the license Priority review status: • 30 days after ordinance effective date through 45 days applications submitted • Requirements: • Must be an active non-profit mutual benefit corporation or statutory agricultural or consumer cooperative incorporated in California prior to 5/22/14 • Has listed proper documents with State for location in the City • Has applied for or been issued a business license prior to 5/22/14 • Has a lease/rental agreement prior to 5/22/14 • Has seller's permit prior to 5/22/14 • Reasons for denial: • Building/equipment/location do not comply with requirements • False statements 23- S • Revocation of a dispensary license within the last 2 years • Director/officer convicted of felony within 10 years prior to filing application • No responsible adult on premises to as manager during business hours • License fees not paid Business licenses: Suspended or revoked for unlawful distribution, and not following initiative provisions/City disciplinary actions Annual_ Individual Operator Permits: (initial setup processing, monitoring, tracking, verification, user fee creation, permit issuance) Required for each manager No false statements Must be at least 18 years old or if at least 21 years old Live Scan background check No felonies within the last 10 years If not approved/denied within 30 days, automatic approval of permit Suspended or revoked for unlawful distribution, and not following initiative provisions/City disciplinary actions. Chief of Police provides form, stamps as received, grants, denies, and renews permits Applicant must fill out all required information Non-refundable fee for permit If Police Chief determines that the application is not completed correctly, a 10 day extension will be granted for City Manager to act on the application Chief of Police must grant or deny within 15 days, if not, the Finance Department will issue the permit Permit is valid for 1 year and renewal is due 30 days before expiration Suspension/Revocation of Cooperative Licenses and Operator Permits Chief of Police provides written notice and hearing information at least 10 days before the hearing Chief of Police decision can be appealed within 7 days to City Council pursuant to the Municipal Code If appeal is lost, applicant can request a judicial review Chief of Police can issue warnings, suspensions, or revocations for: • False statements • Failure to make reasonable effort to prevent illegal distribution/prohibited conduct/failure to abide by previous disciplinary actions 23-6 * Subject to closure as a public nuisance if violate initiative provisions Ballot Measure Inconsistencies: Summary states that medical marijuana businesses are subject to a 6% sales tax The first part of the measure states that medical marijuana businesses are subject to a 6% gross receipts tax Section 9-490 (f) states applicant for Operator Permit must be at least 18 years old Section 9-491 (a) (f) states applicant for Operator Permit can be denied if under 21 years old Ballot Measure Legal Issues Medical cooperative exemption from the 1% sales tax Is in conflict with State sales tax law Priority review status requirements state that items need to be accomplished by 5/22/14 23-7 Finance Dept. —Attachment 3 PROPOSED ORDINANCE IN CITY DRAFT ANALYSIS OPERATIONAL IMPACT, INCONSISTENCIES, AND LEGAL ISSUES General: No maximum number of marijuana businesses stated Amendment by an ordinance approved by the City Council Amendment of municipal code Cultivation allowed or not allowed on premises? Planning/Building Safety (required services prior to opening of business Exempt entities: clinics, health care facilities, residential care facilities, hospice, and home health agencies Determination that proposed business/location meets requirements: • 1,000 feet from public and private schools • 1,000 feet from public libraries • 1,000 feet from youth centers • 200 feet from residential zone unless issued a minor conditional use permit • Permitted in use districts or zones C1, C2, C1 -S, MG, MP, PDC, PDI, C1, and TC • 1,000 feet from other medical marijuana businesses • Odor control (air treatment system/no off-site smell) • Air treatment filtration or ventilation system to control odors • Alarm system • Outdoor signs in accordance with State and City restrictions Operational Requirements (ongoing monitoring and verification): Allow reasonable inspections by City Maintenance of required insurance Seller's permit must be valid and current Security guard No use of marijuana or smoking allowed on-site or within 20 feet No loitering allowed outside business Any unlawful sales outside business should be reported to City within 24 hours No allowance of breach of peace, disturbance of public order, or disorderly conduct 23- 9 Finance Dept, —Attachment 3 Security cameras used continuously with at least 30 days of recorded documentation maintained Centrally monitored fire and burglar alarm system Secure entrances with entry controlled by employees Records to be maintained on site for 3 years: • Owner and/or lessee information • Employee information • Results Live Scans for all employees • Member information for those who participate in cultivation • State identification cards and information for all members receiving medical marijuana • Dates medical marijuana provided to members • Delivery information • Documentation of finances • Insurance policy • Inventory documentation • Valid permits displayed • Employee records (certain felony restrictions/results of annual Live Scans/valid identification cards for employees, owners, and managers) Volume limited to member needs Only sell medical marijuana and related products No recommendations by on-site physicians Required signs must be posted/shall not obstruct entrance or security system/business identification sign to be single window or wall sign No alcohol license from State is allowed Business shall not operate as a lounge or caf6 with consumption on site Quality control to disclose percentage level of certain compounds Labeling requirements (warning labels/date of manufacture/weight/no packaging attractive to minors) Edibles must comply with State law/no products requiring refrigeration or heat/must be prepared by a member Employees must receive appropriate training Medical marijuana supply can only be from members Business hours allowed from lam to 10pm seven days a week 23- 9 Finance Dept, —Attachment 3 No minors allowed on-site unless they are qualified patients, primary caregivers, or with parents/legal guardians Odor control required (air treatment system/no off-site smell) Site management (business to monitor nuisance activities/written rules to members) Non-profit (monetary reimbursements only to cover overhead and operating costs) • Reasonable proof to be provided to City annually Delivery of medical marijuana to members only (employees delivering must have identification card) City is authorized but not required to create City Office of Cultivation Standards and Quality Control to perform the following: • Conduct regular inspections of cultivation practices and procedures • Test medical marijuana at cultivation sites • Establish model guidelines • To determine adherence to guidelines and make results available to the public • Establish quality control testing standards • Test standards and make results available to the public • Establish labeling standards • Sample testing for pesticides and contaminants by business or independent laboratory with destruction required if positive results Taxes and Fees: 1% sales tax Application fees set by resolution Cost recovery of all fees and costs incurred for implementation set by resolution Medical Mariivana Dispensary and Medical Mariivana Cultivation Permits (initial setup processing monitoring, tracking, verification user fee creation permit issuanceh Issued by Chief Executive Officer or designee Applications: • Address • Site and floor plan • Security plan (cameras/fire and burglar alarm system/locked entrances/interior and exterior lighting/secured windows) • Names and addresses of managers, owner, and lessor • Authorization to City to seek verification on application • Proof of non-profit status • Statement that information provided is true and correct • Further information deemed necessary by City CEO • No false statements 23-/0 Finance Dept. —Attachment 3 • Appropriate location that meets all requirements • Applicant must be primary caregiver, qualified patient or legal representative • No history of unlawful, fraudulent, unfair, or deceptive business acts or practices by applicant or any manager • Decision in 60 days — if not, application will go to City Council at the next regularly scheduled meeting • Notice of incomplete application within 30 days • Granted if meet all requirements of Chapter State Board of Equalization Seller's Permit required Written agreement with the City in regard to the following: • Allow reasonable inspections by City • Indemnification of City from all liability • Maintenance of required insurance • Defend City if legal action and reimburse any court costs • Provide updated application annually Conditions to maintain valid permits: • Strict adherence to requirements • Allow reasonable inspections by City • Maintain current and valid contact information with City • Transferable if transferee meets requirements Suspension/Revocation of Permits: • Failure to follow requirements • Operations ceased for 180 days • Change in ownership without issuance of new permits • Failure to maintain security camera recordings • Fails to allow inspections • Subject to closure as a public nuisance if violate ordinance provisions Appeals pursuant to Municipal Code Violations and Penalties: • Any person who violates requirements of this ordinance • Misdemeanor 23- // Finance Dept, — Attachment 4 City of Santa Ana Measure BB — November 4, 2014 Election General: 20 selected from lottery of qualified applicants Prohibits on-site growing or cultivating, restrictions for cuttings Amended municipal code Within 30 days of adoption, registration forms to be prepared by City Co-op/Collectives to apply within 60 days, with non-refundable processing fee Planning/Building Safety Exterior signage limited to one wall sign, non -illuminated, not to exceed ten square feet Sufficient odor absorbing ventilation and exhaust system Patron notification — loitering, forgery, impairment Web -based closed-circuit tv for security, maintain for 90 days Fire and burglar alarm Property owner's consent Permitted in M-1, M-2 Industrial zones Not within 500 feet of another collective or cooperative Not within 1,000 feet of any school, park, residential Operational Requirements Unarmed security guard at all times to monitor site and immediate vicinity Prohibits on-site doctor recommendations Prohibits on-site alcohol or tobacco sales Prohibits on-site food/alcohol/tobacco/marijuana consumption Hours of operation -Monday to Saturday 10 a.m.-S p.m. Sunday 11 a.m.-7 p.m. Dispense to qualified patients, only prescribed amount Max $200 kept on-site overnight, at least one daily bank drop No patients under 21 unless accompanied by caregiver, etc 23- 1A Finance Dept, —Attachment 4 Provide name and number of on-site staff person to PD Criminal background check, employees free of felony or misdemeanor with past four years Food distribution — adhere to state laws and city ordinances Prohibits concentrated cannabis Records at the location Names, addresses of landlord, members, caregivers Receipts - Proof of compliance with Attorney General guidelines - Maintain for five years - Annual audits, no later than February 15, completed by CPA - May be Inspected by PD and other departments, unlawful to refuse, obstruct Non-compliance must cease operation Taxes— Business License Tax Revenue purpose only Annual business license Not considered religious or charitable If claiming exemption, must prove status Tax rates Business tax up to ten percent of gross receipts. Initial five percent, ten percent max City Council may lower rate Minimum $2,000 per location City Council may repeal or amend ordinance as long as tax isn't increased Tax collector may implement rules, regulations, and guidelines on the collection and the methodology Exemptions No fixed place of business, but comes to City as requested by patient, no more than five days within the year If transaction is for collective/co-op activities, business tax is payable Monthly remittance $2,000 minimum basic rate due before April 1 If new licensee, prorated quarterly Late payment subject to penalty and interest 23-/3 Finance Dept. —Attachment 4 Payment of tax does not authorize unlawful business State or Federal law changes do not require changes to tax collection Cooperative/Collective Regulatory Safety Permit. Regulatory Safety Permit from PD, to be displayed at all times visible to public, valid for a year unless revoked. Regulatory Safety Permit to contain: Address - Site plan - Photos - Lease or rental contract, written landlord consent Staff information, photo ID Articles and Bylaws if corporation, Articles of Association if unincorporated association Name of agent for Service of Process BOE Seller's Permit Copy of Medical Marijuana Collective Operating Standards Chief of Police to review within 60 days, other City and County departments to make recommendations to Chief. Chief of Police or designee to grant if: - Fee's paid - Conforms to provisions - No material misrepresentation by applicant - Full cooperation by applicant No permit denied or revoke within the last 5 years within the U.S. Collective to comply with all laws Compliant with Federal agencies and guidelines Written application to renew 60 days before expiration to Chief of Police 23- /y CHAPTER 5 HUMAN RESOURCES / RISK MANAGEMENT DEPARTMENT REPORT BY TAMARA S. LETOURNEAU, ASSISTANT CEO; AND LANCE M. NAKAMOTO, HUMAN RESOURCES MANAGER A. Introduction This preliminary report briefly summarizes the potential impacts on the Human Resources/Risk Management Division related services and resources that may be associated with the addition of medical marijuana businesses in Costa Mesa, including but not limited to impacts to staffing and job classifications, capital expenses for vehicles, staff training, and records management. B. Analysis/Impact on Human Resources/Risk Management Division Based upon the two citizen sponsored initiatives, there would be a maximum of either eight (8) or four (4) dispensaries within the City. One option is to have the regulation of medical businesses incorporated into the Development Services Department. There are three major functions of the "City Draft": 1. Licensing, 2. Enforcement, and 3, Ongoing Oversight The August 5, 2014 and November 18, 2014 City Council Reports mention a City Office of Cultivation Standards and Quality Control with the November 18ffi report indicating this Office could be optional and "...created to conduct regular inspection of cultivation practices and procedures, as well as to test medical marijuana." In the event the City created such an "office," the City's initial focus would appear to be concentrated on these major functions. In order to ensure that the City addresses quality control and adherence to policies and procedures, one option is to utilize existing Code Enforcement Officers (as other cities have done) and/or add to the current staffing to address this issue. If the "City Draft" proposal moves forward, there would be a component for "testing" marijuana. The City's Crime Scene Specialist classification already performs basic "presumptive tests" for drugs in collecting, processing and preserving evidence. One option is for the incumbent Crime Scene Specialists to perform the testing component with appropriate training. In addition to the Code Enforcement Officer and Crime Scene Specialist classifications, the City outsources its former Tax Auditing Specialist classification. As such, the vendor may be required to monitor sales for business taxation purposes under the terms of both citizen -backed initiatives. The city -backed proposal did not call for an additional tax. The approximate total compensation cost for a Code Enforcement Officer is $100,000 and approximately $115,000 for a Crime Scene Specialist. If new positions are approved there may be additional capital outlay for vehicles, equipment, etc. 2d Additionally, there would be costs borne for training and continuing education for these employee(s); possible certification and recertification programs; license/records management; and acting as the City's liaison with regard to other County and State agencies interfacing with medical marijuana collectives/cooperatives. If any of the proposed ordinances are approved, they may impact the wages, terms and conditions of employment for employees represented by Costa Mesa City Employee's Association (CMCEA). There is also a concern, from a risk management viewpoint, that City employees performing these responsibilities are at potential risk for administering and regulating businesses, which may be in violation of federal law. C. Conclusion Depending on which, if any, of the initiatives is approved by voters, there will be impacts relative to staffing, training, records management and monitoring of sales. Should the city -backed proposal be selected, the same impacts will exist in addition to determining appropriate job classifications for the "City Office of Cultivation Standards and Quality Control". There is also potential for a capital outlay for vehicles, equipment and additional training. At this time, we do not know how the CMCEA will react to these issues and the potential conflict with federal law. 25 CHAPTER 6 FIRE DEPARTMENT REPORT BY DAN STEFANO, FIRE CHIEF A. Introduction This preliminary report briefly summarizes the potential impacts on Fire Department related services and resources that may be associated with the addition of medical marijuana businesses in Costa Mesa, including but not limited to fire and life safety and community risk reduction. B. Impact on the Fire Department From a fire prevention and community risk reduction perspective, the introduction of marijuana businesses with on-site cultivation will increase the risk of electrical hazards including fire due to the additional interior illumination (e,g., electric) and heating needs that will be required. This includes potential electrical systems/conditions and heating element hazards as covered in the California Fire Code and Building Codes (e.g., CFC Chapter 6 — Building Services and Systems; Section 605 — Electrical Equipment, Wiring, and Hazards, etc.). To this end, the need for enhanced and specialized collaborative inspections with the building, fire, and police departments will require additional resources for initial and regular site inspections, in addition to increased code enforcement resources to address code compliance (see Fire Department Attachment #1 for a draft copy for an indoor cultivation site). In addition, the utilization of pesticides, insecticides, herbicides, and chemicals required for indoor cultivation will increase the likelihood of a hazardous material type exposure and exacerbate the nature and extent of any indoor fire or incident (e.g., reactivity), as well as nuisance complaints from nearby businesses and residents. From an operational and emergency response perspective, timely and direct access for emergency responders will be impacted. Specifically, response times will impacted by high risk premise entry, due to security and blocked or modified entry and egress areas, which does not exclude the potential of hazardous defense devices (e.g., booby trap devices) after hours. This risk is expanded considerably without quantity limits clearly specified for on-site cultivation sites (see Fire Department Attachment #2). The Fire Department also identifies risk without specific information required relative to on-site cultivation (e.g., the inclusion of a site safety plan, in-line with the security plan measures; electrical safety requirements, emergency access, emergency preplan, etc.). C. Proliferation of Illegal or Non -Approved Marijuana Cultivation Sites/Locations 26 The potential of illegal or non -approved marijuana cultivation sites/locations has been documented throughout California, in particular in Northern California and is a very real concern as was evidenced by a recent incident in Costa Mesa, where an illegal operation was discovered after a Fire Department response to an electrical fire (see Fire Department Attachment #3). D. Conclusion There will be an impact to fire department resources and services with the implementation of medical marijuana businesses in the City of Costa Mesa, in particular as it relates to on-site cultivation. FIRE DEPT Attachment #1: Draft Fire & Building Department Indoor Cultivation Inspection Report FIRE DEPT Attachment #2: Limits on marijuana quantities — Kelly decision FIRE DEPT Attachment #3: Illegal indoor cultivation site in Costa Mesa; Daily Pilot article 27 FIRE DEPT. –ATTACHMENT #1 INDOOR CULTIVATION INSPECTION REPORT ADDRESS: INCIDENT#: CITY/COUNTY BUILDING OFFICIAL NAME: — —. — — ELECTRICAL SYSTEMS/CONDITIONS D METER BYPASSED (CFC 605.6) D EXPOSED WIRING INCLUDING SPLICES (CFC 605.6) D ELECTRICAL ALTERATIONS (CFC605.6) D ELECTRICAL DEVICES EXPOSED TO WATER (605.1) D TEMPORARY WIRING USED IN PLACE OF PERMANENT (CFC 605.9) D TEMPORARY WIRING NOTATIACHED TO STRUCTURE (CFC 605.9. 1) D EXTENSION CORDS USED IN PLACE OF PERMANENT WIRING (CFC 605.5) D COVER PLATES MISSING (CFC 605.6) D MULTI -PLUG ADAPTERS SUBJECTTO ENVIRONMENTAL OR PHYSICAL DAMAGE (CFC 605.4.31 STRUCTURAL CONDITIONS D SEPARATION BETWEEN GARAGE/LIVING SPACES PENETRATED (CFC 703.1) D SELF-CLOSING DOORAT GARAGE/LIVING SPACES (CFC 703.2.31 D SHEET ROCK OPENED TO ATIIC/CRAWLSPACE (CFC 703.1) D WINDOWS BLOCKED OR INACCESSIBLE (CFC 1026.4) D COMBUSTIBLE FLOOR/WALL COVERING (CFC 803.1) D SMOKE ALARMS DISABLED/MISSING (CFC 907.2.10.1.2) D INDICATIONS OF NON-PERMITIED ALTERATIONS (ROOMS ADDED, ETc,) (CFC 102.3) GENERAL SAFETY D PRESSURE VESSELS (PROPANE, CO2, ETc.) WITHOUT VALVE PROTECTION (CFC 3003.6) D PRESSURE VESSELS (PROPANE, CO2, ETC.) UNSECURED (CFC 3003.5.31 D STORAGE OF COMBUSTIBLE MATERIALS (CFC304.1) D PITFALLS, BOOBY TRAPS, ETC. (CFC 507.3) D STORAGE IN ATIIC SPACES PROHIBITED IN RI/R2 (CFC315.2,4) D FUMIGATION DEVICES REQUIRE NOTIFICATION/PERMIT (CFC 1703.3) Firehouse© Coding: INCIDENT TYPE: 551 (ASSIST POLICE OR OTHER GOV'TAGENCY) ACTIONS TAKEN: 002 (MARIJUANA GROW DISCOVERED) 27-1 605.6 Unapproved conditions. Open junction boxes and open -wiring splices shall be prohibited. Approved covers shall be provided for all switch and electrical outlet boxes, 605.1 Abatement of electrical hazards. Identified electrical hazards shall be abated. Identified hazardous electrical conditions in permanent wiring shall be brought to the attention of the code official responsible for enforcement of the California Electrical Code. EIectrical wiring, devices, appliances and other equipment that is modified or damaged and constitutes an electrical shock or fire hazard shall not be used. 605.9 Temporary wiring. Temporary wiring for electrical power and lighting installations is allowed for aperiod not to exceed 90 days. Temporary wiring methods shall meet the applicable provisions of the California Electrical Code. Exception. Temporary wiring for electrical power and lighting installations is allowed during periods of construction, remodeling, repair or demolition of buildings, structures, equipment or similar activities. 605.9.1 Attachment to structures. Temporary wiring attached to a structure shall be attached in an approved manner, 605.5 Extension cords. Extension cords and flexible cords shall not be a substitute for permanent wiring. Extension cords and flexible cords shall not be affixed to structures, extended through walls, ceilings or floors, or under doors or floor coverings, nor shall such cords be subject to environmental damage or physical impact. Extension cords shall be used only with portable appliances. 605.4.3 Installation. Itelocatable power tap cords shall not extend through walls, ceilings, floors, under doors or floor coverings, or be subject to environmental or physical damage. 703.1 Maintenance. The required fire -resistance rating of fire -resistance -rated construction (including walls, fire stops, shaft enclosures, partitions, smoke barriers, floors, fire -resistive coatings and sprayed fire-resistant materials applied to structural members and fire-resistant joint systems) shall be maintained. Stich elements shall be properly repaired, restored or replaced when damaged, altered, breached or penetrated, Openings made therein for the passage of pipes, electrical conduit, wires, ducts, air transfer openings and holes made for any reason shall be protected with approved methods capable of resisting the passage of smoke and fire. Openings through fire -resistance -rated assemblies shall be protected by self or automatic -closing doors of approved construction meeting the fire protection requirements for the assembly. 703.2.3 Door operation. Swinging fire doors shall close from the full -open position and latch automatically. The door closer shall exert enough force to close and latch the door from any partially open position. 27-2 803.1 General. The provisions of this section shall limit the allowable flame spread and smoke development of interior wall and ceiling finishes and interior wall and ceiling trim in existing buildings based on location and occupancy classification. Interior wall and ceiling finishes shall be classified in accordance with Section 803 of the California Building Code. Such materials shall be grouped in accordance with ASTM E 84, as indicated in Section 803.1.1, or in accordance with NFPA 286, as indicated in Section 803.1.2. 907.2.10.1.2 Groups R-2, R-2, R-3.1, R-4 and 1-1. Single- or multiple -station smoke alarms shall be installed and maintained in Groups R-2, R-3, R-3.1, R-4 and 1- lregardless of occupant load at all of the following locations: 1. On the ceiling or wall outside of each separate sleeping area in the immediate vicinity of bedrooms. 1026.4 Operational constraints. Emergency escape and rescue openings and any exit doors shall be maintainedfree of any obstructions other than those allowed by this section and shall be operational from the inside of the room. 102.3 Change of use or occupancy. No change shall be made in the use or occupancy of any structure that would place the structure in a different division of the same group or occupancy or in a different group of occupancies, unless such structure is made to comply with the requirements of this code and the California Building Code. Subject to the approval of the fire code official, the use or occupancy of an existing structure shall be allowed to be changed and the structure is allowed to be occupied for purposes in other groups without conforming to all the requirements of this code and the California Building Code for those groups, provided the new or proposed use is less hazardous, based on life and fire risk., than the existing use. 3003.6 Valve protection. Compressed gas container, cylinder and tank valves shall be protected from physical damage by means of protective caps, collars or similar devices in accordance with Sections 3003.6.1 and 3003.6.2. Securing compressed gas containers, cylinders and tanks. Compressed gas containers, cylinders and tanks shall be secured to prevent falling caused by contact, vibration or seismic activity. Securing of compressed gas containers, cylinders and tanks shall be by one of the following methods: 1. Securing containers, cylinders and tanks to a fixed object with one or more restraints. 2. Securing containers, cylinders and tanks on a cart or other mobile device designed for the movement of compressed gas containers, cylinders or tanks. 3. Nesting of compressed gas containers, cylinders and tanks at container filling or servicing facilities or in seller's warehouses not accessible to the public. Nesting shall be allowed provided the nested containers, cylinders or tanks, if dislodged, do not obstruct the required means of egress. 27-3 NEWS RELEASE ® October I, 2014 Costa Mesa Fire Department Dan Stefano, Fire Chief �rss°e4� Contact: ]Kevin Diamond, Battalion Chief Telephone: (714) 754-5204 4, Securing of compressed gas containers, cylinders and tanks to or within a rack, framework, cabinet or similar assembly designed for such use. Exception: Compressed gas containers, cylinders and tanks in the process of examination, filling, transport or servicing. 304.1 Waste accumulation prohibited. Combustible waste material creating a fire hazard shall not be allowed to accumulate in buildings or structures or upon premises. 304.1.1 Waste material. Accumulations of wastepaper, wood, hay, straw, weeds, litter or combustible or flammable waste or rubbish of any type shall not be permitted to remain on a roof or in any court, yard, vacant lot, alley, parking lot, open space, or beneath a grandstand, bleacher, pier, wharf, manufactured home, recreational vehicle or other similar structure. 315.2.4 Attic, under -floor and concealed spaces. Attic, under -floor and concealed spaces used for storage of combustible materials shall be protected on the storage side as required for !-hour fire -resistance -rated construction, Openings shall be protected by assemblies that are self-closing and are of noncombustible construction or solid wood core not less than 1.75 inches (44.5 mm) in thickness. Storage shall not be placed on exposed joists. Exceptions: 1. Areas protected by approved automatic sprinkler systems. 2. Group R-3 and Group U occupancies. 507.3 Pitfalls. The intentional design or alteration of buildings to disable, injure, maim or kill intruders .is prohibited. No person shall 'install and use firearms, sharp orpointed objects, razor wire, explosives, flammable or combustible liquid containers, or dispensers containing highly toxic, toxic, irritant or other hazardous materials in a manner which may passively or actively disable, injure, maim or kill a fire fighter who forcibly enters a building for the purpose of controlling or extinguishing afire, rescuing trapped occupants or rendering other emergency assistance. 1703.3 Notification. The fire code official and fire chief shall be notified in writing at least 24 hours before the structure is to be closed in connection with the utilization of any toxic or flammable fumigant. Notification shall give the location of the enclosed space to be fumigated or fogged, the occupancy, the fumigants or insecticides to be utilized, the person or persons responsible for the operation, and the date and time at which the operation will begin. Notice of any fumigation or thermal insecticidal fogging shall be served with sufficient advance notice to the occupants of the enclosed space involved to enable the occupants to evacuate the premises, 27-4 Fire Dept. - Attachment 2 Court Strikes Down SB420 Limits Los Angeles, IvTay 22, 2005; The Second District of California Court of Appeals ruled that the state limits on medical marijuana -possession and cultivation established under state law SB 420 are unconstitutional. In the case People v. Patrick Kelly, the court overturned defendant's conviction loot possessing 12 ounces ot'dried marijuana plants on the grounds that the prosecutor had huprogerly argued that the de£eada nt was guilty bneause he possessed more than the 8 -ounce ti,lrmi.t established. in Health & Safety Code Sec. 11362.77 and did not have a doctor's recommendation authorizing more. "Text ot" €Cul. ciecisi r ' . The. Court validated the long-standing view of California NC112ML and other Prop 215 advocates that the SB 420 limits are unconstitutional. Cal NGIiML attorneys have successfully argued the point in several lower court cases, but this is the first time it has been addressed by an appellate court. in a 3-0 decision, five court ruled: "Tho argument was improper,, it was improper because the CUA [Compassionate Use A,etj can only be amended with voters' approval. Voters, however, did not approve the eight -ounce, limit and other caps in section 11.3.6237 (of SB4201; hence, section 11362.77 unconstitutionally amends the CUA." The decision i,scertitied for partial publication, pending possible appeal to the Supreme Court, The full implications of the telly decision remain unclear. In particular, itis not clear whether it rules out the use of SB 420 numbers as guidelires to protect patients with state I'D carets from arrest. The court's reasoning would seem to apply only when the S.B 420 numbers are used to limit patients' rights, 'lot when they are used to protect thorn. However, the court's sweeping pronouncement that this Section of 420 is "unconati'CuUional" might be iniorpteted otherwise by police who would prefer to ignore it. Mather litigation therefore seems likely, Ironically, the court noted. that the constitutional problems in SB 420 could have been avoided by enactment of Sett. Vasconcellos' proposed "SB 4420 Clean -'Up" bill SB 1404 in 2004. That bill made it clear that qualified patients could legally possess whatever amount ofmarijuana was consistent with their needs_ However, SB '14594 was vetoed by Gov. Schwarzenegger on the grounds it removed "reasonable and established quantity guidelines," One incidental casualty ofthe Kelly decision was WYenrlocir'tr's Meas �g 13 anti -pot Initiative, al red at rolling back the county's remits for medical marijuana cultivation trona 29 to 6 plants. Measure B specifically cites the clause in SB 420 that was snuck down in t€re Kelly decision, H&SC '11362.77. Measure B thcrefore appears to rest on invalid taw, malting it vulnerable to legal and political challenge, 'I'lie.Auorricy General's office announced that it would appeal tile Kelly ruling T xt crl'the KeMylecj tan, 27-5 250 marijuana Plants fowi(l in Costa Mesa building -Dally Pilot Page I of 3 Fire Dept. - Attachment 3 alto In OE&Iso up Ono F,�}rl s,;bte+lin: b'pvs.h;IN,.rtl:nlu J,do, CM i.t%ak IIf•tkIlillkltl I?nnluk SWbrld;sgnHL; 1 Alf �+�.w/`■ ^■!■.,,fit) .F J 6:R, a.ln.n. t tio, Nrn:.6.anlq +7t n G:2p5'1' 1pflhri'. NEWS violukTSTA 1t111cifiM„IMdilros on CAldtNUAR Al)Vlit'fISF 8All,go11 iCgNd I'Whielo, R,Raul F,Afatrp L?doxrtioll 11n10tla, Fnhlie b'alely. (lbhunriws' h" 1'11r Roviord Soo In 11;x N'1'HL NR1li4; tItV1Nli WATWiitICF1RVISN l ClltGAT1L1TtM CC)MI'LAIN'r I aNE?MeUUdUANA ENI'[11At'Ivh; l gPOLICE 1tF4:RU1'f8 liCAIGh . . . Today's TwillE)eals by iRdYtt�tidf - � - l Rana sta^t,up-^Natti"ido g19al1—U oeloCaribbean 911r011cn Fetes 06 AsmirdWoohr ! $YI'9RSt up—ftanof Cars-t,)((��,PA NNt1 C CCmssfnn Unlled.8lams i:lto IS"4'.A i i ash, 010as ocl. R,7 AItMo• (')NV AV •ewrvp lnrnx. mex e4010ml nano s .vavc ]ytggCrinoaof I 2507'Tlc'1T7.�Jlliilla, plants found in Costa Mesa tlrlloly tw ts on Pueebonk ,> building C 1 rgrheUnilyPflot . dtt`hellnif5'P1Iut 1'W ll &hale a1,Ub Iwonl .i aft t;t .. . 1 � „dra�l;.a.,,anl c vm Nean I'Mot, sato q,c fnand luk” thil s'. ,w, a 1, OInbM In n b odlapncrll, from JVhilll,, 6lenlonklry Sdmul:dn'I-nonldy. (00snnay (?actin Mild unlr:x penw let/wavemtre,'.e, 1-l.il lfp.trn'enuah Dohrtvuk Nueamh:n p', wuJ I;m.i,e p,nr. Polieosold they feald 11,410 ds ofole"Cluann plants9'uesd'a„v a@urnno, who, it fir lod ¢Prim, porn Iilopal indoor pat liven outnsts iron) Wilittlut Cfunluntnn'Scheol In posts M,,90. UAAGNE HOW "OUR FIOMC: WhA l,OOKWtfld G� � R. €t 600,748.8377 f ,1 Conanienting Po icy ne Facebookoonollaos vnot rugWa monitored by, Dab Plhst staff. If you botieee n!:pmmleOt einlaloa nliy of the balow avrlas, pleasea111110 'tdltor Jnlrn.Canedu nl ialtn.cnnnils[+�Inlimes.com vrd web MIT' ,Ann Utility at annAaleyt(plati nms.tom. Staff rvill review and tmnoca offenQing' cnnunenta tloving working haus, 0 n,n1, to 6y,n1, Monday fhroogh Friday, 'I'hegtdly Pilot, riololV a Ilia right to r2ow, a, blo+;k ormfliso imy nonunent for 06. witson. velum posting to I)ailyPiloCeam, yhu agreyto not provide Canments that: "ave posted nshig Also: Or fake nnnlrss conndo vtligor, proCenc, )IT t a, rneYsc pr hetRlhl Im?gunga m'arprYasimlai npithgls nrslurs, phulogtxtphear illushuhann In poor rnste, ioElununutplyahackr' nfa per5nnol, raGinl or oil iglon.v nnlurc: °drodeFlunnto,p tru'aatening, diapnrnglug, gmsvly innanunnhny, fnlso' Misleoday, fistudulmll, innocurnfon wiAlh•, uvunim gmesaxnggm:dion nr ultvul>simvintad alwlms, liolkiti, the plim4 rights of an)' Writ park); Bra kill)'Ctlapinlbly Ili... nNI or oti'nnshro In dny individwd or cao i ..wi N. hC¢Ir//wtuW,datlyhilcat,oom/news/trr-clPt-me-I105,0,7012268.story 11l6l20N 27-6 250 madJuana plants found in Costa Mesh building - Daily Pilot p1w•tunnn plenty hnmd POritl•pJ ' tlY•Inm • nrrrg •I•ratR9ck4nle Rov's • Cnsm him , CA, Volead Fiona Arnold 440 p.m., rirefighell arrived ata cnlnl)lex of uannnocehl'i bufldings at t8'd5 W4ftt1ae Or., wliero all oleadrlcai hour rens ablaze: police Bald, lYIle light ell dounerl Iia 1•lanax hafere fhey spread to a 'billlcing, ilutue they lalwatigated the (the All, Thep dlaooneced that the elarillearl panel had bean pIhi ao a,unit inside the bulhll118li uld stent powbr, euthorities acid. Fire craws Ino rows of morticians plants inside (felt rmit, police skid, The Fire DepattmRnt reflect Unstn Ntesa police datfletives, who wetted at the Reeled until they tied a warrant to search the building, pollee LL hryan4;lxsss"nid. "Vnt4eals rooms were found to emunfamm'IJunnu Plants in "'Place stagms of dorm npmenC, saint pn)enthit d sr,)tptle'a to ronhnight the grow operation, as well on finished wed int rtivlly finished nNgjaerru propaad. for distill?)tion and 1111%" posh, Wall police said in it nawa calonso, Dobatives Rallied morn thin 25o pIntl Is, several bags of marijuana and alwuGly pounds; of the drug ready to be sold for an esthnatad vu4ro of more that 1520,tlou, Lt. I ani Dondoro said, Polivo dealinecl it; release mare door ix because dory arc still tnvrsctgrthag the aparaflon. No Resets have bean nude, Ghvag arid, tbllow ,l 1pra2lnCdbbmrk jet oil) ollAtibr ("!iladn,es,cons Wi Ramp share a1I Twagt r'f Lies f41P) li'l o ” NY•rAn(, 1 fl!nn'. Malt rel6u'a d!eve '! . �prtt [)a•xoh u)eI lrsinrrnaeg I flu%t $tm}=z Irrtr_•.t h,`exkh,g nnex tram ll""poi npu5A44hrthi N.,lqeand IrTinq fAlIImade I unit" Pito Araund.'Powll I I. GiPi boy; condi, f xm+yht:m costo E c ; ^' VInsn hook volAmy The Daily Pilot is now, aging Porchook. emnmentson stool's rin postal t.TnamanC, logium Faaohoolt and thou asletyaurenmmenr, To report span) orahresn elichthe "X" in too upper right cover of the comment box, an n9apt WraRp, iYlydyntl. blobs in nor prownarin'rler In urorv,meN ue ngn'S `eCtMpN,eln, —'nY� cawnu,", n<lonw5 It Tp('Inmmanlx rive NYa ilei: re: ' ulftrescou ink on Pa Santa Ape MMissueirtp Gwrvm onttrpisica:mmhir)klgafoil clef)I- �_ a mrarcala,maana rvrml Roll Ilea for F,,,.da ,ngn Page 2 (,)(13 "dkcrimlta taan the groundn'of race, mllgima nnlinnal urigh,, i n idea oge, radial sinus, sexual orlontatlou ov cureflily, Of Isfectosale matell In any cool re, prohlbled by Ino, . "tlamo"my IadlAdmil or entity [I cis rgpea(vd mwangos role IVA to another tuairaadloe Tooke doro�gnntnry ar offensive rulnmghUs uhmn matter Inrllhrluni), or repent prior pnanngaf the 81 nresse a under mulfiple threads m•euhjer a. " tdniaea ar'often rnguthy violsUonofany munluipul, atom, federal m• International leo•. ndo, regtllatlm, or millinnoa, "adrartia",promote oroffer to Vole allycnod-or "I I ,Is, coccal in areas specifically desiynisil for, such puri]o5e. "a<„unlnaopyriyhtddorathrr pmnrlolary cantonal of dry kindndihiwt the rvio-tlg I, itjig so, of f, ow ler of dor material, piny, td IIIA' 1'Ight nFd1YIIlmlfocMm orauny thiM pfllij'. ' nlauntl ler Frnnsl,nifplrusds ler ntkcr Iwrmfid, dlennptiva or ilespmctivo Fligs, rnntdetai arcade. BRAIN-DEAD SIMPLE CUB'S YOUR BY 900 rj 1.1119 � r ,-A7-7 creep:�jNr4VW.<ialiyj?IiOG,CC11TIi118tiV5jt11-(:rpt-iT1 C"l i06-mart•�LIfl71A-'(I!'e••2Oi41105,a,iol2.2.liH,StoI')+ I 1/6/20 14 CHAPTER 7 DEVELOPMENT SERVICES DEPARTMENT REPORT BY WILLA BOUWENS-KILLEEN, PRINCIPAL PLANNER -ZONING ADMINISTRATOR A. Introduction This preliminary report briefly summarizes the potential impacts on Development Services Department related services and resources that may be associated with the addition of medical marijuana businesses in Costa Mesa, including but not limited to zoning restrictions, permit requirements and adherence to Costa Mesa Municipal Codes. B. Impact on the Development Services Department In reviewing both citizen -sponsored medical marijuana ballot measures, it appears the Development Services Department would be involved as follows; 1. Compliance with "safety radius restrictions": Proposal number S might require the Planning Division to verifythat the proposed business complies with the "safety radius restrictions" as part of the review of the business license. (This will depend on how the business license is submitted.) 2. Violation of operational requirements: Under proposal number 1, only a Business License is required. Consequently, if the business does not comply with State and Local law, Code Enforcement would be required to enforce those Code violations -- via Notice of Violations, citations, and/or criminal prosecution. (Under proposal number 2, since the Police Department would review and issue dispensary and operator permits, one would assume that they would be responsible for ensuring compliance with State and Local requirements.) 3. Signage: Under proposal number 1, Planning would need to confirm that proposed signage does not contain pictorial representations of the marijuana plant and/or of marijuana usage. Many aspects of Medical Marijuana Collectives being permitted to operate in Costa Mesa would be the same as any business proposing to establish in the City: 1. Business license: The Planning Division would be required to review the business license for compliance with zoning and parking requirements. 2. Parking deviations; A medical marijuana business proposed for an industrial zone may be initially rejected due to a lack of parking, necessitating the processing of a minor Conditional Use Permit (CUP) to deviate from parking standards before approval of the license can be given (assuming the minor CUP can be justified and approved). 28 3. Building permits: A building permit would be required for any changes proposed to the building. This is especially critical for businesses that will cultivate the marijuana because those type of uses draw a greater than normal amount of power and have interior irrigation systems. 4. Enforcement: If compliance cannot be gained, a public nuisance action, as delineated in Title 20 (proposal number 1) or Title 13 (proposal number 2) would probably fall to this department to spearhead and/or process. S. Illegal businesses: Perhaps the greatest impact could be that, without an outright prohibition, other Medical Marijuana businesses may believe they can establish in the City. Enforcement (lack of a business license/removal of a business that cannot be established) can be lengthy, C. Conclusion Consequently, in our opinion, with a few exceptions, allowance of medical marijuana businesses appears to be much the same as any new business that proposes to establish in the City. RR CHAPTER 8 INFORMATION TECHNOLOGY DEPARTMENT REPORT BY STEVE ELY, INFORMATION TECHNOLOGY DIRECTOR A. Introduction This preliminary report briefly summarizes the potential impacts on the Information Technology Department (I,T.) related services and resources that may be associated with the addition of medical marijuana businesses in Costa Mesa, including but not limited to impacts to the City's permitting system, and changes to the geographical information systems spatial layer maps. B. Impact on the I.T. Department We have reviewed the proposed measures to establish regulations for medical marijuana businesses, The impacts to the I.T. Department associated with the proposed measures are minimal and are similar for all measures. At a minimum, permitting software requirements will need to be changed/added to accommodate the proposed measure. As needed, I.T. will make changes to the City's geographical information systems maps as Medical Marijuana Businesses relocate or change locations. C. Conclusion The Information Technology Department will work with the permitting vendor to establish the needed changes in the application for any approved medical marijuana businesses measure. Otherwise, it appears that impacts to our department will be minimal. 30 CHAPTER 9 PUBLIC SERVICES DEPARTMENT REPORT BY ERNESTO MUNOZ, PUBLIC SERVICES DIRECTOR A. Introduction This preliminary report briefly summarizes potential impacts on the Public Services Department related services and resources that may be associated with the addition of medical marijuana dispensaries in Costa Mesa, including but not limited to impacts to public infrastructure, B. Impact on the Public Services Department We have reviewed the proposed measures to establish regulations for medical marijuana dispensaries and cultivation. The impacts to public infrastructure associated with the proposed measures are minimal and are similar for all measures. As established by the applicable codes, the City will retain its ability to adopt and enforce local ordinances to regulate facilities housing these businesses, including permitting requirements for new or modified existing sites. C. Conclusion Permitting requirements and conditioning of new and remodeled sites will follow existing local codes. No impacts are anticipated to the public right-of-way other than those typical of any new or remodeled development. 31 COMPARISON CHART OF FOUR PROPOSED MEDICAL MARIJUANA ORDINANCES REGULATION Ordinance No. 1 Ordinance No. 2 Ordinance No. 3 Ordinance No. 4 Taft &Gardner (Atty Longwith) Webster& Levesque (Atty Welch) Proposed City's Ordinance New Santa Ana Ordinance Alarm system Yes No Yes Yes Securityguard Yes No Yes Yes Security cameras No No Yes Yes Priority to old stores Yes Yes No No Number of stores Eight (minimum) Four (minimum) No limit Twenty City Council may amend (not repeal) No Yes Yes Yes (and may repeal) Inspections Authorized No No Yes Yes Tax Yes Yes No Yes Limit sales to medical marijuana and related items No No Yes No Business indemnify City if legal problems Yes No Yes No Childproof containers Yes No Yes No Pesticide testing No No Yes No Active ingredients testing No No Yes No On-site prescriptions Yes Yes No No Business license Yes Yes Yes Yes Business permit No Yes Yes Yes Operator permit No Yes No No Page 1 of 2 Cultivation permit No No Yes No Lawful zones Commercial / industrial Commercial / industrial Commercial / industrial Industrial Location restrictions Yes Yes Yes Yes Non -concentration of stores Yes Yes Yes "mistakenly said "No" in 11/18 report" Yes Hours 9am to 10pm Sam to lopm 7am to 10pm 10 to 8 Mon -Sat 11 to7Sun Quality control No No Yes No Cultivation standards No No Yes No Background checks Yes Yes Yes Yes Patient confidentiality Yes Yes Yes No Business records No No Yes Yes Transaction records No No Yes Yes Delivery records No No Yes No Employee records No No Yes Yes Employee training No No Yes No General insurance Yes No Yes No Delivery insurance Yes No Yes No No Minors Yes Yes Yes Yes Labeling Yes No Yes No Outdoor lighting No Yes Yes No Signage restrictions Yes No Yes Yes Odor restrictions Yes No Yes Yes Edible regulations Yes No Yes Yes Page 2 of 2 CITY COUNCIL SUPPLEMENTAL MEMORANDUM MEETING DATE: APRIL 19, 2016 SUBJECT: CONSIDERATION OF A CITY INITIATIVE PETITION REGARDING MEDICAL MARIJUANA DISPENSARIES DATE: APRIL 4, 2016 FROM: BRENDA GREEN, CITY CLERK TARQUIN PREZIOSI, DEPUTY CITY ATTORNEY FOR FURTHER INFORMATION CONTACT: BRENDA GREEN, CITY CLERK, 714-754-5221 NB -4 This memo expands upon the options available for City Council consideration regarding an ordinance regulating medical marijuana dispensaries within the City. In addition to placing an initiative on the November 2016 ballot, an alternative for City Council consideration is to adopt an Ordinance to regulate medical marijuana dispensaries within the City. BRENDA GREEN City Clerk