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HomeMy WebLinkAbout16 - NB-4 - Consideration of City Intiative Petition - 6/21/2016CITY COUNCIL AGENDA REPORT MEETING DATE: June 21, 2016 ITEM NUMBER: NB -4 SUBJECT: CONSIDERATION OF A CITY INITIATIVE PETITION REGARDING MEDICAL MARIJUANA BUSINESSES DATE: JUNE 16, 2016 FROM: CITY CLERK'S OFFICE; CITY ATTORNEY'S OFFICE PRESENTATION BY: TARQUIN PREZIOSI, DEPUTY CITY ATTORNEY FOR FURTHER INFORMATION CONTACT: BRENDA GREEN, CITY CLERK, 714-754-5221 RECOMMENDATION Staff recommends that the City Council: Consider and provide direction on whether to place the attached initiative ordinance entitled "The City of Costa Mesa Medical Marijuana Measure" on the November 8, 2016 ballot relating to medical marijuana manufacturing, testing and related uses within certain areas of the City. If so directed, Resolutions calling for a consolidated municipal election, and submission of the measure to the ballot, will be presented for adoption at the July 5, 2016 City Council meeting. BACKGROUND On April 5, 2016, the City Council directed staff to prepare a medical marijuana ballot measure for consideration by Council, in order to compete with the two citizen initiative measures that will be considered by the voters at the November general election. Of the options presented at the April 5t" Council meeting, the City Council directed staff to prepare a new initiative ordinance to be placed on the ballot that would provide: 1) for medical marijuana businesses to be located north of the South Coast Drive and west of Harbor Blvd.; 2) to allow certain types of medical marijuana manufacturing uses in this area; 3) to provide for future regulation of dispensaries consistent with State law; 4) to impose a tax on medical marijuana businesses; and 5) to compete with the two citizen - backed measures on the November 8, 2016 ballot that would allow up to 4 and 8 dispensaries, respectively, in the City. STATE LAW GOVERNING MARIJUANA In 1996, the voters of the State of California approved Proposition 215 (codified as Health and Safety Code Section 11362.5 and entitled "The Compassionate Use Act of 1996"). The intent of the Compassionate Use Act (CUA) was to enable persons in need of marijuana for medical purposes to obtain and use marijuana without the threat of criminal 1 prosecution under limited and specified circumstances. Under the CUA, "qualified patients" with a physician's recommendation for medical cannabis and "primary caregivers" are exempted from being prosecuted under Health and Safety Code Section 11357 (possession of marijuana) and 11358 (cultivation of marijuana) for specified amounts. On January 1, 2004, the California State Legislature enacted Senate Bill 420 (the Medical Marijuana Program Act or MMPA) to clarify the scope of the CUA to allow cities and other governing bodies to adopt and to enforce rules, regulations, and laws consistent with Senate Bill 420. The California Supreme Court has made clear that neither the CUA nor the MMPA expressly or impliedly preempts the authority of cities or counties, under their traditional land use and police powers, to allow, restrict, limit or entirely exclude marijuana cultivation or distribution within their jurisdictions. The MMPA allows cities and counties to adopt local ordinances that regulate the location, operation or establishment of medical marijuana collectives and to enforce such ordinances. The safe distribution of marijuana, as contemplated by the CUA, and the safe distribution of marijuana edibles should include consideration of the safety of all residents and businesses, not just the users of marijuana or the consumers of the marijuana edibles. The proposed ordinance is designed to address safety and professional management in the operation of any proposed medical marijuana business. On October 9, 2015, the Governor signed three pieces of state legislation which comprise the Medical Marijuana Regulation and Safety Act (MMRSA): AB 266, AB 243, and SB 643. AB 266 establishes a dual licensing structure requiring a state license and a local license or land use permit. The Department of Consumer Affairs newly created Bureau of Medical Marijuana Regulation (BMMR) will coordinate the overall regulatory structure establishing minimum health and safety and testing standards. AB 243 establishes a regulatory and licensing structure for cultivation sites under the Department of Food and Agriculture. SB 643 establishes criteria for licensing of medical marijuana businesses, regulates physicians, and recognizes local authority to levy taxes and fees. Generally, and altogether, the MMRSA governs the licensing and control of all medical marijuana businesses in the state and provides criminal immunity for licensees. The legislation protects local control in several ways: it requires dual licensing; local governments may enforce state law in addition to local ordinance (upon request by the local jurisdiction); civil and criminal penalties are available for unlicensed activity; and it expressly protects local licensing practices, zoning ordinances, and local actions taken under the constitutional police power. Under MMRSA, BMMR will regulate transporting, distribution and testing of medical marijuana; the Departments of Food and Agriculture will regulate cultivation; and the Department of Public Health will regulate manufacturing and testing. Before MMRSA was enacted, the only types of marijuana businesses allowed understate law were collectives/cooperatives where patients and primary caregiver joined a non- profit legal entity, to collectively grow and distribute marijuana to members only. The state law (the MMPA) does not require cooperatives/collectives to obtain a state permit or license to operate, but they must be authorized by the local jurisdiction and meet all of the local and state regulations pertaining to their operations. The MMRSA will revoke the Health and Safety Code section enacted under the MMPA that permitted cooperatives and collectives one year after the state begins issuing licenses for the various for-profit categories of medical marijuana businesses now permitted under MMRSA. The BMMR is currently in the early stages of rulemaking necessary to implement the provisions of 2 MMRSA. The BMMR has stated that it anticipates publishing comprehensive regulations and that the State will begin issuing licenses by January 2018. Under MMRSA, these new types of for-profit medical marijuana businesses - including distributors, manufacturers, testing laboratories and transporters - must obtain both a state license and a City permit before they can commence operations. This is because these new categories of medical marijuana businesses allowed under MMRSA were not previously permitted by state law to operate as a collective or cooperative. DISCUSSION Currently, medical marijuana related uses — cultivation and dispensaries — are prohibited in all areas of the City. The proposed initiative ordinance would require a medical marijuana business permit to engage in wholesale distribution, manufacturing, testing, research and development, and transportation of medical marijuana. The ordinance does not alter the City's current ban on dispensaries or cultivation, other than to regulate where dispensaries may be located in the future. The ordinance would permit these medical marijuana businesses to be located only in the Manufacturing Park (MP) zone north of South Coast Drive and west of Harbor Boulevard. Such business would require a conditional use permit (CUP) to locate in this zone, in addition to the medical marijuana business permit. The ordinance would impose a 6% business tax on these uses. The ordinance could be amended by the City Council, expect for matters relating to tax, as discussed below. The ordinance would add a new Section 9-29.5 to Article 4 (Schedules) of Chapter I (Business Tax), of Title 9 (Licenses and Business Regulations) of the Costa Mesa Municipal Code (CMMC). Section 9-29.5 imposes a 6% gross receipts business tax on all medical marijuana businesses authorized under Chapter VI, as well as any non- medical marijuana or cannabis businesses that may arise in the future — unless otherwise prohibited by state law. The initiative provides that this amount may be decreased by the City Council. However, as a general tax, this amount can only be increased by approval of a majority (51 %) vote of the electorate in a general election. Under state law, such businesses would not be allowed to operate until licensed by the state. The ordinance would also add a new Chapter VI (Medical Marijuana Business Permits) to Title 9. Chapter VI requires a business permit to engage in distribution (wholesale), manufacturing, testing, research and development, and transportation of medical marijuana. Chapter VI generally provides the following: • The purpose of the ordinance, which is to regulate these in a responsible manner and that protects the health, safety, and welfare of the residents of the City. • Legal Authority and Definitions, which generally follow the definitions set forth in MMRSA. • The authority of the CEO to issue permits under this Chapter, which valid for two years. • The ability of the CEO to establish procedures and regulations to implement the permit process. • Authority to revoke the permit for any violation of the Municipal Code or state law. • Security measures, including employee background checks, limited access, storage and alarm system, and restrictions relating to owners and employees with felony convictions. 3 Operating requirements including recordkeeping and inventory control, signage and notices, odor control, restriction of minors, loitering prohibition. The requirement to obtain a regular City business license. • Requirements to maintain transaction and sale records for inspection. Further, the ordinance would add a new Article 21 to Chapter IX of Title 13 (Zoning Code) and would amend Article Chapter IV (Citywide Land Use Matrix). Article 21 provides that medical marijuana distributers (wholesale), manufacturers, testing laboratories, research and development laboratories, and transporters may be located in the Manufacturing Park (MP) zone north of South Coast Drive and west of Harbor Boulevard with a conditional use permit. Attachment 4 depicts the area zoned for these medical marijuana uses. These business would require a conditional use permit to locate in this zone, in addition to the medical marijuana business permit. Article 21 would also allow dispensaries to be located in this area, if and when dispensaries are authorized under by the CMMC. Dispensaries would not be authorized to locate within 500 feet of any school or day care facility. As currently written, future dispensary uses would not require a CUP, since it is anticipated that any such use would be subject to a detailed permitting and selection process that may not be amenable to a CUP. ALTERNATIVES CONSIDERED 1. Accept the ordinance as written to be brought back on the July 5, 2016 agenda for placement on the November 8, 2016 ballot. 2. Direct staff to revise the ordinance and consider those revisions at the July 5, 2016 agenda for placement on the November 8, 2016 ballot. 3. Decline to place the initiative ordinance on the ballot. FISCAL IMPACT OF PLACING MEASURE ON BALLOT The cost to place the initiative on the November 2016 ballot is estimated at $10,000.00 and is included in the Fiscal Year 2016-17 budget, Elections Consulting. At present the estimated costs of implementing the ordinance are indeterminate. LEGAL REVIEW The City Attorney's office has reviewed this report for legal content and approved it as to form. THOMAS P. DUARTE BRENDA GREEN City Attorney City Clerk RICHARD L. FRANCIS Assistant CEO 12 ATTACHMENTS: 1. April 5, 2016 Agenda Report (excluding attachments 2. November 18, 2014 Agenda Report (excluding attachments 3. Proposed Initiative Ordinance 4. Zoning Map ATTACHMENT 1 CITY COUNCIL AGENDA REPORT MEETING DATE: April 5, 2016 ITEM NUMBER: NB -2 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 . *9*TilirrWL I7`fielm 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) 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: Security. Requires 24/7 security camera recordings which are accessible to law enforcement and the City. 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 Marijuana Related Items. Yes. 9. Non -Concentration of Stores. No. 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. 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. n 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 BRENDA GREEN Deputy City Attorney 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. Supplemental Memo ATTACHMENT 2 CITY COUNCIL AGENDA REPORT MEETING DATE: November 18, 2014 ITEM NUMBER: NB -2 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: 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 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. 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. 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. 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). 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. 0ICE" 119]i.1RUN ; 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 XI II 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: N 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 Marijuana 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. Security 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 BRENDA GREEN City Attorney City Clerk RICK FRANCIS Assistant CEO ATTACHMENTS: refer to List ATTACHMENT COUNCIL -SPONSORED INITIATIVE MEASURE TO BE SUBMITTED DIRECTLY TO THE VOTERS The City Council for the City of Costa Mesa submits the following measure to the voters of the City for approval and enactment: SECTION 1. Name This ballot measure shall be known and may be cited as "The City of Costa Mesa Medical Marijuana Measure", and shall be referred to herein as the "Measure." SECTION 2. Purpose The purpose of the Measure is to provide for the specific areas in the City within which medical marijuana distributors, manufacturers, processors, research and development laboratories, testing laboratories and transporters can be located; to provide for City regulation of these medical marijuana businesses, and to provide for the specific areas in the City where medical marijuana dispensaries may be located, consistent with the statewide regulations to be adopted by the California Department of Consumer Affairs - Bureau of Medical Marijuana Regulations ("BMMR") and other state agencies, including the departments of Food and Agriculture and Public Health, pursuant to Senate Bill 643, Assembly Bill 266, and Assembly Bill 243, as amended, collectively referred to as the Medical Marijuana Regulation and Safety Act (MMRSA); and to impose a gross receipts tax on all medical marijuana distributors, manufacturers, processors, testing laboratories, transporters, and research and development laboratories, as well as any other marijuana or cannabis business at a rate of 6% of gross receipts. An additional purpose of this Measure is to directly compete with the two measures entitled "Allow Operation of Up to Four Licensed Medical Marijuana Businesses Within the City of Costa Mesa" and "Allow Operation of Up to Eight Licensed Medical Marijuana (Cannabis) Businesses Within the City of Costa Mesa" which each propose a number of amendments to City's Municipal Code regarding medical marijuana. The Measure is intended to comprehensively regulate the same subject as both the "Allow Operation of Up to Four Licensed Medical Marijuana Businesses Within the City of Costa Mesa" and "Allow Operation of Up to Eight Licensed Medical Marijuana (Cannabis) Businesses Within the City of Costa Mesa". If a majority of voters approve both this Measure and either or both of the "Allow Operation of Up to Four Licensed Medical Marijuana Businesses Within the City of Costa Mesa" and "Allow Operation of Up to Eight Licensed Medical Marijuana (Cannabis) Businesses Within the City of Costa Mesa", the ballot measure with the higher percentage of the vote will control. City of Costa Mesa Medical Marijuana Activity Ordinance Page 1 of 18 Now, therefore, the People of the City of Costa Mesa do ordain as follows: AN ORDINANCE OF THE PEOPLE OF THE CITY OF COSTA MESA, CALIFORNIA, ADDING A NEW SECTION TO TITLE 9, CHAPTER I, ARTICLE 4 REGARDING MARIJUANA TAX AND A NEW CHAPTER VI "MEDICAL MARIJUANA BUSINESS PERMITS" TO TITLE 9; AMENDING SECTION 13-16 OF TITLE 13, CHAPTER I, ARTICLE 4 REGARDING ENFORCEMENT; ADDING A NEW ARTICLE 21 "MEDICAL MARIJUANA DISPENSING, DISTRIBUTING, MANUFACTURING, RESEARCH AND DEVELOPMENT AND TESTING TO CHAPTER IX OF TITLE 13; AND AMENDING TABLE 13- 30 OF CHAPTER IV, CITYWIDE LAND USE MATRIX, OF TITLE 13 OF THE COSTA MESA MUNICIPAL CODE. SECTION 3. Title 9, Chapter I, Article 4, Schedules, is hereby amended to add a new section 9-29.5, Marijuana tax, to read as follows: Sec. 9-29.5 Marijuana tax. Notwithstanding any other provision of this code, every person engaged in, managing, conducting, or carrying on any medical marijuana business defined in Chapter VI of this title, or any other medical marijuana, medical cannabis, marijuana and/or cannabis business, shall pay an annual business tax of 6% based on the gross receipts of the business. SECTION 4. Title 9, Chapter VI., entitled "Medical Marijuana Businesses and Permits" is hereby added to the Costa Mesa Municipal Code to read as follows: Title 9. LICENSES AND BUSINESS REGULATIONS Chapter VI. MEDICAL MARIJUANA BUSINESS PERMITS. Sec. 9-481. Purpose and Intent. It is the purpose and intent of this chapter to regulate the distributing, manufacturing, processing, research and development, testing and transporting of cannabis and cannabis -related products in a manner which is responsible, which protects the health, safety, and welfare of the residents of Costa Mesa, and to enforce rules and regulations consistent with state law. In part to meet these objectives, a permit shall be required in order to own and/or to operate a medical marijuana business within the city. Nothing in this chapter is intended to authorize the possession, use, or provision of marijuana for purposes which violate state or federal law. The provisions of this chapter are in addition to any other permits, licenses, and approvals which may be required to conduct business in the city, and are in addition to any permits, licenses and approvals required under state law. City of Costa Mesa Medical Marijuana Activity Ordinance Page 2 of 18 Sec. 9-482. Legal Authority. Pursuant to Sections 5 and 7 of Article XI of the California Constitution, and the provisions of the MMRSA, the city is authorized to adopt ordinances that establish standards, requirements and regulations for local licenses and permits for cannabis and cannabis - related activity. Sec. 9-483. Marijuana business activities prohibited unless specifically authorized by this chapter. Except as specifically authorized in this chapter, the manufacture, processing, storing, laboratory testing, labeling, transporting, dispensing, distribution, delivery, or sale of marijuana or a marijuana product is expressly prohibited in the city. Sec. 9-484. Compliance with Laws. It is the responsibility of the owners and operators of the medical marijuana business to ensure that it is, at all times, operating in a manner compliant with all applicable state and local laws, and any regulations promulgated thereunder. Sec. 9-485. Definitions. When used in this chapter, the following words shall have the meanings ascribed to them as set forth herein. Any reference to California statutes includes any regulations promulgated thereunder and is deemed to include any successor or amended version of the referenced statute or regulatory provision. "Cannabis" means all parts of the Cannabis sativa Linnaeus, Cannabis indica, or Cannabis ruderalis, whether growing or not; the seeds thereof; the resin, whether crude or purified, extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. "Cannabis" also means the separated resin, whether crude or purified, obtained from marijuana. "Cannabis" also means marijuana as defined by Section 11018 of the California Health & Safety Code as enacted by Chapter 14017 of the Statutes of 1972. "Cannabis" does not include the mature stalks of the plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of the plant which is incapable of germination. For the purpose of this Chapter, "cannabis" does not mean industrial hemp as that term is defined by Section 81000 of the California Food and Agricultural Code or Section 11018.5 of the California Health & Safety Code. "Cannabis concentrate" means manufactured cannabis that has undergone a process to concentrate the active cannabinoid ingredient, thereby increasing the product's potency. An edible medical cannabis product is not considered food, as defined by Section 109935 City of Costa Mesa Medical Marijuana Activity Ordinance Page 3 of 18 of the California Health & Safety Code, or a drug, as defined by Section 109925 of the California Health & Safety Code. "Caregiver" or "primary caregiver" has the same meaning as that term is defined in Section 11362.7 of the California Health & Safety Code. "Chief Executive Officer" or "CEO" shall mean the Chief Executive Officer of the City or his or her designee. "Cultivation" means any activity, whether occurring indoors or outdoors, involving the propagation, planting, growing, harvesting, drying, curing, grading, and/or trimming of cannabis plants or any part thereof for any purpose, including medical marijuana. "Cultivation site" means a facility where medical cannabis is cultivated, propagated, planted, grown, harvested, dried, cured, graded, or trimmed, or that does all or any combination of those activities. "Delivery" means the commercial transfer of medical cannabis or medical cannabis products from a dispensary, up to an amount determined to be authorized by the State of California, or any of its departments or divisions, to anyone for any purpose. "Delivery" also includes the use by a dispensary of any technology platform owned, controlled, and/or licensed by the dispensary, or independently licensed by the State of California under the MMRSA (as the same may be amended from time -to -time), that enables anyone to arrange for or facilitate the commercial transfer by a licensed dispensary of medical cannabis or medical cannabis products. "Dispensary" means a medical marijuana business facility where cannabis, medical cannabis products, or devices for the use of medical cannabis or medical cannabis products are offered, either individually or in any combination, for retail sale, including an establishment (whether fixed or mobile) that delivers, pursuant to express authorization, medical cannabis and medical cannabis products as part of a retail sale, and where the operator holds a valid medical marijuana business permit from the city authorizing the operation of a dispensary, and a valid state license as required by state law to operate a dispensary. "Dispensing" means any activity involving the retail sale of medical cannabis or medical cannabis products from a dispensary. "Distribution" means the procurement, sale, and transport of medical cannabis or medical cannabis products between entities licensed pursuant to MMRSA and any subsequent State of California legislation regarding the same. "Distributor" means a person holding a valid medical marijuana business permit for distribution issued by the city, and, a valid state license for distribution, required by state law to engage in the business of purchasing medical cannabis from a licensed cultivator, City of Costa Mesa Medical Marijuana Activity Ordinance Page 4 of 18 or medical cannabis products from a licensed manufacturer, for sale to a licensed dispensary. "Dried flower" means all dead medical cannabis that has been harvested, dried, cured, or otherwise processed, excluding leaves and stems. "Edible cannabis product" means manufactured cannabis that is intended to be used, in whole or in part, for human consumption. An edible medical cannabis product is not considered food as defined by Section 109935 of the California Health & Safety Code or a drug as defined by Section 109925 of the California Health & Safety Code. "Live plants" means living medical cannabis flowers and plants, including seeds, sprouts, immature plants (including unrooted clones), and vegetative stage plants. "Manufacturer" means a person that conducts the production, preparation, propagation, or compounding of manufactured medical cannabis, as defined in this section, or medical cannabis products either directly or indirectly or by extraction methods, or independently by means of chemical synthesis at a fixed location that packages or repackages medical cannabis or medical cannabis products or labels or relabels its container, where the operator holds a valid medical marijuana business permit for manufacturing from the and a valid state license for manufacturing pursuant to MMRSA. "Manufactured cannabis" means raw cannabis that has undergone a process whereby the raw agricultural product has been transformed into a concentrate or manufactured product intended for internal consumption or topical application. "Manufacturing site" means a location that produces, prepares, propagates, or compounds medical cannabis or medical cannabis products, directly or indirectly, by extraction methods, independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis, and is owned and operated by a person issued a valid Medical marijuana business permit for manufacturing from the city and, a valid state license as required for manufacturing of cannabis products. "Marijuana" means "cannabis," as that term is defined in this chapter. "Medical cannabis", "medical marijuana," "medical cannabis product' or "cannabis product' means a product containing cannabis, including, but not limited to, concentrates and extractions, intended to be sold for use by medical cannabis patients in California pursuant to the Compassionate Use Act of 1996 (Proposition 215), found in Section 11362.5 of the California Health & Safety Code (as the same may be amended from time - to -time). For purposes of this Title, "medical cannabis" does not include industrial hemp as defined by Section 81000 of the California Food and Agricultural Code or Section 11018.5 of the California Health & Safety Code. "Medical marijuana activity" includes manufacture, processing, laboratory testing, research and development, transporting, delivery, distribution, or sale of medical City of Costa Mesa Medical Marijuana Activity Ordinance Page 5 of 18 cannabis or a medical cannabis product, within the meaning of California Business and Professions Code 19300 et seq. "Medical marijuana business" means any business or operation which engages in medical marijuana activity. "Medical marijuana business permit" means a regulatory permit issued by the City pursuant to this Chapter to a medical marijuana business, and is required before any medical marijuana activity may be conducted in the City. "MMRSK means the Medical Marijuana Regulation and Safety Act adopted by Senate Bill 643, Assembly Bill 266 and Assembly Bill 243, as amended. "Patient" or "qualified patient" shall have the same definition as California Health & Safety Code Section 11362.7 et seq., as it may be amended, and which means a person who is entitled to the protections of California Health & Safety Code Section 11362.5. For purposes of this ordinance, a qualified patient shall include a person with an identification card as that term is defined by California Health & Safety Code Section 11362.7 et seq. "Person" means an individual, firm, partnership, joint venture, association, corporation, limited liability company, estate, trust, business trust, receiver, syndicate, or any other group or combination acting as a unit and includes the plural as well as the singular number. "Person with an identification card" shall have the meaning given that term by California Health & Safety Code Section 11362.7. "Processing" and "processor" shall have the same meaning as manufacturing and manufacturer, respectively. "Research and development laboratory" means a facility, entity, or site in the city that performs research into and/or the development of medical cannabis or medical cannabis products, where cannabis in any amount is located on-site, and that is both of the following: 1. Accredited by an accrediting body that is independent of all other persons involved in the medical cannabis industry in the state. 2. Registered with the State Department of Public Health, and is owned and operated by a person issued a valid medical marijuana business permit for laboratory testing from the city and a valid state license for such uses as required by state law. "State license" means a permit or license issued by the State of California, or one of its departments or divisions, under MMRSA to engage in medical marijuana activity. City of Costa Mesa Medical Marijuana Activity Ordinance Page 6 of 18 "Topical cannabis" means a product intended for external use. A topical cannabis product is not considered a drug as defined by Section 109925 of the California Health & Safety Code. "Testing laboratory" means a facility, entity, or site in the city that offers or performs tests of medical cannabis or medical cannabis products and that is both of the following: 1. Accredited by an accrediting body that is independent of all other persons involved in the medical cannabis industry in the state. 2. Registered with the State Department of Public Health, and is owned and operated by a person issued a valid medical marijuana business permit for laboratory testing from the city and a valid state license for laboratory testing as required by state law. "Transport" means the transfer of medical cannabis or medical cannabis products from the permitted business location of one licensee to the permitted business location of another licensee, for the purposes of conducting medical marijuana activity authorized by the MMRSA. "Transporter" means a person issued a state license, and a medical marijuana business permit by the city, authorizing the transport of medical cannabis or medical cannabis products in amounts authorized by the State of California, or by one of its departments or divisions under the MMRSA. Sec. 9-486. Type of Authorized Medical Marijuana Businesses Permitted. (a) One of more of the following types of medical marijuana business may be permitted to operate within the City: 1. a medical marijuana distributor; 2. a medical marijuana manufacturer or processor; 3. a medical marijuana testing laboratory; 4. a medical marijuana research and development laboratory; and 5. a medical marijuana transporter. (b) Businesses licensed permitted pursuant to this chapter shall not engage in the retail sale or distribution of cannabis, marijuana, medical cannabis, medical marijuana, medical cannabis product, cannabis product, or any other item. Sec. 9-487. Medical marijuana business permit required to engage in medical marijuana business. City of Costa Mesa Medical Marijuana Activity Ordinance Page 7 of 18 No person may engage in any medical marijuana business or in any medical marijuana activity within the city including manufacture, processing, laboratory testing, transporting, dispensing, distribution, or sale of medical cannabis or a medical cannabis product unless the person (1) has a valid medical marijuana business permit from the city and (2) is currently in compliance with all applicable state and local laws and regulations pertaining to the medical marijuana business and medical marijuana business activities. Sec. 9-488. Term of permit; fees. (a) A medical marijuana business permit shall be valid for two (2) years from the date of issue, unless otherwise suspended or revoked, and shall be renewed bi-annually thereafter, provided the permittee is in compliance with the provisions of this chapter. (b) Medical marijuana business permit and application fees shall be established by resolution of the City Council. Sec. 9-489. Effect of state license suspension, revocation, or termination. Suspension of a license issued by the State of California, or by any of its departments or divisions, shall immediately suspend the ability of a medical marijuana business to operate within the City, until the State of California, or its respective department or division, reinstates or reissues the State license. Should the State of California, or any of its departments or divisions, revoke or terminate the license of a medical marijuana business, such revocation or termination shall also revoke or terminate the ability of a medical cannabis business to operate within the city. Sec. 9-490. Denial and revocation A medical marijuana permit may be revoked upon a hearing by the director pursuant to section 9-120 for failing to comply with the terms of the permit, the applicable provisions of this chapter, this code, state law or regulation and/or any condition of any other permit issued pursuant to this code. Sec. 9-491. Appeals. Appeals from decisions of the CEO under this chapter shall be governed by the procedures set forth in Chapter IX of Title 2 of this code. Sec. 9-492. Prohibition on transfer of medical marijuana business permits. In the event a permit holding Medical Marijuana Business sells or transfer the business to a new owner, the new owner must obtain a new Medical Marijuana Business Permit prior to commencing or continuing operations. A Medical Marijuana Business shall be deemed to have transferred to a new owner, if persons(s) or entities with controlling City of Costa Mesa Medical Marijuana Activity Ordinance Page 8 of 18 interest at the time the Permit was first issued cease to possess controlling ownership interest or an ownership interest of less than fifty-one (51) percent. Sec. 9-493. City business license required. Prior to commencing operations, a medical marijuana business shall obtain a city business license pursuant to Chapter I of this title. Sec. 9-494. Conditional use permit required. No medical marijuana business permit shall be issued, and no person shall conduct a medical marijuana business unless a conditional use permit has been issued therefore pursuant to the provisions of Title 13, Chapter IX, Article 21 of this code. Sec. 9-495. Operating requirements for all medical marijuana businesses permitted under this chapter. (a) Records and recordkeeping. (1) Each owner and operator of a medical marijuana business shall maintain accurate books and records, detailing all of the revenues and expenses of the business, and all of its assets and liabilities. On no less than an annual basis (at or before the time of the renewal of a medical marijuana business permit issued pursuant to this Title), or at any time upon reasonable request of the City, each medical marijuana business shall file a sworn statement detailing the number of sales by the medical marijuana business during the previous twelve month period (or shorter period based upon the timing of the request), provided on a per -month basis. The statement shall also include gross sales for each month, and all applicable taxes paid or due to be paid. (2) Each owner and operator of a medical marijuana business shall maintain a current register of the names and the contact information (including the name, address, and telephone number) of anyone owning or holding an interest in the medical marijuana business, and separately of all the officers, managers, employees, agents and volunteers currently employed or otherwise engaged by the medical marijuana business. The register required by this paragraph shall be provided to the CEO upon a reasonable request. (3) All medical marijuana businesses shall maintain an inventory control and reporting system that accurately documents the present location, amounts, and descriptions of all cannabis and cannabis products for all stages of the production or manufacturing, laboratory testing and distribution processes. City of Costa Mesa Medical Marijuana Activity Ordinance Page 9 of 18 (4) Subject to any restrictions under the Health Insurance Portability and Accountability Act (HIPPA), each medical marijuana business shall allow city officials to have access to the business's books, records, accounts, together with any other data or documents relevant to its permitted medical marijuana activities, for the purpose of conducting an audit or examination. Books, records, accounts, and any and all relevant data or documents will be produced no later than twenty-four (24) hours after receipt of the City's request, unless otherwise stipulated by the City. (b) Security measures. (1) A permitted medical marijuana business shall implement sufficient security measures to deter and prevent the unauthorized entrance into areas containing medical cannabis or medical cannabis products, and to deter and prevent the theft of medical cannabis or medical cannabis products at the medical marijuana business. These security measures shall include: (i) Establishing limited access areas accessible only to authorized medical marijuana business personnel. (ii) All medical cannabis and medical cannabis products shall be stored in a secured and locked room, safe, or vault. All medical cannabis and medical cannabis products shall be kept in a manner as to prevent diversion, theft, and loss. (iii) Sensors shall be installed to detect entry and exit from all secure areas. (iv) Having a professionally installed, maintained, and monitored alarm system. (v) Any bars installed on the windows or the doors of the medical marijuana business shall be installed only on the interior of the building. (vi) Security personnel if utilized must be licensed by the State of California Bureau of Security and Investigative Services Personnel. (vii) Each medical marijuana business shall have the capability to remain secure and operational during a power outage and shall ensure that all access doors are not solely controlled by an electronic access panel to ensure that locks are not released during a power outage. (1) Each medical marijuana business shall identify a designated security representative/liaison to the city, who shall be reasonably available to meet City of Costa Mesa Medical Marijuana Activity Ordinance Page 10 of 18 with the CEO regarding any security related measures or and operational issues. (2) A medical marijuana business shall notify the CEO within twenty-four (24) hours after discovering any of the following: (i) significant discrepancies identified during inventory, as set forth in the city's administrative regulations; (ii) diversion, theft, loss, or any criminal activity involving the medical marijuana business or any agent or employee of the medical marijuana business; or (iii) the loss or unauthorized alteration of records related to cannabis, registering qualifying patients, primary caregivers, or employees or agents of the medical marijuana business. (c) Restriction on alcohol sales. No person shall cause or permit the sale, dispensing, or consumption of alcoholic beverages on or about the premises of the medical marijuana business. (d) Compliance with laws. It is the responsibility of the owners and operators of the medical marijuana business to ensure that it is, at all times, operating in a manner compliant with all applicable state and local laws, and any regulations promulgated thereunder. Nothing in this chapter shall be construed as authorizing any actions which violate state law or local law with respect to the operation of a medical marijuana business or any site-specific, additional operating procedures or requirements which may be imposed as conditions of approval of the location of the medical marijuana business. (e) Taxes. All medical marijuana businesses authorized to operate under this chapter shall pay all sales, use, business and other applicable taxes, and all license, registration, and other fees required under federal, state and local law. Each medical marijuana businesses shall cooperate with the city with respect to any reasonable request to audit the medical marijuana business' books and records for the purpose of verifying compliance with this section, including but not limited to a verification of the amount of taxes required to be paid during any period. (f) Miscellaneous operating requirements. City of Costa Mesa Medical Marijuana Activity Ordinance Page 11 of 18 (1) Restriction on consumption. Cannabis shall not be consumed on the premises of any medical marijuana businesses or elsewhere in the city other than within private residences. (2) No cannabis or cannabis products or graphics depicting cannabis or cannabis products shall be visible from the exterior of any property issued a medical marijuana business permit, or on any of the vehicles owned or used as part of the medical marijuana business. No outdoor storage of cannabis or cannabis products is permitted at any time. (3) Reporting and tracking of product and of gross sales. Each medical marijuana business shall have in place a point-of-sale tracking system to track and report on all aspects of the medical marijuana business including, but not limited to, such matters as cannabis tracking, inventory data, and gross sales (by weight and by sale). The medical marijuana business shall ensure that such information is compatible with the City's record-keeping systems. The system must have the capability to produce historical transactional data for review by the CEO. (4) All cannabis and cannabis products sold, distributed or manufactured shall be cultivated, manufactured, and transported by licensed facilities that maintain operations in full conformance with the State and local regulations. (5) There shall not be a physician located in or around any medical marijuana business at any time for the purpose of evaluating patients for the issuance of a medical marijuana prescription or card. (7) Signage and Notices. (i) In addition to the requirements otherwise set forth in this section, business identification signage for a medical marijuana business shall conform to the requirements of this code, including, but not limited to, seeking the issuance of a city sign permit. (ii) Each entrance to a medical marijuana business shall be visibly posted with a clear and legible notice indicating that smoking, ingesting, or otherwise consuming cannabis on the premises or in the areas adjacent to the medical marijuana business is prohibited. (iii) Business identification signage shall be limited to that needed for identification only. (9) Minors. (i) Persons under the age of eighteen (18) years shall not be allowed on the premises of a medical marijuana business. It shall be unlawful City of Costa Mesa Medical Marijuana Activity Ordinance Page 12 of 18 and a violation of this chapter for any person to employ any person at or for a medical marijuana business who is not at least eighteen (18) years of age. (ii) The entrance to the medical marijuana business shall be clearly and legibly posted with a notice that no person under the age of eighteen (18) years of age is permitted to enter upon the premises of the medical marijuana business. (10) Odor control. Odor control devices and techniques shall be incorporated in all medical marijuana businesses to ensure that odors from marijuana are not detectable off-site. (11) Display of permit and city business license. The original copy of the medical marijuana business permit issued by the City pursuant to this chapter and the city issued business license shall be posted inside the medical marijuana business in a conspicuous location. (12) Background check. Every owner, manager, supervisor or employee of the medical marijuana business must submit fingerprints and other information deemed necessary by the CEO for a background check by the Costa Mesa Police Department to verify that person's criminal history. No person shall be issued a permit to operate a medical marijuana business who has been convicted of a felony within the past 7 years, unless that felony has been dismissed, withdrawn, expunged or set aside pursuant to Penal Code sections 1203.4, 1000 or 1385, or who is currently on probation or parole for the sale, distribution, possession or manufacture of a controlled substance. (13) Loitering. The owner and/or operator of a medical marijuana business shall prohibit loitering by persons outside the facility both on the premises and within fifty (50) feet of the premises. (14) Permits and other approvals. Prior to the establishment of any medical marijuana business or the operation of any such business, the person intending to establish a medical marijuana business must first obtain all applicable planning, zoning, building, and other applicable permits from the relevant governmental agency which may be applicable to the zoning district in which such medical marijuana business intends to operate. Sec. 9-497. Medical marijuana employees. (a) Any person who is an employee or who otherwise works or volunteers within a medical marijuana business must be legally authorized to do so under applicable state law. City of Costa Mesa Medical Marijuana Activity Ordinance Page 13 of 18 (b) No medical marijuana business or owner thereof may employ any person who has convicted of a felony within the past 7 years, unless that felony has been dismissed, withdrawn, expunged or set aside pursuant to Penal Code sections 1203.4, 1000 or 1385, or who is currently on probation or parole for the sale, distribution, possession or manufacture of a controlled substance. (c) All employees must wear an identification badge while on the premises of the business, in a format proscribed by the CEO. Sec. 9-498. Promulgation of administrative regulations. (a) The CEO is authorized to establish any additional administrative rules, regulations and standards governing the issuance, denial or renewal of medical marijuana business permits, or concerning any other subject necessary to carry out the purposes of this chapter. (c) Regulations promulgated by the CEO shall become effective upon the date of publication. Medical marijuana businesses shall be required to comply with all state and local laws and regulations, including but not limited to any rules, regulations or standards adopted by the CEO. Sec. 9-499. Inspection and enforcement. (a) The CEO is charged with enforcing the provisions of the Costa Mesa Municipal Code, or any provision thereof, may enter the location of a medical marijuana business at any time during the hours of operation without notice, and inspect the location of any medical marijuana business as well as any recordings and records required to be maintained pursuant to this title or under applicable provisions of State law. (b) It is unlawful for any person having responsibility for the operation of a medical marijuana business, to impede, obstruct, interfere with, or otherwise not to allow, the City to conduct an inspection, review or copy records, recordings or other documents required to be maintained by a medical marijuana business under this chapter or under state or local law. It is also unlawful for a person to conceal, destroy, deface, damage, or falsify any records, recordings or other documents required to be maintained by a medical marijuana business under this chapter or under state or local law. Sec. 9-500. Violations. (a) Violations declared a public nuisance. Each and every violation of the provisions of this chapter is hereby deemed unlawful and a public nuisance. (b) Each violation a separate offense. City of Costa Mesa Medical Marijuana Activity Ordinance Page 14 of 18 Each and every violation of this chapter shall constitute a separate violation and shall be subject to all remedies and enforcement measures authorized by the Costa Mesa Municipal Code. Additionally, as a nuisance per se, any violation of this chapter shall be subject to injunctive relief, any permit issued pursuant to this chapter being deemed null and void, disgorgement and payment to the City of any monies unlawfully obtained, costs of abatement, costs of investigation, attorney fees, and any other relief or remedy available at law or in equity. The City may also pursue any and all remedies and actions available and applicable under state and local laws for any violations committed by the medical marijuana business or persons related to, or associated with, the medical marijuana activity. Additionally, when there is determined to be an imminent threat to public health, safety or welfare, the CEO, or the Chief of Police, may take immediate action to temporarily suspend a medical marijuana business permit issued by the City, pending a hearing before the City Council. (c) Criminal Penalties. Each and every violation of the provisions of this chapter may be prosecuted as a misdemeanor and upon conviction be subject to a fine not to exceed one thousand dollars ($1,000) or imprisonment in the county jail for a period of not more than twelve (12) months, or by both such fine and imprisonment. Each day a violation is committed or permitted to continue shall constitute a separate offense. (d) Remedies cumulative and not exclusive. The remedies provided herein are not to be construed as exclusive remedies. The City is authorized to pursue any proceedings or remedies provided by law. SECTION 4. Title 13, Chapter I, Article 4, Enforcement, Section 13-16(d) is hereby amended to read as follows: No criminal prosecution, citation orpenalty. Notwithstanding the provisions of subsections (a) and (b) of this section, no person shall be criminally prosecuted or cited, or suffer any criminal penalty, for any violation of the provisions of section 13-30, table 13-30, rows 31 b relating to the' prohibition of medical marijuana cultivation within the city, or for a violation of the provisions of Chapter IX, Article 20 related to the prohibition against medical marijuana cultivation. City of Costa Mesa Medical Marijuana Activity Ordinance Page 15 of 18 SECTION 5. Title 13, Chapter IX, Article 21 is hereby added to read as follows: Article 21. Medical Marijuana Dispensing, Distributing, Manufacturing, Processing, Research and Development, Testing and Transporting Locations. Sec. 13-200.90 Purpose. The purpose of this article is to regulate the location of medical marijuana dispensaries, distributing facilities, manufacturing sites, processing sites, research and developing laboratories, testing laboratories and transport facilities in order to promote the health, safety, morals and general welfare of the residents and the businesses within the city by maintaining local control over the ability to authorize and regulate the location of medical marijuana businesses. Sec. 13-200.91 Applicability. (a) Nothing in this article is intended, nor shall it be construed, to burden any defense to criminal prosecution under the Compassionate Use Act of 1996. (b) All the provisions of this article shall apply to all property, public and private, within the City. (c) All the provisions of this article shall apply indoors and outdoors. (d) Unless otherwise provided herein, the terms used in this article shall have the meaning ascribed to them in Title 9, Chapter VI of this code. Sec. 13-200.91 Medical marijuana dispensaries, distributing facilities, manufacturing sites, processing sites, research and developing laboratories, testing laboratories and transport facilities. (a) Medical marijuana distribution, dispensing, manufacturing, processing, transporting, research and development and testing is prohibited in all zone districts within the city, except for those portions of the Manufacturing Park (MP) zone that are located north of South Coast Drive and west of Harbor Blvd. (b) A conditional use permit shall be required and may be issued to allow the location of any business engaged in the distribution, manufacturing, processing, researching and developing, testing or transporting of medical marijuana in the MP zone, subject to the following conditions: (i) the requirements of Chapter III of this title have been met; (ii) the findings for granting a conditional use permit in accordance with section 13-29(g) are met; and (iii) the applicant obtains a medical marijuana business license pursuant to Chapter VI of Title 9 of this code. City of Costa Mesa Medical Marijuana Activity Ordinance Page 16 of 18 (c) No person shall engage in any use set forth in this article unless that use is specifically authorized by Chapter VI of Title 9 of this code. (d) No person shall dispense medical marijuana, and no medical marijuana dispensary shall be located, within five hundred (500) feet of the property line of any lot containing a day care, public or private primary or secondary educational school, including pre - k through 12th grade. Sec. 13-200.92 Declaration of public nuisance. Any use, structure, or property that is altered, enlarged, erected, established, maintained, moved, or operated contrary to the provisions of this article, is hereby declared to be unlawful and a public nuisance and may be abated by the city through civil and/or administrative 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. Sec. 13-200.93 Violations. Violations of this article shall be punishable pursuant to the provisions of section 13-16. SECTION 6. Table 13-30 of Chapter IV (Citywide Land Use Matrix) of Title 13 (Planning, Zoning and Development) is hereby amended to modify row 31 a and 128 and add rows 31 c, 31 d, 31e and 31f as follows: Section 13-30, Table 13-30, Row, 31a., 31c., 31d., 31e., 31f and 128. 9 Subject to the location restrictions of Section 13-200.91. City of Costa Mesa Medical Marijuana Activity Ordinance Page 17 of 18 ZONES P P P P C D D D R P P I� LAND USES R 2 2 RACCC 1 T M M R R R D D& P 1 M H 3 P L 1 2 S' C' G P N R DD LMH C C'I'R'S, D' D' D' M' 31a. Medical marijuana dispensary P9 31c. Cannabis and/or marijuana C9 distributer 31d. Cannabis and/or marijuana C9 manufacturer or processor 31 e. Cannabis and/or marijuana C9 transporter 31f. Cannabis and/or marijuana testing or research and C9 development laboratories 128 Research and development laboratories — other than cannabis C C C P C C P P P and/or marijuana testing laboratories 9 Subject to the location restrictions of Section 13-200.91. City of Costa Mesa Medical Marijuana Activity Ordinance Page 17 of 18 SECTION 7. Inconsistencies. Any provision of the Costa Mesa Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to affect the provisions of this Ordinance. SECTION 8. Future Changes, Any future changes or amendments to this ordinance, including any future changes or amendments any Municipal Code section affected by the Measure or a reduction in the tax imposed by this Measure, may occur in the manner set forth in the Government Code and the City's Municipal Code, and shall not reauire a vote of the people. SECTION 9. Severability. If any section, subsection, sentence, clause, or phrase 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 City Council hereby declares that it would have adopted this ordinance, and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional, without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional. SECTION 10. Effective Date This ordinance shall take effect according to law ten days after certification of the election at which it is adopted. City of Costa Mesa Medical Marijuana Activity Ordinance Page 18 of 18 COUNTYe' :BL%r SCENIC AV i. -' CORPORATE 'DR-: re-ETTRO DR -SA -.4 r Hil? TF P_ 4 N EVY HAMPSHIRE DR ft *— 1. .-'1 .r IT i -i > . I - f f -t � 4SOU -H COAS DR k f#Ta� -0 1 . . 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