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
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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
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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.
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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
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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.
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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.
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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
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31a. Medical marijuana dispensary
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31c. Cannabis and/or marijuana
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distributer
31d. Cannabis and/or marijuana
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manufacturer or processor
31 e. Cannabis and/or marijuana
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transporter
31f. Cannabis and/or marijuana
testing or research and
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development laboratories
128 Research and development
laboratories — other than cannabis
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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
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