San Carlos
CA

Staff Report

Consideration of Introducing an Ordinance Amending Title 5, Title 8 and Title 18 of the San Carlos Municipal Code to Regulate Commercial Cannabis Activities Within the City of San Carlos.

Information

Department:Community Development DepartmentSponsors:
Category:Staff Report

Attachments

  1. Printout
  2. Ordinance with Exhibits A & B (This file has not yet been converted to a viewable format)
  3. Exhibit C to Ordinance - Option 1 (This file has not yet been converted to a viewable format)
  4. Exhibit C to Ordinance - Option 2 (This file has not yet been converted to a viewable format)
  5. October 2nd, 2017 Planning Commission Meeting Minutes and Packet

Body

 

 

 

 

 

 

 

 

 

 

 

 

 

RECOMMENDATION:

 

Staff recommends that the City Council introduce an Ordinance amending sections of the San Carlos Municipal Code to regulate commercial cannabis activities in San Carlos, as shown in the attached Ordinance and Exhibit A (Title 18, Zoning), Exhibit B (Title 5, Business Taxes, Licenses, and Regulations), and Exhibit C (Title 8, Health and Safety) to this report.

 

FISCAL IMPLICATIONS:

 

Permits for commercial cannabis businesses will be processed and charged a deposit from which costs will be charged for full cost recovery. The City may consider a Cannabis Tax in the near future, which could result in excise tax revenues associated with business-to-business sales on a case by case basis.

 

BACKGROUND:

 

Recent changes to the way California regulates commercial cannabis activities and the personal use of cannabis have triggered the need for the City to consider local cannabis regulations.

 

In 2015, the State passed the Medical Cannabis Regulation and Safety Act (MCRSA), formerly known as the Medical Marijuana Regulation and Safety Act, and on November 8, 2016, California voters passed Proposition 64, the Adult Use of Marijuana Act (AUMA), legalizing the cultivation, distribution and use of non-medical (recreational) cannabis by persons 21 and over, subject to certain regulatory conditions. Statewide, 57% of voters voted in favor of Proposition 64, as did 63% of voters in the County and 65% of San Carlos voters. Most recently, the State legislature passed SB 94, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), unifying regulations on medical and non-medical commercial cannabis activities and the personal use of cannabis.

 

Since the passage of AUMA, it has been lawful for persons 21 and over to plant, cultivate, harvest, dry, and process up to six living cannabis plants for personal use. Local governments can regulate or ban all personal, outdoor cultivation and “reasonably regulate,” but not ban, personal, indoor cultivation. MAUCRSA preserves the authority of cities to adopt business and land use regulations for commercial cannabis business activities. It defines a range of business license types, including: retailers; cultivators; manufacturers; distributors; transporters; and testing laboratories. Cities may expressly ban or adopt business and/or land use regulations pertaining to any or all of the State license types. This will allow local municipalities to work with their communities to determine the cannabis activities that are better suited for their community, and/or which activities should be banned. Without local regulations or bans in place prior to January 1, 2018, the State could issue licenses for commercial cannabis activities starting on that date without any local control. Therefore, many cities are working to adopt local regulations so that they are in effect prior to January 1, 2018.

 

During its April 10, 2017 meeting, the City Council directed staff to draft rules and regulations to allow some cannabis-related uses allowed under the new State law, while banning others. Specifically, Council directed staff to:

 

·         Ban all commercial cannabis-related activity within 600 feet of Residential Zoning Districts and in Mixed-Use Zoning Districts;

 

·         Draft regulations to allow, under strict control, the following cannabis-related uses: manufacturing, distributing, testing, nurseries and microbusinesses without a retail component; and

 

·         Conduct further research and community engagement with regard to allowing a select number of retail establishments and report back to Council for further consideration.

 

At the direction of City Council, staff conducted further outreach via a Shape San Carlos topic and returned to City Council on June 12, 2017 to present the results and discuss cannabis retail establishments in further detail. At that meeting, City Council directed staff not to permit any cannabis retail establishments at this time.

 

Over the past several months, staff has been working with SCI Consulting Group and PlaceWorks, Inc. to develop regulations for City Council consideration. The regulations will include amendments to several Titles of the San Carlos Municipal Code (“SCMC”), including: Title 5, Business Taxes, Licenses and Regulations; Title 8, Health and Safety; and Title 18, Zoning.

 

Below is a draft timeline to begin issuing permits by January 1, 2018, as required by State law:

 

2017

Oct. 23:                  City Council First Reading Cannabis regulation ordinances

 

Nov. 13:                    City Council Second Reading Cannabis regulation ordinances and consideration of cannabis regulatory fee schedule – in effect 30 days later

 

Dec. 13:                  Open Cannabis Application Process and begin issuing first Commercial Cannabis Business Permits, pending State permitting

 

2018

 

Jan. 2:                   Cannabis commercial businesses operational (pending temporary State permits)

 

Jan. 2:                  City or City Designee can begin monitoring and compliance inspections

 

Nov. 6:                 Possible Cannabis Tax on Ballot

 

ANALYSIS:

 

At today’s hearing, staff recommends that the City Council introduce an Ordinance amending Titles 5, 8, and 18 of the SCMC to regulate commercial cannabis activities in San Carlos. This section summarizes each set of amendments in the following order:

 

·         Title 18, Zoning

 

·         Title 8, Health and Safety

 

·         Title 5, Business Taxes, Licenses, and Regulations

 

Title 18, Zoning

 

The Planning Commission reviewed the draft amendments to Title 18, Zoning, at a hearing on October 2, 2017, and recommended that the City Council adopt the draft amendments, with modifications, which are included in Attachment 1, Exhibit A to the Ordinance, and summarized below. The Planning Commission minutes and packet are included as Attachment 4 to this report.

 

Use Classifications and Permit Requirements

 

For the most part, the cannabis license types under MAUCRSA fit within the existing use classifications in Chapter 18.40 of the Zoning Ordinance. As shown in Attachment 1, Exhibit A to the Ordinance, some of the use classifications are recommended for adjustment to accommodate and clarify the cannabis-related aspects of the use. In addition to existing land use classifications, two new use classifications are recommended:

 

·         Cannabis dispensary, defined as retail sales of cannabis and cannabis products. This use classification would be prohibited in all zones.

 

·         Cannabis microbusiness, which would allow cannabis cultivation (less than 10,000 square feet), as well as distribution and manufacturing. This use classification does not include retail cannabis sales.

 

The correlation between existing and proposed use classifications in Chapter 18.40 of the Zoning Ordinance and the MAUCRSA license types are shown in Table 1.

 

The proposed amendments to the Zoning Ordinance do not change the permit requirements for the uses that conform to existing use classifications. For the new use classifications, cannabis dispensaries would be prohibited in all zones, as noted above, and cannabis microbusinesses would follow a similar permit requirement structure as the other industrial use classifications that cover cannabis activities, such as: Industry; General; Warehousing and Storage; and Wholesaling and Distribution. The proposed permit requirements for each cannabis-related activity are also shown in Table 1.

 

 

Use-and Activity-Specific Standards

 

Chapter 18.23 of the SCMC details standards for specific uses and activities. The proposed amendments to the Zoning Ordinance would change Section 18.23.120, Home Occupations, to indicate that cannabis businesses are prohibited as home occupations. They would also change Section 18.23.170, Personal Services, to eliminate existing requirements for medical marijuana collectives, which would be replaced by the requirements for commercial cannabis businesses.

 

Table 1: Commercial Cannabis Use Classification & Proposed Permit Requirements

License Type (MAUCRSA)

Land Use Classification (San Carlos Zoning Ordinance)

Affected Zoning Districts

GCI

IA

IL

IH

IP

Cultivation (nurseries)

Nurseries and Garden Centers

P

-

M

M

-

Manufacturer (type 1, no volatile solvents)

Industry, General

M

P

P

P

-

Manufacturer (type 2, volatile solvents)

Industry, General

M

P

P

P

-

Testing

Research and Development

P

P

P

P

P

Distributor

Wholesaling and Distribution

P

P

P

P

-

Microbusiness

Cannabis Microbusiness (new use classification)

P

P

P

P

-

Retailer

Cannabis Dispensary (new use classification)

-

-

-

-

-

Notes: Commercial cannabis uses described above include both medicinal and recreational cannabis uses.

Zoning Districts: General Commercial/Industrial (GCI), Industrial Arts (IA), Light Industrial (IL), Heavy Industrial (IH), and Industrial Professional (IP).

“P” designates permitted uses.

“M” designates use classifications that are permitted after review and approval of a minor use permit by the Zoning Administrator.

“-” designates uses that are not permitted.

 

The proposed amendments would add two new sections to Chapter 18.23:

 

·         Section 18.23.270 would provide operational and performance standards for commercial cannabis businesses. The proposed standards are focused on land use issues (e.g., buffers, parking and signage); standards related to health and safety would be addressed in Title 8, Health and Safety, of the SCMC.

 

·         Section 18.23.280 would specify operational standards related to visibility for personal cultivation of up to six cannabis plants.

 

Planning Commission Input

 

At its October 2, 2017 hearing, the Planning Commission recommended that the City Council adopt the proposed Zoning Ordinance amendments, with modifications. The recommended modifications and a response to each are provided below.

 

Environmental Impacts

 

The Planning Commission recommended that the Zoning Ordinance amendments include requirements to reduce the environmental footprint of commercial cannabis uses, including  water use, water quality and energy consumption.

 

Commercial cannabis uses in San Carlos would rely on water from the California Water Service Company (CalWater), and businesses would pay for water service based on a rate applied to the amount of water used. Businesses would be incentivized to conserve water to the extent feasible to minimize service charges. Therefore, staff does not recommend additional water use or conservation requirements for commercial cannabis uses.

 

Section 8.09.060 of the proposed new Health and Safety Code Chapter 8.09 includes an operational standard prohibiting the discharge of liquids of any kind into a public or private sewage or disposal system, watercourse, body or water, or into the ground, except in compliance with applicable regulations of the San Francisco Bay Regional Water Quality Control Board. In addition, Section 26060 of the Business and Professions Code directs the State to develop guidelines for the use of pesticides for cannabis cultivation activity, prohibits the use of any pesticide that has been banned for use by the State, and requires that pesticide applications for cannabis cultivation be conducted in compliance with existing State law. Therefore, staff does not recommend additional water quality requirements for commercial cannabis uses.

 

Electricity customers in San Carlos already purchase electricity from Peninsula Clean Energy (PCE), a community choice energy (CCE) program that sources its energy from renewable supplies, such as solar and wind, at a lower rate than traditional energy from Pacific Gas & Electric Company (PG&E). The default “ECOplus” program includes 50 percent of its energy from renewable sources, and is 80-percent carbon free. Customers also have the option to choose the “ECO100” program, which is 100 percent renewable and carbon-free. Therefore, energy consumption from all San Carlos residents and businesses already relies substantially on renewable sources.

 

The Planning Commission also asked staff to consider allowing “mixed light” cultivation, in which the interior of the building could be exposed to natural sunlight through an opening in the roof, which would reduce the need for artificial lighting and further reduce energy consumption. Staff agrees with this approach, and recommends that the proposed Zoning Ordinance amendments include the opportunity for mixed light cultivation, as shown in Attachment 1, Exhibit A to the Ordinance.

 

Wholesale Clarification

 

The Planning Commission recommended that the use classification for cannabis nurseries be modified to clarify that wholesale sales may only occur between cannabis businesses, consistent with State law. This recommendation is reflected in the proposed Zoning Ordinance amendments shown in Attachment 1, Exhibit A to the Ordinance.

 

Title 8, Health and Safety

 

Chapter 8.09 of the SCMC is currently titled “Regulation of Collective Cultivation and Distribution of Medical Marijuana.” Under the proposed Ordinance, this entire chapter would be replaced to address both medical and non-medical cannabis under a new title: “Regulation of Commercial Cannabis Activities.” With this change, medical and recreational cannabis activities will be regulated under the same set of regulations with no distinction.

 

Commercial Cannabis Business Permit

 

In this new chapter, a Commercial Cannabis Business Permit (CCBP) would be required prior to commercial cannabis business activity. Permits would be valid for one year or until December 31 of each year, subject to an annual renewal.

 

The proposed CCBP selection process would involve two phases. In Phase 1, applicants would pay a relatively low application fee for an initial review to ensure that the applicant meets minimum requirements for eligibility. Applicants would submit a Live Scan background check on the business owner/applicant. In addition, applicants would need to submit either a signed Zoning Clearance letter per SCMC Chapter 18.28 from the Planning Division, or, if a Minor Use Permit (MUP) is required, the MUP application must have been submitted and deemed complete by the Planning Division.

 

In Phase 2, a higher application fee would apply, and applicants would complete a comprehensive owner background check. The application would be subject to review by the Zoning Administrator at a public hearing. Decisions could be appealed to the Planning Commission and subsequently to the City Council.

 

The proposed chapter would also establish a tailored revocation process through a public hearing before the Zoning Administrator, including for actions that would be grounds for denial of the original permit, violations of the CCBP or City or State law, misconduct, or nuisances.

 

Operational Standards

 

Chapter 8.09 details required operational standards for commercial cannabis business activities that relate to health and safety, including standards related to the following:
 

·         Security cameras, surveillance systems and alarm systems

·         Participation in the State’s track and trace system

·         Interior and exterior lighting

·         Nuisances like trash, litter and graffiti

·         Avoiding “attractive” advertising to minors

·         Odor control systems

·         Business abandonment

·         Testing, labeling and storage of cannabis products

·         Disposal of cannabis and related materials

·         Water usage

·         Employee safety

 

Delivery Service

 

Attachments 2 and 3 of this report provide two options (shown as Exhibit C) regarding the delivery of cannabis to customers in San Carlos. In both versions, deliveries may not originate from within the City because, pursuant to State law, delivery services must originate from a retail store, and the City plans to ban retail cannabis stores. In Exhibit C – Option 1, delivery services from outside San Carlos may deliver cannabis to customers in San Carlos. In Exhibit C – Option 2, all cannabis deliveries into San Carlos are prohibited.

 

Planning Commission Input

 

At its October 2, 2017 hearing, the Planning Commission provided recommendations to the City Council on the draft replacement of Chapter 8.09 of the SCMC. Specifically, the Planning Commission recommended that references to law enforcement, including police and the Sheriff’s Office, be corrected, which has been done in the draft Chapter 8.09 included in both versions of Exhibit C to the Ordinance. The Planning Commission also recommended that the CCBP appeal procedure include an appeal to the City Council after the Planning Commission.

 

The draft Chapter 8.09 included in Exhibit C to the Ordinance includes the following appeal procedures:
 

·         Original CCBP: Public hearing before the Zoning Administrator. May be appealed to the Planning Commission and then to City Council.

 

·         CCBP Annual Renewal: Decision by the Community Development Director. May be appealed to the Zoning Administrator.

 

·         CCBP Revocation: Public hearing before the Zoning Administrator. May be appealed to the Planning Commission.

 

Title 5, Business Taxes, Licenses, and Regulations

 

Chapter 5.04 of the SCMC outlines registration requirements for businesses that operate in San Carlos. The proposed amendments to Title 5 would clarify that a CCBP is required before a business registration certificate can be issued. This proposed amendment would help to ensure that all City staff and prospective applicants understand the full permit requirements for commercial cannabis businesses in San Carlos. The proposed changes are articulated on Exhibit B to the Ordinance.

 

ENVIRONMENTAL DETERMINATION:

 

Adoption of the proposed amendments to Titles 5, 8, and 18 are exempt from the California Environmental Quality Act (CEQA). Section 26055(h) of the California Public Resources Code states: “Without limiting any other statutory exemption or categorical exemption, Division 13 (commencing with Section 21000) of the Public Resources Code [i.e., CEQA] does not apply to the adoption of an ordinance, rule, or regulation by a local jurisdiction that requires discretionary review and approval of permits, licenses, or other authorizations to engage in commercial cannabis activity. To qualify for this exemption, the discretionary review in any such law, ordinance, rule, or regulation shall include any applicable environmental review pursuant to Division 13 (commencing with Section 21000) of the Public Resources Code. This subdivision shall become inoperative on July 1, 2019.”

 

By applying this exemption to the adoption of the proposed amendments, land use and/or business permit applications for commercial cannabis businesses will be subject to CEQA review. Because some commercial cannabis business uses are permitted without discretionary review in some zoning districts, CEQA review would occur through the CCBP process.

 

ALTERNATIVES:

 

The alternatives available to the City Council include:

 

  1. Introduce an Ordinance of the City Council of the City of San Carlos amending Titles 5, Title 8 – with Option 1, and Title 18 of the San Carlos Municipal Code to regulate commercial cannabis activities within the City of San Carlos; or

 

  1. Introduce an Ordinance of the City Council of the City of San Carlos amending Titles 5, Title 8 – with Option 2, and Title 18 of the San Carlos Municipal Code to regulate commercial cannabis activities within the City of San Carlos; or

 

  1. Do not introduce an Ordinance of the City Council of the City of San Carlos amending Titles 5, Title 8 – with Option 1, and Title 18 of the San Carlos Municipal Code to regulate commercial cannabis activities within the City of San Carlos; or

 

4.      Provide staff with alternative direction.