11-A (Including Supplemental Info) — Bellflower City Council, June 27, 2022

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11-A

TO: Honorable Mayor and Members of the City Council

ATTENTION: Jeffrey L. Stewart, City Manager

FROM: Tae Rhee, Director of Finance

SUBJECT: Consideration and possible action to conduct a public hearing requested by My CBD Hub LLC for cannabis tax exemption and refund of taxes paid.

DATE: June 27, 2022

EXECUTIVE SUMMARY

My CBD Hub LLC, subsidiary of Koi CBD LLC (“Koi”), engages in the business of selling industrial hemp-derived products, and it argues that its business is not subject to Bellflower Municipal Code (“BMC”) Chapter 3.37, Cannabis Tax Ordinance. As a result, on April 18, 2022, My CBD Hub LLC and its attorney, Ms. Andrea A. Golan of Vicente Sederberg LLP, submitted a Cannabis Business Tax Exemption Application and requested a refund of cannabis taxes paid since 2019 totaling $39,761.85 together with a letter containing legal arguments. Staff disagreed with the arguments and, therefore, denied the request by letter dated April 28, 2022. On May 23, 2022, Ms. Golan filed a notice of appeal with the City Clerk in accordance with BMC § 3.37.180(B) to request a hearing to be held with the City Council.

RECOMMENDATION TO CITY COUNCIL

1) Open a public hearing and consider the appeal for cannabis tax exemption and refund of taxes paid by My CBD Hub LLC; and

2) After receiving testimonial and documentary evidence from My CBD Hub LLC, determine whether to deny, grant, or conditionally grant the appeal; or

3) Alternatively, discuss and take other action related to this item.

FISCAL IMPACT

Dependent upon City Council action, the fiscal impact is between $0 and $39,761.85.

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Staff Report – My CBD Hub LLC Cannabis Tax Appeal Hearing June 27, 2022

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DISCUSSION

In 2019, when staff learned that My CBD Hub LLC was operating in the City of Bellflower, in accordance with Bellflower Municipal Code (“BMC”) § 3.37.120, the Director of Finance reviewed the cannabis tax regulations within BMC Chapter 3.37 to determine whether the cannabis tax applies to retail establishments selling industrial hemp-derived products.

The cannabis tax regulations are separate from the BMC regulations governing cannabis business permits issued in accordance with BMC Title 14. After reviewing the matter and consulting with the City Attorney’s office, the Director of Finance promulgated administrative policy and procedure (“AP&P”) No. 3, which authorized collection of cannabis taxes from the businesses selling industrial hemp-derived products effective July 1, 2019. AP&P No. 3 was later amended on April 28, 2022 (Attachment No. 2), and ratified by Resolution No. 22-18 on May 9, 2022, affirming application of the cannabis tax to businesses selling industrial hemp-derived products.

My CBD Hub LLC and its attorney disagree with AP&P No. 3 and argue that the City’s Cannabis Tax Ordinance does not apply to industrial hemp-derived products. As a result, on April 18, 2022, My CBD Hub LLC and its attorney, Ms. Andrea A. Golan of Vicente Sederberg LLP, submitted a Cannabis Business Tax Exemption Application (Attachment No. 1, Exhibit C) for a refund of cannabis taxes paid since 2019 totaling $39,761.85 together with a letter containing legal arguments (Attachment No. 1, Exhibit C). Staff disagreed with the arguments and, therefore, denied the request by letter dated April 28, 2022 (Attachment No. 1, Exhibit B). On May 23, 2022, Ms. Golan filed a notice of appeal with the City Clerk in accordance with BMC § 3.37.180(B) to request a hearing to be held with the City Council (Attachment No. 1).

ANALYSIS

BMC Title 14, Cannabis-Related Businesses, governs cannabis business permits, and its definition of “cannabis” excludes industrial hemp. As a result, businesses selling industrial hemp-derived products are not required to obtain cannabis business permits.

Those regulations, however, are separate from BMC Chapter 3.37 (Cannabis Tax Ordinance). The Cannabis Tax Ordinance imposes taxes on all persons engaging in cannabis business (including illegally operating businesses). The definition of “cannabis” in Chapter 3.37 is much broader than BMC Title 14 and includes industrial hemp. As a result, businesses that sell industrial hemp-derived products are required to pay the cannabis tax even though they are not required to obtain cannabis business permits. A full explanation is included in AP&P No. 3. It is attached for reference.

As set forth in the City’s letter dated April 28, 2022, the reasoning set forth in My CBD Hub LLC’s appeal is unpersuasive. It is recommended that the City Council deny the appeal.

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Staff Report – My CBD Hub LLC Cannabis Tax Appeal Hearing June 27, 2022

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ATTACHMENTS

Attachment No. 1: Notice of Appeal of Denial of Request for Cannabis Business Tax Exemption and Refund for My CBD Hub LLC, Dated May 23, 2022 ..................... 4 Exhibit A: May 10, 2022, letter from City of Bellflower regarding commencement of the 14-day appeal period .................................... 9 Exhibit B: April 28, 2022, City of Bellflower letter of denial ................................ 11 Exhibit C: April 13, 2022, Application for Cannabis Business Tax Exemption and Refund ..................................................................................... 14 April 18, 2022, Letter from Ms. Andrea A. Golan /
Vicente Sederberg LLP ................................................................... 17 Exhibit D: Text of Measure B: A “Marijuana Tax Measure” ................................ 23 Attachment No. 2: Resolution No. 22-18 and AP&P No. 3, Revised April 28, 2022 ..... 30 - 3 -

633 W. 5th Street, 26th Floor Los Angeles, CA 90071 Tel: 310-684-2016 California | Colorado | Florida | Massachusetts | New Jersey | New York | Texas May 23, 2022
City Clerk, City of Bellflower
16600 Civic Center Drive
Bellflower, CA 90706
Re: Notice of Appeal of Denial of Request for Cannabis Business Tax Exemption and Refund for My CBD Hub LLC
Dear Sirs/Madams:

Pursuant to Bellflower Municipal Code ("BMC") section 3.37.180(B), My CBD Hub LLC, subsidiary of Koi CBD LLC (“Koi”) appeals the April 28, 2022, denial of Koi’s application for cannabis business tax exemption and refund (“Notice of Appeal”). This Notice of Appeal is timely submitted to the City Clerk pursuant to the 14-day appeal period commencing on May 9, 2022, the date of receipt of the City’s denial of Koi’s application for the cannabis business tax exemption and refund (“City Denial”). Attached herein are the following exhibits:

1.Exhibit A: May 10, 2022, letter from Mr. Tae Rhee regarding commencement of the 14-day appeal period

2.Exhibit B: April 28, 2022, City of Bellflower letter of denial

3.Exhibit C: Application for Cannabis Business Tax Exemption and Refund

4.Exhibit D: Text of Measure B: A “Marijuana Tax Measure” Koi appeals the City Denial on the basis that the City's imposition of a cannabis tax on the retail sale of hemp-derived products, without voter consent, violates both State statute and the Constitution of the State of California. Government Code 53723 and Article XIII, section C of the California Constitution which prohibits local governments from imposing, extending, or increasing taxes without voter approval.1 2 The City's unilateral expansion of the cannabis tax to include a gross receipts tax on non-cannabis products is an "increase" within the meaning of the Government Code and Article XIII C and requires taxpayer consent. Accordingly, Koi should not be subject to a gross receipts cannabis tax for the sale of products that do not contain cannabis. 1 Government Code 57323 requires local governments to seek voter approval of all new general taxes. It provides:
"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." (Gov. Code, § 53723, italics added.) 2 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. (Cal. Const., art. XIII C, § 2, subd. (b).) - 4 -

2 Contrary to the City’s assertion, when Bellflower voters voted in favor of a Marijuana Tax,3 they did not intend for such tax to include non-marijuana products. State and federal law distinguish between “hemp,” an agricultural product containing not more than 0.3% tetrahydrocannabinol, and “marijuana,” a Schedule I Controlled Substance under federal law subject to a highly controlled and comprehensive regulatory framework under state law. Moreover, the plain meaning of the word “marijuana,” as understood by the ordinary person and by its dictionary definition, means a psychoactive substance smoked or ingested for its intoxicating effect. In other words, not hemp.

The Measure B Marijuana Tax was placed on the ballot by the City Council immediately following the passage of Proposition 64 (the Adult Use of Marijuana Act or "AUMA"). The Measure’s "Official Arguments" in favor of Measure B, signed by both the City's mayor pro tem Ron Schnablegger and city councilmember Ray Dunton, make express reference to AUMA:

We recognize that cultivation and distribution of cannabis is not necessarily a preferred activity among all facets of the community. However, it is simply a matter of good government to regulate and tax a lucrative business that that has been overwhelmingly approved by voters throughout the State and in the City on November 8, 2016."4

The "Official Arguments" continue to explain that the Measure "will be implemented through a tightly regulated Conditional Use Permit (CUP) process and regulatory ordinance. It is the City's intent to allow only a very limited number of highly qualified operators to do business in the City.”5 Hemp operations in the City are not subject to a “tightly regulated Conditional Use Permit (CUP) process, nor have they ever been. Nor does the City limit hemp operations to “only a very limited number of highly qualified operators to do business in the City.”

In addition, Measure B's “Impartial Analysis” provided by the office of the Bellflower City Attorney, sets forth the comprehensive system that mirrors AUMA, to legalize, control, and regulate the cultivation, processing, manufacture, distribution, and sale of recreational cannabis products for use by adults 21 years and older.6 Here, nothing in Measure B or the ballot materials addressed taxing or regulating products that are not subject to this comprehensive regulatory structure.

Moreover, unlike Measure B, Proposition 64 did explain to voters the legal distinction between hemp and cannabis. The Proposition 64 ballot initiative set forth twenty-seven distinct purposes, one of which is to "[a]llow industrial hemp to be grown as an agricultural product, and for agricultural or academic research, and regulated separately from the strains of cannabis with higher delta-9 tetrahydrocannabinol concentrations."7

3 Los Angeles County Elections Office, "CONSOLIDATED MUNICIPAL AND SPECIAL ELECTIONS MARCH 7, 2017: MEASURES APPEARING ON THE BALLOT."
4 Bellflower Elections, Ballot Pamp. Official arguments in favor of Measure B (Mar. 7, 2017). 5 Id.
6 Id.
7 Id.
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3 Additionally, the official argument submitted in opposition of Measure B could not be construed by voters to encompass hemp or non-intoxicating hemp products:

Official arguments.

The following argument was submitted in opposition of Measure B:

Argument Against 12 Pot Businesses in Bellflower & their taxation

Please VOTE NO, against the sale of pot in our city!

This measure doesn't allow enough distance away from schools, safe passages to & from school, homes where children live, & churches from these 12 pot businesses that could harm the brain development of kids with an increased drug supply & drug culture.

Maybe a few pot businesses, but 12?

Is the city withholding accurate information about the true nature of the city's finances?

Why wasn't a community task force set up to research the best practices on such an important issue to develop our community standards on this issue with forums at local schools & parks?

Federal law is against this, plus a new President might enforce all drug laws.

His proposed Attorney General is against Pot Businesses. Especially if Marijuana sold in Bellflower will be sold in another state, like what is happening in Colorado. We should take a wait & see approach to this, like surrounding bedroom communities. We do not have large industrial areas to hide pot businesses, like Long Beach.

With the city's new direction will our property values drop? What will be the total liability & cost to the city & its residents with higher emergency room visits with kids experimenting at a higher levels. VOTE NO, SAY NO TO POT & TAXES!8

It is evident these arguments are not directed towards non-intoxicating consumer products permissible to manufacture, distribute, and sell without a state cannabis license.

(
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4 Pursuant to BMC 3.37.090, "the tax imposed by this [Cannabis Tax Ordinance] does not apply to any person when imposition of such tax would violate a Federal or State statute, the Constitution of the United States, or the Constitution of the State of California." The City's imposition of a cannabis tax on the retail sale of hemp-derived products, without voter consent, violates both State statute and the Constitution of the State of California. Government Code 53723 and Article XIII, section C of the California Constitution prohibit local governments from imposing, extending, or increasing taxes without voter approval.9 10 The City's unilateral expansion of the cannabis tax to include a gross receipts tax on non-cannabis products is an "increase" within the meaning of the Government Code and Article XIII C and requires taxpayer consent. Accordingly, Koi requests the City grant this appeal by exempting Koi from the City’s cannabis tax and refunding the sum of $39,761.85 in cannabis tax paid to the City from October 2019 to April 2022.

Sincerely,

Andrea A. Golan
Vicente Sederberg LLP

9 Government Code 57323 requires local governments to seek voter approval of all new general taxes. It provides:
"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." (Gov. Code, § 53723, italics added.) 10 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. (Cal. Const., art. XIII C, § 2, subd. (b).) - 7 -

EXHIBIT A
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May 10, 2022

Ms. Andrea A. Golan
Vicente Sederberg LLP
633 W. 5th Street, 26th Floor
Los Angeles, CA 90071

Re: 14-Day Notice of Appeal for Cannabis Tax Exemption/Refund for My CBD Hub

Dear Ms. Golan:

Per your request, this letter confirms the 14-day appeal notice period to start on Monday, May 9, 2022 and end on Monday, May 23, 2022 for My CBD Hub’s cannabis tax exemption/ refund request.

Pursuant to Section 3.37.180(B) of the Bellflower Municipal Code, you may appeal the Tax Administrator’s decision to the City Council by filing a notice of appeal with the City Clerk within 14 days of the decision or administrative ruling.

Sincerely,

Tae Rhee
Director of Finance/Cannabis Tax Administrator

cc: Brad Ridenour, CEO, My CBD Hub LLC
City Clerk, City of Bellflower
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EXHIBIT B
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EXHIBIT C
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Business Address:
(Street)(City)(State)(Zip Code)
(Street)(City)(State)(Zip Code)
Business Phone:Email Address:

Date of
Exemption: $
(List all individual amounts paid with dates)
Imposition of the tax upon the applicant violates a Federal statute and/or the Constitution of the United States.

Imposition of the tax upon the applicant violates a California statute and/or the Constitution of the State of California.

Written justification/supporting documentation attached.

Authorized Signature:Date:

Print Name & Title:Phone No.:

Tax Administrator Use Only:

Sign and Date:/ /
Print Name:

Tax Administrator
www.bellf lower.org
Mailing Address:
(if different)
The Cannabis Bus iness Tax is im posed on ev ery pers on engaged in cannabis bus ines s in the City of Bellf lower pursuant t o C hapter

3.37 of Bellf lower Municipal Code. Bellf lower Municipal Code Section 3.37.090, C onstitutional Exemptions, prov ides any pers on believ ing they are exempt f rom pay ing the tax must f ile an application with the administrator f or an exemption.

Business Name: My CBD Hub LLC
City of Bellflower Send completed application
form to:

City of Bellflower
Attn:Finance Department
16600 Civic Center Drive
Bellflower, CA 90706
Cannabis Business Tax
Exemption Application
Requested Total Refund Amount
Check all applicable boxes below:

I declare under penalty of perjury under the laws of the state of California that the statements herein and any attachments are true, correct and complete.

City of Bellflower Finance Department, 16600 Civic Center Drive, Bellflower, CA 90706 Office (562) 804-1424 Fax (562) 925-8660 Approved Denied
ver. 12/21/2021
17045 Bellflower Blvd. Bellflower, CA 90706
562.804.4405 [email protected]
X
Oct-Dec 2019; 2020; 2021; 2022 39,761.85
*SEE ATTACHED
April 13, 2022
DocuSign Envelope ID: 5C2149D6-5370-4272-AA9B-370C08BDAE66 BRAD RIDENOUR CEO 949.825.5590
X
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April 18, 2022

City of Bellflower
Attn: Finance Department
16600 Civic Center Drive
Bellflower, CA 90706

Re: Cannabis Business Tax Exemption Application for My CBD Hub LLC, Subsidiary of Koi

CBD LLC

Business Address:

My CBD Hub
17045 Bellflower Blvd.

Bellflower, CA 90706

Dear Sirs/Madams:

Pursuant to the attached Cannabis Business Tax Exemption Application and Bellflower Municipal Code ("BMC") section 3.37.090, Koi CBD LLC (“Koi”) requests an exemption from the City of Bellflower's Cannabis Tax and a refund of cannabis tax paid in the amount of $39,761.85, paid from October 2019 to April 2022. Koi’s subsidiary My CBD Hub LLC operates a single retail location in the city of Bellflower called My CBD Hub.

Pursuant to BMC 3.37.090, "the tax imposed by this [Cannabis Tax Ordinance ("CTO")] does not apply to any person when imposition of such tax would violate a Federal or State statute, the Constitution of the United States, or the Constitution of the State of California." The City's imposition of a cannabis tax on the retail sale of hemp-derived products, without voter consent, violates both State statute and the Constitution of the State of California. Government Code 53723 and Article XIII, section C of the California Constitution prohibit local governments from imposing, extending, or increasing taxes without voter approval.1 2 The City's unilateral expansion of the cannabis tax to include a gross receipts tax on non-cannabis products is an "increase" within the meaning of the Government Code and Article XIII C and requires taxpayer consent.

Accordingly, Koi should not be subject to a gross receipts cannabis tax for the sale of products that do not contain cannabis.

1 Government Code 57323 requires local governments to seek voter approval of all new general taxes. It provides:
"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." (Gov. Code, § 53723, italics added.) 2 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. (Cal. Const., art. XIII C, § 2, subd. (b).) - 17 -

2 The City’s authority for the CTO is Measure B, a voter-approved Marijuana Tax 3 placed on the ballot by the City Council following the passage of Proposition 64 (the Adult Use of Marijuana Act or "AUMA"). Measure B's implementing ordinance, Ordinance 1324, and the subsequent City cannabis ordinances create a license structure and regulatory scheme that mirrors AUMA. AUMA expressly excludes "hemp" from the definition of "marijuana." And like AUMA, Bellflower Ordinances 1353 and 1351 define "cannabis" to exclude "hemp. Nothing in Measure B puts the electorate on notice that the Measure was intended to include the sale of products that do not contain cannabis. In 2019, the City notified the public through its "Administrative Policies and Procedures: App No. 3" that it would utilize two different definitions of "cannabis" -- a more expansive definition for the purpose of collecting a cannabis tax from sellers of non-cannabis hemp-derived goods and a more narrow definition for purposes of Title 14 of the BMC. 4 Not only does the City lack taxpayer consent for its broad application of cannabis tax to non-cannabis products, the City does not enforce the CTO equally upon all taxpayers that meet the definition of "dispensary.” Dozens of health and wellness retailers from CVS Health to Walgreens, Rite Aid, ULTA, and brand name apparel retailers, sell hemp-derived products within Bellflower’s city limits but are not subject to the same tax burden.

The voters who approved Measure B did not intend to impose a cannabis tax on sales of products that do not contain cannabis, nor did voters, in voting yes to "imposing a tax on cannabis- related businesses" intend to make all sellers of hemp-derived products "dispensaries" for the purpose of collecting the cannabis tax.5 Ascertaining voter intent implicates the same principles that govern statutory construction.6 The words in the initiative are given their ordinary meaning, and the initiative's language is construed in the context as a whole and the initiative's overall scheme.7 Absent ambiguity, it is presumed that the voters intend the meaning apparent on the face of an initiative measure.8 Where there is ambiguity in the language of a measure, ballot summaries and arguments are accepted sources from which to ascertain the voters' intent and understanding of a ballot measure."9 Moreover, when construing initiatives, the courts presume electors are aware of existing law.10

The full text of the ballot measure, Ordinance 1324, sets forth the licensing and tax regime for cannabis businesses. Neither the ordinances nor the initiative reference hemp operations, already permitted within the city limits and not subject to the City's or the State's cannabis licensing, tax, and regulatory regime. Under existing law in 2017, "hemp" was expressly excluded from the definition of "marijuana." And under existing law in 2017, the laws and regulations

3 Los Angeles County Elections Office, "CONSOLIDATED MUNICIPAL AND SPECIAL ELECTIONS MARCH 7, 2017: MEASURES APPEARING ON THE BALLOT."
4 City of Bellflower Administrative Policies and Procedures: App No. 3 (Jul. 25, 2019), p. 2. 5 Bellflower Elections, "Impartial analysis of Measure B." 6 Professional Engineers in California Government v. Kempton (2007) 40 Cal.4th 1016, 1037. 7 People v. Rizo (2000) 22 Cal.4th 681, 685.
8 Lesher Communications, Inc. v. City of Walnut Creek (1990) 52 Cal.3d 531, 543. 9 Legislature v. Deukmejian (1983) 34 Cal.3d 658, 673, fn. 14. 10 In re Lance W. (1985) 37 Cal.3d 873, 890, fn. 11.
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3 pertaining to the growth, production, distribution, and sale of cannabis (for medical and recreational uses) clearly did not apply to industrial hemp, nor do they apply today. 11

The impartial analysis for Measure B provided by the office of the Bellflower city attorney makes clear that the Measure arose out of the licensing scheme created by Proposition 64 and was intended for cannabis operators:

Measure B would impose a new general tax upon cannabis businesses operating within the City of Bellflower including commercial cultivation, distribution, manufacturing, and retail sales. All tax revenue derived from the tax would be deposited in the City's General Fund.

Measure B itself does not authorize or permit cannabis business activities.

Rather, beginning July 1, 2017, it authorizes imposition of an annual tax upon all commercial cannabis activities authorized by separate City Council action and state law.

For commercial cannabis cultivation (except for nurseries) the tax would be $15.00 per fiscal year, per square foot of authorized space. Commencing July 1, 2020, this tax will increase each fiscal year by $2.50 per square foot until it reaches a maximum annual tax rate of $25.00 per square foot. For nurseries, the tax would be $2.00 per square foot of authorized space.

Beginning July 1, 2020, this tax will increase each fiscal year by $1.50 per square foot until it reaches a maximum annual tax rate of $5.00 per square foot.

Every person transporting cannabis or cannabis products from one permitted business location of one permittee to another must pay an annual tax of $1,500.00 per year.

Every person who operates a dispensary, manufacturing facility, testing laboratory, or distribution facility, or engages in delivery of cannabis in the City must pay an initial annual tax of 5% of the gross receipts per fiscal year. That rate would increase on July 1, 2020 (and for each fiscal year thereafter) by 2.5% until it reaches an annual maximum tax rate of 10%.

Beginning July 1, 2024, and continuing each July 1st thereafter, non-gross receipt based cannabis taxes (cultivation, nurseries, and transportation) would increase based upon the consumer price index.

11 Food and Agriculture Code § 81000 – 81015. The California Industrial Hemp Farming Act (Senate Bill 566, Chapter 398, Statutes of 2013) was signed into law to authorize the commercial production of industrial hemp in California. See also Prop. 64, Business & Professions Code § 26001(s), as approved by voters, Gen. Elec. (Nov. 8, 2016) eff. Nov. 9, 2016.)
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4 There is no sunset clause on the taxes. All the taxes implemented by Measure B may be suspended or reduced by City Council action. Any other increase of the tax would require voter approval.12

The "Official Arguments" in favor of Measure B, signed by both the City's mayor pro tem Ron Schnablegger and city councilmember Ray Dunton, explains that Measure B "will be implemented through a tightly regulated Conditional Use Permit (CUP) process and regulatory ordinance. It is the City's intent to allow only a very limited number of highly qualified operators to do business in the City. We recognize that cultivation and distribution of cannabis is not necessarily a preferred activity among all facets of the community. However, it is simply a matter of good government to regulate and tax a lucrative business that that has been overwhelmingly approved by voters throughout the State and in the City on November 8, 2016."13

These arguments clearly do not pertain to hemp operations or sales of hemp products.

Similarly, the Official Argument submitted in opposition of Measure B addresses the concerns for the neighborhood, for property values, kids' brain development, drug culture and increased drug supply if Measure B were to pass:

Argument Against 12 Pot Businesses in Bellflower & their taxation

Please VOTE NO, against the sale of pot in our city!

Maybe a few pot businesses, but 12?

Is the city withholding accurate information about the true nature of the city's finances?

Why wasn't a community task force set up to research the best practices on such an important issue to develop our community standards on this issue with forums at local schools & parks?

12 Bellflower Elections, Ballot Pamp. Impartial analysis of Measure B by the office of the Bellflower City Attorney as presented to the voters (Mar. 7, 2017).
13 Bellflower Elections, Ballot Pamp. Official arguments in favor of Measure B (Mar. 7, 2017). - 20 -

5 Federal law is against this, plus a new President might enforce all drug laws.

It is evident these arguments are not directed towards non-intoxicating, already legal consumer products permissible to manufacture, distribute, and sell without a state cannabis license.

Taken together, the language of the ballot Measure B, the Impartial Analysis provided by the City Attorney's office, the Arguments in Favor of Measure B (signed off on by both the City's mayor pro tem and city councilmember), the Arguments Against Measure B, and the City Council's well-documented regulatory intent, all compel the same conclusion – that the voters who enacted Measure B had no intention of imposing a cannabis tax on the sale of products that do not contain cannabis and are not subject to the licensing and regulatory framework governing the cultivation, distribution, manufacture and sale of cannabis products. Based on these facts and the law cited herein, Koi respectfully requests an exemption from the City's cannabis business tax and requests a refund of cannabis tax paid in the amount of $39,761.85.

Sincerely,

Andrea A. Golan
Vicente Sederberg LLP

14 Bellflower Elections, Ballot Pamp. Official argument against Measure B (Mar. 7, 2017). - 21 -

EXHIBIT D
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Measure B:

Bellower
Marijuana Tax
The basics
Bellflower, California, Marijuana Tax,
Measure B (March 2017)
A marijuana tax measure was on the ballot for Bellower voters in Los Angeles County, California, on March 7, 2017. It was approved.

A yes vote was a vote in favor of authorizing the city to impose a tax on marijuana businesses.

A no vote was a vote against authorizing the city to impose a tax on marijuana businesses.

Election results
TEXT OF MEASURE ▾PATH TO THE BALLOT SEE ALSO ▾MORE ▾
S U B S C R I B E D O N AT E
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Election date:

March 7, 2017
Status:

Approved
Topic:

Local marijuana tax
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Local marijuana tax
on the ballot
March 7, 2017 ballot
measures in California
Los Angeles County,
California ballot
measures
City tax on the ballot
See also
Bellower, California
Measure B
Result Votes Percentage
Yes 3,159 73.84%
No 1,119 26.16%
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Text of measure
Ballot question
The following question appeared on the ballot:
“Shall the proposition imposing a tax on cannabis related businesses operating within the City of Bellower be adopted?”
Impartial analysis
[1]
[2]
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2 - 24 -

The following impartial analysis of Measure B was provided by the ofce of the Bellower city attorney:
“Measure B is a proposition placed on the ballot by the Bellower City Council. If approved by voters, Measure B would impose a new general tax upon cannabis businesses operating within the City of Bellower including commercial cultivation, distribution, manufacturing, and retail sales. All tax revenue derived from the tax would be deposited in the City’s General Fund.

Measure B itself does not authorize or permit cannabis business activities. Rather, beginning July 1, 2017, it authorizes imposition of an annual tax upon all commercial cannabis activities authorized by separate City Council action and state law.

For commercial cannabis cultivation (except for nurseries) the tax would be $15.00 per scal year, per square foot of authorized space. Commencing July 1, 2020, this tax will increase each scal year by $2.50 per square foot until it reaches a maximum annual tax rate of $25.00 per square foot. For nurseries, the tax would be $2.00 per square foot of authorized space. Beginning July 1, 2020, this tax will increase each scal year by $1.50 per square foot until it reaches a maximum annual tax rate of $5.00 per square foot.

Every person transporting cannabis or cannabis products from one permitted business location of one permittee to another must pay an annual tax of $1,500.00 per year.

Every person who operates a dispensary, manufacturing facility, testing laboratory, or distribution facility, or engages in delivery of cannabis in the City must pay an initial annual tax of 5% of the gross receipts per scal year. That rate would increase on July 1, 2020 (and for each scal year thereafter) by 2.5% until it reaches an annual maximum tax rate of 10%.

There is no sunset clause on the taxes. All the taxes implemented by Measure B may be suspended or reduced by City Council action. Any other increase of the tax would require voter approval.

Measure B would impose a “general tax.” Therefore, all tax revenue would be available for use by the City to pay for general City operations and services. The City would not be legally bound in any way to use the tax monies for any special purpose or for any particular facilities or programs. Since this ballot measure proposes a “general tax” rather than a “special tax,” it requires approval by a simple majority of the City’s voters.

A “yes” vote on Measure B favors the Measure. A “no” vote on Measure B opposes the Measure.”
[3]
[2]
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Support
Supporters
The following individuals signed the ofcial arguments in support of Measure B.

Ron Schnablegger, mayor pro tem
Ray Dunton, city councilmember
Arguments in favor
Ofcial arguments
The following argument was submitted in favor of Measure B:
“A YES vote on Measure B will make Bellower a scally sound City at no cost to the residents of Bellower. The anticipated revenues from Measure B will provide funding for needed law enforcement, including additional neighborhood patrols, parks and recreation and after-school programs. The estimated new funds of up to $3 million annually would allow the City to continue providing the existing law enforcement and economic development services provided by the existing utility user tax fees that are set to expire in April 2018. All programs funded by Measure B will be subject to citizen oversight and review, and the funds will be fully audited every year.

Measure B will be implemented through a tightly regulated Conditional Use Permit (CUP) process and regulatory ordinance. It is the City’s intent to allow only a very limited number of highly qualied operators to do business in the City. We recognize that cultivation and distribution of cannabis is not necessarily a preferred activity among all facets of the community. However, it is simply a matter of good government to regulate and tax a lucrative business that that has been overwhelmingly approved by voters throughout the State and in the City on November 8, 2016.

Vote YES on Measure B. It is a matter of good government and good business.” Opposition
Opponents
John Paul Drayer, who described himself as a homeowner and educator, signed the ofcial argument in opposition to Measure B.
[4]
[4]
[2]
[5]Thank you!
2 - 26 -

Arguments against
Ofcial arguments
The following argument was submitted in opposition to Measure B:
“Argument Against 12 Pot Businesses in Bellower & their taxation Please VOTE NO, against the sale of pot in our city!
This measure doesn’t allow enough distance away from schools, safe passages to & from school, homes where children live, & churches from these 12 pot businesses that could harm the brain development of kids with an increased drug supply & drug culture.

Where is the urgency on the part of the city manager, Mayor, & City Council for more regular businesses among the vacant lots & buildings throughout Bellower? The City will open its doors wide open for up to 12 pot businesses in your neighborhood? Why has the city given up on our family oriented community & our kids’ brain development? (google the research)
Maybe a few pot businesses, but 12?
Is the city withholding accurate information about the true nature of the city’s nances? Why wasn’t a community task force set up to research the best practices on such an important issue to develop our community standards on this issue with forums at local schools & parks?
Federal law is against this, plus a new President might enforce all drug laws. His proposed Attorney General is against Pot Businesses. Especially if Marijuana sold in Bellower will be sold in another state, like what is happening in Colorado. We should take a wait & see approach to this, like surrounding bedroom communities. We do not have large industrial areas to hide pot businesses, like Long Beach.

With the city’s new direction will our property values drop? What will be the total liability & cost to the city & its residents with higher emergency room visits with kids experimenting at a higher levels. VOTE NO, SAY NO TO POT & TAXES!” Path to the ballot
See also: Laws governing local ballot measures in California This measure was put on the ballot through a vote of the Bellower City Council. [5]
[2]
Thank you!
2 - 27 -

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1. Los Angeles County Elections Ofce, "CONSOLIDATED MUNICIPAL AND SPECIAL ELECTIONS MARCH 7, 2017: MEASURES APPEARING ON THE BALLOT," accessed January 8, 2017

2. Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.

3. Bellower Elections, "Impartial analysis of Measure B," accessed March 7, 2017

4. Bellower Elections, "Argument in favor of Measure B," accessed March 7, 2017

5. Bellower Elections, "Arguments against Measure B," accessed March 7, 2017 Click to show less.

D o N o t S e l l M y P e r s o n a l I n f o r m a t i o n Thank you!
2 - 29 -

CITY OF BELLFLOWER
RESOLUTION NO. 22-18

A RESOLUTION RATIFYING ADMINISTRATIVE POLICY AND
PROCEDURE NO. 3 ("AP&P NO. 3"), AS AMENDED,

DETERMINING THAT THE CITY OF BELLFLOWER'S CANNABIS

TAX APPLIES TO THE SALE OF INDUSTRIAL HEMP-DERIVED

PRODUCTS
THE CITY COUNCIL RESOLVES AS FOLLOWS:

SECTION 1. The City Council finds and declares as follows:

A. Bellflower Municipal Code ("BMC") § 3.37.120 authorizes the City Manager, or designee, to implement BMC Chapter 3.37 by, in part, promulgating administrative policies and procedures ("AP&P") to facilitate collection of the cannabis tax authorized by voters in 2017.

B. On June 25, 2019, the City Manager promulgated AP&P No. 3 that was subsequently amended on April 28, 2022 and is attached as Exhibit "A," and incorporated by reference. As set forth in AP&P No. 3, the cannabis tax imposed by BMC Chapter 3.37 applies to all retail establishments selling industrial hemp-derived products within the City's jurisdiction. As urther detailed within AP&P No. 3, while such retail establishments may be required to pay the cannabis tax, they may not be required to obtain a cannabis business permit contemplated by BMC Title 14.

SECTION 2. Ratification. The City Council finds that it is in the public ir.terest to ratify the City Manager's actions in promulgating AP&P No. 3 in order to properly implement the will of the voters as set forth in BMC Chapter 3.37 and assist in the collection of the cannabis tax. Accordingly, the City Council retroactively ratifies AP&P No. 3 effective July 1, 2019 and authorizes its implementation since that date and as amended April 28, 2022.

SECTION 3. This Resolution does not affect any penalty, forfeiture, or liability incurred before, or preclude prosecution and imposition of penalties for any violation occurring before, this Resolution's effective date. Any such amended part will remain in full force and effect for sustaining action or prosecuting violations occurring before the effective date of this Resolution.

SECTION 4. If any part of this Resolution or its application is deemed invalid by a court of competent jurisdiction, the City Council intends that such invalidity will not affect the effectiveness of the remaining provisions or appl!cations and, to this end, the provisions of this Resolution are severable.

Page 1 of 2 ends

- 30 -

City of Bellflower
Resolution No. 22-18

Page 2 of 2 ends

SECTION 5. The Mayor, or presiding officer, is authorized to affix a signature to this Resolution signifying its adoption by the City Council of the City of Bellflower and the City Clerk, or her duly appointed deputy, is directed to attest thereto.

SECTION 6. Electronic Signatures. This Ordinance may be executed with electronic signatures in accordance with Government Code §16.5. Such electronic signatures will be treated in all respects as having the same effect as an original signature.

SECTION 7. This Resolution will become effective immediately upon adoption.

PASSED, APPROVED, AND ADOPTED BY THE CITY COUNCIL OF TH CITY OF BELLFLOWER ON THIS 9T" DAY OF MAY 2022.

Ray D tor., Mayor
ATTEST:
i
ayy O iqui, ty Clerk

APPROV A
Karl H. Berger, it Attorney
ATTACHMEp T.
l
Amended AP&P No. 3
- 31 -

ADMINISTRATIVE POLICIES AND PROCEDURES
APP NO.: 3 (Revised 4/28/2022)

WHEN THE GROSS RECEIPTS TAX ON CANNABIS DISPENSARIES APPLIES TO

PERSONS ENGAGED IN THE BUSINESS OF SELLING CANNABIS PRODUCTS

DERIVED FROM INDUSTRIAL HEMP
I.Purpose and Applicability
Every person who is engaged in business as a dispensary in the City of Beilflower must pay an annual commercial cannabis tax based on a percentage of gross receipts per fiscal year. For purposes of Title 3, Chapter 3.37 (the "Cannabis Tax Ordinance"), dispensary" is defined as "a facility where cannabis, cannabis products, or devices for the use of cannabis or cannabis products are offered, either individually or in any combination, for retail sale, including an establishment that delivers cannabis and cannabis products as part of a retail sale."2 For purposes of the Cannabis Tax Ordinance, "cannabis" is defined as:

A]II parts of the plant 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 cannabis. "Cannabis" also means marijuana as defined by Health and Safety Code Section 11018 and is not limited to medical cannabis."3
By contrast, for purposes of Title 14 (Cannabis-Related Businesses) "cannabis" is defined as set forth in Business & Professions Code section 26001(. That section provides:

Cannabis' means all parts of the plant 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 cannabis. '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 division, 'cannabis' BMC § 3.37.060(D)(1).

BMC § 3.37.020
3 BMC § 3.37.020.

Page 1 of 3 ends

- 32 -

ADMINISTRATIVE POLICIES AND PROCEDURES
APP NO.: 3 (Revised 4/28/2022)
does not mean 'industrial hemp' as defined by Section 11018.5 of the Health and Safety Code."
The definition of"cannabis" in the Cannabis Tax Ordinance is broader insofar as it does not exclude "industrial hemp." Accordingly, references to "cannabis" and "cannabis products" in the Cannabis Tax Ordinance necessarily include industrial hemp and industrial hemp-derived products.

Health and Safety Code section 11018.5 defines "industrial hemp" as a crop that is limited to types of the plant Cannabis sativa L. having no more than three-tenths of 1 percent tetrahydrocannabinol (THC) contained in the dried flowering tops, whether growing or not; the seeds of the plant; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin produced therefrom."
In the Agriculture Improvement Act of 2018 (the "Farm Bill"), effective January 1, 2019, Congress removed industrial hemp-derived products from Schedule I status under the Controlled Substances Act, provided that the hemp is produced in a manner consistent with the Farm Bill, federal regulations, state regulations, and by a licensed grower.

Division 24 of the California Food and Agriculture Code provides for the cultivation of industrial hemp by registered growers and established agricultural research institutions.

Industrial hemp-derived products have soared in popularity recently, particularly cannibidiol (CBD) oil and products infused with CBD oil. An increasing number of retail establishments are incorporating these industrial-hemp derived goods into their product mix and some retail establishments are choosing to specialize in the sale of industrial hemp-derived products, making them the focus of their business model.

This policy addresses the question of when a retail establishment selling cannabis products derived from industrial hemp becomes a "dispensary" for purposes of the Cannabis Tax Ordinance and, therefore, subject to the applicable gross receipts tax.

This policy does not apply to any person or retail establishment engaged in the business of selling cannabis or cannabis products that are not derived from industrial hemp.

II. Definitions
Uniess the contrary is stated or clearly appears from the context, the words and phrases used herein have the meaning set foRh in BMC Chapter 3.37.

Page 2 of 3 ends

- 33 -

ADMINISTRATIVE POLICIES AND PROCEDURES
aPP No.: s Re isea 4 as/2o22
III. Administration
For purposes of the Cannabis Tax Ordinance, a retail establishment is a "dispensary" for purposes of BMC § 3.37.060(D)(1)°, and therefore subject to the applicable gross receipts tax, if more than 50% of the establishmenYs overall gross receipts5 are attributable to the sale of cannabis products derived from industrial hemp.

Reference: BMC § 3.37.060(D)(1);
Authority: BMC § 3.37.120
APPROVED:

City Manager ,
APPROVED AS TO FORM:

CityAitomey
Origination: 7/25/2019 j
Revised: 4/2812022
This does not mean the establishment would necessarily be classified as a "dispensary" for purposes of Title 14 and, therefore, require a Cannabis Business Permit to operate lawfully. Because "industrial hemp" is not within the definition of"cannabis" as used in Title 14, a cannabis business permit is not required for the sale of cannabis products derived from industrial hemp. 5 In this context, "overall gross receipts" means the total gross receipts of the retail establishment.

Page 3 of 3 ends

- 34 -

STATE OF CALIFORNIA

COUNTY OF LOS ANGELES )SS

CITY OF BELLFLOWER
I, Mayra Ochiqui, City Clerk of the City of Bellflower, California, do hereby certify under penalty of perjury that the foregoing Resolution No. 22-18 was duly passed, approved, and adopted by the City Council of the City of Beliflower at the Regular Meeting of the City Council on May 9, 2022, by the following vote to wit:

AYES: Council Members — Sanchez, Santa Ines, Hamada, Koops and Mayor Dunton
Dated: May 10 2022
Mayr Oc qui, C C erk
City f B Ilflower, California
SEAL)
- 35 -

Supplemental Information
for
Item 11-A, My CBD Hub LLC Appeal Hearing

Dean C. Logan
Los Angeles County
Registrar-Recorder/County Clerk
Official Sample Ballot
Consolidated Municipal and
Special Elections
March 7, 2017
Polls open at 7 am and close at 8 pm

lavote.net

044

PAGE
2 CITY

BELLFLOWER CITY GENERAL MUNICIPAL ELECTION
Member of the
City Council
JUAN F. GARZA Appointed Councilmember/Consultant 28
Vote for no more
than Two
JOHN PAUL DRAYER Educator/Businessman 29
DAN KOOPS Council Member/Businessman 30
RENE E. MEJIA Healthcare Wholesaler/Educator 31
ROBERT "BOB" WILSON Small Business Owner 32

BELLFLOWER CITY SPECIAL MUNICIPAL ELECTION
B
CANNABIS TAX. Shall the proposition imposing a tax on cannabis related businesses operating within the City of Bellflower be adopted?
35 YES
36 NO
PLEASE NOTE: The order in which candidates' names appear on the ballot is determined by a random drawing of 26 letters of the alphabet.

END OF BALLOT
02-01202-012 LA 044-009

CITY ATTORNEY’S IMPARTIAL ANALYSIS OF MEASURE B
Measure B is a proposition placed on the ballot by the Bellflower City Council. If approved by voters, Measure B would impose a new general tax upon cannabis businesses operating within the City of Bellflower including commercial cultivation, distribution, manufacturing, and retail sales. All tax revenue derived from the tax would be deposited in the City’s General Fund.

Measure B itself does not authorize or permit cannabis business activities.

Rather, beginning July 1, 2017, it authorizes imposition of an annual tax upon all commercial cannabis activities authorized by separate City Council action and state law.

Every person transporting cannabis or cannabis products from one permitted business location of one permittee to another must pay an annual tax of $1,500.00 per year.

There is no sunset clause on the taxes. All the taxes implemented by Measure B may be suspended or reduced by City Council action. Any other increase of the tax would require voter approval.

A “yes” vote on Measure B favors the Measure. A “no” vote on Measure B opposes the Measure.

PR-005043-1 LA 044-035

ARGUMENT IN FAVOR OF MEASURE B

A YES vote on Measure B will make Bellflower a fiscally sound City at no cost to the residents of Bellflower. The anticipated revenues from Measure B will provide funding for needed law enforcement, including additional neighborhood patrols, parks and recreation and after-school programs. The estimated new funds of up to $3 million annually would allow the City to continue providing the existing law enforcement and economic development services provided by the existing utility user tax fees that are set to expire in April 2018. All programs funded by Measure B will be subject to citizen oversight and review, and the funds will be fully audited every year.

Measure B will be implemented through a tightly regulated Conditional Use Permit (CUP) process and regulatory ordinance. It is the City’s intent to allow only a very limited number of highly qualified operators to do business in the City. We recognize that cultivation and distribution of cannabis is not necessarily a preferred activity among all facets of the community. However, it is simply a matter of good government to regulate and tax a lucrative business that that has been overwhelmingly approved by voters throughout the State and in the City on November 8, 2016.

Vote YES on Measure B. It is a matter of good government and good business.

RON SCHNABLEGGER

Mayor Pro Tem

RAY DUNTON

City Councilmember

PR-005043-2 LA 044-036

REBUTTAL TO ARGUMENT IN FAVOR OF MEASURE B
The Rebuttal Against the 12 Pot Businesses & New City Taxes PLEASE VOTE NO AGAINST THE 12 PROPOSED POT BUSINESSES &

NEW TAXES
This is a question of zoning & changing the quality of life issues in our Family Friendly Hometown of Bellflower. How many new POT businesses will determine the change in the character, & direction of our city. Can we afford these extra police & city code enforcement costs?
The question of advertising to minors has not been fully answered by the city council in their mad rush to waste taxpayers money by prematurely placing this on the ballot without a complete community engagement or answering all our concerns to protect the brain development of our children.

Why didn’t the city engage in community forums with parents & concerned citizens in the 12 proposed Pot Business locations throughout the city at the nearest Park or School to them, to seriously, truthfully, & honestly discuss the total impacts to these neighborhoods. Will their property values drop, will the Pot businesses try to recruit children, will the Pot Businesses have insurance if Pot is still against Federal Law, will insurance rates go up? What has happened in the other states & neighborhoods that have legalized Pot? We need to fully educate the public of all the risks. We are not prepared! The city has put the cart before the horse! This is bad public policy!
PLEASE VOTE NO ON THE 12 POT BUSINESSES!

JOHN PAUL DRAYER
Bellflower Homeowner, Educator
562 331-5028
PR-005043-3 LA 044-037

ARGUMENT AGAINST MEASURE B

Argument Against 12 Pot Businesses in Bellflower & their taxation Please VOTE NO, against the sale of pot in our city!
This measure doesn’t allow enough distance away from schools, safe passages to & from school, homes where children live, & churches from these 12 pot businesses that could harm the brain development of kids with an increased drug supply & drug culture.

Where is the urgency on the part of the city manager, Mayor, & City Council for more regular businesses among the vacant lots & buildings throughout Bellflower? The City will open its doors wide open for up to 12 pot businesses in your neighborhood? Why has the city given up on our family oriented community & our kids’ brain development? (google the research) Maybe a few pot businesses, but 12?
Is the city withholding accurate information about the true nature of the city’s finances?
Why wasn’t a community task force set up to research the best practices on such an important issue to develop our community standards on this issue with forums at local schools & parks?
Federal law is against this, plus a new President might enforce all drug laws. His proposed Attorney General is against Pot Businesses. Especially if Marijuana sold in Bellflower will be sold in another state, like what is happening in Colorado. We should take a wait & see approach to this, like surrounding bedroom communities. We do not have large industrial areas to hide pot businesses, like Long Beach.

JOHN PAUL DRAYER

Bellflower Homeowner & Educator 562 331-5028

[email protected]

PR-005043-4 LA 044-038

REBUTTAL TO ARGUMENT AGAINST MEASURE B

The argument against Measure B is a purposeful misrepresentation of the facts, and like a report from a poor student, it needs to be corrected.

Correction #1 – The effort to regulate cannabis in Bellflower is not being considered with a sense of “urgency.” The City Council began researching “best practices” last April and is still engaging the community in finalizing its standards.

Correction #2 – The Conditional Use Process being considered for cannabis facilities is a tightly regulated process, which includes approvals by the City’s Planning Commission, City Council and the State of California. It is not an “Open Arms” approach and a set number of approved facilities has not been decided.

Correction #3 – The City’s efforts include every protection for our young people – starting with regulations that EXCEED the Proposition 64 standards approved by the voters. State law requires every commercially grown cannabis plant to be tagged and traceable. Anyone seeking to pass such cannabis to kids will be caught and arrested.

Correction #4 – Whether we like it or not, cannabis was approved by voters throughout the State, and in Bellflower, on November 8. Measure B is recognition by the current City Council that local regulation and taxation of cannabis presents an opportunity to make Bellflower fiscally sound. The “wait and see” approach stated within the argument against Measure B has failed Bellflower many times in the past.

It is not time to wait and see! VOTE YES ON MEASURE B.

RON SCHNABLEGGER

Mayor Pro Tem

RAY DUNTON

Councilmember

PR-005043-5 LA 044-039

PROPOSED ORDINANCE OF MEASURE B

A PROPOSITION ADOPTING AN ORDINANCE TO APPROVE ARTICLE II OF CHAPTER 3.37 TO TITLE 3 OF THE BELLFLOWER MUNICIPAL CODE ENTITLED “CANNABIS TAX” AND IMPOSING A TAX ON VARIOUS
CANNABIS RELATED BUSINESSES.

THE PEOPLE OF THE CITY OF BELLFLOWER DO HEREBY ORDAIN AS FOLLOWS:

SECTION 1. Article II of Chapter 3.37 in Title 3 of the Bellflower Municipal Code (“BMC”) , entitled “Cannabis tax,” is approved to read as follows:
“ARTICLE II – VOTER APPROVED TAX
§ 3.37.040 VOTER APPROVAL REQUIRED.

This Article II of Chapter 3.37 of the Bellflower Municipal Code must be approved by voters in accordance with applicable law.
§ 3.37.050 TAX IMPOSED.

There is established and imposed, beginning July 1, 2017, a cannabis tax in the manner and rates set forth in this chapter.
§ 3.37.060 CANNABIS TAX.

A. Tax on commercial cannabis cultivation except nurseries.

1. Every person who is engaged in commercial cannabis cultivation in the City must pay an annual Cannabis tax. The initial tax rate effective July 1, 2017 for commercial cannabis cultivation, excluding nurseries, is set at $15.00 per fiscal year, per square foot of canopy space authorized by each City permit, or by each state license in the absence of a City permit, not deducting for unutilized square footage. The square footage is the maximum square footage of canopy allowed by the City permit for commercial cannabis cultivation, or, in the absence of a City permit, the square footage is the maximum square footage of canopy for commercial cannabis cultivation allowed by the state license type. In no case can canopy square footage which is authorized by the permit or license, but not utilized for cultivation, be deducted for the purpose of determining the tax for cultivation unless duly authorized in writing by the administrator.

2. Beginning on July 1, 2020, the tax rate will automatically increase each fiscal year by $2.50 per square foot of authorized canopy. Except as otherwise provided, the maximum tax rate is $25.00 per square foot. (Continued on next page)

PR-005043-6 LA 044-040

PROPOSED ORDINANCE OF MEASURE B (Continued)

B. Tax on cultivation of cannabis as a nursery.

1. Every person who is engaged in cultivation of cannabis as a nursery as defined in this chapter in the City must pay an annual Cannabis tax. The initial tax rate effective July 1, 2017 is set at $2.00 per square foot of canopy authorized by each City permit, or by each state license in the absence of a City permit, not deducting for unutilized square footage. The square footage is the maximum square footage of canopy allowed by the City permit for cultivation of cannabis as a nursery, or, in the absence of a City permit, the square footage is the maximum square footage of canopy for cultivation of cannabis as a nursery allowed by the state license type. In no case must canopy square footage which is authorized by the permit or license but not utilized for cultivation as a nursery be deducted for the purpose of determining the tax for cultivation as a nursery unless duly authorized in writing by the administrator.

2. Beginning on July 1, 2020, such tax rate will automatically increase each fiscal year by $1.50 per square foot of canopy utilized for cannabis cultivation as a nursery. Except as otherwise provided, the maximum tax rate is $5.00 per square foot per annum.

C. Tax on transportation businesses.

Every person who is engaged in a cannabis transportation business must pay an annual Cannabis tax of $1,500.00 per year effective July 1, 2017.

D. Tax on all other commercial cannabis businesses.

1. Every person who is engaged in business as a dispensary, manufacturer, testing laboratory, or distribution facility, or engaging in delivery of cannabis in the City must pay an annual commercial Cannabis tax. The initial tax rate effective July 1, 2017 is set at 5% of the gross receipts per fiscal year.

2. Beginning on July 1, 2020, the tax rate will automatically increase each fiscal year by 2.5%. Except as otherwise provided, the maximum tax rate is 10% per fiscal year on gross receipts.
§ 3.37.070 AUTOMATIC TAX INCREASE.

A. Beginning on July 1, 2024, non-gross receipts based taxes imposed by this chapter will be increased annually each July 1st on a percentage basis using the percentage increase in the consumer price index (“CPI”) for all urban consumers as calculated by the United States Department of Labor, Bureau of Labor Statistics, for the Los Angeles-Riverside-Orange County area, for the 12 months ending March 31st of each year.
(Continued on next page)
PR-005043-7 LA 044-041

PROPOSED ORDINANCE OF MEASURE B (Continued)

B. Notwithstanding any other provisions of this code, the tax imposed in this chapter will be increased by a minimum of one cent ($0.01) every year for square footage-based or other non-gross receipts based taxes. § 3.37.080 REPORTING AND REMITTANCE OF TAX.

A. Each person required by this chapter to remit a tax must file a return to the administrator on forms approved by the administrator on or before the due date. The full amount of the tax owed must be included with the return and filed with the administrator. The administrator is authorized to require such additional information as deemed necessary to determine if the tax is being levied, collected, and remitted in accordance with this chapter. Pursuant to Revenue and Tax Code § 7284.6, the administrator, and its agents, must maintain such filing returns as confidential information, and not subject to the California Public Records Act.

B. The Cannabis tax imposed by this chapter is imposed on a fiscal year basis and is due and payable in quarterly installments as follows:

1. Each person or business owing a Cannabis tax must, on or before the last day of the month following the close of each fiscal year quarter remit to the administrator the tax due. The tax due is no less than the quarterly installment due, but the taxpayer may at any time pay the tax due for the entire fiscal year.

2. If the Cannabis tax is owed on commercial cannabis cultivation, the square footage tax due is paid based on the square footage of cultivation authorized by the City permit. The tax will not be prorated or adjusted for any reduction in the square footage authorized but not utilized for cultivation unless duly authorized in writing by the administrator. If the cultivation begins in the middle of a fiscal year, the administrator must prorate, in daily increments, the amount due for the fiscal year.

C. Tax statements and payments for all outstanding taxes owed the City are immediately due to the administrator upon cessation of business for any reason.

D. The administrator may establish shorter reporting and payment periods for any taxpayer as the administrator deems necessary to ensure collection of the tax.

E. The administrator may, as part of administering the tax, modify the form of payment and take such other administrative actions as needed to facilitate collection of the tax.
(Continued on next page)

PR-005043-8 LA 044-042

PROPOSED ORDINANCE OF MEASURE B (Continued)

§ 3.37.090 CONSTITUTIONAL EXEMPTIONS.

A. The tax imposed by this chapter does not apply to:

1. Any person or service when imposition of the tax upon that person or service would violate a federal or state statute, the Constitution of the United States, or the Constitution of the state of California;

2. The city.

B. Except as otherwise provided, any person that is exempt from the tax imposed by this chapter must file an application with the administrator for an exemption. The application for a Tax exemption must be made upon a form approved by the administrator and state those facts, declared under penalty of perjury, which qualify the applicant for an exemption, and include the names of all utility service providers serving that person. If deemed exempt by the administrator, such person must give the administrator timely written notice of any change in utility service providers so that the administrator can properly notify the new utility service provider of the person’s Tax exempt status.

C. A person failing to comply with this section is not entitled to a refund of Tax remitted to the administrator from such person as a result of such non-compliance. § 3.37.100 SUSPENSION OR REDUCTION.

Nothing in this chapter requires the City Council to collect a tax; the city council may suspend or reduce tax rates imposed by this chapter by resolution after a public hearing.
§ 3.37.110 CITY COUNCIL AUTHORITY TO AMEND.

Unless voter is approval is required by the California Constitution or applicable law, the City Council may exercise all applicable powers set forth in the Government Code including, without limitation, amending this chapter by ordinance upon three affirmative votes by its members. It may, in additional, adopt by ordinance or resolution such additional regulations that may be necessary to implement the purposes of this chapter.”
SECTION 2. Environmental Analysis. This Resolution is exempt from review under the California Environmental Quality Act (California Public Resources Code §§ 2100, et seq., “CEQA”) and CEQA regulations (14 California Code of Regulations §§ 15000, et seq.) because it establishes rules and procedures to implement government funding mechanisms; does not involve any commitment to a specific project which could result in a potentially significant physical impact on the environment; and constitutes an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. Accordingly, this Resolution does not constitute a “project” that requires environmental review (see specifically 14 CCR § 15378(b)(4-5)).
(Continued on next page)
PR-005043-9 LA 044-043

PROPOSED ORDINANCE OF MEASURE B (Continued)

SECTION 3. Interpretation. This Proposition must be interpreted so as to be consistent with all federal and state laws, rules, and regulations. If any section, sub-section, sentence, clause, phrase, part, or portion of this Proposition is held to be invalid or unconstitutional by a final judgment of a court of competent jurisdiction, such decision does not affect the validity of the remaining portions of this Proposition.

The voters declare that this Proposition, and each section, sub-section, sentence, clause, phrase, part, or portion thereof, would have been adopted or passed irrespective of the fact that any one or more sections, sub-sections, sentences, clauses, phrases, part, or portion is found to be invalid. If any provision of this Proposition is held invalid as applied to any person or circumstance, such invalidity does not affect any application of this Proposition that can be given effect without the invalid application.

SECTION 4. Severability. If any portion of this Proposition is held by a court of competent jurisdiction to be invalid, the remainder of the Proposition and the application of such provision to other persons or circumstances will not be affected thereby. We the People indicate our strong desire that: (i) the City Council use its best efforts to sustain and reenact that portion, and (ii) the City Council implement this Proposition by taking all steps possible to cure any inadequacies or deficiencies identified by the court in a manner consistent with the express and implied intent of this Proposition, and then adopting or reenacting such portion as necessary or desirable to allow imposition of the tax.

SECTION 5. Construction. This Proposition must be broadly construed in order to achieve the purposes stated in this Proposition. It is the intent of the voters that the provisions of this Proposition be interpreted or implemented by the City and others in a manner that facilitates the purposes set forth in this Proposition.

SECTION 6. Effective Date. This Proposition will enact and impose a general tax. Accordingly, it will be submitted to a general election on March 7, 2017 for voter approval. If a majority of voters vote in favor of this Proposition, it will become valid and binding ten days after the date that the City Council certifies the election results in accordance with Elections Code § 9217.

SECTION 7. City Council Authority. BMC Chapter 3.37 may be repealed or amended by a majority of the City Council without voter approval. However, voter approval is required for any amendment that would increase the rate of any tax levied pursuant to this Proposition as required by California Constitution Article XIIIC.

Should the provisions of Government Code § 53720, et seq. or California Constitution Article XIIIC be repealed or amended, or interpreted by the courts so that voter approval is not required for enacting this Proposition, then this Proposition will take effect as provided for all other City ordinances and may be amended in the same manner as all other City ordinances.

SECTION 8. Effective Date. The Mayor will sign this Proposition and the City Clerk will attest and certify to the passage and adoption of this Ordinance if a majority of the voters voting in the City’s general election on March 7, 2017 approve the Proposition.

PR-005043-10 LA 044-044

Bellflower City CouncilJune 27, 2022

Bellflower City Council
June 27, 2022