CITY OF COMMERCE AGENDA REPORT
Item No.
TO: Honorable City Council
FROM: City Manager
SUBJECT: Introduction and First Reading of an Ordinance to Approve Development Agreement No. ### Related to Commercial Cannabis Permit Application No. 18-052 MEETING DATE: August 8, 2023
REQUEST(S):
Consideration of an Ordinance to approve a new Development Agreement for Commercial Cannabis Permit (CCP) Application No. 18-052 to allow commercial cannabis operations at 5350-80 East Washington Boulevard, Commerce CA, for the reasons outlined in the Analysis section of this report.
RECOMMENDATION:
Staff recommends that the City Council:
Make a determination whether to waive Full Reading and Introduce for First Reading by Title only a proposed Uncodified Ordinance related to application No. 18-052 which was recommended for City Council approval by the Planning Commission Make a determination regarding Denial or Approval by Introduction and First Reading of Uncodified Ordinance finding the Development Agreement is exempt from further CEQA review pursuant to Administrative Code, Title 14, Chapter 3, Section 15301(a), Class 1, Existing Facilities because the Development Agreement includes a project that consists of small additions, expansions or alterations to existing structures where there will be negligible or no expansion of the existing structures and/or uses; and pursuant to said findings, direct staff to prepare and file corresponding Notice of Exemption; and Make a determination regarding Denial or Approval by Introduction and First Reading of an Uncodified Ordinance approving the findings consistent with, and pursuant to, Government Code Section 65867.5; and Approve the Conditions of Approval (as also incorporated into the Development Agreement); and Direct staff to assign a number for the adopted Ordinance and Development Agreement.
PUBLIC HEARING NOTICE:
A notice related to this action was published in Los Cerritos News on July 28, 2023. Notices were also mailed out to property owners located within 500 feet of the subject properties, in accordance with City of Commerce Municipal Code.
APPLICATION REQUEST
Pursuant to Ordinance 700, which established Commercial Cannabis regulations for the City of Commerce, the City commenced the development agreement process at the beginning of October 2018. On April 10, 2023, DJCC Corporation submitted an application for commercial cannabis indoor cultivation, distribution, and manufacturing, taking over Application No. 18-052, also previously known as DJCC Corporation. DJCC’s application also included a request to make the following modifications to the development agreement that was previously approved by the City Council for DJCC Corporation:
The applicant requested that the Monthly Non-Operating Fee be reduced or eliminated entirely.
The applicant requested that the period the City may require the business to relocate be extended from two (2) years to at least five (5) years.
The relocation provision was included in the development agreement due to the applicant’s proposed site being located within the City’s adopted housing overlay zone. All commercial cannabis operations that overlapped the City’s housing overlay zone have a relocation provision in their respective development agreements. The relocation provision provides that the City would have the discretion to require a relocation of the commercial cannabis business at the beginning of two (2) years from the effective date and given one-hundred and eighty (180) days to relocate. To date, the City has not exercised its right to invoke the relocation clause for any commercial cannabis business.
DJCC Corporation
CCP Application #
Applicant
Address and Zone
Uses
18-052
DJCC Corporation
5350-80 E. Washington Blvd; C/M-1
Cultivation/ Distribution/
Manufacturing
BACKGROUND
On October 18, 2018, David Ju and Joyce Cho originally submitted a Commercial Cannabis Permit application. Owner, David Ju submitted a formal letter that stated he was selling DJCC Corporation to Mr. Mohammad Amirhajebi in February 2019. The application reflected Mohammad Amirhajebi to be the sole owner of DJCC Corporation at 5380 East Washington Boulevard., Commerce, CA (also referenced as 5350-80 East Washington Boulevard).
When introduced to the Planning Commission on February 13, 2019, fourteen (14) development agreements were considered as part of the agenda item. DJCC Corporation’s development agreement noted that Mohammad Amirhajebi would be the owner for the business located at 5380 East Washington Boulevard.
On May 7, 2019, the City Council approved Ordinance No. 722 related to Development Agreement No. 722, which allowed DJCC Corporation to conduct Commercial Cannabis activity at 5380 East Washington Boulevard, in the City of Commerce.
Subsequently, DJCC Corporation filed an application to relocate its business from 5380 East Washington Boulevard to 5333 East Slauson Avenue. On November 26, 2019, the Planning Commission adopted a resolution recommending the approval of ordinance No. 739 related to the relocation of DJCC Corporation to 5333 East Slauson Avenue. Mohammad Amirhajebi was listed as the owner of DJCC Corporation.
On January 7, 2020, the City Council adopted eleven ordinances, one of which was Ordinance No. 739, which allowed applicants to either amend or execute new development agreements to legally conduct commercial cannabis operations in the City of Commerce. However, on July 7, 2020, the City Council took action to repeal all eleven ordinances, including Ordinance 739 due to qualified referendum petitions that were submitted against them. As a result of this action, DJCC’s original approval for Development Agreement (DA No. 722) remained effective. However, DA No. 722 itself was not effective because DJCC had failed to executed the development agreement.
On September 29, 2021, pursuant to City staff’s request and recommendation, the Planning Commission considered and made a recommendation to the City Council to disqualify DJCC Corporation and repeal Ordinance No. 722 related to development agreement No. 722 due to the applicant never executing the development agreement and DJCC Corporation’s failure to pay Commercial Cannabis Program-related fees.
On October 19, 2021, the City Council considered the disqualification of DJCC Corporation and the repeal of Ordinance No. 722. After the applicant’s testimony, City Council made the decision to continue the item to the next City Council meeting on November 1, 2021, on the condition that DJCC Corporation agree to submit all past due fees. If DJCC Corporation paid all outstanding fees, the City Council would allow DJCC Corporation the opportunity to comply with their contractual obligations and approve their request to reinstate the approval of Development Agreement No. 722.
On October 27, 2021, DJCC Corporation submitted all payments that had been previously delinquent. This request was approved during a City Council meeting on November 1, 2021, allowing them the opportunity to reinstate Development Agreement No. 722. However, after attempts to contact the proposed owner to sign their development agreement, the proposed owner again failed to execute Development Agreement No. 722.
On January 31, 2023, Rob Katherman, a representative of David Ju and Joyce Cho, the original applicants on record for DJCC Corporation wrote to staff requesting to reinstate the previous development agreement for Ordinance No. 722. According to Mr. Katherman, Mohammad Amirhajebi, the previously approved owner of DJCC Corporation defaulted on his purchase of the company.
The new development agreement application showed a request for a change of ownership to reflect Mr. Edward Ed Novshad as the new owner of DJCC Corporation.
Following that correspondence, staff requested additional documents that support the representative’s claim. The representative attached a Termination of Stock Sale and Purchase agreement between Mohammad Amirhajebi and David Ju and Joyce Cho that was executed in February 2023. Also attached was a letter to Mr. Amirhajebi from David Ju canceling the purchase escrow on July 1, 2022, due to defaulting on the purchase and releasing Mr. Amirhajebi from any ownership interest (See Attachment C).
After receiving the supporting documents from Mr. Katherman on February 14, 2023, City staff sent an email to Mohammad Amirhajebi and his representative Edwin Benyamini advising of the communication between Mr. Katherman and CCP staff regarding the incomplete transfer of ownership of DJCC between Mr. Amirhajebi and Mr. Ju (See Attachment D). City staff did not receive a response.
On March 15, 2023, CCP staff again emailed Mr. Amirhajebi and his representative stating that the City is prepared to proceed with the request of David Ju based on the Termination of Stock Sale and Purchase that was signed by Mohammad Amirhajebi on February 20, 2023, which voided Ordinance No. 722. City staff did not receive a response. City staff did not make further attempts to communicate with Mr. Amirhajebi.
On April 18, 2023, Mr. Katherman emailed staff a signed development agreement application for applicant No. 18-052 which requests a transfer of ownership to Edward Ed Novshad and an increase in the square footage of their cultivation cannabis activity, originally 10,000 square feet to 16,000 square feet.
One of the conditions of approval will be a requirement that DJCC Corporation indemnify and hold harmless the City against any lawsuits that may be initiated challenging the approval of the development agreement, including any and all lawsuits challenging the determination of the lawful owner of DJCC Corporation.
July 19th Planning Commission Meeting
On July 19, 2023, during the City’s Planning Commission meeting, Mr. Edward Ed Novshad and original applicant Mr. David Ju gave a public testimony regarding their proposed development agreement. They requested for the Commission to recommend reducing or eliminating their non-operating fees (Section 8, Part F: Monthly Non-Operating Fee). The applicant expressed a concern regarding the amount of time it takes from the date the Council approves the project to the date operators receive all applicable clearances allowing them to commence operations. The applicant also requested to modify the development agreement’s relocation provision and allow DJCC to operate potentially for 5-10 years minimum to allow for the cannabis operator to receive agency approvals and operations to commence.
The Planning Commission adopted a resolution recommending that the City Council adopt an Ordinance for Applicant No. 18-052. While acknowledging the applicant’s requested revisions to the development agreement, the Planning Commission did not recommend approving the applicant’s suggested revisions.
Staff is currently in the process of analyzing several changes to the City’s cannabis program, including possible reductions to the City’s overall fees for commercial cannabis operators to align and be comparable to the current fee structures implemented in neighboring cities. The removal of the relocation provision from development agreements for cannabis businesses located in the City’s housing overlay zone may be a potential program wide modification that the City Council may consider at a future date. Staff will conduct additional analysis regarding the feasibility of the applicant’s proposed revisions to the development agreement. At this time, staff does not recommend approval of the applicant’s proposed revisions to the development agreement in order to ensure that DJCC’s development agreement remains consistent with all similar current development agreements.
However, the City Council has the discretion to approve the development agreement as recommended by staff or approve the development agreement with modifications.
DJCC Corporation currently holds a legal or equitable interest in real property considered in the development agreement, located at 5350-80 East Washington Boulevard, in the City of Commerce. The project site is approximately 18,448 square feet and is developed with one commercial building measuring approximately 16,579 square feet. The proposed use for the site would be to cultivate, manufacture, and distribute commercial cannabis products.
The request for a development agreement has been reviewed by City staff and has met the minimum requirements set forth by Ordinance 700.
If approved, DJCC Corporation will be required to comply fully with the terms of the development agreement as well as conditions of approval which include, but are not limited to, façade improvements, and compliance with all state and local ordinances.
A zoning analysis is provided for each site where a relocation site is proposed. The zoning analysis includes the following information:
1. General Plan Designation
2. Zoning Designation
3. Applicable Zoning Regulation
4. Environmental Assessment
5. Project Description
CEQA COMPLIANCE AND CATEGORICAL EXEMPTIONS:
A Notice of Exemption from CEQA for the development agreement will be prepared pursuant to CEQA (Public Resources Code §21000 et seq.) and the State CEQA Guidelines (Title 14, California Code of Regulations, Division 6, Chapter 3, §15000 et seq.) prior to the City Council’s consideration for approval. The subject development agreement is a “project” that is subject to environmental review.
City staff anticipates that the Notice of Exemption will find that the project contemplated by the development agreement is exempt from environmental review pursuant to the guidelines of the California Environmental Quality Act (Public Resources Code § 21080(b)(9); Administrative Code, Title 14, Chapter 3, § 15301(a), Class 1, Existing Facilities). This section specifically applies to small additions, expansions, or alterations to existing structures where there is negligible or no expansion of the use. For this project, the applicant will limit the construction to interior tenant improvements, electrical, plumbing, and façade improvements.
CONCLUSION:
Staff recommends that the City Council - after independent review, consideration, analysis of staff’s report and the information presented, oral and written testimony by all parties and persons of the public, and the record as a whole – make a determination on an ordinance approving and adopting corresponding development agreement related to Application No. 18-052 as specifically outlined in the Recommendation section on page one of this report.
Prepared by: CCP Staff
Reviewed by: Vilko Domic, Assistant City Manager
Approved as to form by: Noel Tapia, City Attorney
ATTACHMENTS:
Planning Commission Resolution
Draft Development Agreement No. ###
Stock Agreement and July 1, 2023 Correspondence
Staff Email Correspondence
Proposed Ordinance