March 19, 2024
City Council
Planning Commission
Recommendations Retail Cannabis
Code Amendments
2 Background
• November 3, 2020: Costa Mesa voters approve Measure Q, The Costa Mesa Retail Cannabis Tax and Regulation Measure
• June 15, 2021: City adopts ordinances in Title 13 and Title 9 establishing minimum standards and permitting requirements
• Since June 2022, the City has approved 22 conditional use permits for cannabis retail storefronts
3 Background
• September 5, 2023: City Council directed the Planning Commission to explore potential changes to 8 topic areas of the retail cannabis provisions • November 27, 2023: Planning Commission discussed potential modifications regarding separation requirements and establishing a “cap” • December 11, 2023: Planning Commission discussed the remaining topics and directed staff to draft amendments pertaining to 6 of 8 topic areas • January 22, 2024: Planning Commission voted 5-0 to recommend that the City Council give first reading to proposed amendments
4 Background - Proposed Amendment Topic Areas
• Increasing the “youth center” and cannabis storefront separation from 600 feet to 1,000 feet;
• Establishing a separation from properties zoned for residential use; • Establishing a minimum separation between cannabis storefronts; • Establishing a maximum number of retail cannabis storefronts; • Allowing the word “cannabis” on cannabis storefront signage; • Limiting advertising /marketing of cannabis retail products to youth; • Strengthening labor peace agreement requirements for cannabis storefronts; and • Providing notification and relocation assistance for businesses displaced by retail cannabis uses.
Planning Commission
Recommendations
6 Recommended Amendment – Youth Center Separation
Increase minimum separation between cannabis storefronts and youth centers from 600 FT to 1,000 FT
• Planning Commission considered examples from no separation to 1,000 FT • Proposed change is consistent with the City’s adopted sensitive use separations for cannabis
• Proposed change would not impact any existing approved or proposed storefront applications
7 Recommended Amendment – Residential Zone Separation
Establish a minimum 100 FT separation between cannabis storefronts and properties zoned for residential use
• Planning Commission considered examples ranging from no separation to 400 FT
• Preliminary GIS exercise explored various separations from residential zones • The following number of approved or proposed storefront locations are within 100 FT of a residential zone:
5 of 22 Approved
CUPs (23%)
2 of 9 pending
CUP applications
(22%)
1 of 4 CBP
applications
(25%)
6 of 17 Pre-
Application/Wait
List (35%)
8 Recommended Amendment – Storefront Separation
Establish a minimum 500 FT separation between cannabis storefronts • Planning Commission considered examples ranging from no separation to 1,000 FT
• Most approved and proposed cannabis storefront sites are within 500 FT of another approved or proposed location
10 of 22 Approved CUPs
(46%) are within 500 FT
of another approved
CUP site
6 of 9 pending CUP
applications (67%) are
within 500 FT of an
approved or pending
CUP site
4 of 4 CBP applications
(100%) are within 500
FT of an approved or
pending CUP site
13 of 17 Pre-
Application/Wait List
(77%) are within 500 FT
of an approved,
pending, or CBP site
9 Considerations for Recommended Separations
• Cannabis storefronts with a CUP would continue operating at locations that do not meet new separation requirements (legal nonconforming) • At what point would the separation requirements apply to… • CUP applications in progress: 9
• CBP applications: 4
• Pre-Application and Wait List: 17
10 Recommended Amendment – Limit Number of Storefronts
Establish a maximum of 30 cannabis storefronts Section 13-200.93(e) • After 30 approvals, discontinue processing applications until there are fewer than 15 storefront CUPs
• To date, 22 CUPs have been approved and 8 more (of 9 CUPs in progress) would be possible under the proposed amendments
11 Cannabis Storefront Application Status
• Approved CUPs: 22
• CUP applications in progress: 9
• CBP applications: 4
• Pre-Applications & Wait List: 17
Pre-Application
&
Wait List
Cannabis
Business Permit
Application
Conditional Use
Permit in
Progress
Plan Check &
Under
Construction
Obtained
Storefront CBP or
are Open
31 Applications
22 Approved CUPs
17 4 9 12 10 12 Recommended Amendments – Entrance Signage
• Entrances shall have a notice up to 12 x 18 inches in size. • The word “cannabis” is allowed up to two times on each notice. • Letter height shall be limited to up to 1 inch in size. • All notice lettering shall be the same font and color. 13 Recommended Amendments – Advertising and Marketing
• Cannabis advertising/marketing shall not encourage persons under 21 years of age to consume cannabis or cannabis products
• Shall not depict and/or suggest the consumption of cannabis or cannabis products.
Cost Recovery Summary
Cannabis Employee Badge Fee
15 Cannabis Employee Badge Fee
• City hired a cost recovery and fee development expert; • On May 13, 2021, the Cannabis Ad Hoc Committee recommended full cost recovery;
• On June 1, 2021, a detailed presentation was made to the City Council and fees were adopted;
• Fees were based on 2019 labor costs;
• Methodology is dictated by the Federal Office of Management and Budget A-87 Circular Letter; and
• Federal OMB Letter defines the methodology for legal cost recovery (cannot make a profit).
Next Steps
17 Summary
• City Council directed the Planning Commission to consider recommending amendments in 8 key areas
• Planning Commission recommended amendments to 6 of those areas • Cannabis industry has requested more certainty regarding the status and future processing of all phases of retail storefront applications • At this time, 22 CUPs have been approved (10 allowed to operate) • 30 applications remain in the process (9 CUP, 4 CBP, and 17 Pre- Application/Wait List)
18 Action Items
City Council direction is requested regarding the following:
• Separation from youth centers, residential zones, and other cannabis storefronts
• When separations would apply (effective immediately, effective at a future date, etc.)
• Limiting the number of cannabis storefronts
• Cannabis signage/entrance notice
• Advertising/marketing to youth
• Labor peace agreements
• Relocation noticing and assistance
Or continue to operate under the City’s existing retail cannabis program 19 Recommendation
Staff recommends the City Council:
1. Find that the project is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15061(b)(3); and
2. Introduce for first reading, by title only, Ordinance No. 2024-XX amending Title 13 and Ordinance No. 2024-XX amending Title 9, of the Costa Mesa Municipal Code regarding cannabis.
March 19, 2024
City Council
Planning Commission
Recommendations Retail Cannabis
Code Amendments
CANNABIS FEE ANALYSIS
MARCH 19, 2024 CITY COUNCIL
CITY OF COSTA MESA
DERIVING THE COST OF SERVICE
2CLEARSOURCE REPORT TO THE CITY OF COSTA MESA
Apply fully burdened hourly labor rates to time required to perform Hourly Rate for
Personnel
Providing
Services
Time Required to
Perform the
Service
Cost of Servicex =
Fully Burdened Hourly
Rates:
Direct and indirect
labor costs
Services and supplies
Agency overhead
Estimated or Known
Times for Providing
Services
Maximum Fee Amount
3CLEARSOURCE REPORT TO THE CITY OF COSTA MESA
Full Cost of
Service ($)
Revenue from
Current Fee ($)
Maximum Level of Cost
Recovery = 100%
Minimum Level of Cost
Recovery = 0%
Current Level of Cost
Recovery = X%
City Subsidy
EVALUATING COST RECOVERY
Compare full cost of service to revenues available to fund activities Set policy for targeted recovery within the spectrum
COST OF SERVICE ANALYSIS
COST RECOVERY ANALYSIS
CLEARSOURCE REPORT TO THE CITY OF COSTA MESA 4
Employee Badge Issuance
- Employee Badge Issuance: Fee collected per employee.
Description Current
Fees
Cost of
Service
Proposed
Fee
Fee
Change
Proposed
Recovery
Marijuana Business Permit - Employee Badge
Measure X Facility $341 $631 $631 $290 100%
Measure Q Facility n/a $631 $631 n/a - new 100%
DISCUSSION & QUESTIONS
TERRY MADSEN | PRINCIPAL CONSULTANT
[email protected] | 831.288.0608
www.clearsourcefinancial.com
CITY OF COSTA MESA