Agenda packet — Costa Mesa City Council, April 2, 2024 (part 1 of 3)

CITY OF COSTA MESA
REGULAR CITY COUNCIL AND HOUSING AUTHORITY*
Agenda
City Council Chambers
77 Fair Drive
6:00 PMTuesday, April 2, 2024
*Note: All agency memberships are reflected in the title "Council Member" 5:00 P.M. Closed Session
The City Council meetings are presented in a hybrid format, both in-person at City Hall and as a courtesy virtually via Zoom Webinar. If the Zoom feature is having technical difficulties or experiencing any other critical issues, and unless required by the Brown Act, the meeting will continue only in person.

TRANSLATION SERVICES AVAILABLE / SERVICIOS DE TRADUCCIÓN DISPONIBLE Please contact the City Clerk at (714) 754-5225 to request language interpreting services for City meetings. Notification at least 48 hours prior to the meeting will enable the City to make arrangements.

Favor de comunicarse con la Secretaria Municipal al (714) 754-5225 para solicitar servicios de interpretación de idioma para las juntas de la Ciudad. Se pide notificación por lo mínimo 48 horas de anticipación, esto permite que la Ciudad haga los arreglos necesarios.

Members of the public can view the City Council meetings live on COSTA MESA TV (SPECTRUM CHANNEL 3 AND AT&T U-VERSE CHANNEL 99) or
http://costamesa.granicus.com/player/camera/2?publish_id=10&redirect=true and online at youtube.com/costamesatv.

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1 REGULAR CITY COUNCIL AND HOUSING
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Agenda April 2, 2024
As a courtesy, the public may participate via the Zoom option.

Zoom Webinar: (For both 5:00 p.m. and 6:00 p.m. meetings) Please click the link below to join the webinar:
https://us06web.zoom.us/j/81879579049?
pwd=_XoNBT2uciL7zrDsfj4A9Q9srLgExg.bQEU-le6VvXjPDeL
Or sign into Zoom.com and “Join a Meeting”
Enter Webinar ID: 818 7957 9049/ Password: 608584
• If Zoom is not already installed on your computer, click “Download & Run Zoom” on the launch page and press “Run” when prompted by your browser. If Zoom has previously been installed on your computer, please allow a few moments for the application to launch automatically.
• Select “Join Audio via Computer.”
• The virtual conference room will open. If you receive a message reading, “Please wait for the host to start this meeting,” simply remain in the room until the meeting begins.
• During the Public Comment Period, use the “raise hand” feature located in the participants’ window and wait for city staff to announce your name and unmute your line when it is your turn to speak. Comments are limited to 3 minutes, or as otherwise directed.

Participate via telephone: (For both 5:00 p.m. and 6:00 p.m. meetings) Call: 1 669 900 6833 Enter Webinar ID: 818 7957 9049/ Password: 608584 During the Public Comment Period, press *9 to add yourself to the queue and wait for city staff to announce your name/phone number and press *6 to unmute your line when it is your turn to speak. Comments are limited to 3 minutes, or as otherwise directed.

Note, if you have installed a zoom update, please restart your computer before participating in the meeting.

Additionally, members of the public who wish to make a written comment on a specific agenda item, may submit a written comment via email to the City Clerk at [email protected].

Comments received by 12:00 p.m. on the date of the meeting will be provided to the City Council, made available to the public, and will be part of the meeting record.

Please know that it is important for the City to allow public participation at this meeting. If you are unable to participate in the meeting via the processes set forth above, please contact the City Clerk at (714) 754-5225 or [email protected] and staff will attempt to accommodate you. While the City does not expect there to be any changes to the above process for participating in this meeting, if there is a change, the City will post the information as soon as possible to the City’s website.

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Agenda April 2, 2024
Note that records submitted by the public will not be redacted in any way and will be posted online as submitted, including any personal contact information. All pictures, PowerPoints, and videos submitted for display at a public meeting must be previously reviewed by staff to verify appropriateness for general audiences. No links to YouTube videos or other streaming services will be accepted, a direct video file will need to be emailed to staff prior to each meeting in order to minimize complications and to play the video without delay. The video must be one of the following formats, .mp4, .mov or .wmv. Only one file may be included per speaker for public comments, for both videos and pictures. Please e-mail to the City Clerk at [email protected] NO LATER THAN 12:00 Noon on the date of the meeting. If you do not receive confirmation from the city prior to the meeting, please call the City Clerks office at 714-754-5225.

Note regarding agenda-related documents provided to a majority of the City Council after distribution of the City Council agenda packet (GC §54957.5): Any related documents provided to a majority of the City Council after distribution of the City Council Agenda Packets will be made available for public inspection. Such documents will be posted on the city’s website and will be available at the City Clerk's office, 77 Fair Drive, Costa Mesa, CA 92626.

All cell phones and other electronic devices are to be turned off or set to vibrate. Members of the audience are requested to step outside the Council Chambers to conduct a phone conversation.

Free Wi-Fi is available in the Council Chambers during the meetings. The network username available is: CM_Council. The password is: cmcouncil1953.

As a LEED Gold Certified City, Costa Mesa is fully committed to environmental sustainability.

A minimum number of hard copies of the agenda will be available in the Council Chambers.

For your convenience, a binder of the entire agenda packet will be at the table in the foyer of the Council Chambers for viewing. Agendas and reports can be viewed on the City website at https://costamesa.legistar.com/Calendar.aspx.

In compliance with the Americans with Disabilities Act, Assistive Listening headphones are available and can be checked out from the City Clerk. If you need special assistance to participate in this meeting, please contact the City Clerk at (714) 754-5225. Notification at least 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting. [28 CFR 35.102.35.104 ADA Title II].

En conformidad con la Ley de Estadounidenses con Discapacidades (ADA), aparatos de asistencia están disponibles y podrán ser prestados notificando a la Secretaria Municipal. Si necesita asistencia especial para participar en esta junta, comuníquese con la oficina de la Secretaria Municipal al (714) 754-5225. Se pide dar notificación a la Ciudad por lo mínimo 48 horas de anticipación para garantizar accesibilidad razonable a la junta. [28 CFR

35.102.35.104 ADA Title II].

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3 REGULAR CITY COUNCIL AND HOUSING
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Agenda April 2, 2024
CLOSED SESSION - 5:00 P.M.

CALL TO ORDER

ROLL CALL
PUBLIC COMMENTS Members of the public are welcome to address the City Council only on those items on the Closed Session agenda. Each member of the public will be given a total of three minutes to speak on all items on the Closed Session agenda.

CLOSED SESSION ITEMS:

1. CONFERENCE WITH LEGAL COUNSEL - INITIATION OF LITIGATION - ONE CASE Pursuant to California Government Code Section 54956.9 (d)(4), Potential Litigation.

2. CONFERENCE WITH REAL PROPERTY NEGOTIATOR
Pursuant to California Government Code Section 54956.8
APN: 420-012-16
Agency Negotiators: Lori Ann Farrell Harrison, City Manager Negotiating Parties: State of California
Under Negotiation: Price and Terms of Payment

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Agenda April 2, 2024

REGULAR MEETING OF THE CITY COUNCIL AND HOUSING AUTHORITY APRIL 2, 2024 – 6:00 P.M.

JOHN STEPHENS
Mayor

JEFFREY HARLAN ANDREA MARR Mayor Pro Tem - District 6 Council Member - District 3

MANUEL CHAVEZ LOREN GAMEROS
Council Member - District 4 Council Member - District 2

ARLIS REYNOLDS DON HARPER
Council Member - District 5 Council Member - District 1

KIMBERLY HALL BARLOW LORI ANN FARRELL HARRISON
City Attorney City Manager

CALL TO ORDER

NATIONAL ANTHEM AND PLEDGE OF ALLEGIANCE

MOMENT OF SOLEMN EXPRESSION
[Per Council Policy 000-12, these presentations are made by community volunteers stating their own views. The City Council disclaims any intent to endorse or sponsor the views of any speaker.]

ROLL CALL

CITY ATTORNEY CLOSED SESSION REPORT
PRESENTATIONS:

1. Presentation: Active Transportation Committee Update PUBLIC COMMENTS – MATTERS NOT LISTED ON THE AGENDA
Comments on Consent Calendar items may also be heard at this time.

Comments are limited to 3 minutes, or as otherwise directed.

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Agenda April 2, 2024

COUNCIL MEMBER COMMITTEE REPORTS, COMMENTS, AND SUGGESTIONS Each council member is limited to 3 minutes. Additional comments will be heard at the end of the meeting.

1. Council Member Chavez

2. Council Member Gameros

3. Council Member Harper

4. Council Member Marr

5. Council Member Reynolds

6. Mayor Pro Tem Harlan

7. Mayor Stephens
REPORT – CITY MANAGER
REPORT – CITY ATTORNEY

CONSENT CALENDAR
All matters listed under the Consent Calendar are considered to be routine and will be acted upon in one motion. There will be no separate discussion of these items unless members of the City Council, staff, or the public request specific items to be discussed and/or removed from the Consent Calendar for discussion.

1. PROCEDURAL WAIVER: WAIVE THE FULL READING OF ALL

ORDINANCES AND RESOLUTIONS
24-105
RECOMMENDATION:

City Council and Housing Authority approve the reading by title only and waive full reading of Ordinances and Resolutions.

2. READING FOLDER 24-106
RECOMMENDATION:

City Council receive and file Claims received by the City Clerk and authorize staff to reject any and all Claims: Morgan & Morgan (Heidi Kearns), Eli Navarette, Gary Reynolds.

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Agenda April 2, 2024

3. ADOPTION OF WARRANT RESOLUTION 24-104
RECOMMENDATION:

City Council approve Warrant Resolution No. 2714.

Summary Check Register 03-14-2024
Summary Check Register 03-21-2024
Attachments:

4. MINUTES 24-107
RECOMMENDATION:

City Council approve the minutes of the regular meeting of March 19, 2024. 03-19-2024 Draft MinutesAttachments:

5. DESIGNATION OF VOTING DELEGATE FOR THE SOUTHERN
CALIFORNIA ASSOCIATION OF GOVERNMENTS (SCAG) 2024

REGIONAL CONFERENCE AND GENERAL ASSEMBLY
24-112
RECOMMENDATION:

Staff recommends the City Council designate Council Member Arlis Reynolds as the delegate for the upcoming 2024 Annual Southern California Association of Governments (SCAG) Regional Conference and General Assembly.

6. AMENDMENT TO THE CITYWIDE TRAFFIC SIGNAL MAINTENANCE

CONTRACT
24-103
RECOMMENDATION:

Staff recommends the City Council:

1. Approve the First Amendment (Attachment 1) to the Maintenance Services Agreement (MSA) with Yunex LLC to provide maintenance of the City’s traffic signals, increasing the annual compensation for current and future years of the MSA by $100,000, for an annual amount not to exceed $500,000.

2. Authorize the City Manager and the City Clerk to execute the agreement and future amendments to the agreement.

1. Amendment No. 1 to MSA

2. MSA for signal maintenance with Yunex
Attachments:

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7. REJECT ALL BIDS - WILSON, WAKEHAM, AND TEWINKLE PARKS BRIDGES REPLACEMENT PROJECT, CITY PROJECT NO. 23-12
24-114
RECOMMENDATION:

Staff recommends the City Council reject all bids for the Wilson, Wakeham, and TeWinkle Parks Bridges Replacement Project, City Project No. 23-12.

1. Bid AbstractAttachments:

AT THIS TIME COUNCIL WILL ADDRESS ANY ITEMS PULLED FROM THE CONSENT

CALENDAR
------------------------------END OF CONSENT CALENDAR-------------------------------

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Agenda April 2, 2024
PUBLIC HEARINGS:
(Pursuant to Resolution No. 05-55, Public Hearings begin at 7:00 p.m.)

1. SECOND READING OF ORDINANCE NO. 2024-02 AMENDING TITLE 13 (PLANNING, ZONING AND DEVELOPMENT) OF THE COSTA

MESA MUNICIPAL CODE TO ESTABLISH AFFORDABLE HOUSING

REQUIREMENTS FOR NEW RESIDENTIAL DEVELOPMENT

PROJECTS AND FEE RESOLUTION TO ESTABLISH THE

AFFORDABLE HOUSING IN-LIEU FEE SCHEDULE
24-102
RECOMMENDATION:

Staff recommends the Council:

1. Find that the project is categorically exempt from the California Environmental Quality Act (CEQA), Section 15061(b)(3) (“General Rule”).

2. Give second reading to and adopt Ordinance No. 2024-02 approving the Affordable Housing Ordinance and amending Title 13 to establish the affordable housing requirements for new residential development projects.

3. Adopt a fee resolution establishing the affordable housing in-lieu fee schedule.

Agenda Report

1. Draft Ordinance

2. In-Lieu Fee Resolution

3. City Council AHO Changes

4. Housing Plan Programs

5. HCD Compliance Info

6. Information Bulletin 532
Attachments:

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Agenda April 2, 2024
OLD BUSINESS:

1. CITY COUNCIL FIRST READING OF ORDINANCES TO AMEND TITLE 13 (PLANNING, ZONING AND DEVELOPMENT) AND TITLE 9
(LICENSES AND BUSINESS REGULATIONS) OF THE COSTA MESA
MUNICIPAL CODE TO MODIFY THE CITY ’S RETAIL CANNABIS

PROVISIONS AND FIND THIS PROJECT TO BE CATEGORICALLY

EXEMPT FROM CEQA
24-113
RECOMMENDATION:

Staff recommends the City Council:

1. Find that the project is categorically exempt from the California Environmental Quality Act (CEQA), Section 15061(b)(3) (“General Rule”).

2. Introduce for first reading, by title only, Ordinance No. 2024-03 amending Title 13 (Planning, Zoning and Development) and Ordinance No. 2024-04 amending Title 9 (Licenses and Business Regulations) of the Costa Mesa Municipal Code to modify the City’s retail cannabis provisions.

Agenda Report

1. Draft Ordinance Title 13

2. Draft Ordinance Title 9

3. Exhibit A Title 13

4. Exhibit A Title 9

5. Track changes Title 13

6. Track changes Title 9
Attachments:

NEW BUSINESS: (Next Page)

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Agenda April 2, 2024

1. AWARD OF FIRE STATION NO. 4 TRAINING TOWER AND SITE
IMPROVEMENTS PROJECT, CITY PROJECT NO. 23-04, AND

FINDING OF A CATEGORICAL EXEMPTION FROM THE CALIFORNIA

ENVIRONMENTAL QUALITY ACT (CEQA)
24-098
RECOMMENDATION:

Staff recommends the City Council:

1. Find that the Fire Station No. 4 Training Tower and Site Improvements Project, City Project No. 23-04, is categorically exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA guidelines Section 15301.

2. Adopt plans, specifications, and working details for the Fire Station No. 4 Training Tower and Site Improvements Project, City Project No. 23-04.

3. Authorize the City Manager and City Clerk to execute a Public Works Agreement (PWA) in a not to exceed amount of $3.5 million and future contract amendments as approved by the City Attorney within City Council authorized limits to Caliba, Inc., 8031 Main Street, Stanton, California 90680.

4. Authorize the City Manager and City Clerk to execute a Professional Services Agreement (PSA) in the amount of $347,241 and future contract amendments as approved by the City Attorney and within City Council authorized limits to STV Construction, Inc ., 1055 West 7th Street, Suite 2900, Los Angeles, California 90017.

5. Authorize the City Manager to negotiate change orders, as needed, to split the project into phases based on available funding, and explore financing options, including bond financing, with final bond documents to be brought to the City Council for final adoption, to fund the remaining unfunded portion of the project’s construction costs currently totaling $1.5 million for the second phase of the project.

ENVIRONMENTAL DETERMINATION:

The proposed action is exempt from the California Environmental Quality Act (CEQA). The action involves an organizational or administrative activity of government that will not result in direct or indirect physical change in the environment. In addition, the proposed action is exempt under Section 15301 relating to the operation, repair, maintenance, permitting, and /or minor alteration of existing public facilities.

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Agenda April 2, 2024

1. Bid Abstract

2. Kazoni's Bid Protest

3. Caliba's Response

4. STV's Proposal
Attachments:

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Agenda April 2, 2024

2. FISCAL YEAR 2023-24 MID-YEAR BUDGET UPDATE AND

ADJUSTMENTS
24-051
RECOMMENDATION:

The Finance Department is undergoing the mid-year budget review for Fiscal Year 2023-24 that began on July 1, 2023. Certain staffing changes are recommended to assist in achieving City Council goals and priorities as soon as possible. In addition, Funds in the Capital Improvement Program (CIP) that need to be carried over into Fiscal Year 2023-24 require City Council approval.

1. Amend the Table of Organization to add 3.27 new FTEs in the Economic and Development Services Department ( 2.0 FTEs); Parks and Community Services (0.75 FTE); and the Police Department ( 0.52 FTEs) to help achieve City Council goals and priorities related to housing, park and environmental resources management, and public safety.

2. Approve FY 2023-24 Staffing title changes and compensation adjustments to realign positions with current operational needs in multiple departments (Attachment 2).
a. Approve Resolution No. 2024-XX, approving new classification and salary /pay ranges for an Animal Services Coordinator, new title for Multimedia Specialist and new title and pay ranges for Finance Officer.
b. Approve Resolution No. 2024-XX approving compensation adjustments for Finance Officer (Confidential).
c. Approve Resolution No. 2024-XX creating new classification and salary/pay ranges for Graduate Intern and compensation
adjustments for Intern classification, absorbed within the existing adopted budget, in order to create a more viable pipeline of applicants to recruit City employees.

3. Approve FY 2023-24 Budget Carryovers from the prior year in the General Fund and the various Capital Projects Funds (Attachment 1) for outstanding capital projects.

1. Mid year CIP

2. Confidential Resolution

3. Part Time Resolution

4. CMCEA Resolution

5. 4.2.24 Org chart
Attachments:

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Agenda April 2, 2024

3. APPOINTMENTS TO VARIOUS CITY COMMITTEES 24-086
RECOMMENDATION:

Staff recommends the City Council make appointments as follows:

1. Animal Services Committee - Make four ( 4) member appointments with a term expiration of April 2026. One nomination by Mayor Stephens, Council Member Harper, Council Member Gameros, and Mayor Pro Tem Harlan. A Council Member may defer his nomination to the Council Liaison (Mayor Stephens, Council Member Harper).

2. Active Transportation Committee - Make six ( 6) member appointments with a term expiration of April 2026. One nomination by Mayor Stephens, Council Member Harper, Council Member Gameros, and Mayor Pro Tem Harlan and, two at large appointments, the two at-large members should ensure broad representation of different mobility options and experiences ( e.g., walk, bike, bus, and age ability). A Council Member may defer his nomination to the Council Liaison (Council Member Reynolds).

3. Finance and Pension Advisory Committee - Make four ( 4) member appointments with a term expiration of April 2028. One nomination by Mayor Stephens, Council Member Harper, Council Member Gameros, and Mayor Pro Tem Harlan. A Council Member may defer his nomination to the Council Liaison (Mayor Stephens, Alternate Council Member Marr, and Council Member Harper).

4. Housing and Public Service Grants Committee - Make four ( 4) regular member appointments with a term expiration of April 2026. One nomination by Mayor Stephens, Council Member Harper, Council Member Gameros, and Mayor Pro Tem Harlan. A Council Member may defer his nomination to the Council Liaison (Council Member Chavez, Alternate Council Member Harper).

5. Mobile Home Park Advisory Committee - Make one ( 1) Park Owner or Representative appointment, two ( 2) Mobile Home Park Resident appointments, and one (1) Independent Citizen At-large appointment, all with a term expiration of April 2028. One nomination by Mayor Stephens, Council Member Harper, Council Member Gameros, and Mayor Pro Tem Harlan. A Council Member may defer his nomination to the Council Liaison ( Council Member Reynolds, Alternate Council Member Chavez).

6. Approve the recommendation from the Historical Preservation Committee to formally dissolve in lieu of merging with the Costa Mesa Historical Society and transferring the Committee’s funds to the Costa Mesa Historical Society.

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Agenda April 2, 2024

1. Animal Services Committee Applications

2. Active Transportation Committee Applications

3. Finance and Pension Advisory Committee Applications

4. Housing and Public Service Grants Committee

5. Mobile Home Park Advisory Committee
Attachments:

ADDITIONAL COUNCIL /BOARD MEMBER COMMITTEE REPORTS, COMMENTS, AND

SUGGESTIONS

ADJOURNMENT

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15 CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 24-105 Meeting Date: 4/2/2024
TITLE:

PROCEDURAL WAIVER: WAIVE THE FULL READING OF ALL ORDINANCES AND

RESOLUTIONS
RECOMMENDATION:

City Council and Housing Authority approve the reading by title only and waive full reading of Ordinances and Resolutions.

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16 CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 24-106 Meeting Date: 4/2/2024
TITLE:

READING FOLDER
DEPARTMENT: City Manager’s Office/City Clerk’s Division RECOMMENDATION:

City Council receive and file Claims received by the City Clerk and authorize staff to reject any and all Claims: Morgan & Morgan (Heidi Kearns), Eli Navarette, Gary Reynolds.

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17 CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 24-104 Meeting Date: 4/2/2024
TITLE:

ADOPTION OF WARRANT RESOLUTION
DEPARTMENT: FINANCE DEPARTMENT
PRESENTED BY: CAROL MOLINA, FINANCE DIRECTOR
CONTACT INFORMATION: CAROL MOLINA, FINANCE DIRECTOR, (714) 754-5243 RECOMMENDATION:

City Council approve Warrant Resolution No. 2714.

BACKGROUND:

In accordance with Section 37202 of the California Government Code, the Director of Finance or their designated representative hereby certify to the accuracy of the following demands and to the availability of funds for payment thereof.

FISCAL REVIEW:

Funding Payroll Register No. 24-06 On Cycle for $3,420,334.44 and City operating expenses for $2,085,703.56.

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Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 24-107 Meeting Date: 4/2/2024
TITLE:

MINUTES
DEPARTMENT: City Manager’s Office/City City’s Division
RECOMMENDATION:

City Council approve the minutes of the regular meeting of March 19, 2024.

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61 Minutes – Regular Meeting – March 19, 2024 Page 1 of 15

REGULAR CITY COUNCIL AND HOUSING AUTHORITY
MARCH 19, 2024 – MINUTES
CALL TO ORDER – The Closed Session meeting was called to order by Mayor Stephens at 4:00 p.m.

ROLL CALL

Present: Council Member Chavez, Council Member Marr, Council Member Reynolds, Mayor Pro Tem Harlan, and Mayor Stephens.

Absent: Council Member Gameros and Council Member Harper.

PUBLIC COMMENTS
Dennis D’Alessio spoke on Closed Session Item No. 2 regarding 1963 Wallace Ave.

Steve Sheldon spoke on Closed Session Item No. 2 regarding 1963 Wallace Ave.

CLOSED SESSION ITEMS:

1. CONFERENCE WITH LABOR NEGOTIATORS
Pursuant to California Government Code Section 54957.6 (a) Agency Designated Representative: Lori Ann Farrell Harrison, City Manager; Alma Reyes, Deputy City Manager; Kasama Lee, Human Resources Manager; Fanni Acosta, Human Resources Administrator; Carol Molina, Finance Director Name of Employee Organization: Costa Mesa Firefighters Management Association (CMFMA).

2. CONFERENCE WITH LEGAL COUNSEL EXISTING LITIGATION–ONE CASE Pursuant to California Government Code Section 54956.9 (d)(1) Name of Case: City of Costa Mesa v. D’Alessio; 1963 Wallace Ave.

Orange County Superior Court Case No. 30 2020 01133479.

3. CONFERENCE WITH LEGAL COUNSEL EXISTING LITIGATION–ONE CASE Pursuant to California Government Code Section 54956.9 (d)(1) Name of Case: Garten v. City of Costa Mesa
Orange County Superior Court Case No. 30-2021-01235189-CU-PA-CJC.

4. CONFERENCE WITH LEGAL COUNSEL EXISTING LITIGATION–ONE CASE Pursuant to California Government Code Section 54956.9 (d)(1) Name of Case: Noble v. City of Costa Mesa
Orange County Superior Court Case No. 30-2023-01336982-CU-FR-CXC. 62 Minutes – Regular Meeting – March 19, 2024 Page 2 of 15

5. Public Employment, Workers’ Compensation Claim
Pursuant to California Government Code Section 54956.9 (b)(1) WCAB NO. ADJ12812911, ADJ12812910, ADJ18260334.

6. Public Employment, Workers’ Compensation Claim
Pursuant to California Government Code Section 54956.9 (b)(1) WCAB NO. ADJ15545669.

7. Public Employment, Workers’ Compensation Claim
Pursuant to California Government Code Section 54956.9 (b)(1) WCAB NO. ADJ11380560.

8. Public Employment, Workers’ Compensation Claim
Pursuant to California Government Code Section 54956.9 (b)(1) WCAB NO. ADJ13462798.

City Council recessed at 4:08 p.m. for Closed Session.

Closed Session adjourned at 5:38 p.m.

CALL TO ORDER – The Regular City Council and Housing Authority meeting was called to order by Mayor Stephens at 6:00 p.m.

NATIONAL ANTHEM AND PLEDGE OF ALLEGIANCE
A video was played of the National Anthem and Mayor Stephens led the Pledge of Allegiance.

MOMENT OF SOLEMN EXPRESSION – Led by Pastor Monica Corsaro, Fairview Community Church.

ROLL CALL

Present: Council Member Chavez, Council Member Gameros, Council Member Harper, Council Member Marr, Council Member Reynolds, Mayor Pro Tem Harlan, and Mayor Stephens.

Absent: None.

CITY ATTORNEY CLOSED SESSION REPORT – No reportable action.

PUBLIC COMMENTS – MATTERS NOT LISTED ON THE AGENDA
Speaker, praised the Fire Department, paramedics, and the Police Department.

Ida Wolf spoke on the maintenance issues at the senior center and the proposed development at the senior center.

Speaker, spoke on enforcement for the street vendors that are not permitted.

Jay Humphrey, Costa Mesa, spoke on safety issues associated with electric bikes. 63 Minutes – Regular Meeting – March 19, 2024 Page 3 of 15 Speaker, spoke on enforcement for the street vendors that are not permitted.

Wendy Leece, Costa Mesa, spoke on the Costa Mesa 311 application, spoke on street sweeping, and maintenance issues at the Senior Center.

Speaker, spoke on issues associated with the recovery home on Joann Street.

Speaker, spoke on 19th street traffic concerns, bike lanes, and requested information on the permit parking program.

COUNCIL MEMBER COMMITTEE REPORTS, COMMENTS, AND SUGGESTIONS Council Member Reynolds requested improvements at the Senior Center, spoke on attending the CivicWell Conference and reflecting on the work that the City has done, spoke on bike safety, spoke on an e-bike ordinance, spoke on Victoria School opening for parks space, and streamlining the process for small community events.

Council Member Chavez requested an update on street vendor issues and requested to adjourn in memory of Officers Ketchum and Libolt and Huy Pham.

Council Member Gameros thanked staff for mitigating measures at the dog park, spoke on street vendor issues, and spoke in memory of Officers Ketchum and Libolt.

Council Member Harper requested to speak to Ida Wolf, spoke on Senior Center issues that need to be addressed, and spoke on addressing street vendor issues.

Council Member Marr requested an update on the Joann Street property, spoke on attending the CivicWell Conference, spoke on emergency management, and requested to agendize parking requirements in commercial zones.

Chief Lawrence provided an update on crime and safety in the community.

Mayor Pro Tem Harlan reported on attending the opening of the Costa Mesa Pony Little league, spoke on attending the CivicWell Conference, and requested the status of an e-bike ordinance.

Mayor Stephens spoke on visiting the equestrian center at the Orange County Fairgrounds, presented the Woman of the Year proclamation to Deputy Chief LaPointe, spoke on hosting multi mayor happy hours with Will O’Neil, Mayor of Newport Beach, from 5:00 p.m. to 7:00 p.m. on Thursday, March 28 th at Country Club Restaurant and on May 22 nd at Muldoon’s Irish Pub in Newport Beach, spoke on presenting a certificate at Shen Yun, spoke on the work being done for an e-bike ordinance, requested an update on street vendor issues.

REPORT – CITY MANAGER – Ms. Farrell Harrison spoke on housing and the Fair Housing Foundation workshop on March 20 th, spoke on the Earth Day festival on Saturday, April 20 th, spoke on bringing back a report on street vendors, spoke on maintenance issues at the senior center, spoke on providing an updated emergency services handbook, and the forthcoming e- bike ordinance.
64 Minutes – Regular Meeting – March 19, 2024 Page 4 of 15 REPORT – CITY ATTORNEY – NONE.

CONSENT CALENDAR
MOVED/SECOND: Council Member Chavez/Mayor Pro Tem Harlan MOTION: Approve the Consent Calendar except for Item No. 5.

The motion carried by the following roll call vote:

Ayes: Council Member Chavez, Council Member Gameros, Council Member Harper, Council Member Marr, Council Member Reynolds, Mayor Pro Tem Harlan, and Mayor Stephens.

Nays: None.

Absent: None.

Abstain: None.

Motion carried: 7-0

1. PROCEDURAL WAIVER: WAIVE THE FULL READING OF ALL ORDINANCES AND

RESOLUTIONS
ACTION:

City Council and Housing Authority approved the reading by title only and waived full reading of Ordinances and Resolutions.

2. READING FOLDER
ACTION:

City Council received and filed Claims received by the City Clerk and authorized staff to reject any and all Claims: Enrique Aceves, Noreen Becker, Loya Casualty Insurance Company (Brittany Smith), Kathia Powers.

3. ADOPTION OF WARRANT RESOLUTION
ACTION:

City Council approved Warrant Resolution No. 2713.

4. MINUTES
ACTION:

City Council approved the minutes of the regular meetings of February 20, 2024 and March 5, 2024, the Special Study Session meeting of February 27, 2024, and the regular Study Session meeting of March 12, 2024.

6. AUTOMATED LICENSE PLATE READER (ALPR) CAMERA SYSTEM LEASE AND

MAINTENANCE AGREEMENT
ACTION:

1. City Council authorized the lease of 31 existing Flock Safety Inc. automated license plate reader (ALPR) camera systems from the Omnia Partners Cooperative Agreement No. 23-6692-03 with Insight Public Sector in an amount not to exceed $306,900 utilizing general funds from the department’s budget for a term of three years.
65 Minutes – Regular Meeting – March 19, 2024 Page 5 of 15

2. Authorized the lease of 15 new Flock Safety Inc. automatic license plate reader (ALPR) camera systems from the Omnia Partner Cooperative Agreement No. 23-6692-03 with Insight Public Sector in an amount not to exceed $153,750 utilizing funds from the awarded Organized Retail Theft (ORT) grant for a term of three years.

3. Authorized the City Manager or designee to execute two separate agreements for maintenance of the automated license plate reader (ALPR) camera systems with Flock Safety Inc., in a form approved by the City Attorney.

7. AMENDMENT NUMBER ONE TO PROFESSIONAL SERVICES AGREEMENT (PSA) WITH CABCO YELLOW, INC. FOR SENIOR TRANSPORTATION PROGRAMS ACTION:

1. City Council approved and authorized the City Manager and the City Clerk to execute Amendment No. 1 to the Professional Services Agreement (PSA) with CabCo Yellow, Inc, DBA California Yellow Cab, for the Senior Transportation Programs and NHS Transportation Program to increase the not-to-exceed amount by $130,000 for a total of $300,000 annually with a 10% contingency.

2. Authorized the City Manager and City Clerk to execute future amendments to the agreement within Council authorized limits.

ITEMS PULLED FROM THE CONSENT CALENDAR

5. AWARD OF THE ADAMS AVENUE IMPROVEMENT PROJECT, CITY PROJECT NO. 23-07, AND FINDING OF CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA)

CATEGORICAL EXEMPTION
Public Comments:

Jay Humphrey, Costa Mesa, spoke on coordination of the project with undergrounding the utilities.

Kianna Parviz spoke on problems at the youth home on Joann Street.

MOVED/SECOND: Mayor Stephens/Council Member Reynolds
MOTION: Approve staff recommendation.

The motion carried by the following roll call vote:

Ayes: Council Member Chavez, Council Member Gameros, Council Member Harper, Council Member Marr, Council Member Reynolds, Mayor Pro Tem Harlan, and Mayor Stephens.

Nays: None.

Absent: None.

Abstain: None.

Motion carried: 7-0
66 Minutes – Regular Meeting – March 19, 2024 Page 6 of 15 ACTION:

1. City Council found that the project is categorically exempt from the California Environmental Quality Act (CEQA), pursuant to CEQA Guidelines Section 15301.

2. Adopted plans, specifications, and working details for the Adams Avenue Improvement Project, City Project No. 23-07.

3. Awarded a Public Works Agreement (PWA) for construction to All American Asphalt, 400 East Sixth Street, Corona, California 92879 in the amount of $2,327,723.20.

4. Authorized the City Manager and City Clerk to execute the PWA for All American Asphalt and future amendments to the agreements within Council authorized limits.

5. Authorized a ten percent (10%) contingency in the amount of $232,772 for construction and unforeseen costs related to this project. -------------------------------------END OF CONSENT CALENDAR------------------------------------- City Council recessed into a break at 6:54 p.m.

City Council reconvened at 7:00 p.m.

PUBLIC HEARINGS:

1. CITY COUNCIL FIRST READING OF ORDINANCES TO AMEND TITLE 13 (PLANNING, ZONING AND DEVELOPMENT) AND TITLE 9 (LICENSES AND

BUSINESS REGULATIONS) OF THE COSTA MESA MUNICIPAL CODE TO MODIFY THE CITY’S RETAIL CANNABIS PROVISIONS AND FIND THIS PROJECT TO BE

CATEGORICALLY EXEMPT FROM CEQA
Presentation by Ms. Halligan, Senior Planner.

Public Comments:

Speaker, spoke on drivers under the influence.

Zachery Blauvelt, High Seas, spoke on the badge fees, the fingerprinting process, removing the 24-hour security guard requirement, and signage requirements.

Jay Humphrey, Costa Mesa, spoke on setting precedents for other businesses and affecting the future of the community.

Speaker, requested the cannabis administrative regulations to be published on the website, spoke on the badge fees, state compliance, the word “cannabis” on signage, and the 24-hour security guard requirement.

Karen Hannawi, MedLeaf, spoke on the application process and delays. 67 Minutes – Regular Meeting – March 19, 2024 Page 7 of 15 Michael Moussalli, owner of HighSeas and Se7enLeaf, spoke on the use of the word “cannabis” on signage, the 24-hour security guard requirement, and spoke on various fees associated with the process.

Randy Olsen, MedLeaf, spoke on the application process and delays.

Keith Scheinberg spoke on the application process.

Speaker, MedLeaf, spoke on the application process and delays.

Speaker, United Food and Commercial Workers, spoke on the badge fees.

Speaker, spoke on signage, placing a map on the city website locating all cannabis dispensaries, and providing a sign with the city logo stating that the location is a city approved store.

Speaker, spoke on increasing the proposed distance between retail cannabis storefronts and residences to at least 500 feet.

Mike Hannegan, Secret Garden, spoke on marketing and advertising of legal cannabis.

Marianne Orr, Costa Mesa, spoke on increasing the proposed distance between retail cannabis storefronts and residences to at least 500 feet, and spoke on sensitive use areas.

Christopher Kopech, Secret Garden, spoke on the badge fees, signage issues, and the 24-hour security guard requirement.

Speaker, spoke on fees and for-profit businesses, and spoke on the buffer between residential areas and storefronts.

Speaker, representing the bicycling community, spoke on safe driving and in opposition of more cannabis storefronts.

Wendy Leece, spoke on the mailers that were sent out in 2020, spoke on a cap on the number of storefronts, spoke on a 1000 foot distance between storefronts, and spoke on taking into consideration the residents and their concerns.

Speaker, Costa Mesa resident, spoke on setting a cap, storefronts in industrial areas, and a 1000 foot buffer.

Speaker, spoke on setting a cap, setting a distance between storefronts, and distance between storefronts and residences.

Janet Loftus, spoke in support of the Planning Commissions recommendations, spoke on setting a cap, setting a distance between storefronts, and a distance between storefronts and residences.
68 Minutes – Regular Meeting – March 19, 2024 Page 8 of 15 Schellie Walsh, spoke on setting a cap, setting a distance between storefronts, a distance between storefronts and residences, and a distance between sensitive use areas.

Devon Julian, Culture Cannabis Club, thanked council for their support of the industry, spoke on reducing fees and secondary review fees, and allowing a grace period during background checks.

Cynthia McDonald, spoke on regulating cannabis land use, spoke on a cap of 12, spoke on not reducing the badge fees, and spoke on signage.

City Council recessed into a break at 9:26 p.m.

City Council reconvened at 9:44 p.m.

Ms. Hall Barlow clarified what changes can be made by resolution and/or by a super majority vote.

MOVED/SECOND: Council Member Gameros/Council Member Chavez MOTION: Maintain the Police Department badge fee of $81 and reduce the Development Services fee from $550 to $225, and allow the use of a temporary badge.

SUBSTITUTE MOTION/SECOND: Mayor Stephens/Council Member Harper SUBSTITUTE MOTION: Continue the item, staff to investigate methods to improve efficiency in badge processing (including State-compliant design and the use of temporary badges), and consider outsourcing background checks and badging to the City’s cannabis consultant (HDL).

Council Member Gameros requested streamlining badging for employees of multiple Costa Mesa cannabis operations.

Mayor Stephens (1st) and Council Member Harper (2nd) agreed to the change.

The motion carried by the following roll call vote:

Ayes: Council Member Chavez, Council Member Gameros, Council Member Harper, Council Member Marr, Council Member Reynolds, Mayor Pro Tem Harlan, and Mayor Stephens.

Nays: None.

Absent: None.

Abstain: None.

Motion carried: 7-0
69 Minutes – Regular Meeting – March 19, 2024 Page 9 of 15 ACTION:

1. City Council continued the item, staff to investigate methods to improve efficiency in badge processing (including State-compliant design and the use of temporary badges), and consider outsourcing background checks and badging to the City’s cannabis consultant (HDL), and streamlining badging for employees of multiple Costa Mesa cannabis operations.

MOVED/SECOND: Council Member Harper/Council Member Chavez MOTION: Encourage all cannabis storefronts to have a licensed security guard onsite 24 hours per day and requires, at a minimum, all cannabis storefront operations to have a licensed security guard onsite during hours of operation.

Mayor Stephens clarified that the Chief of Police can make a determination to require a licensed security guard onsite for 24 hours a day, if in his/her professional opinion this is needed to ensure public safety.

Council Member Gameros requested that a licensed security guard be present during hours of operation, including when any cash, cannabis, or cannabis products are shipped from or received at the facility.

Council Member Harper (1st) and Council Member Chavez (2nd) agreed to the change.

MOVED/SECOND: Council Member Harper/Council Member Chavez MOTION: Modified the 24-hours licensed security guard requirement to: Encourage all cannabis storefronts to have a licensed security guard onsite 24 hours per day and requires, at a minimum, all cannabis storefront operations to have a licensed security guard onsite during hours of operation, including when any cash, cannabis, or cannabis products are shipped from or received at the facility. Additionally, the Chief of Police can make a determination to have a licensed security guard onsite for 24 hours a day, if in his/her professional opinion this is needed to ensure public safety.

The motion carried by the following roll call vote:

Ayes: Council Member Chavez, Council Member Gameros, Council Member Harper, Mayor Pro Tem Harlan, and Mayor Stephens.

Nays: Council Member Marr and Council Member Reynolds.

Absent: None.

Abstain: None.

Motion carried: 5-2
ACTION:

2. Modified the 24-hours licensed security guard requirement to: Encourage all cannabis storefronts to have a licensed security guard onsite 24 hours per day and requires, at a minimum, all cannabis storefront operations to have a licensed security guard onsite during hours of operation, including when any cash, cannabis, or cannabis products are shipped from or received at the facility. Additionally, the Chief of Police can make a determination to have a licensed security guard onsite for 24 hours a day, if in his/her professional opinion this is needed to ensure public safety. 70 Minutes – Regular Meeting – March 19, 2024 Page 10 of 15 MOVED/SECOND: Council Member Harper/Council Member Chavez MOTION: Allow the processing of 34 cannabis storefront applications.

Council Member Marr clarified if the motion was wording from slide 10 of the staff presentation reading: After 30 approvals, discontinue processing applications until there are fewer than 15 storefront CUP’s.

Mayor Stephens requested clarification on the “discontinue processing applications until there are fewer than 15 storefront CUP’s.”
Council Member Harper changed his motion from 15 to 10.

Council Member Marr requested the change from Conditional Use Permit to Cannabis Business Permit.

Council Member Harper (1st) and Council Member Chavez (2nd) agreed to the change.

Mayor Pro Tem Harlan clarified that the maximum number would be 35 which includes all applications that have moved past the pre-application phase.

Council Member Harper (1st) and Council Member Chavez (2nd) agreed.

Council Member Reynolds requested the change to continue to process the applications that are past the “pre-application” stage up to 35 applications.

Council Member Harper (1st) and Council Member Chavez (2nd) agreed.

Council Member Harper amended the motion to allow the city to refund the $1500 pre- application fee to applicants in the pre-application phase.

Council Member Chavez (2nd) agreed.

MOVED/SECOND: Council Member Harper/Council Member Chavez MOTION: Directed staff to prepare revisions to allow processing of only pending applications which have moved past the pre-application phase, up to a cap of 35 cannabis storefronts, and thereafter, suspend processing applications for new storefronts until such time when the number of operating licensed cannabis storefronts falls below 10, and allow the City to refund the $1,500 pre-application fee to all applicants in the pre-application phase.

The motion carried by the following roll call vote:

Ayes: Council Member Chavez, Council Member Gameros, Council Member Harper, Council Member Marr, Council Member Reynolds, and Mayor Pro Tem Harlan.

Nays: Mayor Stephens.

Absent: None.

Abstain: None.

Motion carried: 6-1
71 Minutes – Regular Meeting – March 19, 2024 Page 11 of 15 ACTION:

3. Directed staff to prepare revisions to allow processing of only pending applications which have moved past the pre-application phase, up to a cap of 35 cannabis storefronts, and thereafter, suspend processing applications for new storefronts until such time when the number of operating licensed cannabis storefronts falls below 10, and allow the City to refund the $1,500 pre-application fee to all applicants in the pre- application phase.

MOVED/SECOND: Council Member Marr/Council Member Reynolds MOTION: The separation requirement between cannabis storefronts and residential zones shall be 250 feet.

Council Member Chavez clarified that any completed applications would be exempted from the new residential zone separation requirement.

MOVED/SECOND: Council Member Marr/Council Member Reynolds MOTION: The separation requirement between cannabis storefronts and residential zones shall be 250 feet.

The motion carried by the following roll call vote:

Ayes: Council Member Chavez, Council Member Gameros, Council Member Harper, Council Member Marr, Council Member Reynolds, and Mayor Pro Tem Harlan.

Nays: Mayor Stephens.

Absent: None.

Abstain: None.

Motion carried: 6-1
ACTION:

4. The separation requirement between cannabis storefronts and residential zones shall be 250 feet.

MOVED/SECOND: Council Member Reynolds/Council Member Marr MOTION: The minimum separation between cannabis storefronts and youth centers (as defined in the CMMC) shall be 1000 feet.

The motion carried by the following roll call vote:

Ayes: Council Member Chavez, Council Member Gameros, Council Member Harper, Council Member Marr, Council Member Reynolds, Mayor Pro Tem Harlan, and Mayor Stephens.

Nays: None.

Absent: None.

Abstain: None.

Motion carried: 7-0
ACTION:

5. The minimum separation between cannabis storefronts and youth centers (as defined in the CMMC) shall be 1000 feet.
72 Minutes – Regular Meeting – March 19, 2024 Page 12 of 15 MOVED/SECOND: Council Member Marr /Council Member Reynolds MOTION: Existing tenants shall be notified when a cannabis statement is proposed to occupy an existing tenant space.

Mayor Pro Tem Harlan requested that the property owner provide notice to the tenant.

MOVED/SECOND: Council Member Marr /Council Member Reynolds MOTION: Property owners shall notify an existing tenant when a cannabis storefront is proposed to occupy an existing tenant space.

The motion carried by the following roll call vote:

Ayes: Council Member Chavez, Council Member Gameros, Council Member Harper, Council Member Marr, Council Member Reynolds, Mayor Pro Tem Harlan, and Mayor Stephens.

Nays: None.

Absent: None.

Abstain: None.

Motion carried: 7-0
ACTION:

6. Property owners shall notify an existing tenant when a cannabis storefront is proposed to occupy an existing tenant space.

MOVED/SECOND: Council Member Gameros/Council Member Reynolds MOTION: Allow the word cannabis to be used up to two times with a maximum letter height of one inch on the entrance notice.

Mayor Stephens requested the letter height on the notice be limited to 2 inches in size.

Council Member Gameros (1st) agreed to the change.

Council Member Reynolds requested to include an official Costa Mesa certification or logo on the signage.

Council Member Gameros agreed to the change.

Discussion ensued on including a Costa Mesa logo.

Council Member Reynolds withdrew the request.

Council Member Reynolds requested clarification of the motion.

Council Member Reynolds withdrew her second.

Council Member Chavez seconded the motion.
73 Minutes – Regular Meeting – March 19, 2024 Page 13 of 15 MOVED/SECOND: Council Member Gameros/Council Member Chavez MOTION: Allow the word cannabis to be used up to two times with a maximum letter height of two inches on the entrance notice.

The motion carried by the following roll call vote:

Ayes: Council Member Chavez, Council Member Gameros, Council Member Harper, Council Member Marr, Mayor Pro Tem Harlan, and Mayor Stephens.

Nays: Council Member Reynolds.

Absent: None.

Abstain: None.

Motion carried: 6-1
ACTION:

7. Allow the word cannabis to be used up to two times with a maximum letter height of two inches on the entrance notice.

MOVED/SECOND: Council Member Gameros/Council Member Chavez MOTION: Publish the Cannabis Business Administrative Regulations on the City’s website.

The motion carried by the following roll call vote:

Ayes: Council Member Chavez, Council Member Gameros, Council Member Harper, Council Member Marr, Council Member Reynolds, Mayor Pro Tem Harlan, and Mayor Stephens.

Nays: None.

Absent: None.

Abstain: None.

Motion carried: 7-0
ACTION:

8. Publish the Cannabis Business Administrative Regulations on the City’s website.

MOVED/SECOND: Council Member Reynolds
MOTION: Approve the Planning Commission’s recommendation specifying that advertising and marketing would not depict or suggest the consumption of cannabis or cannabis products.

Mayor Stephens requested to incorporate specifically State regulations for cannabis advertising and marketing into the CMMC.

Council Member Reynolds did not agree to the change.
74 Minutes – Regular Meeting – March 19, 2024 Page 14 of 15 SUBSTITUTE MOTION/SECOND: Mayor Stephens/Council Member Chavez SUBSTITUTE MOTION: Incorporate specifically State regulations for cannabis advertising and marketing into the CMMC.

The motion carried by the following roll call vote:

Ayes: Council Member Chavez, Council Member Gameros, Council Member Harper, Council Member Reynolds, Mayor Pro Tem Harlan, and Mayor Stephens.

Nays: Council Member Marr.

Absent: None.

Abstain: None.

Motion carried: 6-1
ACTION:

9. Incorporate specifically State regulations for cannabis advertising and marketing into the CMMC (California Code of Regulations Title 4 Section 15040).

OLD BUSINESS: NONE.

NEW BUSINESS: NONE.

ADDITIONAL COUNCIL/BOARD MEMBER COMMITTEE REPORTS, COMMENTS, AND SUGGESTIONS – NONE.

ADJOURNMENT – Mayor Stephens adjourned the meeting at 10:28 p.m. in memory of officers Ketchum and Libolt and Huy Pham.
75 Minutes – Regular Meeting – March 19, 2024 Page 15 of 15 Minutes adopted on this 2nd day of April, 2024.
___________________________
John Stephens, Mayor
ATTEST:
___________________________
Brenda Green, City Clerk
76 CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 24-112 Meeting Date: 4/2/2024
TITLE:

DESIGNATION OF VOTING DELEGATE FOR THE SOUTHERN CALIFORNIA ASSOCIATION OF GOVERNMENTS (SCAG) 2024 REGIONAL CONFERENCE AND GENERAL ASSEMBLY DEPARTMENT: CITY MANAGER’S OFFICE/CITY CLERK DIVISON
PRESENTED BY: BRENDA GREEN, CITY CLERK
CONTACT INFORMATION: BRENDA GREEN, (714) 754-5221
RECOMMENDATION:

BACKGROUND:

The annual SCAG Regional Conference & General Assembly will be held Thursday, May 2, 2024 through Friday, May 3, 2024 at the JW Marriott Desert Springs Resort & Spa in Palm Desert, CA.

SCAG requests that each member city appoint a delegate to vote at the Assembly.

ANALYSIS:

It is during the Annual General Assembly that resolutions are adopted, setting the legislative platform for SCAG in the coming year. SCAG by-laws entitle each city to one vote in matters affecting municipal or SCAG policy. Each member city is entitled to designate a delegate to participate in the voting.

ALTERNATIVES:

City Council may choose to not appoint a delegate or may select another City Council member as the delegate.

FISCAL REVIEW:

The funding for the conference is included in the Fiscal Year 2023-24 City Council budget.

LEGAL REVIEW:

The City Attorney’s Office has reviewed this report and has approved it as to form.

Page 1 of 2 ends

77 File #: 24-112 Meeting Date: 4/2/2024
CITY COUNCIL GOALS AND PRIORITIES:

This item is administrative in nature.

CONCLUSION:

Page 2 of 2 ends

78 CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 24-103 Meeting Date: 4/2/2024
TITLE:

AMENDMENT TO THE CITYWIDE TRAFFIC SIGNAL MAINTENANCE CONTRACT DEPARTMENT: PUBLIC WORKS DEPARTMENT / TRANSPORTATION

SERVICES DIVISION
PRESENTED BY: RAJA SETHURAMAN, PUBLIC WORKS DIRECTOR
CONTACT INFORMATION: JENNIFER ROSALES, TRANSPORTATION SERVICES MANAGER (714) 754-5343
RECOMMENDATION:

Staff recommends the City Council:

2. Authorize the City Manager and the City Clerk to execute the agreement and future amendments to the agreement.

BACKGROUND:

On May 3, 2022, the City Council awarded an MSA with Yunex, LLC (Attachment 2) to perform routine and extraordinary traffic signal maintenance services for the City’s traffic operations equipment. The contract term is for an initial term of three (3) years with two (2) one-year renewal options for a total of five years. The City is currently in the second year of the initial term of the signal maintenance contract with an annual amount not to exceed $400,000 and a 10% contingency.

ANALYSIS:

Yunex, LLC has successfully provided reliable and continuous traffic signal maintenance services to the City for the past nine years. The necessary services include the performance of “routine”as well as “extraordinary” maintenance of the City’s 131 traffic signals, three (3) pedestrian hybrid beacons/fire station signals, six (6) rectangular rapid flashing beacons, 54 radar speed feedback signs, six (6) flashing crosswalks, 47 Closed Circuit Television cameras, sixteen (16) battery backup systems, ten (10) school warning flashers, and approximately 36 miles of underground communications cable and associated hardware.

The City recently added two (2) new pedestrian hybrid beacons (HAWK signals), one (1) new traffic

Page 1 of 2 ends

79 File #: 24-103 Meeting Date: 4/2/2024
The City recently added two (2) new pedestrian hybrid beacons (HAWK signals), one (1) new traffic signal for pedestrians, six (6) new rectangular rapid flashing beacons, and two (2) new radar speed feedback signs. In addition, Transportation Services has seen a significant increase in the cost of traffic signal equipment over the past two years. This increase is due to a number of factors including the rising costs of raw materials, supply chain disruptions, freight costs and economic factors. In addition to the increased cost of traffic signal equipment, the City’straffic signal infrastructure and equipment are aging, requiring more frequent repairs. The current purchase limits are already close to being met this fiscal year due to the above factors.

With the additional signal installations and continued increase in equipment cost including damaged communication equipment, staff requests City Council approval of the First Amendment to the MSA to increase the annual compensation for current and future years of the agreement by $100,000 to ensure sufficient funding to continue and provide proper care of the City’straffic signal infrastructure and operations.

ALTERNATIVES:

An alternative to awarding this agreement would be to reject the proposed amendment and redirect staff to proceed with the contract as is. This would require staff to reduce the maintenance of traffic signal equipment to preserve funding for urgent special requests and emergency responses. This alternative is not recommended at this time as it would severely impact public safety and daily operations.

FISCAL REVIEW:

Funding for the Amendment to the MSA with Yunex, LLC for traffic signal maintenance is available in the annually appropriated operations budget of the Public Works Department/Transportation Services Division.

LEGAL REVIEW:

The City Attorney’sOffice has reviewed this agenda report, prepared the proposed Amendment to the MSA and approves them both as to form.

CITY COUNCIL GOALS AND PRIORITIES:

This item supports the following City Council Goal:
· Strengthen the public’s safety and improve the quality of life.

CONCLUSION:

Staff recommends the City Council:

1. Approve the First Amendment (Attachment 1) to the MSA with Yunex LLC to provide maintenance of the City’s traffic signals, increasing the annual compensation for current and future years of the MSA by $100,000 for an annual amount not to exceed $500,000.

2. Authorize the City Manager and the City Clerk to execute the agreement and future amendments to the agreement.

Page 2 of 2 ends

80 1
Yunex, LLC
Amendment One

AMENDMENT NUMBER ONE TO

MAINTENANCE SERVICES AGREEMENT
WITH

YUNEX, LLC

This Amendment Number One (“Amendment”) is dated April 2, 2024, (“Effective Date”), by and between the CITY OF COSTA MESA, a municipal corporation (“City”) and Yunex, LLC a Delaware limited liability company (“Consultant”).

WHEREAS, City and Consultant entered into an agreement on May 3, 2022 for Consultant to provide traffic signal maintenance services (the “Agreement”); and WHEREAS, City and Consultant originally established an annual not -to-exceed amount of $400,000; and
WHEREAS, City and Consultant desire to increase the annual not -to-exceed amount to $500,000.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. The second sentence in section 2.1 of the Agreement is revised to state, “Contractor’s annual compensation shall not exceed $500,000.00 annually.”

2. All terms not defined herein shall have the same meaning and use as set forth in the Agreement.

3. All other terms, conditions, and provisions of the Agreement shall remain in full force and effect.

4. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original. All counterparts shall be construed together and shall constitute one agreement.

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed by and through their respective authorized officers, as of the date first above written.

CONSULTANT

________________________________ Date: __________________________ Signature

________________________________
Name and Title
81 2
Yunex, LLC
Amendment One

CITY OF COSTA MESA

__________________________________ Date: __________________________ Lori Ann Farrell Harrison
City Manager

ATTEST:

__________________________________ Date: __________________________ Brenda Green
City Clerk

APPROVED AS TO FORM:

__________________________________ Date: __________________________ Kimberly Hall Barlow
City Attorney

APPROVED AS TO INSURANCE:

__________________________________ Date: __________________________ Ruth Wang
Risk Management

APPROVED AS TO CONTENT:

__________________________________ Date: __________________________ Jennifer Rosales
Project Manager

DEPARTMENTAL APPROVAL:

__________________________________ Date: __________________________ Raja Sethuraman
Public Works Director

PURCHASING APPROVAL:

__________________________________ Date: __________________________ Carol Molina
Finance Director
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CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 24-114 Meeting Date: 4/2/2024
TITLE:

REJECT ALL BIDS - WILSON, WAKEHAM, AND TEWINKLE PARKS BRIDGES REPLACEMENT PROJECT, CITY PROJECT NO. 23-12
DEPARTMENT: PUBLIC WORKS DEPARTMENT/ENGINEERING DIVISION PRESENTED BY: RAJA SETHURAMAN, PUBLIC WORKS DIRECTOR
CONTACT INFORMATION: SEUNG YANG, P.E., CITY ENGINEER, (714) 754-5335 RECOMMENDATION:

Staff recommends the City Council reject all bids for the Wilson, Wakeham, and TeWinkle Parks Bridges Replacement Project, City Project No. 23-12.

BACKGROUND:

The Wilson, Wakeham, and TeWinkle Parks Bridges Replacement Project consisted of replacing all the wooden bridges at Wilson Park and the single wooden bridge at TeWinkle Park and Wakeham Park with new pedestrian bridges.

The existing pedestrian bridges at these parks have been in steady deterioration over time. Exposure to the natural elements has caused rotting and decay in certain areas of the bridges. Temporary repairs have been made over the years, which only endure for a short period of time.

The initial scope of this project was to replace the existing pedestrian bridges by awarding a contractor to procure, deliver, and install new bridges at Wilson, Wakeham, and TeWinkle Parks.

ANALYSIS:

On February 8, 2024, staff received twenty (20) bids for this project. The bid abstract is shown in Attachment 1. Staff has reviewed all bids and determined the lowest responsive bid from Boulder Contracting Company with a bid of $294,089. The first two bidders, 3M Construction Corporation and Harbor Coating & Restoration were deemed non-responsive.

The third lowest bidder, Boulder Contracting Company, protested the first two low bidders citing a violation of the General Provision that no person, company, or entity can submit more than one bid.

In this case, both companies, 3M Construction Corporation and Harbor Coating & Restoration shared a corporate officer that was listed in both bids and had financial interest in both companies.

Therefore, staff determined that 3M Construction Corporation and Harbor Coating & Restoration were non-responsive.

The lowest responsive bid submitted by Boulder Contracting for $294,089 is approximately 47% over

Page 1 of 2 ends

162
File #: 24-114 Meeting Date: 4/2/2024
The lowest responsive bid submitted by Boulder Contracting for $294,089 is approximately 47% over the allotted budget of $200,000. Hence, staff recommends that the City Council reject all bids at this time and authorize staff to pursue other options including use of alternative materials and phased implementation of bridge repairs by park.

ALTERNATIVES:

The alternative is to reject staff’s recommendation and award to the lowest responsive bidder, Boulder Contracting Company. Staff has determined that this alternative is not recommended since the current budget does not support the amount required for the lowest responsive bidder.

FISCAL REVIEW:

There is no fiscal impact at this time if all bids are rejected.

LEGAL REVIEW:

The City Attorney’s Office has reviewed this agenda report and approves it as to form.

CITY COUNCIL GOALS AND PRIORITIES:

This item is administrative in nature.

CONCLUSION:

Staff recommends the City Council reject all bids for the Wilson, Wakeham, and TeWinkle Parks Bridges Replacement Project, City Project No. 23-12.

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163
City Total Base Bid

1. 3M Construction Corporation Anaheim ** $249,743.00 Non-responsive bid

2. Harbor Coating & Restoration Orange ** $292,763.00 Non-responsive bid

3. Boulder Contracting Company Escondido $294,089.00

4. Oppenheimer National San Juan Capistrano $303,992.29

5. A2ZConstruct Inc Rancho Santa Margarita $312,000.00

6. IO Environmental & Infrastructure Inc San Diego ** $329,575.20

7. Leonida Builders Inc Action $332,999.60

8. Sol Construction, Inc Riverside $367,279.00

9. M-RE Construction, Inc. El Monte ** $365,000.00

10. Cheloletty Engineering, Inc. Villa Park $399,400.00

11. Metrocell Construction Ontario ** $402,522.14

12. Wright Construction Engineering Corp San Marcos $421,330.00

13. Houalla Enterprises, Ltd. Newport Beach $487,146.00

14. Beador Construction Company, Inc. Costa Mesa $534,700.00

15. M.S. Construction Management Group Dana Point $567,953.00

16. R.E. Schultz Construction, Inc. Orange $638,400.00

17. Los Angeles Engineering, Inc. Covina ** $649,500.00

18. MBC Enterprises Inc. Huntingtion Beach ** $745,600.00

19. Kazoni Inc Kazoni Construction ** $772,018.55

20. PUB Construction, Inc. Diamond Bar ** $854,156.00
**
AVERAGE BID:

RESPONSIBLE LOW BIDDER:

BY:
$294,089.00
Boulder Contracting Company
BID OPENING RESULTS: February 8, 2024

CITY OF COSTA MESA

PUBLIC SERVICES DEPARTMENT
CITY PROJECT NO. 23-12

WILSON, WAKEHAM, AND TEWINKLE PARKS BRIDGES REPLACEMENT Bidder
$466,008.34
Bid calcuation error or discrepancy identified in proposal sheets of contractors bid.

ATTACHMENT 1
164

CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 24-102 Meeting Date: 4/2/2024
TITLE:

SECOND READING OF ORDINANCE NO. 2024-02 AMENDING TITLE 13 (PLANNING, ZONING

AND DEVELOPMENT) OF THE COSTA MESA MUNICIPAL CODE TO ESTABLISH AFFORDABLE

HOUSING REQUIREMENTS FOR NEW RESIDENTIAL DEVELOPMENT PROJECTS AND FEE

RESOLUTION TO ESTABLISH THE AFFORDABLE HOUSING IN-LIEU FEE SCHEDULE DEPARTMENT: ECONOMIC AND DEVELOPMENT SERVICES

DEPARTMENT/PLANNING DIVISION
PRESENTED BY: NANCY HUYNH, PRINCIPAL PLANNER
CONTACT INFORMATION: NANCY HUYNH, PRINCIPAL PLANNER, (714) 754-5609 RECOMMENDATION:

Staff recommends the Council:

1. Find that the project is categorically exempt from the California Environmental Quality Act (CEQA), Section 15061(b)(3) (“General Rule”).

3. Adopt a fee resolution establishing the affordable housing in-lieu fee schedule.

Page 1 of 1 ends

165

Page 1 of 10 ends

City of Costa Mesa
Agenda Report

77 Fair Drive
Costa Mesa, CA 92626
Item #: 24-102 Meeting Date: 4/2/2024
TITLE: SECOND READING OF ORDINANCE NO. 2024-02 AMENDING TITLE 13 (PLANNING,

ZONING AND DEVELOPMENT) OF THE COSTA MESA MUNICIPAL CODE TO ESTABLISH

AFFORDABLE HOUSING REQUIREMENTS FOR NEW RESIDENTIAL DEVELOPMENT PROJECTS

AND FEE RESOLUTION TO ESTABLISH THE AFFORDABLE HOUSING IN-LIEU FEE SCHEDULE

DEPARTMENT: ECONOMIC AND DEVELOPMENT SERVICES DEPARTMENT/PLANNING

DIVISION

PRESENTED BY: NANCY HUYNH, PRINCIPAL PLANNER

CONTACT INFORMATION: NANCY HUYNH, PRINCIPAL PLANNER, (714) 754-5609

RECOMMENDATION:

Staff recommends the Council:

1. Find that the project is categorically exempt from the California Environmental Quality Act (CEQA), Section 15061(b)(3) (“General Rule”).

2. Give second reading to and adop t Ordinance No. 2024-02 approving the Affordable Housing Ordinance and amending Title 13 to establish the affordable housing requirements for new residential development projects.

3. Adopt a fee resolution establishing the affordable housing in-lieu fee schedule.

BACKGROUND:

Based on recent housing data analyzed in the adopted 2021-2029 Housing Element, it has been shown that half of renters in Costa Mesa experience housing cost burdens. Because these lower income households are “priced out”, they tend to move into more crowded living conditions to reduce their housing expenses, move further away for cheaper housing at the exp ense of longer commute times, move out of the state, or unfortunately, enter into homelessness. An affordable, or inclusionary, housing policy is a key tool that cities throughout the United States have adopted to address housing affordability in their com munities. To address this affordable housing issue , Housing Program 2A (Inclusionary Housing Ordinance) of the Housing Element was included to “analyze the market impacts and potential affordability requirements for an inclusionary housing requirement for specific projects” in the City.

2021-2029 Housing Element

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While the State Department of Housing and Community Development (HCD) approved the City’s adopted Housing Element, it has not been deemed in substantial compliance with State housing law until specific housing programs have been implemented. The 40 housing programs included in the Housing Element are intended to increase housing production while also addressing housing affordability for all income levels. T hese housing programs would remove ba rriers to housing developments and reform current zoning regulations that may currently encumber housing production in the City.

Implementation of Program 2A (adoption of an inclusionary housing ordinance) is required for the City to maintain compliance with State housing laws. If the City does not implement Program 2A, the State could find the City’s Housing Element out of compliance and in violation of State housing laws. This could leave the City vulnerable to legal challenges from the State and potent ially result in significant legal fees to defend against any litigation. In addition, the HCD has the ability to penalize the City with fines up to $100,000 per month if the City’s Housing Element is determined to be in violation of State housing law.

The City could also lose local control over land use and permitting decisions including the authority to issue building permits for any type of projects or improvements. Such has been the case in the City of Beverly Hills and more locally, San Clemente. Lastly, without a certified Housing Element, the City risks continued ineligibility for receipt of State and County funding sources or loan programs that could support housing programs including gap funding assistance for 100% affordable housing projects such as Jamboree Housing’s proposed Senior Center housing project.

Regional Housing Needs Assessment (RHNA)

California’s RHNA is the basis for determining the State’s future housing need by income category and is based on growth in population, households, and employment. For the 2021 -2029 6th Housing Element, the City was allocated 11,760 housing units to accomm odate the City’s projected housing needs, with more than half of those housing units required to be affordable. The City’s RHNA allocation is divided amongst four income categories, which are benchmarked on the County of Orange’s median income for a famil y of four. Table 1 below identifies the four income categories by which the City’s RHNA allocation is divided.

Table 1 – City of Costa Mesa RHNA by Income Category

Adoption of an Affordable Housing Ordinance (AHO) would assist in achieving the City’s RHNA for the very-low-, low-, and moderate-income categories, coupled with the other Housing Element programs intended to remove or reduce existing barriers and constraints to market-rate housing developments.

An “Incentive-Based” Program
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The City’s proposed Affordable Housing Program has been structured as an “incentive -based program”.

To implement the Affordable Housing Program, the City would rezone non -residentially zoned properties located along major corridors to allow for higher density housing with reduced parking requirements and the allowance of affordable rents for low income units to be calculated based on 80% of the area median income (AMI) where 60% is required under state density bonus law . Adding residential development as an allowed use at higher densities creates land value and incentivize s housing production overall . That value is coupled with a requirement to provide a portion of the project’s units as affordable housing. This program structure is in effect a local density bonus program.

The rezone and increase in density create opportunities for new homes that presently do not exist because of the lack of available properties that allow residential uses and the historically low maximum allowable density in Costa Mesa (maximum of 20 units per acre pursuant to the City’s General P lan).

Rezoning would create value and thus, incentivizing landowners to sell commercial and industrial properties to housing developers and incentivize housing developers to build.

DISCUSSION

City Council First Reading

On January 16, 2024, the City Council considered the Planning Commission’s recommendations, discussed the draft ordinance, and made further changes to the draft including:

 Establishing a minimum threshold project size for application of the affordability requirements;  Requiring the onsite production of affordable units for rental projects with over 50 units;  Allowing payment of in-lieu affordable housing fees for rental projects with fewer than 50 units;  Allowing payment of in-lieu affordable housing fees for ownership projects; and  Allowing a residential project for which the City enters into a development agreement to provide affordable housing or other community benefits equivalent to the Affordable Housing Ordinance requirements.

The City Council voted 4 -2 (Councilmember Chavez an d Mayor Pro Tem Harlan voting no; Councilmember Harper absent) to give first reading of Ordinance No. 2024 -02. The January 16, 2024 City Council agenda report, meeting video, and public comments are included in the links below:

 January 16, 2024 City Council Agenda Report:
https://costamesa.legistar.com/View.ashx?M=F&ID=12583737&GUID=46F95F9D-81D5-4D12- 9292-3369710C4230

 January 16, 2024 City Council Meeting Video:
https://costamesa.granicus.com/player/clip/4078?view_id=14&redirect=true

 January 16, 2024 City Council Public Comments:
https://costamesa.legistar.com/View.ashx?M=E3&ID=1144863&GUID=584645D0-2AD4-4EB6- 168

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9E72-78009403D0D6
The City Council’s modifications to the draf t ordinance are included as Attachment 3. Their changes are shown as underlined and strikethrough. Table 2 below provides a summary of the Affordable Housing Program components and requirements included in the City Council’s first reading.

Table 2 – Proposed Affordable Housing Program Components and Requirements Program Component Proposed Requirements
Project Threshold 15 units
Number of Affordable Units/Required
Income – Rental Project
 60+ dwelling unit (du)/acre: 11% at low -
income or 7% at very-low income
 Under 60 du/acre: 6% at low -income or
4% at very-low income
Number of Affordable Units/Required
Income – Ownership Project Payment of in-lieu fee
Covenant Period – Rental At least 55 years
Covenant Period – Ownership 45 years (if producing affordable units onsite) Affordable Unit Minimum Size No more than 15% smaller than average market rate unit
Affordable Unit Bedroom Mix Proportional to market rate units Affordable Unit Location Evenly distributed/dispersed throughout residential project
Alternatives for Compliance
 Land dedication
 Offsite construction of affordable units
 Payment of in-lieu fees:
o Ownership: All ownership projects
can pay in-lieu fee
o Rental: Rental projects fewer than
50 units can pay in-lieu fee
 Onsite construction of rental units
(ownership only)
Incentives
 Allow residential uses in
commercial/industrial corridors
 Increased densities
 Allow low -income rents to be charged
based on 80% AMI vs. 60% AMI (required
by State density bonus)
 Reduced parking requirements
 Concurrent processing

City Council Study Session on Proposed In-Lieu Fee Amounts

As part of their first reading discussion, the City Council directed staff to provide an in-lieu housing fee analysis for their review and consideration at the second reading of the ordinance. The proposed in - lieu fee analysis has been presented to the Cit y Council at a study session on February 27, 2024.

During the study session, staff and Keyser Marston Associates (KMA) presented the proposed fee schedule as well as an explanation of the fee calculations. The City Council also received public 169

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comments, asked staff and KMA follow -up questions, and provided their comments on the proposed fees and overall vision for the proposed AHO.

The February 27, 2024 City Council study session agenda report, meeting video, and public comments are included in the links below:
 February 27, 2024 City Council Agenda Report:
https://costamesa.legistar.com/View.ashx?M=F&ID=12707839&GUID=649FCC95-B510-4D3F- 92E7-9C400FFFDF63

 February 27, 2024 City Council Meeting Video:
https://costamesa.granicus.com/player/clip/4093?view_id=14&redirect=true

 February 27, 2024 City Council Public Comments:
https://costamesa.legistar.com/View.ashx?M=E3&ID=1171565&GUID=B7C4B0DD-7AD7-4ADC- B8C3-392422409AF7
Public comments as well as the City Council’s feedback from the February 27, 2024 study session expressed the need to ensure Costa Mesa is competitive with nearby cities and ca n attract housing developers for the creation of housing in the community. Discussions included comparing the City’s proposed in-lieu fee amounts with the City of Santa Ana (who has seen success with their affordable housing program) and concerns that the City’s proposed fee amounts were too high. The City’s expert housing consultant, KMA, clarified that Santa Ana did not determine their in-lieu fee amounts based on a fee study or financial impact analysis ; and therefore, is not equivalent to their onsite p roduction requirements. In contrast, Costa Mesa’s proposed fee amounts are derived from the proposed AHO requirements so that the fees are equivalent to producing the affordable units onsite. While the City Council could consider lowering the in-lieu fee amounts, doing so would result in less onsite production of affordable units, and housing developers would likely choose to pay the in -lieu fees instead. KMA also recommends that the AHO requirements should, therefore, also be lowered for the fee amount to be equivalent to the onsite production of affordable units.

Fee Resolution to Establish the Affordable Housing In-Lieu Fee Amounts

Included with this Agenda Report is a fee resolution to adopt the in -lieu fee amounts (as shown in Table 3 below) with adoption of the AHO. The proposed fee amounts are based on the proposed AHO requirement set aside percentages.

Table 3 – Proposed Affordable Housing In-Lieu Fee Amounts 170

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To provide the City Council w ith additional comparisons of other cities’ affordable housing in -lieu fee amounts, refer to Table 4. As shown in the table, there is no standard to establish an affordable housing in-lieu fee amount or fee structure. The in-lieu fees could be based on a sliding scale (as proposed in the AHO), flat fee per square foot, incremental increase over time, or a formula based on certain variables. The City of Encinitas more recently increased their fees from $20 per square foot to $23.79 per square foot . Encinitas also adjusts their fee ad ministratively based on the percentage change in the most current Engineering News Record Construction Cost Index for the Los Angeles region. The City of San Diego adopted a program that included an incremental increase to their in-lieu fee amounts each fiscal year with the current fee set at $25 per square foot.

Table 4 – Comparison of Other Cities In-Lieu Fee Amounts Encinitas
 1 – 6 units: sliding scale1
 7+ units: $23.79 per sq. ft.
 Affordability Requirement:
o 10% Very Low or 15% Low
Irvine
 Formula based and calculated per project2
 Affordability Requirement:
o 5% Very Low + 5% Low + 5% Moderate
Long Beach
 Rental: $38 per sq. ft.
 Ownership: $29.10 per sq. ft.
 Affordability Requirement:
o 11% Very Low – Rental
o 10% Moderate – Ownership
Oceanside
 2023 in-lieu fee set at $15 per sq. ft.
 2024 in-lieu fee increased to $20 per sq. ft.
 Affordability Requirement:
o 10% Low – Rental
o 10% Moderate – Ownership
Santa Monica  Rental: $35.70 per sq. ft.
 Ownership: $41.70 per sq. ft.
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 Affordability Requirement:
o 5% to 30% Very Low, Low, and Moderate
San Diego
 Incremental increase from July 1, 2020 through
June 30, 20243
 2024 in-lieu fee increased to $25 per sq. ft.
 Affordability Requirement:
o 10% Very Low or Low – Rental
o 10 to 15% Moderate – Ownership
1 Sliding scale is based on a percentage of the adopted in -lieu fee amount depending on the number of units. For example, one unit project would be required to pay 14% of the in-lieu fee dollar amount. 2 Formula is based on land value, density, and percentage share of cost related to affordable units not being produced. 3 Prior to July 1, 2020, the in -lieu fee was established at $12.73 per sq. ft. and has increased every fiscal year (2021 - $15.18, 2022 - $17.64, 2023 – $20.09)

Stakeholders Meeting on Proposed In-Lieu Fee Amounts

At the direction of the City Council, s taff met with several housing developers in early March for additional feedback on the proposed in -lieu fee amounts. The housing developers included representatives from Irvine Company, City Ventures, Legacy, Sakioka Company, and Meritage Homes.

These housing developers specialize in both for-sale homes within in-fill locations, and developers with experience in rental housing.

The housing developers provided their general thoughts on the City’s proposed ordinance. The developers were supportive of the Planning Commission’s recommendation to reduce the affordable requirement for the 60+ du/ac rental projects to 10% low or 5% very-low income. They stated that if the ordinance is adopted, housing developers will likely utilize the State’s Density Bonus Law given the flexible incentives and waivers provided under the law. The State’s Density Bonus would help developers achieve their project goals and return on investment. When asked about suggestions for any additional incentives that the City could provide, the developers identified expedited processing to reduce the entitlement and plan check time which would allow developers to com mence construction at a faster pace and therefore reduce carrying costs. In this regard, the currently proposed AHO allows housing developers to simultaneously process construction plans while also processing their required entitlement planning applications.

The housing developers indicated that a high in -lieu fee amount would encourage the production of affordable housing units onsite. One of the for -sale housing developers with recent experience in developing for-sale units in Huntington Beach indicated that they did have success there with producing affordable units onsite within their market -rate project. However, that developer also mentioned that property owner equity is more difficult to build on the for -sale affordable units, as compared to market rate ownership. As such, they would prefer to pay an in -lieu fee. Developers stated that an in-lieu fee amount between $10 and $15 per leasable/saleable square feet would be the “breaking point” for a land development deal. However, it was acknowledged that it is difficult to determine an appropriate in-lieu fee amount because each housing project would have different variables (e.g., land costs, permitting review time, site preparation, and construction costs, etc.) . In addition, changes in interest rates c an significantly impact a developer’s proforma. The developers also commented on the proposed “sliding scale fee” approach. While they understood th at the sliding scale is intended to protect smaller projects with less units to “spread the cost”, they felt that it may be punitive towards higher density housing projects that are building more units in the City. A flat fee, regardless of project 172

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size, was preferred. The developers did appreciate the option to pay a fractional in-lieu fee in a situation where the number of required units would result in a fraction.

State Density Bonus and Local Affordable Housing Program Strategies

It is important to note that residential developers can choose by right to use California’s Density Bonus Law, which is cod ified in Government Code §65915 et seq. (State Density Bonus) for projects that adhere to the minimum criteria defined below:
 5% units restricted to “Very Low Income”
 10% units restricted to “Low Income” rental units or 10% “Moderate Income” for sale units  100% affordable units (excluding manager’s units) with a maximum of 20% moderate units  10% “Very Low Income” units restricted for transitional foster youth, disabled veterans, or  homeless
 20% “Low Income” units for student housing at accredited colleges.  A senior housing development.
 An age-restricted mobile home park
 The project donates at least one acre of land to the jurisdiction for very low -income units, the land has the appropriate permits and approvals, and has access to needed public facilities  Projects which include a childcare facility

State Density Bonus allows for increased housing density on a property above the maximum allowed under the City’s General Plan Land Use Element, a statutorily defined number of concessions/incentives, and potentially reductions and/or waivers to the City’s development standards.

The draft affordable housing ordinance is proposed to be designed to specifically include similar and in certain situations potentially greater housing development incentives than allowed by State Density Bonus Law. For example, the proposed AHO, while State Density Bonus requires the rents to be calculated based on 60% of AMI. In addition, the City’s amended parking standards are proposed to be based on demonstrated market demand. The intention of the AHO is to create sufficient incentives through the proposed zoning code amendments to incentivize affordable housing construction that serves the local households at all income levels and is also consistent with the communities housing values.

Costa Mesa Community’s Input on Need for Affordable Housing

More recently with the passage of Measure K (Ordinance to Revitalize Commercial and Industrial Areas and Protect Residential Neighborhoods), the Costa Mesa community recognized the impact of high housing costs in the City that has made it challenging to at tract teachers, police officers, firefighters, and other professionals. During the community survey polling for the Measure K ballot initiative, the majority of Costa Mesa residents surveyed were in favor of addressing the City’s housing needs as well as supporting more affordable housing options for all income levels. The Costa Mesa community has also identified that there is a benefit to provide an opportunity for current and future generations to find affordable housing in the community they grew up in. In the same community survey polling, residents also expressed support for an inclusionary housing requirement. The survey results from the community polling included the following findings:

 81% in favor of addressing housing needs;
 74% in favor of providing housing at all income levels for seniors, families, and young adults; 173

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 83% in favor of helping ensure more affordable housing is available for middle income and working-class families; and
 71% in favor of requiring up to 15% of new and redeveloped housing units to be affordable housing.

Since the passage of Measure K, the Planning Division has also seen an increase in inquiries and interest in developing housing projects along the corridor areas . The Planning Division has received approximately 30 inquiries and met with many of these prospective housing developers which include City Ventures , Meritage Homes, and Toll Brothers . While Measure K promotes more housing development opportunities, it does not directly address the City’s housing affordability issues.

PUBLIC NOTICE:

Pursuant to Government Code Section 36933, a summary of the proposed Ordinance was published once in the newspaper no less than five days prior to the April 2, 2024 second reading. A summary of the adopted ordinance will also be published within 15 days after the adoption.

Pursuant to Government Code Section 66016, the proposed fee schedule and fee study was made available to the public 15 days prior to the April 2, 2024, City Council meeting.

Public comments received prior to the April 2, 2024 City Council meeting may be viewed at this link:

CITY OF COSTA MESA - Calendar (legistar.com)

ALTERNATIVES:

The City Council may give second reading and adopt the Ordinance as proposed, modify the Ordinance, or not adopt the Ordinance. If the City Council chooses to make substantive modifications to the Ordinance, the modified Ordinance would need to return at a future meeting for second reading and adoption.

Similarly, the City Council may adopt the fee resolution, modify the proposed fee schedule, or not adopt the fee resolution.

The City Council may also consider implementing the in-lieu fee schedule incrementally, similar to the City of San Diego. The City of San Diego set the in-lieu fee at a lower amount and over a five -year period, increased the fee to its eventual rate. The fee increased $12.27 over the five-year period. The fee is then updated annually based on the annual increase in the Construction Costs Index (CCI) published by Engineering News Record for Los Angeles, or similar construction industry index selected by the City Manager if the CCI index is discontinued. See Attachment 6, Information Bulletin 532, Requirements for Inclusionary Affordable Housing , City of San Diego . The Council could consider setting the fee at a lower rate and establish a schedule for increases over any specified period of time until the preferred maximum fee amount is met. For example, the Council may evaluate a fee of $12 in year one, with increase s over a 10 -year period to an eventual amount of $22.00 per applicable square foot and include an annual update to the fee based on CCI or similar construction ind ustry index.

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FISCAL REVIEW:

Should the City Council adopt the Affordable Housing Ordinance and in-lieu housing fee resolution, the City could potentially receive funding from payment of fees that would be deposited into a Housing Trust Fund to support and promote affordable housing programs in the City, including the administration of the City’s Affordable Housing Program.

LEGAL REVIEW:

The proposed Ordinance, fee resolution, and this report have been prepared in conjunction with and approved by the City Attorney’s Office.

CONCLUSION:

Addressing housing needs for all income levels has been identified as one of the main housing goals by the Costa Mesa community and City Council. The community profile described in the 2021-2029 Housing Element showed that approximately half of Costa Mesa residents are overpaying for housing costs due to the lack of housing options especially affordable housing. Adoption of an Affordable Housing Ordinance would be a step towards addressing this issue coupled with the other Housing Element programs intended to remove or reduce existing barriers and constraints to market-rate housing developments. Furthermore, the ordinance would help towards achieving the City’s RHNA for the very-low-, low-, and moderate-income categories. Its adoption would also fulfill the objective of Program 2A of the Housing Element and help achieve City Council’s goal to “diversify, stabilize and increase housing to reflect community needs”.

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ATTACHMENT 1

Ordinance No. 2024-02 Page 1 of 17

ORDINANCE NO. 2024-02

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF COSTA
MESA AMENDING TITLE 13 (PLANNING, ZONING, AND

DEVELOPMENT) OF THE COSTA MESA MUNICIPAL CODE TO

ESTABLISH AFFORDABLE HOUSING REQUIREMENTS FOR NEW

RESIDENTIAL PROJECTS

THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA DOES HEREBY FIND AND DECLAIRE AS FOLLOWS:

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

WHEREAS, the City compiled a community housing characteristics report which found that approximately 47-percent of the Costa Mesa community earns a lower income and approximately 29-percent of the community qualify for very low or extremely low- income housing. Based on housing prices, lower income households cannot afford to own or rent in Costa Mesa without experiencing overpayment; WHEREAS, on September 27, 2021, the City Council adopted a Strategic Plan identifying five key goals to address specific community issues and needs which included to “diversify, stabilize, and increase housing to reflect community needs.” To address this goal, Council identified considering a draft affordable housing ordinance as a priority; WHEREAS, the City’s adopted 2021-2029 Housing Element includes Program 2A which calls for the City to adopt an affordable housing ordinance; WHEREAS, the City retained an expert consultant, Keyser Marston Associates Inc. (KMA), to prepare a Financial Evaluation in order to evaluate supportable affordable housing requirements and make policy recommendations for a potential affordable housing ordinance;
WHEREAS, the City Council held two joint study sessions with the Planning Commission on May 16, 2023 and July 11, 2023 with all persons having the opportunity to speak for and against the proposal;
WHEREAS, a draft affordable housing ordinance has been prepared based on the direction of the City Council and Planning Commission, and considering KMA’s Financial Evaluation and feedback received during public comments and during stakeholders meetings with housing advocates and housing developers; 176

Ordinance No. 2024-02 Page 2 of 17

WHEREAS, a duly noticed public hearing was held by the Planning Commission on November 13, 2023 with all persons having the opportunity to speak for and against the proposal;
WHEREAS, the Planning Commission voted 4-0 (Chair Ereth, Commissioner Rojas, and Commissioner Klepack absent) to continue the item to December 11, 2023; WHEREAS, a public hearing was held by Planning Commission on December 11, 2023 with all persons having the opportunity to speak for and against the proposal; WHEREAS, the Planning Commission voted 5-2 (Commissioners Zich and Andrade voting no) to recommend that the City Council give first reading to adopt an ordinance amending Title 13 of the Costa Mesa Municipal Code to establish minimum affordable housing requirements; and
WHEREAS, a duly noticed public hearing was held by the City Council on January 16, 2024 with all persons having the opportunity to speak for and against the proposal.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF COSTA MESA HEREBY ORDAINS AS FOLLOWS:

SECTION 2: Code Amendment. Title 13 (Planning, Zoning and Development). Title 13, Planning, Zoning and Development of the Costa Mesa Municipal Code, as specified in Exhibit A, attached hereto and incorporated herein by this reference, is hereby amended as set forth therein.

SECTION 3. Compliance with CEQA. Adoption of this Ordinance is exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15061(b)(3) (General Rule). Under Section 15061(b)(3), the activity is covered by the general rule that CEQA applies only to projects that have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the project is exempt from CEQA. This Ordinance will not affect the physical environment by permitting a new use or intensifying an existing use. Instead, the Ordinance establishes affordable housing requirements through a range of means for individual projects. There is no potential for the changes to result in significant impact on the environment. Furthermore, the Ordinance is not considered a project as defined pursuant to Public Resource Code 21065 because the Ordinance will not cause either direct 177

Ordinance No. 2024-02 Page 3 of 17

physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.

SECTION 4. Severability. If any section, subsection, sentence, clause, phrase or portion of this Ordinance is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council of the City of Costa Mesa hereby declares that it would have adopted this Ordinance and each section, subsection, sentence, clause, phrase, or portion thereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases or portions be declared invalid or unconstitutional.

SECTION 5. Effective Date. This Ordinance shall take effect on the 31st day after adoption.

SECTION 6. Certification. The Mayor shall sign and the City Clerk shall certify to the passage and adoption of this Ordinance and shall cause the same to be published or posted in the manner required by law.

PASSED AND ADOPTED this 2nd day of April, 2024

________________________________
John Stephens, Mayor

ATTEST: APPROVED AS TO FORM

______________________________ ________________________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney 178

Ordinance No. 2024-02 Page 4 of 17

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss

CITY OF COSTA MESA )

I, BRENDA GREEN, City Clerk of the City of Costa Mesa, DO HEREBY CERTIFY that the above and foregoing Ordinance No. 2024-02 was duly introduced for first reading at a regular meeting of the City Council held on the 16th day of January 2024, and that thereafter, said Ordinance was duly passed and adopted at a regular meeting of the City Council held on the 2nd day of April, 2024, by the following roll call vote, to wit:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of Costa Mesa this 3rd day of April, 2024.

_______________________________
Brenda Green, City Clerk

179

Ordinance No. 2024-02 Page 5 of 17

EXHIBIT A

ARTICLE 1. RESIDENTIAL DISTRICTS
13-38.1. Affordable housing requirements for new residential developments.

For any proposed residential or mixed-use project with fifteen (15) or more dwelling units, the affordable housing requirements set forth in Chapter XVII (Affordable Housing Ordinance) shall apply unless otherwise exempted.

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Ordinance No. 2024-02 Page 6 of 17

CHAPTER XVII. AFFORDABLE HOUSING ORDINANCE
13-326. Purpose.

The purpose of this chapter is to establish an affordable housing program that facilitates the development and availability of housing affordable to a broad range of households with varying income levels within the City to meet current and future affordable housing needs.
13-327. Applicability.

This chapter shall apply to:
(a) properties that are located in areas for which the City completed a Zone Change and/or General Plan Amendment that allows for residential development after the effective date of this chapter; and/or
(b) properties that receive City approval of a General Plan Amendment, Zone Change or other discretionary land use or development approval including but not limited to Master Plan, Specific Plan, or subdivision after the effective date of this chapter and which allows for residential development and/or an increase in residential density as compared to the land uses and density that exists on the site at the time of the effective date of this chapter; and
(c) provided, however, that this chapter shall not be applied in a manner that conflicts with applicable State law.
13-328. Exemptions.

The requirements of this chapter shall not apply to the following:
(a) Residential projects with less than fifteen (15) dwelling units; (b) Conversions of existing multi-family residential developments such as apartments to residential common interest developments (condominiums) for ownership housing pursuant to section 13-42;
(c) The reconstruction of any residential structures that have been destroyed by fire, flood, earthquake or other act of nature;
(d) Residential building additions, repairs or remodels; 181

Ordinance No. 2024-02 Page 7 of 17

(e) Residential projects or mixed-use projects having residential units and located within the boundaries of the Fairview Development Center Specific Plan; and (f) Any residential project for which the city enters into a development agreement pursuant to California Government Code Section 65964 that provides affordable housing obligations comparable to this chapter.
13-328. Fairview Developmental Center Specific Plan.

All residential projects or mixed-use development projects having residential units and located within the boundaries of the Fairview Development Center Specific Plan shall be subject to the affordability requirements established by the provisions of the Specific Plan at the time of its adoption and are not subject to the requirements of this chapter. 13-329. Definitions.

As used in this chapter the following terms shall have the meanings set forth below.

Terms not specifically defined herein shall have the meanings ascribed to them elsewhere in this code:

Affordable Housing Agreement. A legally binding recorded agreement and/or deed restriction in a form satisfactory to the director and the city attorney setting forth those provisions necessary to ensure that the requirements of the chapter are met, including but not limited to those specified in section 13-332.

Affordable Housing Plan. A plan containing all of the information specified and submitted in conformance with this chapter specifying the manner in which affordable units will be provided.

Affordable Housing Trust Fund. The fund into which all collected in-lieu fees are deposited for the purposes of furthering affordable housing goals within the City.

Affordable Rent. The maximum affordable housing cost minus any housing costs that are imposed on the tenant on a mandatory basis. The affordable housing cost is based on the percentages of AMI identified in the following table, as adjusted for household size appropriate for the unit (as defined in California Health and Safety Code Section 50052.5), times 30%:
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Ordinance No. 2024-02 Page 8 of 17

Income Category
Percentage of
AMI
Low Income 80%
Very Low Income 50%

Affordable Sales Price. The maximum price that can be charged to a moderate income household based on the calculation methodology defined in California Health and Safety Code Section 50052.5.

Affordable Unit. A dwelling unit that is required to be rented at the affordable rent or sold at the affordable sales price to very low, low- and moderate-income households.

Applicant. A person or entity that applies for approval or approvals for a residential project and/or owns the property or properties on which a residential project is proposed.

Area Median Income (AMI). The median household income of households in Orange County, adjusted for household size, as determined by the California Housing and Community Development department (HCD).

Director. The Director of Economic and Development Services or his or her designee.

Density Bonus. An increase in the number of units permitted in a proposed Residential Project provided pursuant to California State Density Bonus Law as set forth in Government Code Section 65915 et seq.

Extremely Low-Income Household. A household with a gross annual household Income that does not exceed 30% of AMI for Orange County as defined in California Health and Safety Code Section 50106.

Gross Annual Household Income. As defined in 25 Cal. Code Regs. Section 6914 including any successor section thereto.

In-lieu Fee. The fee payable as an alternative to the construction of on-site affordable units.

Low-income Households. A household with a gross annual household income between 51% and 80% of AMI for Orange County as defined in California Health and Safety Code Section 50079.5.
183

Ordinance No. 2024-02 Page 9 of 17

Market-rate Unit. A dwelling unit offered on the open market at the prevailing market-rate for purchase or rental.

Moderate-income Household. A household with a gross annual household income between 81% and 120% of AMI for Orange County as defined in California Health and Safety Code Section 50093.

Ownership Project. A residential project that is intended to be sold for homeownership.

Rental Project. A residential project that is intended to be rented to tenants.

Residential Project. A project undertaken for the purpose of development of land for residential purposes that requires the issuance of a discretionary approval or permit, including a permit for construction, and that will include fifteen (15) or more dwelling units.

Very Low-income Households. A household with a gross annual household income that does not exceed 50% of AMI for Orange County, as defined in California Health and Safety Code Section 50105.

Zone Change. Any proposed change to the official zoning map. The terms rezone and zoning amendment shall also have the same meaning.
13-330. Affordable Housing Requirements.

The following requirements and standards shall apply to any residential project subject to this chapter:
(a) Project Threshold. The affordable housing requirement is applicable to any proposed residential project with fifteen (15) dwelling units or more. (b) Number of Affordable Units. The minimum number of dwelling units required to be set aside as affordable units and the required affordability level(s) of the units are specified as follow:
(1) Rental Projects. An applicant of a rental project shall fulfill their obligation with onsite production of affordable rental units at either low or very-low income levels and the minimum required number of units shall be calculated based on the proposed project’s base density.
184

Ordinance No. 2024-02 Page 10 of 17

a. For residential projects either rezoned to or located in the areas designated to be rezoned in the General Plan and/or within the boundaries of Figure 13-200.106 of section 13.200.106 at 60 or more dwelling units per acre: at least 11% of the total applicable dwelling units proposed shall be affordable at the low-income level or at least 7% at the very-low income level. b. For residential projects either rezoned to or located in the areas to be rezoned in the General Plan and/or within the boundaries of Figure 13- 200.106 of section 13.200.106 at under 60 dwelling units per acre: at least 6% of the total applicable dwelling units proposed shall be affordable at the low-income level or at least 4% at the very-low income level. c. For any partial affordable unit calculated, the applicant shall pay a fractional in-lieu fee payment in accordance with the adopted in-lieu fee schedule or round up the calculation to the highest whole number.
(2) Ownership Projects. Onsite production of affordable units is not required for ownership projects. An applicant of an ownership project may choose to fulfill their obligation with payment of in-lieu fees, onsite production of affordable ownership or rental units, offsite production of affordable ownership or rental units, or dedication of land.
a. The applicable in-lieu fee calculation for ownership residential projects shall be based on the requirements set forth in section 13-331(a). b. Should an applicant choose to fulfill their obligation with on-site production of affordable ownership units, the minimum set-aside requirement shall be at least 8% at the moderate-income level. All applicable requirements pursuant to this chapter for onsite production of affordable units shall also apply.
(3) Residential Projects with Mixed Housing Types. If an applicant proposes a residential project that includes both ownership and rental units, the provisions of this chapter that apply to ownership projects shall apply to that portion of the development that consists of ownership units, while the provisions of this chapter 185

Ordinance No. 2024-02 Page 11 of 17

that apply to rental projects shall apply to that portion of the development that consists of rental units.
(4) Parcel or Lot Merger. An applicant shall not avoid the requirements of this chapter by submitting piecemeal planning permit applications. At the time of the application for first approval for the residential project, the applicant shall identify all contiguous property under common ownership and control. The applicant shall not be required to construct dwelling units upon the contiguous property at the time of the application for first approval; however, the applicant shall be required to include the contiguous property under common ownership or control in its affordable housing plan. The affordable housing agreement shall be recorded against the residential project and all contiguous property under common ownership or control and shall require compliance with this chapter upon development of each contiguous property at such time as there are planning permit applications that would authorize residential units for the residential development and the contiguous property under common ownership or control.
(c) Covenant Period. The affordable units shall remain affordable for a minimum period as specified in the subsection below or as stated in the affordable housing agreement or other agreement(s).
(1) For rental projects, the affordable units must remain affordable for not less than fifty-five (55) years. After fifty-five (55) years the affordability covenant may be removed only if the property is redeveloped as a non-residential use. (2) For ownership projects that fulfill their obligation with onsite production of affordable units, the affordable units must remain affordable for not less than forty-five (45) years.
(d) Timing of Construction. The affordable units shall be constructed concurrently with or prior to the construction of market rate units.
(1) In phased developments, the affordable units shall be constructed in proportion to the number of dwelling units in each phase of the market rate project. The applicant shall provide a Construction Phasing Plan as part of their project 186

Ordinance No. 2024-02 Page 12 of 17

plans for review by the director or their designee prior to the submittal of plans for a building permit.
(e) Unit Size. The size of the affordable units shall be the same size as the market rate units but the final review authority may consider and approve affordable units no more than 15% smaller in square footage than the average square footage of the market rate units.
(f) Bedroom Mix. The bedroom mix of the affordable units shall be proportional to the market rate units or as otherwise agreed in the affordable housing agreements or other approved agreements with the City.
(g) Design. All exterior and interior improvements including floor plan design, finishes/materials, etc. for the affordable units shall be comparable, if not same, to the market rate units. The affordable units shall have same access to and enjoyment of all community amenities/facilities in the residential project. The final review authority may consider and approve alternative exterior and/or interior design improvements for the affordable units as long as it is comparably the same to the market rate units. (h) Location. Affordable Units shall be dispersed and evenly distributed throughout a residential project and not clustered in a particular area of the development or as otherwise agreed at the City’s discretion in an affordable housing agreement.

Affordable units within a residential project that share a common entrance or access shall not have separate entrances or access for market rate and affordable units. (i) Certificate of Occupancy. No certificate of occupancy will be issued for any corresponding market rate unit in a new residential project prior to completion of the required affordable units (including offsite) and/or payment of in-lieu fees. 13-331. Alternative Compliance Procedures.

The following are the alternative options to fulfill the requirements of this chapter if onsite production of affordable units is determined by the director or their designee to be economically infeasible.
(a) In-Lieu Fees. The payment of in-lieu fees may be used to fulfill the affordable housing requirement for the following residential projects: Ownership projects of any size; 187

Ordinance No. 2024-02 Page 13 of 17

rental projects with fewer than fifty (50) dwelling units and any fractional number of affordable units required.
(1) In-lieu fees shall be paid prior to the issuance of the first building permit for the residential project unless specified and/or agreed elsewhere in recorded agreement(s) with the City. For phased developments, the applicant may pay a pro rata share of the in-lieu fee concurrently with the issuance of a building permit for each phase.
(2) In-lieu fees shall be paid according to a fee schedule adopted by the City Council.

The in-lieu fee schedule shall be adjusted periodically on an annual basis or as determined by the City Council or their designee and shall be adopted by resolution.
(3) All in-lieu fees collected shall be deposited into the City’s housing trust fund. (b) Offsite Construction. Affordable units may be constructed offsite only upon a determination by the director or their designee that onsite production of affordable units is economically infeasible. If this alternative compliance option is chosen, then the offsite affordable units must be constructed prior to or concurrently with construction of the market rate residential project.
(1) The offsite affordable units shall comply with all applicable requirements pursuant to this chapter for onsite production of affordable units. (2) The offsite location shall be located within the City of Costa Mesa boundaries and shall be located within a reasonable distance from the market rate residential project that is subject to the affordable housing requirement. (3) For residential projects for which a master plan is required, the affordable units may either be provided onsite or offsite on a separate parcel within the residential project’s approved master plan boundaries.
(c) Onsite Construction of Rental Units for Ownership Projects. An applicant of a market rate ownership project may construct affordable rental units concurrently with the market rate ownership units. The affordable rental units may be interspersed or located on a separate parcel within the market rate ownership project site and shall 188

Ordinance No. 2024-02 Page 14 of 17

comply with all applicable requirements pursuant to this chapter for onsite production of units.
(d) Land Dedication. An applicant may dedicate, without cost to the City, land (single or multiple parcels) within the City of Costa Mesa boundaries that is sufficient to accommodate the number of affordable units required by the market rate project. The following requirements are applicable to any land proposed to be dedicated to the City to fulfill the affordable housing requirement:
(1) The land to be dedicated to the City shall be located in the City of Costa Mesa; (2) The General Plan and zoning standards shall allow for residential use at a density sufficient to allow for the market rate project’s required number of affordable units to be constructed;
(3) The land shall be suitable in terms of size, configuration, and physical characteristics including existing utilities, streets, and other infrastructure improvements necessary to allow for the market rate project’s required number of affordable units to be constructed;
(4) The value of the land shall be equivalent or comparable to the in-lieu fee payment that would be applicable to the proposed residential project; (5) The applicant shall provide property related report(s) to demonstrate the suitability and value of the land to be dedicated including but not limited to title report, appraisal report, and environmental site assessment(s). 13-332. Affordable Housing Agreement and Affordable Housing Plan.

The applicant shall prepare and submit a draft affordable housing agreement and affordable housing plan as part of the proposed residential project’s planning application(s). The director shall review and determine if the plan and agreement are complete and in substantial conformance with the requirements of this chapter. This section shall not apply to residential projects where the developer fulfills their obligation with payment of in-lieu fees or land dedication.
(a) Affordable Housing Plan Requirements. The applicant shall submit a plan detailing how the requirements of this chapter will be implemented. The plan shall include the following information but not limited to:
189

Ordinance No. 2024-02 Page 15 of 17

(1) The location, structure, proposed tenure and size of the proposed market rate and affordable units;
(2) The total number of affordable units to be provided and the calculations used to determine the number of required affordable units;
(3) A floor plan and site plan depicting the location of the affordable units; (4) The income level targets for each affordable unit;
(5) The mechanisms that will be used to assure that the affordable units remain affordable for the required term as specified in section 13-330(b); (6) A marketing plan for the process by which qualified households will be reviewed and selected to either purchase or rent affordable units; and (7) Construction phasing plan schedule with the anticipated completion and opening date and as applicable for phased residential projects. (b) Affordable Housing Agreement Requirements. Upon final project approval, the developer shall execute and record an affordable housing agreement in a form approved by the City Attorney, prior to approval of any final or parcel map or issuance of any building permit, whichever occurs first, and that at a minimum specifies the number, type, location, size, and phasing of all affordable units, provisions for income certification and screening of potential purchasers or renters of the affordable units, and resale control mechanisms including the financing of ongoing administrative and monitoring costs, consistent with the approved affordable housing plan and any administrative procedures adopted pursuant to section 13-338. (1) An affordable housing agreement will not be required for projects which will be satisfying their affordable housing requirement through payment to the City of an in-lieu fee.
(2) The City Council, by resolution, may establish fees for the ongoing administration and monitoring of the affordable units, which fees may be updated periodically, as required.
13-333. Affordable Housing Trust Fund.
190

Ordinance No. 2024-02 Page 16 of 17

All in-lieu fees, promissory note repayments, shared appreciation payments and other funds collected under this chapter shall be deposited into a separate account to be designated as the City of Costa Mesa Affordable Housing Trust Fund. The City may elect to deposit funds from other sources into this affordable housing trust fund. The moneys and all earnings from investments of the moneys in the affordable housing trust fund shall be expended exclusively to provide or assure continued provision of affordable housing in the City through, including but not limited to, acquisition, construction, development assistance, rent subsidies, or first-time homebuyer programs, and for the associated costs of administering and monitoring these programs.
13-334. Density Bonus.

Pursuant to the California State Density Bonus Law (Government Code Section 65915, et seq.), if the applicant is proposing to provide affordable units in exchange for an increase in density, concessions, incentives, or waivers/modifications of development standards, the affordable units required to fulfill the density bonus may also count as affordable units required in this chapter provided they also meet, or exceed, the requirements outlined in section 13-330.
13-335. Parking Requirements.

An applicant that provides affordable units pursuant to this chapter is not required to comply with the parking requirements set forth in section 13-85. A lower parking requirement may be allowed if supported by a parking study prepared by a traffic engineering firm with expertise in parking trends and demands, unless otherwise prohibited by state law. The parking study shall be reviewed and approved by the director or their designee.
13-336. Concurrent Processing.

Concurrent processing of planning application(s) and plan check application(s) may be allowed at the discretion of the director or their designee when the planning application(s) have been deemed complete. The applicant shall be required to enter into a hold harmless agreement with the City prior to any concurrent review. 13-337. Compliance Monitoring.
191

Ordinance No. 2024-02 Page 17 of 17

To ensure that affordable units constructed pursuant to this chapter are properly maintained and continue to comply with the applicable provisions of this chapter, the applicant or responsible party at the time shall submit annual compliance reports to the City for review. In addition, the City shall conduct periodic onsite audits to ensure compliance with all applicable laws, policies, and agreements. The City Council may adopt fees for the costs of monitoring and compliance review, which shall be deposited into the affordable housing trust fund for that purpose. 13-338. Administrative Procedures.

The City Manager is authorized to adopt administrative rules, regulations, policies, guidelines, standards, and/or procedures necessary to implement the provisions of this chapter including but not limited to eligibility requirements and/or preference standards that may be applied in the selection of homebuyers and tenants. 13-339. Enforcement.
(a) Violations of this chapter may be enforced by all available remedies at law or in equity, including, but not limited to those set forth in section 1-33 of this code. (b) Failure of any city official, employee, or agent to fulfill and/or enforce the requirements of this chapter shall not excuse any person or property from the requirements of this chapter.

192
ATTACHMENT 2

Resolution No. 2024-10 Page 1 of 5

RESOLUTION NO. 2024-10

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA

MESA, CALIFORNIA, ESTABLISHING AND ADOPTING AFFORDABLE

HOUSING IN-LIEU FEE SCHEDULE FOR THE AFFORDABLE HOUSING

ORDINANCE

THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA DOES HEREBY FINDS AND DECLARES AS FOLLOWS:

WHEREAS, the City Council adopted the 2021 -2029 Housing Element on November 15, 2022; and
WHEREAS, the City’s adopted 2021-2029 Housing Element includes Housing Plan Program 2A which calls for the City to adopt an inclusionary housing ordinance; and WHEREAS, the City retained an expert consultant, Keyser Marston Associates Inc. (KMA), to prepare a Financial Evaluation in order to evaluate supportable affordable housing requirements and make policy recommendations for a potential affordable housing ordinance; and
WHEREAS, on January 16, 2024, the City Council gave first reading of the Affordable Housing Ordinance (Ordinance No. 2024-02) and as part of their motion directed staff to present the Affordable Housing In-Lieu Fee Resolution with the second reading of the ordinance; and
WHEREAS, Government Code Section 65850(g) states that …The ordinance shall provide alternative means of compliance that may include, but are not limited to, in-lieu fees…; and
WHEREAS, KMA prepared the Affordable Housing In-Lieu Fee Analysis based on the proposed affordable housing requirements pursuant to Ordinance No. 2024-02; and WHEREAS, the City Council held a study session on February 27, 2024 to separately discuss the proposed affordable housing in-lieu fee amounts prior to the second reading of Ordinance No. 2024-02 and with all persons having the opportunity to speak for and against the proposal; and
WHEREAS, pursuant to the provisions of the California Constitution and the laws of the State of California, the City of Costa Mesa is authorized to adopt and implement rates, 193
Resolution No. 2024-10 Page 2 of 5

fees, and charges for municipal services; provided, however, that such rates, fees, and/or charges do not exceed the estimated reasonable cost of providing such services; and WHEREAS, Government Code Section 66016 requires notice to be given and data made available at specified times prior to the adoption of certain increases in rates, fees, and charges, or the adoption of new rates, fees, and charges for use permits and inspections; and
WHEREAS, the City has complied with the noticing requirements of Government Code Section 66016; and
WHEREAS, although the C ity is not required to comply with the noticing requirements of Government Code Section 66018, the City has nevertheless publishe d all notices consistent with the requirements of that section, including having published notice in accordance with Government Code Section 6062a and having made the data available concerning rates, fees, and charges prior to conducting a public hearing on the fees; and
WHEREAS, the City Council has held at least one public hearing and received oral and written presentations with respect to the proposed fees before adopting this Resolution; and
WHEREAS, the City Council is currently considering adopting a n ordinance titled “An Ordinance of the City Council of the City of Costa Mesa Amending Title 13 (Planning, Zoning, and Development) of the Costa Mesa Municipal Code to Establish Affordable Housing Requirements for New Residential Projects” (“Affordable Housing Ordinance”); and
WHEREAS, the City Council desires to establish the Affordable Housing In -Lieu Fee as an alternative means of compliance for the Affordable Housing Ordinance; and WHEREAS, all legal prerequisites to the adoption of this Resolution have occurred.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF COSTA MESA HEREBY RESOLVES as follows:

Section 1. Findings . The City Council hereby finds that based upon the data, information, analysis, oral and written documentation presented to th e City Council concerning the fees described in Exhibit "A" attached hereto and by this reference incorporated herein, do not exceed the established reasonable cost of providing the service 194
Resolution No. 2024-10 Page 3 of 5

for which the fees are levied and that the fees solely recover an objectively reasonable approximation of the city’s actual and reasonable costs.

Section 2. Exhibit A. The fees set forth in Exhibit “A” are hereby adopted and approved.

Section 3. Effective Date. The fees set forth in Exhibit "A" shall be effective on the later to occur of (a) 60 days after Council adoption of this Resolution; or (b) the effective date of the Affordable Housing Ordinance or any other ordinance which authorizes the fees set forth in this resolution.

Section 4. Certification. The City Clerk shall certify to the passage and adoption of this Resolution and enter it into the book of original Resolutions.

PASSED AND ADOPTED this 2nd day of April, 2024.

_____________________________
John Stephens, Mayor

ATTEST: APPROVED AS TO FORM:

________________________ _____________________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney

195
Resolution No. 2024-10 Page 4 of 5

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss

CITY OF COSTA MESA )

I, BRENDA GREEN, City Clerk of the City of Costa Mesa, DO HEREBY CERTIFY that the above and foregoing is the original of Resolution No. 2024-10 and was duly passed and adopted by the City Council of the City of Costa Mesa at a regular meeting held on the 2nd day of April, 2024, by the following roll call vote, to wit:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of Costa Mesa this 3rd day of April, 2024.

___________________________
Brenda Green, City Clerk
196
Resolution No. 2024-10 Page 5 of 5

EXHIBIT A
Affordable Housing In-Lieu Fee Schedule

In-Lieu Fee Payment Schedule – Rental and Ownership Housing Projects

Fractional In-Lieu Fee Payment Schedule – Rental Housing Projects

Fractional In-Lieu Fee Payment Schedule – Ownership Housing Projects

197
ATTACHMENT 3
A
RTICLE 1. RESIDENTIAL DISTRICTS
13-38.1. Affordable housing requirements for new residential developments.

For any proposed residential or mixed-use project with fifteen (15) 60 or more dwelling units per acre and with a minimum project site size of two (2) acres, the affordable housing requirements set forth in Chapter XVII (Affordable Housing Ordinance) shall apply unless otherwise exempted. -1-
198

CHAPTER XVII. AFFORDABLE HOUSING ORDINANCE
13-326. Purpose.

This chapter shall apply to:
(a) properties that are located in areas which the City completed a Zone Change and/or General Plan Amendment that allows for residential development after the effective date of this chapter; and/or
(b) properties that receive City approval of a General Plan Amendment, Zone Change or other discretionary land use or development approval including but not limited to Master Plan, Specific Plan, or subdivision after the effective date of this chapter and which allows for residential development and/or an increase in residential density as compared to the land uses and density that exists on the site at the time of the effective date of this chapter; and (c) provided, however, that this chapter shall not be applied in a manner that conflicts with applicable State law.
13-328. Exemptions.

The requirements of this chapter shall not apply to the following:
(a) R
esidential projects with less than fifteen (15) 60 dwelling units per acre; (b) Residential projects with a site size under two (2) acres regardless of proposed density; (c) Any ownership residential project;
(b) Conversions of existing multi -family residential developments such as apartments to residential common interest developments (condominiums) for ownership housing pursuant to section 13-42;
(c) The reconstruction of any residential structures that have been destroyed by fire, flood, earthquake or other act of nature;
(d) Residential building additions, repairs or remodels; -2-
199

(e) Residential projects or mixed- use projects having residential units and located within the boundaries of the Fairview Development Center Specific Plan; and (f) A ny residential project for which the city enters into a development agreement pursuant to California Government Code Section 65964 that provides affordable housing obligations comparable to this chapter.
13-328. Fairview Developmental Center Specific Plan.

All residential projects or mixed- use development projects having residential units and located within the boundaries of the Fairview Development Center Specific Plan shall be subject to the affordability requirements established by the provisions of the Specific Plan at the time of its adoption and are not subject to the requirements of this chapter. 13-329. Definitions.

As used in this chapter the following terms shall have the meanings set forth below. Terms not specifically defined herein shall have the meanings ascribed to them elsewhere in this code:

Affordable Housing Plan. A plan containing all of the information specified and submitted in conformance with this chapter specifying the manner in which affordable units will be provided.

Affordable Housing Trust Fund. The fund into which all collected in-lieu fees are deposited for the purposes of furthering affordable housing goals within the City.

Income Category
Percentage of
AMI
Low Income 80%
Very Low Income 50%

-3-
200

Affordable Sales Price. The maximum price that can be charged to a moderate income household based on the calculation methodology defined in California Health and Safety Code Section 50052.5.

Affordable Unit. A dwelling unit that is required to be rented at the affordable rent or sold at the affordable sales price to very low, low- and moderate-income households.

Applicant. A person or entity that applies for approval or approvals for a residential project and/or owns the property or properties on which a residential project is proposed.

Area Median Income (AMI). The median household income of households in Orange County, adjusted for household size, as determined by the California Housing and Community Development department (HCD).

Director. The Director of Economic and Development Services or his or her designee.

Extremely Low-Income Household. A household with a gross annual household Income that does not exceed 30% of AMI for Orange County as defined in California Health and Safety Code Section 50106.

Gross Annual Household Income. As defined in 25 Cal Code Regs. Section 6914 including any successor section thereto.

In-lieu Fee. The fee payable as an alternative to the construction of on-site affordable units.

Low-income Households. A household with a gross annual household income between 51% and 80% of AMI for Orange County as defined in California Health and Safety Code Section 50079.5.

Market-rate Unit. A dwelling unit offered on the open market at the prevailing market -rate for purchase or rental.

Moderate-income Household. A household with a gross annual household income between 81% and 120% of AMI for Orange County as defined in California Health and Safety Code Section 50093.

Ownership Project. A residential project that is intended to be sold for homeownership.

Rental Project. A residential project that is intended to be rented to tenants. -4-
201

Very Low-income Households. A household with a gross annual household income that does not exceed 50% of AMI for Orange County, as defined in California Health and Safety Code Section 50105.

Zone Change. Any proposed change to the official zoning map. The terms rezone and zoning amendment shall also have the same meaning.
13-330. Affordable Housing Requirements.

The following requirements and standards shall apply to any residential project subject to this chapter:
(a) Project Threshold. The affordable housing requirements is applicable to any proposed residential project with fifteen (15) 60 dwelling units or more and with a project site size of two (2) acres.
(b) Number of Affordable Units. The minimum number of dwelling units required to be set aside as affordable units and the required affordability level(s) of the units are specified as follow:
(1) Rental Projects. An applicant of a rental project shall fulfill their obligation with onsite production of affordable rental units at either low or very -low income levels and the minimum required number of units shall be calculated based on the proposed project’s base density.
a. For
residential projects either rezoned to or located in the areas designated to be rezoned in the General Plan and/or within the boundaries of Figure 13-200.106 of section 13.200.106 at 60 or more dwelling units per acre: at least 11% 10% of the total applicable dwelling units proposed shall be affordable at the low-income level or at least 7% 5% at the very-low income level.
b. For residential projects either rezoned to or located in the areas to be rezoned in the General Plan and/or within the boundaries of Figure 13-200.106 of section

13.200.106 at under 60 dwelling units per acre: at least 6% of the total applicable dwelling units proposed shall be affordable at the low-income level or at least 4% at the very-low income level.
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c. For any partial affordable unit calculated, the applicant shall pay a fractional in-lieu fee payment in accordance with the adopted in- lieu fee schedule or round up the calculation to the highest whole number.
(2) O wnership Projects. Onsite production of affordable units is not required for ownership projects. An applicant of an ownership project may choose to fulfill their obligation with payment of in-lieu fees, onsite production of affordable ownership or rental units, offsite production of affordable ownership or rental units, or dedication of land. a. The applicable in-lieu fee calculation for ownership residential projects shall be based on the requirements set forth in section 13-331(a). b. Should an applicant choose to fulfill their obligation with on-site production of affordable ownership units, the minimum set-aside requirement shall be at least 8% at the moderate-income level. All applicable requirements pursuant to this chapter for onsite production of affordable units shall also apply. (3) Residential Projects with Mixed Housing Types. If an applicant proposes a residential project that includes both ownership and rental units, the provisions of this chapter that apply to ownership projects shall apply to that portion of the development that consists of ownership units, while the provisions of this chapter that apply to rental projects shall apply to that portion of the development that consists of rental units. (4) Parcel or Lot Merger . An applicant shall not avoid the requirements of this chapter by submitting piecemeal planning permit applications. At the time of the application for first approval for the residential project, the applicant shall identify all contiguous property under common ownership and control. The applicant shall not be required to construct dwelling units upon the contiguous property at the time of the application for first approval; however, the applicant shall be required to include the contiguous property under common ownership or control in its affordable housing plan. The affordable housing agreement shall be recorded against the residential project and all contiguous property under common ownership or control and shall require compliance with this chapter upon development of each contiguous property at such time as there are planning permit applications that would authorize residential units for the residential development and the contiguous property under common ownership or control.
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(c) Covenant Period. The affordable units shall remain affordable for a minimum period as specified in the subsection below or as stated in the affordable housing agreement or other agreement(s).
(1) For rental projects, the affordable units must remain affordable for not less than fifty - five (55) years. After fifty -five (55) years the affordability covenant may be removed only if the property is redeveloped as a non-residential use. (2) For ow
nership projects that fulfill their obligation with onsite production of affordable units, the affordable units must remain affordable for not less than forty-five (45) years. (d) Timing of Construction. The affordable units shall be constructed concurrently with or prior to the construction of market rate units.
(1) In phased developments, the affordable units shall be constructed in proportion to the number of dwelling units in each phase of the market rate project. The applicant shall provide a Construction Phasing Plan as part of their project plans for review by t he director or their designee prior to the submittal of plans for a building permit. (e) Unit Size. The size of the affordable units shall be the same size as the market rate units but the final review authority may consider and approve affordable units no more than 15% smaller in square footage than the average square footage of the market rate units. (f) Bedroom Mix. The bedroom mix of the affordable units shall be proportional to the market rate units or as otherwise agreed in the affordable housing agreements or other approved agreements with the City.
(g) Design. All exterior and interior improvements including floor plan design, finishes/materials, etc. for the affordable units shall be comparable, if not same, to the market rate units. The affordable units shall have same access to and enjoyment of all community amenities/facilities in the residential project. T he final review authority may consider and approve alternative exterior and/or interior design improvements for the affordable units as long as it is comparably the same to the market rate units.
(h) Location. Affordable Units shall be dispersed and evenly distributed throughout a residential project and not clustered in a particular area of the development or as otherwise agreed at the City’s discretion in an affordable housing agreement. Affordable units within a residential project that share a common entrance or access shall not have separate entrances or access for market rate and affordable units.
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(i) Certificate of Occupancy . No certificate of occupancy will be issued for any corresponding market rate unit in a new residential project prior to completion of the required affordable units (including offsite) and/or payment of in-lieu fees.
13-331. Alternative Compliance Procedures.

The following are the alternative options to fulfill the requirements of this chapter if onsite pr
oduction of affordable units is determined by the director or their designee to be economically infeasible and would impose an extreme hardship. The director or their designee’s determination shall be made based upon evidence of economic hardship provided by the applicant. (a) In-Lieu Fees. The payment of in- lieu fees may be used to fulfill the affordable housing requirement for the following residential projects: Ownership projects of any size; rental projects with fewer than fifty (50) one-hundred (100) or fewer dwelling units and any fractional number of affordable units required.
(1) In-l ieu fees shall be paid prior to the issuance of the first building permit for the residential project unless specified and/or agreed elsewhere in recorded agreement(s) with the City.

For phased developments, the applicant may pay a pro rata share of t he in -lieu fee concurrently with the issuance of a building permit for each phase. (2) In-lieu fees shall be paid according to a fee schedule adopted by the City Council. The in- lieu fee schedule shall be adjusted periodically on an annual basis or as determined by the City Council or their designee and shall be adopted by resolution. (3) All in-lieu fees collected shall be deposited in to the City’s housing trust fund. (b) Offsite Construction. Affordable units may be constructed offsite only upon a determination by the director or their designee that onsite production of affordable units is economically infeasible. If this alternative compliance option is chosen, then the offsite affordable uni ts must be constructed prior to or concurrently with construction of the market rate residential project.
(1) The offsite affordable units shall comply with all applicable requirements pursuant to this chapter for onsite production of affordable units. (2) The offsite location shall be located within the City of Costa Mesa boundaries and shall be located within a reasonable distance from the market rate residential project that is subject to the affordable housing requirement.
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(3) For residential projects for which a master plan is required, the affordable units may either be provided onsite or offsite on a separate parcel within the residential project’s approved master plan boundaries.
(c) Onsite Construction of Rental Units for Ownership Projects. An applicant of a market rate ownership project may construct affordable rental units concurrently with the market rate ownership units. The affordable rental units may be interspersed or located on a separate parcel within the market rate ownership project site and shall comply with all applicable requirements pursuant to this chapter for onsite production of units. (d) Land Dedication. An applicant may dedicate, without cost to the City, land (single or multiple parcels) within the City of Costa Mesa boundaries that is sufficient to accommodate the number of affordable units required by the market rate project. The following requirements are applicable to any land proposed to be dedicated to the City to fulfill the affordable housing requirement:
(1) The land to be dedicated to the City shall be located in the City of Costa Mesa; (2) The General Plan and zoning standards shall allow for residential use at a density sufficient to allow for the market rate project’s required number of affordable units to be constructed;
(3) The land shall be suitable in terms of size, configuration, and physical characteristics including existing utilities, streets, and other infrastructure improvements necessary to allow for the market rate project’s required number of affordable units to be constructed;
(4) The value of the land shall be equivalent or comparable to the in-lieu fee payment that would be applicable to the proposed residential project; (5) The applicant shall provide property related report(s) to demonstrate the suitability and value of the land to be dedicated including but not limited to title report, appraisal report, and environmental site assessment(s).
13-332. Affordable Housing Agreement and Affordable Housing Plan.

(a) Affordable Housing Plan Requirements. The applicant shall submit a plan detailing how the requirements of this chapter will be implemented. The plan shall include the following information but not limited to:
(1) The location, structure, proposed tenure and size of the proposed market rate and affordable units;
(2) The total number of affordable units to be provided and the calculations used to determine the number of required affordable units;
(3) A floor plan and site plan depicting the location of the affordable units; (4) The income level targets for each affordable unit;
(5) The mechanisms that will be used to assure that the affordable units remain affordable for the required term as specified in section 13-330(b); (6) A
marketing plan for the process by which qualified households will be reviewed and selected to either purchase or rent affordable units; and (7) Construction phasing plan schedule with the anticipated completion and opening date and as applicable for phased residential projects.
(b) A ffordable Housing Agreement Requirements . Upon final project approval, the developer shall execute and record an affordable housing agreement in a form approved by the City Attorney, prior to approval of any final or parcel map or issuance of any building permit, whichever occurs first, and that at a minimum specifies the number, type, location, size, and phasing of all affordable units, provisions for income certification and screening of potential purchasers or renters of units, and resale control mechanisms including the financing of ongoing administrative and monitoring costs, consistent with the approved affordable housing plan and any administrative procedures adopted pursuant to section 13-338. (1) A n affordable housing agreement will not be required for projects which will be satisfying their affordable housing requirement through payment to the City of an in- lieu fee.
(2) The City Council, by resolution, may establish fees for the ongoing administration and monitoring of the affordable units, which fees may be updated periodically, as required. 13-333. Affordable Housing Trust Fund.
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All in -lieu fees, promissory note repayments, shared appreciation payments and other funds collected under this chapter shall be deposited into a separate account to be designated as the City of Costa Mesa Affordable Housing Trust Fund. The City may elect to deposit funds from other sources into this affordable housing trust fund. The moneys and all earnings from investments of the moneys in the affordable housing trust fund shall be expended exclusively to provide or assure continued provision of affordable housing in the City through including but not limited to acquisition, construction, development assistance, rent subsidies, or first -time homebuyer programs, and for the associated costs of administering and monitoring these programs.
13-334. Density Bonus.

Pursuant to the California State Density Bonus Law (Government Code Section 65915 et seq), if the applicant is proposing to provide affordable units in exchange for an increase in density, concessions, incentives, or waivers/modifications of development standards, the affordable units required to fulfill the density bonus may also count as affordable units required in this chapter provided they also meet, or exceed, the requirements outlined in section 13-330. 13-335. Parking Requirements.

and agreements. The City Council may adopt fees for the costs of monitoring and compliance review, which shall be deposited into the affordable housing trust fund for that purpose. 13-338. Administrative Procedures.

The City Manager is authorized to adopt administrative rules, regulations, policies, guidelines, standards, and/or procedures necessary to implement the provisions of this chapter including but not limited to eligibility requirements and/or preference standards that may be applied in the selection of homebuyers and tenants.
13-339. Enforcement.
(a) Violations of this chapter may be enforced by all available remedies at law or in equity, including, but not limited to those set forth in section 1-33 of this code. (b) Failure of any city official, employee, or agent to fulfill and/or enforce the requirements of this chapter shall not excuse any person or property from the requirements of this chapter.

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ATTACHMENT 4
2021-2029 Adopted Housing Element Program Summary
Program No. Housing Program
1A Owner-Occupied Housing Rehabilitation
1B Mobile Home Rehabilitation
1C Monitoring and Preservation of At-Risk Housing Units 2A Inclusionary Housing Ordinance
2B Affordable Housing Development
2C Supportive Services for Persons with Special Needs
2D Facilitate Development of Senior Housing Options
2E Encourage Development of Housing Options for Large-Family Households 2F Persons with Physical and Development Disabilities
2G Safety Element Update and Adoption of Environmental Justice Policies 2H Farmworker Housing
2I Promote State Density Bonus Incentives
2J Transitional and Supportive Housing
2K Planning Application Fees
2L Development of Housing for Extremely Low and Lower-Income Households 2M Parking Standards for Residential Developments
2N Reasonable Accommodation
2O Definition of Single Housekeeping Unit
2P Group Homes
3A Adequate Sites
3B Fairview Development Center
3C Update the North Costa Mesa Specific Plan
3D Update the City's Urban Plans and Overlays
3E Promote the Development of Accessory Dwelling Units
3F Motel Conversions, Efficiency Units, and Co-Living Housing Types 3G Address City-wide Vote Relation to Housing Element Compliance 3H Analyze the Potential of Establishing an Overlay to Permit Residential Use in the Airport
3I Analyze the Potential of Establishing an Overlay to Permit Residential Uses in the 17th Street Corridor Area
3J Analyze the Potential of Modifying the Newport Boulevard Specific Plan to Promote Residential Uses Along Newport Blvd
3K Explore Potential Future Housing Opportunities on Church Sites 3L Annual Progress Reports
3M ADU and JADU Monitoring Program
3N Candidate Sites Used in Previous Housing Elements
3O Water and Sewer Resources
3P Federal/State Housing Programs
3Q Lot Consolidation
3R Development of Large Sites
3S Review and Revise Findings
4A Fair Housing
4B Rental Housing Assistance
4C Ownership Housing Assistance
4D Fair Housing Assistance
4E Low Barrier Navigation Centers
4F Homeless Shelter
4G Assembly Bill 139
4H Housing Education and Outreach Program
4I Partnership with local Organizations and Community Groups

210
Housing Element Compliance
Incentives
Incentives for Housing Element Compliance: Various state grant and loan programs require an HCD-certified housing element. Examples of active state funding sources that require housing element compliance for eligibility include the following:

Permanent Local Housing Allocation (PLHA): Helps cities and counties increase the supply of housing for households at or below 60% of area median income, increase assistance to affordable owner-occupied workforce housing, assist persons experiencing or at risk of homelessness, facilitate housing affordability, meet RHNA requirements, and ensure geographic equity in fund distribution.

Affordable Housing and Sustainable Communities (AHSC):
:
:
:
:
:

The AHSC Program funds land-
use, housing, transportation, and land preservation projects to support infill and compact development that reduce greenhouse gas ("GHG") emissions. Funding for the AHSC Program is provided from the Greenhouse Gas Reduction Fund (GGRF), an account established to receive Cap-and-Trade auction proceeds.

SB 1 Planning Grants State-funded Sustainable Communities grants help cities pay for local transportation improvements.

CalHOME Program The purpose of the CalHOME Program is to enable low- and very low- income households to become or remain homeowners through grants to local public agencies and nonprofit developers to assist individual first-time homebuyers through deferred-payment loans for down payment assistance, home rehabilitation, including manufactured homes not on permanent foundations, acquisition and rehabilitation, homebuyer counseling, self-help mortgage assistance, or technical assistance for self-help homeownership.

Infill Infrastructure Grants (IIG) IIG provides grant assistance, available as gap funding for infrastructure improvements necessary for specific residential or mixed-use infill development projects or areas.

Prohousing Designation Program Prohousing designated jurisdictions will be awarded preference points on competitive funding applications (e.g. IIG, AHSC, Transformative Climate Communities (TCC), etc.). Local Early Action Planning (LEAP) and Regional Early Action Planning (REAP) grants can be utilized to establish prohousing policies for the purposes of eventually earning a Prohousing Designation.

Local Housing Trust Fund Program (LHTF) The LHTF Program provides matching funds to local and regional housing trust funds dedicated to the creation, rehabilitation, or preservation of affordable housing, transitional housing and emergency shelters.

Regional Transport
ation Funding Transportation funding for some regions depend on local jurisdiction housing element compliance (e.g. One Bay Area Grant funding (OBAG), SANDAG’s Active Transportation Grant Program, etc.).

ATTACHMENT 5
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Housing Element Noncompliance
Consequences
Penalties and Consequences of Housing Element Noncompliance HCD is authorized to review any action or failure to act by a local government that it determines is inconsistent with an adopted housing element or housing element law. This includes failure to implement program actions included in the housing element. HCD may revoke housing element compliance if the local government’s actions do not comply with state law. Examples of penalties and consequences of housing element noncompliance:

General Plan Inadequacy
: The housing element is a mandatory element of the General Plan.

When a jurisdiction’s housing element is found to be out of compliance, its General Plan could be found inadequate, and therefore invalid.

Local governments with an invalid General Plan can
no longer make permitting decisions.
:
:

Legal Suits and Attorney Fees Local governments with noncompliant housing elements are vulnerable to litigation from housing rights’ organization, developers, and HCD. If a jurisdiction faces a court action stemming from its lack of compliance and either loses or settles the case, it often must pay substantial attorney fees to the plaintiff’s attorneys in addition to the fees paid by its own attorneys. Potential consequences of lawsuits include: mandatory compliance within 120 days, suspension of local control on building matters, and court approval of housing developments.

Loss of Permitting Authority Courts have authority to take local government residential and nonresidential permit authority to bring the jurisdiction’s General Plan and housing element into substantial compliance with State law. The court may suspend the locality’s authority to issue building permits or grant zoning changes, variances, or subdivision map approvals – giving local governments a strong incentive to bring its housing element into compliance.

Newer Consequences of Housing Element Noncompliance
Financial Penalties: Court-issued judgement directing the jurisdictions to bring its housing element in substantial compliance with state housing element law. If a jurisdiction’s housing element continues to be found out of compliance, courts can multiply financial penalties by a factor of six.

Court Receivership: Courts may appoint an agent with all powers necessary to remedy identified housing element deficiencies and bring the jurisdiction’s housing element into substantial compliance with housing element law.
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ATTACHMENT 6

1 Requirements for Inclusionary Affordable Housing

INFORMATION BULLETIN
532
February 2023
View All Information Bulletins

IN THIS BULLETIN:
• Inclusionary Affordable Housing Ordinance Applicability • Exemptions from the Inclusionary Housing Ordinance
• Development of Inclusionary Dwelling Units
• Inclusionary In Lieu Fee
• Other Methods of Compliance
• Variances and Waivers
• Affordable/In-fill Housing and Sustainable Buildings Expedite Program This bulletin summarizes the City of San Diego’s Inclusionary Affordable Housing Ordinance. For more details, please see San Diego Municipal Code (SDMC) Chapter 14, Article 2, Division 13, as well as the San Diego Housing Commission’s Inclusionary Affordable Housing Implementation and Monitoring Procedures Manual (Procedures Manual).

Note: The information in this bulletin reflects amendments adopted by O-21432 N.S. and certified within the Coastal Overlay Zone as of August 2022.

Inclusionary Affordable Housing Ordinance Applicability The Inclusionary Affordable Housing Ordinance applies to all new residential development of 10 or more dwelling units outside the Coastal Overlay Zone, five or more dwelling units within the Coastal Overlay Zone, and all condominium conversions of two or more dwelling units. Developments are required to provide a certain percentage of affordable units in the development. Applicants may also choose to pay an Inclusionary In Lieu Fee for all or a portion of the inclusionary dwelling units; rehabilitate existing dwelling units or SRO Hotel Rooms; convert hotel or motel guest rooms to inclusionary dwelling units; or donate land.

Residential development that provides affordable dwelling units as a condition of the development and has an application for a development permit, for a subdivision, or for a Building Permit deemed complete before July 1, 2020, shall be subject to the version of the Inclusionary Affordable Housing Regulations in effect prior to July 1, 2020, as set forth in the Procedures Manual.

The Inclusionary In Lieu Fee applicable to residential development that has an application for a development permit, for a subdivision, or for a Building Permit deemed complete before July 1, 2020, shall be $12.73 per square foot multiplied by the net building area of the unrestricted market- rate residential development.
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ATTACHMENT 6

2 Exemptions from the Inclusionary Housing Ordinance
The following types of residential development projects are exempt from the Inclusionary Housing Ordinance as outlined in SDMC §142.1303:
• Projects subject to the North City Future Urbanizing Area inclusionary housing requirements. • Rehabilitation of an existing building that does not result in a net increase of dwelling units. • Density bonus units constructed in accordance with Chapter 14, Article 3, Division 7.

Development of Inclusionary Dwelling Units
The Inclusionary Affordable Housing Regulations may be satisfied by setting aside 10% of the total dwelling units in the development for households earning at or below certain income levels. As the Procedures Manual outlines, these requirements shall be implemented incrementally from July 1, 2020, through June 30, 2024.

Inclusionary In Lieu Fee
From July 1, 2020, through June 30, 2024, the Inclusionary In Lieu Fee requirements shall be implemented incrementally. This fee is the product of the applicable square foot charge (rate) as shown below, multiplied by the net building area defined in the S an Diego Municipal Code (SDMC).

Net building area means the aggregate gross floor area of all the unrestricted dwelling units within a development, excluding areas outside the dwelling unit’s habitable space such as garages, carports, parking areas, porches, patios, open space, and excluding common areas such as lobbies, common hallways, stairways, elevators and equipment spaces.

Deemed Complete Date Applicable Square Foot Charge
(Rate) to Calculate Fee
Prior to July 1, 2020 $12.73
July 1, 2020 - June 30, 2021 $15.18
July 1, 2021 - June 30, 2022 $17.64
July 1, 2022 - June 30, 2023 $20.09
July 1, 2023 - June 30, 2024 $22.55
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ATTACHMENT 6

3 Deemed Complete Date Applicable Square Foot Charge
(Rate) to Calculate Fee
July 1, 2024 and after $25.001
1Lieu Fee shall be updated annually in accordance with SDMC §142.1306.

Other Methods of Compliance
The requirements of the Inclusionary Affordable Housing Ordinance may also be satisfied by the following methods:
• Rehabilitation of Existing Dwelling Units, SRO Hotel Rooms, or Conversion of Guest Rooms
Existing dwelling units and SRO Hotel Rooms can be rehabilitated, or existing guest rooms in a motel or hotel could be converted to inclusionary dwelling units to satisfy the requirements in accordance with SDMC §142.1307. This provision is not eligible for use within the Coastal Overlay Zone.
• Land Donation
Land may be donated if the value of the land is equal to or greater than the applicable Inclusionary In Lieu Fee as outlined in SDMC §142.1308.

Variances and Waivers
The Inclusionary Housing Ordinance allows applicants to request a Variance (Process 4) or Waiver (Process 5) from the affordable housing requirements. A Variance is required to deviate from specific portions of the Ordinance, and a Waiver must be exempted entirely from the Ordinance.

The City decision-maker may approve a Variance or Waiver only if specific findings can be substantiated (see SDMC §142.1311).

Affordable/In-fill Housing and Sustainable Buildings Expedite Program This program Is an optional service available for a fee and provides reduced project processing times in the development review process for both discretionary and ministerial projects that provide affordable housing. This Expedite Program significantly streamlines the City review process and typically results in time savings in excess of 50%. For more information, please see Information Bulletin 538.

215

CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 24-113 Meeting Date: 4/2/2024
TITLE:

CITY COUNCIL FIRST READING OF ORDINANCES TO AMEND TITLE 13 (PLANNING, ZONING AND DEVELOPMENT) AND TITLE 9 (LICENSES AND BUSINESS REGULATIONS) OF THE COSTA MESA MUNICIPAL CODE TO MODIFY THE CITY’S RETAIL CANNABIS PROVISIONS

AND FIND THIS PROJECT TO BE CATEGORICALLY EXEMPT FROM CEQA DEPARTMENT: ECONOMIC AND DEVELOPMENT SERVICES

DEPARTMENT/PLANNING DIVISION
PRESENTED BY: MICHELLE HALLIGAN, SENIOR PLANNER
CONTACT INFORMATION: MICHELLE HALLIGAN, SENIOR PLANNER, 714-754-5608 RECOMMENDATION:

Staff recommends the City Council:

1. Find that the project is categorically exempt from the California Environmental Quality Act (CEQA), Section 15061(b)(3) (“General Rule”).

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City of Costa Mesa
Agenda Report

77 Fair Drive
Costa Mesa, CA
92626
Item #: 24-113 Meeting Date: 04/2/2024

TITLE: CITY COUNCIL FIRST READING OF ORDINANCES TO AMEND TITLE 13 (PLANNING, ZONING AND DEVELOPMENT) AND TITLE 9 (L ICENSES AND BUSINESS REGULATIONS) OF THE COSTA MESA MUNICIPAL CODE TO MODIFY THE CITY’S RETAIL CANNABIS PROVISIONS

AND FIND THIS PROJECT TO BE CATEGORICALLY EXEMPT FROM CEQA

DEPARTMENT: ECONOMIC AND DEVELOPMENT SERVICES DEPARTMENT/PLANNING

DIVISION

PRESENTED BY: MICHELLE HALLIGAN, SENIOR PLANNER

CONTACT INFORMATION: MICHELLE HALLIGAN, SENIOR PLANNER, 714-754-5608

RECOMMENDATION:

Staff recommends the City Council:

1. Find that the project is categorically exempt from the California Environmental Quality Act (CEQA), Section 15061(b)(3) (“General Rule”).

2. Introduce for first reading, by title only, Ordinance No. 2024-03 amending Title 13 (Planning, Zoning and D evelopment) and Ordinance No. 2024 -04 amending Title 9 ( Licenses and Business Regulations) of the Costa Mesa Municipal Code to modify the City’s retail cannabis provisions.

BACKGROUND:

At the March 19, 2024 , City Council meeting, the City Council considered the Planning Commission’s recommendations, as well as other issues raised by members of the cannabis industry and the public.

The City Council passed nine motions for staff to modify and return with a revised Ordinance for “first reading”. The March 19, 2024, City Council report and video are linked below:

March 19, 2024 City Council Report:
https://costamesa.legistar.com/LegislationDetail.aspx?ID=6576096&GUID=EF1D8EE8-A9A0-4153- 82A6-19FFB634CE53

Video: https://costamesa.granicus.com/player/clip/4107?view_id=14&redirect=true

217

Item #: 24-113 Meeting Date: 04/02/2024

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ANALYSIS:

On March 19, 2024, City Council directed amendments to Title 13 and Title 9 of the CMMC which are reflected in draft City Council Ordinances contained in Attachments 3 and 4, respectively. The proposed amendments are distinctly shown in “track changes” versions, where added text is identified by an underline and text removal is shown in strikethrough format in Attachments 5 (Title 13) and 6 (Title 9).

A summary of the City Council motions is provided below:

Limit on Cannabis Storefronts
After considering the Planning Commission’s recommendation and hearing public testimony, the City Council voted 6 to 1 to direct staff to prepare revisions to allow processing of only pending applications which have moved past the pre -application phase, up to a cap of 35 cannabis storefronts , and, thereafter, suspend processing applications fo r new storefronts until such time when the number of operating licensed cannabis storefronts falls below 10. The motion included allowing the City to refund the $1,500 pre-application fee to all applicants in the pre-application phase.

A “track changes” version of the City Council’s proposed modification to Section 9-494.5 is provided in Attachment 6.

Separation between Cannabis Storefronts and Youth Centers The currently adopted minimum separation between youth centers , as defined in t he CMMC, and cannabis storefronts is 600 feet in accordance with the State’s minimum requirement (California Business and Professions Code Section 26054(b)). After considering the Planning Commission’s recommendation and hearing public testimony, the City Council voted to support the Planning Commission’s recommendation to increase the minimum separation between cannabis storefronts and youth centers, as defined in the CMMC, from 600 feet to 1,000 feet. No currently proposed cannabis storefront applications are located within 1,000 feet from a youth center, as defined in the CMMC.

The proposed text change regarding separation from youth centers is provided in Section 13-200.93(e) in Attachment 5.

Separation Between Cannabis Storefronts and Residential Zones The currently adopted CMMC conditionally allows cannabis storefronts in commercial zones without a separation from residential zones. After considering the Planning Commission’s recommendation and hearing public testimony, the City Council approved a motion to increase the Planning Commission’s 100-foot recommended storefront separation requirement from a residentially zoned property to 250 feet. Pursuant to City Council direction, any completed applications would be exempted from the new residential zone separation requirement.

The proposed residential separation amendment to Section 13-200.93(e) is provided in “track changes” format in Attachment 5.

Allowing the word “Cannabis” on Storefront Signage
As adopted, CMMC Section 9 -495(g)(6) contains provisions for signage and notices at cannabis storefronts to limit cannabis signage to what is necessary for identification only. 218

Item #: 24-113 Meeting Date: 04/02/2024

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Additionally, retail cannabis storefronts have also been subject to a condition of approval limiting cannabis business signage and symbols to ensure cannabis dispensaries maintain a high-quality aesthetic and limit cannabis advertising in the City to persons under 21 years of age. Rather than allowing the word cannabis on business signage, the Planning Commission recommended allowing the word cannabis to be used up to two times with a maximum letter height of one inch on the entrance notice. The City Council voted to increase the maximum recommended letter height from one inch to two inches to improve visibility.

A “track changes” version of the City Council’s modification to Section 9 -495(g)(6b) is provided in Attachment 6.

Advertising and Marketing Restrictions Related to Youths The proposed Planning Commission recommendation specified that advertising and marketing would not depict or suggest the consumption of cannabis or cannabis products. After considering the Planning Commission’s recommendation and hearing public testimony, the City Council voted 6 to 1 to instead incorporate specifically the State regulations for cannabis advertising and marketing into the CMMC (California Code of Regulations Title 4 Section 15040).

The proposed modification to Section 9-495(6) is provided in Attachment 6.

Tenant Notification
At the March 19, 2024 , City Council meeting, the City Council voted to direct staff to prepare an amendment to the City’s cannabis provisions that require a property owner to notify existing tenants when a cannabis storefront is proposed to occupy an existing occupied tenant space.

The City Council’s proposed modification to Title 9-487 is provided in Attachment 6.

Onsite Security Guard
Pursuant to CMMC Title 9-495(h)(1), all cannabis storefronts must currently have at least one licensed private security guard at the premises 24 hours per day. At the March 19, 2024, City Council meeting, the City Council voted to direct staff to draft amendments to modify the overnight security guard requirement. The amendment encourages all cannabis storefronts to have a licen sed security guard onsite 24 hours per day and require s, at a minimum, all cannabis storefront operations to have a licensed security guard onsite during hours of operation, including when any cash, cannabis or cannabis products are shipped from or receive d at the facility. As described in the motion, the amendment also requires select storefront operations, as determined by the Chief of Police or designee, to have a licensed security guard onsite for 24 hours per day, if in his/her professional opinion this is needed to ensure public safety.

The proposed modification to Title 9-495(h)(1) is provided in Attachment 6.

Cannabis Business Administrative Regulations
Costa Mesa’s Cannabis Business Administrative Regulations are policies that set forth and clarify internal procedures necessary for implementing the City’s cannabis ordinances such as processing applications. The authority of the City Manager to establish administrative regulations is contained in CMMC Section 9-497, “Promulgation of Administrative Regulations”. 219

Item #: 24-113 Meeting Date: 04/02/2024

Page 4 of 5 ends

At the March 19, 2024 , City Council meeting, the Council voted unanimously to publish the cannabis business adopted Administrative Regulations on the City’s website. The Administrative Regulations governing cannabis businesses are posted online and are accessible via the following link:
https://www.costamesaca.gov/trending/cannabis/cannabis-business-permits

State Law Updates
In addition to the items outlined above, staff has retained proposed language in the ordinances which require disclosures relating to “financial interest holders” in cannabis businesses to reflect new changes in state law on this issue. These changes are still included in the proposed amendments.

Employee Background Check/Badge Fee
At the March 19, 2024, City Council meeting, a motion was approved that directed staff to reduce the employee badge fees, and for staff to investigate methods to improve efficiency in badge processing (including State-compliant design and the use of temporary badges), determine average time required for Department of Justice and Federal Bureau of Investigation background checks, consider outsourcing background checks and badging to the City’s cannabis consultant (HDL), and streamlining badging for employees of multiple Costa Mesa cannabis operations. Staff is addressing the Council’s recommendations and will bring the revised employee badge fees and additional information to the City Council at the next regularly scheduled meeting.

ENVIRONMENTAL DETERMINATION:

The proposed Ordinances are exempt from environmental review under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15061(b)(3) (“General Rule”) in that the updates to the City’s Municipal Code provisions for retail cannabis storefronts will not have a significant impact on the environment.

ALTERNATIVES:

The City Council has the following alternatives:

1. Give first reading. The City Council may give first reading to the draft Ordinances.

2. Give first reading with modifications. The City Council may modify the draft Ordinances and give first reading.

3. Not adopt the changes to the City’s retail cannabis provisions. The City Council may choose to not adopt the proposed Code amendments.

4. Continue the Ordinances review to a date certain. The City Council may continue the item to a date certain with direction for staff to return with additional information, changes and/or clarifications.

FISCAL REVIEW:

The adoption of the proposed Ordinances is not anticipated to have any fiscal impact on the City’s budget.

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Item #: 24-113 Meeting Date: 04/02/2024

Page 5 of 5 ends

LEGAL REVIEW:

The draft Ordinances and staff report have been prepared in conjunction with and reviewed by the City Attorney’s Office.

CITY COUNCIL GOALS AND PRIORITIES:

This item supports the following City Council Goal:

 Strengthen the public’s safety and improve the quality of life.

CONCLUSION:

The proposed retail cannabis ordinance amendments are intended to address issues of potential over concentration, land use compatibility, as well as improving economic and business conditions. The City Council’s proposed revisions to the retail cannabis provisions are reflected in the attached exhibits.

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ATTACHMENT 1
Ordinance No. 2024-03 Page 1 of 4

ORDINANCE NO. 2024-03

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, AMENDING TITLE 13 (PLANNING, ZONING, AND DEVELOPMENT) , CHAPTER IX (SPECIAL LAND USE REGULATIONS), ARTICLE 21 (LOCATION OF

CANNABIS DISTRIBUTING, MANUFACTURING, RESEARCH AND DEVELOPMENT,

TESTING LABORATOIES, RETAIL STORERONT AND RETAIL NONSTOREFRONT

USES) OF THE COSTA MESA MUNICIPAL CODE OF THE COSTA MESA MUNICIPAL

CODE PERTAINING TO CANNABIS STOREFRONTS

THE CITY COUNCIL OF THE CITY OF COSTA MESA , CALIFORNIA DOES HEREBY FIND AND DECLARE AS FOLLOWS:

WHEREAS, in November 2020, the Costa Mesa voters approved Measure Q; which allows for storefront and non-storefront retail cannabis uses on commercially zoned properties meeting specific location requirements, and non-storefront retail cannabis uses on Industrial Park (MP) and Planned Development Industrial (PDI) zoned properties; WHEREAS, Measure Q authorizes the City Council to adopt ordina nces to regulate cannabis retail uses;
WHEREAS, on June 15, 2021, the City Council adopted Ordinance No. 21-08 and No. 21-09 to amend Titles 9 and 13 of the Costa Mesa Municipal Code (CMMC) to establish regulations for cannabis retail uses;
WHEREAS, at the July 18, 2023 City Council meeting, a Councilmember requested that an item be agenized to discuss the potential for exploring amendments to the City’s cannabis ordinances in response to public input; WHEREAS, on September 5, 2023, the City Council dire cted the Planning Commission to explore potential amendments to the City’s cannabis retail storefront provisions specific to eight topics;
WHEREAS, the Planning Commission discussed potential amendments to the City’s cannabis retail storefront provisions at the November 27, 2023, December 11, 2023, and January 22, 2024, Planning Commission meetings; Now, therefore, THE CITY COUNCIL OF THE CITY OF COSTA MESA , CALIFORNIA DOES HEREBY ORDAIN AS FOLLOWS:

Section 1. Title 13, of the Costa Mesa Municipal Code is hereby amended to read as specified in Exhibit A, attached hereto and incorporated herein by this reference. 222
Ordinance No. 2024-03 Page 2 of 4
Section 2. Compliance with CEQA. Pursuant to the California Environmental Quality Act (CEQA), the project is exempt from the provisions of the California Environmental Quality Act (CEQA) under Section 15061(b)(3) (“General Rule”), as this action will not have any significant effect on the environment.

Section 3. Inconsistencies. Any provision of the Costa Mesa Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to affect the provisions of this Ordinance.

Section 4. Severability. If any chapter, article, section, subsection, subdivision, sentence, clause, phrase, or portion of this Ordinance, or the application thereof to any person, is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portion of this Ordinance or its application to other persons. The City Council hereby declares that it would have adopted this Ordinance and each chapter, article, section, subsection, subdivision, sentence, clause, phrase or portion thereof, irrespective of the fact that any one or more subsections, subdivi sions, sentences, clauses, phrases, or portions of the application thereof to any person, be declared invalid o r unconstitutional. No portion of this Ordinance shall supersede any local, State, or Federal law, regulation, or codes dealing with life safety factors.

Section 5. Effective Date. This Ordinance shall take effect thirty (30) days after its final passage.

Section 6. Certification. The City Clerk shall certify to the passage and adoption of this Ordinance and shall cause the same to be published or posted in the manner required by law.

223
Ordinance No. 2024-03 Page 3 of 4
PASSED AND ADOPTED this ___day of _____, 2024.

_____________________________
John Stephens, Mayor

ATTEST: APPROVED AS TO FORM:

________________________ _____________________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney

224
Ordinance No. 2024-03 Page 4 of 4

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss

CITY OF COSTA MESA )

I, BRENDA GREEN, City Clerk of the City of Costa Mesa, DO HEREBY CERTIFY that the above and foregoing Ordinance No. 2024-03 was duly introduced for first reading at a regular meeting of the City Council held on the ____day of _________ 2024, and that thereafter, said Ordinance was duly passed and adopted at a regular meeting of the City Council held on the ___ day of _________, 2024, by the following roll call vote, to wit:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of Costa Mesa this ___ day of ___________, 2024.

__________________________
Brenda Green, City Clerk

225
ATTACHMENT 2
Ordinance No. 2024-04 Page 1 of 4

ORDINANCE NO. 2024-04

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, AMENDING TITLE 9 (LICENSES AND BUSINESS REGULATIONS) OF

THE COSTA MESA MUNICIPAL CODE PERTAINING TO CANNABIS BUSINESSES

THE CITY COUNCIL OF THE CITY OF COSTA MESA , CALIFORNIA DOES HEREBY FIND AND DECLARE AS FOLLOWS:

WHEREAS, in November 2020, the Costa Mesa voters approved Measure Q; which allows for storefront and non-storefront retail cannabis uses on commercially zoned properties meeting specific location requirements, and non-storefront retail cannabis uses on Industrial Park (MP) and Planned Development Industrial (PDI) zoned properties; WHEREAS, Measure Q authorizes the City Counci l to adopt ordinances to regulate cannabis retail uses;
WHEREAS, on June 15, 2021, the City Council adopted Ordinance No. 21-08 and No. 21-09 to amend Titles 9 and 13 of the Costa Mesa Municipal Code (CMMC) to establish regulations for cannabis retail uses;
WHEREAS, at the July 18, 2023 City Council meeting, a Councilmember requested that an item be agenized to discuss the potential for exploring amendments to the City’s cannabis ordinances in response to public input; WHEREAS, on September 5, 2023, the City Council directed the Planning Commission to explore potential amendments to the City’s cannabis retail storefront provisions specific to eight topics;
WHEREAS, the Planning Commission discussed potential amendments to the City’s cannabis retail storefront provisions at the November 27, 2023, December 11, 2023, and January 22, 2024, Planning Commission meetings; Now, therefore, THE CITY COUNCIL OF THE CITY OF COSTA MESA , CALIFORNIA DOES HEREBY ORDAIN AS FOLLOWS:

Section 1. Title 13, of the Costa Mesa Municipal Code is hereby amended to read as specified in Exhibit A, attached hereto and incorporated herein by this reference.

Section 2. Compliance with CEQA. Pursuant to the California Environmental Quality Act (CEQA), the project is exempt from the provisions of the California Environmental Quality Act (CEQA) under Section 15061(b)(3) (“General Rule”), as this action will not have any 226
Ordinance No. 2024-04 Page 2 of 4

significant effect on the environment.

Section 4. Severability. If any chapter, article, section, subsection, subdivision, sentence, clause, phrase, or portion of this Ordinance, or the application thereof to any person, is for any reason held to be invalid or unconstitutional by the decision of any cou rt of competent jurisdiction, such decision shall not affect the validity of the remaining portion of this Ordinance or its application to other persons. The City Council hereby declares that it would have adopted this Ordinance and each chapter, article, section, subsection, subdivision, sentence, clause, phrase or portion thereof, irrespective of the fact that any one or more subsections, subdivi sions, sentences, clauses, phrases, or portions of the application thereof to any person, be declared invalid or unconstitutional. No portion of this Ordinance shall supersede any local, State, or Federal law, regulation, or codes dealing with life safety factors.

Section 5. Effective Date. This Ordinance shall take effect thirty (30) days after its final passage.

Section 6. Certification. The City Clerk shall certify to the passage and adoption of this Ordinance and shall cause the same to be published or posted in the manner required by law.

227
Ordinance No. 2024-04 Page 3 of 4

PASSED AND ADOPTED this ___day of _____, 2024.

_____________________________
John Stephens, Mayor

ATTEST: APPROVED AS TO FORM:

________________________ _____________________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney

228
Ordinance No. 2024-04 Page 4 of 4

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss

CITY OF COSTA MESA )

I, BRENDA GREEN, City Clerk of the City of Costa Mesa, DO HEREBY CERTIFY that the above and foregoing Ordinance No. 2024-04 was duly introduced for first reading at a regular meeting of the City Council held on the ____day of _________ 2024, and that thereafter, said Ordinance was duly passed and adopted at a regular meeting of the City Council held on the ___ day of _________, 2024, by the following roll call vote, to wit:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of Costa Mesa this ___ day of ___________, 2024.

__________________________
Brenda Green, City Clerk

229

ATTACHMENT 3

EXHIBIT A

CHAPTER IX. SPECIAL LAND USE REGULATIONS. ARTICLE 21. LOCATION OF

CANNABIS DISTRIBUTING, MANUFACTURING, RESEARCH AND DEVELOPMENT,

TESTING LABORATORIES, RETAIL STOREFRONT AND RETAIL NON-

STOREFRONT USES

13-200.90. Purpose.

The purpose of this article is to regulate the location of and standards for cannabis distributing facilities, manufacturing sites, research and development laboratories, testing laboratories, retail storefront and retail non-storefront uses in order to promote the health, safety, morals and general welfare of the residents and the businesses within the city by maintaining local control over the ability to authorize and regulate the location of cannabis businesses.

13-200.91. Applicability.
(a) Nothing in this article is intended, nor shall it be construed, to burden any defense to criminal prosecution under the Compassionate Use Act of 1996. (b) All the provisions of this article shall apply to all property, public and private, within the city.
(c) All the provisions of this article shall apply indoors and outdoors. (d) Unless otherwise provided herein or in this title, the terms used in this article shall have the meaning ascribed to them in Title 9, Chapter VI of this Code.

13-200.92. Cannabis distributing facilities, manufacturing sites, research and development laboratories, and testing laboratories.
(a) Cannabis distribution, manufacturing, research and development and testing is prohibited in all zone districts within the city, except for those portions of the manufacturing park (MP) and planned development industrial (PDI) zones that are located both north of South Coast Drive and west of Harbor Boulevard, excluding any portion of the South Coast Collection (the “Green Zone”).
(b) A conditional use permit shall be required and may be issued to allow the location of any business engaged in the distribution, manufacturing, researching and developing, or testing of cannabis in the MP or PDI zones pursuant to subsection (a) of this section, subject to the following conditions:
(1) The requirements of Chapter III of this title have been met; (2) The findings for granting a conditional use permit in accordance with section 13- 29(g) are met;
(3) The applicant obtains a cannabis business license pursuant to Chapter VI of Title 9 of this Code; and
(4) The use is conducted in compliance with all applicable state and local laws. (c) No person shall engage in any use set forth in this article unless that use is specifically authorized by Chapter VI of Title 9 of this Code.
230

13-200.93. Cannabis retail storefront and non-storefront uses. (a) Cannabis retail storefront uses are prohibited in all zone districts within the city, except for the commercial zone districts.
(b) Cannabis retail non-storefront uses are prohibited in all zone districts within the city, except for the commercial zone districts and within the Green Zone. (c) The following planning application shall be required for cannabis retail uses:
(1) A conditional use permit shall be required for retail storefronts and non-storefronts; and
(2) An amendment to the approved conditional use permit shall be required for existing licensed cannabis distribution or manufacturing businesses to operate a retail non-storefront under the existing business and within the same licensed premise. The amendment shall be processed as a minor conditional use permit. (d) A conditional use permit may be issued to allow the location of a retail cannabis use pursuant to subsections (a) and (b) of this section, subject to the following conditions:
(1) The requirements of Chapter III of this title have been met; (2) The findings for granting conditional use permit pursuant to section 13-29(g) are met;
(3) The applicant obtains a cannabis business licensed for the location pursuant to Chapter VI of Title 9 of this Code; and
(4) The use is conducted in compliance with all applicable state and local laws, regulations, and all applicable conditional use permit conditions of approval. (e) Cannabis retail storefront location.
(1) No cannabis retail storefront use shall be located within one-thousand (1,000) feet from a K-12 school, playground, child daycare, homeless shelter, or youth center, that is in operation at the time of submission of a completed Cannabis Business Permit application, or within two hundred fifty (250) feet from a property zoned for residential use;
i. For the purpose of identifying separations from cannabis storefronts and properties zoned for residential use, properties zoned for residential use are within the following zoning districts: R1 Single-Family Residential District, R2-MD Multiple-Family Residential District, Medium Density, R2-HD Multiple-Family Residential District, High Density, R3 Multiple- Family Residential District, TC Town Center District, PDR-LD Planned Density Residential—Low Density, PDR-MD Planned Development Residential—Medium Density, PDR-HD Planned Development
Residential—High Density, and PDR-NCM Planned Development Residential—North Costa Mesa.
ii. Where a non-residential property was developed for residential or mixed residential use in accordance with an overlay, urban plan, or specific plan, and the residential development and use remains, the property would be considered residential when establishing a separation from cannabis storefronts.
iii. Where an overlay, urban plan, or specific plan allows residential development on a property zoned for residential use, but residential 231

development has not been constructed, such property would not be considered a property zoned for residential use pursuant to this provision. iv. Where a legal nonconforming residential unit or units have been developed on a property zoned for non-residential use, the property would not be considered residential when establishing a separation from cannabis storefronts.
(2) All distances referenced in (e)(1) shall be measured in a straight line from the premises where the cannabis retail use is to be located to the closest property line of a K-12 school, playground, child daycare, homeless shelter, youth center or property zoned for residential use, or from the premises of a lawfully existing cannabis retail storefront use.
i. For purposes of this sub-sub-section, the property line of a playground shall be a thirty (30) foot radius from the exterior physical boundaries of the playground equipment area;
(3) All distances shall be measured without regard to the boundaries of the city and and/or intervening structures or other barriers;
(4) At a property as for which the zoning administrator, director or planning commission determines, based on a preponderance of the evidence, that unpermitted and/or illegal cannabis activity involving sales, delivery and/or dispensing has taken place at any time in the 365 days preceding an application under this Article. If an unpermitted and/or illegal cannabis activity has existed on a property no cannabis business may be permitted on that property unless 365 days has elapsed since that unpermitted and/or illegal cannabis activity has vacated the property, and the owner of that property has compensated the City for any and all expenditure of public funds and resources, including all costs, expenses (including but not limited to the salaries of peace and/or code enforcement officers) and/or attorney’s fees, incurred in investigating, abating or attempting to abate the unpermitted use or uses, whether or not any type of civil, criminal or administrative proceedings have been commenced against the property, provided however if the owner of the property is required to evict that use, the 365 days shall begin to run from the date of the filing of an unlawful detainer complaint, in which case a permit may be issued after the 365 days had elapsed and that use is no longer occupying the property. (5) A determination and/or finding under sub-section (e)(4) is subject to the appeal provisions of Chapter IX of Title 2 of this Code.
(6) The nonconforming provisions contained in Chapter X of this Code pertain to cannabis uses except as follows:
i. When an approved retail cannabis storefront conditional use permit location which lawfully met separation requirements at the time of the submission of a cannabis business permit application for the subject property does not conform to the separation and the permitted cannabis retail operation is discontinued or abandoned for more than one hundred eighty (180) days, or when a permitted cannabis use is replaced in whole or part for any period of time by any other use, the conditional use permit shall be null and void after the permittee has had an opportunity for a hearing before the issuing officer as provided in Chapter II of Title 9. 232

(f) Retail storefront uses shall be subject to the following development standards in addition to those contained in Chapter VI of Title 9:
(1) Opaque window coverings unless required by the City for security purposes are prohibited;
(2) Permanent security or safety bars shall not be placed on any interior or exterior windows or door, unless required by the City for security purposes; (3) Directional signage to the use including but not limited to A-frame signs, sandwich board signs, banners, or flags are prohibited;
(4) No use shall advertise by having a person holding a sign and advertising the business to passersby, whether such person is on the premises of the commercial cannabis business or elsewhere including, but not limited to, the public right-of- way;
(5) Uses shall comply with the landscaping requirements set forth in Chapter VII of this title including bringing the site landscaping into conformance when feasible as determined by the director;
(6) Parking requirements shall be subject to Section 13-89; (7) The hours of operation may be established as part of the planning application subject to the final review authority and may be more restrictive than those set forth in Chapter VI of Title 9. Modification of operation hours when established as part of the planning application shall be subject to an amendment of the planning application;
(8) Drive-through services or walk-up window services are prohibited; (9) Outdoor seating or patio areas are prohibited;
(10) Special events that include live entertainment, dancing, and/or amplified music, or that are otherwise visible and/or audible from the public right-of-way, are prohibited;
(11) All cannabis products shall be secured after business hours in a locked container under 24-hour video surveillance; and
(12) For uses within two hundred (200) feet of a residential zone, all exterior lighting shall be shielded and/or directed away from residential areas. In addition, trash facilities shall be screened from view and designed and located appropriately to minimize potential noise and odor impacts to adjacent residential areas. (g) Non-storefront uses shall be subject to the following development standards in addition to those contained in Chapter VI of Title 9:
(1) Uses may operate independently from a retail storefront or as a part of, and in conjunction with, a permitted storefront, distribution, or manufacturing facility; (2) Parking requirements shall be subject to Section 13-89 and shall also include sufficient parking spaces for delivery vehicles;
(3) All deliveries to customers shall be completed by 10:00 p.m.; and (4) The general public shall not be permitted to enter the premises of a non-storefront retail use.
(h) Except as specifically authorized in this article, all other cannabis retail uses such as but not limited to lounges and cafes are expressly prohibited in the city. (i) No person shall engage in any use set forth in this article unless that use is specifically authorized by Chapter VI of Title 9 of this Code.
233

(j) Any cannabis use, including but not limited to those involving sale, delivery and/or dispensing, that is not permitted, licensed and otherwise in full compliance with all applicable provisions of this Code and state and local law, shall not be considered a legally non-conforming use pursuant to, and notwithstanding any contrary provisions of, Chapter IX of this title.

13-200.94. Declaration of public nuisance.

Any use, structure, or property that is altered, enlarged, erected, established, maintained, moved, or operated contrary to the provisions of this article, is hereby declared to be unlawful and a public nuisance and may be abated by the city through civil and/or administrative proceedings by means of a restraining order, preliminary or permanent injunction, or in any other manner provided by law for the abatement of such nuisances.

13-200.95. Violations.

Violations of this article shall be punishable pursuant to the provisions of section 13-16 in addition to any other remedy available at law or in equity.

234

ATTACHMENT 4

EXHIBIT A

CHAPTER VI. CANNABIS BUSINESS PERMITS

9-481. Purpose and intent.

It is the purpose and intent of this chapter to regulate the distributing, manufacturing, processing, research and development, retail sale, testing and transporting of cannabis and cannabis -related products in a manner which is responsible, which protects the health, safety, a nd welfare of the residents of Costa Mesa, and to enforce rules and regulations consistent with state law. In part to meet these objectives, a permit shall be required in order to own and/or to operate a cannabis business within the city. Nothing in this c hapter is intended to authorize the possession, use, or provision of cannabis for purposes which violate state or federal law. The provisions of this chapter are in addition to any othe r permits, licenses, and approvals which may be required to conduct business in the city, and are in addition to any permits, licenses and approvals required under state law.

9-482. Legal authority.

Pursuant to Sections 5 and 7 of Article X I of the California Constitution and the provisions of Division 10 of the Business and Professions Code, the city is authorized to adopt ordinance s that establish standards, requirements and regulations for local licenses and permits for cannabis and cannabis-related activity.

9-482.5 Authority of the City Manager
The City Manager is authorized to make reasonable rules, policies, and procedures consistent with the intent and spirit of this Chapter as may be necessary to administer and enforce the provisions of this Chapter and any other ordinances, regulations or laws relating to and affecting the permitting and operations of commercial cannabis businesses.

The City Manager is authorized to make reasonable rules, policies, and procedures consistent with the intent and spirit of this Chapter concerning the applications, the application process, the information required of applicants, the applicati on procedures, and the administration and procedures to be used and followed in the application process for permit applications and requests for permit changes or modifications pursuant to this Chapter, and the implementation and administration of social equity programs.

9-483. Cannabis business activities prohibited unless specifically authorized by this chapter.

Except as specifically authorized in this chapter, the manufacture, processing, storing, laboratory testing, labeling, transporting, dispensing, furnishing, distribution, delivery, or sale of cannabis or a cannabis product is expressly prohibited in the city.

9-484. Compliance with laws.

It is the responsibility of the owners and operators of the cannabis business to ensure that it is, at all times, operating in a manner compliant with all applicable state and local laws, and any regulations promulgated thereunder.

235

9-485. Definitions.

Unless otherwise defined in this chapter or in chapte r I of Title 13, the words used in this chapter shall have the same definitions ascribed to them in Division 10 of the Business and Professions Code or the definitions of the Health and Safety Code applicable to school and child daycare. Any reference to California statutes includes any regulations promulgated thereunder and is deemed to include any successor or amended version of the referenced statute or regulatory provision.

Cannabis means all parts of the Cannabis sativa Linnaeus, Cannabis indica, or Cannabis ruderalis, whether growing or not; the seeds thereof; the resin, whether crude or purified, extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. “Cannabis” also means the separated resin, whether crude or purified, obtained from marijuana. “Cannabis” also means marijuana as defined by section 11018 of the California Health and Safety Code as enacted by Chapter 14017 of the Statutes of 1972. “Cannabis” does not include the mature stalks of th e plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of the plant which is incapable of germination. For the purpose of this chapter, “cannabis” does not mean industrial hemp as that term is defined by section 81000 of the California Food and Agricultural Code or section 11018.5 of the California Health and Safety Code.

Cannabis business permit means a regulatory permit issued by the city pursuant to this chapter to a cannabis business, and is required before any cannabis activity may be conducted in the city.

Cannabis goods means cannabis and/or cannabis products.

Cannabis product or manufactured cannabis product or product means cannabis that has undergone a process whereby the plant material is transformed into a concentrate for internal consumption or topical application, including, but not limited to, concentrated cannab is, an edible cannabis product, or a topical cannabis product containing cannabis or concentrated cannabis in combination with other ingredients.

Caregiver or primary caregiver has the same meaning as that term is defined in section 11362.7 of the California Health and Safety Code.

City manager shall mean the city manager of the city or designee.

Director shall mean the city’s Director of the Economic and Development Services department or designee, unless otherwise specified.

Dispensing means any activity involving the retail sale of cannabis or cannabis products.

Distributor means a person or entity th at engages in distribution. The direct and/or retail sale, distribution, or furnishing of any cannabis or cannabis product to any consumer or end user by a distributor is expressly prohibited, unless otherwise authorized pursuant to this chapter.

236

Edible cannabis product means manufactured cannabis that is intended to be used, in whole or in part, for oral human consumption including, but not limited to, chewing gum, but excluding products set forth in Division 15 (commencing with Section 32501) of the California Food and Agricultural Code. An edible cannabis product is not considered food as defined by California Health and Safety Code Section 109935 or a drug as defined by California Health and Safety Code Section 109925.

Financial interest holder shall have the same meaning as set forth in Title 4, Division 19, section 15004 of the California Code of Regulations.

Free sample means any amount of cannabis goods provided to a patron of a business or member of the public without cost or payment or exchan ge for any other thing of value.

Green Zone means those portions of the manufacturing park (MP) and planned development industrial (PDI) zones that are located both north of South Coast Drive and west of Harbor Boulevard, excluding any portion of the South Coast Collection.

Homeless shelter has the same meaning as emergency shelter.

Labor Peace Agreement has the same meaning set forth in Business and Professions Code section 26001.

Manufacturing site means a location where cannabis products are manufactured.

Marijuana means “cannabis,” as that term is defined in this chapter.

Marijuana activity and/or cannabis activity includes manufacture, processing, laboratory testing, research and development, transporting, delivery, dispensing, distribution, furnishing, giving away or sale, or arranging and/or directing any of the foregoing, or any other activity involving cannabis or a cannabis product.

Marijuana business and/or cannabis business means any business or operation which engages in any marijuana or cannabis activity.

Marijuana business permit has the same meaning as cannabis business permit.

Patient or qualified patient shall have the same definition as California Health and Safety Code section 11362.7 et seq., as it may be amended, and which means a person who is entitled to the protections of California Health and Safety Code section 11362.5. For purposes of this chapter, a qualified patient shall include a person with an identification card as that t erm is defined by California Health and Safety Code section 11362.7 et seq.

Person with an identification card shall have the meaning given that term by California Health and Safety Code section 11362.7.

237

Playground shall mean and include both a public playground located in a city park and a private playground. A private playground shall mean a privately-owned outdoor recreation area, including a tot lot, containing playground equipment or amenities such as swings, slides, sandboxes, or similar installations designed for use by minors and serving either the general public or residents of a development where the playground equipment is located, including residential subdivisions and/or developments such as apartments, townhomes and/or condominium complexes, mobile home parks or other similar residential uses, as well as playground equipment serving registered guests at hotels and motels. A private playground does not include a playground or playground equipment installed at a single -family residence, or play equipment that is part of a privately -owned commercial business or place of worship, or a playground that is access -controlled during operating hours or does not have direct access from the public right -of-way. A private playground does not include areas designated for use as a playing field or court, pool, or skate facility.

Premises shall have the same meaning as set forth in Business and Professions Code section 26001 sub-section (ap) for purposes of measuring the required distance from retail storefront uses to those uses set forth in section 13-200.93(e)(1).

Processing and processor shall have the same meaning as manufacturing and manufacturer, respectively.

Property shall mean any single development lot that has been subdivided bearing its own assessor’s parcel number or with an approved subdivision map or condominium map unless the context clearly indicates a different meaning.

Research and development laboratory means a facility, entity, or site in the cit y that performs research into and/or the development of cannabis or cannabis products, where cannabis in any amount is located on-site, and that is both of the following:

1. Accredited by an accrediting body that is independent of all other persons involved in the cannabis industry in the state.

2. Registered with the State Department of Public Health, and is owned and operated by a person issued a valid cannabis business permit for laboratory testing from the city and is currently in compliance with all applicable state and local laws and regulations pertaining to the cannabis business and cannabis activities.

South Coast Collection or SoCo means all properties located at 3303 through 3323, inclusive, Hyland Avenue, in the City of Costa Mesa, commonly known as “SoCo” or “SOCO.”

State means the State of California, including any of its departments, divisions, and/or bureaus.

State license means a permit or license issued by the state to engage in cannabis activity.

Youth center means any public or private facility that is primarily used to host recreation or social activities for minors, specifically private youth membership organizations or clubs, social services teenage club facilities, video arcades where ten (10) or more games or game mac hines or devices 238

are operated or similar amusement park facilities, but does not include dance studios, tutoring, martial arts studios or similar type of uses.

9-486. Type of authorized cannabis businesses permitted. (a) One (1) or more of the following types of adult (A -license) and/or medical (M -license) cannabis business may be permitted to operate within the city:

1. Cannabis distributor (includes license classification type 11);

2. Cannabis manufacturer (includes license classification type 6 and 7);

3. Cannabis testing laboratory (includes license classification type 8);

4. Cannabis retail - storefront (includes license classification type 10);

5. Cannabis retail - non-storefront (includes license classification type 9); and

6. Cannabis research and development laboratory.

(b) Businesses permitted pursuant to this chapter shall not engage in the retail sale, delivery or dispensing of cannabis, cannabis product, hemp or hemp products unless expressly permitted to do so pursuant to the terms of their cannabis business permit. (c) No person may engage in any type of cannabis business that is not specifically authorized pursuant to this section and this code, including, but not limited to, cultivating cannabis. (d) The City Council may by resolution limit and/or restrict the number of cannabis retail permits available for issuance and/or renewal.

9-487. Cannabis business permit required to engage in a cannabis business.

No person may engage in any cannabis business or in any cannabis activity within the city including manufacturing, processing, lab oratory testing, transporting, dispensing, distribution, or sale of cannabis or a cannabis product unless the person: 1) has a valid cannabis business permit from the city that authorizes the specific business and activity at specific location; 2) has a va lid business license issued to the entity that is listed on the cannabis business permit; and 3) is currently in compliance with all other applicable state and local laws and regulations pertaining to the cannabis business and cannabis activity. All cannabis business permits shall include a copy of a written notice to any existing tenant of the proposed business premises from the owner of the property of the intent to file a cannabis business permit application for those premises.

9-487.3. Disclosure of Financial Interest Holders Required.

Any and all financial interest holders must be disclosed to the City as part of any application for issuance and/or renewal of a cannabis business permit.

9-487.5. Change in business name.

No operator shall operate, conduct, manage, engage in, or carry on a cannabis business under any name other than the business name specified in the permit and/or any “doing business as” or “DBA”, or “fictitious business name” or “FBN”, provided in the permit application and/or business license.

Proof of the “DBA” or “FBN” filing with the County Clerk Recorder shall be required. Any approved changes and/or updates to the permit may require payment of fees as set by resolution of the City Council.

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9-488. Term of permit-Fees.
(a) A cannabis business permit shall be valid for two (2) years from the date of issue, unless otherwise suspended or revoked, and may be renewe d bi-annually thereafter, provided the permittee and application for renewal are in compliance with all of the provisions of this chapter as well as all administrative regulations adopted pursuant to section 9-497. (b) Cannabis business permit application fees and renewal fees shall be established by resolution of the city council as may be amended from time to time. Failure to timely submit fees and/or comply with the administrative regulations governing applications an d/or renewals shall be grounds for denial of application and/or renewal.

9-489. Effect of state license suspension, revocation, or termination.

Suspension of a license issued by the State of California, or by any of its departments or divisions, shall immediately suspend the ability of a cannabis business to operate within the city, until the State of California, or its respective departments or divisions, reinstates or reissues the State license within 90 days. Should the state license remain suspended for 90 days or longer, any permit issued pursuant to this chapter shall expire and be of no further force and effect. Should the State of California, or any of its departme nts or divisions, revoke or terminate the license of a cannabis business, such revocation or termination shall also revoke or terminate the ability of a business permitted pursuant to this chapter including the persons and entities set forth in section 9-490(c) to operate any cannabis business within the city for a period of five years from the date of such revocation or termination.

9-490. Denial and revocation.
(a) Revocation. A cannabis business permit may be revoked and/or suspended pursuant to the procedures of section 9 -120, and/or deemed abandoned or forfeited pursuant to the procedures of section 9 -495, for failing to comply with the terms of the permit, the applicable provisions of this chapter, this Code, city regulations, state law or regulations and/or any conditions of any other permit issued pursuant to this Code. (b) Denial. An application for a cannabis business permit may be denied where it fails to provide all required information, documentation and/or fees and/or where it does not or would not be able to comply with the applicable provisions of this chapter, this Code, city regulations and/or state law or regulations and/or where the applicant is otherwise ineligible for such permit.
(c) Effect of revocation and denial. Whenever an application for a permit is denied, no other similar application by such applicant or permittee will be considered for a period of one (1) year from the date of the denial of an application. Whenever a permit has been revoked, no other similar application by such permittee shall be considered for a period of five (5) years from either the date the notice of the permit revocation was mailed or the date of the final decision of the city to revoke the permit, whichever is later. The prohibitions of this subsection shall also apply to the following:

1. Any individual whose permit was revoked or whose application was denied who later becomes a director or officer of a corporation, profit or nonprofit, or a member 240

of a partnership or a person owning or possessing any portion of the shares of a corporation seeking to obtain a new permit.

2. A corporation, profit or nonprofit, whose permit was revoked, or application was denied, to any of its directors or officers or to any person who owned any portion of its shares, who attempts by way of a new corporation or using their individual names or becoming a member of a partnership or a director or officer or a person owning or possessing any por tion of the shares in another corporation seeking to obtain a new permit.
(d) Ineligibility. In addition to any other law, no person or entity shall be eligible for and/or receive a cannabis business permit if that person or entity, or any director or officer of that entity or a person who owned any portion of that entity’s shares, or any financial interest holder of that entity, engaged or engages in unpermitted and/or illegal cannab is activity involving sales, delivery and/or dispensing in the city, or had an ownership interest in any property set forth in section 13 -200.93(e)(5), in the five (5) years preceding an application under this chapter or during the application process. A determination of ineligibility under this sub -section (d) may be made by the City Manager and shall be based on the preponderance of the evidence . This prohibition shall not apply to a natural person who would otherwise be ineligible based on a criminal co nviction that has been dismissed, withdrawn, expunged or set aside or is otherwise exempted pursuant to sections 9 - 495(g)(10) and/or 9-496(b).

9-491. Appeals.

Notwithstanding any other provision of this code, only a decision by the city manager to suspend, revoke or deny a cannabis business permit under this chapter shall be subject to appeal, which shall be governed by the procedures set forth in Chapter IX of Title 2 of this code.

9-492. Prohibition on transfer of cannabis business permits.

In the event a permit holding cannabis business sells or transfers the business to a new owner and/or operates the business under a new entity and/or name not listed on the permit, the new owner must obtain a new cannabis business permit and business license prior to commencing or continuing operations. A cannabis business shall be deemed to have tran sferred to a new owner within the meaning of this section if person(s) or entities with controlling interest at the time the permit was first issued cease(s) at any time to possess controlling ownership interest and/or hold an ownership interest of less than fifty-one (51) percent.

9-493. City business license required.

Prior to commencing operations, a cannabis business and any financial interest holder therein shall each separately obtain and thereafter maintain a valid city business license pursuant to Chapter I of this title. Failure to hold a valid business license at all times shall render the cannabis business permit invalid.

9-494. Conditional use permit required.

No cannabis business permit shall be issued, and no person shall conduct a cannabis business unless a conditional use permit has been issued therefore pursuant to the provisions of Title 13, Chapter IX, Article 21 of this Code. Approval of a conditional use permit shall not waive any other 241

requirements of State or local law or regulation, including, but not limited, to the requirement to obtain a building permit, certif icate of occupancy, cannabis business permit and/or city business license.

9.494.5 Maximum cannabis retail storefront cannabis business permits.

A maximum of thirty five (35) storefront retail cannabis business permits may be issued by the City; provided, however, that City will only process applications which have passed the pre - application phase as of the effective date of this ordinance . Thereafter, no further storefront retail cannabis business permits for new locations may be issued by the City until the total number of operating licensed storefront retail establishments falls below ten (10), after which time the City may issue further cannabis business permits not to exceed ten (10) total active storefront retail cannabis business permits operating at one time.

9-495. Operating requirements for all cannabis businesses permitted under this chapter. (a) Records and recordkeeping.

1. Each owner and operator of a cannabis business shall maintain accurate books and records, detailing all of the revenues and expenses of the business, and all of its assets and liabilities. On no less than a quarterly basis or at any time upon reasonable request of the city, each cannabis business shall file a sworn statement detailing the number of sales by the cannabis business during the previous three (3) month period (or shorter period based upon the timing of the reques t), provided on a per -month basis. The statement shall also include gross sales for each month, and all applicable taxes paid or due to be paid.

Each owner and operator shall keep and preserve for a period of no less than seven (7) years, all records as m ay be necessary to determine the amount of such tax the operator may have been liable to collect and remit to the city.

2. Each owner and operator of a cannabis business shall maintain a current register of the names and the contact information (includ ing the name, address, telephone number, a copy of that person’s government issued identification, and email address) of anyone owning or holding an interest in the cannabis business, and separately of all the officers, managers, employees, agents and volu nteers currently employed or otherwise engaged by the cannabis business. The register required by this paragraph shall be provided to the city manager upon a reasonable request.

3. All cannabis businesses shall maintain an inventory control and reporti ng system that accurately documents the present location, amounts, and descriptions of all cannabis and cannabis products for all stages of the production or manufacturing, laboratory testing and distribution processes.

4. Subject to any restrictions under the Health Insurance Portability and Accountability Act (HIPAA), each cannabis business shall allow city officials to have access to the business’s books, records, accounts, together with any other data or documents relevant to its permitted cannabis activities, for the purpose of conducting an audit or examination. Books, records, accounts, and any and all relevant data or documents 242

will be produced no later than twenty -four (24) hours after receipt of the city’s request, unless otherwise stipulated by the city.

5. Each owner and operator of a cannabis business shall disclose to the City the names and addresses of each and every financial interest holder of that business within ten (10) calendar days of that person becoming a financial interest holder of the cannabis business, and thereafter shall notify the City within ten (10) business days if that person or entity ceases to be a financial interest holder. Each financial interest holder shall obtain a business license pursuant to section 9 -493 within thirty (30) days of becoming a financial interest holder of that business.

(b) Security measures.

1. A permitted cannabis bus iness shall implement sufficient security measures to deter and prevent the unauthorized entrance into areas containing cannabis or cannabis products, and to deter and prevent the theft of cannabis or cannabis products at the cannabis business. These security measures shall include:
a. Establishing limited access areas accessible only to authorized cannabis business personnel;
b. All cannabis and cannabis products shall be stored in a secured and locked room, safe, or vault, and shall be kept in a manner as to prevent diversion, theft, and loss;
c. Sensors shall be installed to detect entry and exit from all secure areas; d. Having a professionally installed, maintained, and monitored alarm system; e. Any bars to be installed on the windows or the doors of the cannabis business for security purposes, if permitted by the city, shall be installed only on the interior of the building;
f. Security personnel if utilized must be licensed by the State of California Bureau of Security and In vestigative Services Personnel, shall comply with the requirements of California Business and Professions Code Chapters 11.4 and 11.5 of Division 3, and have a valid business license from the city; and g. Each cannabis business shall have the capabilit y to remain secure and operational during a power outage and shall ensure that all access doors are not solely controlled by an electronic access panel to ensure that locks are not released during a power outage.

2. Each cannabis business shall identify a designated security representative/liaison to the city, who shall be reasonably available to meet with the city manager regarding any security related measures or and operational issues.

3. A cannabis business shall notify the city manager within twenty-four (24) hours after discovering any of the following:
a. Significant discrepancies identified during inventory, as set forth in the city’s administrative regulations;
b. Diversion, theft, loss, or any criminal activity involving the cannabis busi ness or any agent or employee of the cannabis business; or
c. The loss or unauthorized alteration of records related to cannabis, registering qualifying patients, primary caregivers, or employees or agents of the cannabis business and/or cannabis sales.

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(c) Restriction on alcohol sales. No person shall cause or permit the sale, dispensing, or consumption of alcoholic beverages on or about the premises of the cannabis business. (d) Compliance with laws. It is the responsibility of the owners an d operators of the cannabis business to ensure that it is, at all times, operating in a manner compliant with all applicable state and local laws, and any regulations promulgated thereunder. Nothing in this chapter shall be construed as authorizing any act ions which violate state law or local law with respect to the operation of a cannabis business or any site -specific, additional operating procedures or requirements which may be imposed as conditions of approval of the location of the cannabis business.
(e) Taxes. All cannabis businesses authorized to operate under this chapter shall pay all sales, use, business and other applicable taxes, and all license, registration, and other fees required under federal, state and local law. Each cannabis business shall cooperate with the city with respect to any reasonable request to audit the cannabis business’s books and records for the purpose of verifying compliance with this section, including, but not limited to, a verification of the amount of taxes required to be paid during any period. (f) Insurance. Permittee shall obtain and maintain at all times during the term of the permit comprehensive general liability insurance and comprehensive automotive liability insurance protecting the permittee in an amount of not less than one million dollars ($1,000,000.00) per occurrence, combined single limit, including bodily injury and property damage and not less than one million dollars ($1,000,000.00) aggregate for each personal injury liability, products-completed operations and each accident, issued by an insurance provider rated at least A -:VIII in A.M. Best and Company’s Insurance Guide and either admitted and authorized to do business in California or is listed on the California Department of Insurance’s List of Approved Surplus Line Insurers.

(g) Miscellaneous operating requirements.

1. Restriction on consumption. Cannabis shall not be consumed on the premises of any cannabis businesses or elsewhere in the city other than within private residences.

2. No cannabis or cannabis products or graphics depicting cannabis or cannabis products shall be visible from the exterior of any property issued a cannabis business permit, or on any of the vehicles owned or used as part of the cannabis business except as otherwise expressly allowed by this chapter. No outdoor storage of cannabis or cannabis products is permitted at any time.

3. Reporting and tracking of product and of gross sales. Each cannabis business shall have in place a point-of-sale tracking system to track and report on all aspects of the cannabis business including, but not limited to, such matters as cannabis tracking, inventory data, and gross sales (by weight and by sale). The cannabis business shall ensure that such information is compatible with the city’s record-keeping systems.

The system must have the capability to produce historical transactional data for review by the city manager.

4. All cannabis and cannabis products sold, distributed or manufactured shall be cultivated, manufactured, and tran sported by licensed facilities that maintain operations in full conformance with all state and local regulations.

5. There shall not be a physician located in or around any cannabis business at any time for the purpose of evaluating patients for the issuan ce of a cannabis prescription or card.
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6. Signage, notices, and advertising.
a. In addition to the requirements otherwise set forth in this section, business identification signage for a cannabis business shall conform to the requirements of this Code, including, but not limited to, seeking the issuance of a city sign permit.
b. Each entrance to a cannabis retail business shall be visibly posted with one clear and legible notice up to twelve (12) inches by eighteen (18) inches in size, indicating tha t smoking, ingesting, or otherwise consuming cannabis on the premises or in the areas adjacent to the cannabis business is prohibited. The word “cannabis” is allowed to be used up to two times on each of these specific notices. Letter height in the notice shall be limited to up to two (2) inches in size. All notice lettering shall be the same font and color. c. Business identification signage shall be limited to that needed for identification only.
d. The business shall at all times comply with the advertising and marketing restrictions of Business and Professions Code sections 26150 -26156, in addition to the requirements of this code.
e. Cannabis business advertising and/or marketing materials in the cit y shall comply with advertising, marketing and merchandising restrictions provided in California Code of Regulations sections 15040-15041.1.

7. Minors.
a. Persons under the age of twenty -one (21) years shall not be allowed on the premises of a cannabis business, except as otherwise specifically provided for by state law. It is unlawful and a violation of this chapter for any person to employ any person at or for a cannabis business who is not at least twenty -one (21) years of age.
b. The entrance to the cannabis business shall be clearly and legibly posted with a notice that no person under the age of twenty-one (21) years of age is permitted to enter upon the premises of the cannabis business except as specifically provided for herein.

8. Odor control. Odor control devices and techniques shall be incorporated in all cannabis businesses to ensure that odors from cannabis are not detectable off-site.

9. Display of permit and city business license. The original copy of the cannabis business permit issued by the city pursuant to this chapter and the city -issued business license shall be posted inside the cannabis business in a conspicuous location.

10. Background check. Every owner, manager, supervisor or employee of the cannabis business must submit fingerprints and other information deemed necessary by the city manager for a background check by the Costa Mesa police department to verify that person’s criminal history. No person shall be issued a permit to operate a cannabis business who has been convicted of a felony within the past seven (7) years, unless that felony has been dismissed, withdrawn, expunged or set aside pursuant to Penal Code section 1203.4, 1000 or 1385, or who is currently on probation or parole for the sale, distribution, possession or manufacture of a controlled substance.

Exempted from this prohibition is a conviction for a felony involving cannabis 245

and/or marijuana for which the underlying cannabis or marijuana offense has subsequently been designated a misdemeanor or infraction or decriminalized pursuant to the provisions of the Control, Regulate and Tax Adult Use of Marijuana Act or federal law.

11. Loitering. The owner and/or operator of a cannabis business shall prohibit loitering by persons outside the facility both on the premises and within fifty (50) feet of the premises.

12. Permits and other approvals. Prior to the establishment of any cannabis business or the operation of any such business, the person intending to establish a cannabis business must first obtain all applicable planning, zoning, building, and other applicable permits from the relevant governmental agency which may be applicable to the zoning district in which such cannabis business intends to operate.

13. Free samples. No cannabis business shall provide or cause to be provided any free sample of cannabis goods to any person within the city.

14. A licensed retailer may only sell ca nnabis goods, cannabis accessories, and licensees’ branded merchandise or promotional materials.

(h) Additional operating requirements for retail sale (storefront) businesses. In addition to every other requirement of this section, other than those s et forth in subsection (i) ( retail sale, non-storefront) that are expressly inapplicable, every business that sells cannabis as a storefront retailer shall comply with the following requirements:

1. All cannabis retail storefront operators are encouraged to have a licensed private security guard present at the premises twenty -four (24) hours per day. The security plan shall include at least one (1) licensed private security guard or guards who shall b e present at the premises at all times during operations, deliveries of any cannabis product to or from the premises, and transportation of cash to or from the premises, exterior lighting, and continuous video monitoring and recording of the interior and e xterior of the premises. Video surveillance recordings must also include video of all entryways and exits of the premises.

All video recordings shall be maintained for a minimum of ninety (90) days. At the request of the Chief of Police or designee, based upon site-specific concerns or safety incidents, at least one (1) licensed private security guard or guards may be required to be present at the premises twenty-four (24) hours per day.

2. Both the private security guard and the business personnel shall monitor the premises and the immediate vicinity of the premises to ensure that patrons immediately leave the premises and do not consume cannabis in the vicinity of the retail business or on the property or in the parking lot, and shall ensure that persons do not loiter, linger, or otherwise congregate within fifty (50) feet of the premises.

3. There shall be no on-site sales of alcohol or tobacco products, (excluding rolling papers and light ers) and no on -site consumption of food, alcohol, cannabis or tobacco by patrons.

4. Hours of operation shall be limited to: 7:00 a.m. to 10:00 p.m. daily , unless further restricted by conditions of approval. No licensed retail business shall be open to the public between the hours of 10:01 p.m. and 6:59 a.m. of any day. 246

5. The cannabis retail business shall notify patrons of the following both verbally and through posting of a sign in a conspicuous location:
a. Unlawful sale, barter or distribution of cannabi s is a crime and subject to a fine or arrest.
b. Loitering on and around the retail premises is prohibited by California Penal Code section 647 and that patrons must immediately leave the premises and not consume cannabis in the vicinity and/or on the property or in the parking lot.
c. A warning that patrons and/or employees may be subject to prosecution under federal cannabis laws, if applicable.
d. That the use of cannabis may impair a person’s ability to drive a motor vehicle or operate machinery and that doing so is illegal.

6. No one under the age of twenty -one (21) shall be allowed to enter the premises of a cannabis business unless the business holds a retail medical cannabis license (M - license) issued by the State.

7. No person shall be permitted to enter the prem ises without government -issued identification, and cannabis goods may not be provided to any person, whether by purchase, trade, gift, or otherwise, who does not possess a valid government-issued identification and who does not meet the age requirements of this Chapter.

8. Electronic age verification device required. Proof of age of every person other than employees entering the business shall be verified with an electronic age verification device, prior to entry of the retail area or delivery to that person. The electronic age verification device may be mobile or fixed, and shall be able to retain a log of all scans that includes the following information: date, time, and age. Said log shall be kept for a minimum of one hundred eighty (180) business days and all records shall be made available to the City Manager upon request.

9. Point-of-sale tracking required. The business shall facilitate the sale, making available, furnishing and/or delivery of cannabis goods with a technology platform that uses point -of-sale technology to track, and database technology to record and store, the following information for each transaction involving the exchange of cannabis goods between the business and consumer:
a. The date and time of transaction.
b. The first name and employee number of the employee who processed the sale of cannabis goods on behalf of the business.
c. A list of all the cannabis goods purchased, including the quantity purchased. d. The total amount paid for the sale, including the individual prices paid for cannabis or cannabis products purchased, and any amounts paid for taxes.

10. Cannabis retail businesses shall also record on the video surveillance system point - of-sale areas and areas where cannabis goods are displayed for sale.

11. Adequate signage shall clearly state who has inspected any cannabis product for pesticides, or other regulated contaminants, distributed at this location.

12. Shipments of cannabis goods may only be accepted during regular business hours.

13. Inventory shall be secured using a lockable storage system during non -business hours.

14. No cannabis product shall be visible from the exterior of the business. 247

15. All required labelling shall be maintained on all product, as required by State law, at all times.

16. A permitted commercial cannabis retail business shall have one hundred eighty (180) days after permit issuance by the city to commence operations, after which the permit shall be void and of no further force and effect. A cannabis retail business shall be considered nonoperational and abandoned after failing to r eport income and/or reporting no income to the city in any one quarter, ceasing to operate, losing the right to occupy the permitted premises or otherwise failing to maintain an on - going permitted business at the premises for a total of ninety (90) days in any twelve (12) month period. A notice of determination of abandonment shall be delivered to the premises of the retail business and is subject to appeal pursuant to Chapter IX of Title 2. The forgoing notwithstanding, a permitted commercial cannabis busi ness may temporarily suspend operations for a period of time not to exceed ninety (90) days as may be reasonably required to affect upgrades, modifications, repairs, and/or to remedy other real property related problems, as approved in writing by the director or city manager.

17. Obtain and maintain at all times during the term of the permit the insurance required pursuant to subsection (f) of this section in the minimum amounts of two million dollars ($2,000,000.00), and enter into an agreement approved by the city attorney to defend, with attorneys of city’s choosing, indemnify, release and hold harmless the city, its city council, boards, commissions, officers and employees from and against any and all claims, demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including, without limitation, attorneys’ fees, disbursements and court costs) of every kind and nature whatsoever which may arise from or in any manner relate (directly or indirectly) to the permittee or the permittee’s activities. This indemnification shall include, but not be limited to, damages awarded against the city, if any, costs of suit, attorneys’ fees, and other expenses incurred in connection with such claim, a ction, or proceeding whether incurred by the permittee, city, and/or the parties initiating or bringing such proceeding, and shall not be limited by the types and/or amounts of insurance required herein;

18. For an applicant with two or more employees, provide a notarized statement that the applicant will enter into, or demonstrate that it has already entered into, and abide by the terms of a labor peace agreement as otherwise required by Business and Professions Code section 26105.5.

(i) Additional operating requirements for retail sale (non -storefront) delivery businesses. In addition to every other requirement of this section, except only for subsection (h)(1) through (5) and (10) (retail sale, store-front), every business that sells and/or delivers cannabis as a non-store front retailer shall comply with the following requirements:

1. Commercial cannabis retail deliveries may be made only from a commercial cannabis retail business permitted by the City in compliance with this chapter, and in compliance with all State regulations.

2. All employees who deliver cannabis shall have valid identification and a copy of the retail business' cannabis business permit and State license at all times while making deliveries.
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3. All commercial cannabis retail businesses shall maintain proof of vehicle insurance for any and all vehicles being used to transport cannabis goods as required by State law.

4. Deliveries may only take place during normal business hours of the commercial cannabis retail business.

5. During delivery, the delivery employee shall maintain a physical or electronic copy of the delivery request and shall make it available upon request by the licensing authority and law enforcement officers. The delivery request documentation shall comply with State law.

6. A licensed delivery employee shall not leave the State of California while possessing cannabis products while performing his or her duties for the cannabis retailer.

7. A commercial cannabis retail business shall maintain a list of all deliveries , including the address delivered to, the amount and type of product delivered, and any other information required by the State.

8. A manifest with all information required in this section shall accompany any delivery person at all times during the delivery process and delivery hours.

9. Any delivery method shall be made in compliance with State law, as amended, including use of a vehicle that has a dedicated GPS device for identifying the location of the vehicle (cell phones and tablets are not sufficient).

10. Each delivery request shall have a receipt prepared by the commercial cannabis retail business with the following information:
a. Name and address of the commercial cannabis retail business. b. The name of the employee who delivered the order.
c. The date and time the delivery request was made.
d. The complete delivery addresses.
e. A detailed description of the cannabis goods requested for delivery including the weight or volume, or any accurate measure of the amount of cannabis goods requested.
f. The total amount paid for the delivery including any fees or taxes. g. At the time of the delivery, the date and time delivery was made, and the signature of the person who received the delivery.
h. No cannabis delivery vehicle shall display signs, decals or any other form of advertisement.
i. Inspections by an authorized City representative may be conducted anytime during regular business hours.

11. Delivery must be made to a physical address that is not on publicly owned land, a school, a day care, or a youth center.

12. The delivery employee shall not carry cannabis goods valued in excess of $5,000 at any time with no more than $3,000 of cannabis goods that are not already part of a customer order that was processed prior to leaving the premises.

13. Delivery must be made in pe rson by a direct employee of the licensed retailer. An independent contractor, third -party courier service, or an individual employed through a staffing agency would not be considered directly employed by the licensed retailer.

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9-496. Cannabis employees.

(a) Any person who is an employee or who otherwise works within a cannabis business must be legally authorized to do so under applicable state law. (b) No cannabis business or owner thereof may employ any person who has been convicted of a felony within the past seven (7) years, unless that felony has been dismissed, withdrawn, expunged or set aside pursuant to Penal Code section 1203.4, 1000 or 1385, or who is currently on probation or parole for the sale, distribution, possession or manufacture of a controlled substance. Exempted from this prohibition is a conv iction for a felony involving cannabis and/or marijuana for which the underlying cannabis or marijuana offense has subsequently been designated a misdemeanor or infraction or decriminalized pursuant to the provisions of the Control, Regulate and Tax Adult Use of Marijuana Act or federal law. (c) All employees must wear an identification badge while on the premises of the business, in a format authorized by the city manager. Any person employed by a single employer at multiple locations in the City may b e required to obtain only one identification badge.

9-497. Promulgation of administrative regulations.
(a) The city manager is also authorized to establish any additi onal administrative rules, regulations, policies, procedures and/or standards governing the issuance, denial or renewal of cannabis business permits, or concerning any other subject necessary to carry out the purposes of this chapter.
(b) Regulations promulgated by the city manager shall become effective upon the date of publication. Cannabis businesses shall be required to comply with all state and local laws and regulations, including, but not limited to, any rules, regulations policies, procedures and/or standards adopted by the city manager. (c) Such administrative rules, regulations and/or standards may include establishing standards and timing for application processing, including but not limited to providing priority for existing licensees in good standing.

9-498. Inspection and enforcement.
(a) The city manager is charged with enforcing the provisions of the Costa Mesa Municipal Code, or any provision th ereof, and may enter the location of a cannabis business at any time during the hours of operation without notice, and inspect the location of any cannabis business as well as any recordings and records required to be maintained pursuant to this title or under applicable provisions of state law. (b) It is unlawful for any person having responsibility for the operation of a cannabis business, to impede, obstruct, interfere with, or otherwise not to allow, the city to conduct an inspection, review or copy records, recordings or other documents required to be maintained by a cannabis business under this chapter or under state or local law.

It is also unlawful for a person to conceal, destroy, deface, damage, or falsify any records, recordings or other docum ents required to be maintained by a cannabis business under this chapter or under state or local law.

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9-499. Violations.

(a) Violations declared a public nuisance. Each and every violation of the provisions of this chapter is hereby deemed unlawful and a public nuisance. (b) Each violation a separate offense. Each and every violation of this chapter shall constitute a separate violation and shall be subject to al l remedies and enforcement measures authorized by the Costa Mesa Municipal Code. Additionally, as a nuisance per se, any violation of this chapter shall be subject to injunctive relief, any permit issued pursuant to this chapter being deemed null and void, disgorgement and payment to the city of any monies unlawfully obtained, costs of abatement, costs of investigation, attorney fees, and any other relief or remedy available at law or in equity. The city may also pursue any and all remedies and actions avai lable and applicable under state and local laws for any violations committed by the cannabis business or persons related to, or associated with, the cannabis activity. Additionally, when there is determined to be an imminent threat to public health, safety or welfare, the city manager, or the chief of police, may take immediate action to temporarily suspend a cannabis business permit issued by the city, pending a hearing before the city council.
(c) Criminal penalties. Each and every violation of the provisions of this chapter may be prosecuted as a misdemeanor and upon conviction be subject to a fine not to exceed one thousand dollars ($1,000.00) or imprisonment in the County Jail for a period of not more than twelve (12) months, or by both such fine an d imprisonment. Each day a violation is committed or permitted to continue shall constitute a separate offense. (d) Remedies cumulative and not exclusive. The remedies provided herein are not to be construed as exclusive remedies. The city is authorize d to pursue any proceedings or remedies provided by law.

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ATTACHMENT 5

CHAPTER IX. SPECIAL LAND USE REGULATIONS. ARTICLE 21. LOCATION OF

CANNABIS DISTRIBUTING, MANUFACTURING, RESEARCH AND DEVELOPMENT,

TESTING LABORATORIES, RETAIL STOREFRONT AND RETAIL NON-

STOREFRONT USES

13-200.90. Purpose.

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iv. Where a legal nonconforming residential unit or units have been developed on a property zoned for non-residential use, the property would not be considered residential when establishing a separation from cannabis storefronts.
(2) All distances referenced in (e)(1) shall be measured in a straight line from the premises where the cannabis retail use is to be located to the closest property line of a K-12 school, playground, child daycare, homeless shelter, or youth center or property zoned for residential use, or from the premises of a lawfully existing cannabis retail storefront use.
i. For purposes of this sub-sub-section, the property line of a playground shall be a thirty (30) foot radius from the exterior physical boundaries of the playground equipment area;
(3) All distances shall be measured without regard to the boundaries of the city and and/or intervening structures or other barriers;
(4) At a property as for which the zoning administrator, director or planning commission determines, based on a preponderance of the evidence, that unpermitted and/or illegal cannabis activity involving sales, delivery and/or dispensing has taken place at any time in the 365 days preceding an application under this Article. If an unpermitted and/or illegal cannabis activity has existed on a property no cannabis business may be permitted on that property unless 365 days has elapsed since that unpermitted and/or illegal cannabis activity has vacated the property, and the owner of that property has compensated the City for any and all expenditure of public funds and resources, including all costs, expenses (including but not limited to the salaries of peace and/or code enforcement officers) and/or attorney’s fees, incurred in investigating, abating or attempting to abate the unpermitted use or uses, whether or not any type of civil, criminal or administrative proceedings have been commenced against the property, provided however if the owner of the property is required to evict that use, the 365 days shall begin to run from the date of the filing of an unlawful detainer complaint, in which case a permit may be issued after the 365 days had elapsed and that use is no longer occupying the property. (5) A determination and/or finding under sub-section (e)(4) is subject to the appeal provisions of Chapter IX of Title 2 of this Code.
(6) The nonconforming provisions contained in Chapter X of this Code pertain to cannabis uses except as follows:
i. When an approved retail cannabis storefront conditional use permit location which lawfully met separation requirements at the time of the submission of a cannabis business permit application for the subject property does not conform to the separation and the permitted cannabis retail operation is discontinued or abandoned for more than one hundred eighty (180) days, or when a permitted cannabis use is replaced in whole or part for any period of time by any other use, the conditional use permit shall be null and void after the permittee has had an opportunity for a hearing before the issuing officer as provided in Chapter II of Title 9. (f) Retail storefront uses shall be subject to the following development standards in addition to those contained in Chapter VI of Title 9:
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(1) Opaque window coverings unless required by the City for security purposes are prohibited;
(2) Permanent security or safety bars shall not be placed on any interior or exterior windows or door, unless required by the City for security purposes; (3) Directional signage to the use including but not limited to A-frame signs, sandwich board signs, banners, or flags are prohibited;
(4) No use shall advertise by having a person holding a sign and advertising the business to passersby, whether such person is on the premises of the commercial cannabis business or elsewhere including, but not limited to, the public right-of- way;
(5) Uses shall comply with the landscaping requirements set forth in Chapter VII of this title including bringing the site landscaping into conformance when feasible as determined by the director;
(6) Parking requirements shall be subject to Section 13-89; (7) The hours of operation may be established as part of the planning application subject to the final review authority and may be more restrictive than those set forth in Chapter VI of Title 9. Modification of operation hours when established as part of the planning application shall be subject to an amendment of the planning application;
(8) Drive-through services or walk-up window services are prohibited; (9) Outdoor seating or patio areas are prohibited;
(10) Special events that include live entertainment, dancing, and/or amplified music, or that are otherwise visible and/or audible from the public right-of-way, are prohibited;
(11) All cannabis products shall be secured after business hours in a locked container under 24-hour video surveillance; and
(12) For uses within two hundred (200) feet of a residential zone, all exterior lighting shall be shielded and/or directed away from residential areas. In addition, trash facilities shall be screened from view and designed and located appropriately to minimize potential noise and odor impacts to adjacent residential areas. (g) Non-storefront uses shall be subject to the following development standards in addition to those contained in Chapter VI of Title 9:
(1) Uses may operate independently from a retail storefront or as a part of, and in conjunction with, a permitted storefront, distribution, or manufacturing facility; (2) Parking requirements shall be subject to Section 13-89 and shall also include sufficient parking spaces for delivery vehicles;
(3) All deliveries to customers shall be completed by 10:00 p.m.; and (4) The general public shall not be permitted to enter the premises of a non-storefront retail use.
(h) Except as specifically authorized in this article, all other cannabis retail uses such as but not limited to lounges and cafes are expressly prohibited in the city. (i) No person shall engage in any use set forth in this article unless that use is specifically authorized by Chapter VI of Title 9 of this Code.
(j) Any cannabis use, including but not limited to those involving sale, delivery and/or dispensing, that is not permitted, licensed and otherwise in full compliance with all applicable provisions of this Code and state and local law, shall not be considered a 255

legally non-conforming use pursuant to, and notwithstanding any contrary provisions of, Chapter IX of this title.

13-200.94. Declaration of public nuisance.

13-200.95. Violations.

Violations of this article shall be punishable pursuant to the provisions of section 13-16 in addition to any other remedy available at law or in equity.

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ATTACHMENT 6

EXHIBIT A

CHAPTER VI. CANNABIS BUSINESS PERMITS

9-481. Purpose and intent.

9-482. Legal authority.

9-483. Cannabis business activities prohibited unless specifically authorized by this chapter.

9-484. Compliance with laws.

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9-485. Definitions.

Cannabis business permit means a regulatory permit issued by the city pursuant to this chapter to a cannabis business, and is required before any cannabis activity may be conducted in the city.

Cannabis goods means cannabis and/or cannabis products.

Caregiver or primary caregiver has the same meaning as that term is defined in section 11362.7 of the California Health and Safety Code.

City manager shall mean the city manager of the city or designee.

Director shall mean the city’s Director of the Economic and Development Services department or designee, unless otherwise specified.

Dispensing means any activity involving the retail sale of cannabis or cannabis products.

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Financial interest holder shall have the same meaning as set forth in Title 4, Division 19, section 15004 of the California Code of Regulations.

Free sample means any amount of cannabis goods provided to a patron of a business or member of the public without cost or payment or exchan ge for any other thing of value.

Homeless shelter has the same meaning as emergency shelter.

Labor Peace Agreement has the same meaning set forth in Business and Professions Code section 26001.

Manufacturing site means a location where cannabis products are manufactured.

Marijuana means “cannabis,” as that term is defined in this chapter.

Marijuana business and/or cannabis business means any business or operation which engages in any marijuana or cannabis activity.

Marijuana business permit has the same meaning as cannabis business permit.

Person with an identification card shall have the meaning given that term by California Health and Safety Code section 11362.7.

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