Cotati City Council
Agenda Staff Report
Item type: CONSENT CALENDAR (ACTION)
To: City Council
Subject: Commercial Cannabis Ordinance Amendments
Date: April 26, 2022
Written by: Damien O'Bid, City Manager
Recommendation
It is recommended that the City Council adopt an ordinance to amend the commercial cannabis municipal code, including allowing retailers to have commercial cannabis cafe/lounges under the specified conditions, streamlining permitting of Level 2 manufacturing, and other general code cleanup.
Background
California’s laws regulating cannabis were substantially revised in 2017 by comprehensive new legislation known as the Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA).
MAUCRSA established a uniform licensing regime for both medical and adult-use cannabis effective Jan 1, 2018. Consisting of two separate bills sponsored by the Governor’s office (SB 94 and AB 133), MAUCRSA supplanted prior legislation known as MCRSA (formerly MMRSA), which applied only to medical cannabis. It also made adjustments to California’s legalization law, the Adult Use of Marijuana Act (AUMA) a.k.a. Prop 64, consistent with the intent of the initiative.
In 2018, the City of Cotati (City) adopted Ordinance 883, which added Section 17.42.200 (Commercial Cannabis Uses and Requirements) to the land use chapter of the City Municipal Code. This allowed up to two cannabis retail permits in the City, one of which could be a microbusiness. At this time, the City has issued two retail cannabis permits; Mercy Wellness and Red’s Dispensary. Mercy Wellness has been in continuous operation as an adult use and medical dispensary, operating with a City microbusiness permit, since the adoption of the commercial cannabis land use code. Red’s is permitted by the City as a retail location, and is currently under construction with operation expected to commence by summer/fall of 2022.
Since 2018, the commercial cannabis industry has evolved, so staff have proposed changes to meet the needs of our local businesses. During the initial adoption of the commercial cannabis land use code, the potential for on-site consumption was discussed. However, given the unknown nature of the adult use cannabis industry at that time, the consensus was to take this in stages as we gain more experience with this land use. Additionally, the police were still reviewing methods to determine the degree of intoxication that would be defensive in court if someone is driving under the influence. In the intervening years, cannabis retail with appropriate controls have proven to have no significant issues. Also, while there is no breathalyzer test like there is for alcohol, the accepted method to determine degree of intoxication is a field sobriety test, as is used when intoxication by non-alcoholic substances is suspected.
In 2023, large cultivation sites will be allowed in the state, which will likely accelerate the trend for cannabis to become a commodity. Sonoma County will need to differentiate itself as an area for higher-end brands and experiences, similar to the well-established wine industry. One way this can be done is through lounges or tasting areas, particularly with an experiential element. Locally, Santa Rosa currently allows on-site consumption lounges. Statewide, San Francisco, West Hollywood, Imperial City, Palm Springs, Coalinga and Lompoc have also permitted on-site consumption lounges.
The State is currently considering changes that could impact the proposed tasting café/lounges.
The Bureau of Cannabis Control (BCC), which regulates cannabis in California, currently operates under emergency regulations. Recently, the BCC readopted the existing emergency regulations and issued updated permanent regulations for public comment until April 19, 2022. The proposed regulations, if adopted in their current form, would allow the sale of non-cannabis, non-alcoholic prepackaged food and clarify the existing practice at some consumption lounges to permit delivery of outside food and beverages.
Separately, Assembly Member Bloom has introduced AB 1034 (Cannabis: retail preparation, sale, or consumption of non-cannabis food and beverage products). This bill, if passed by the State Legislature and signed by the Governor, would authorize a local jurisdiction to allow for the preparation or sale of non-cannabis food or beverage products, as specified, by a licensed retailer or microbusiness in the area where the consumption of cannabis is allowed. However, the ability to have on-site consumption is still subject to the local jurisdictions’ approval.
Prior to bringing the proposed ordinance to the Planning Commission, staff reached out to all currently permitted cannabis businesses in Cotati to allow them to comment on the draft ordinance. The comments received on the ordinance are attached to this staff report and were considered in the drafting of the ordinance.
The primary comments raised by the Planning Commission included:
1. How would the City review consumption lounge applications to ensure the various potential issues (such as smoke handling and responsible service) are appropriately addressed?
Staff responded that any cannabis retailer (we have a current limit of 2 in the City) would need to amend their cannabis business permit, which would be subject multiple review steps to ensure issues are addressed. This includes submittal of the amended permit package to the City for staff review and then ultimately City Council review and approval to allow the use. The ordinance is written to address public safety and other areas of concern from a policy perspective, while allowing the businesses to propose innovative methods that ensure responsible service and safe rides home to protect the customer and the public.
2. How would the Consumption Lounge manage service to customers who may arrive under the influence (such as a customer who has already been drinking alcohol)? Staff responded that while State law prohibits sale of alcohol at a cannabis retailer or Consumption Lounge, that scenario would need to be considered in the development of a responsible service program.
On April 12, 2022, the City Council introduced the cannabis ordinance. The primary comment was regarding the need to see the applications to understand how cannabis lounges plan to address potential public safety and nuisance issues.
Analysis/Discussion
The proposed ordinance changes, in summary, includes the following:
1. Various non-substantive clean-up and clarifications of the existing commercial cannabis ordinance.
2. Removing the Use Permit requirement for Level 2 (Volatile) Manufacturing, including Microbusinesses.
3. Adding the Commercial Cannabis Café/Lounge use as an available accessory use to a retailer or microbusiness with retail activity, with City Council approval.
4. Expanding operating hours for commercial cannabis retailers to be consistent with allowable hours under state law.
5. Modifying the Smoking Ordinance to allow for smoking or vaping at Cannabis Consumption Lounges/Cafes with the specified conditions and controls.
The proposed ordinance does not expand the number of commercial cannabis permits issued by the City. The proposed Cannabis Consumption Lounge/Café must be located on the same legal parcel as the retailer and/or microbusiness with a retail activity. Currently, the State requires the Cannabis Consumption Lounge/Café to be located within the same premises as the permitted retailer and/or microbusiness with a retail activity.
Removal of the Use Permit for Level 2 Manufacturing
After processing many Commercial Cannabis Permit applications, staff have found that the Commercial Cannabis Permit application contains essentially the same material that is needed for a Use Permit. Therefore, requiring a Use Permit requires additional time and money for the applicant, but doesn’t appear to add any community benefit. Additionally, the City Council approves the Commercial Cannabis Permit, so requiring the Planning Commission to then review the Use Permit application could create a conflict if the Planning Commission were to deny a Use Permit for a use permitted by the City Council. Finally, the commercial cannabis ordinance allows the City to revoke the commercial cannabis permit for businesses that refuse to follow the local requirements. However, the related Use Permit entitlement could potentially run with the land, depending on interpretation, adding additional uncertainty into the permitting process. For all of these reasons, staff have proposed changes that would eliminate the Use Permit requirement and rely on the Commercial Cannabis Permit process, which would consolidate all cannabis permitting at the City Council.
Adding Commercial Cannabis Café/Lounge as an available accessory use Currently, state law and regulations allow for on-site consumption, subject to certain conditions, within the state licensed premises of a retailer or microbusiness with retail activity. One of the primary conditions limiting this is the local jurisdiction permitting on-site consumption. On-site consumption is only permitted for ages 21 or older, so medical patients between 18-20 are not allowed in a consumption lounge. Additionally, while a consumption café/lounge is within the licensed premises of a retailer, the actual cannabis retail activity occurs in a different section of the premises. For the proposed ordinance revision, a significant amount of time was spent reviewing public safety, as well as access and retail considerations for the consumption lounge.
One consideration was how customers travel from the retail area to the consumption café/lounge area. For safety reasons, it’s preferable that the customer internally access the consumption café/lounge area after purchasing cannabis, or have the cannabis delivered via secure mechanical or pneumatic means.
While non-cannabis products currently cannot be prepared or sold in a consumption café/lounge, the allowance for this is likely to occur later this year. Currently, in other jurisdictions, noncannabis food is typically delivered. However, preparation or sale of non-cannabis food and beverage would likely be a beneficial activity, so it is proposed to be allowed when permitted by the state.
Lastly, while the cannabis retail space is limited by city ordinance to 4,000 square feet, with up to 200 square feet of non-cannabis retail, the proposed consumption café/lounges do not contain a restriction on floor area. The size of the consumption café/lounge instead would be evaluated with the review and City Council approval of the commercial cannabis permit. The state requires that the cannabis café/lounge is within the licensed premises, and the proposed ordinance requires that they are within the same legal parcel of land.
If recommended by the Planning Commission and adopted by the City Council, the two allowed retail/microbusiness locations could expand with on-site consumption through an amendment of their commercial cannabis permit, which would need to be approved by the City Council.
Expanded Operational Hours for Cannabis Storefront Retailers The existing ordinance limited operating hours, primarily due to a previously existing church use that no longer exists in the same retail center as Mercy Wellness. Given the controls and positive operational experience to date, as well as the fact that the conflicting use no longer exists, staff proposes that operating hours align with state law, which are 8 am to 10 pm. This expands hours from the currently City-limited operating hours of 10 am to 7 pm. This change also includes associated cannabis consumption cafes/lounges and delivery operations.
Modifying the Smoking Ordinance
Staff also spent considerable time considering the implications of consumption by smoking/vaping as well as the possibility of edibles. In either case, responsible service of cannabis is a key consideration, similar to alcohol in a bar. Smoking/vaping effects are immediately apparent and easier to monitor, while intoxication with edibles can be significantly delayed and likely takes a different strategy to effectively monitor. Therefore, a robust retailer program to ensure responsible service and safe rides home is a key consideration for any business allowed to have on-site consumption. Cannabis does not have a breathalyzer test to determine sobriety, so from a police perspective this would be determined through a field sobriety test if pulled over for suspected driving under the influence. Also, because intoxication by smoking or vaping is easier to monitor, it is believed to be the preferred and most common method of consumption in lounges. Therefore, an exception under the City’s smoking ordinance was required to permit this use. While this only allows cannabis under very specific circumstances, it is not unlike cigar lounges or similar uses common in other jurisdictions. The primary consideration here is mitigating the smell and exposure to secondhand smoke.
Financial Considerations
While the ultimate revenue effect of the ordinance changes are not known, the addition of cannabis café/lounges is expected to generate more revenue for the cannabis retail businesses, largely through increased smaller on-site sales for “tasting” which would likely convert to sales for off-site use. In the longer term, the proposed changes are expected to allow our retail businesses the opportunity to differentiate themselves in the rapidly changing legal cannabis market in California and hopefully encourage the growth of local businesses in Cotati that continue to contribute to the community.
Environmental Issues
The proposed ordinance to amend the Land Use Code to streamline permitting of level 2 manufacturing and microbusinesses, allow for cannabis consumption cafes/lounges associated with cannabis retail businesses, including amendments to the smoking ordinance and associated edits to clarify the commercial cannabis ordinance fulfills certain policies and objectives identified in the 2015 General Plan and Housing Element, and is consistent with the program level Final Environmental Impact Report (SCH# 2013082037) for the Cotati General Plan Update (certified on March 24, 2015 (Resolution No. 2015-11)). The Planning Commission recommended that no further environmental review is required in accordance with Section 15168 of the CEQA Guidelines.
Attachments:
Mercy Wellness Comments (PDF)
Santa Rosa Arts Center Mercy OSC Letter of Support (PDF) Veterans Cannabis Group Onsite Consumption Lounge Support Letter (PDF) Letter of Support for Mercy Wellness of Cotati On-Site Consumption Lounge (1-259) (PDF) Mercy OSC Handwritten Letters of Support (3-18-22 to 4-7-22) (PDF) Mercy OSC Handwritten Letters of Support (As of 3-17-22) (PDF) PC - 2022 - 4 (PDF)
PC Reso Exhibit 1 (PDF)