Cotati City Council
Agenda Staff Report
Item type: CONSENT CALENDAR (ACTION)
To: City Council
Subject: Resolution granting the City Manager Authority to extend of the previously approved Commercial Cannabis Retail and Distribution Permit for Steve Monahan, (DBA IndyThree) at 8145 Gravenstein Highway in the Commercial Gravenstein Highway (CG) Zoning District, PA21/22
Date: August 23, 2022
Written by: Noah Housh, Director of Community Development Recommendation
It is recommended that the City Council adopt a resolution granting the City Manager the authority to extend the previously approved Commercial Cannabis Retail and Distribution Permit, allowing Steve Monahan (DBA Indythree) to operate a retail cannabis sales facility at 8145 Gravenstein Highway in the Commercial, Gravenstein Highway (CG) Zoning District.
Background
In October 2016, a formal application to develop the property at the corner of Alder Avenue and HWY 116 (now addressed as 8145 Gravenstein Highway) was filed with the City proposing a 6,000 square-foot commercial building and a 125-unit assisted living facility.
On February 13, 2018, the Cotati City Council approved regulations to allow for certain commercial cannabis operations in the City, limiting the number and location of specific cannabis business types. Retail locations were (essentially) restricted to the west side of Cotati, and further limited based on their proximity to other uses.
On June 12, 2018, Steve Monahan, doing business as Indythree, LLC was granted approval for a Cannabis Retail and Distribution permit to operate from undeveloped property located at 8145 Gravenstein Highway in the Commercial, Gravenstein Highway (CG) Zoning District. This approval was conditioned upon execution of a formalized agreement to develop the property with a retail building suitable to house a commercial cannabis retail distribution use, which was being proposed as a component of the larger 125-unit assisted living facility project.
On November 13, 2018, the Cotati City Council approved an Agreement to Implement Requirements of the Commercial Cannabis Permit issued to Indythree, LLC, and authorized the City Manager to execute the Agreement. This Agreement acknowledged it is in the City’s best interest to ensure that development of the site is completed in a timely manner and included a schedule of milestones that must be met in order for Indythree, LLC to retain their Commercial Cannabis Permit. This agreement further identified that if certain milestones were not met, the City Council has grounds for revocation of the Commercial Cannabis Permit. The Agreement also provided Indythree, LLC and Steve Monahan assurances that, if all milestones were met, or milestones that cannot be met have been diligently pursued, the Commercial Cannabis Permit will be extended.
On September 16, 2019, the Cotati Planning Commission recommended City Council approval of a Mitigated Negative Declaration, Zoning Code Text Amendment, Use Permit, Design Review and a Lot Line Adjustment to allow the development of the property located at 8145 Gravenstein Highway with a 125-unit assisted living facility and a separate 4,000 square foot retail location intended to house the approved Commercial Cannabis Retail and Distribution operation.
On October 22, 2019, the Cotati City Council supported the Planning Commission recommendation and approved the Assisted Living and Commercial Cannabis Retail location project.
On November 11, 2019, the City Council conducted the second reading of the re-zoning ordinance and 30-days after this action, all approvals were in place to allow the project to move to submit building permits. Unfortunately, shortly after City Council approval of the Assisted Living/Retail Facility project, the applicant informed City staff that the project was unlikely to move forward due to the economic impacts of the COVID-19 pandemic. City staff encouraged the applicant to pursue alternative methods to implement the Cannabis Retail and Distribution permit approval in the approved location. In response, the applicant began to explore improving the existing buildings on the property, both to house the Cannabis retail facility and to provide additional commercial space for other adjoining uses.
In June of 2020, the approved Cannabis Retail and Distribution permit technically expired given that all of the milestones had not been met; however the City Council has the authority to provide an extension.
On September 17, 2020, the applicants applied for (and were subsequently issued) building permits to begin repairs to the existing buildings on-site (which were in a state of severe disrepair) while the City reviewed site and building design changes proposed under a pending Design Review application.
On September 22, 2020, the Cotati City Council adopted a resolution tolling the expiration of permit approvals which may occur during the time period of the COVID-19 Emergency Declaration. This action was retroactive to the March 2020 time period when the emergency declaration was made by the City Council.
On October 19, 2020, the applicants filed a Design Review application proposing to make changes to the property at 8145 Gravenstein Highway, including site and building improvements to facilitate the future use of the three existing buildings, one of which is intended to house the Retail Cannabis and Distribution Use approved on-site. This application is currently under review by the Community Development Department.
On January 26, 2021, staff presented a request for extension of the previously granted Cannabis Retail Sales and Distribution Permit to the City Council for approval. After reviewing the provided information, the City Council expressed concerns with granting an extension of the Cannabis permit without having a more complete understanding of the structure and site improvements now proposed to house the retail cannabis facility. The Council further requested staff provide details regarding options for granting a retail cannabis permit to a different operator, given the delays experienced in implementing this approval. This request included direction that this information was to be brought back before the City Council within 90-days.
On April 13, 2021, the City Council considered the request for extension of the approved Cannabis Retail Sales and Distribution permit. After considering this request, the City Council granted a 240-day extension, but directed the applicant to come back before the City Council to request any additional time needed to complete the on-site construction and begin Dispensary operations.
On June 21, 2021, the Planning Commission approved Design Review of the proposed building and site improvements including construction of a new parking lot to serve the existing buildings; modification of the parapet to improve the roof lines of two of the structures; new siding, trim, lighting, doors and windows on all three of the buildings; landscaping of the entire site and pedestrian and bicycle serving improvements on-site and along Alder Avenue.
On October 12, 2021, the City Council granted the applicant an additional 240-day extension on the approved Cannabis Retail and Distribution permit (to June 8, 2022). The previous extension of 240-days was not adequate to allow the project applicant to go through the Design Review process, formalize the building permit submittal, draft the legal documentation for the public improvements and dedications and construct all required on-site improvements. This would have been challenging during a typical development process and the Covid-19 supply chain impacts and labor shortages have made construction and occupancy of the use impossible within the Council allotted 240-days according to the applicant. The City Council resolution also granted the City Manager the ability to issue a one-time 90-day extension, provided the applicant was showing substantial progress on completion of the improvements.
Prior to the expiration of the second 240 day extension, the applicant requested a 90 day extension, which was granted after carefully evaluating the project status. Therefore, the current permit expiration date is approximately September 8, 2022
Analysis/Discussion
It is expected that all improvements will be completed by the first week of October 2022.
However, issuance of a Caltrans encroachment permit for minor improvements along the project frontage has been problematic. Additionally, PG&E needs to install a new pole mounted transformer on Highway 116, requiring approvals from both PG&E and Caltrans. As a point of reference, the City has also been trying to obtain an encroachment permit from Caltrans to build a Caltrans approved parking lot. This permit was just issued after over 18 months, so it’s clear that Caltrans has significant issues at this time processing encroachment permits.
Although the applicant is optimistic that the encroachment permits will be issued and work completed by early October, it is recommended that authority for further permit extensions be delegated to the City Manager, provided the applicant continues to show clear progress to completion. The request from the applicant, as well as the State approved Cannabis Permit, are attached to this report.
Financial Considerations
There are no direct financial impacts to the City’s General Fund associated with the extension of the current permit approval. Upon implementation of the approved use, City staff anticipates direct sales and cannabis tax benefits to the General Fund, and the applicant previously provided a summary of the anticipated tax revenues associated with their 2018 application. While the assumptions of the market study that supported those projections may not hold in today’s environment (due to changes in the cannabis market and the opening of competing cannabis retail uses), staff anticipates tax benefits from the implementation of the second allowable cannabis retail facility opening and operating within the City. Further, granting authority to the City Manager to extend this permit is seen as the most expeditious method to achieve such implementation.
Environmental Issues
Approval of the requested extension of the previously approved Cannabis Retail and Distribution Permit is found to qualify for a Class 1 and Class 4 Categorical Exemption under Sections 15301 (Existing Facilities) and 15304 (Minor Alterations to Land) of the California Environmental Quality Act (CEQA). Specifically, it is found to qualify given that the project would occupy an existing structure on a previously developed parcel requiring minor alterations and improvements to facilitate the approved use.
Attachments:
Indythree LLC - Timeline Extension Request Letter (PDF) Jane Dispensary - State Cannabis License (PDF)