Cudahy City Council
July 2, 2024

AGENDA

A REGULAR MEETING

OF THE CUDAHY CITY COUNCIL
and JOINT MEETING of the
CITY OF CUDAHY AS SUCCESSOR AGENCY and HOUSING SUCCESSOR AGENCY

TO THE CUDAHY DEVELOPMENT COMMISSION
Tuesday, July 2, 2024 – 6:30 P.M.

Written materials distributed to the City Council within 72 hours of the City Council meeting shall be available for public inspection at www.cityofcudahy.com In compliance with the Americans with Disabilities Act (ADA) if you need special assistance to participate in this meeting, you should contact the City Clerk’s Office at (323) 773-5143 at least 72 hours in advance of the meeting.

Rules of Decorum
Under the Government Code, the City Council may regulate disruptive behavior that impedes the City Council Meeting.

Disruptive conduct may include, but is not limited to:
• Screaming or yelling during another audience member’s public comments period; • Profane language directed at individuals in the meeting room; • Throwing objects at other individuals in the meeting room; • Verbal altercations with other individuals in the meeting room; and • Going beyond the allotted three-minute public comment period granted.

When a person’s or group’s conduct disrupts the meeting, the Mayor or presiding officer will request that the person or group stop the disruptive behavior and WARN the person or group that they will be asked to leave the meeting room if the behavior continues.

If the person or group refuses to stop the disruptive behavior, the Mayor or presiding officer may order the person or group to leave the meeting room and may request that those persons be escorted from the meeting room. Any person who, without authority of law, willfully disturbs or breaks up a City Council meeting is guilty of a misdemeanor. (Pen. Code, § 403.)
Jose R. Gonzalez, Mayor
Elizabeth Alcantar, Vice Mayor
Martin U. Fuentes, Council Member
Cynthia Gonzalez, Council Member
Daisy Lomelí, Council Member
This meeting will be conducted in
person, telephonically, and
electronically.

Council Chambers/Bedwell Hall
5240 Santa Ana Street
Cudahy, CA 90201
Teleconference Phone Number:
1 (669) 900-6833
Meeting ID: 846 5323 8079
https://us06web.zoom.us/j/84653238079

City of Cudahy
City Council and Successor Agency
Regular Meeting Agenda
July 2, 2024, at 6:30 P.M.

1. CALL TO ORDER

2. ROLL CALL
Council / Agency Member Fuentes
Council / Agency Member Gonzalez
Council / Agency Member Lomelí
Vice Mayor / Vice Chair Alcantar
Mayor / Chair Gonzalez

3. APPROVAL OF AGENDA

4. PLEDGE OF ALLEGIANCE

5. LAND ACKNOWLEDGMENT
We would like to acknowledge that the land we inhabit today was once known as Tovangaar, the home of the Gabrieleño-Tongva people. We show our respects to the Gabrieleño-Tongva people, as well as all Indigenous people, past, present, and future, and honor their labor as original caretakers of this land. We commit to uplifting the Gabrieleño-Tongva people, invite you to acknowledge the history, and join us in caring for this land.

6. PRESENTATIONS
A. Proclamation to Transtech Engineers, Inc 35-year Anniversary B. Proclamation declaring July 7th as Cudahy Rent Stabilization Day

7. PUBLIC COMMENTS
(Each member of the public may provide a public comment in person, telephonically or electronically.

In person participants must submit one comment card if they wish to address the City Council. Only speakers that submit a comment card within the first 20 minutes of the meeting will be permitted to speak. Remote participants may provide public comment by clicking the hand icon on Zoom or pressing star (*) nine (9) on the telephone, if they wish to address the City Council. Members of the public are permitted to speak for three (3) minutes concerning items under the City Council’s jurisdiction, including items on the council agenda.)
(Any person who, without authority of law, willfully disturbs or breaks up a City Council meeting is guilty of a misdemeanor. (Pen. Code, § 403).)

8. CITY COUNCIL COMMENTS / REQUESTS FOR AGENDA ITEMS (Each Council Member is limited to three minutes.)

City of Cudahy
City Council and Successor Agency
Regular Meeting Agenda
July 2, 2024, at 6:30 P.M.

(This is the time for the City Council / Agency to comment on any topics related to “City Business,” including announcements, reflections on city / regional events, response to public comments, suggested discussion topics for future council meetings, general concerns about particular city matters, questions to the staff, and directives to the staff (subject to approval / consent of the City Council majority members present, regarding staff directives). Each Council / Agency Member will be allowed to speak for a period not to exceed three (3) minutes. Notwithstanding the foregoing, the City Council Members shall not use this comment period for serial discussions or debate between members on City business matters not properly agendized. The City Attorney shall be responsible for regulating this aspect of the proceeding.)

9. CITY MANAGER REPORT (information only)

10. REPORTS REGARDING AD HOC, ADVISORY, STANDING, OR OTHER COMMITTEE

MEETINGS

11. WAIVER OF FULL READING OF RESOLUTIONS AND ORDINANCES (Consideration to waive full text reading of all Resolutions and Ordinances by single motion made at the start of each meeting, subject to the ability of the City Council / Agency to read the full text of selected resolutions and ordinances when the item is addressed by subsequent motion.) (COUNCIL / AGENCY)
Recommendation: Approve the Waiver of Full Reading of Resolutions and Ordinances.

12. CONSENT CALENDAR
(Items under the Consent Calendar are considered routine and will be enacted by one motion, prior to the vote to approve the Consent Calendar, each Council Member shall have a maximum of three (3) minutes to comment on the Consent Calendar as a whole. There will be no separate discussion of these items unless a Council / Agency Member so requests specific item(s) be removed from the Consent Calendar for separate action. Items may only be considered as a separate action if either (1) a Council Member must recuse themselves due to a conflict of interest or (2) a Council Member has specific questions for City Staff. Items called for separate discussion will be heard as the next order of business.) A. Consideration to Review and Approve the Draft Minutes of June 4, 2024, for the Regular Meeting and the Draft Minutes of June 11, 2024, for the Special Meeting of the City Council and the Joint Meeting of the City of Cudahy as Successor Agency and Housing Successor Agency to the Cudahy Development Commission (page 9)
Presented by the City Clerk
Recommendation: The City Council is requested to review and approve the City Council / Successor Agency Draft Minutes for June 4, 2024, and June 11, 2024.

B. Approval of the Local Agency Investment Fund (LAIF) for the Month of May 2024 (page 31)

City of Cudahy
City Council and Successor Agency
Regular Meeting Agenda
July 2, 2024, at 6:30 P.M.

Presented by the Finance Director
Recommendation: The City Council is requested to approve the Local Agency Investment Fund (LAIF) Report for the month of May 2024 in the amount of $12,864,594.90.

C. Approval of the City Demands and Payroll Including Statement of Investment for the Month of May 2024 (page 35)
Presented by the Finance Director
Recommendation: The City Council is requested to approve the Demands and Payroll in the amount of $1,090,538.63 including the Statement of Investments for the month of May 2024.

D. Adoption by second reading of Ordinance No. 746 Repealing Ordinance No. 681 terminating Development Agreement No. 18-021C, between the City of Cudahy and Davina, LLC (page 47) Presented by the Community Development Director
Recommendation: City staff recommends that the City Council take the following action(s):

1. Adopt by second reading Ordinance No. 746 repealing Ordinance No. 681 terminating DA No. 18-021C, between the City of Cudahy and Davina, LLC.

E. Adoption by second reading of Ordinance No. 747 Repealing Ordinance No. 678 terminating Development Agreement No. 18-016C, between the City of Cudahy and Genius Distribution, LLC (page 71)
Presented by the Community Development Director
Recommendation: City staff recommends that the City Council take the following action(s):

1. Adopt by second reading Ordinance No. 747 repealing Ordinance No. 678 terminating DA No. 18-016C, between the City of Cudahy and Genius Distribution, LLC.

F. Adoption by second reading of Ordinance No. 748 repealing Ordinance No. 682 terminating Development Agreement No. 18-022C, between the City of Cudahy and Herbal Dragon, LLC (page 95)
Presented by the Community Development Director

City of Cudahy
City Council and Successor Agency
Regular Meeting Agenda
July 2, 2024, at 6:30 P.M.

Recommendation: City staff recommends that the City Council take the following action(s):

1. Adopt by second reading, Ordinance No. 748 repealing Ordinance No. 682 terminating DA No. 18-022C, between the City of Cudahy (“City”) and Herbal Dragon, LLC (“Operator”).

G. Adoption by second reading of Ordinance No. 749 repealing Ordinance No. 680, terminating Development Agreement No. 18-020C, between the City of Cudahy and Daniel and Goliath, LLC (page 119)
Presented by the Community Development Director
Recommendation: City staff recommends that the City Council take the following action(s):

1. Adopt by second reading, Ordinance No. 749 repealing Ordinance No. 680 terminating DA No. 18-020C, between the City of Cudahy and Daniel and Goliath, LLC.

H. Adoption of Resolution 24-23 Approving the Local Streets and Road Funding Program Project List for Fiscal Year (FY) 2024-25 to comply with the Road Repair and Accountability Act of 2017 (SB1 BEALL) (page 143)
Presented by the Interim Public Works Director
Recommendation: The City Council is requested to adopt Resolution 24-23, approving the Local Streets and Road Funding Program Project List for Fiscal Year (FY) 2024-25 to comply with the Road Repair and Accountability Act of 2017 (SB1 Beall).

I. Adoption of Resolution No. 24-24 Approving the Street Lighting Assessment Report for Fiscal Year (FY) 2024-25 and Declaring the Intention of the City Council to Hold a Public Hearing and Levy the Annual Assessment to Maintain the City of Cudahy Street Lighting District (page 151) Presented by the Finance Director
Recommendation: The City Council is requested to:

1. Adopt Resolution No. 24-24, approving the Street Lighting Assessment Report for Fiscal Year (FY) 2024-25; and

2. Declare the intention of the City Council to hold a Public Hearing and levy the annual assessment to maintain the City of Cudahy Street Lighting District and direct staff to publish the Resolution and Notice of Public Hearing for the July 16, 2024, City Council meeting.

City of Cudahy
City Council and Successor Agency
Regular Meeting Agenda
July 2, 2024, at 6:30 P.M.

13. PUBLIC HEARING
A. Public Hearing Regarding Increased Fees for the Handling of Solid Waste and Recyclable Materials for Residential and Commercial Properties within the City and Adoption of proposed Resolution No. 24-25 levying fees for the handling of solid waste and recyclable materials (page 197) Presented by the Finance Director
Recommendation: The City Council is requested to:

1. Receive and file the request from Republic Services to increase fees for the handling of solid waste and recyclable materials against residential properties by 5.00% or $1.23 per dwelling unit per month from $24.69 to $25.92 per month and commercial/industrial customers within the City by 5.83% to be applied to commercial and roll-off service rates; and

2. Adopt proposed Resolution No. 24-25 levying fees for handling solid waste and recyclable materials, also known as rubbish collection charge, against residential properties within the City.

14. BUSINESS SESSION
A. Adoption of a Proposed Resolution No. 24-26 Augmenting the City of Cudahy Fiscal Year (FY) 2023-2024 City Budget to Fund Contractually Obligated Lump Sum Compensation to City Employees (page 223)
Presented by the Finance Director
Recommendation: The City Council is requested to:

1. Adopt proposed Resolution No. 24-26 augmenting the City of Cudahy Fiscal Year (FY) 2023-2024 City Budget to Fund Contractually Obligated Lump Sum Compensation to City Employees.

B. Consideration and Approval of Resolution No. 24-27, (1) Giving Notice of the Submission to the Qualified Voters for the City Of Cudahy of an Ordinance Relating to the Modification of Term Limits For the Council Members in the City of Cudahy; (2) Requesting The Board Of Supervisors of the County of Los Angeles Grant the City’s Request For Consolidation of Said General Municipal Election with the November 5, 2024 Statewide General Election Administered by the RegistrarRecorder/County Clerk of the County of Los Angeles; (3) Requesting the County Clerk Provide Specific Election Administration Services in Connection with the City’s General Municipal Election; and (4) Setting Rules and Deadlines For Arguments and Rebuttals For and Against the Ordinance (page 229)
Presented by the City Attorney

City of Cudahy
City Council and Successor Agency
Regular Meeting Agenda
July 2, 2024, at 6:30 P.M.

Recommendation: The City Council is requested to adopt proposed Resolution No. 24-27, giving notice of the submission to the Qualified Voters for the City of Cudahy of an Ordinance relating to the Modification of Term Limits For the Council Members in the City of Cudahy; (2) Requesting The Board of Supervisors of the County of Los Angeles Grant the City’s Request For Consolidation of Said General Municipal Election with the November 5, 2024 Statewide General Election Administered by the RegistrarRecorder/County Clerk of the County of Los Angeles; (3) Requesting the County Clerk Provide Specific Election Administration Services in Connection with the City’s General Municipal Election; and (4) Setting Rules and Deadlines For Arguments and Rebuttals For and Against the Ordinance.

15. COUNCIL DISCUSSION – NONE

16. CLOSED SESSION
A. Conference with Legal Counsel Anticipated Litigation - Significant Exposure to Litigation Pursuant to Government Code Section 54956.9 subdivision (d)(4) (One Matter)

17. CLOSED SESSION ANNOUNCEMENT

18. ADJOURNMENT
I, Richard Iglesias, hereby certify under penalty of perjury under the laws of the State of California that the foregoing agenda was posted on the City’s Website, City Hall, Clara Park, and Lugo Park not less than 72 hours prior to the meeting. A copy of said Agenda is on file in the City Clerk’sOffice.

Dated this 27th day of June 2024
Richard Iglesias
City Clerk

Blank Page

“Serving the People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 1 of 2

STAFF REPORT
Date: July 2, 2024
To: Honorable Mayor/Chair and City Council/Agency Members From: Alfonso Noyola, City Manager/Executive Director
By: Richard Iglesias, City Clerk
Subject: Consideration to Review and Approve the Draft Minutes of June 4, 2024, for the Regular Meeting and the Draft Minutes of June 11, 2024, for the Special Meeting of the City Council and the Joint Meeting of the City of Cudahy as Successor Agency and Housing Successor Agency to the Cudahy Development Commission

RECOMMENDATION
The City Council is requested to review and approve the City Council / Successor Agency Draft Minutes for June 4, 2024, and June 11, 2024.

BACKGROUND / ANALYSIS
On December 12, 2016, the City Council of the City of Cudahy adopted Resolution No. 16-38, approving the use of summary action minutes, meant to allow the City Clerk's Office to write the minutes in brief, assuring a record of Council's actions, due to having a recording of the full Council Meeting on the City’s website.

Historically
The Municipal Clerk is one of the oldest professions in government, dating back to 1272 A.D., originating in England. The record keeper then was called Remembrancer, an English official whose job was to remind the Lord Treasurer and Barons of Court, of business pending.

Years later, in the 1600s, when early colonists came to America, the office of the Clerk was one of the first offices to be established. Over the years, the City Clerk’s office has become the core for local government, and the liaison to the residents of the Community. The Municipal Clerk (City Clerk) is the record keeper of a City’s recorded history.

Item Number
12A

“Serving the People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 2 of 2
William Bennett Munro, a Canadian historian, and political scientist, who taught at Harvard University and the California Institute of Technology, stated in one of his first textbooks written: “No other office in municipal service has so many contacts. It serves the Mayor, the City Council, the City Manager (when there is one), and all administrative departments, without exception. All of them call upon it, almost daily, for some service or information. Its work is not spectacular, but it demands versatility, alertness, accuracy, and no end of patience.

The public does not realize how many loose ends of city administration this office pulls together.”
Moving forward to the present time, the City Clerk’s office today is generally responsible for keeping a record of City Council meetings; agreements; recordings of official documents; legal advertisements; municipal elections; commissions and committees current files; claims against the city; and other legal or official documents.

City Clerks are required to keep record of the proceedings (minutes) of Council meetings (Government Code Sections 36814 and 40801). Minutes are the official record of a meeting which provides a history of the Council’s decisions and actions.

CONCLUSION
The City Council is requested to approve the attached City Council / Agency Draft Minutes of the proceedings of June 4, 2024, and June 11, 2024.

STRATEGIC PLAN CORRELATION
No correlation to the strategic plan.

FINANCIAL IMPACT
No Financial Impact.

ATTACHMENT
A. June 4, 2024, Draft Minutes
B. June 11, 2024, Draft Minutes
C. Resolution No. 16-38, approving the City Clerk’s use of Summary Action Minutes as the Official Record of the City Council proceedings.

City Council/Successor Agency Minutes of 6/4/2024 Page 1 of 14

MINUTES
CUDAHY CITY COUNCIL REGULAR MEETING and
CITY OF CUDAHY AS SUCCESSOR AGENCY and

HOUSING SUCCESSOR AGENCY TO THE CUDAHY

DEVELOPMENT COMMISSION JOINT MEETING
June 4, 2024, 6:30 P.M.

1. CALL TO ORDER
Vice Mayor / Vice Chair Alcantar called the meeting to order at 6:39 p.m.

2. ROLL CALL
PRESENT: Council / Agency Member Martin Fuentes
Council / Agency Member Cynthia Gonzalez
Council / Agency Member Daisy Lomelí
Vice Mayor / Vice Chair Elizabeth Alcantar
ABSENT: Mayor / Chair Jose R. Gonzalez
ALSO PRESENT: City Manager, Alfonso Noyola, City Attorney, Stephanie Arechiga, Assistant City Attorney, Paloma McEvoy, City Clerk, Richard Iglesias, Community Development Director, Juan Arauz, Finance Director, Joshua Calhoun, Community Services Director, Brenda Rodriguez, Assistant to the City Manager, Johncito “John” Peraza, Building Official, Raul Diaz, and Executive Assistant, Janet Andrade.

3. APPROVAL OF AGENDA
Motion: Council Member C. Gonzalez motioned to approve agenda as is, seconded by Council Member Fuentes. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None

4. PLEDGE OF ALLEGIANCE
The Pledge of Allegiance was led by Council Member Fuentes.

5. LAND ACKNOWLEDGEMENT
The Land Acknowledgment was led by Council Member Lomelí.

Attachment A Page 11 of 240
City Council/Successor Agency Minutes of 6/4/2024 Page 2 of 14 We would like to acknowledge that the land we inhabit today was once known as Tovangaar, the home of the Gabrieleño-Tongva people. We show our respects to the Gabrieleño-Tongva people, as well as all Indigenous people, past, present, and future, and honor their labor as original caretakers of this land. We commit to uplifting the Gabrieleño-Tongva people, invite you to acknowledge the history, and join us in caring for this land.

6. PRESENTATIONS
A. Certificate of Recognition to Recipients of the Cudahy to College and Career Scholarship

7. PUBLIC COMMENTS
Susie de Santiago congratulated the recipients of the scholarships, notice of overnight parking during holidays not being advertised on social media, supported the city’s next steps with cannabis, and mentioned having community programs included in the budget.

Michael Valenzuela mentioned he has emailed the Mayor and no response, shared his frustration with the replacement of the American flags with the pride flags.

8. CITY COUNCIL COMMENTS / REQUESTS FOR AGENDA ITEMS
Council Member Fuentes shared his attendance at Casino JPA meeting, traveled to Sacramento representing Gateway Council of Governments, attended Bell Chamber of Commerce GALA, attended raising the flag at City of Downey and addressed the public comment speaker regarding the flag replacement, requested to have a City YouTube channel for events and Flickr for all pictures.

Council Member C. Gonzalez shared her attendance at the Bell Chamber of Commerce dinner, SELA standoff event over 50 students attended, shared an update on safety meeting, upcoming Keeping Cudahy clean meeting, working a plan to get out to vote, and requested putting something together for violence prevention month in October and work with the nonprofit.

Council Member Lomelí shared her attendance at the SELA standoff, spoke on International Day of Families, mentioned audio and translation for the Community Development workshop was not great and asked staff to look into it, spoke on Pride month and invited the community to SELA pride on June 29th.

Vice Mayor Alcantar commented on the holiday relaxed parking schedule and would like to continue that, participated on the SELA leaders committee with SELA collaborative SPCC plan event with Council Member Lomeli, participated in the Environmental Champion Award Celebration, highlighted Hub cities is in danger of being completely lost and unfunded by the County, asked to see how we can support Hub Cities, and how we

City Council/Successor Agency Minutes of 6/4/2024 Page 3 of 14 can be more proactive regarding renters, lastly, proposed a conversation around an ordinance to support homeless prevention and eviction.

9. CITY MANAGER REPORT (information only)

10. REPORTS REGARDING AD HOC, ADVISORY, STANDING OR OTHER COMMITTEE MEETINGS – NONE

11. WAIVER OF FULL READING OF RESOLUTIONS AND ORDINANCES Motion: Council Member Lomelí motioned to waive full reading of resolutions and ordinances, seconded by Council Member Fuentes. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None

12. CONSENT CALENDAR
A. Consideration to Review and Approve the Draft Minutes of May 21, 2024, for the Regular Meeting of the City Council and the Joint Meeting of the City of Cudahy as Successor Agency and Housing Successor Agency to the Cudahy Development Commission
Presented by the City Clerk
Recommendation: The City Council is requested to review and approve the City Council / Successor Agency Draft Minutes for May 21, 2024.

B. Direct Staff to Begin the Review of the City’s Conflict of Interest Code Presented by the City Clerk
Recommendation: It is recommended that the City Council direct staff to review the conflict of interest code and file the 2024 Local Agency Biennial Notice by October 1, 2024.

C. Consideration to Adopt Statement of Investment Policy Presented by the Finance Director
Recommendation: The City Council is requested to adopt Resolution No. 24-12 approving the Statement of Investment Policy.

City Council/Successor Agency Minutes of 6/4/2024 Page 4 of 14 D. Adoption by the Second Reading of Ordinance No. 743 of the City Council of the City of Cudahy approving Municipal Code Text Amendment No. 2024-04 to amend Chapter 9.08 (Alcoholic Beverages) of Title 9 (Public Peace, Morals and Welfare) of the Cudahy Municipal Code
Presented by the Senior Planner
Recommendation: Staff recommends that the City Council take the following actions:

Conduct the second reading Ordinance No. 743 of the City Council of the City of Cudahy, California, approving Municipal Code Text Amendment No. 2024-03 amending Chapter

9.08 (Alcoholic Beverages) of Title 9 (Public Peace, Morals and Welfare) of the Cudahy Municipal Code.

E. Conduct the Second Reading of Ordinance No. 744 of the City Council of the City of Cudahy approving Zoning Code Text Amendment (“ZTA”) No. 2024-01 to amend Chapters 20.16, 20.20, 20.24, 20.28, 20.30, 20.52, 20.56, 20.64, 20.84, and 20.88 of Title 20 (Zoning Code) of the Cudahy Municipal Code (“CMC”) Presented by the Senior Planner
Recommendation: Staff recommends that the City Council take the following actions:

Conduct the second reading of Ordinance No. 744 (Attachment A) of the City of Cudahy, California, recommending the City Council to approve Zoning Code Text Amendment No. 2024-01 amending Title 20 (Zoning Code), Chapters 20.16, 20.20, 20.24, 20.28, 20.30,

20.52, 20.56, 20.64, 20.84 and 20.88 of the CMC.

F. Conduct the Second Reading of Ordinance No. 745 of the City Council of the City of Cudahy adding a New Chapter, Chapter 15.44 (Electric Vehicle Charging Station), to Title 15 (Buildings and Construction) of the Existing CMC as Proposed by Municipal Code Text Amendment No. 2024-03
Presented by the Building Official
Recommendation: Staff recommends that the City Council of the City of Cudahy (the “City”): Conduct the second reading Ordinance No. 745 (Attachment A) of the City Council of the City of Cudahy, California, approving adding a new chapter, Chapter 15.44 (Electric Vehicle Charging Station), to Title 15 (Buildings and Construction) of the existing CMC as proposed by Municipal Code Text Amendment No. 2024-03.

Motion: Council Member Lomelí motioned to approve Consent Calendar items, seconded by Council Member C. Gonzalez. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar

City Council/Successor Agency Minutes of 6/4/2024 Page 5 of 14 NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None

13. PUBLIC HEARING
*The Public Hearing scheduled to consider the adoption by first reading of an Ordinance repealing Ordinance No. 677 terminating Development Agreement No. 18-012C, between the City of Cudahy and 420 Club, LLC, and revoking Commercial Cannabis Permit No. 18-0019 will be rescheduled and re-noticed to a date uncertain.

A. Introduction and adoption by first reading of Ordinance No. 746 Repealing Ordinance No. 681 terminating Development Agreement No. 18-021C, between the City of Cudahy and Davina, LLC
Presented by the Community Development Director
Recommendation: City staff recommends that the City Council take the following action(s): Open public hearing and receive comments and testimony; and Make a determination that Davina, LLC (“Operator”) is not in compliance with the terms and conditions of Development Agreement (“DA”) No. 18-021C and find that the Operator is in default of contractual obligations set forth in the DA; and Introduce and adopt by first reading Ordinance No. 746 (Attachment A) repealing Ordinance No. 681 terminating DA No. 18-021C, between the City of Cudahy and Davina, LLC; and Determine that these actions are exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15321 (Enforcement Actions by Regulatory Agencies).

At 7:16 p.m. Vice Mayor Alcantar opened public comment.

Public Comments:

Susie de Santiago supported the item to terminate.

At 7:17 p.m. Vice Mayor Alcantar closed public comment.

Motion: Council Member Lomelí motioned to determine that Davina, LLC (“Operator”) is not in compliance with the terms and conditions of Development Agreement (“DA”) No. 18-021C and find that the Operator is in default of contractual obligations set forth in the DA; and Introduce and adopt by first reading Ordinance No. 746 (Attachment A) repealing Ordinance No. 681 terminating DA No. 18-021C, between the City of Cudahy and Davina, LLC; and Determine that these actions are exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15321 (Enforcement Actions by Regulatory Agencies), seconded by Council Member C. Gonzalez. Motion passed 4- 0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar

City Council/Successor Agency Minutes of 6/4/2024 Page 6 of 14 NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None
B. Introduction and adoption by first reading of Ordinance No. 747 Repealing Ordinance No. 678 terminating Development Agreement No. 18-016C, between the City of Cudahy and Genius Distribution, LLC
Presented by the Community Development Director
Recommendation: City staff recommends that the City Council take the following action(s): Open public hearing and receive comments and testimony; and Make a determination that Genius Distribution, LLC (“Operator”) is not in compliance with the terms and conditions of its Development Agreement (“DA”) No. 18-016C and find that the Operator is in default of contractual obligations set forth in the DA; and Introduce and adopt by first reading Ordinance No. 747 (Attachment A) repealing Ordinance No. 678 terminating DA No. 18-016C, between the City of Cudahy and Genius Distribution, LLC; and Determine that these actions are exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15321 (Enforcement Actions by Regulatory Agencies).

At 7:24 p.m. Vice Mayor Alcantar opened public comment.

Public Comments:

Susie de Santiago supported the item to terminate.

Michael Valenzuela asked what kind of revenue would be brought to the city.

At 7:25 p.m. Vice Mayor Alcantar closed public comment.

Motion: Council Member Lomelí motioned to determine that Genius Distribution, LLC (“Operator”) is not in compliance with the terms and conditions of its Development Agreement (“DA”) No. 18-016C and find that the Operator is in default of contractual obligations set forth in the DA; and Introduce and adopt by first reading Ordinance No. 747 (Attachment A) repealing Ordinance No. 678 terminating DA No. 18-016C, between the City of Cudahy and Genius Distribution, LLC; and Determine that these actions are exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15321 (Enforcement Actions by Regulatory Agencies), seconded by Council Member C. Gonzalez. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None

City Council/Successor Agency Minutes of 6/4/2024 Page 7 of 14 C. Introduction and adoption by first reading of Ordinance No. 748 repealing Ordinance No. 682 terminating Development Agreement No. 18-022C, between the City of Cudahy and Herbal Dragon, LLC
Presented by the Community Development Director
Recommendation: City staff recommends that the City Council take the following action(s): Open public hearing and receive comments and testimony; and Make a determination that Herbal Dragon, LLC (“Operator”) is not in compliance with the terms and conditions of its Development Agreement (“DA”) with the City and find that the Operator is in default of contractual obligations set forth in the DA; and Introduce and adopt by first reading, Ordinance No. 748 (Attachment A) repealing Ordinance No. 682 terminating DA No. 18-022C, between the City of Cudahy and Herbal Dragon, LLC; and Determine these actions are exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15321 (Enforcement Actions by Regulatory Agencies).

At 7:33 p.m. Vice Mayor Alcantar opened public comment.

Public Comments:

Susie de Santiago supported the staff recommendation to terminate.

Michael Valenzuela asked if there are any collections being done besides just suspending their license.

At 7:35 p.m. Vice Mayor Alcantar closed public comment.

Motion: Council Member Lomelí motioned to determination that Herbal Dragon, LLC (“Operator”) is not in compliance with the terms and conditions of its Development Agreement (“DA”) with the City and find that the Operator is in default of contractual obligations set forth in the DA; and Introduce and adopt by first reading, Ordinance No. 748 (Attachment A) repealing Ordinance No. 682 terminating DA No. 18-022C, between the City of Cudahy and Herbal Dragon, LLC; and Determine these actions are exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15321 (Enforcement Actions by Regulatory Agencies), seconded by Council Member C. Gonzalez. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None
D. Introduction and adoption by first reading of Ordinance No. 749 repealing Ordinance No. 680, terminating Development Agreement No. 18-020C, between the City of Cudahy and Daniel and Goliath, LLC

City Council/Successor Agency Minutes of 6/4/2024 Page 8 of 14 Presented by the Community Development Director
Recommendation: City staff recommends that the City Council take the following action(s): Open public hearing and receive comments and testimony; and Make a determination that Daniel and Goliath, LLC (“Operator”) is not in compliance with the terms and conditions of Development Agreement (“DA”) No. 18-020C with the City and find that the Operator is in default of contractual obligations set forth in the DA; and Introduce and adopt by first reading t Ordinance No. 749 (Attachment A) repealing Ordinance No. 680 terminating DA No. 18-020C, between the City of Cudahy and Daniel and Goliath, LLC; and Determine that these actions are exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15321 (Enforcement Actions by Regulatory Agencies).

At 7:40 p.m. Vice Mayor Alcantar opened public comment.

Public Comments:

Susie de Santiago supported the staff recommendation to terminate.

Michael Valenzuela asked for clarification on the suspension of the license At 7:43 p.m. Vice Mayor Alcantar closed public comment.

Motion: Council Member C. Gonzalez motioned to determination that Daniel and Goliath, LLC (“Operator”) is not in compliance with the terms and conditions of Development Agreement (“DA”) No. 18-020C with the City and find that the Operator is in default of contractual obligations set forth in the DA; and Introduce and adopt by first reading t Ordinance No. 749 (Attachment A) repealing Ordinance No. 680 terminating DA No. 18- 020C, between the City of Cudahy and Daniel and Goliath, LLC; and Determine that these actions are exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15321 (Enforcement Actions by Regulatory Agencies), seconded by Council Member Lomelí. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None

14. BUSINESS SESSION
A. Approval of First Amendment to Professional Services Agreement with SWA Group, Inc. for Geotechnical Services for Site 3 and Site 4 of the Los Angeles River Improvement Project
Presented by the Administrative Analyst

City Council/Successor Agency Minutes of 6/4/2024 Page 9 of 14 Recommendation: The City Council is requested to approve the First Amendment to Professional Services Agreement (PSA) with SWA Group, Inc. for Geotechnical Services for Site 3 and Site 4 of the Los Angeles River Improvement Project in a fixed sum of $24,680.

Motion: Council Member C. Gonzalez motioned to approve the First Amendment to Professional Services Agreement (PSA) with SWA Group, Inc. for Geotechnical Services for Site 3 and Site 4 of the Los Angeles River Improvement Project in a fixed sum of $24,680, seconded by Council Member Fuentes. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None
B. Approval of the First Amendment to the Purchase and Sale Agreement for the property located at 8420 Atlantic Avenue, in Cudahy, California
Presented by the Community Development Director
Recommendation: Staff recommends that the City Council take the following actions:

Approve the First Amendment to the Purchase and Sale Agreement (Attachment A) for the real property located at 8420 Atlantic Avenue, Cudahy, California (Assessor Parcel Numbers: 6224-034-014; 6224-034-032; 6224-034-040; and 6224-034-041) (“Property”), and authorize the City Manager to execute all related documents; and Determine that the Project is exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption).

Motion: Council Member Fuentes motioned to Approve the First Amendment to the Purchase and Sale Agreement for the real property located at 8420 Atlantic Avenue, Cudahy, California (Assessor Parcel Numbers: 6224-034-014; 6224-034-032; 6224-034- 040; and 6224-034-041) (“Property”), and authorize the City Manager to execute all related documents; and Determine that the Project is exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption), seconded by Council Member Lomelí. Motion passed 4-0- 1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None
C. Request to Consider the Approval of a Reimbursement Agreement between the City of Cudahy and Local Coordinating Alliance 1 (LCA1) for Shelter Beds Within the Salvation Army Bell Shelter

City Council/Successor Agency Minutes of 6/4/2024 Page 10 of 14 Presented by the Community Development Director
Recommendation: It is recommended that the City Council take the following action(s):

Approve the Reimbursement Agreement between the City of Cudahy and LCA1 for the Bell Salvation Army Bell Shelter Beds not to exceed amount of $31,086.00 (Attachments A and B). Authorize the City Manager to execute the contract and all other necessary documentation.

Motion: Council Member C. Gonzalez motioned to approve the Reimbursement Agreement between the City of Cudahy and LCA1 for the Bell Salvation Army Bell Shelter Beds not to exceed amount of $31,086.00 (Attachments A and B). Authorize the City Manager to execute the contract and all other necessary documentation, seconded by Council Member Fuentes. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None
D. Adoption of Proposed Resolution No. 24-13: Permanent Local Housing Allocation (PLHA) Program Grant Funding Eligible Activity for Year 4 Presented by the Community Development Director
Recommendation: Staff recommends that the City Council adopt Resolution No. 24-13 which approves the following action(s): Elect eligible activity for Year 4 of the 5-year Permanent Local Housing Allocation Program grant period for Supportive Services Case Management.

Motion: Council Member C. Gonzalez motioned to adopt Resolution No. 24-13 which approves the following action(s): Elect eligible activity for Year 4 of the 5-year Permanent Local Housing Allocation Program grant period for Supportive Services Case Management, seconded by Council Member Fuentes. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None
E. Adoption of Proposed Resolution No. 24-14, A Resolution of the City Council of the City of Cudahy Adopting the Salary Plan for City Employees Presented by the Finance Director

City Council/Successor Agency Minutes of 6/4/2024 Page 11 of 14 Recommendation: The City Council is requested to approve Resolution No. 24-14, of the City Council of the City of Cudahy adopting the Salary Plan for City employees.

Motion: Council Member Lomelí motioned to approve Resolution No. 24-14, of the City Council of the City of Cudahy adopting the Salary Plan for City employees, seconded by Council Member C. Gonzalez. Motion passed 5-0 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None
F. Adoption of Proposed Resolution No. 24-15, A Resolution of the City Council of the City of Cudahy Adopting the FY 2024-25 Classification Plan Presented by the Finance Director
Recommendation: The City Council is requested to approve Resolution No. 24-15, A Resolution of the City Council of the City of Cudahy adopting the Fiscal Year (FY) 2024- 25 Classification Plan.

Motion: Council Member Lomelí motioned to approve Resolution No. 24-15, A Resolution of the City Council of the City of Cudahy adopting the Fiscal Year (FY) 2024-25 Classification Plan., seconded by Council Member C. Gonzalez. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None
G. Adoption of Proposed Resolution No. 24-16 Replacing and Superseding Resolution No. 23-27, Designating Holidays on which City Offices Shall be Closed for Fiscal Year 2024-25
Presented by the Human Resources Manager
Recommendation: The City Council is requested to adopt proposed Resolution No. 24- 16, Designating Holidays on which City Offices Shall be Closed for Fiscal Year 2024-25.

Motion: Council Member Fuentes motioned to adopt proposed Resolution No. 24-16, Designating Holidays on which City Offices Shall be Closed for Fiscal Year 2024-25, seconded by Council Member Lomelí. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None

City Council/Successor Agency Minutes of 6/4/2024 Page 12 of 14 ABSENT: J. Gonzalez
ABSTAIN: None
H. Adoption of Proposed Resolution No. 24-17 (1) Calling For and Giving Notice of a General Municipal Election to Be Held on Tuesday, November 5, 2024 for the Election of Two (2) City Councilmembers; (2) Requesting that the Board of Supervisors of the County of Los Angeles Grant the City’s Request for Consolidation of Said General Municipal Election With the November 5, 2024 Statewide General Election Administered by the Registrar-Recorder/County Clerk of the County of Los Angeles (“County Clerk”); (3) Requesting that the County Clerk Provide Specific Election Administration Services in Connection with the City’s General Municipal Election; (4) Adopting Regulations for Candidates for Elective Office Regarding Candidate Statements; and (5) Providing for the Determination of Tie Votes By Lot Pursuant to Elections Code Section 15651 (A)
Presented by the City Clerk
Recommendation: The Council is requested to approve proposed Resolution No. 24-17:

Calling for and giving notice of a General Municipal Election to be held on Tuesday, November 5, 2024, for the Election of two (2) City Councilmembers; Requesting that the Board of Supervisors of the County of Los Angeles grant the City’s Request for Consolidation of said General Municipal Election with the November 5, 2024 Statewide General Election administered by the Registrar-Recorder/County Clerk of the County of Los Angeles (“County Clerk”); Request the County Clerk provide specific election administration services in connection with the City’s General Municipal Election; Adopt regulations for candidates for elective office regarding candidate statements; and Provide for the determination of tie votes by lot pursuant to Elections Code Section 15651(a).

Motion: Council Member Lomelí motioned to approve proposed Resolution No. 24-17:

Calling for and giving notice of a General Municipal Election to be held on Tuesday, November 5, 2024, for the Election of two (2) City Councilmembers; Requesting that the Board of Supervisors of the County of Los Angeles grant the City’s Request for Consolidation of said General Municipal Election with the November 5, 2024 Statewide General Election administered by the Registrar-Recorder/County Clerk of the County of Los Angeles (“County Clerk”); Request the County Clerk provide specific election administration services in connection with the City’s General Municipal Election; Adopt regulations for candidates for elective office regarding candidate statements; and Provide for the determination of tie votes by lot pursuant to Elections Code Section 15651(a), seconded by Council Member C. Gonzalez. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None

City Council/Successor Agency Minutes of 6/4/2024 Page 13 of 14 I. Adoption of Proposed Resolution No. 24-18 Electing the Population and Inflation Factors and Establishing the City’s Fiscal Year (FY) 2024-2025 Appropriations Limit (GANN Limit)
Presented by the Finance Director
Recommendation: The City Council is requested to adopt proposed Resolution No. 23- 18 confirming the population and inflation factors used to calculate the annual Appropriation Limit (GANN Limit) and establish the City’s GANN Limit for Fiscal Year (FY) 2024-2025.

Motion: Council Member Fuentes motioned to adopt proposed Resolution No. 23-18 confirming the population and inflation factors used to calculate the annual Appropriation Limit (GANN Limit) and establish the City’s GANN Limit for Fiscal Year (FY) 2024-2025, seconded by Council Member Lomelí. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None
J. Adoption of Resolution No. 24-19 Approving Proposed Fiscal Year (FY) 2024-25 City of Cudahy Capital and Operating Budget (City Budget)
Presented by the Finance Director
Recommendation: The City Council is requested to adopt Resolution No. 24-19, adopting the Proposed FY 2024-25 City Capital and Operating Budget.

Motion: Council Member Fuentes motioned to adopt Resolution No. 24-19, adopting the Proposed FY 2024-25 City Capital and Operating Budget, seconded by Council Member C. Gonzalez. Motion passed 4-0-1 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: None

15. COUNCIL DISCUSSION – NONE

16. CLOSED SESSION – NONE

17. CLOSED SESSION ANNOUNCEMENT – NONE

18. ADJOURNMENT

City Council/Successor Agency Minutes of 6/4/2024 Page 14 of 14 The City Council / Agency meeting adjourned at 8:41 p.m.

Jose R. Gonzalez
Mayor
ATTEST:

Richard Iglesias
City Clerk

City Council/Successor Agency Minutes of 6/11/2024 Page 1 of 4

MINUTES
CUDAHY CITY COUNCIL SPECIAL MEETING and
CITY OF CUDAHY AS SUCCESSOR AGENCY and

HOUSING SUCCESSOR AGENCY TO THE CUDAHY

DEVELOPMENT COMMISSION JOINT MEETING
June 11, 2024, 6:30 P.M.

1. CALL TO ORDER
Mayor / Chair Jose R. Gonzalez called the meeting to order at 6:35 p.m.

2. ROLL CALL
PRESENT: Council / Agency Member Martin Fuentes
Council / Agency Member Cynthia Gonzalez
Council / Agency Member Daisy Lomelí
Vice Mayor / Vice Chair Elizabeth Alcantar
Mayor / Chair Jose R. Gonzalez
ABSENT: NONE
ALSO PRESENT: City Manager, Alfonso Noyola, City Attorney, Stephanie Arechiga, City Clerk, Richard Iglesias, Finance Director, Joshua Calhoun, Assistant to the City Manager, Johncito “John” Peraza, and Executive Assistant, Janet Andrade.

3. PUBLIC COMMENTS
Erika Cervantes shared her support for item 4E.

4. BUSINESS SESSION
A. Consideration to Approve an Agreement with TransTech for Senior Engineer Capital Improvement Project (CIP) Management Services
Presented by the Assistant to the City Manager
Recommendation: The City Council is recommended to approve an agreement for $45,600 with TransTech to provide Senior Engineer Capital Improvement Project (CIP) Management Services for an initial ninety (90) days term with the option to extend for an additional 90 days.

Motion: Council Member Fuentes motioned to approve to approve an agreement for $45,600 with TransTech to provide Senior Engineer Capital Improvement Project (CIP) Management Services for an initial ninety (90) days term with the option to extend for an Attachment B Page 25 of 240
City Council/Successor Agency Minutes of 6/11/2024 Page 2 of 4 additional 90 days, seconded by Council Member Lomelí. Motion passed 5-0 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, Alcantar, and J. Gonzalez NOES: None
ABSENT: None
ABSTAIN: None
B. Consideration to Approve an Agreement with TransTech for Public Works Oversight Services
Presented by the Assistant to the City Manager
Recommendation: The City Council is recommended to approve an agreement for $45,600 with TransTech to provide Public Works Oversight Services for an initial ninety (90) days term with the option to extend for an additional 90 days.

Motion: Council Member Fuentes motioned to approve an agreement for $45,600 with TransTech to provide Public Works Oversight Services for an initial ninety (90) days term with the option to extend for an additional 90 days, seconded by Council Member C.

Gonzalez. Motion passed 5-0 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, Alcantar, and J. Gonzalez NOES: None
ABSENT: None
ABSTAIN: None
C. Approve Resolution 2024-20 of the City Council of the City of Cudahy Approving A Five-Year Municipal Law Enforcement Services Agreement with the County of Los Angeles for Public Services Provided By the Los Angeles County Sheriff’s Department and Authorizing the City Manager to Procure Services of the Los Angeles County Sheriff’s Department Up to an Amount Authorized in the City’s Operating and Capital Budget for the Period of July 1, 2024 through June 30, 2029 Presented by the Assistant to the City Manager
Recommendation: The City Council is recommended to approve Resolution 24-20 approving the 5-Year Agreement with the County of Los Angeles for the period of July 1, 2024, through June 30, 2029, and Authorize the Mayor to execute the 5-Year Agreement on behalf of the City.

Motion: Council Member Fuentes motioned to approve Resolution 24-20 approving the 5-Year Agreement with the County of Los Angeles for the period of July 1, 2024, through June 30, 2029, and authorize the Mayor to execute the 5-Year Agreement on behalf of the City, seconded by Council Member C. Gonzalez. Motion passed 5-0 by the following roll call vote:

City Council/Successor Agency Minutes of 6/11/2024 Page 3 of 4 AYES: Fuentes, C. Gonzalez, Lomelí, Alcantar, and J. Gonzalez NOES: None
ABSENT: None
ABSTAIN: None
D. Adoption of the City’s Legislative Platform (Platform) Presented by the Assistant to the City Manager
Recommendation: The City Council is recommended to adopt the Legislative Platform (Platform) that will guide the City’s legislative priorities and funding pursuits at the local, regional, state, and federal levels of government.

Motion: Vice Mayor Alcantar motioned to adopt the Legislative Platform (Platform) that will guide the City’s legislative priorities and funding pursuits at the local, regional, state, and federal levels of government, seconded by Council Member Lomelí. Motion passed 5-0 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, Alcantar, and J. Gonzalez NOES: None
ABSENT: None
ABSTAIN: None
E. Consideration and Discussion Regarding a Resolution Denouncing Digital Discrimination
Presented by the City Clerk
Recommendation: The City Council is recommended to discuss the possible adoption of Resolution No. 24-21, denouncing digital discrimination.

Motion: Vice Mayor Alcantar motioned to adoption of Resolution No. 24-21, denouncing digital discrimination, seconded by Council Member C. Gonzalez. Motion passed 5-0 by the following roll call vote:

AYES: Fuentes, C. Gonzalez, Lomelí, Alcantar, and J. Gonzalez NOES: None
ABSENT: None
ABSTAIN: None
At 7:22 p.m., Mayor J. Gonzalez recused himself and exited from the remainder of the meeting.

F. Consideration and Discussion Regarding a Resolution Affirming the City of Cudahy’s Support and Solidarity with Pro-Palestinian Student Protestors at Public Colleges and

City Council/Successor Agency Minutes of 6/11/2024 Page 4 of 4 Universities, their Demands for Full Disclosure and Divestment from War and Occupation, and Protection of their First Amendment Rights to Peacefully Assemble Presented by the City Clerk
Recommendation: The City Council is recommended to discuss the possible adoption of Resolution No. 24-22, affirming the City of Cudahy’s Support and Solidarity with ProPalestinian Student Protestors at Public Colleges and Universities, their Demands for Full Disclosure and Divestment from War and Occupation, and Protection of their First Amendment Rights to Peacefully Assemble.

Motion: Council Member Lomelí motioned to adoption of Resolution No. 24-22, affirming the City of Cudahy’s Support and Solidarity with Pro-Palestinian Student Protestors at Public Colleges and Universities, their Demands for Full Disclosure and Divestment from War and Occupation, and Protection of their First Amendment Rights to Peacefully Assemble, seconded by Council Member C. Gonzalez. Motion passed 3-0-1 by the following roll call vote:

AYES: C. Gonzalez, Lomelí, and Alcantar
NOES: None
ABSENT: J. Gonzalez
ABSTAIN: Fuentes
Vice Mayor Alcantar requested to discuss a sexual harassment policy at the City level along with sexual harassment training .

5. ADJOURNMENT
The City Council / Agency meeting adjourned at 7:36 p.m.

Jose R. Gonzalez
Mayor
ATTEST:

Richard Iglesias
City Clerk

Attachment
C

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 1 of 2

STAFF REPORT
Date: July 2, 2024
To: Honorable Mayor/Chair and City Council/Agency Members From: Alfonso Noyola, City Manager/Executive Director
By: Joshua Calhoun, Finance Director
Subject: Approval of the Local Agency Investment Fund (LAIF) for the Month of May 2024

RECOMMENDATION
The City Council is requested to approve the Local Agency Investment Fund (LAIF) Report for the month of May 2024 in the amount of $12,864,594.90.

BACKGROUND

1. In 1955, the Pooled Money Investment Account (PMIA) started. LAIF became part of the PMIA. The oversight is provided by the Pooled Money Investment Board (PMIB) and an inhouse Investment Committee. The PMIB members consist of the State Treasurer, Director of Finance, and State Controller.

2. In 1977, LAIF was created as a voluntary program by Section 16429.1 et seq. of the California Government Code. The program was intended to be used as an investment alternative for California's local governments and special districts. The LAIF continues today under State Treasurer, Fiona Ma's administration.

3. On May 1, 2024, the balance in LAIF was $12,864,594.90 (See Attachment).

4. On May 31, 2024, the balance in LAIF was $12,864,594.90 (See Attachment).

ANALYSIS
The voluntary program offers local agencies the opportunity to participate in a major portfolio, which invests hundreds of millions of dollars, using the investment expertise of the State Item Number
12B

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 2 of 2

Treasurer’s Office investment staff at no additional cost to the taxpayer.

All securities are purchased under the authority of Government Code Section 16430 and 16480.4. The State Treasurer's Office takes delivery of all securities purchased on a delivery versus payment basis using a third-party custodian.

Cudahy Municipal Code Section 3.04.080 indicates, "Except as otherwise provided, no warrant shall be drawn or evidence of indebtedness issued unless there shall be at the time sufficient money in the treasury legally applicable to the payment of the same."

CONCLUSION
Once the City Council approves the current LAIF, this balance may be relied upon when determining if the City has sufficient funds available to pay demands and payroll as required by Cudahy Municipal Code Section 3.04.080.

STRATEGIC PLAN CORRELATION
Strategy #2. Provide regular updates to the City Council and community about the city’s finances.

FINANCIAL IMPACT
None

ATTACHMENT
A. Local Agency Investment Fund (LAIF) Balance

LOCAL AGENCY INVESTMENT FUND
General Account - City #98-19-225
Beginning Balance as of May 01, 2024 $12,864,994.90
LAIF Interest earned 0
Transfer from City operating account 0
Transfer to City operating account 0
Ending Balance as of May 31, 2024 $12,864,594.90
Attachment A Page 33 of 240
Blank Page

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 1 of 2

STAFF REPORT
Date: July 2, 2024
To: Honorable Mayor/Chair and City Council/Agency Members From: Alfonso Noyola, City Manager/Executive Director
By: Joshua Calhoun, Finance Director
Subject: Approval of the City Demands and Payroll Including Statement of Investment for the Month of May 2024

RECOMMENDATION
The City Council is requested to approve the Demands and Payroll in the amount of $1,090,538.63 including the Statement of Investments for the month of May 2024.

BACKGROUND

1. On December 13, 1993, Ordinance 476 was adopted and codified as Cudahy Municipal Code Section 3.04.080 indicating, "Except as otherwise provided, no warrant shall be drawn, or evidence of indebtedness issued unless there shall be at the time sufficient money in the treasury legally applicable to the payment of the same."

2. During the month, the Finance Department have completed the following demands and payroll:

A/P Demands $449,082.58
Payroll $641,456.05
Total: $1,090,538.63
Attachment A
Attachment B
Item Number
12C

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 2 of 2

ANALYSIS
The Check Register Report (Attachment A), Payroll Warrants including payroll taxes and insurance premiums (Attachment B), Statement of Investment (Attachment C) indicate that the cash and investment balance was sufficient for disbursements for the month, a summary of cash received and disbursed by month during Fiscal Year (FY) 2023-24 (Attachment D), and a summary of cash received and disbursed by month during FY 2022-23 (Attachment E).

Cudahy Municipal Code Section 3.04.070 indicates, "Budgeted demands paid by warrant prior to audit by the council shall be presented to the council for ratification and approval..."

CONCLUSION
The Finance Director certifies the accuracy and availability of funds for payment. A Demand/Warrant Register has been submitted to the City Council for approval in accordance with Cudahy Municipal Code Section 3.04.070.

STRATEGIC PLAN CORRELATION
Goal (Financial Stability and Transparency)
• Provide regular updates to the City Council and Community about the City’s finances.

FINANCIAL IMPACT
The Statement of Investments Report (Attachment C) indicates that there are sufficient funds within the City’s holdings to meet the City’s cash flow requirements.

ATTACHMENTS
A. Accounts Payable Check Register Report.

B. Payroll Warrants including payroll taxes and insurance premiums.

C. Statement of Investments
D. Summary of Cash Receipt / Disbursement by Month FY 2023-24 E. Summary of Cash Receipt / Disbursement by Month FY 2022-23 F. Credit Card Payment Detail

6/10/2024 2:13:36 PM Page 1 of 3
My Check Report
City of Cudahy, CA By Check Number
Date Range: 05/01/2024 - 05/31/2024
Vendor Number Vendor Name Payment Date Discount Amount Payment Type Payment Amount Number Bank Code: WF Checking-WF Checking
10097 FUENTES MARTIN 05/01/2024 Regular 0.00 215.25 55556 2378-3 8330 ATLANTIC AVE INC 05/09/2024 Regular 0.00 2,104.49 55557 10603 ADVANCED IMAGING SOLUTIONS 05/09/2024 Regular 0.00 468.28 55558 10658 ALFONSO NOYOLA 05/09/2024 Regular 0.00 174.00 55559 10841 American Global Security, Inc. 05/09/2024 Regular 0.00 8,820.00 55560 10978 Anel Flores 05/09/2024 Regular 0.00 100.00 55561
0057-4 AT & T 05/09/2024 Regular 0.00 371.36 55562
10906 City Fabrick 05/09/2024 Regular 0.00 24,017.86 55563 5365 CITY OF BELL ATTN: ACCOUNTS PAYABLE 05/09/2024 Regular 0.00 7,716.00 55564 10576 CIVICPLUS 05/09/2024 Regular 0.00 12,631.50 55565 10711 CLEARNETWORK, INC. 05/09/2024 Regular 0.00 395.84 55566 10800 Community Family Guidance Center 05/09/2024 Regular 0.00 5,000.00 55567 10692 DS TECHNICIAN, INC. 05/09/2024 Regular 0.00 154.00 55568 10564 ELIZABETH ALCANTAR 05/09/2024 Regular 0.00 123.00 55569 10485 ENTERPRISE FM TRUST 05/09/2024 Regular 0.00 5,662.59 55570 10886 FEHR & PEERS 05/09/2024 Regular 0.00 3,648.75 55571 10977 Felipe Villalobos 05/09/2024 Regular 0.00 100.00 55572 10097 FUENTES MARTIN 05/09/2024 Regular 0.00 152.75 55573 10617 GONZALEZ JOSE R 05/09/2024 Regular 0.00 81.75 55574 2139-2 HDL COREN & CONE 05/09/2024 Regular 0.00 1,624.29 55575 8382 IGLESIAS RICHARD 05/09/2024 Regular 0.00 174.00 55576 10976 Juan Sotelo 05/09/2024 Regular 0.00 100.00 55577
10394 KEENAN ASSOCIATES 05/09/2024 Regular 0.00 5,994.00 55578 8309 LAMAS RICARDO 05/09/2024 Regular 0.00 148.00 55579 10868 Language Network, Inc. 05/09/2024 Regular 0.00 5,996.70 55580 10598 LEAF 05/09/2024 Regular 0.00 464.97 55581
10920 LHH Recruitment Solutions 05/09/2024 Regular 0.00 3,013.20 55582 10618 LOMELI, DAISY 05/09/2024 Regular 0.00 48.50 55583 10655 LUIS AGUILAR 05/09/2024 Regular 0.00 440.00 55584 10975 Mayra Rodriguez 05/09/2024 Regular 0.00 100.00 55585 10720 MISSION SQUARE RETIREMENT 05/09/2024 Regular 0.00 250.00 55586 10900 National Recreation & Park Association 05/09/2024 Regular 0.00 540.00 55587 10974 Nohemy Quintanilla 05/09/2024 Regular 0.00 100.00 55588 5187 OCCUPATIONAL HEALTH SERVICES ATTN: ACCO 05/09/2024 Regular 0.00 269.63 55589 10201-1 OLIVAREZ MADRUGA LAW ORGANIZATION, LLP 05/09/2024 Regular 0.00 51,988.35 55590 10436 ONTARIO REFRIGERATION 05/09/2024 Regular 0.00 747.00 55591 9717 PCAM, LLC 05/09/2024 Regular 0.00 380.00 55592
10973 Prabhdeep Dhanoa 05/09/2024 Regular 0.00 -5,000.00 55593 10973 Prabhdeep Dhanoa 05/09/2024 Regular 0.00 5,000.00 55593 2802 SAM'S CLUB 05/09/2024 Regular 0.00 4,060.60 55594
8394 SANDLER BROTHERS 05/09/2024 Regular 0.00 407.79 55595 10424 SHARPLINE SOLUTIONS 05/09/2024 Regular 0.00 3,113.22 55596 10483-1 SOUTHERN CALIFORNIA NEWS GROUP 05/09/2024 Regular 0.00 926.70 55597 10203 SWANK MOTION PICTURES, INC. 05/09/2024 Regular 0.00 3,750.00 55598 10827 Teslarian, Inc. 05/09/2024 Regular 0.00 3,200.00 55599 10776 The Arroyo Group 05/09/2024 Regular 0.00 2,888.70 55600 0079 TRACT 180 WATER COMPANY 05/09/2024 Regular 0.00 1,540.70 55601 0078 TRACT 349 MUTUAL WATER CO 05/09/2024 Regular 0.00 2,163.67 55602 2859 UNDERGROUND SERVICE ALERT-SC SOUTHERN 05/09/2024 Regular 0.00 46.75 55603 5631 WELLS LOCK & KEY 05/09/2024 Regular 0.00 822.00 55604 9951 WILLDAN 05/09/2024 Regular 0.00 30,400.00 55605
10805 World Trip, Inc. 05/09/2024 Regular 0.00 2,100.00 55606 2378-3 8330 ATLANTIC AVE INC 05/22/2024 Regular 0.00 1,142.86 55607 7995 AMERICAN CITY PEST & TERMITE 05/22/2024 Regular 0.00 457.00 55608 Attachment A Page 37 of 240
My Check Report Date Range: 05/01/2024 - 05/31/2024
6/10/2024 2:13:36 PM Page 2 of 3
Vendor Number Vendor Name Payment Date Discount Amount Payment Type Payment Amount Number 10987 Antonio Ortiz 05/22/2024 Regular 0.00 200.00 55609 9966 AT & T LONG DISTANCE SERVICE 05/22/2024 Regular 0.00 46.23 55610 8021 AT & T MOBILITY 05/22/2024 Regular 0.00 2,360.64 55611 10964 BFS Landscape Architects 05/22/2024 Regular 0.00 6,875.00 55612 2289 CONSOLIDATED DISPOSAL INC. 05/22/2024 Regular 0.00 73,535.62 55613 10744 EDDIE C. TORRES JR. 05/22/2024 Regular 0.00 2,062.25 55614 6086 EWING INC 05/22/2024 Regular 0.00 1,172.45 55615
10581 FIESTA TAXI COOPERATIVE INC. 05/22/2024 Regular 0.00 10,135.73 55616 2139-2 HDL COREN & CONE 05/22/2024 Regular 0.00 1,500.00 55617 10986 Jennifer Jimenez 05/22/2024 Regular 0.00 45.00 55618 10618 LOMELI, DAISY 05/22/2024 Regular 0.00 162.14 55619 10721 LOOMIS 05/22/2024 Regular 0.00 388.65 55620
10985 Maria Camanero 05/22/2024 Regular 0.00 100.00 55621 10984 Maria Hernandez 05/22/2024 Regular 0.00 100.00 55622 10921 Moran Consulting, Inc. 05/22/2024 Regular 0.00 2,267.54 55623 10201-1 OLIVAREZ MADRUGA LAW ORGANIZATION, LLP 05/22/2024 Regular 0.00 450.00 55624 10732 OMEGA INDUSTRIAL SUPPLY, INC. 05/22/2024 Regular 0.00 1,091.56 55625 9717 PCAM, LLC 05/22/2024 Regular 0.00 22,106.78 55626
10824 PlaceWorks, Inc. 05/22/2024 Regular 0.00 13,470.62 55627 10973 Prabhdeep Dhanoa 05/22/2024 Regular 0.00 12,695.00 55628 10983 Raul Diaz 05/22/2024 Regular 0.00 250.00 55629
9737 REGIONAL TAP SERVICE CENTER 05/22/2024 Regular 0.00 206.40 55630 10430 RIGHT OF WAY, INC. 05/22/2024 Regular 0.00 180.68 55631 10982 Robert Half 05/22/2024 Regular 0.00 20,000.00 55632 10750 RUGAMAS CREATIVE SOLUTIONS 05/22/2024 Regular 0.00 840.52 55633 10651 RYDIN DRI-STICK DECAL CORP 05/22/2024 Regular 0.00 1,148.84 55634 5737 SOUTH COAST A.Q.M.D. 05/22/2024 Regular 0.00 161.81 55635 5599 T & A TACO 05/22/2024 Regular 0.00 680.00 55636
10869 The Pun Group, LLP. 05/22/2024 Regular 0.00 4,600.00 55637 10981 Tomas Osegueda 05/22/2024 Regular 0.00 55.00 55638 10745 TRAVELERS 05/22/2024 Regular 0.00 7,706.17 55639
10735 YUNEX, LLC. 05/22/2024 Regular 0.00 5,899.43 55640 10490 CHARTER COMMUNICATIONS 05/22/2024 Regular 0.00 975.00 55641 10729 WELLSONE COMMERCIAL CARD 05/06/2024 Bank Draft 0.00 28,694.51 DFT0000474 10490 CHARTER COMMUNICATIONS 05/08/2024 Bank Draft 0.00 229.98 DFT0000475 10490 CHARTER COMMUNICATIONS 05/08/2024 Bank Draft 0.00 229.98 DFT0000476 10053 HAULAWAY STORAGE CONTAINERS 05/08/2024 Bank Draft 0.00 89.04 DFT0000477 0070 SOUTHERN CALIFORNIA EDISON 05/08/2024 Bank Draft 0.00 4,768.30 DFT0000478 0070 SOUTHERN CALIFORNIA EDISON 05/08/2024 Bank Draft 0.00 18,605.27 DFT0000479 0070 SOUTHERN CALIFORNIA EDISON 05/08/2024 Bank Draft 0.00 367.44 DFT0000480 10962 Wells Fargo Bank Charges 05/10/2024 Bank Draft 0.00 828.66 DFT0000482 0071-1 SO CAL GAS 05/22/2024 Bank Draft 0.00 144.31 DFT0000487 10490 CHARTER COMMUNICATIONS 05/22/2024 Bank Draft 0.00 319.98 DFT0000488 Regular Checks
Manual Checks
Voided Checks
Discount
Payment
Payment Type Count
Bank Code WF Checking Summary
Bank Drafts
EFT's
86 0
1 10
0 0.00

0.00 0.00

0.00 0.00
97 0.00
Payment
399,805.11

0.00 -5,000.00
54,277.47

0.00 449,082.58
Payable
Count
107
0 0
12 0
119

My Check Report Date Range: 05/01/2024 - 05/31/2024
6/10/2024 2:13:36 PM Page 3 of 3
All Bank Codes Check Summary
Payment Type Discount
Payment
Count Payment
Payable
Count
Regular Checks
Manual Checks
Voided Checks
Bank Drafts
EFT's
86 0
1 10
0 0.00

0.00 0.00

0.00 0.00
97 0.00
399,805.11

0.00 -5,000.00
54,277.47

0.00 449,082.58
107
0 0
12 0
119
Fund Name Period Amount
Fund Summary
998 Pooled Cash 5/2024 449,082.58
449,082.58

05/06/24 05/20/24 05/31/24 Total
(a) Direct Deposits 125,879.23 125,175.58 126,920.05 377,974.86 (b) ICMA & Union Dues 2,605.00 2,605.00 2,605.00 7,815.00 (c) CalPERS Ret & 457 Plan 23,347.96 23,858.59 23,602.79 70,809.34 (d) Payroll taxes 47,744.58 27,309.92 26,704.41 101,758.91 (e) CalPERS Medical 74,839.32 74,839.32
(f) Medical 3,967.62 918.51 3,372.49 8,258.62
Total Amount 278,894.34 179,356.97 183,204.74 641,456.05 (a) Employees / Council Members / Commissioners
(b) ICMA & Union Dues
(c) CalPERS Retirement & 457 Plan
(d) Federal / State payroll taxes and unemployment
(e) CalPERS Medical (active and retired)
(f) Medical Insurance - Active and Retired employees

CITY OF CUDAHY
Payroll - including payroll taxes and insurance premiums:

Attachment B Page 40 of 240
Type Issuer Amount % of Total
Deposit - 4588 Wells Fargo 3,437,097.82 16.30%
Successor Agency - 0688 Wells Fargo 3,942,051.01 18.70% Checking - 7128 Wells Fargo 199,744.51 0.95%
Payroll - 4570 Wells Fargo 297,034.32 1.41%
Savings - 4752 Wells Fargo 332,468.39 1.58%
Money Market Account Bank of New York (BNY) (a) 10,715.51 0.05% Pooled Savings State Local Agency 12,864,594.90 61.02%
Investment Fund (LAIF)
Total 21,083,706.46 100.00%
Pursuant to California Government Code Section 53646(b), I hereby certify that all investments held by the Authority are in compliance with state law and the agency's Statement of Investment Policy, and that there are sufficient funds within the agency's investment holdings to meet the Authority's cash flow requirements for the next six (6) months.

Respectfully submitted,
Joshua Calhoun
Joshua Calboun
Finance Director

CITY OF CUDAHY
Statement of Investments
May 31, 2024
Attachment C Page 41 of 240
Month
Receipts Disbursement
July 2023 $ 1,698,263.55 $ 2,043,188.80 (a)
August 2023 1,570,904.87 3,148,357.16 (b)
September 2023 1,125,855.21 1,693,834.27
October 2023 1,259,614.45 848,009.43
November 2023 1,061,252.71 1,514,985.44
December 2023 770,294.89 1,120,942.42
January 2024 3,400,198.28 (c) 2,880,738.20 (d)
February 2024 1,189,496.91 1,382,500.65
March 2024 846,479.31 1,818,213.76 (e)
April 2024 1,764,923.25 1,399,214.40
May 2024 2,994,309.17 (f) 1,090,538.63
June 2024
Total: $ 17,681,592.60 18,940,523.16
Note (a) - City liab. & workers comp insurance, and PERS unfunded pension liab.

Note (b) - Includes $1,893,444 to Siemens Industries
Note (c) - Includes $1,786,952 in Motor Vehicle In-lieu fees Note (d) - Includes $1,141,928 paid to LA County Sheriff - 3 invoices Note (e) - Includes $158,445 paid to National Auto Fleet - vehicle Note (f) - Includes $1,786,952 in Motor Vehicle In-lieu receipt Month
Cash Receipts Disbursement
July 2023 $ 913,951.26 $ 1,604,912.00 (1)
August 2023 1,069,666.17 2,784,467.93 (2)
September 2023 797,120.38 1,543,754.51
October 2023 759,320.17 710,945.37
November 2023 632,862.51 1,244,543.67
December 2023 526,471.62 679,307.44
January 2024 2,671,465.70 (3) 2,421,667.28 (4)
February 2024 740,080.40 1,107,319.93
March 2024 563,376.03 1,261,506.18
April 2024 1,187,411.21 1,169,015.14
May 2024 2,640,204.13 (5) 567,429.42
June 2024
Total: $ 12,501,929.58 $ 15,094,868.87
Note (1) - City liab. & workers comp insurance, and PERS unfunded pension liab.

Note (2) - Includes $1,893,444 to Siemens Industries
Note (3) - Includes $1,786,952 in Motor Vehicle In-lieu fees Note (4) - Includes $158,445 paid to National Auto Fleet - vehicle Note (4) - Includes $1,786,952 in Motor Vehicle In-lieu receipt.

All Funds
General Fund
City of Cudahy
Summary of Cash Receipt/Disbursement by Month - FY 2023-2024 Attachment D Page 42 of 240
Month
Cash Receipts Disbursement
July 2022 $ 4,033,647.40 (a) 1,789,957.16 $
August 2022 1,686,604.16 1,750,512.85
September 2022 823,969.03 2,318,824.72 (b)
October 2022 1,991,064.32 3,914,418.49 (c)
November 2022 1,086,868.12 869,692.56
December 2022 1,406,231.74 1,395,830.23
January 2023 2,714,262.24 (d) 1,463,847.38
February 2023 739,588.01 1,006,801.94
March 2023 1,120,658.63 1,991,169.04
April 2023 1,196,447.59 1,257,126.86
May 2023 3,260,684.11 (e) 1,984,309.07
June 2023 2,011,618.48 1,230,025.68
Total: $ 22,071,643.83 20,972,515.98
Note (a) - Includes $2.819 M received from American Rescue Plan Act, Fund 530 Note (b) - Includes $949K paid to Siemens
Note (c) - Includes $1,230,610 deposited into an Escrow fund for the Seimens Project Note (d) - Includes $1,628,225 in Motor Vehicle In-Lieu tax Note (e) - Includes $1,625,225 in Motor Vehicle In-lieu tax Month
Cash Receipts Disbursement
July 2022 $ 845,547.28 $ 1,589,154.35 (1)
August 2022 1,012,769.79 1,077,279.74
September 2022 541,456.74 2,140,117.92 (2)
October 2022 1,628,965.30 834,689.66
November 2022 802,869.63 598,974.94
December 2022 774,144.70 976,007.61
January 2023 2,377,440.36 (3) 1,266,258.83
February 2023 489,780.43 829,217.41
March 2023 620,900.31 1,602,710.73 (4)
April 2023 969,432.86 710,177.71
May 2023 2,843,131.44 (5) 1,675,594.30 (6)
June 2023 435,137.76 945,268.74
Total: $ 13,341,576.60 $ 14,245,451.94
Note (1) - City liab. & workers comp insurance, and PERS unfunded pension liab.

City pre-payment option of PERS unfunded pension liability saved 3.5% interest ($12k) than paying on a monthly basis.

Note (2) - Includes $949K paid to Siemens
Note (3) - Includes $1,628,225 in Motor Vehicle In-Lieu tax Note (4) - Includes 2 Sheriff payments
Note (5) - Includes $1,628,225 in Motor Vehicle In-lieu tax Note (6) - Includes 2 Sheriff payments
City of Cudahy
Summary of Cash Receipt/Disbursement by Month - FY 2022-2023 All Funds
General Fund
Attachment E Page 43 of 240
Supplier - Name Amount G/L Account
Renaissance Hotels Pal 6,048.44 Mayor attended California Contract Cities Annual Municipal Seminar.

United Rentals #15618 Portable AC unit rental for Clara Park 5,928.85 Sq *bell Chamber Of Comme Chamber Gala sponsorship 3,500.00 Societyforhumanresource 2,559.75 Attending SHRM Conference, HR Manager Los Angeles Rams 2,155.00 Community Excursion - L.A. Rams vs Cowboys, Aug 11, 2024.

Nrpa Operating 1,560.00 National Recreational Park Conference Registration American Air 1,495.92 Vice Mayor - YEO Network National Convening 2024.

Full Source, Llc Parks and Recreation Uniforms. 1,412.86 Bellagio - Adv Dep 1,185.96 Council Member Daisy Lomeli - NALEO 2024 Annual Conference.

Z Abrasives Inc Sand for sandblasting and pressure washer nozzle part. 1,134.49 Hotelscom7205522749254 1,105.95 SHRM Conference 2024 for HR Manager Gih*globalindustrialeq New roof hatch for clara park. 1,090.32 Southwes 1,037.91 Flight for Cynthia Gonzalez- NALEO Conference in Las Vegas.

Sp Triad Sports Group Soccer goals for youth soccer season. 1,014.91 Expedia 72829424627011 CM Hotel Reservation: Travel to Washington DC 977.82 Paypal Registration: Contra 875.00 ct Cities 2024 Annual Municipal Seminar Marriott Desert Spring 870.34 Hotel, Martin U. Fuentes - SCAG Regional Conference Yeonetwork.Org 750.00 Elizabeth Alcantar to the YEO Network National Convening 2024.

Fredpryor Careertrack Staff Training Seminar Subscription 747.00 Hotelscom7283488655204 686.66 Mayor Jose R. Gonzalez- Washington DC meeting and white house tour.

Ruff Ruff Poop Bags Doggy bags. 672.26
Adobe *adobe Monthly Adobe Subscription 671.72
Msft * E0300s40id Microsoft 365 Subscription 662.70
Homedepot.Com Items for street department. 558.97
Staples Inc 541.37 General Supply Order
Vivint Inc/Us Alarm company 522.18
Gaucho Grill Downey Travel and meetings 403.68
Walters Wholesale Elec#20 Street Maintenance supplies 360.30 Lilly Juice Bar Senior Activities 353.60
Msft * E0300s3yi4 Subscription 334.66
Delta Air Travel and meetings 328.10
Fedex Offic10200010249 Advertising 323.31
Sq *agua Y Salud Office Supplies 306.00
Lees Bbq & Boba Office Supplies 285.55
Amzn Mktp Us Building Materials 284.08
Golden Bowl 17 Office Supplies 252.77
Anaheim Lawnmower Sh Park Maintenance & Supplies 237.59 Amazon Prime Subscription 229.00
Lafctticketing Excursions 200.00
Party City Bopis Senior Activities 194.36
Www.Gomsa.Net Training and Education 185.40
Sams Club Renewal Office Supplies 170.89
Hp *instant Ink Office Supplies 163.04
Business.Apple.Com Subscription 140.53
76 - Rocket 117 Travel and meetings 134.37
Samsclub.Com Office Supplies 122.89
Ramcast Ornamental Suppl Park Maintenance & Supplies 115.56 Wingstop 717 Travel and meetings 106.52
Mr Hose Inc Park Maintenance & Supplies 100.65
Postermywall Premium Advertising 99.95
Amazon.Com*3i15w3d63 Building Materials 89.07
The Ups Store 5391 Employee Physical 77.00
Credit Card Payment Detail
April 01, 2024 to April 30, 2024, paid May 08, 2024

Attachment F Page 44 of 240

ATTACHMENT F
Supplier - Name Amount G/L Account
Credit Card Payment Detail
April 01, 2024 to April 30, 2024, paid May 08, 2024
Facebk* Tg2jt386e2 Special Events July 4th 75.00
Facebk* Uk42y446e2 Advertising 74.97
Flickr.Com Special Events July 4th 72.99
Oreilly 2959 Vehicle Maintenance 69.50
El Pescador 7 Travel and meetings 62.75
Cvs/Pharmacy #08858 Special Events July 4th 61.81
Facebk* Suycj4g6e2 Special Events July 4th 50.00
The Marketplace Grill Caf Travel and meetings 46.81
Contractors Wh #703 46.11 Building Materials
Idrive.Com* Overuse Ch 45.54 Subscription
Cudahy 44.97 Vehicle Maintenance
Zoom.Us 888-799-9666 40.00 Subscription
Starbucks Store 67663 39.57 Office Supplies
Norms - Downey 37.29 Travel and meetings
Portos Bakery Downeycl 32.95 Travel and meetings
Msft * E0300s41tp 32.00 Subscription
Jims Burgers #2 27.44 Travel and meetings
Allianz Travel Ins 27.00 Travel and meetings
Tst* Eureka Restaurant Gr 26.28 Travel and meetings
Smart And Final 319 26.24 Senior Activities
Target 00001909 23.14 Travel and meetings
Starbucks 800-782-7282 22.00 Office Supplies
Ferguson Ent #2758 19.68 Building Materials
Staples 00113670 16.53 Advertising
Autozone #5371 14.31 Vehicle Maintenance
Digitalspace 14.00 Telephone
Superior Super Whse 12.22 Employee Recognition
Tst* Nothing Bundt Cakes 12.00 Office Supplies
Msft * E0300s3xiq 8.00 Subscription
Dollartree 6.89 Office Supplies
Sprouts Farmers Mar 5.69 Travel and meetings
Bargain World #1 5.58 Employee Recognition
Msft * E0300s40ie 5.00 Subscription
Apple.Com/Bill 4.99 Subscription
46,474.50

Blank Page

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 1 of 14

STAFF REPORT
Date: July 2, 2024
To: Honorable Mayor/Chair and City Council/Agency Members From: Alfonso Noyola, City Manager
By: Juan Arauz, AICP, Community Development Director
Subject: Adoption by second reading of Ordinance No. 746 Repealing Ordinance No. 681 terminating Development Agreement No. 18-021C, between the City of Cudahy and Davina, LLC.

RECOMMENDATION
City staff recommends that the City Council take the following action(s):

1. Adopt by second reading Ordinance No. 746 (Attachment A) repealing Ordinance No. 681 terminating DA No. 18-021C, between the City of Cudahy and Davina, LLC.

SUMMARY
Pursuant to the terms and conditions of DA No. 18-021C and CCP No. 18-0019, it is the City’s purpose and intent to regulate cannabis activities within the City in a responsible manner to protect the health, safety, and welfare of the residents of Cudahy and to enforce rules and regulations consistent with California’s Cannabis laws. Cannabis operators with development agreements are obligated to comply with all provisions of the Cudahy Municipal Code (“CMC”), obligations of the DA, and conditions of approval under the CCP, and applicable state and local laws and related regulations. This report provides a summary of the unrefuted evidence offered at an administrative review hearing; a decision by a third-party hearing officer (“Hearing Officer”) on November 14, 2023 finding the Operator in default of the DA and out of compliance with the CCP; the public hearing by the Planning Commission , determining that the Operator has failed to comply with the terms and conditions of its DA, despite being provided with ample notice and several opportunities to achieve compliance, thereby recommending to the City Council that it repeal Ordinance No. 681 and DA No. 18-021C through the adoption of Planning Commission Resolution No. 2024-05. On June 4, 2024, the City Council voted X-X to adopt Ordinance No. 746.

Item Number
12D

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 2 of 14

BACKGROUND

1. On September 11, 2017, the City adopted Ordinance No. 673 (Attachment B) establishing the City’s commercial cannabis production activity regulations codified in Chapter 5.20 of the Cudahy Municipal Code (“CMC”). CMC Section 5.20.040 authorizes medicinal commercial cannabis activities within a designated overlay zone, pursuant to a development agreement adopted in accordance with the Development Agreement Law (Govt. Code Section 65864 et seq.) and Chapter 20.28 of the CMC.

2. On April 30, 2018, the Planning Commission recommended approval of CCP No. 18-0019 for cannabis manufacturing at 4916 Cecilia Street, as illustrated in Figure 1 below, subject to the execution of a development agreement between the City and the Operator for cannabis manufacturing. The Operator is one of seven tenants at the Site which all have separate development agreements with the City but share an interest in CCP No. 18-0019 and are subject to the same conditions of approval. As discussed in further detail below, the conditions of approval of CCP No. 18-0019 require the Operator to make timely payments of the fees due under the Development Agreement.

Figure 1 – Aerial of the Site.

3. On May 15, 2018, the City Council adopted Resolution No. 18-17 (Attachment C) approving the issuance of CCP No. 18-0019 with conditions of approval to the Operator, subject to the execution of a development agreement with the City.

4. On June 5, 2018, the City Council adopted Ordinance No. 681 (Attachment D) approving Development Agreement No. 18-021C by and between the Operator and the City authorizing commercial cannabis manufacturing activities at the Site as illustrated in Figure 2, below. The DA requires the Operator to make timely payments for Community Benefit Fees; Cost Recovery Fees; and Non-Operating Fees.1 1 As used herein, the term Non-Operating Fees and Operating Fees are used interchangeably. 4916 Cecilia

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 3 of 14
Figure 2 – Floor Plan

5. On October 2, 2019, the City provided the Operator with a Notice of Delinquency (Attachment F – pg. 181) due to failure to pay the various fees due under CCP 18-0019 and DA No. 18-021C, prior to placing the Operator in default status due to payment noncompliance with the DA, inclusive of the non-payment of Community Benefit Fees, Cost Recovery Fees, and Non-Operating Fees in the amount of nine thousand eight hundred sixty-nine dollars and one cent ($9,869.01). The Operator was given no later than October 17, 2019, to cure the amount, however the delinquency was not timely cured.

6. On May 4, 2021, the City provided the Operator with a Notice of Default (Attachment F – pgs. 183-184) due to non-compliance with the payment of fees and associated penalties in the amount of fifty-three thousand two hundred fifty-one dollars and fifteen cents ($53,251.15). The Operator was given no later than 30 days to cure the default, however, the default was not timely cured.

7. On October 19, 2021, the City provided the Operator with a Final Demand Letter (Attachment F – pgs. 186-187) due to payment non-compliance informing the Operator that fees and penalties had accumulated to fifty-eight thousand four hundred thirty-two dollars and thirty-nine cents ($58,432.39). The Operator was given no later than 30 days to cure the default and comply with payment obligations, however the default was not timely cured.

8. On December 7, 2022, the City Manager offered a Cannabis Deferment and Payment Program (Attachment F – pgs. 189-190) to assist cannabis Operators with accumulated Community Benefits, Cost Recovery and Non-Operating Fees by deferring and providing additional time for payment without penalty. Under the program:
a. Unpaid Non-Operating Fees would be deferred (without penalty) until six (6) months after the Operator was issued a Certificate of Occupancy, and then repay already accumulated Non-Operating Fees within twelve (12) months; and Unit C
4916 Cecilia

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 4 of 14
b. Operators would continue to be responsible for the timely payment of Community Benefit Fees and Cost Recovery Fees, as they accumulated; and c. Previously incurred Community Benefit Fees and Cost Recovery Fees would be subject to a payment plan and require timely payments.

All cannabis operators that were interested in participating in the program were given no later than January 31, 2023, to execute an agreement to participate in the Deferment and Payment Program. The City Manager did not receive a request from the Operator to participate in the Deferment and Payment Program. As of the writing of this report, the payment of fees due under DA No. 18-021C and CCP No. 18-0019 plus applicable penalties and interest continue to accumulate.

9. On May 31, 2023, the City sent a Final Demand Letter (Attachment E) demanding the Operator to respond to the following demands: 1) Proof of revival of the LLC’s entity status with the State; 2) Forwarding payment for all past due amounts; and 3) Contact the City to revise the CCP’s Schedule of Performance and for further information to become compliant with the DA and CCP. The Operator did not respond in a timely manner and has failed to make any attempt to cure the defaults.

10. On August 9, 2023, the City issued an Escrow Account Letter (Attachment F – pgs. 196- 197) requiring all cannabis operators to open an escrow account by September 15, 2023, to ensure payment of Cost Recovery Fees. As of the writing of this report, the Operator has not opened an escrow account nor made any payments into the account.

11. On October 12, 2023, the City issued the Operator a Notice of Review Hearing (Attachment F – pgs. 349-350) with the hearing date, time, and place. The Notice of Review Hearing requested the Operator to contact staff to confirm appearance at the Review Hearing and advised the Operator to respond within ten days of the date of the letter to confirm appearance Review Hearing or otherwise waive the right to present evidence at the hearing (Attachment G). The notice also informed the Operator that it was responsible for the cost of the Review Hearing and requested the Operator to deliver a cashier’s check three days prior to the scheduled hearing or would otherwise constitute further default on the DA. The City did not receive a timely response from the Operator nor payment for the cost of the Review Hearing.

12. On October 24, 2023, the City issued a letter (Attachment F – pgs. 199-200) updating the Operator on their payment and fees related to the DA by correcting the amount due to an error in the total amount billed. The City provided a credit in the amount of Fourteen thousand nine hundred fifty dollars and fifty cents ($14,950.50).

13. As of October 24, 2023, Operator owed the City One hundred forty-six thousand twentyseven dollars and nine cents ($146,027.09). Operator has continued to fail to make payments and as of the writing of this report owes One hundred sixty-eight thousand seven hundred two dollars and twenty-nine cents ($168,702.29). Community Benefit Fees, Cost-Recovery and Non-Operating Fees plus penalties continue to accrue and the

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 5 of 14
total amount due may be higher as of the date of this staff report.

14. On November 2, 2023, the City sent a follow up notice to the Notice of Review to the Operator confirming that it had not received any communication from the Operator confirming attendance at the Review Hearing and that the ability to present before the hearing officer had been waived (Attachment H). The City did not receive a timely response from the Operator.

15. On November 14, 2023, the duly appointed third-party Hearing Officer, Steve Napolitano, conducted a Review Hearing as authorized under the CMC Section 5.20.080(7) and Section 19 of the DA No. 18-021C to hear and consider information and evidence submitted by City staff through an Administrative Record (Attachment F) and the Operator. No representation from the Operator was present at the hearing nor did the Operator submit any information or evidence for consideration.

16. On January 14, 2024, the Hearing Officer issued a written decision and order (Attachment I) finding evidence showing the Operator, despite considerable notice and opportunities to cure outstanding issues, has breached the terms and conditions of the DA and CCP and recommends the Planning Commission and City Council repeal Ordinance No. 681 terminating DA No. 18-021C and revoke the related interest in CCP No. 18-0019.

17. Approximately two months after the Review Hearing, on January 6, 2024, an attorney who appears to represent the Operatorsubmitted a letter to the City alleging the City was in default with the terms of DA No. 18-021C (“Notice to Cure Breach”) (Attachment J).

The Notice to Cure Breach alleged the City had breached DA No. 18-021C by (a) failing to waive fees pursuant to the Article 23.i of the DA (Force Majeure); (b) failing to “expedite” approvals and by seeking fees for delays allegedly caused by the City; (c) requiring the Operator to pay Non-Operating Fees as required by the DA; (d) implementing fees that violate The Mitigation Fee Act (Govt Code § 65864-65869.5); and (e) failing to conduct an annual hearing to determine compliance with the DA No. 18-021C. The Notice to Cure Breach also alleged the City was liable under the Civil RICO statute. The Operator demanded that the City (i) waive all accumulated Non-Operating Fees for a period of 15 months; (ii) “waive all fees during any delays caused by the City[;]” (iii) “waive all fees when the City was in default under the agreements[;]” (iv) issue certificate of occupancy to the Operator; (v) halt the hearing process before the third-party Hearing Officer; and (vi) expedite the processing of all permit applications.

18. On January 8, 2024, the City received a request to submit the Notice to Cure Breach into the administrative record for the hearing that took place on November 14, 2023 (Attachment K).

19. On March 18, 2024, pursuant to State law and the CMC, the Planning Commission held a duly noticed public hearing to consider the Hearing Officer’s recommendation to repeal Ordinance No. 681 and terminate DA No. 18-021C. Hours before the hearing, the attorney representing the Operator requested that a comment letter be submitted into the record

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 6 of 14
at the May 18 Planning Commission hearing (Attachment L).2 The Planning Commission considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents. No representation from the Operator was present at the hearing.

After closing public hearing, the Planning Commission adopted Resolution No. 2024-05 (Attachment M), recommending the City Council repeal Ordinance No. 681 and terminate related DA No. 18-021C.

20. On June 4, 2024, pursuant to State law and the CMC, the City Council held a duly noticed public hearing to consider the recommendation by the Planning Commission to repeal Ordinance No. 681 and terminate DA No. 18-021C. After consideration of all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents. No representation from the Operator was present at the hearing. After closing public hearing, the City Council voted X-X to introduce and adopt by first reading Ordinance No. 746.

DISCUSSION/ANALYSIS
During a review of the Operator’s compliance with the Development Agreement, the burden is upon the Operator to demonstrate good faith compliance with the terms of the Development Agreement under Article 19. Pursuant to Government Code Section 65868.1 and Articles 19 and 19.d of the DA, if the City Council determines, based on substantial evidence, that the Operator has not complied in good faith with the terms of the conditions of the DA, the City Council may terminate the DA, or alternatively may choose to modify and impose conditions reasonably necessary to protect the interests of the City. Conversely, if the Operator is found to be in compliance with the DA, the Owner may request the City to issue a Certificate of Compliance pursuant to Article 19.e. Any decision to terminate a development agreement must be reviewed by the Planning Commission prior to review by the City Council. Gov. Code § 65867. Under Article 19.d, the decision to terminate a development agreement by the City Council is final.

As it relates to the CCP, pursuant to the CMC Sections 5.20.080(6) and 5.20.080(7), any material violations of Chapter 5.20, any other relevant city law or state law, condition of approval, or any other required agreement or covenant, such as a development agreement, by a cannabis permittee, or cannabis permittee’s agent, is grounds for suspending or revoking the relevant cannabis permit. The decision to suspend or revoke a commercial cannabis permit is with the City Manager or his designee. Furthermore, pursuant to CMC Section 5.20.080, any decision regarding the suspension or revocation may be appealed to the City Council.

The City has appointed a third-party hearing officer to conduct a review of the Operator’s 2 The City assumes that the request to add the letter to the May 18 Planning Commission hearing was a typo and was intended to be submitted into the record for the March 18, 2024 Planning Commission hearing. The City accepted the letter as a public comment into the record. All Planning Commissioners and City Council members were also addressed in the communication.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 7 of 14
compliance with CCP No. 18-0019 and DA No. 18-021C. The findings and determinations made by the Hearing Officer inform any subsequent action to terminate or modify the Development Agreement and suspension or revocation of the CCP. As stated above, and further described in Attachment I, the Hearing Officer issued a written decision making several findings of fact and conclusions and determined that Davina, LLC breached the terms and conditions pursuant to DA No. 18-021C and CCP No. 18-0019, based on a preponderance of the evidence, in the following material aspects:

1. Violation #1: Breach of Payment Obligations. Pursuant to the terms of the DA, the Operator is responsible for timely payment of Community Benefit Fees (Article 5.b); Cost Recovery Fees (Article 8); and Operating Fees (Article 7.c). The Operator is also obligated to pay the fees due under the DA pursuant to CCP Condition of Approval No. 45; and timely payment for Non-Operating Fees pursuant to Condition of Approval No. 13 (Attachment F- pgs. 54-69). Conditions of Approval 1(a) and 1(b) require the Operator to pay all City-issued invoices within 30 days of receipt. Pursuant to the terms of the DA, Operators that are more than 30 days past due on operating fees are subject to a penalty equal to twenty-five percent (25%). In addition, a ten percent (10%) penalty shall be added to the first day of each calendar month following the imposition of the initial 25% penalty, if the fee remains unpaid in whole or in part, up to a maximum of the one hundred percent (100%) of the payable fee. The conditions of approval for CCP No. 18- 0019 are incorporated into the DA through Article 18 and require the Owner to comply with all conditions contained therein (Attachment F – p. 80-124). The City offered the Operator relief in the form of the Cannabis Deferment and Payment Program; however, the Operator did not acknowledge nor execute a Letter Agreement with the City to participate in the Cannabis Deferment and Payment Program. Further, the Operator failed to respond to multiple notices informing the Operator of the lack of payment and continued to default on payments.

As of October 24, 2023, the City reported that the Operator is past due in the amount of One hundred forty-six thousand twenty-seven dollars and nine cents ($146,027.09) and past-due payments continue to accumulate, including late payment penalties. As of the writing of this report, the Operator now owes the City $168.702.29.

Table 1. Summary of Past and Current Amounts Due as of May 14, 2024 Fee Type Payment Amount Due
Community Benefit Program $48,381.27
Cost Recovery Fees $74,021.27
Non-Operating Fees $36,271.20
Penalties (Late Payments) $10,027.92
TOTAL $168,702.29
Based on the evidence submitted by the City, the Hearing Officer found that “based on the unrefuted evidence presented by the City...a preponderance of the evidence shows that [Operator] breached multiple conditions of the DA and CCP. Despite multiple

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 8 of 14
attempts and notices by the City to gain compliance, the evidence shows that [Operator] failed to comply with their payment obligations, which constitutes the necessary grounds for termination of the DA and revocation of the CCP under the CMC” (Attachment I). The Hearing Officer’s determination was ratified by the Planning Commission through the adoption of Resolution No. 2024-05 which recommends that the City Council find that the Operator is in default of the terms set forth in DA No. 18-021C and repeal Ordinance No. 681 and terminate the related DA.

2. Violation #2: Failure to comply with state law - Suspended Status with the Secretary of State (SOS) and Franchise Tax Board (FTB). Pursuant to Article 4.a of the DA, the Operator must be a lawful entity capable of operating in accordance with state laws. A Certificate of Status dated October 31, 2023, states: “The above-referenced entity’s powers, rights, and privileges are suspended in California. As of the date of the Review Hearing on November 14, 2023, the Operator’s entity status was “FTB/SOS Suspended.” The Hearing Officer further determined “[a]ccording to the California Franchise Tax Board website, a suspended entity cannot do business in California until they cure the reason for their suspension, which is supported by Rev. and Tax Code Sec. 23303 and case law cited by the City: Casiopea Bovet, LLC v. Chiang (2017) 12 Cal.App.5th 656, 662; City of San Diego v. San Diegan for Open Government (2016) 3 Cal.App.5th 568, 577” (Attachment I).

Despite notice of default and opportunity to cure, the Operator’s status remained “suspended” at the time of the Review Hearing. Non-compliance with state law due to the Operator's legal status as a California limited liability is suspended by the State’s Secretary of State, as such, the Operator is unable to operate in the State of California.

3. Violation #3: Failure to Implement the Project Under Prescribed Time Limits. CCP Condition of Approval No. 51.A set a 90-day time frame in which the Operator must complete construction of Phase I of the Project. The 90-day period began following the 15-day appeal period from the date of the CCP approval, or June 20, 2018, meaning the Operator needed to complete Phase I by September 18, 2018. CCP Condition of Approval

51.A.iii sets a 180-day time limitation from the effective date of the CCP to complete all tenant improvements, construction, and obtain a certificate of occupancy from the Building Department, or December 17, 2018. The Operator was given a notice of default and opportunity to cure pursuant to the City’s Final Demand Letter to the Operator (Attachment F- pgs. 192-194), with no response from the Operator. The Operator has failed to provide any evidence that it has obtained a Zoning Clearance, completed construction of Phase I, or completed the tenant improvements, obtained a certificate of occupancy, or otherwise complete Phase II within the prescribed time periods. Nor does the City have any record of any request by the Operator for an extension of time to the City Manager and there is no evidence to demonstrate the Operator has made substantial progress, such as submitting an application for a Zoning Clearance or building permit plan check.

Allegations of Default on Behalf of the City:

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 9 of 14
As an initial matter, the Notice to Cure Breach offered as evidence to demonstrate compliance with the DA and CCP was untimely submitted, nor does it actually offer evidence of Operator’s compliance with the CCP and DA. The request was made nearly two months after the Review Hearing that took place on November 14, 2023, after providing the Operator with multiple notices, and need not be considered. However, the City shall respond to the allegations made by the Operator’s representative which are largely unsupported by the evidence, the law, or both.

1. Operator is not Excused for Performance Pursuant to Force Majeure. The DA provides a Force Majeure clause at Article 23.i, which applies to unforeseen events that include “war, insurrection, acts of God, local, state or national emergencies, strikes and other labor difficulties beyond the party’s control, or any default by the City hereunder, which Force Majeure event substantially interferes with the development, construction or operation of the Project” (emphasis added).

Operator has failed to make a substantiated showing that the circumstances of Force Majeure were present during the time of default. The City provided the Operator with the first notice that it was in breach of the DA and CCP, approximately five months prior to the Governor’s issuance of Executive Order N-22-20 (Attachment N). The Operator was provided 30 days to cure the default pursuant to Article 14.a of the DA (Attachment F- pgs. 80-124). During this time, Operator did not cure the default, nor take diligent efforts to cure the default. City issued a subsequent notice to Operator on May 4, 2021 (Attachment F- pgs. 183-184) – during the unsupported allegation of the City’s closure.

Further, City Hall was not closed for a 15-month period. During the height of the pandemic, City Hall’s physical premises were closed to the public, however, the City continued to conduct business, and process requests, including applications for building permits which could be dropped off at the front of City Hall. Additionally, both commercial cannabis activities, inclusive of cannabis manufacturing, and commercial construction were permitted by the authority granted to the State Public Health Officer pursuant to Executive Order N-33-20 (Attachment N). The State permitted cannabis activities and construction to continue through the height of the pandemic and operators were able to continue processing applications, such as building permits, during this time.

The Notice to Cure Breach alleges that the Operator has invested $10 million from the onset of the COVID-19 pandemic to present day but has not provided any evidence to substantiate this point. However, if the Operator was prohibited from engaging in activities that would have allowed them to pursue the operation of a cannabis business, it is unclear how the Operator could have been prohibited from investing $10 million into the Project and been prohibited from moving forward with implementation of the Project at the same time.

Even assuming arguendo that there was an event of Force Majeure, Article 23.i3 does not 3 In full, Article 23.i states “If delays are caused by unforeseen events beyond the control of Owner, such delays will entitle Owner to an extension of time as provided in this section. Such unforeseen events (‘Force Majeure’) shall mean war, insurrection, acts of God, local, state or national emergencies, strikes and other labor difficulties beyond

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 10 of 14
excuse performance, but only provides the Owner with an extension of time. There is no excusal of performance under Force Majeure nor does Article 23.i grant the City the ability to waive fees. Any allegation that City “agreed” not to charge fees during the COVID-19 pandemic or other delays are unsupported by any evidence in the administrative record.

2. Operator Has Failed to Demonstrate How the City has Failed to Expedite Approvals. The Notice to Cure Breach asserts the City has delayed in approving certain plans, however the City has no record of the Operators attempt to apply for and obtain a Zoning Clearance or implement the multiple phases of the Project as described in Violation #3, above.

Operator failed to offer any evidence that it complied with the timelines and requirements set forth in the CCP and DA. Further, as stated above, the Operator has been in default since 2019. Despite this, the City provided a pathway to achieve compliance with multiple defaults, including the schedule of performance, which the Operator did not timely attempt to cure any default.

Any allegation by the Operator that the City’s duty to review building plans was limited by the annual review process under Article 19 of the Development Agreement is unfounded and expressly contradicted in the DA terms. It’s unclear why the Operator is under the impression that its Project would be constructed and operated without any review of permit applications, etc., other than the reviews contemplated under Section 19 of the Development Agreement and is contrary to law. CMC Section 15.04.010 requires all development projects to comply with the Los Angeles Building Code requirements. Title 15 of the CMC also requires projects to comply with Los Angeles County’s Electrical Code requirements (Chapter 15.08), Plumbing Code requirements (Chapter 15.12), and Mechanical Code (Chapter 15.16). Providing comments to ensure that a project applicant complies with such state and local requirements does not constitute a delay on the City’s part, but enforcement of the Operator’s requirement to comply with state, local and federal regulations. At no time does the Notice allege the City refused to accept or review plans or other submissions by the Operator. If anything, this assertion cuts against Operator’s own argument and would result in further delays for the Operator to implement the Project.

3. There is No Evidence in the Administrative Record to Support a Finding that the City Did Not Intend for the Non-Operating Fees Not to Apply. To support the notion that NonOperating Fees would not apply the Operator’s representative submitted statements by a former councilmember who now acts as a consultant to many of the defaulting operators and other persons affiliated with the Operator.4 Any assertion that Non-Operating Fees were not intended to apply are directly the party’s control, or any default by the City hereunder, which Force Majeure event substantially interferes with the development, construction or operation of the Project.” 4 The Operator’s attorney offered a statement by Daffodil Tyminski that was submitted to the City pursuant to Evidence Code Section 1152 and 1154, which protects the confidentiality of statements made during settlement or negotiation discussions. Based on this submitted statement it appears that the Operator has waived that privilege afforded by those previous statements.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 11 of 14
contradicted by language in Article 7.c(1) which states the Operator shall be charged a “monthly operating fee of [.42 x total square foot of the ’Premises‘] until Owner is operating on the Premises and selling product under its City Regulatory Permit and State Regulatory Permit. Once Owner is operational and generating revenue, the monthly operating fee is [.42 x total square foot of ’Production Space‘] or a monthly operating fee based on gross receipts. DA Article 7.c(i) (emphasis added). The Development Agreement further provides that “Operating Fees shall begin to accrue ninety (90) days after the end of the month of the Effective Date of the Agreement.” Id. The language provided in the Development Agreement plainly states a formula that applies for Operating Fees for when the Operator is operating based on square footage or gross receipts or a formula based on square footage when the Operator is not operating or in “non-operation.” To argue that there is no such thing as Non-Operating Fees merely because those exact words is a matter of semantics. Further, there is no language in the DA that discusses or implies the intent for such fees to apply only to operators who “squat” on licenses as represented in a declaration submitted by the consultant.

Failure to pay such fees are out of compliance with Conditions of Approval Nos. 1(a) and (b), requiring payment of all City-issued invoices within thirty days of receipt. (Attachment F- pgs. 54-72). Non-payment of Non-Operating Fees is also in violation of Conditions of Approval 13, 21, 37, and 45.

4. The Assertion that Non-Operating Fees are Illegal Impact Fees is Not Supported by the Law. Non-Operating Fees are a part of the Development Agreement entered into between the City and the Operator and was enacted via ordinance pursuant to Development Agreement Law (Govt. Code §§ 65864-65869.5). Fees imposed by development agreements are expressly exempt from the Mitigation Fee Act. (Govt. Code § 66000(b) (“’Fee’ means a monetary exaction other than a tax or special assessment…but does not include…fees collected under development agreements adopted pursuant to Article 2.5 (commencing with Section 65864) of Chapter 4…”).) Therefore, the fees agreed to by the Operator through the execution of the DA and subsequent Letter Agreement are not subject to the Mitigation Fee Act.

Even if the Mitigation Fee Act was applicable to the past due fees, to properly contest, the Non-Operating Fees, the Operator would have been required to tender the required payment in full and serve written notice to the City that informs the City that payment has been tendered under protest accompanied by a statement of facts. (Govt. Code § 66020(a).) However, such protests must be filed at the time of the approval of the development or within ninety (90) days of the imposition of fees. The City and Operator entered into the Development Agreement on June 5, 2018. The 90-day statute of limitations to protest such fees ended on September 3, 2023, and Operator has not tendered payment in full as required by Government Code Section 66020(a). Therefore, any opportunity to protest under the Mitigation Fee Act has long since passed. AR pp. 9-

10. Further, as stated above, Operator does not contest that it previously acknowledged that

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 12 of 14
all of the fees due, inclusive of Non-Operating Fees, were presently due and owing at the time it signed a Letter Agreement.

5. There is No Requirement to Perform an Annual Review. Operator points to CMC Section

20.84.600 and Government Code Section 65865.1 to assert the City is in breach of the Development Agreement by failing to conduct a periodic review of the Operator’s compliance with the Development Agreement. However, Operator’s assertion is directly contradicted by the express language in the Development Agreement. Article 19.f of the Development Agreement expressly provides that “City’s failure to conduct a periodic review of this Agreement shall not constitute a breach of this Agreement.” Nor does the City have any record of the Operator requesting an annual review to demonstrate compliance with the DA or CCP.

6. The City Has Not Breached the Ability for the City Council to Make a Final Determination on the Operator’s Compliance with the Development Agreement and Whether to Modify or Terminate the DA, or Otherwise Find the Operator in Compliance. The plain language in Article 19.d of the Development Agreement provides that “[a]t the time and place set for the Review Hearing, Owner shall be given an opportunity to be heard. If City Council finds, based upon substantial evidence, that Owner has not complied in good faith with the terms or conditions of this Agreement, City Council may terminate this Agreement notwithstanding any other provision of this Agreement to the contrary, or modify this Agreement and impose such conditions as are reasonably necessary to protect the interests of the City.” The City has retained a third-party hearing officer for the purpose of hearing the evidence and making a recommendation to the City Manager, Planning Commission and City Council to “adopt an ordinance repealing Ordinance No. 681 and terminate Development Agreement No. 18-021C and revoke Operator’s interest under CCP18-0019.” (Attachment F – pgs. 2-10) The Operator has been provided an opportunity to be heard at the administrative hearing conducted by a third-party hearing officer, whose findings and determinations were sent to the Planning Commission and now City Council. No one has denied the Operator the opportunity to be “heard” before the City Council, but the Operator ignores the procedural requirements that require the repeal of an ordinance to terminate a development agreement, which includes a process by which the Operator may address the Planning Commission as well as the City Council.

Further, there is nothing in Article 19.d or the CMC that prohibits the City from appointing a third-party hearing officer from conducting the initial hearing and forwarding findings to City decisionmakers for the purpose of determining whether to take any action to modify or terminate the Development Agreement or Commercial Cannabis Permit so long as the City Council’s determination and actions are supported by substantial evidence. All such findings and recommendations made by the hearing officer shall be forwarded to the appropriate decisionmakers for final disposition. The City has provided Operator with more than 30 days’ notice of the November 14, 2023 hearing, requesting Operator to provide evidence of compliance at least 10 days prior to the hearing (Attachment F- pgs. 349-350). The Operator provided no response. The City sent a follow up communication informing Operator that it did not submit any documentation and has waived its rights at

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 13 of 14
the Review Hearing (Attachment I). Operator instead submitted a Notice to Cure Breach approximately two months after Review Hearing alleging the City is in default of DA18- 021C. Pursuant to Article 14.d of DA18-021C, Operator’s remedies for a default are limited to a termination of the Development Agreement.

CMC Section 5.20.080(6)(a) permits the City Manager to revoke an operator’s interest in a CCP upon a determination “that the cannabis permittee has failed to comply with [Chapter 5.20], any condition of approval, or any agreement or covenant as required pursuant to this chapter.” The City Manager’s decision to revoke the operator’s interest in a CCP may be appealed to a third-party hearing officer or to the City Council. CMC §

5.20.080(7). As determined by the Hearing Officer, there is a preponderance of evidence to support a finding that the Operator is out of compliance with the DA and CCP.

7. Operator’s Assertion for Damages under the Development Agreement are Improper.

Even if the City were in default of the DA, which it is not, the Operator’s remedies are limited under the DA. Pursuant to Articles 14.a and 14.b of the DA, the Operator may only seek monetary damages if there is a showing of “bad faith intentional acts [or] the grossly negligent or malicious acts of City and its officials, officers, agents and employees.” Pursuant to Article 14.d of the DA, even if the City were in default, which it is not, the Operator’s remedies would otherwise be limited to a cancellation of the Development Agreement after providing a 60-day notice of default. Operator’s notice did not provide 60-day notice, but 30-day notice.

Based on the evidence provided by the City, which was unrefuted, the Hearing Officer found that the Operator “has breached the terms and conditions of DA 18-021C and [Operator’s] portion of its CCP and recommends to the Planning Commission and/or City Council repeal Ordinance No. 681 and terminate DA [No.] 18-021C...” (Attachment I).

Pursuant to CMC Section 20.84.070, DA 18-021C and CCP No. 18-0019 were processed concurrently and approved collectively under Ordinance No. 681. To repeal Ordinance No. 681, the repeal shall occur in the same manner as the original proceedings and pursuant to CMC Section 20.84.500.

PUBLIC NOTICE AND COMMENTS

This item was noticed in accordance with the City’s public notice requirements, which involved mailed notices to property owners and tenants within 300 feet of the Site and publication in the local paper (Attachment O). As of the writing of this report, City staff have not received any public comments.

ENVIRONMENTAL ANALYSIS

The action(s) have been assessed in accordance with the California Environmental Quality Act (“CEQA”) (Pub. Res. Code § 21000 et seq.), CEQA Guidelines (Cal, Code Regs., tit. 14, § 15000 et seq.) and the environmental regulations of the City. The Project is categorically exempt from

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 14 of 14
the requirements of CEQA pursuant to CEQA Guidelines Section 15321 - Class 21 (Enforcement Actions by Regulatory Agencies). This exemption is applicable to “[a]ctions by regulatory agencies to enforce or revoke a lease, permit, license, certificate, or other entitlement for use issues, adopted, or prescribed by the regulatory agency or enforcement or a law, general rule, standard, or objective, administered or adopted by the regulatory agency.” If the City Council adopts Ordinance No. 746 to repeal Ordinance No. 681 and terminate DA No. 2018-021C, it would be an enforcement action. Therefore, the action(s) are categorically exempt from the provisions of CEQA.

CONCLUSION
As discussed above and based on the preponderance of unrefuted evidence offered at the administrative review hearing; and the Planning Commission’s finding that the Operator has failed to comply with the terms and conditions of its DA, despite being provided with ample notice and several opportunities to achieve compliance, thereby recommending to the City Council that it repeal Ordinance No. 681 and DA No. 18-021C through the adoption of Planning Commission Resolution No. 2024-05. As stated above, the Operator has failed to comply with their obligations under the DA and CCP, despite being provided with ample notice and several opportunities to achieve compliance. Therefore, City staff recommends the City Council adopt Ordinance No. 746 repealing Ordinance No. 681 terminating DA18-021C.

ATTACHMENTS
A. Ordinance No. 746

ORDINANCE NO. 746

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF CUDAHY REPEALING ORDINANCE NO. 681 AND

TERMINATING RELATED DEVELOPMENT AGREEMENT
NO. 18-021C BETWEEN DAVINA, LLC AND THE CITY OF
CUDAHY.

WHEREAS, the City of Cudahy (the “City”) is a general law city, incorporated under the laws of the State of California; and
WHEREAS, pursuant to its police power, the City may enact and enforce laws within its boundaries that promote the public health, safety, or general welfare of the community, and are not in conflict with general laws; and WHEREAS, to strengthen the public planning process, encourage private participation in comprehensive planning and reduce the economic risk of development, the California State Legislature adopted Section 65864 et seq. of the California Government Code (the “Development Agreement Statute"); and WHEREAS, the Development Agreement Statute authorizes the City to enter into a development agreement with a person having legal or equitable interest in real property for the development of such property in order to establish certain development rights in exchange for public benefits; and
WHEREAS, in accordance with the Development Agreement Statute, the City Council adopted Ordinance No. 690 in 2018 establishing the procedures and requirements for the consideration of development agreement with the City and are contained within Cudahy Municipal Code (“CMC”) Sections 20.84.530 through

20.84.640; and
WHEREAS, on September 11, 2017, the City Council adopted Ordinance No. 673 establishing regulations for commercial cannabis activities in a specified Overlay Zone through an acquisition of a Commercial Cannabis Permit and execution of a development agreement with the City; and
WHEREAS, on April 30, 2018, the City Planning Commission (“Planning Commission”) conducted a properly noticed public hearing to consider an application by Davina, LLC (“Operator”) for approval of a Commercial Cannabis Permit by and between the City and to allow non-store front commercial cannabis manufacturing activities at 4916 Cecilia Street, Unit C (“Site”); and
WHEREAS, at this hearing, the Planning Commission heard and considered verbal and written testimony and evidence, and recommended approval of the Commercial Cannabis Permit subject to Operator’s execution of a development agreement with the City; and
WHEREAS, on May 15, 2018, the City Council conducted a properly noticed Attachment A Page 61 of 240
Ordinance No. 746

public hearing to consider the issuance of the Commercial Cannabis Permit (“CCP”) No. 18-0019 and Development Agreement (“DA”) No. 18-021C at which the City Council heard and considered both written and oral testimony and evidence and subsequently approved, and adopted Resolution No. 18-17 for CCP No. 18-0019; and WHEREAS, at the same hearing the City Council considered and approved CCP No. 18-0019, it also conducted the first reading of Ordinance No. 681 which authorized the execution of DA No. 18-021C between the Operator and the City; and WHEREAS, on June 5, 2018, the City Council adopted, at a second reading, Ordinance No. 681 approving DA No. 18-021C and authorizing the Mayor to execute the DA on behalf of the City; and
WHEREAS, the effective date of the Development Agreement is July 5, 2018 (“Effective Date”); and
WHEREAS, upon the Effective Date of Ordinance No. 681, the Operator was granted the permission to conduct commercial cannabis retail delivery activities provided, among other things, it apply for and receive a Zoning Clearance pursuant to the CMC’s requirements, receive State licensing approval from the Department of Cannabis Control, and comply with the terms outlined in the DA and conditions of approval under the CCP inclusive of the timely payment of Community Benefit Fees, Cost Recovery Fees and Operating/Non-Operating Fees and applicable penalties and interest; and WHEREAS, the Operator has not complied with the terms and conditions of the DA and CCP despite multiple notices and opportunities to cure and remains in material breach of thereof; and
WHEREAS, on October 12, 2023, the City provided notice to the Operator that it would be conducting a Review Hearing (“Review Hearing”) under Article 19(c) of DA No. 18-021C, which informed the Operator of the burden to prove compliance with the DA and CCP;
WHEREAS, the Operator never provided a timely response to the City’s notice for a Review Hearing;
WHEREAS, on November 2, 2023, the City sent a follow up notice informing the Operator it had not received any response to the Review Hearing Notice; and WHEREAS, the Operator did not respond to the follow up notice; and WHEREAS, on November 14, 2023, Steve Napolitano, Esq., a duly appointed third-party hearing officer for the City (“Hearing Officer”), conducted a properly noticed Review Hearing;
WHEREAS, the Operator did not participate at the Review Hearing, was not present at the hearing and did not present any evidence for consideration prior to or during the hearing, and the Hearing Officer heard and considered information and

Ordinance No. 746

evidence by City staff, which a true and correct copy of the staff report and supporting evidence is attached hereto as Exhibit “A” and incorporated herein by reference; and WHEREAS, the Hearing Officer heard and considered information and evidence by City staff; and
WHEREAS, on January 14, 2024, the Hearing Officer issued a written decision and order (the “Decision”), incorporated by reference and attached hereto as Exhibit “B”, making several findings of fact and conclusions of law with respect to the Operators noncompliance with the DA and CCP based on a preponderance of the evidence; and WHEREAS, the Hearing Officer determined that Operator breached its payment obligations due to the Operator’s non-payment of fees and penalties due and owed to the City totaling$162,894.46, which continue to accumulate; and WHEREAS, the Operator continues to fail to meet its payment obligations and the total amount due to the City as of May 14, 2024 is $168,702.29; and WHEREAS, the Operator breached its obligation to maintain its legal status with the State of California, as the Operator’s LLC entity status has been suspended by the State of California; and
WHEREAS, the Operator had breached its obligation to implement the Project within the prescribed time periods contained within CCP No. 18-0019 Condition of Approval No. 51 (Time Limits), because there is no evidence that the Operator has made a diligent effort to implement the Project in any fashion inclusive of an application for a Zoning Clearance to permit the commercial cannabis activities; and WHEREAS, the Hearing Officer has recommended that the City Council adopt an ordinance repealing Ordinance No. 681 terminating DA 18-021C and revoking the related interest in CCP 18-0019; and
WHEREAS, pursuant to state law and the CMC, the Planning Commission duly noticed, agendized, and conducted a public hearing on this matter on March 18, 2024; WHEREAS, and the Planning Commission considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents relating to the repeal of Ordinance No. 681;
WHEREAS, after the close of such public hearing, the Planning Commission adopted Resolution No. 2024-05, attached hereto and incorporated by reference as Exhibit “C,” recommending the City Council repeal Ordinance No. 681 and terminate related DA No. 18-021C; and
WHEREAS, pursuant to state law and the CMC, the City Council duly noticed, agendized, and conducted a public hearing on this matter; and

Ordinance No. 746

WHEREAS, the City Council considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents relating to the repeal of Ordinance No. 681; and
WHEREAS, after the close of such public hearing, the City Council introduced and adopted by first reading Ordinance No. 746 repealing Ordinance No. 681 and terminating related DA No. 18-021C; and

NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF CUDAHY DOES ORDAIN AS FOLLOWS:

SECTION 1. RECITALS
That the above Recitals are true and correct and are incorporated as though fully set forth herein.

SECTION 2. ADOPTION OF HEARING OFFICER’S FINDINGS OF FACT AND

CONCLUSIONS OF LAW
The City Council has reviewed and considered the Decision by the Hearing Officer (Exhibit “B”) issued on January 14, 2024, on this matter. For the reasons stated in the Decision, and as recommended by the Planning Commission (Exhibit “C”), the City Council adopts the Hearing Officer’s findings of fact and conclusions of law as its own and determines that Davina, LLC is not in compliance with the terms and conditions of the Development Agreement No. 18-021C and finds that Davina, LLC is in default of its contractual obligations set forth in said Development Agreement and has breached its Conditions of Approval for CCP No. 18-0019 by a showing of the preponderance of the evidence.

SECTION 3. TERMINATION OF DEVELOPMENT AGREEMENT
Pursuant to Article 19(d) of the Development Agreement, the City Council may terminate Development Agreement No.18-021C in its entirety. For the reasons stated in the Decision, and as recommended by the Planning Commission, the City Council hereby adopts this Ordinance repealing Ordinance No. 681 and terminating DA No. 18- 021C in its entirety.

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 hereby declares that it would have adopted this Ordinance, and each section, subsection, subdivision, sentence, clause, phrase, or portion thereof, irrespective of the fact that any one or more sections, subsections, subdivisions, sentences, clauses, phrases, or portions might subsequently be declared invalid or unconstitutional.

Ordinance No. 746

SECTION 5. CALIFORNIA ENVIRONMENTAL QUALITY ACT
The City Council has determined that this Ordinance is categorically exempt from the California Environmental Quality Act (“CEQA”) (Pub. Res. Code § 21000 et seq.) and CEQA Guidelines (Cal. Code Regs., tit. 14, § 21000 et seq.) pursuant to CEQA Guidelines Section 15321 (Class 21) because the repeal of Ordinance No. 681 and termination of DA No. 18-021C is an enforcement action to revoke an entitlement interest.

SECTION 6. PUBLICATION
The City Clerk shall certify the passage and adoption of this Ordinance and shall cause this Ordinance to be published and/or posted as required by law, which shall take full force and effect thirty days from its adoption.

PASSED, APPROVED, AND ADOPTED by the City Council of the City of Cudahy at the regular meeting of this ______ day of _____ 2024. ______________________________
Jose R. Gonzalez
Mayor
ATTEST:
____________________________
Richard Iglesias
City Clerk

Ordinance No. 746

CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS:

CITY OF CUDAHY )
I, Richard Iglesias, City Clerk of the City of Cudahy, hereby certify that the foregoing Ordinance No. 746 was introduced for a first reading on the 4th day of June 2024 and approved for a second reading and adopted by said Council at its regular meeting held on the ______ day of ______ 2024 by the following vote, to-wit:

AYES:

NOES:

ABSENT:

ABSTAIN:

Richard Iglesias
City Clerk

Ordinance No. 746

EXHIBIT “A”
EVIDENCE SUBMITTED BY THE CITY (“ADMINISTRATIVE RECORD”)

Ordinance No. 746

EXHIBIT “B”

HEARING OFFICER DECISION AND ORDER

Ordinance No. 746

EXHIBIT “C”

PLANNING COMMISSION RESOLUTION

Blank Page

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 1 of 15

STAFF REPORT
Date: July 2, 2024
To: Honorable Mayor/Chair and City Council/Agency Members From: Alfonso Noyola, City Manager
By: Juan Arauz, AICP, Community Development Director
Subject: Adoption by second reading of Ordinance No. 747 Repealing Ordinance No. 678 terminating Development Agreement No. 18-016C, between the City of Cudahy and Genius Distribution, LLC

RECOMMENDATION
City staff recommends that the City Council take the following action(s):

1. Adopt by second reading Ordinance No. 747 (Attachment A) repealing Ordinance No. 678 terminating DA No. 18-016C, between the City of Cudahy and Genius Distribution, LLC.

SUMMARY
Pursuant to the terms and conditions of DA No. 18-016C and CCP No. 18-0019, it is the City’s purpose and intent to regulate cannabis activities within the City in a responsible manner to protect the health, safety, and welfare of the residents of Cudahy and to enforce rules and regulations consistent with California’s Cannabis laws. Cannabis operators with development agreements are obligated to comply with all provisions of the Cudahy Municipal Code (“CMC”), obligations of the DA, and conditions of approval under the CCP, and applicable state and local laws and related regulations. This report provides a summary of the unrefuted evidence offered at an administrative review hearing; a decision by a third-party hearing officer (“Hearing Officer”) on November 14, 2023 finding the Operator in default of the DA and out of compliance with the CCP; the public hearing by the Planning Commission , determining that the Operator has failed to comply with the terms and conditions of its DA, despite being provided with ample notice and several opportunities to achieve compliance, thereby recommending to the City Council that it repeal Ordinance No. 678 and DA No. 18-016C through the adoption of Planning Commission Resolution No. 2024-04. On June 4, 2024, the City Council voted X-X to adopt Ordinance No. 748.

Item Number
12E

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 2 of 15

BACKGROUND

1. On September 11, 2017, the City adopted Ordinance No. 673 (Attachment B) establishing the City’s commercial cannabis production activity regulations codified in Chapter 5.20 of the Cudahy Municipal Code (“CMC”). CMC Section 5.20.040 authorizes medicinal commercial cannabis activities within a designated overlay zone, pursuant to a development agreement adopted in accordance with the Development Agreement Law (Govt. Code Section 65864 et seq.) and Chapter 20.28 of the CMC.

2. On April 30, 2018, the Planning Commission recommended approval of CCP No. 18-0019 for cannabis distribution at 4916 Cecilia Street, as illustrated in Figure 1 below, subject to the execution of a development agreement between the City and the Operator for cannabis distribution. The Operator is one of seven tenants at the Site which all have separate Development Agreements with the City but share an interest in CCP No. 18-0019 and are subject to the same conditions of approval. As discussed in further detail below, the conditions of approval of CCP No. 18-0019 require the Operator to make timely payments of the fees due under the Development Agreement.

Figure 1 – Aerial of the Site.

3. On May 15, 2018, the City Council adopted Resolution No. 18-17 (Attachment C) approving the issuance of CCP No. 18-0019 with conditions of approval to the Operator, subject to the execution of a development agreement with the City.

4. On June 5, 2018, the City Council adopted Ordinance No. 678 (Attachment D) approving Development Agreement No. 18-016C by and between the Operator and the City authorizing commercial cannabis distribution activities at the Site as illustrated in Figure 2, below. The DA requires the Operator to make timely payments for Community Benefit Fees; Cost Recovery Fees; and Non-Operating Fees.1
1 As used herein, the term Non-Operating Fees and Operating Fees are used interchangeably. 4916 Cecilia

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 3 of 15

Figure 2 – Floor Plan

5. On October 2, 2019, the City provided the Operator with a Notice of Delinquency (Attachment F – pg. 180) due to failure to pay the various fees due under CCP 18-0019 and DA No. 18-016C, prior to placing the Operator in default status due to payment noncompliance with the DA, inclusive of the non-payment of Community Benefit Fees, Cost Recovery Fees, and Non-Operating Fees in the amount of Eight thousand eight hundred ninety-one dollars and seventy-six cents ($8,891.76). The Operator was given no later than October 17, 2019, to cure the amount, however the delinquency was not timely cured.

6. On May 4, 2021, the City provided the Operator with a Notice of Default (Attachment F – pgs. 182-183) due to non-compliance with the payment of fees and associated penalties in the amount of Forty-one thousand four hundred sixty-eight dollars and thirty-five cents ($41,468.35). The Operator was given no later than 30 days to cure the default, however, the default was not timely cured.

7. On September 2, 2021, the City notified the Operator of their failure to sign the DA (Attachment F – pgs. 185). The DA was signed January 19, 2023.

8. On December 7, 2022, the City Manager offered a Cannabis Deferment and Payment Program (Attachment F – pgs. 187-188) to assist cannabis Operators with accumulated Community Benefits, Cost Recovery and Non-Operating Fees by deferring and providing additional time for payment without penalty. Under the program:
a. Unpaid Non-Operating Fees would be deferred (without penalty) until six (6) months after the Operator was issued a Certificate of Occupancy, and then repay already accumulated Non-Operating Fees within twelve (12) months; and b. Operators would continue to be responsible for the timely payment of Community Benefit Fees and Cost Recovery Fees, as they accumulated; and Unit D
4916 Cecilia

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 4 of 15

c. Previously incurred Community Benefit Fees and Cost Recovery Fees would be subject to a payment plan and require timely payments.

All cannabis operators that were interested in participating in the program were given no later than January 31, 2023, to execute an agreement to participate in the Deferment and Payment Program. The City received interest from the Operator and due to the good faith negotiations between both parties, the City extended the opportunity for the Operator to participate.

9. On February 1, 2023, the City’s Finance Department presented the Operator with a Letter Agreement agreeing to the Deferment and Payment Program to forbear the outstanding payments due (“Letter Agreement”) (Attachment F – pgs. 190-196). The Operator accepted the proposed terms and executed the Letter Agreement on February 2, 2023, and agreed to commence payments on March 1, 2023. The Operator also acknowledged and agreed “that the past due amounts stated [in the Letter Agreement] are true and correct and are in fact presently due and owing. The parties agree that the Operator is in ‘default status’ on its obligations under its Development Agreement with the City.”

10. Between April and June 2023, the City provided the Operator with three Notices of Delinquency (Attachment F – pgs. 198-212) and provided an opportunity for the Operator to cure outstanding payments due. However, the default on the Letter Agreement was not timely cured and therefore was terminated and no longer in full force and effect as of June 16, 2023. Accordingly, the total of all past due amounts at the time the Letter Agreement was terminated and an amount of One hundred thirty-two thousand forty-six dollars and seventy-nine cents ($132,046.79) was due and owed.

11. On June 23, 2023, the City sent a Final Demand Letter (Attachment E) demanding the Operator to respond to the following demands: 1) Proof of revival of the LLC’s entity status with the State; 2) Forwarding payment for all past due amounts; and 3) Contact the City to revise the CCP’s Schedule of Performance and for further information to become compliant with the DA and CCP. The Operator did not respond in a timely manner and has failed to make any attempt to cure the defaults.

12. On August 9, 2023, the City issued an Escrow Account Letter (Attachment F – pgs. 218- 219) requiring all cannabis operators to open an escrow account by September 15, 2023, to ensure payment of Cost Recovery Fees. As of the writing of this report, the Operator has not opened an escrow account nor made any payments into the account.

13. On October 12, 2023, the City issued the Operator a Notice of Review Hearing (Attachment F – pgs. 221-222) with the hearing date, time, and place. The Notice of Review Hearing requested the Operator to contact staff to confirm appearance at the Review Hearing and advised the Operator to respond within ten days of the date of the letter to confirm appearance Review Hearing or otherwise waive the right to present evidence at the hearing (Attachment I). The notice also informed the Operator that it was

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 5 of 15

responsible for the cost of the Review Hearing and requested the Operator to deliver a cashier’s check three days prior to the scheduled hearing or would otherwise constitute further default on the DA. The City did not receive a timely response from the Operator nor payment for the cost of the Review Hearing.

14. On October 24, 2023, the City issued a letter (Attachment F – pgs. 224-225) updating the Operator on their payment and fees related to the DA by correcting the amount due to an error in the total amount billed. The City provided a credit in the amount of Fourteen thousand nine hundred fifty dollars and fifty cents ($14,950.50).

15. As of October 24, 2023, Operator owed the City One hundred thirty thousand six hundred eleven dollars and seventy-four cents ($130,611.74). Operator has continued to fail to make payments and as of the writing of this report owes One hundred fifty thousand eight hundred fifty-one dollars and sixty-seven cents. ($150,851.67). Community Benefit Fees, Cost-Recovery and Non-Operating Fees plus penalties continue to accrue and the total amount due may be higher as of the date of this staff report.

16. On November 2, 2023, the City sent a follow up notice to the Notice of Review to the Operator confirming that it had not received any communication from the Operator confirming attendance at the Review Hearing and that the ability to present before the hearing officer had been waived (Attachment G). The City did not receive a timely response from the Operator.

17. On November 14, 2023, the duly appointed third-party Hearing Officer, Steve Napolitano, conducted a Review Hearing as authorized under the CMC Section 5.20.080(7) and Article 19 of the DA No. 18-016C to hear and consider information and evidence submitted by City staff through an Administrative Record (Attachment F) and the Operator. No representation from the Operator was present at the hearing nor did the Operatorsubmit any information or evidence for consideration.

18. On January 14, 2024, the Hearing Officer issued a written decision and order (Attachment H) finding evidence showing the Operator, despite considerable notice and opportunities to cure outstanding issues, has breached the terms and conditions of the DA and CCP and recommends the Planning Commission and City Council repeal Ordinance No. 678 terminating DA No. 18-016C and revoke the related interest in CCP No. 18-0019.

19. Approximately two months after the Review Hearing, on January 6, 2024, an attorney who appears to represent the Operator submitted a letter to the City alleging the City was in default with the terms of DA No. 18-016C (“Notice to Cure Breach”) (Attachment I).

The Notice to Cure Breach alleged the City had breached DA No. 18-016C by (a) failing to waive fees pursuant to the Article 23.i of the DA (Force Majeure); (b) failing to “expedite” approvals and by seeking fees for delays allegedly caused by the City; (c) requiring the Operator to pay Non-Operating Fees as required by the DA; (d) implementing fees that violate The Mitigation Fee Act (Govt. Code § 65864-65869.5); and (e) failing to conduct an annual hearing to determine compliance with the DA No. 18-016C. The Notice to Cure

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 6 of 15

Breach also alleged the City was liable under the Civil RICO statute. The Operator demanded that the City (i) waive all accumulated Non-Operating Fees for a period of 15 months; (ii) “waive all fees during any delays caused by the City[;]” (iii) “waive all fees when the City was in default under the agreements[;]” (iv) issue certificate of occupancy to the Operator; (v) halt the hearing process before the third-party Hearing Officer; and (vi) expedite the processing of all permit applications.

20. On January 8, 2024, the City received a request to submit the Notice to Cure Breach into the administrative record for the hearing that took place on November 14, 2023 (Attachment J).

21. On March 18, 2024, pursuant to State law and the CMC, the Planning Commission held a duly noticed public hearing to consider the Hearing Officer’s recommendation to repeal Ordinance No. 678 and terminate DA No. 18-016C. Hours before the hearing, the attorney representing the Operator requested that a comment letter be submitted into the record for the May 18 Planning Commission hearing (Attachment K).2 The Planning Commission considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents. No representation from the Operator was present at the hearing. After closing public hearing, the Planning Commission adopted Resolution No. 2024-04 (Attachment L), recommending the City Council repeal Ordinance No. 678 and terminate related DA No. 18-016C.

22. On June 4, 2024, pursuant to State law and the CMC, the City Council held a duly noticed public hearing to consider the recommendation by the Planning Commission to repeal Ordinance No. 682 and terminate DA No. 18-016C. After consideration of all public comments received before and during the public hearing , the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents. No representation from the Operator was present at the hearing. After closing public hearing, the City Council voted X-X to introduce and adopt by first reading Ordinance No. 747.

DISCUSSION/ANALYSIS
During a review of the Operator’s compliance with the Development Agreement, the burden is upon the Operator to demonstrate good faith compliance with the terms of the Development Agreement under Article 19. Pursuant to Government Code Section 65868.1 and Articles 19 and 19.d of the Development Agreement, if the City Council determines, based on substantial evidence, that the Operator has not complied in good faith with the terms of the conditions of the DA, the City Council may terminate the DA, or alternatively may choose to modify and impose conditions reasonably necessary to protect the interests of the City. 2 The City assumes that the request to add the letter to the May 18 Planning Commission hearing was a typo and was intended to be submitted into the record for the March 18, 2024 Planning Commission hearing. The City accepted the letter as a public comment into the record. All Planning Commissioners and City Council members were also addressed in the communication.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 7 of 15

Conversely, if the Operator is found to be in compliance with the DA, the Operator may request the City to issue a Certificate of Compliance pursuant to Article 19.e. Any decision to terminate a development agreement must be reviewed by the Planning Commission prior to review by the City Council. Gov. Code § 65867 Under Article 19.d, the decision to terminate a development agreement by the City Council is final.

As it relates to the CCP, pursuant to the CMC Sections 5.20.080(6) and 5.20.080(7), any material violations of Chapter 5.20, any other relevant city law or state law, condition of approval, or any other required agreement or covenant, such as a development agreement, by a cannabis permittee, or cannabis permittee’s agent, is grounds for suspending or revoking the relevant cannabis permit. The decision to suspend or revoke a commercial cannabis permit is with the City Manager or his designee. Furthermore, pursuant to CMC Section 5.20.080, any decision regarding the suspension or revocation may be appealed to the City Council.

The City has appointed a third-party hearing officer to conduct a review of the Operator’s compliance with CCP No. 18-0019 and DA No. 18-016C. The findings and determinations made by the Hearing Officer inform any subsequent action to terminate or modify the Development Agreement and suspension or revocation of the CCP. As stated above, and further described in Attachment H the Hearing Officer issued a written decision making several findings of fact and conclusions and determined that Genius Distribution, LLC breached the terms and conditions pursuant to DA No. 18-016C and CCP No. 18-0019, based on a preponderance of the evidence, in the following material aspects:

1. Violation #1: Breach of Payment Obligations. Pursuant to the terms of the DA, the Operator is responsible for timely payment of Community Benefit Fees (Article 5.b); Cost Recovery Fees (Article 8); and Operating Fees (Article 7.c). The Operator is also obligated to pay the fees due under the DA pursuant to CCP Condition of Approval No. 45; and timely payment for Non-Operating Fees pursuant to Condition of Approval No. 13 (Attachment F pgs. 54-69). Conditions of Approval 1(a) and 1(b) require the Operator to pay all City-issued invoices within 30 days of receipt. Pursuant to the terms of the DA, Operators that are more than 30 days past due on operating fees are subject to a penalty equal to twenty-five percent (25%). In addition, a ten percent (10%) penalty shall be added to the first day of each calendar month following the imposition of the initial 25% penalty, if the fee remains unpaid in whole or in part, up to a maximum of the one hundred percent (100%) of the payable fee. The conditions of approval for CCP No. 18- 0019 are incorporated into the DA through Article 18 and require the Owner to comply with all conditions contained therein (Attachment F – pgs. 77-119). The City offered the Operator relief in the form of the Cannabis Deferment and Payment Program. The City executed a Letter Agreement to grant the Operator relief in the form of deferred payment obligations of the Operating Fees and a payment schedule for past-due Community Benefit Fees and Cost Recovery Fees; and an obligation to remain current on recurring fees under the DA. The Operator did not make any timely payments in the three months that followed the execution of the Letter Agreement between March to May 2023.

As of October 24, 2023, the City reported that the Operator is past due in the amount of One

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 8 of 15

hundred thirty thousand six hundred eleven dollars and seventy-four cents ($130,611.74) and past-due payments continue to accumulate, including late payment penalties. As of the writing of this report, the Operator now owes the City $150,851.67.

Table 1. Summary of Past and Current Amounts Due as of May 14, 2024 Type ment Amount Due
munity Benefit Program 381.27
Recovery Fees 977.58
-Operating Fees 105.04
alties (Late Payments) 87.78
AL 0,851.67
Based on the evidence submitted by the City, the Hearing Officer found that “based on the unrefuted evidence presented by the City...a preponderance of the evidence shows that [Operator] breached multiple conditions of the DA and CCP. Despite multiple attempts and notices by the City to gain compliance, the evidence shows that [Operator] failed to comply with their payment obligations, which constitutes the necessary grounds for termination of the DA and revocation of the CCP under the CMC” (Attachment H). The Hearing Officer’s determination was ratified by the Planning Commission through the adoption of Resolution No. 2024-04 which recommends that the City Council find that Operator is in default of the terms set forth in DA No. 18-016C and repeal Ordinance No. 678 and terminate the related DA.

2. Violation #2: Failure to comply with state law - Suspended Status with the Secretary of State (SOS) and Franchise Tax Board (FTB). Pursuant to Article 4.a of the DA, the Operator must be a lawful entity capable of operating in accordance with state laws. A Certificate of Status dated October 31, 2023, states: “The above-referenced entity’s powers, rights, and privileges are suspended in California. As of the date of the Review Hearing on November 14, 2023, the Operator’s entity status was “FTB/SOS Suspended.” The Hearing Officer further determined “[a]ccording to the California Franchise Tax Board website, a suspended entity cannot do business in California until they cure the reason for their suspension, which is supported by Rev. and Tax Code Sec. 23303 and case law cited by the City: Casiopea Bovet, LLC v. Chiang (2017) 12 Cal.App.5th 656, 662; City of San Diego v. San Diegan for Open Government (2016) 3 Cal.App.5th 568, 577” (Attachment H).

Despite notice of default and opportunity to cure, the Operator’s status remained “suspended” at the time of the Review Hearing. Non-compliance with state law due to the Operator's legal status as a California limited liability is suspended by the State’s Secretary of State, as such, the Operator is unable to operate in the State of California.

3. Violation #3: Failure to Implement the Project Under Prescribed Time Limits. CCP Condition of Approval No. 51.A set a 90-day time frame in which the Operator must complete construction of Phase I of the Project. The 90-day period began following the 15-day appeal period from the date of the CCP approval, or June 20, 2018, meaning the

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 9 of 15

Operator needed to complete Phase I by September 18, 2018. CCP Condition of Approval

51.A.iii sets a 180-day time limitation from the effective date of the CCP to complete all tenant improvements, construction, and obtain a certificate of occupancy from the Building Department, or December 17, 2018. The Operator was given a notice of default and opportunity to cure pursuant to the City’s Final Demand Letter to the Operator (Attachment E), with no response from the Operator. The Operator has failed to provide any evidence that it has obtained a Zoning Clearance, completed construction of Phase I, or completed the tenant improvements, obtained a certificate of occupancy, or otherwise complete Phase II within the prescribed time periods. Nor does the City have any record of any request by the Operator for an extension of time to the City Manager and there is no evidence to demonstrate the Operator has made substantial progress, such as submitting an application for a Zoning Clearance or building permit plan check.

Allegations of Default on Behalf of the City:

As an initial matter, the Notice to Cure Breach offered as evidence to demonstrate compliance with the DA and CCP was untimely submitted, nor does it actually offer evidence of Operator’s compliance with the CCP and DA. The request was made nearly two months after the Review Hearing that took place on November 14, 2023, after providing the Operator with multiple notices, and need not be considered. However, the City shall respond to the allegations made by the Operator’s representative which are largely unsupported by the evidence, the law, or both.

1. Operator is not Excused for Performance Pursuant to Force Majeure. The DA provides a Force Majeure clause at Article 23.i, which applies to unforeseen events that include “war, insurrection, acts of God, local, state or national emergencies, strikes and other labor difficulties beyond the party’s control, or any default by the City hereunder, which Force Majeure event substantially interferes with the development, construction or operation of the Project” (emphasis added).

Operator has failed to make a substantiated showing that the circumstances of Force Majeure were present during the time of default. The City provided the Operator with the first notice that it was in breach of the DA and CCP, approximately five months prior to the Governor’s issuance of Executive Order N-22-20 (Attachment M). The Operator was provided 30 days to cure the default pursuant to Article 14.a of the DA (Attachment F – pgs. 77-119). During this time, Operator did not cure the default, nor take diligent efforts to cure the default. City issued a subsequent notice to Operator on May 4, 2021 (Attachment F – pgs. 182-183) – during the unsupported allegation of the City’s closure.

Further, City Hall was not closed for a 15-month period. During the height of the pandemic, City Hall’s physical premises were closed to the public, however, the City continued to conduct business, and process requests, including applications for building permits which could be dropped off at the front of City Hall. Additionally, both commercial cannabis activities, inclusive of cannabis manufacturing, and commercial construction were permitted by the authority granted to the State Public Health Officer pursuant to Executive Order N-33-20 (Attachment M). The State permitted cannabis activities and

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 10 of 15

construction to continue through the height of the pandemic and operators were able to continue processing applications, such as building permits, during this time.

The Notice to Cure Breach alleges that the Operator has invested $10 million from the onset of the COVID-19 pandemic to present day but has not provided any evidence to substantiate this point. However, if the Operator was prohibited from engaging in activities that would have allowed them to pursue the operation of a cannabis business, it is unclear how the Operator could have been prohibited from investing $10 million into the Project and been prohibited from moving forward with implementation of the Project at the same time.

Even assuming arguendo that there was an event of Force Majeure, Article 23.i3 does not excuse performance, but only provides the Owner with an extension of time. There is no excusal of performance under Force Majeure nor does Article 23.i grant the City the ability to waive fees. Any allegation that City “agreed” not to charge fees during the COVID-19 pandemic or other delays are unsupported by any evidence in the administrative record.

The Operator acknowledged all fees, inclusive of Cost-Recovery Fees, Community Benefit Fees, and Non-Operating Fees accrued upon signing a Letter Agreement with the City on February 2, 2023, in which the Operator acknowledged and agreed “that the past due amounts stated are true and correct and are in fact presently due and owing. The parties agree that the Operator is in ‘default status’ on its obligations under the Development Agreement with the City…[and would] remain in ‘default status’ on its Development Agreement until all past due fees set forth in [the] Letter Agreement have been paid and Operator is in full compliance with all terms of its Development Agreement” (Attachment F – pgs. 190-196).

2. Operator Has Failed to Demonstrate How the City has Failed to Expedite Approvals. The Notice to Cure Breach asserts the City has delayed in approving certain plans, however the City has no record of the Operators attempt to apply for and obtain a Zoning Clearance or implement the multiple phases of the Project as described in Violation #3, above.

Operator failed to offer any evidence that it complied with the timelines and requirements set forth in the CCP and DA. Further, as stated above, the Operator has been in default since 2019. Despite this, the City provided a pathway to achieve compliance with multiple defaults, including the schedule of performance, which the Operator did not timely attempt to cure any default.

Any allegation by the Operator that the City’s duty to review building plans was limited by the annual review process under Article 19 of the Development Agreement is unfounded and expressly contradicted in the DA terms. It’s unclear why the Operator is under the impression that its Project would be constructed and operated without any 3 In full, Article 23.i states “If delays are caused by unforeseen events beyond the control of Owner, such delays will entitle Owner to an extension of time as provided in this section. Such unforeseen events (‘Force Majeure’) shall mean war, insurrection, acts of God, local, state or national emergencies, strikes and other labor difficulties beyond the party’s control, or any default by the City hereunder, which Force Majeure event substantially interferes with the development, construction or operation of the Project.”

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 11 of 15

review of permit applications, etc., other than the reviews contemplated under Section 19 of the Development Agreement and is contrary to law. CMC Section 15.04.010 requires all development projects to comply with the Los Angeles Building Code requirements. Title 15 of the CMC also requires projects to comply with Los Angeles County’s Electrical Code requirements (Chapter 15.08), Plumbing Code requirements (Chapter 15.12), and Mechanical Code (Chapter 15.16). Providing comments to ensure that a project applicant complies with such state and local requirements does not constitute a delay on the City’s part, but enforcement of the Operator’s requirement to comply with state, local and federal regulations. At no time does the Notice allege the City refused to accept or review plans or other submissions by the Operator. If anything, this assertion cuts against Operator’s own argument and would result in further delays for the Operator to implement the Project.

3. There is No Evidence in the Administrative Record to Support a Finding that the City Did Not Intend for the Non-Operating Fees Not to Apply. To support the notion that NonOperating Fees would not apply the Operator’s representative submitted statements by a former councilmember who now acts as a consultant to many of the defaulting operators and other persons affiliated with the Operator.4 Any assertion that Non-Operating Fees were not intended to apply are directly contradicted by language in Article 7.c(1) which states the Operator shall be charged a “monthly operating fee of [.42 x total square foot of the ’Premises‘] until Owner is operating on the Premises and selling product under its City Regulatory Permit and State Regulatory Permit. Once Owner is operational and generating revenue, the monthly operating fee is [.42 x total square foot of ’Production Space‘] or a monthly operating fee based on gross receipts. DA Article 7.c(i) (emphasis added). The Development Agreement further provides that “Operating Fees shall begin to accrue ninety (90) days after the end of the month of the Effective Date of the Agreement.” Id. The language provided in the Development Agreement plainly states a formula that applies for Operating Fees for when the Operator is operating based on square footage or gross receipts or a formula based on square footage when the Operator is not operating or in “non-operation.” To argue that there is no such thing as Non-Operating Fees merely because those exact words is a matter of semantics. Further, there is no language in the DA language that discusses or implies the intent for such fees to apply only to operators who “squat” on licenses as represented in a declaration submitted by the consultant.

Failure to pay such fees are out of compliance with Conditions of Approval Nos. 1(a) and (b), requiring payment of all City-issued invoices within thirty days of receipt (Attachment F- pgs. 54-69). Non-payment of Non-Operating Fees is also in violation of Conditions of Approval 13, 21, 37, and 45.
4 The Operator’s attorney offered a statement by Daffodil Tyminski that was submitted to the City pursuant to Evidence Code Section 1152 and 1154, which protects the confidentiality of statements made during settlement or negotiation discussions. Based on this submitted statement it appears that the Operator has waived that privilege afforded by those previous statements.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 12 of 15

4. The Assertion that Non-Operating Fees are Illegal Impact Fees is Not Supported by the Law. Non-Operating Fees are a part of the Development Agreement entered into between the City and the Operator and was enacted via ordinance pursuant to Development Agreement Law (Govt. Code §§ 65864-65869.5). Fees imposed by development agreements are expressly exempt from the Mitigation Fee Act. (Govt. Code § 66000(b) (“’Fee’ means a monetary exaction other than a tax or special assessment…but does not include…fees collected under development agreements adopted pursuant to Article 2.5 (commencing with Section 65864) of Chapter 4…”).) Therefore, the fees agreed to by the Operator through the execution of the DA and subsequent Letter Agreement are not subject to the Mitigation Fee Act.

Even if the Mitigation Fee Act was applicable to the past due fees, to properly contest, the Non-Operating Fees, the Operator would have been required to tender the required payment in full and serve written notice to the City that informs the City that payment has been tendered under protest accompanied by a statement of facts. (Govt. Code § 66020(a).) However, such protests must be filed at the time of the approval of the development or within ninety (90) days of the imposition of fees. The City and Operator entered into the Development Agreement on June 5, 2018. The 90-day statute of limitations to protest such fees ended on September 3, 2023, and Operator has not tendered payment in full as required by Government Code Section 66020(a). Therefore, any opportunity to protest under the Mitigation Fee Act has long since passed.

Further, as stated above, Operator does not contest that it previously acknowledged that all of the fees due, inclusive of Non-Operating Fees, were presently due and owing at the time it signed a Letter Agreement.

5. There is No Requirement to Perform an Annual Review. Operator points to CMC Section

20.84.600 and Government Code Section 65865.1 to assert the City is in breach of the Development Agreement by failing to conduct a periodic review of the Operator’s compliance with the Development Agreement. However, Operator’s assertion is directly contradicted by the express language in the Development Agreement. Article 19.f of the Development Agreement expressly provides that “City’s failure to conduct a periodic review of this Agreement shall not constitute a breach of this Agreement.” Nor does the City have any record of the Operator requesting an annual review to demonstrate compliance with the DA or CCP.

6. The City Has Not Breached the Ability for the City Council to Make a Final Determination on the Operator’s Compliance with the Development Agreement and Whether to Modify or Terminate the DA, or Otherwise Find the Operator in Compliance. The plain language in Article 19.d of the Development Agreement provides that “[a]t the time and place set for the Review Hearing, Owner shall be given an opportunity to be heard. If City Council finds, based upon substantial evidence, that Owner has not complied in good faith with the terms or conditions of this Agreement, City Council may terminate this Agreement notwithstanding any other provision of this Agreement to the contrary, or modify this Agreement and impose such conditions as are reasonably necessary to protect the

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 13 of 15

interests of the City.” The City has retained a third-party hearing officer for the purpose of hearing the evidence and making a recommendation to the City Manager, Planning Commission and City Council to “adopt an ordinance repealing Ordinance No. 678 and terminate Development Agreement No. 18-016C and revoke Operator’s interest under CCP18-0019 (Attachment H)”. The Operator has been provided an opportunity to be heard at the administrative hearing conducted by a third-party hearing officer, whose findings and determinations were sent to the Planning Commission and now City Council.

No one has denied the Operator the opportunity to be “heard” before the City Council, but the Operator ignores the procedural requirements that require the repeal of an ordinance to terminate a development agreement, which includes a process by which the Operator may address the Planning Commission as well as the City Council.

Further, there is nothing in Article 19.d or the CMC that prohibits the City from appointing a third-party hearing officer from conducting the initial hearing and forwarding findings to City decisionmakers for the purpose of determining whether to take any action to modify or terminate the Development Agreement or Commercial Cannabis Permitso long as the City Council’s determination and actions are supported by substantial evidence. All such findings and recommendations made by the hearing officer shall be forwarded to the appropriate decisionmakers for final disposition. The City has provided Operator with more than 30 days’ notice of the November 14, 2023 hearing, requesting Operator to provide evidence of compliance at least 10 days prior to the hearing (Attachment F – pgs. 221-222). The Operator provided no response. The City sent a follow up communication informing Operator that it did not submit any documentation and has waived its rights at the Review Hearing (Attachment G). Operator instead submitted a Notice to Cure Breach approximately two months afterthe Review Hearing alleging the City is in default of DA18- 016C. Pursuant to Article 14.d of DA18-016C, Operator’s remedies for a default are limited to a termination of the Development Agreement.

CMC Section 5.20.080(6)(a) permits the City Manager to revoke an operator’s interest in a CCP upon a determination “that the cannabis permittee has failed to comply with [Chapter 5.20], any condition of approval, or any agreement or covenant as required pursuant to this chapter.” The City Manager’s decision to revoke the operator’s interest in a CCP may be appealed to a third-party hearing officer or to the City Council. CMC §

5.20.080(7). As determined by the Hearing Officer, there is a preponderance of evidence to support a finding that the Operator is out of compliance with the DA and CCP.

7. Operator’s Assertion for Damages under the Development Agreement are Improper.

Even if the City were in default of the DA, which it is not, the Operator’s remedies are limited under the DA. Pursuant to Articles 14.a and 14.b of the DA, the Operator may only seek monetary damages if there is a showing of “bad faith intentional acts [or] the grossly negligent or malicious acts of City and its officials, officers, agents and employees.” Pursuant to Article 14.d of the DA, even if the City were in default, which it is not, the Operator’s remedies would otherwise be limited to a cancellation of the Development Agreement after providing a 60-day notice of default. Operator’s notice did not provide

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 14 of 15

60-day notice, but 30-day notice.

Based on the evidence provided by the City, which was unrefuted, the Hearing Officer found that the Operator “has breached the terms and conditions of DA 18-016C and [Operator’s] portion of its CCP and recommends to the Planning Commission and/or City Council repeal Ordinance No. 678 and terminate DA [No.] 18-016C...” (Attachment H).

Pursuant to CMC Section 20.84.070, DA 18-016C and CCP No. 18-0019 were processed concurrently and approved collectively under Ordinance No. 678. To repeal Ordinance No. 678, the repeal shall occur in the same manner as the original proceedings and pursuant to CMC Section 20.84.500.

PUBLIC NOTICE AND COMMENTS

This item was noticed in accordance with the City’s public notice requirements, which involved mailed notices to property owners and tenants within 300 feet of the Site and publication in the local paper (Attachment N). As of the writing of this report, City staff have not received any public comments.

ENVIRONMENTAL ANALYSIS

The action(s) have been assessed in accordance with the California Environmental Quality Act (“CEQA”) (Pub. Res. Code § 21000 et seq.), CEQA Guidelines (Cal, Code Regs., tit. 14, § 15000 et seq.) and the environmental regulations of the City. The Project is categorically exempt from the requirements of CEQA pursuant to CEQA Guidelines Section 15321 - Class 21 (Enforcement Actions by Regulatory Agencies). This exemption is applicable to “[a]ctions by regulatory agencies to enforce or revoke a lease, permit, license, certificate, or other entitlement for use issues, adopted, or prescribed by the regulatory agency or enforcement or a law, general rule, standard, or objective, administered or adopted by the regulatory agency.” If the City Council adopts Ordinance No. 747 to repeal Ordinance No. 678 and terminate DA No. 2018-016C, it would be an enforcement action. Therefore, the action(s) are categorically exempt from the provisions of CEQA.

CONCLUSION
As discussed above and based on the preponderance of unrefuted evidence offered at the administrative review hearing; and the Planning Commission’s finding that the Operator has failed to comply with their terms and conditions of the DA, thereby recommending to the City Council that it repeal Ordinance No. 678 and terminate DA No. 18-016C through the adoption of Planning Commission Resolution No. 2024-05. As stated above, the Operator has failed to comply with their obligations under the DA and CCP, despite being provided with ample notice and several opportunities to achieve compliance. Therefore, City staff recommends the City Council adopt Ordinance No. 747 repealing Ordinance No. 678 terminating DA18-016C.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 15 of 15

ATTACHMENT(S)
A. Ordinance No. 747

ORDINANCE NO. 747

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF CUDAHY REPEALING ORDINANCE NO. 678 AND

TERMINATING RELATED DEVELOPMENT AGREEMENT
NO. 18-016C BETWEEN GENIUS DISTRIBUTION, LLC
AND THE CITY OF CUDAHY.

WHEREAS, the City of Cudahy (the “City”) is a general law city, incorporated under the laws of the State of California; and
WHEREAS, pursuant to its police power, the City may enact and enforce laws within its boundaries that promote the public health, safety, or general welfare of the community, and are not in conflict with general laws; and WHEREAS, to strengthen the public planning process, encourage private participation in comprehensive planning and reduce the economic risk of development, the California State Legislature adopted Section 65864 et seq. of the California Government Code (the “Development Agreement Statute"); and WHEREAS, the Development Agreement Statute authorizes the City to enter into a development agreement with a person having legal or equitable interest in real property for the development of such property in order to establish certain development rights in exchange for public benefits; and
WHEREAS, in accordance with the Development Agreement Statute, the City Council adopted Ordinance No. 690 in 2018 establishing the procedures and requirements for the consideration of development agreement with the City and are contained within Cudahy Municipal Code (“CMC”) Sections 20.84.530 through

20.84.640; and
WHEREAS, on September 11, 2017, the City Council adopted Ordinance No. 673 establishing regulations for commercial cannabis activities, in a specified Overlay Zone through an acquisition of a Commercial Cannabis Permit and execution of a development agreement with the City; and
WHEREAS, on April 30, 2018, the City Planning Commission (“Planning Commission”) conducted a properly noticed public hearing to consider an application by Genius Distribution, LLC (“Operator”) for approval of a Commercial Cannabis Permit to allow non-store front commercial cannabis manufacturing activities at 4916 Cecilia Street, Unit D (“Site”); and
WHEREAS, at this hearing, the Planning Commission heard and considered verbal and written testimony and evidence, and recommended approval of the Commercial Cannabis Permit subject to Operator’s execution of a development agreement with the City; and
WHEREAS, on May 15, 2018, the City Council conducted a properly noticed Attachment A Page 86 of 240
Ordinance No. 747

public hearing to consider the issuance of the Commercial Cannabis Permit (“CCP”) No. 18-0019 and Development Agreement (“DA”) No. 18-016C at which the City Council heard and considered both written and oral testimony and evidence and subsequently approved, and adopted Resolution No. 18-17 for CCP No. 18-0019; and WHEREAS, at the same hearing the City Council considered and approved CCP No. 18-0019, it also conducted the first reading of Ordinance No. 678 which authorized the execution of DA No. 18-016C between the Operator and the City; and WHEREAS, on June 5, 2018, the City Council adopted, on second reading, Ordinance No. 678 approving DA No. 18-016C and authorizing the Mayor to execute the DA on behalf of the City; and
WHEREAS, the effective date of the Development Agreement is July 5, 2018 (“Effective Date”); and
WHEREAS, upon the Effective Date of Ordinance No. 678, the Operator was granted the permission to conduct commercial cannabis retail delivery activities provided, among other things, it apply for and receive a Zoning Clearance pursuant to the CMC’s requirements, receive State licensing approval from the Department of Cannabis Control, and comply with the terms outlined in the DA and conditions of approval under the CCP inclusive of the timely payment of Community Benefit Fees, Cost Recovery Fees and Operating/Non-Operating Fees and applicable penalties and interest; and WHEREAS, the Operator has not complied with the terms and conditions of the DA and CCP despite multiple notices and opportunities to cure, and remains in material breach of thereof; and
WHEREAS, on October 12, 2023, the City provided notice to the Operator that it would be conducting a Review Hearing (“Review Hearing”) under Article 19 of DA No. 18-016C which informed the Operator of the burden to prove compliance with the DA and CCP; and
WHEREAS, the Operator never provided a timely response to the City’s notice for a Review Hearing; and
WHEREAS, on November 2, 2023, the City sent a follow up notice informing the Operator it had not received any response to the Review Hearing Notice; and WHEREAS, the Operator did not respond to the follow up notice; and WHEREAS, on November 14, 2023, Steve Napolitano, Esq., a duly appointed third-party hearing officer for the City (“Hearing Officer”), conducted a properly noticed Review Hearing; and
WHEREAS, the Operator did not participate at the Review Hearing, was not present at the hearing and did not present any evidence for consideration prior to or during the hearing, and the Hearing Officer heard and considered information and

Ordinance No. 747

evidence by City staff, which a true and correct copy of the staff report and supporting evidence is attached hereto as Exhibit “A” and incorporated herein by reference; and WHEREAS, the Hearing Officer heard and considered information and evidence by City staff; and
WHEREAS, on January 14, 2024, the Hearing Officer issued a written decision and order (the “Decision”), incorporated by reference and attached hereto as Exhibit “B”, making several findings of fact and conclusions of law with respect to the Operators noncompliance with the DA and CCP based on a preponderance of the evidence; and WHEREAS, the Hearing Officer determined that Operator breached its payment obligations due to the Operator’s non-payment of fees and penalties due and owed to the City totaling $145,818.40 which continue to accumulate; and WHEREAS, the Operator continues to fail to meet its payment obligations and the total amount due to the City as of May 14, 2024 is $150,851.67; and WHEREAS, the Operator breached its obligation to maintain its legal status with the State of California, as the Operator’s LLC entity status has been suspended by the State of California; and
WHEREAS, the Operator had breached its obligation to implement the Project within the prescribed time periods contained within CCP No. 18-0019 Condition of Approval No. 51 (Time Limits), because there is no evidence that the Operator has made a diligent effort to implement the Project in any fashion inclusive of an application for a Zoning Clearance to permit the commercial cannabis activities; and WHEREAS, the Hearing Officer has recommended that the City Council adopt an ordinance repealing Ordinance No. 678 terminating DA 18-016C and revoking the related interest in CCP 18-0019; and
WHEREAS, pursuant to state law and the CMC, the Planning Commission duly noticed, agendized, and conducted a public hearing on this matter on March 18, 2024; and
WHEREAS, the Planning Commission considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents relating to the repeal of Ordinance No. 678; and
WHEREAS, after the close of such public hearing, the Planning Commission adopted Resolution No. 2024-04, attached hereto and incorporated by reference as Exhibit “C,” recommending the City Council repeal Ordinance No. 678 and terminate related DA No. 18-016C; and
WHEREAS, pursuant to state law and the CMC, the City Council duly noticed, agendized, and conducted a public hearing on this matter; and

Ordinance No. 747

WHEREAS, the City Council considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents relating to the repeal of Ordinance No. 678; and
WHEREAS, after the close of such public hearing, the City Council introduced and adopted by first reading Ordinance No. 2024-04 repealing Ordinance No. 678 and terminating related DA No. 18-016C.

NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF CUDAHY DOES HEREBYORDAIN AS FOLLOWS:

SECTION 1. RECITALS
That the above Recitals are true and correct and are incorporated as though fully set forth herein.

SECTION 2. ADOPTION OF HEARING OFFICER’S FINDINGS OF FACT AND

CONCLUSIONS OF LAW
The City Council has reviewed and considered the Decision by the Hearing Officer (Exhibit “B”) issued on January 14, 2024, on this matter. For the reasons stated in the Decision, and as recommended by the Planning Commission (Exhibit “C”), the City Council adopts the Hearing Officer’s findings of fact and conclusions of law as its own and determines that Genius Distribution, LLC is not in compliance with the terms and conditions of the Development Agreement No. 18-016C and finds that Genius Distribution, LLC is in default of its contractual obligations set forth in said Development Agreement and has breached its Conditions of Approval for CCP No. 18-0019 by a showing of the preponderance of the evidence.

SECTION 3. TERMINATION OF DEVELOPMENT AGREEMENT
Pursuant to Article 19(d) of the Development Agreement, the City Council may terminate Development Agreement No.18-016C in its entirety. For the reasons stated in the Decision, and as recommended by the Planning Commission, the City Council hereby adopts this Ordinance repealing Ordinance No. 678 and terminating DA No. 18- 016C in its entirety.

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 hereby declares that it would have adopted this Ordinance, and each section, subsection, subdivision, sentence, clause, phrase, or portion thereof, irrespective of the fact that any one or more sections, subsections, subdivisions, sentences, clauses, phrases, or portions might subsequently be declared invalid or unconstitutional.

Ordinance No. 747

SECTION 5. CALIFORNIA ENVIRONMENTAL QUALITY ACT
The City Council has determined that this Ordinance is categorically exempt from the California Environmental Quality Act (“CEQA”) (Pub. Res. Code § 21000 et seq.) and CEQA Guidelines (Cal. Code Regs., tit. 14, § 21000 et seq.) pursuant to CEQA Guidelines Section 15321 (Class 21) because the repeal of Ordinance No. 678 and termination of DA No. 18-016C is an enforcement action to revoke an entitlement interest.

SECTION 6. PUBLICATION
The City Clerk shall certify the passage and adoption of this Ordinance and shall cause this Ordinance to be published and/or posted as required by law, which shall take full force and effect thirty days from its adoption.

PASSED, APPROVED, AND ADOPTED by the City Council of the City of Cudahy at the regular meeting of this ______ day of _____ 2024. ______________________________
Jose R. Gonzalez
Mayor
ATTEST:
____________________________
Richard Iglesias
City Clerk

Ordinance No. 747

CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS:

CITY OF CUDAHY )
I, Richard Iglesias, City Clerk of the City of Cudahy, hereby certify that the foregoing Ordinance No. 747 was introduced for a first reading on the 4th day of June 2024 and approved for a second reading and adopted by said Council at its regular meeting held on the ______ day of ______ 2024 by the following vote, to-wit:

AYES:

NOES:

ABSENT:

ABSTAIN:

Richard Iglesias
City Clerk

Ordinance No. 747

EXHIBIT “A”
EVIDENCE SUBMITTED BY THE CITY (“ADMINISTRATIVE RECORD”)

Ordinance No. 747

EXHIBIT “B”

HEARING OFFICER DECISION AND ORDER

Ordinance No. 747

EXHIBIT “C”

PLANNING COMMISSION RESOLUTION

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 1 of 15

STAFF REPORT
Date: July 2, 2024
To: Honorable Mayor/Chair and City Council/Agency Members From: Alfonso Noyola, City Manager
By: Juan Arauz, AICP, Community Development Director
Subject: Adoption by second reading of Ordinance No. 748 repealing Ordinance No. 682 terminating Development Agreement No. 18-022C, between the City of Cudahy and Herbal Dragon, LLC

RECOMMENDATION
City staff recommends that the City Council take the following action(s):

1. Adopt by second reading, Ordinance No. 748 (Attachment A) repealing Ordinance No. 682 terminating DA No. 18-022C, between the City of Cudahy (“City”) and Herbal Dragon, LLC (“Operator”).

SUMMARY
Pursuant to the terms and conditions of DA No. 18-022C and CCP No. 18-0019, it is the City’s purpose and intent to regulate cannabis activities within the City in a responsible manner to protect the health, safety, and welfare of the residents of Cudahy and to enforce rules and regulations consistent with California’s Cannabis laws. Cannabis operators with development agreements are obligated to comply with all provisions of the Cudahy Municipal Code (“CMC”), obligations of the DA, and conditions of approval under the CCP, and applicable state and local laws and related regulations. This report provides unrefuted evidence offered at an administrative review hearing; a decision by a third-party hearing officer (“Hearing Officer”) on November 14, 2023 finding the Operator in default of the DA and out of compliance with the CCP; the public hearing by the Planning Commission, determining that the Operator has failed to comply with the terms and conditions of its DA, despite being provided with ample notice and several opportunities to achieve compliance, thereby recommending to the City Council that it repeal Ordinance No. 682 and DA No. 18-022C through the adoption of Planning Commission Resolution No. 2024-06. On June 4, the City Council voted X-X to adopt Ordinance No. 748.

Item Number
12F

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 2 of 15

BACKGROUND

1. On September 11, 2017, the City adopted Ordinance No. 673 (Attachment B) establishing the City’s commercial cannabis production activity regulations codified in Chapter 5.20 of the Cudahy Municipal Code (“CMC”). CMC Section 5.20.040 authorizes medicinal commercial cannabis activities within a designated overlay zone, pursuant to a development agreement adopted in accordance with the Development Agreement Law (Govt. Code Section 65864 et seq.) and Chapter 20.28 of the CMC.

2. On April 30, 2018, the Planning Commission recommended approval of CCP No. 18-0019 for cannabis manufacturing at 4916 Cecilia Street, as illustrated in Figure 1 below, subject to the execution of a development agreement between the City and the Operator for cannabis manufacturing. The Operator is one of seven tenants at the Site which all have separate Development Agreements with the City but share an interest in CCP No. 18-0019 and are subject to the same conditions of approval. As discussed in further detail below, the conditions of approval of CCP No. 18-0019 require the Operator to make timely payments of the fees due under the Development Agreement.

Figure 1 – Aerial of the Site.

3. On May 15, 2018, the City Council adopted Resolution No. 18-17 (Attachment C) approving the issuance of CCP No. 18-0019 with conditions of approval to the Operator, subject to the execution of a development agreement with the City.

4. On June 5, 2018, the City Council adopted Ordinance No. 682 (Attachment D) approving Development Agreement No. 18-022C by and between the Operator and the City authorizing commercial cannabis manufacturing activities at the Site as illustrated in Figure 2, below. The DA requires the Operator to make timely payments for Community Benefit Fees; Cost Recovery Fees; and Non-Operating Fees.1 1 As used herein, the term Non-Operating Fees and Operating Fees are used interchangeably. 4916 Cecilia

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 3 of 15

Figure 2 – Floor Plan

5. On October 2, 2019, the City provided the Operator with a Notice of Delinquency (Attachment F- pg. 185) due to failure to pay the various fees due under CCP 18-0019 and DA No. 18-022C, prior to placing the Operator in default status due to payment noncompliance with the DA, inclusive of the non-payment of Community Benefit Fees, Cost Recovery Fees, and Non-Operating Fees in the amount of Fourteen thousand eight hundred ninety-six dollars and forty-three cents ($14,896.43). The Operator was given no later than October 17, 2019, to cure the amount, however the delinquency was not timely cured.

6. On May 4, 2021, the City provided the Operator with a Notice of Default (Attachment F pgs. 187-188) due to non-compliance with the payment of fees and associated penalties in the amount of Sixty-eight thousand three hundred fifty-seven dollars and ninety-nine cents ($68,357.99). The Operator was given no later than 30 days to cure the default, however, the default was not timely cured.

7. On October 19, 2021, the City provided the Operator with a Final Demand Letter (Attachment F- pgs. 190-191) due to payment non-compliance informing the Operator that fees and penalties had accumulated to Seventy-five thousand six hundred fifty-six dollars and three cents ($75,656.03). The Operator was given no later than 30 days to cure the default and comply with payment obligations, however the default was not timely cured.

8. On December 7, 2022, the City Manager offered a Cannabis Deferment and Payment Program (Attachment F- pgs. 193-194) to assist cannabis Operators with accumulated Community Benefits, Cost Recovery and Non-Operating Fees by deferring and providing additional time for payment without penalty. Under the program:
a. Unpaid Non-Operating Fees would be deferred (without penalty) until six (6) months after the Operator was issued a Certificate of Occupancy, and then repay already UNIT E
4916 Cecilia

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 4 of 15

accumulated Non-Operating Fees within twelve (12) months; and b. Operators would continue to be responsible for the timely payment of Community Benefit Fees and Cost Recovery Fees, as they accumulated; and c. Previously incurred Community Benefit Fees and Cost Recovery Fees would be subject to a payment plan and require timely payments.

All cannabis operators that were interested in participating in the program were given no later than January 31, 2023, to execute an agreement to participate in the Deferment and Payment Program. The City received interest from the Operator and due to the good faith negotiations between both parties, the City extended the opportunity for the Operator to participate.

9. On February 1, 2023, the City’s Finance Department presented the Operator with a Letter Agreement agreeing to the Deferment and Payment Program to forbear the outstanding payments due (“Letter Agreement”) (Attachment F- pgs. 196-203). The Operator accepted the proposed terms and executed the Letter Agreement on February 2, 2023, and agreed to commence payments on March 2, 2023. The Operator also acknowledged and agreed “that the past due amounts stated [in the Letter Agreement] are true and correct and are in fact presently due and owing. The parties agree that the Operator is in ‘default status’ on its obligations under its Development Agreement with the City.”

10. Between April and June 2023, the City provided the Operator with three Notices of Delinquency (Attachment F- pgs. 205-22) and provided an opportunity for the Operator to cure outstanding payments due. However, the default on the Letter Agreement was not timely cured and therefore was terminated and no longer in full force and effect as of June 16, 2023. Accordingly, the total of all past due amounts at the time the Letter Agreement was terminated and an amount of One hundred eighty-one thousand two hundred fifty-two dollars and seventy-nine cents ($181,252.79) and was due and owed.

11. On June 23, 2023, the City sent a Final Demand Letter (Attachment E) demanding the Operator to respond to the following demands: 1) Proof of revival of the LLC’s entity status with the State; 2) Forwarding payment for all past due amounts; and 3) Contact the City to revise the CCP’s Schedule of Performance and for further information to become compliant with the DA and CCP. The Operator did not respond in a timely manner and has failed to make any attempt to cure the defaults.

12. On August 9, 2023, the City issued an Escrow Account Letter (Attachment F- pgs.228-229) requiring all cannabis operators to open an escrow account by September 15, 2023, to ensure payment of Cost Recovery Fees. As of the writing of this report, the Operator has not opened an escrow account nor made any payments into the account.

13. On October 12, 2023, the City issued the Operator a Notice of Review Hearing (Attachment F- pgs. 231-232) with the hearing date, time, and place. The Notice of Review Hearing requested the Operator to contact staff to confirm appearance at the Review Hearing and advised the Operator to respond within ten days of the date of the letter to

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 5 of 15

confirm appearance Review Hearing or otherwise waive the right to present evidence at the hearing. The notice also informed the Operator that it was responsible for the cost of the Review Hearing and requested the Operator to deliver a cashier’s check three days prior to the scheduled hearing or would otherwise constitute further default on the DA.

The City did not receive a timely response from the Operator nor payment for the cost of the Review Hearing.

14. On October 24, 2023, the City issued a letter (Attachment F- pgs. 234-235) updating the Respondent on their payment and fees related to the DA by correcting the amount due to an error in the total amount billed. The City provided a credit in the amount of Fourteen thousand nine hundred fifty dollars and fifty cents ($14,950.50).

15. As of October 24, 2023, Operator owed the City One hundred eighty-six thousand one hundred seventy dollars and ninety-eight cents ($186,170.98). Operator has continued to fail to make payments and as of the writing of this report owes Two hundred sixteen thousand five hundred five dollars and forty-seven cents ($216,505.47). Community Benefit Fees, Cost-Recovery and Non-Operating Fees plus penalties continue to accrue and the total amount due may be higher as of the date of this staff report.

16. On November 2, 2023, the City sent a follow up notice to the Notice of Review to the Operator confirming that it had not received any communication from the Operator confirming attendance at the Review Hearing and that the ability to present before the hearing officer had been waived (Attachment G). The City did not receive a timely response from the Operator.

17. On November 14, 2023, the duly appointed third-party Hearing Officer, Steve Napolitano, conducted a Review Hearing as authorized under the CMC Section 5.20.080(7) and Section 19 of the DA No. 18-022C to hear and consider information and evidence submitted by City staff through an Administrative Record (Attachment F) and the Operator. No representation from the Operator was present at the hearing nor did the Operator submit any information or evidence for consideration.

18. On January 14, 2024, the Hearing Officer issued a written decision and order (Attachment H) finding evidence showing the Operator, despite considerable notice and opportunities to cure outstanding issues, has breached the terms and conditions of the DA and CCP and recommends the Planning Commission and City Council repeal Ordinance No. 682 terminating DA No. 18-022C and revoke the related interest in CCP No. 18-0019.

19. Approximately two months after the Review Hearing, on January 6, 2024, an attorney who appears to represent the Operator submitted a letter to the City alleging the City was in default with the terms of DA No. 18-022C (“Notice to Cure Breach”) (Attachment I).

The Notice to Cure Breach alleged the City had breached DA No. 18-022C by (a) failing to waive fees pursuant to the Article 23.i of the DA (Force Majeure); (b) failing to “expedite” approvals and by seeking fees for delays allegedly caused by the City; (c) requiring the Operator to pay Non-Operating Fees as required by the DA; (d) implementing fees that

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 6 of 15

violate The Mitigation Fee Act (Govt Code § 65864-65869.5); and (e) failing to conduct an annual hearing to determine compliance with the DA No. 18-022C. The Notice to Cure Breach also alleged the City was liable under the Civil RICO statute. The Operator demanded that the City (i) waive all accumulated Non-Operating Fees for a period of 15 months; (ii) “waive all fees during any delays caused by the City[;]” (iii) “waive all fees when the City was in default under the agreements[;]” (iv) issue certificate of occupancy to the Operator; (v) halt the hearing process before the third-party Hearing Officer; and (vi) expedite the processing of all permit applications.

20. On January 8, 2024, the City received a request to submit the Notice to Cure Breach into the administrative record for the hearing that took place on November 14, 2023 (Attachment J).

21. On March 18, 2024, pursuant to State law and the CMC, the Planning Commission held a duly noticed public hearing to consider the Hearing Officer’s recommendation to repeal Ordinance No. 682 and terminate DA No. 18-022C. Hours before the hearing, the attorney representing the Operator requested that a comment letter be submitted into the record at the May 18 Planning Commission hearing (Attachment K).2 The Planning Commission considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents. No representation from the Operator was present at the hearing. After closing public hearing, the Planning Commission adopted Resolution No. 2024-06 (Attachment L), recommending the City Council repeal Ordinance No. 682 and terminate related DA No. 18-022C.

22. On June 4, 2024, pursuant to State law and the CMC, the City Council held a duly noticed public hearing to consider the recommendation by the Planning Commission to repeal Ordinance No. 682 and terminate DA NO. 18-022C. After consideration of all public comments received before and during the public hearing , the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents. No representation from the Operator was present at the hearing. After closing public hearing, the City Council voted X-X to introduce and adopt by first reading Ordinance No. 748.

DISCUSSION/ANALYSIS
During a review of the Operator’s compliance with the Development Agreement, the burden is upon the Operator to demonstrate good faith compliance with the terms of the Development Agreement under Article 19. Pursuant to Government Code Section 65868.1 and Articles 19 and

19.d of the DA, if the City Council determines, based on substantial evidence, that the Operator has not complied in good faith with the terms of the conditions of the DA, the City Council may 2 The City assumes that the request to add the letter to the May 18 Planning Commission hearing was a typo and was intended to be submitted into the record for the March 18, 2024 Planning Commission hearing. The City accepted the letter as a public comment into the record. All Planning Commissioners and City Council members were also addressed in the communication.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 7 of 15

terminate the DA, or alternatively may choose to modify and impose conditions reasonably necessary to protect the interests of the City. Conversely, if the Operator is found to be in compliance with the Development Agreement, the Operator may request the City to issue a Certificate of Compliance pursuant to Article 19.e. Any decision to terminate a development agreement must be reviewed by the Planning Commission prior to review by the City Council.

Gov. Code § 65867 Under Article 19.d, the decision to terminate a development agreement by the City Council is final.

As it relates to the CCP, pursuant to the CMC Sections 5.20.080(6) and 5.20.080(7), any material violations of Chapter 5.20, any other relevant city law or state law, condition of approval, or any other required agreement or covenant, such as a development agreement, by a cannabis permittee, or cannabis permittee’s agent, is grounds for suspending or revoking the relevant cannabis permit. The decision to suspend or revoke a commercial cannabis permit is with the City Manager or his designee. Furthermore, pursuant to CMC Section 5.20.080, any decision regarding the suspension or revocation may be appealed to the City Council.

The City has appointed a third-party hearing officer to conduct a review of the Operator’s compliance with CPP No. 18-0019 and DA No. 18-0022C. The findings and determinations made by the Hearing Officer inform any subsequent action to terminate or modify the Development Agreement and suspension or revocation of the CCP. As stated above, and further described in Attachment H, the Hearing Officer issued a written decision making several findings of fact and conclusions and determined that Herbal Dragon, LLC breached the terms and conditions pursuant to DA No. 18-022C and CCP No. 18-0019, based on a preponderance of the evidence, in the following material aspects:

1. Violation #1: Breach of Payment Obligations. Pursuant to the terms of the DA, the Operator is responsible for timely payment of Community Benefit Fees (Article 5.b); Cost Recovery Fees (Article 8); and Operating Fees (Article 7.c). The Operator is also obligated to make the fees due under the DA pursuant to CCP Condition of Approval No. 45; and timely payment for Non-Operating Fees pursuant to Condition of Approval No. 13 (Attachment F – pgs. 54-69). Conditions of Approval 1(a) and 1(b) require the Operator to pay all City-issued invoices within 30 days of receipt. Pursuant to the terms of the DA, Operators that are more than 30 days past due on operating fees are subject to a penalty equal to twenty-five percent (25%). In addition, a ten percent (10%) penalty shall be added to the first day of each calendar month following the imposition of the initial 25% penalty, if the fee remains unpaid in whole or in part, up to a maximum of the onehundred percent (100%) of the payable fee. The conditions of approval for CCP No. 18- 0019 are incorporated into the DA through Article 18 and require the Owner to comply with all conditions contained therein (Attachment F – p. 77-129). The City offered the Operator relief in the form of the Cannabis Deferment and Payment Program. The City executed a Letter Agreement to grant the Operator relief in the form of deferred payment obligations of the Operating Fees and a payment schedule for past-due Community Benefit Fees and Cost Recovery Fees; and an obligation to remain current on recurring fees under the DA. The Operator did not make any timely payments in the three months that followed the execution of the Letter Agreement between March to May 2023.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 8 of 15

As of October 24, 2023, the City reported that the Operator is past due in the amount of One hundred eighty-six thousand one hundred seventy dollars and ninety-eight cents ($186,170.98) and past-due payments continue to accumulate, including late payment penalties. As of the writing of this report, the Operator now owes the City $216,505.47.

Table 1. Summary of Past and Current Amounts Due as of May 14, 2024 Fee Type Payment Amount Due
Community Benefit Program $48,381.27
Cost Recovery Fees $75,890.52
Non-Operating Fees $72,256.80
Penalties (Late Payments) $19,976.88
TOTAL $216,505.47
Based on the evidence submitted by the City, the Hearing Officer found that “based on the unrefuted evidence presented by the City...a preponderance of the evidence shows that [Operator] breached multiple conditions of the DA and CCP. Despite multiple attempts and notices by the City to gain compliance, the evidence shows that [Operator] failed to comply with their payment obligations, which constitutes the necessary grounds for termination of the DA and revocation of the CCP under the CMC” (Attachment H).

The Hearing Officer’s determination was ratified by the Planning Commission through the adoption of Resolution No. 2024-06 which recommends that the City Council find that Operator is in default of the terms set forth in DA No. 18-022C and repeal Ordinance No. 682 and terminate the related DA.

2. Violation #2: Failure to comply with state law - Suspended Status with the Secretary of State (SOS) and Franchise Tax Board (FTB). Pursuant to Article 4.a of the DA, the Operator must be a lawful entity capable of operating in accordance with state laws. A Certificate of Status dated October 31, 2023, states: “The above-referenced entity’s powers, rights, and privileges are suspended in California. As of the date of the Review Hearing on November 14, 2023, the Operator’s entity status was “FTB/SOS Suspended.” The Hearing Officer further determined “[a]ccording to the California Franchise Tax Board website, a suspended entity cannot do business in California until they cure the reason for their suspension, which is supported by Rev. and Tax Code Sec. 23303 and case law cited by the City: Casiopea Bovet, LLC v. Chiang (2017) 12 Cal.App.5th 656, 662; City of San Diego v. San Diegan for Open Government (2016) 3 Cal.App.5th 568, 577” (Attachment H).

Despite notice of default and opportunity to cure, the Operator’s status remained “suspended” at the time of the Review Hearing. Non-compliance with state law due to the Operator's legal status as a California limited liability is suspended by the State’s Secretary of State, as such, the Operator is unable to operate in the State of California.

3. Violation #3: Failure to Implement the Project Under Prescribed Time Limits. CCP Condition of Approval No. 51.A set a 90-day time frame in which the Operator must complete construction of Phase I of the Project. The 90-day period began following the

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 9 of 15

15-day appeal period from the date of the CCP approval, or June 20, 2018, meaning the Operator needed to complete Phase I by September 18, 2018. CCP Condition of Approval

51.A.iii sets a 180-day time limitation from the effective date of the CCP to complete all tenant improvements, construction, and obtain a certificate of occupancy from the Building Department, or December 17, 2018. The Operator was given a notice of default and opportunity to cure pursuant to the City’s Final Demand Letter to the Operator (Attachment F - pgs. 224-226), with no response from the Operator. The Operator has failed to provide any evidence that it has obtained a Zoning Clearance, completed construction of Phase I, or completed the tenant improvements, obtained a certificate of occupancy, or otherwise complete Phase II within the prescribed time periods. Nor does the City have any record of any request by the Operator for an extension of time to the City Manager and there is no evidence to demonstrate the Operator has made substantial progress, such as submitting an application for a Zoning Clearance or building permit plan check.

Allegations of Default on Behalf of the City:

As an initial matter, the Notice to Cure Breach offered as evidence to demonstrate compliance with the DA and CCP was untimely submitted, nor does it actually offer evidence of Operator’s compliance with the CCP and DA. The request was made nearly two months after the Review Hearing that took place on November 14, 2023, after providing the Operator with multiple notices, and need not be considered. However, the City shall respond to the allegations made by the Operator’s representative which are largely unsupported by the evidence, the law, or both.

1. Operator is not Excused for Performance Pursuant to Force Majeure. The DA provides a Force Majeure clause at Article 23.i, which applies to unforeseen events that include “war, insurrection, acts of God, local, state or national emergencies, strikes and other labor difficulties beyond the party’s control, or any default by the City hereunder, which Force Majeure event substantially interferes with the development, construction or operation of the Project” (emphasis added).

Operator has failed to make a substantiated showing that the circumstances of Force Majeure were present during the time of default. The City provided the Operator with the first notice that it was in breach of the DA and CCP, approximately five months prior to the Governor’s issuance of Executive Order N-22-20 (Attachment M). The Operator was provided 30 days to cure the default pursuant to Article 14.a of the DA (Attachment F- pgs. 77-129). During this time, Operator did not cure the default, nor take diligent efforts to cure the default. City issued a subsequent notice to Operator on May 4, 2021 (Attachment F- 187-188) – during the unsupported allegation of the City’s closure.

Further, City Hall was not closed for a 15-month period. During the height of the pandemic, City Hall’s physical premises were closed to the public, however, the City continued to conduct business, and process requests, including applications for building permits which could be dropped off at the front of City Hall. Additionally, both commercial cannabis activities, inclusive of cannabis manufacturing, and commercial construction

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 10 of 15

were permitted by the authority granted to the State Public Health Officer pursuant to Executive Order N-33-20 (Attachment M). The State permitted cannabis activities and construction to continue through the height of the pandemic and operators were able to continue processing applications, such as building permits, during this time.

The Notice to Cure Breach alleges that the Operator has invested $10 million from the onset of the COVID-19 pandemic to present day but has not provided any evidence to substantiate this point. However, if the Operator was prohibited from engaging in activities that would have allowed them to pursue the operation of a cannabis business, it is unclear how the Operator could have been prohibited from investing $10 million into the Project and been prohibited from moving forward with implementation of the Project at the same time.

Even assuming arguendo that there was an event of Force Majeure, Article 23.i3 does not excuse performance, but only provides the Owner with an extension of time. There is no excusal of performance under Force Majeure nor does Article 23.i grant the City the ability to waive fees. Any allegation that City “agreed” not to charge fees during the COVID-19 pandemic or other delays are unsupported by any evidence in the administrative record.

The Operator acknowledged all fees, inclusive of Cost-Recovery Fees, Community Benefit Fees, and Non-Operating Fees accrued upon signing a Letter Agreement with the City on February 2, 2023, in which the Operator acknowledged and agreed “that the past due amounts stated are true and correct and are in fact presently due and owing. The parties agree that the Operator is in ‘default status’ on its obligations under the Development Agreement with the City…[and would] remain in ‘default status’ on its Development Agreement until all past due fees set forth in [the] Letter Agreement have been paid and Operator is in full compliance with all terms of its Development Agreement.” (Attachment F- pgs.196-203)

2. Operator Has Failed to Demonstrate How the City has Failed to Expedite Approvals. The Notice to Cure Breach asserts the City has delayed in approving certain plans, however the City has no record of the Operators attempt to apply for and obtain a Zoning Clearance or implement the multiple phases of the Project as described in Violation #3, above.

Operator failed to offer any evidence that it complied with the timelines and requirements set forth in the CCP and DA. Further, as stated above, the Operator has been in default since 2019. Despite this, the City provided a pathway to achieve compliance with multiple defaults, including the schedule of performance, which the Operator did not timely attempt to cure any default.

Any allegation by the Operator that the City’s duty to review building plans was limited by the annual review process under Article 19 of the Development Agreement is 3 In full, Article 23.i states “If delays are caused by unforeseen events beyond the control of Owner, such delays will entitle Owner to an extension of time as provided in this section. Such unforeseen events (‘Force Majeure’) shall mean war, insurrection, acts of God, local, state or national emergencies, strikes and other labor difficulties beyond the party’s control, or any default by the City hereunder, which Force Majeure event substantially interferes with the development, construction or operation of the Project.”

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 11 of 15

unfounded and expressly contradicted in the DA terms. It’s unclear why the Operator is under the impression that its Project would be constructed and operated without any review of permit applications, etc., other than the reviews contemplated under Section 19 of the Development Agreement and is contrary to law. CMC Section 15.04.010 requires all development projects to comply with the Los Angeles Building Code requirements. Title 15 of the CMC also requires projects to comply with Los Angeles County’s Electrical Code requirements (Chapter 15.08), Plumbing Code requirements (Chapter 15.12), and Mechanical Code (Chapter 15.16). Providing comments to ensure that a project applicant complies with such state and local requirements does not constitute a delay on the City’s part, but enforcement of the Operator’s requirement to comply with state, local and federal regulations. At no time does the Notice allege the City refused to accept or review plans or other submissions by the Operator. If anything, this assertion cuts against Operator’s own argument and would result in further delays for the Operator to implement the Project.

3. There is No Evidence in the Administrative Record to Support a Finding that the City Did Not Intend for the Non-Operating Fees Not to Apply. To support the notion that NonOperating Fees would not apply the Operator’s representative submitted statements by a former councilmember who now acts as a consultant to many of the defaulting operators and other persons affiliated with the Operator.4 Any assertion that Non-Operating Fees were not intended to apply are directly contradicted by language in Article 7.c(1) which states the Operator shall be charged a “monthly operating fee of [.42 x total square foot of the ’Premises‘] until Owner is operating on the Premises and selling product under its City Regulatory Permit and State Regulatory Permit. Once Owner is operational and generating revenue, the monthly operating fee is [.42 x total square foot of ’Production Space‘] or a monthly operating fee based on gross receipts. DA Article 7.c(i) (emphasis added). The Development Agreement further provides that “Operating Fees shall begin to accrue ninety (90) days after the end of the month of the Effective Date of the Agreement.” Id. The language provided in the Development Agreement plainly states a formula that applies for Operating Fees for when the Operator is operating based on square footage or gross receipts or a formula based on square footage when the Operator is not operating or in “non-operation.” To argue that there is no such thing as Non-Operating Fees merely because those exact words is a matter of semantics. Further, there is no language in the DA that discusses or implies the intent for such fees to apply only to operators who “squat” on licenses as represented in a declaration submitted by the consultant.

Failure to pay such fees are out of compliance with Conditions of Approval Nos. 1(a) and (b), requiring payment of all City-issued invoices within thirty days of receipt. (Attachment F- 54-69). Non-payment of Non-Operating Fees is also in violation of 4 The Operator’s representative offered a statement by Daffodil Tyminski that was submitted to the City pursuant to Evidence Code Section 1152 and 1154, which protects the confidentiality of statements made during settlement or negotiation discussions. Based on this submitted statement it appears that the Operator has waived that privilege afforded by those previous statements.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 12 of 15

Conditions of Approval 13, 21, 37, and 45.

4. The Assertion that Non-Operating Fees are Illegal Impact Fees is Not Supported by the Law. Non-Operating Fees are a part of the Development Agreement entered into between the City and the Operator and was enacted via ordinance pursuant to Development Agreement Law (Govt. Code §§ 65864-65869.5). Fees imposed by development agreements are expressly exempt from the Mitigation Fee Act. (Govt. Code § 66000(b) (“’Fee’ means a monetary exaction other than a tax or special assessment…but does not include…fees collected under development agreements adopted pursuant to Article 2.5 (commencing with Section 65864) of Chapter 4…”).) Therefore, the fees agreed to by the Operator through the execution of the DA and subsequent Letter Agreement are not subject to the Mitigation Fee Act.

Even if the Mitigation Fee Act was applicable to the past due fees, to properly contest, the Non-Operating Fees, the Operator would have been required to tender the required payment in full and serve written notice to the City that informs the City that payment has been tendered under protest accompanied by a statement of facts. (Govt. Code § 66020(a).) However, such protests must be filed at the time of the approval of the development or within ninety (90) days of the imposition of fees. The City and Operator entered into the Development Agreement on June 5, 2018. The 90-day statute of limitations to protest such fees ended on September 3, 2023, and Operator has not tendered payment in full as required by Government Code Section 66020(a). Therefore, any opportunity to protest under the Mitigation Fee Act has long since passed (Attachment F- pgs- 77-129).

Further, as stated above, Operator does not contest that it previously acknowledged that all of the fees due, inclusive of Non-Operating Fees, were presently due and owing at the time it signed a Letter Agreement.

5. There is No Requirement to Perform an Annual Review. Operator points to CMC Section

20.84.600 and Government Code Section 65865.1 to assert the City is in breach of the Development Agreement by failing to conduct a periodic review of the Operator’s compliance with the Development Agreement. However, Operator’s assertion is directly contradicted by the express language in the Development Agreement. Article 19.f of the Development Agreement expressly provides that “City’s failure to conduct a periodic review of this Agreement shall not constitute a breach of this Agreement.” Nor does the City have any record of the Operator requesting an annual review to demonstrate compliance with the DA or CCP.

6. The City Has Not Breached the Ability for the City Council to Make a Final Determination on the Operator’s Compliance with the Development Agreement and Whether to Modify or Terminate the DA, or Otherwise Find the Operator in Compliance. The plain language in Article 19.d of the Development Agreement provides that “[a]t the time and place set for the Review Hearing, Owner shall be given an opportunity to be heard. If City Council finds, based upon substantial evidence, that Owner has not complied in good faith with

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 13 of 15

the terms or conditions of this Agreement, City Council may terminate this Agreement notwithstanding any other provision of this Agreement to the contrary, or modify this Agreement and impose such conditions as are reasonably necessary to protect the interests of the City.” The City has retained a third-party hearing officer for the purpose of hearing the evidence and making a recommendation to the City Manager, Planning Commission and City Council to “adopt an ordinance repealing Ordinance No. 682 and terminate Development Agreement No. 18-022C and revoke Operator’s interest under CCP18-0019.” (Attachment F- pgs. 2-10). The Operator has been provided an opportunity to be heard at the administrative hearing conducted by a third-party hearing officer, whose findings and determinations were sent to the Planning Commission and now City Council. No one has denied the Operator the opportunity to be “heard” before the City Council, but the Operator ignores the procedural requirements that require the repeal of an ordinance to terminate a development agreement, which includes a process by which the Operator may address the City Planning Commission as well as the City Council.

Further, there is nothing in Article 19.d or the CMC that prohibits the City from appointing a third-party hearing officer from conducting the initial hearing and forwarding findings to City decisionmakers for the purpose of determining whether to take any action to modify or terminate the Development Agreement or Commercial Cannabis Permitso long as the City Council’s determination and actions are supported by substantial evidence. All such findings and recommendations made by the hearing officer shall be forwarded to the appropriate decisionmakers for final disposition. The City has provided Operator with more than 30 days’ notice of the November 14, 2023 hearing, requesting Operator to provide evidence of compliance at least 10 days prior to the hearing (Attachment F- pgs. 231-232). The Operator provided no response. The City sent a follow up communication informing Operator that it did not submit any documentation and has waived its rights at the Review Hearing (Attachment G). Operator instead submitted a Notice to Cure Breach approximately two months afterthe Review Hearing alleging the City is in default of DA18- 022C. Pursuant to Article 14.d of DA18-022C, Operator’s remedies for a default are limited to a termination of the Development Agreement.

CMC Section 5.20.080(6)(a) permits the City Manager to revoke an operator’s interest in a CCP upon a determination “that the cannabis permittee has failed to comply with [Chapter 5.20], any condition of approval, or any agreement or covenant as required pursuant to this chapter.” The City Manager’s decision to revoke the operator’s interest in a CCP may be appealed to a third-party hearing officer or to the City Council. CMC §

5.20.080(7). As determined by the Hearing Officer, there is a preponderance of evidence to support a finding that the Operator is out of compliance with the DA and CCP.

7. Operator’s Assertion for Damages under the Development Agreement are Improper.

Even if the City were in default of the DA, which it is not, the Operator’s remedies are limited under the DA. Pursuant to Articles 14.a and 14.b of the DA, the Operator may only seek monetary damages if there is a showing of “bad faith intentional acts [or] the grossly negligent or malicious acts of City and its officials, officers, agents and employees.”

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 14 of 15

Pursuant to Article 14.d of the DA, even if the City were in default, which it is not, the Operator’s remedies would otherwise be limited to a cancellation of the Development Agreement after providing a 60-day notice of default. Operator’s notice did not provide 60-day notice, but 30-day notice.

Based on the evidence provided by the City, which was unrefuted, the Hearing Officer found that the Operator “has breached the terms and conditions of DA 18-022C and [Operator’s] portion of its CCP and recommends to the Planning Commission and/or City Council repeal Ordinance No. 682 and terminate DA [No.] 18-022C...” (Attachment H).

Pursuant to CMC Section 20.84.070, DA 18-022C and CCP No. 18-0019 were processed concurrently and approved collectively under Ordinance No. 682. To repeal Ordinance No. 682, the repeal shall occur in the same manner as the original proceedings and pursuant to CMC Section 20.84.500.

PUBLIC NOTICE AND COMMENTS

This item was noticed in accordance with the City’s public notice requirements, which involved mailed notices to property owners and tenants within 300 feet of the Site and publication in the local paper (Attachment N). As of the writing of this report, City staff have not received any public comments.

ENVIRONMENTAL ANALYSIS
The action(s) have been assessed in accordance with the California Environmental Quality Act (“CEQA”) (Pub. Res. Code § 21000 et seq.), CEQA Guidelines (Cal, Code Regs., tit. 14, § 15000 et seq.) and the environmental regulations of the City. The Project is categorically exempt from the requirements of CEQA pursuant to CEQA Guidelines Section 15321 - Class 21 (Enforcement Actions by Regulatory Agencies). This exemption is applicable to “[a]ctions by regulatory agencies to enforce or revoke a lease, permit, license, certificate, or other entitlement for use issues, adopted, or prescribed by the regulatory agency or enforcement or a law, general rule, standard, or objective, administered or adopted by the regulatory agency.” If the City Council adopts Ordinance No. 748 to repeal Ordinance No. 682 and terminate DA No. 2018-022C, it would be an enforcement action. Therefore, the action(s) are categorically exempt from the provisions of CEQA.

CONCLUSION
As discussed above and based on the preponderance of unrefuted evidence offered at the administrative review hearing; and the Planning Commission’s finding that the Operator has failed to comply with the terms and conditions of the DA, thereby recommending to the City Council that it repeal Ordinance No. 682 and terminate DA No. 18-022C through the adoption of Planning Commission Resolution No. 2024-06. As stated above, the Operator has failed to comply with their obligations under the DA and CCP, despite being provided with ample notice and several opportunities to achieve compliance. Therefore, City staff recommends the City Council adopt Ordinance No. 748 repealing Ordinance No. 682 terminating DA No. 18-022C.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 15 of 15

ATTACHMENT(S)
A. Ordinance No. 748

ORDINANCE NO. 748

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF CUDAHY REPEALING ORDINANCE NO. 682 AND

TERMINATING RELATED DEVELOPMENT AGREEMENT
NO. 18-022C BETWEEN HERBAL DRAGON, LLC AND
THE CITY OF CUDAHY.

WHEREAS, the City of Cudahy (the “City”) is a general law city, incorporated under the laws of the State of California; and
WHEREAS, pursuant to its police power, the City may enact and enforce laws within its boundaries that promote the public health, safety, or general welfare of the community, and are not in conflict with general laws; and WHEREAS, to strengthen the public planning process, encourage private participation in comprehensive planning and reduce the economic risk of development, the California State Legislature adopted Section 65864 et seq. of the California Government Code (the “Development Agreement Statute"); and WHEREAS, the Development Agreement Statute authorizes the City to enter into a development agreement with a person having legal or equitable interest in real property for the development of such property in order to establish certain development rights in exchange for public benefits; and
WHEREAS, in accordance with the Development Agreement Statute, the City Council adopted Ordinance No. 690 in 2018 establishing the procedures and requirements for the consideration of development agreement with the City and are contained within Cudahy Municipal Code (“CMC”) Sections 20.84.530 through

20.84.640; and
WHEREAS, on September 11, 2017, the City Council adopted Ordinance No. 673 establishing regulations for commercial cannabis activities in a specified Overlay Zone through an acquisition of a Commercial Cannabis Permit and execution of a development agreement with the City; and
WHEREAS, on April 30, 2018, the City Planning Commission (“Planning Commission”) conducted a properly noticed public hearing to consider an application by Herbal Dragon, LLC (“Operator”) for the approval of a Commercial Cannabis Permit to allow non-store front commercial cannabis manufacturing activities at 4916 Cecilia Street, Unit E (“Site”); and
WHEREAS, at this hearing, the Planning Commission heard and considered verbal and written testimony and evidence, and recommended approval of the Commercial Cannabis Permit subject to Operator’s execution of a development agreement with the City; and
WHEREAS, on May 15, 2018, the City Council conducted a properly noticed Attachment A Page 110 of 240
Ordinance No. 748

public hearing to consider the issuance of the Commercial Cannabis Permit (“CCP”) No. 18-0019 and Development Agreement (“DA”) No. 18-022C at which the City Council heard and considered both written and oral testimony and evidence and subsequently approved, and adopted Resolution No. 18-17 for CCP No. 18-0019; and WHEREAS, at the same hearing the City Council considered and approved CCP No. 18-0019, it also conducted the first reading of Ordinance No. 682 which authorized the execution of DA No. 18-022C between the Operator and the City; and WHEREAS, on June 5, 2018, the City Council adopted, on second reading, Ordinance No. 682 approving DA No. 18-022C and authorizing the Mayor to execute the DA on behalf of the City; and
WHEREAS, the effective date of the Development Agreement is July 5, 2018 (“Effective Date”); and
WHEREAS, upon the Effective Date of Ordinance No. 682, the Operator was granted the permission to conduct commercial cannabis manufacturing activities provided, among other things, it apply for and receive a Zoning Clearance pursuant to the CMC’s requirements, receive State licensing approval from the Department of Cannabis Control, and comply with the terms outlined in the DA and conditions of approval under the CCP inclusive of the timely payment of Community Benefit Fees, Cost Recovery Fees and Operating/Non-Operating Fees and applicable penalties and interest; and
WHEREAS, the Operator has not complied with the terms and conditions of the DA and CCP despite multiple notices and opportunities to cure, and remains in material breach of thereof; and
WHEREAS, on October 12, 2023, the City provided notice to the Operator that it would be conducting a Review Hearing (“Review Hearing”) under Article 19© of the DA No. 18-022C which informed the Operator of the burden to prove compliance with the DA and CCP; and
WHEREAS, the Operator never provided a timely response to the City’s notice for a Review Hearing; and
WHEREAS, on November 2, 2023, the City sent a follow up notice informing the Operator it had not received any response to the Review Hearing Notice; and WHEREAS, the Operator did not respond to the follow up notice; and WHEREAS, on November 14, 2023, Steve Napolitano, Esq., a duly appointed third-party hearing officer for the City (“Hearing Officer”), conducted a properly noticed Review Hearing;
WHEREAS, the Operator did not participate at the Review Hearing, was not present at the hearing and did not present any evidence for consideration prior to or

Ordinance No. 748

during the hearing, and the Hearing Officer heard and considered information and evidence by City staff, which a true and correct copy of the staff report and supporting evidence is attached hereto as Exhibit “A” and incorporated herein by reference; and WHEREAS, on January 14, 2024, the Hearing Officer issued a written decision and order (the “Decision”), incorporated by reference and attached hereto as Exhibit “B”, making several findings of fact and conclusions of law with respect to the Operators noncompliance with the DA and CCP based on a preponderance of the evidence; and WHEREAS, the Hearing Officer determined that Operator breached its payment obligations due to the Operator’s non-payment of fees and penalties due and owed to the City totaling $208,580.84; and
WHEREAS, the Operator continues to fail to meet its payment obligations and the total amount due to the City as of May 14 , 2024 is $216,505.47; and WHEREAS, the Operator breached its obligation to maintain its legal status with the State of California, as the Operator’s LLC entity status has been suspended by the State of California; and
WHEREAS, the Operator had breached its obligation to implement the Project within the prescribed time periods contained within CCP No. 18-0019 Condition of Approval No. 51 (Time Limits), because there is no evidence that the Operator has made a diligent effort to implement the Project in any fashion inclusive of an application for a Zoning Clearance to permit the commercial cannabis activities; and WHEREAS, the Hearing Officer has recommended that the City Council adopt an ordinance repealing Ordinance No. 682 terminating DA 18-022C and revoking the related interest in CCP 18-0019; and
WHEREAS, pursuant to state law and the CMC, the Planning Commission duly noticed, agendized, and conducted a public hearing on this matter on March 18, 2024; and
WHEREAS, the Planning Commission considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents relating to the repeal of Ordinance No. 682; and
WHEREAS, after the close of such public hearing, the Planning Commission adopted Resolution No. 2024-06, attached hereto and incorporated by reference as Exhibit “C,” recommending the City Council repeal Ordinance No. 682 and terminate related DA No. 18-022C; and
WHEREAS, pursuant to state law and the CMC, the City Council duly noticed, agendized, and conducted a public hearing on this matter; and WHEREAS, the City Council considered all public comments received before and

Ordinance No. 748

during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents relating to the repeal of Ordinance No. 682; and
WHEREAS, after the close of such public hearing, the City Council introduced and adopted by first reading Ordinance No. 2024-06 repealing Ordinance No. 682 and terminating related DA No. 18-022C.

NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF CUDAHY DOES HEREBY ORDAIN AS FOLLOWS:

SECTION 1. RECITALS
That the above Recitals are true and correct and are incorporated as though fully set forth herein.

SECTION 2. ADOPTION OF HEARING OFFICER’S FINDINGS OF FACT AND

CONCLUSIONS OF LAW
The City Council has reviewed and considered the Decision by the Hearing Officer (Exhibit “A”) issued on January 14, 2024, on this matter. For the reasons stated in the Decision, and as recommended by the Planning Commission (Exhibit “C”), the City Council adopts the Hearing Officer’s findings of fact and conclusions of law as its own and determines that Herbal Dragon, LLC is not in compliance with the terms and conditions of the Development Agreement No. 18-022C and finds that Herbal Dragon, LLC is in default of its contractual obligations set forth in said Development Agreement and has breached its Conditions of Approval for CCP No. 18-0019 by a showing of the preponderance of the evidence.

SECTION 3. TERMINATION OF DEVELOPMENT AGREEMENT
Pursuant to Article 19(d) of the Development Agreement, the City Council may terminate Development Agreement No.18-022C in its entirety. For the reasons stated in the Decision, and as recommended by the Planning Commission, the City Council hereby adopts this Ordinance repealing Ordinance No. 682 and terminating DA No. 18- 022C in its entirety.

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 hereby declares that it would have adopted this Ordinance, and each section, subsection, subdivision, sentence, clause, phrase, or portion thereof, irrespective of the fact that any one or more sections, subsections, subdivisions, sentences, clauses, phrases, or portions might subsequently be declared invalid or unconstitutional.

Ordinance No. 748

SECTION 5. CALIFORNIA ENVIRONMENTAL QUALITY ACT
The City Council has determined that this Ordinance is categorically exempt from the California Environmental Quality Act (“CEQA”) (Pub. Res. Code § 21000 et seq.) and CEQA Guidelines (Cal. Code Regs., tit. 14, § 21000 et seq.) pursuant to CEQA Guidelines Section 15321 (Class 21) because the repeal of Ordinance No. 682 and termination of DA No. 18-022C is an enforcement action to revoke an entitlement interest.

SECTION 6. PUBLICATION
The City Clerk shall certify the passage and adoption of this Ordinance and shall cause this Ordinance to be published and/or posted as required by law, which shall take full force and effect thirty days from its adoption.

PASSED, APPROVED, AND ADOPTED by the City Council of the City of Cudahy at the regular meeting of this ______ day of _____ 2024. ______________________________
Jose R. Gonzalez
Mayor
ATTEST:
____________________________
Richard Iglesias
City Clerk

Ordinance No. 748

CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS:

CITY OF CUDAHY )
I, Richard Iglesias, City Clerk of the City of Cudahy, hereby certify that the foregoing Ordinance No. 748 was introduced for a first reading on the 4th day of June 2024 and approved for a second reading and adopted by said Council at its regular meeting held on the ______ day of ______ 2024 by the following vote, to-wit:

AYES:

NOES:

ABSENT:

ABSTAIN:

Richard Iglesias
City Clerk

Ordinance No. 748

EXHIBIT “A”
EVIDENCE SUBMITTED BY THE CITY (“ADMINISTRATIVE RECORD”)

Ordinance No. 748

EXHIBIT “B”

HEARING OFFICER DECISION AND ORDER

Ordinance No. 748

EXHIBIT “C”

PLANNING COMMISSION RESOLUTION

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 1 of 14

STAFF REPORT
Date: July 2, 2024
To: Honorable Mayor/Chair and City Council/Agency Members From: Alfonso Noyola, City Manager
By: Juan Arauz, AICP, Community Development Director
Subject: Adoption by second reading of Ordinance No. 749 repealing Ordinance No. 680, terminating Development Agreement No. 18-020C, between the City of Cudahy and Daniel and Goliath, LLC.

RECOMMENDATION
City staff recommends that the City Council take the following action(s):

1. Adopt by second reading, Ordinance No. 749 (Attachment A) repealing Ordinance No. 680 terminating DA No. 18-020C, between the City of Cudahy and Daniel and Goliath, LLC.

SUMMARY
Pursuant to the terms and conditions of DA No. 18-020C and CCP No. 18-0019, it is the City’s purpose and intent to regulate cannabis activities within the City in a responsible manner to protect the health, safety, and welfare of the residents of Cudahy and to enforce rules and regulations consistent with California’s cannabis laws. Cannabis operators with development agreements are obligated to comply with all provisions of the Cudahy Municipal Code (“CMC”), obligations of the DA, and conditions of approval under the CCP, and applicable state and local laws and related regulations. This report provides a summary of the unrefuted evidence offered at an administrative review hearing; a decision by a third-party hearing officer finding the Operator in default of the DA and out of compliance with the CCP; the public hearing by the Planning Commission determining that the Operator has failed to comply with the terms and conditions of its DA, despite being provided with ample notice and several opportunities to achieve compliance, thereby recommending to the City Council that it repeal Ordinance No. 680 and DA No. 18-020C through the adoption of Planning Commission Resolution No. 2024-

03. On June 4, 2024, the City Council voted X-X to adopt Ordinance No. 749.

BACKGROUND
Item Number
12G

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 2 of 14

1. On September 11, 2017, the City adopted Ordinance No. 673 (Attachment B) establishing the City’s commercial cannabis production activity regulations codified in Chapter 5.20 of the Cudahy Municipal Code (“CMC”). CMC Section 5.20.040 authorizes medicinal commercial cannabis activities within a designated overlay zone, pursuant to a development agreement adopted in accordance with the Development Agreement Law (Govt. Code Section 65864 et seq.) and Chapter 20.28 of the CMC.

2. On April 30, 2018, the Planning Commission recommended approval of CCP No. 18-0019 for cannabis retail delivery at 4916 Cecilia Street, as illustrated in Figure 1 below, subject to the execution of a development agreement between the City and the Operator for cannabis retail delivery. The Operator is one of seven tenants at the Site which all have separate development agreements with the City but share an interest in CCP No. 18-0019 and are subject to the same conditions of approval. As discussed in further detail below, the conditions of approval of CCP No. 18-0019 require the Operator to make timely payments of the fees due under the Development Agreement.

Figure 1 – Aerial of the Site

3. On May 15, 2018, the City Council adopted Resolution No. 18-17 (Attachment C) approving the issuance of CCP No. 18-0019 with conditions of approval to the Operator, subject to the execution of a development agreement with the City.

4. On June 5, 2018, the City Council adopted Ordinance No. 680 (Attachment D) approving Development Agreement No. 18-020C by and between the Operator and the City authorizing commercial cannabis retail delivery activities at the Site as illustrated in Figure 2, below. The DA requires the Operator to make timely payments for Community Benefit Fees; Cost Recovery Fees; and Non-Operating Fees.1
Figure 2 – Floor Plan
1 As used herein, the term Non-Operating Fees and Operating Fees are used interchangeably. 4916 Cecilia

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 3 of 14

5. On October 2, 2019, the City provided the Operator with a Notice of Delinquency (Attachment F - pg. 178) due to failure to pay the various fees due under CCP 18-0019 and DA No. 18-020C, prior to placing the Operator in default status due to payment noncompliance with the DA, inclusive of the non-payment of Community Benefit Fees, Cost Recovery Fees, and Non-Operating Fees in the amount of Eight thousand three hundred fifty-seven dollars and five cents ($8,357.05). The Operator was given no later than October 17, 2019, to cure the amount, however the delinquency was not timely cured.

6. On May 4, 2021, the City provided the Operator with a Notice of Default (Attachment F – pgs. 180-181) due to non-compliance with the payment of fees and associated penalties in the amount of Forty thousand nine hundred thirty-three dollars and sixty-four cents ($40,933.64). The Operator was given no later than 30 daysto cure the default, however, the default was not timely cured.

7. On October 19, 2021, the City provided the Operator with a Final Demand Letter (Attachment F – pg. 183-184) due to payment non-compliance informing the Operator that fees and penalties had accumulated to forty-five thousand three hundred forty dollars and forty cents ($45,340.40). The Operator was given no later than 30 days to cure the default and comply with payment obligations, however the default was not timely cured.

8. On December 7, 2022, the City Manager offered a Cannabis Deferment and Payment Program (Attachment F – pgs. 186-187) to assist cannabis Operators with accumulated Community Benefits, Cost Recovery and Non-Operating Fees by deferring and providing additional time for payment without penalty. Under the program:
a. Unpaid Non-Operating Fees would be deferred (without penalty) until six (6) months after the Operator was issued a Certificate of Occupancy, and then repay already accumulated Non-Operating Fees within twelve (12) months; and b. Operators would continue to be responsible for the timely payment of Community Benefit Fees and Cost Recovery Fees, as they accumulated; and c. Previously incurred Community Benefit Fees and Cost Recovery Fees would be subject

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 4 of 14

to a payment plan and require timely payments.

All cannabis operators that were interested in participating in the program were given no later than January 31, 2023, to execute an agreement to participate in the Deferment and Payment Program. The City received interest from the Operator and due to the good faith negotiations between both parties, the City extended the opportunity for the Operator to participate.

9. On February 1, 2023, the City’s Finance Department presented the Operator with a Letter Agreement agreeing to the Deferment and Payment Program to forbear the outstanding payments due (“Letter Agreement”) (Attachment F. - pgs. 189-196). The Operator accepted the proposed terms and executed the Letter Agreement on February 2, 2023, and agreed to commence payments on March 2, 2023. The Operator also acknowledged and agreed “that the past due amounts stated [in the Letter Agreement] are true and correct and are in fact presently due and owing. The parties agree that the Operator is in ‘default status’ on its obligations under its Development Agreement with the City.”

10. Between April and June 2023, the City provided the Operator with three Notices of Delinquency (Attachment F – pgs. 198-214) and provided an opportunity for the Operator to cure outstanding payments due. However, the default on the Letter Agreement was not timely cured and therefore was terminated and no longer in full force and effect as of June 16, 2023. Accordingly, the total of all past due amounts at the time the Letter Agreement was terminated and an amount of One hundred thirty-one thousand eight hundred fifty-four dollars and twenty-eight cents ($131,854.28) was due and owed.

11. On June 23, 2023, the City sent a Final Demand Letter (Attachment E) demanding the Operator to respond to the following demands: 1) Proof of revival of the LLC’s entity status with the State; 2) Forwarding payment for all past due amounts; and 3) Contact the City to revise the CCP’s Schedule of Performance and for further information to become compliant with the DA and CCP. The Operator did not respond in a timely manner and has failed to make any attempt to cure the defaults.

12. On August 9, 2023, the City issued an Escrow Account Letter (Attachment F – pgs. 218- 219) requiring all cannabis operators to open an escrow account by September 15, 2023, to ensure payment of Cost Recovery Fees. As of the writing of this report, the Operator has not opened an escrow account nor made any payments into the account.

13. On October 12, 2023, the City issued the Operator a Notice of Review Hearing (Attachment F – pgs. 376-377) with the hearing date, time, and place. The Notice of Review Hearing requested the Operator to contact staff to confirm appearance at the Review Hearing and advised the Operator to respond within ten days of the date of the letter to confirm appearance Review Hearing or otherwise waive the right to present evidence at the hearing (Attachment G). The notice also informed the Operator that it was responsible for the cost of the Review Hearing and requested the Operator to deliver a cashier’s check three days prior to the scheduled hearing or would otherwise constitute

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 5 of 14

further default on the DA. The City did not receive a timely response from the Operator nor payment for the cost of the Review Hearing.

14. On October 24, 2023, the City issued a letter (Attachment F – pgs. 221-222) updating the Operator on their payment and fees related to the DA by correcting the amount due to an error in the total amount billed. The City provided a credit in the amount of Fourteen thousand nine hundred fifty dollars and fifty cents ($14,950.50).

15. As of October 24, 2023, Operator owed the City One hundred twenty-six thousand two hundred eighty-two dollars and sixty-nine cents ($126,282.69). Operator has continued to fail to make payments and as of the writing of this report owes One hundred forty-six thousand two hundred forty-seven dollars and seventy cents ($146,247.70). Community Benefit Fees, Cost-Recovery and Non-Operating Fees plus penalties continue to accrue and the total amount due may be higher as of the date of this staff report.

16. On November 2, 2023, the City sent a follow up notice to the Notice of Review to the Operator confirming that it had not received any communication from the Operator confirming attendance at the Review Hearing and that the ability to present before the hearing officer had been waived (Attachment G). The City did not receive a timely response from the Operator.

17. On November 14, 2023, the duly appointed third-party Hearing Officer, Steve Napolitano, conducted a Review Hearing as authorized under the CMC Section 5.20.080(7) and Article 19 of the DA No. 18-020C to hear and consider information and evidence submitted by City staff through an Administrative Record (Attachment F) and the Operator. No representation from the Operator was present at the hearing nor did the Operator submit any information or evidence for consideration.

18. On January 14, 2024, the Hearing Officer issued a written decision and order (Attachment H) finding evidence showing the Operator, despite considerable notice and opportunities to cure outstanding issues, has breached the terms and conditions of the DA and CCP and recommends the Planning Commission and City Council repeal Ordinance No. 680 terminating DA No. 18-020C and revoke the related interest in CCP No. 18-0019.

19. Approximately two months after the Review Hearing, on January 6, 2024, an attorney who appears to represent the Operator submitted a letter to the City alleging the City was in default with the terms of DA No. 18-020C (“Notice to Cure Breach”) (Attachment I).

The Notice to Cure Breach alleged the City had breached DA No. 18-020C by (a) failing to waive fees pursuant to the Article 23.i of the DA (Force Majeure); (b) failing to “expedite” approvals and by seeking fees for delays allegedly caused by the City; (c) requiring the Operator to pay Non-Operating Fees as required by the DA; (d) implementing fees that violate The Mitigation Fee Act (Govt Code § 65864-65869.5); and (e) failing to conduct an annual hearing to determine compliance with the DA No. 18-020C. The Notice to Cure Breach also alleged the City was liable under the Civil RICO statute. The Operator demanded that the City (i) waive all accumulated Non-Operating Fees for a period of 15

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 6 of 14

months; (ii) “waive all fees during any delays caused by the City[;]” (iii) “waive all fees when the City was in default under the agreements[;]” (iv) issue certificate of occupancy to the Operator; (v) halt the hearing process before the third-party Hearing Officer; and (vi) expedite the processing of all permit applications.

20. On January 8, 2024, the City received a request to submit the Notice to Cure Breach into the administrative record for the hearing that took place on November 14, 2023 (Attachment J).

21. On March 18, 2024, pursuant to State law and the CMC, the Planning Commission held a duly noticed public hearing to consider the Hearing Officer’s recommendation to repeal Ordinance No. 680 and terminate DA No. 18-020C. Hours before the hearing, the attorney representing the Operator requested that a comment letter be submitted into the record for the for the May 18 Planning Commission hearing (Attachment K).2 The Planning Commission considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents. No representation from the Operator was present at the hearing. After closing public hearing, the Planning Commission adopted Resolution No. 2024-03 (Attachment L), recommending the City Council repeal Ordinance No. 680 and terminate related DA No. 18-020C.

22. On June 4, 2024, pursuant to State law and the CMC, the City Council held a duly noticed public hearing to consider the recommendation by the Planning Commission to repeal Ordinance No. 680 and terminate DA No. 18-020C. After consideration of all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents. No representation from the Operator was present at the hearing. After closing public hearing, the City Council voted X-X to introduce and adopt by first reading Ordinance No. 749.

DISCUSSION/ANALYSIS
During a review of the Operator’s compliance with the Development Agreement, the burden is upon the Operator to demonstrate good faith compliance with the terms of the Development Agreement under Article 19. Pursuant to Government Code Section 65868.1 and Articles 19 and 19.d of the Development Agreement, if the City Council determines, based on substantial evidence, that the Operator has not complied in good faith with the terms of the conditions of the Development Agreement, the City Council may terminate the Development Agreement, or alternatively, may choose to modify and impose conditions reasonably necessary to protect the interests of the City. Conversely, if the Operator is found to be in compliance with the Development Agreement, the Owner may request the City to issue a Certificate of Compliance 2 The City assumes that the request to add the letter to the May 18 Planning Commission hearing was a typo and was intended to be submitted into the record for the March 18, 2024 Planning Commission hearing. The City accepted the letter as a public comment into the record. All Planning Commissioners and City Council members were also addressed in the communication.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 7 of 14

pursuant to Article 19.e. Any decision to terminate a development agreement must be reviewed by the Planning Commission prior to review by the City Council. Gov. Code § 65867.

Under Article 19.d, the decision to terminate a development agreement by the City Council is final.

As it relates to the CCP, pursuant to the CMC Sections 5.20.080(6) and 5.20.080(7), any material violations of Chapter 5.20, any other relevant city law or state law, condition of approval, or any other required agreement or covenant, such as a development agreement, by a cannabis permittee, or cannabis permittee’s agent, is ground for suspending or revoking the relevant cannabis permit. The decision to suspend or revoke a commercial cannabis permit is with the City Manager or his designee. Furthermore, pursuant to CMC Section 5.20.080, any decision regarding the suspension or revocation may be appealed to the City Council.

The City has appointed a third-party hearing officer to conduct a review of the Operator’s compliance with CCP No. 18-0019 and DA No. 18-020C. The findings and determinations made by the Hearing Officer inform any subsequent action to terminate or modify the Development Agreement and suspension or revocation of the CCP. As stated above, and further described in Attachment H, the Hearing Officer issued a written decision making several findings of fact and conclusions and determined that Daniel and Goliath, LLC breached the terms and conditions pursuant to DA No. 18-020C and CCP No. 18-0019, based on a preponderance of the evidence, in the following material aspects:

1. Violation #1: Breach of Payment Obligations. Pursuant to the terms of the DA, the Operator is responsible for timely payment of Community Benefit Fees (Article 5.b); Cost Recovery Fees (Article 8); and Operating Fees (Article 7.c). The Operator is also obligated to pay the fees due under the DA pursuant to CCP Condition of Approval No. 45; and timely payment for Non-Operating Fees pursuant to Condition of Approval No. 13 (Attachment F – pgs. 54-69). Conditions of Approval 1(a) and 1(b) require the Operator to pay all City-issued invoices within 30 days of receipt. Pursuant to the terms of the DA, Operators that are more than 30 days past due on operating fees are subject to a penalty equal to twenty-five percent (25%). In addition, a ten percent (10%) penalty shall be added to the first day of each calendar month following the imposition of the initial 25% penalty, if the fee remains unpaid in whole or in part, up to a maximum of the one hundred percent (100%) of the payable fee. The City executed a Letter Agreement to grant the Operator relief in the form of deferred payment obligations of the Operating Fees and a payment schedule for past-due Community Benefit Fees and Cost Recovery Fees; and an obligation to remain current on recurring fees under the DA. The Operator did not make any timely payments in the three months that followed the execution of the Letter Agreement between March to May 2023.

As of October 24, 2023, the City reported that the Operator is past due in the amount of One hundred twenty-six thousand two hundred eighty-two dollars and sixty-nine cents ($126,282.69) and past-due payments continue to accumulate, including late payment penalties. As of the writing of this report, the Operator now owes the City $146,247.70.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 8 of 14

Table 1. Summary of Past and Current Amounts Due as of May 14, 2024 Fee Type Payment Amount Due
Community Benefit Program $48,381.27
Cost Recovery Fees $68,373.52
Non-Operating Fees $23,105.04
Penalties (Late Payments) $6,387.87
TOTAL $146,247.70
Based on the evidence submitted by the City, the Hearing Officer found that “based on the unrefuted evidence presented by the City...a preponderance of the evidence shows that [Operator] breached multiple conditions of the DA and CCP. Despite multiple attempts and notices by the City to gain compliance, the evidence shows that [Operator] failed to comply with their payment obligations, which constitutes the necessary grounds for termination of the DA and revocation of the CCP under the CMC” (Attachment H). The Hearing Officer’s determination was ratified by the Planning Commission through the adoption of Resolution No. 2024-04 which recommends that the City Council find that Operator is in default of the terms set forth in DA No. 18-016C and repeal Ordinance No. 678 and terminate the related DA.

2. Violation #2: Failure to comply with state law - Suspended Status with the Secretary of State (SOS) and Franchise Tax Board (FTB). Pursuant to Article 4.a of the DA, the Operator must be a lawful entity capable of operating in accordance with state laws. A Certificate of Status dated October 31, 2023, states: “The above-referenced entity’s powers, rights, and privileges are suspended in California. As of the date of the Review Hearing on November 14, 2023, the Operator’s entity status was “FTB/SOS Suspended.” The Hearing Officer further determined “[a]ccording to the California Franchise Tax Board website, a suspended entity cannot do business in California until they cure the reason for their suspension, which is supported by Rev. and Tax Code Sec. 23303 and case law cited by the City: Casiopea Bovet, LLC v. Chiang (2017) 12 Cal.App.5th 656, 662; City of San Diego v. San Diegan for Open Government (2016) 3 Cal.App.5th 568, 577”. Despite notice of default and opportunity to cure, the Operator’s status remained “suspended” at the time of the Review Hearing. Non-compliance with state law due to the Operator's legal status as a California limited liability is suspended by the State’s Secretary of State, as such, the Operator is unable to operate in the State of California.

3. Violation #3: Failure to Implement the Project Under Prescribed Time Limits. CCP Condition of Approval No. 51.A set a 90-day time frame in which the Operator must complete construction of Phase I of the Project. The 90-day period began following the 15-day appeal period from the date of the CCP approval, or June 20, 2018, meaning the Operator needed to complete Phase I by September 18, 2018. CCP Condition of Approval

51.A.iii sets a 180-day time limitation from the effective date of the CCP to complete all tenant improvements, construction, and obtain a certificate of occupancy from the Building Department, or December 17, 2018. The Operator was given a notice of default and opportunity to cure pursuant to the City’s Final Demand Letter to the Operator

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 9 of 14

(Attachment F – pgs. 214-216), with no response from the Operator. The Operator has failed to provide any evidence that it has obtained a Zoning Clearance, completed construction of Phase I, or completed the tenant improvements, obtained a certificate of occupancy, or otherwise complete Phase II within the prescribed time periods. Nor does the City have any record of any request by the Operator for an extension of time to the City Manager and there is no evidence to demonstrate the Operator has made substantial progress, such as submitting an application for a Zoning Clearance or building permit plan check.

Allegations of Default on Behalf of the City:

As an initial matter, the Notice to Cure Breach offered as evidence to demonstrate compliance with the DA and CCP was untimely submitted, nor does it actually offer evidence of Operator’s compliance with the CCP and DA. The request was made nearly two months after the Review Hearing that took place on November 14, 2023, after providing the Operator with multiple notices, and need not be considered. However, the City shall respond to the allegations made by the Operator’s representative which are largely unsupported by the evidence, the law, or both.

1. Operator is not Excused for Performance Pursuant to Force Majeure. The DA provides a Force Majeure clause at Article 23.i, which applies to unforeseen events that include “war, insurrection, acts of God, local, state or national emergencies, strikes and other labor difficulties beyond the party’s control, or any default by the City hereunder, which Force Majeure event substantially interferes with the development, construction or operation of the Project” (emphasis added).

Operator has failed to make a substantiated showing that the circumstances of Force Majeure were present during the time of default. The City provided the Operator with the first notice that it was in breach of the DA and CCP, approximately five months prior to the Governor’s issuance of Executive Order N-22-20 (Attachment M). The Operator was provided 30 days to cure the default pursuant to Article 14.a of the DA (Attachment F – pgs. 77-120). During this time, Operator did not cure the default, nor take diligent efforts to cure the default. City issued a subsequent notice to Operator on May 4, 2021 (Attachment F – pgs. 180-181) – during the unsupported allegation of the City’s closure.

Further, City Hall was not closed for a 15-month period. During the height of the pandemic, City Hall’s physical premises were closed to the public, however, the City continued to conduct business, and process requests, including applications for building permits which could be dropped off at the front of City Hall. Additionally, both commercial cannabis activities, inclusive of cannabis manufacturing, and commercial construction were permitted by the authority granted to the State Public Health Officer pursuant to Executive Order N-33-20 (Attachment M). The State permitted cannabis activities and commercial construction to continue through the height of the pandemic and operators were able to continue processing applications, such as building permits, during this time.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 10 of 14

The Notice to Cure Breach alleges that the Operator has invested $10 million from the onset of the COVID-19 pandemic to present day but has not provided any evidence to substantiate this point. However, if the Operator was prohibited from engaging in activities that would have allowed them to pursue the operation of a cannabis business, it is unclear how the Operator could have been prohibited from investing $10 million into the Project and been prohibited from moving forward with implementation of the Project at the same time.

Even assuming arguendo that there was an event of Force Majeure, Article 23.i3 does not excuse performance, but only provides the Owner with an extension of time. There is no excusal of performance under Force Majeure nor does Article 23.i grant the City the ability to waive fees. Any allegation that City “agreed” not to charge fees during the COVID-19 pandemic or other delays are unsupported by any evidence in the administrative record.

The Operator acknowledged all fees, inclusive of Cost-Recovery Fees, Community Benefit Fees, and Non-Operating Fees accrued upon signing a Letter Agreement with the City on February 2, 2023, in which the Operator acknowledged and agreed “that the past due amounts stated are true and correct and are in fact presently due and owing. The parties agree that the Operator is in ‘default status’ on its obligations under the Development Agreement with the City…[and would] remain in ‘default status’ on its Development Agreement until all past due fees set forth in [the] Letter Agreement have been paid and Operator is in full compliance with all terms of its Development Agreement.” (Attachment F – pgs. 188-379)

2. Operator Has Failed to Demonstrate How the City has Failed to Expedite Approvals. The Notice to Cure Breach asserts the City has delayed in approving certain plans, however the City has no record of the Operators attempt to apply for and obtain a Zoning Clearance or implement the multiple phases of the Project as described in Violation #3, above.

Operator failed to offer any evidence that it complied with the timelines and requirements set forth in the CCP and DA. Further, as stated above, the Operator has been in default since 2019. Despite this, the City provided a pathway to achieve compliance with multiple defaults, including the schedule of performance, which the Operator did not timely attempt to cure any default.

Any allegation by the Operator that the City’s duty to review building plans was limited by the annual review process under Article 19 of the Development Agreement is unfounded and expressly contradicted in the DA terms. It’s unclear why the Operator is under the impression that its Project would be constructed and operated without any review of permit applications, etc., other than the reviews contemplated under Article 19 of the Development Agreement and is contrary to law. CMC Section 15.04.010 requires all development projects to comply with the Los Angeles Building Code requirements. Title 15 of the CMC also requires projects to comply with Los Angeles County’s Electrical Code 3 In full, Article 23.i states “If delays are caused by unforeseen events beyond the control of Owner, such delays will entitle Owner to an extension of time as provided in this section. Such unforeseen events (‘Force Majeure’) shall mean war, insurrection, acts of God, local, state or national emergencies, strikes and other labor difficulties beyond the party’s control, or any default by the City hereunder, which Force Majeure event substantially interferes with the development, construction or operation of the Project.”

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 11 of 14

requirements (Chapter 15.08), Plumbing Code requirements (Chapter 15.12), and Mechanical Code (Chapter 15.16). Providing comments to ensure that a project applicant complies with such state and local requirements does not constitute a delay on the City’s part, but enforcement of the Operator’s requirement to comply with state, local and federal regulations. At no time does the Notice of Default allege the City refused to accept or review plans or other submissions by the Operator. If anything, this assertion cuts against Operator’s own argument and would result in further delays for the Operator to implement the Project.

3. There is No Evidence in the Administrative Record to Support a Finding that the City Did Not Intend for the Non-Operating Fees Not to Apply. To support the notion that NonOperating Fees would not apply the Operator’s representative submitted statements by a former councilmember who now acts as a consultant to many of the defaulting operators and other persons affiliated with the Operator.4 Any assertion that Non-Operating Fees were not intended to apply are directly contradicted by language in Article 7.c(1) which states the Operator shall be charged a “monthly operating fee of [.42 x total square foot of the ‘Premises’] until Owner is operating on the Premises and selling product under its City Regulatory Permit and State Regulatory Permit. Once Owner is operational and generating revenue, the monthly operating fee is [.42 x total square foot of ‘Production Space’] or a monthly operating fee based on gross receipts.” DA Article 7.c(i) (emphasis added). The Development Agreement further provides that “Operating Fees shall begin to accrue ninety (90) days after the end of the month of the Effective Date of the Agreement.” Id. The language provided in the Development Agreement plainly states a formula that applies for Operating Fees for when the Operator is operating based on square footage or gross receipts or a formula based on square footage when the Operator is not operating or in “non-operation.” To argue that that there is no such thing as Non-Operating Fees merely because those exact words is a matter of semantics. Further, there is no language in the DA that discusses or implies the intent for such fees to apply only to operators who “squat” on licenses as represented in a declaration submitted by the consultant.

Failure to pay such fees are out of compliance with Conditions of Approval Nos. 1(a) and (b), requiring payment of all City-issued invoices within thirty days of receipt. (Attachment Fpgs. 54-69). Non-payment of Non-Operating Fees is also in violation of Conditions of Approval 13, 21, 37, and 45.

4. The Assertion that Non-Operating Fees are Illegal Impact Fees is Not Supported by the Law. Non-Operating Fees are a part of the Development Agreement entered into between the City and the Operator and was enacted via ordinance pursuant to Development Agreement Law (Govt. Code §§ 65864-65869.5). Fees imposed by 4The Operator’s attorney offered a statement by Daffodil Tyminski that was submitted to the City pursuant to Evidence Code Section 1152 and 1154, which protects the confidentiality of statements made during settlement or negotiation discussions. Based on this submitted statement it appears that the Operator has waived that privilege afforded by those previous statements.

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 12 of 14

development agreements are expressly exempt from the Mitigation Fee Act. (Govt. Code § 66000(b) (“’Fee’ means a monetary exaction other than a tax or special assessment…but does not include…fees collected under development agreements adopted pursuant to Article 2.5 (commencing with Section 65864) of Chapter 4…”).) Therefore, the fees agreed to by the Operator through the execution of the DA and subsequent Letter Agreement are not subject to the Mitigation Fee Act.

Even if the Mitigation Fee Act was applicable to the past due fees, to properly contest, the Non-Operating Fees, the Operator would have been required to tender the required payment in full and serve written notice to the City that informs the City that payment has been tendered under protest accompanied by a statement of facts. (Govt. Code § 66020(a).) However, such protests must be filed at the time of the approval of the development or within ninety (90) days of the imposition of fees. The City and Operator entered into the Development Agreement on June 5, 2018. The 90-day statute of limitations to protest such fees ended on September 3, 2023, and Operator has not tendered payment in full as required by Government Code Section 66020(a). Therefore, any opportunity to protest under the Mitigation Fee Act has long since passed.” AR pp. 9-10.

Further, as stated above, Operator does not contest that it previously acknowledged that all of the fees due, inclusive of Non-Operating Fees, were presently due and owing at the time it signed a Letter Agreement.

5. There is No Requirement to Perform an Annual Review. Operator points to CMC Section

20.84.600 and Government Code Section 65865.1 to assert the City is in breach of the Development Agreement by failing to conduct a periodic review of the Operator’s compliance with the Development Agreement. However, Operator’s assertion is directly contradicted by the express language in the Development Agreement. Article 19.f of the Development Agreement expressly provides that “City’s failure to conduct a periodic review of this Agreement shall not constitute a breach of this Agreement.” Nor does the City have any record of the Operator requesting an annual review to demonstrate compliance with the DA or CCP.

6. The City Has Not Breached the Ability for the City Council to Make a Final Determination on the Operator’s Compliance with the Development Agreement and Whether to Modify or Terminate the DA, or Otherwise Find the Operator in Compliance. The plain language in Article 19.d of the Development Agreement provides that “[a]t the time and place set for the Review Hearing, Owner shall be given an opportunity to be heard. If City Council finds, based upon substantial evidence, that Owner has not complied in good faith with the terms or conditions of this Agreement, City Council may terminate this Agreement notwithstanding any other provision of this Agreement to the contrary, or modify this Agreement and impose such conditions as are reasonably necessary to protect the interests of the City.” The City has retained a third-party hearing officer for the purpose of hearing the evidence and making a recommendation to the City Manager, Planning Commission and City Council to “adopt an ordinance repealing Ordinance No. 680 and

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 13 of 14

terminate Development Agreement No. 18-020C and revoke Operator’s interest under CCP18-0019.” (Attachment F – pgs. 2-11). The Operator has been provided an opportunity to be heard at the administrative hearing conducted by a third-party hearing officer, whose findings and determinations were sent to the Planning Commission and now City Council. No one has denied the Operator the opportunity to be “heard” before the City Council, but the Operator ignores the procedural requirements that require the repeal of an ordinance to terminate a development agreement, which includes a process by which the Operator may address the Planning Commission as well as the City Council.

Further, there is nothing in Article 19.d or the CMC that prohibits the City from appointing a third-party hearing officer from conducting the initial hearing and forwarding findings to City decisionmakers for the purpose of determining whether to take any action to modify or terminate the Development Agreement or Commercial Cannabis Permitso long as the City Council’s determination and actions are supported by substantial evidence. All such findings and recommendations made by the hearing officer shall be forwarded to the appropriate decisionmakers for final disposition. The City has provided Operator with more than 30 days’ notice of the November 14, 2023 hearing, requesting Operator to provide evidence of compliance at least 10 days prior to the hearing (Attachment F – pgs. 377-379). The Operator provided no response. The City sent a follow up communication informing Operator that it did not submit any documentation and has waived its rights at the Review Hearing (Attachment G). Operator instead submitted a Notice of Default approximately two months afterthe Review Hearing alleging the City is in default of DA18- 020C. Pursuant to Article 14.d of DA18-020C, Operator’s remedies for a default are limited to a termination of the Development Agreement.

CMC Section 5.20.080(6)(a) permits the City Manager to revoke an operator’s interest in a CCP upon a determination “that the cannabis permittee has failed to comply with [Chapter 5.20], any condition of approval, or any agreement or covenant as required pursuant to this chapter.” The City Manager’s decision to revoke the operator’s interest in a CCP may be appealed to a third-party hearing officer or to the City Council. CMC §

5.20.080(7). As determined by the Hearing Officer, there is a preponderance of evidence to support a finding that the Operator is out of compliance with the DA and CCP.

7. Operator’s Assertion for Damages under the Development Agreement are Improper.

Even if the City were in default of the DA, which it is not, the Operator’s remedies are limited under the DA. Pursuant to Articles 14.a and 14.b of the DA, the Operator may only seek monetary damages if there is a showing of “bad faith intentional acts [or] the grossly negligent or malicious acts of City and its officials, officers, agents and employees.” Pursuant to Article 14.d of the DA, even if the City were in default, which it is not, the Operator’s remedies would otherwise be limited to a cancellation of the Development Agreement after providing a 60-day notice of default. Operator’s notice did not provide 60-day notice, but 30-day notice.

Based on the evidence provided by the City, which was unrefuted, the Hearing Officer

“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/02/2024 Page 14 of 14

found that the Operator “has breached the terms and conditions of DA 18-020C and [Operator’s] portion of its CCP and recommends to the Planning Commission and/or City Council repeal Ordinance No. 680 and terminate DA [No.] 18-020C...” (Attachment H).

Pursuant to CMC Section 20.84.070, DA 18-020C and CCP No. 18-0019 were processed concurrently and approved collectively under Ordinance No. 680. To repeal Ordinance No. 680, the repeal shall occur in the same manner as the original proceedings and pursuant to CMC Section 20.84.500.

PUBLIC NOTICE AND COMMENTS

This item was noticed in accordance with the City’s public notice requirements, which involved mailed notices to property owners and tenants within 300 feet of the Site and publication in the local paper (Attachment N). As of the writing of this report, City staff have not received any public comments.

ENVIRONMENTAL ANALYSIS

The action(s) have been assessed in accordance with the California Environmental Quality Act (“CEQA”) (Pub. Res. Code § 21000 et seq.), CEQA Guidelines (Cal, Code Regs., tit. 14, § 15000 et seq.) and the environmental regulations of the City. The Project is categorically exempt from the requirements of CEQA pursuant to CEQA Guidelines Section 15321 - Class 21 (Enforcement Actions by Regulatory Agencies). This exemption is applicable to “[a]ctions by regulatory agencies to enforce or revoke a lease, permit, license, certificate, or other entitlement for use issues, adopted, or prescribed by the regulatory agency or enforcement or a law, general rule, standard, or objective, administered or adopted by the regulatory agency.” If the City Council adopts Ordinance No. 749 to repeal Ordinance No. 680 and terminate DA No. 2018-020C, it would be an enforcement action. Therefore, the action(s) are categorically exempt from the provisions of CEQA.

CONCLUSION
As discussed above and based on the preponderance of unrefuted evidence offered at the administrative review hearing; the public hearing by the Planning Commission finding that the Operator has failed to comply with the terms and conditions of its DA, despite being provided with ample notice and several opportunities to achieve compliance, thereby recommending to the City Council that it repeal Ordinance No. 680 and DA No. 18-020C through the adoption of Planning Commission Resolution No. 2024-03. As stated above, the Operator has failed to comply with their obligations under the DA, despite being provided with ample notice and several opportunities to achieve compliance. Therefore, City staff recommends the City Council adopt Ordinance No. 749 repealing Ordinance No. 680 terminating DA18-021C.

ATTACHMENT(S)
A. Ordinance No. 749

ORDINANCE NO. 749

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF CUDAHY REPEALING ORDINANCE NO. 680 AND

TERMINATING RELATED DEVELOPMENT AGREEMENT
NO. 18-020C BETWEEN DANIEL & GOLIATH, LLC AND
THE CITY OF CUDAHY.

WHEREAS, the City of Cudahy (the “City”) is a general law city, incorporated under the laws of the State of California; and
WHEREAS, pursuant to its police power, the City may enact and enforce laws within its boundaries that promote the public health, safety, or general welfare of the community, and are not in conflict with general laws; and
WHEREAS, to strengthen the public planning process, encourage private participation in comprehensive planning and reduce the economic risk of development, the California State Legislature adopted Section 65864 et seq. of the California Government Code (the “Development Agreement Statute"); and
WHEREAS, the Development Agreement Statute authorizes the City to enter into a development agreement with a person having legal or equitable interest in real property for the development of such property in order to establish certain development rights in exchange for public benefits; and
WHEREAS, in accordance with the Development Agreement Statute, the City Council adopted Ordinance No. 690 in 2018 establishing the procedures and requirements for the consideration of development agreement with the City and are contained within Cudahy Municipal Code (“CMC”) Sections 20.84.530 through

20.84.640; and
WHEREAS, on September 11, 2017, the City Council adopted Ordinance No. 673 establishing regulations for commercial cannabis activities, in a specified Overlay Zone through an acquisition of a Commercial Cannabis Permit and execution of a development agreement with the City; and
WHEREAS, on April 30, 2018, the City Planning Commission (“Planning Commission”) conducted a properly noticed public hearing to consider an application by Daniel & Goliath, LLC (“Operator”) for approval of a Commercial Cannabis Permit by and between the City, and to allow non-store front commercial cannabis manufacturing activities at 4916 Cecilia Street, Unit F (“Site”); and WHEREAS, at this hearing, the Planning Commission heard and considered verbal and written testimony and evidence, and recommended approval of the Commercial Cannabis Permit subject to Operator’s execution of a development agreement with the City; and
WHEREAS, on May 15, 2018, the City Council conducted a properly noticed public Attachment A Page 133 of 240
Ordinance No. 749