Agenda — Cudahy City Council, July 16, 2024 (part 16 of 20)

EXHIBIT "B"

COMMERCIAL CANNABIS PERMIT

SEE ATTACHMENT
[The Permit will be based upon the Staff Report with
. Conditions of Approval in a Letter to Follow]
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ATTACHMENT E

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REVIEW HEARING STAFF REPORT
Date: January 8, 2024
To: Hearing Officer, Steve Napolitano
From: Juan Arauz, AICP, Community Development Director
Prepared By: Jessica Guillen, Assistant Planner
Concurrence: Cecilia Madrigal-Gonzalez, Senior Planner, Joshua Calhoun, Finance Director, Glenn Ward Calsada, Special Counsel, Raul Diaz, Building Official and Paloma McEvoy, Assistant City Attorney.

Subject: Compliance Hearing relating to Commercial Cannabis (“CCP”) 18-0014 and Development Agreement (“DA”) 18-014C between Starcraft, LLC (“Operator”) and the City of Cudahy (“City”).

RECOMMENDATION
Staff recommends that the Hearing Officer take the following action(s):

1. Hear the evidence presented by the City and the Operator; and

2. Make a determination that the Operator is not in compliance with the terms and conditions of DA18-014C with the City and find that the Operator is in default of contractual obligations set forth in the DA; and

3. Make a determination that the Operator is not in compliance with the conditions of approval of CCP18-0014; and

4. Make a recommendation to the City Manager for Planning Commission and City Council to adopt an ordinance repealing Ordinance No. 701 and terminate DA18-014C and revoke the Operator’s interest under CCP18-0014.

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BACKGROUND/TIMELINE
On September 11, 2017, the City adopted Ordinance No. 673 (Attachment A) 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 (Gov. Code § 65864 et seq.) and Chapter 20.28 of the CMC.

On November 19, 2018, the Planning Commission recommend the City Council to approve CCP18- 0014 to permit cannabis cultivation activities at 4925 Cecilia Street (“Site”), subject to the approval of a development agreement between the City and Operator for cannabis cultivation.

On December 4, 2018, the City Council adopted Resolution No. 18-57 (Attachment B) approving the issuance of CCP18-0014 (Attachment C) that imposed conditions of approval upon the Operator subject to the execution of a development agreement with the City.

On December 4, 2018, the City Council conducted the first reading to adopt Ordinance No. 701 approving DA18-014C (Attachment D). The second reading was conducted on December 18, 2018, approving Ordinance No. 701 (Attachment E) inclusive of Exhibits A-F (Attachment F) between Operator and the City authorizing commercial cannabis cultivation activities at the Site as illustrated in Figures 1 and 2 below. The Site Plan and Floor Plan are incorporated by reference in Section 3.c of DA18-014C. Recital I DA18-014C permits the Operator to operate in an approximately 8,525 square foot (“sf”) building inclusive of 2,933 sf of manufacturing area and 3,689 sf for distribution activities.

FIGURE 1 – AERIAL OF SITE
Site
4925 Cecilia Street
ATTACHMENT F Page 2831 of 3559
FIGURE 2 – FLOOR PLAN
On October 2, 2019, the City provided the Operator with a Notice of Delinquency (Attachment G) prior to placing the Operator in default status due to payment non-compliance with the Development Agreement and Commercial Cannabis Permit, inclusive of the payment of Community Benefit Fees, Cost Recovery Fees, and Non-Operating Fees1 in the amount of fiftyfive thousand three hundred five dollars and twenty-five cents ($55,305.25). The Operator was given no later October 17, 2019, to pay the past due amounts, however, the default was not timely cured.

On May 4, 2021, the City provided the Operator with a Notice of Default (Attachment H) due to payment non-compliance with a payment of fees and associated penalties in the amount of two hundred thousand three hundred sixty-eight dollars and forty-eight cents ($200,368.48). The Operator was given no later than thirty (30) days to cure the default, however, the default was not timely cured.

On August 3, 2021, the Building & Safety Division issued Permit No. 8308 (Attachment I) for an electrical panel and circuit.

On October 19, 2021, the City sent the Operator a Final Demand Letter (Attachment J) due to payment non-compliance, informing the Operator that fees and penalties had accumulated to two hundred forty thousand one hundred seventy-nine dollars and forty-eight cents ($240,179.48). This letter included a list of prior efforts by the City to achieve compliance. The Operator was given no later than thirty (30) days to cure default, however, the default was not timely cured.
1 As used herein, the terms Operating Fees and Non-Operating Fees are used interchangeably.

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On December 6, 2022, the City Manager presented the City Council with a proposed a Cannabis Deferment and Payment Program ("Payment Agreement”) to assist cannabis operators with the accumulated non-operating and other fees by deferring and providing additional time for payment without penalty. The City Council directed the City Manager to offer the Payment Agreement to Operators who have defaulted on their payment obligations. which was approved by the City Council. On December 7, 2023, the City presented the Payment Agreement to the Operator (Attachment K). All cannabis operators interested in participating in this program were given no later than January 31, 2023, to execute the Payment Agreement. The City received interest from the Operator and due to their good-faith negotiations the City extended the deadline to execute a Payment Agreement. 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 accumulated NonOperating 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.

Further, the plans indicated 200 square feet of cannabis distribution activities, which is outside of the scope of activities the Operator was approved for (Attachment L). The Operator was authorized by the City for commercial cannabis cultivation activities only.

Prior to undertaking any operational or construction-related activity which is not expressly described in the CCP conditions, the Operator shall first contact the City Manager, or his designee, to determine if the proposed activity requires a modification of their CCP. The City Manager may, at his sole discretion, require the Operator to file a written and/or mapped description of the proposed activity in order to determine if a permit modification is required.

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FIGURE 3 – NON-CONFORMING FLOOR PLAN
• Plumbing Permit (Installation of new toilet and sink) issued by the City’s Building & Safety Division on February 9, 2022. (Attachment I.)
• Building Permit No. 8548 (Installation of metal panels on the exterior of the facility) issued by the City’s Building & Safety Division on May 4, 2022 (Attachment I.) • Building Permit No. 8451 (For the demolition of interior partition walls) issued by the City’s Building & Safety Division on November 4, 2022 (Attachment I.) On February 1, 2023, the City’s Finance Department presented the Operator with a Letter Agreement agreeing to a payment plan to forbear outstanding payment due on the DA (Attachment M). The Operator accepted the proposed terms on February 2, 2023, and agreed to begin payments on March 1, 2023. The Operator also 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 status’ on its obligations under its 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.” The Letter Agreement also provided that if the Operator is more than thirty (30) days late on any of the forbearance payments due under the Letter Agreement or fees and costs under the Development Agreement would be deemed a material breach of the Letter Agreement. The Letter Agreement also provided that if the Operator is more than thirty (30) days late on any of the forbearance payments due under the Letter Agreement or fees and costs under the Development Agreement would be deemed a material breach of the Letter Agreement.” The Letter Agreement that in the event of an uncured default under the Letter Agreement, the Letter Agreement would terminate without further notice to the Operator allowing the City to “exercise any and all rights and remedies under the Development Agreement and revocation of the CCP.” The Operator accepted the proposed terms on February 2, 2023, and agreed to begin payments on March 1, 2023 ATTACHMENT F Page 2834 of 3559
Between April 2023 and June 2023, the City notified the Operator with three (3) separate Notices of Delinquency (Attachment N) and provided an opportunity to cure outstanding payments due.

The notices sent in April and May provided the Operator thirty (30) days to cure the default, while the June 2023 notice provided ten (10) days to cure, otherwise the Letter Agreement would be terminated. The City also provided the Operator with statements reflecting a summary of the amounts due on April 6, 2023, and May 15, 2023. However, the default on the Letter Agreement was not timely cured and therefore the Letter Agreement was terminated and no longer in full force and effect as of June 16, 2023. Accordingly, the total of all past due fees at the time the Letter Agreement was terminated and an amount of $478,747.18 was due and owed.

On June 23, 2023, the City sent a Final Demand Letter (Attachment O) demanding Operator to respond to the following demands: 1) Proof of the revival (or request for revival) of the LLC’s entity status with the California Secretary of State; 2) Forwarding your payment for the total past due amount; 3) Contact City staff for a meeting to revise CCP’s Schedule of Performance and for further information to become compliant with DA18-014C and CCP18-0014. The Operator did not respond in a timely manner and failed to make any attempt to cure the defaults within the thirty (30) day period.

On August 9, 2023, the City issued an Escrow Account Letter (Attachment P) requiring all cannabis Operators to open an escrow account by September 15, 2023, to ensure payment of Cost Recovery Fees consistent with the escrow accounts required to be opened and maintained by all cannabis Operators within the City. As of the writing of this report, the Operator has not opened an escrow account nor made any payments into the account.

Under Section 5 of DA18-014C the City Manager or his/her designee(s) have the right to enter all Site from time to time unannounced for the purpose of making reasonable inspections to observe and enforce compliance with the Development Agreement and state and local laws and regulations without the requirement of a search warrant, subpoena, or court order. On October 10, 2023, the City staff from the Building and Safety Division conducted an inspection of the Site and posted a stop work notice due to unpermitted construction (Attachment Q). During the inspection the following building and fire code violations were observed: (1) installation of a double door and roll up door; and (2) installation of fire sprinkler lines. All violations observed were constructed without obtaining property permits and/or inspections. The Operator has failed to take necessary actions to correct the stop work notice. To correct the actions, the Operator is required to obtain requisite approvals and permits from the City Planning Division, Building & Safety Division, and the County Fire Department. As of the writing of this report, the Operator has not obtained requisite approvals and permits from the City Planning Division, Building & Safety Division, or the County Fire Department.

On October 24, 2023, the City issued a letter (Attachment R) 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 $14,950.50. As of December 1, 2023, the ATTACHMENT F Page 2835 of 3559
Operator owes the City five hundred twelve thousand seven hundred twenty-nine dollars and one cent ($512,729.01). 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 On November 27, 2023, the City issued to the Operator a Notice of Review Hearing (Attachment S) with the hearing date, time, and place.

As of December 18, 2023, the website for the California Department of Cannabis Control shows no record of a cannabis license issued to Starcraft, LLC See https://search.cannabis.ca.gov/results?searchQuery=starcraft or (Attachment T).

DISCUSSION/ANALYSIS
Under Section 19 of the Development Agreement, if the “City finds and determines based on substantial evidence that, Owner or Landlord executing [the] Agreement, or successor in interest thereto, has not complied in good faith with the terms or conditions of the Agreement, City may terminate or modify [the] Agreement (except that no modification shall increase Owner’s liability nor reduce Owner’s rights).

Pursuant to the CMC Section 5.20.080(6), “[a]ny material violations of this chapter or any other relevant city law by a cannabis permittee, or cannabis permittee’s agent, is ground for suspending or revoking the relevant cannabis permit.” To suspend or revoke a cannabis permit the City Manager must determine “that the cannabis permittee has failed to comply with any conditions of approval, or any agreement or covenant.” CMC § 5.20.080(6)(a).) City staff recommends that the Hearing Officer review the material violations and evidence and make the following findings in support of finding the Operator to be in default of DA18-014C and in violation of the conditions of approval for CCP18-0014.

Violation #1. Breach of Payment Obligations. Pursuant to the DA Section 5.b (Community Benefit Fees), Section 7.c (Operating Fees) and Section 8 (Cost Recovery Fees), the Operator must pay the City an annual Community Benefit Fee in the amount of $66,667.00 ($13,333.40 down payment and monthly payments in the amount of $5,333.36), a Cost Recovery Ree, and an Operating [or Non-Operating] Fee each year since 2018. The Operator is also obliged to make payments for these fees under Condition of Approval No. 45; the obligation for Non-Operating Fees is also repeated in Condition of Approval No. 8 for cultivation activities. The Operator has not made the required timely payments and as of December 1, 2023, is past due in the amount of $503,912.82 as shown in Table 1 below. Past-due payments continue to accumulate, including late payment penalties. The Operator must pay all required DA fees in accordance with DA terms.

Failure to pay fees constitutes a breach of the DA and may result in suspension or immediate revocation of the DA. Accordingly, the Operator is in breach of its payment obligation under DA No. 18-014C.

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TABLE 1 – SUMMARY OF PAST AND CURRENT AMOUNTS DUE AS OF DECEMBER 1, 20232 Fee Type Payment Amount Due
Community Benefit Program $ 333,335.00
Cost Recovery Fees $ 90,914.46
Non-Operating Fees $ 70,732.20
Penalties (Late Payment) $ 17,747.35
TOTAL: $ 512,729.01
Finding 1. The Operator breached the terms of Development Agreement No. 18-014C by failing to make all required payments to the City that are required pursuant to the terms of Development Agreement No. 18-014C.

Evidence: On December 18, 2018, Operator executed DA18-014C, which is a legally binding contract between the Operator and the City and requires payment of fees pursuant to DA Section

5.b (Community Benefit Fees), Section 7.c (Operating Fees), Section 8 (Cost Recovery Fees). In addition, in accordance with Section 7.c(1), late payment of Non-Operating Fees are subject to penalties that begin to accrue once a payment is more than thirty (30) days late. In December 2022, the City offered a Payment Agreement to the Operator which was accepted through the execution of a Letter Agreement with the first payment due on March 1, 2023. Despite the City’s multiple notices and attempts to get the Operator in compliance, the Operator did not make a single required payment in March, April, and May of 2023. The Operator did not cure the delinquency and as a result, the payment plan was null and void as of June 16, 2023. (See, 10-day Notice of Intention to Terminate Letter Agreement (Attachment N).) Proper notice of default was given with the opportunity to cure, but the Operator has failed to fulfill its monetary obligations owed to the City. (See, Final Demand Letter and Notice of Default with 30-day Opportunity to Cure (Attachment O).) This failure is a material breach of the DA and grounds for termination of the DA.

First, in the event that the Operator asserts that City Officials previously made representations that nonretail cannabis operators would not have to pay Non-Operating Fees – no such authority is granted under the CMC nor the Development Agreement. Forgiveness of fees due to a government agency, if not for a public purpose, constitutes an unlawful gift of public funds in violation of Article XVI, Section 6 of the California Constitution. The Operator agreed to pay the Non-Operating Fees through the execution of DA18-014C, which is further reinforced through Condition of Approval Nos. 8 and 14. Further the Operator acknowledged the amounts due under the Letter Agreement.
2 The amount due at the time of the Review Hearing may differ than the amount presented in Table 1. The City reserves the right to present updated information reflecting the actual amounts owed at the time of the Review Hearing.

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Second, if the Operator asserts that it was unable to move forward with its project due to closures at City Hall caused by the COVID-19 pandemic, and performance under DA18-014C is excused under Section 23.i (Force Majuere) this argument would also fail. Further any argument that the Operator was it was unable to move forward with its project due to closures at City Hall caused by the COVID-19 pandemic also fails. 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 U.) Lastly, the Operator’s default and failure to comply with DA18-014C and CCP18-0014 began prior to the onset of the COVID-19 pandemic and continues as of the writing of this report.

Third, if the Operator asserts that any of the fees due under DA18-014C are subject to the Mitigation Fee Act, such assertion is not supported by the law. The Contested 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 (Gov. Code §§ 65864-65869.5). Fees imposed by development agreements are expressly exempt from the Mitigation Fee Act. Gov.

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 DA 18-014C and subsequent Letter Agreement are not subject to the Mitigation Fee Act.

Further, even if the Mitigation Fee Act was applicable to the past due fees, to properly contest the Contested 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. (Gov. 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 March 5, 2019. The 90-day statute of limitations to protest such fees ended on June 3, 2019, and the 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.

However, the holdings in these cases are inapplicable to fees due under DA18-014C, which was adopted by ordinance. Here, the Court notably limited the holding to adjudicative decisions, and not legislative decisions. Id., at p. 385; see also Lingle v. Chevron U.S.A., (2005) 544 U.S. 528, 547 (reaffirming that the rough proportionality requirement applies to adjudicative decisions and not legislative decisions), Leroy Land Development v. Tahoe Regional Planning Agency (1991) 939 F.2d 696, 698 (holding that separately negotiated agreements are not subject to an unconstitutional “takings” analysis because the agreements were entered into voluntarily, in good faith and supported by consideration). In consideration for the fees due under the development agreement, Operator received a ten (10) year term with an option to renew for another ten (10) year term to operate a medicinal commercial cannabis facility.

Finding 2: The Operator has failed to comply with Conditions of Approval Nos. 1(a) and (b) of the CCP, which required the Operator to pay all City-issued invoices within thirty (30) days of receipt thereof.

Evidence: The City approved Development Agreement No. 18-014C subject to Conditions of Approval, which are incorporated under Section 18 of Development Agreement No. 18-014C.

Condition of Approval 1(b) provides that the Operator is required to pay all City-issued invoices within 30 days of receipt thereof. The City has sent the Operator regular monthly invoices for Community Benefit Program fees, Cost Recovery fees, Non-Operating fees, and late penalties since 2019 (Attachment U). The current outstanding fees owed by the Operator have been owed to the City for longer than thirty (30) days. Despite demand and after proper notice of default and opportunity to cure, the Operator has failed to cure its monetary obligations owed to the City.

Finding 3: Pursuant to Condition of Approval Nos. 8 and 14, the Operator failure to pay all fees constitutes a cross-breach of Development Agreement No. 18-014C and is grounds for revocation of the CCP.

Evidence. Pursuant to the foregoing evidence, the Operator’s non-payment of Non-Operating Fees due under the Development Agreement and all fees due under the Development Agreement, respectively in violation of Condition Nos. 14 and 19 and constitute grounds for revocation of the Operator's interest in the CCP for the Site.

Finding 4: Pursuant to the Letter Agreement, “[t]he failure to pay the past due delinquency as required by the notice shall be deemed an uncured event of default and a basis for termination of the Development Agreement. Nothing in this provision abrogates any other remedies available to the City under the Development Agreement for an event of default.”

Evidence: As stated above, the Letter Agreement contained language in which the Operator, ATTACHMENT F Page 2839 of 3559
Operator “acknowledge[d] and agree[d] that past due amounts stated are true and correct and are in fact presently due and owing.” Pursuant to the foregoing evidence, the Operator’s nonpayment of fees due under the Letter Agreement are grounds for termination of DA18-014C.

Violation #2. Breach of Conditions of Approval No. 20 (Time Limits) under CCP 18-0014. CCP Condition No. 20.A. states the approval decision for this CCP becomes effective upon the expiration of the 15-day appeal period following the approval decision, or when any appeals of the decision are finally resolved. The CCP effective date for the Development Agreement was December 18, 2018. No appeal was ever filed and thus CCP Condition No. 20.A.i sets a 90-day time limit from the effective date of the CCP for the Permittee to obtain a Zoning Clearance. CCP Condition No. 20A.ii sets a 90-day time limit from the effective date of the CCP for the Permittee to complete construction of Phase I, or until March 18, 2019. CCP Condition No. 20A.iii sets a 180-day time limit from the effective date of the CCP for the Permittee to complete all Tenant Improvements and construction and to obtain a Certificate of Occupancy from the City Building Department, or until June 16, 2019. The City Manager may grant an extension of time if the Permittee has made a diligent effort to implement the Project.

Finding 5: The Operator has not obtained a Zoning Clearance pursuant to Chapter 20.84 of the CMC, nor has the Operator applied for all the required building permits to complete tenant improvements or otherwise obtained a certificate of occupancy. Therefore, the Operator breached its Conditions of Approval under CCP18-0014 by failing to implement the Project within the time frames set forth in Conditions of Approval No. 20.

To the extent the Operator has obtained building permits and constructed any improvements, these permits were obtained in violation of Condition of Approval No. 18 under CCP18-0014. The Operator has not obtained a Zoning Clearance pursuant to Chapter 20.84 of the CMC, Operator but has obtained permits for (1) an electrical permit for an electrical panel and circuit; (2) a plumbing permit for a toilet and sink; (3) a building permit for the installation of metal panels on the exterior of the facility; and (4) a demolition permit for the demolition of interior partition walls.

In order for the Operator to complete tenant improvements or otherwise obtain a certificate of occupancy the Operator is required to remove all improvements made illegally as outlined in (Attachment Q) and submit complete plans for plan check to complete tenant improvements.

Therefore, the Operator breached its conditions of approval for CCP18-0014 by failing to implement the Project within the time limits set forth in Conditions of Approval No. 20.

Evidence:

Operator has obtained four (4) permits for the following: (1) an electrical permit for an electrical panel and circuit; (2) a plumbing permit for a toilet and sink; (3) a building permit for the installation of metal panels on the exterior of the facility; and (4) a demolition permit for the demolition of interior partition walls. The Operator did not submit all required permits in a timely ATTACHMENT F Page 2840 of 3559
manner in order to accomplish the full tenant improvements required to complete Phase I of construction as described in CCP Condition No. 20. Within the time limits set forth in Condition of Approval No. 20. Without an extension, the deadlines expired in 2019. The City has no record of any request by the Operator to the City Manager for an extension of time. Despite the Operator submitting for building plan check the Operator remains in breach of its conditions of approval by failing to implement the Project within the time limits set forth in the Conditions for Approval No. 20.

In order for the Operator to complete tenant improvements or otherwise obtain a certificate of occupancy the Operator is required to remove all improvements made illegally as outlined in Attachment P. Therefore, the Operator breached its conditions of approval for CCP18-0014 by failing to implement the Project within the time limits set forth in Conditions of Approval No. 20.

Violation #3. Breach of Conditions of Approval No. 18 (Construction Activities) under CCP 18- 0014. CCP18-0014 Condition of Approval No. 18 states that prior to any construction, the Operator shall obtain a Zoning Clearance for construction from the Planning Division and a Building Permit from the Building and Safety Division.

Finding 6: The Operator failed to obtain any requisite approvals and permits from the City Planning Division, Building & Safety Division, and the Los Angeles County Fire Department, prior to the installation of a double door, roll up door, and fire sprinkler lines in the facility. Therefore, the Operator breached its conditions of approval for CCP18-0014.

Evidence: The City has no record of any requisite approvals, inclusive of a Zoning Clearance, for permits obtained by the Operator for some limited work described above. Additionally, the City contacted the Los Angeles Fire Department, Special Occupancy Inspection Unit and no building permits record were found for the fire sprinklers (Attachment W). In accordance with the DA, the Owner shall not operate any facility, and no permit, license, or other approval issued by City shall be valid unless and until the Los Angeles County Fire Department has approved Owner's site plan, floor plan, safety plan, and any other plans that require its approval.

Violation #4. Breach of Conditions of Approval No. 17 (Commercial Cannabis Permit Modification) under CCP 18-0014 CCP Condition of Approval No. 17 states prior to undertaking any operational or construction-related activity which is not expressly described in the CCP conditions, the Operator shall first contact the City Manager, or his designee, to determine if the proposed activity requires a modification of the CCP. The City Manager may, at his sole discretion, require the Operator to file a written and/or mapped description of the proposed activity in order to determine if a permit modification is required.

Finding 7: On January 4, 2022, the Operator submitted building permit plans for interior tenant improvements at the Site to the City’s Plan Check Consultants without first obtaining a Zoning Clearance from the Planning Division and payment of the required fees. Furthermore, the plans ATTACHMENT F Page 2841 of 3559
submitted by the Operator to the City’s Plan Check Consultants do not conform to the original Site Plan and Floor Plans approved by the City in the Operator’s CCP and DA and include plans for distribution activities which the Operator was not approved for. The Operator was authorized by the City for commercial cannabis cultivation activities only. The Operator never filed a written or mapped description of the design changes made to the facility plans nor made the City Manager aware that such changes would be made. The City Manager has not approved any changes to the facility that do not conform to the original Site Plan and Floor Plan approved by the City in the Operator’s CCP and DA. Therefore, the Operator breached its conditions of approval for CCP18- 0014 by failing to receive City Manager approval for the design changes made to the facility set forth in Condition of Approval No. 17.

Evidence:

The Operator has not filed a written or mapped description of the design changes made to the facility as Condition of Approval No. 17 requires. The City Manager has not approved any changes to the facility that do not conform to the original Site Plan and Floor Plan approved by the City in the Operator’s CCP and DA. The Operator remains in breach of its conditions of approval by failing to file the required documentation for the City Manager to approve such changes as expressly described in the Conditions of Approval No. 17.

Violation #5: Failure to Obtain State-Issued Cannabis Licenses for Cultivation and Manufacturing. Recital I of the DA states the Owner has applied for one (1) license: cultivation.

Section 21 of the DA states that the facility shall not operate unless the Owner is the holder of a State-issued Cannabis license for the type of commercial cannabis facility or business operation that is the subject of the DA.

Finding 8: The operator has breached the DA because the Owner has not obtained a State-issued Cannabis license for the facility. A search of the term “Starcraft” on the Cal Cannabis website shows no record of an active cannabis license issued to the Operator.

Evidence: See https://search.cannabis.ca.gov/results?searchQuery=starcraft or (Attachment T).

NOTICE
Pursuant to Section 22 of the Development Agreement the City sent a Review Hearing notice via certified mail, and a courtesy email notice, to all concerned parties on November 27, 2023. The notice advised that the Review Hearing would be held on the hearing date at such location designated in Attachment S. Proof of certified mailing is provided in Attachment X.

ENVIRONMENTAL ANALYSIS
The action(s) have been assessed in accordance with the California Environmental Quality Act (“CEQA”) and the environmental regulations of the City. The Project is expected to be categorically exempt from the requirements to prepare additional environmental documentation per CEQA Section 15321. Class 21 (Enforcement Actions by Regulatory Agencies) is applicable to ATTACHMENT F Page 2842 of 3559
“Actions 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.” Therefore, the action(s) are categorically exempt from the provisions of CEQA.

CONCLUSION
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 Cannabis laws. (CMC § 5.20.010.) Cannabis Operators with development agreements are obligated to comply with all provisions of the CMC, obligations under DA18-014C and Conditions of Approval under CCP18-0014. As discussed above and based on the evidence attached to this report, the Operator has failed to comply with their obligations despite being provided with ample notice and opportunities to achieve compliance. Therefore, staff recommends the Hearing Officer after independent review, consideration, analysis of staff’s report and the information presented, oral and written testimony by all parties and their witnesses, and the record as a whole – make a determination the Operator, Starcraft, LLC, has breached the terms and conditions in DA No. 18-014C and recommend that the Planning Commission and City Council repeal Ordinance No. 701 and terminate DA18-014C and revoke the interest under CCP18-0014.

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ATTACHMENT(S)
A. Ordinance No. 673
B. City Council Resolution No. 18-57
C. CCP18-0014 Conditions of Approval
D. Development Agreement No. 18-014C
E. Ordinance No. 701
F. Exhibit A-F of Development Agreement No. 18-014C
G. Correspondence Letter- Notice of Delinquency dated October 2, 2019 H. Correspondence Letter- Notice of Default dated May 4, 2021 I. Issued Building Permits and Submittals
J. Correspondence Letter- Final Demand dated October 19, 2021 K. Correspondence Letter- Notice of Cannabis Deferment and Payment Program dated December 7, 2022
L. Facility Plans Approved by 3rd Party Consultant
M. Letter of Agreement (Payment Plan) dated February 2, 2023 N. Correspondence Letter- April, May, and June Delinquency notices.

O. Final Demand Letter dated June 23, 2023
P. Correspondence Letter – Notice of Escrow Account dated August 9, 2023 Q. Violation Notice and Pictures- Unannounced Inspection conducted October 10, 2023 R. Correspondence Letter – Notice of updated payment of fees dated October 24, 2023 S. Notice of Hearing dated November 27, 2023
T. State Cannabis Unified Search Results for StarCraft, LLC U. Invoices from 2019 to December 2023
V. Executive Order N-33-20
W. LA County Fire Department Project Corrections
X. Proof of certified Mailing of Review Hearing
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DECISION and ORDER
Administrative Hearing Regarding Compliance by StarCraft LLC (Respondent) with Commercial Cannabis Permit (CCP) 18-0014 and Development Agreement (DA) 18-014C Between Respondent and the City of Cudahy (City).

Hearing Date: January 8, 2024.

Hearing Officer: Steve Napolitano, Esq. The Hearing Officer was present for the hearing.

The hearing took place in the City Council Chambers at Cudahy City Hall, 5220 Santa Ana St., Cudahy, CA 90201. The hearing was recorded and a copy is available through the City Clerk’s Office.

Respondent: StarCraft LLC, 4925 Cecilia St., Cudahy, CA 90201. Respondent did not appear and was not represented at the hearing.

City was present and represented by:
• Cecilia Madrigal-Gonzalez, Senior Planner
• Paloma McEvoy, Assistance City Attorney
• Glenn Calsada, Special Counsel
• Juan Arauz, Community Development Director
• Joshua Calhoun, Finance Director
• Raul Diaz, Building Official
• Richard Iglesias, City Clerk

DECISION SUMMARY
Based on the evidence and analysis discussed below, this Hearing Officer finds that a preponderance of the evidence shows that Respondent, despite considerable notice and opportunities to cure any issues, has breached the terms and conditions of DA 18-014C and Respondent’s portion of its CCP and recommends that the Planning Commission and/or City Council repeal Ordinance No. 701 and terminate DA 18-014C and revoke Respondent’s interest under CCP 18-0014.

ADMINISTRATIVE HEARING PROCEDURES
All state and local public entities are subject to due process of law. State agencies are subject to statutory requirements, including the Administrative Procedures Act. Local public agencies are, with some minor exceptions, not subject to the APA and generally subject only to the constitutional limitations of due process of law. Govt. Code §11410.30. While a local agency may elect to apply some or all of the provisions of the APA to its hearings, the City has not done so.

The process required by law are those imposed by our constitution(s) as well as any procedures adopted by the City. In Mohilef v. Janovici (1996) 51 Cal.App.4th 267 and E.W.A.P., Inc. v. City of Los Angeles (1997) 56 Cal.App.4th 310, the court explored what due process is necessary in an administrative proceeding. There is general agreement that there must be notice and an opportunity to be heard. Beyond this, “there is no precise manner of hearing which must be afforded; rather the particular interests at issue must be considered in determining what kind of hearing is appropriate. A formal hearing, with full rights of confrontation and cross-examination is not necessarily required. (Saleeby v. State Bar (1985) 39 Cal.3d 547, 565, 216 Cal.Rptr. 367, 702 P.2d 525.) ‘Due process’ is an ATTACHMENT G Page 2845 of 3559
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elusive concept. Its exact boundaries are undefinable, and its content varies according to specific factual contexts.” Mohilef at 286. Our Supreme Court has stated, “[D]ue process may require only that the administrative agency comply with the statutory limitations on its authority.” People v. Ramirez (1979) 25 Cal.3d 260, 269
Beyond notice and a hearing, the procedures available in this case to the participants are those provided by Cudahy Municipal Code (CMC) 5.20.080.

The legal standard of review applicable to an administrative hearing is based on a preponderance of the evidence, or “evidence which is of greater weight and more convincing than the evidence which is offered in opposition to it; that is evidence which as a whole shows that the fact sought to be proved is more probable than not.” Black’s Law Dictionary, Fifth Edition.

BACKGROUND
Background information was presented in the City’s Staff Report dated January 8, 2024, with attachments A through X, which were admitted into the record.

On September 11, 2017, the City adopted Ordinance No. 673 (Attachment A) establishing the City of Cudahy'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.

On December 4, 2018, the City Council adopted Resolution No. 18-56 (Attachment B) approving the issuance of CCP18-0014 (Attachment C) that imposed conditions of approval upon the Respondent subject to the execution of a development agreement with the City.

On December 4, 2018, the City Council conducted the first reading to adopt Ordinance No. 701 approving DA18-014C (Attachment D). The second reading was conducted on December 18, 2018, approving Ordinance No. 701 (Attachment E) inclusive of Exhibits A-F (Attachment F) between Respondent and the City authorizing commercial cannabis cultivation activities at the Site as illustrated in Figures 1 and 2 of the City’s Staff Report. The Site Plan and Floor Plan are incorporated by reference in Section 3.c of DA18-014C. Recital I DA18-014C permits the Respondent to operate in an approximately 8,525 square foot (“sf”) building inclusive of 2,933 sf of manufacturing area and 3,689 sf for distribution activities.

On October 2, 2019, the City provided the Respondent with a Notice of Delinquency (Attachment G) prior to placing the Respondent in default status due to payment non-compliance with the Development Agreement and Commercial Cannabis Permit, inclusive of the payment of Community Benefit Fees, Cost Recovery Fees, and Non-Operating Fees1 in the amount of fifty-five thousand three hundred five dollars and twenty-five cents ($55,305.25). The Respondent was given no later October 17, 2019, to pay the past due amounts, however, the default was not timely cured.

On May 4, 2021, the City provided the Respondent with a Notice of Default (Attachment H) due to payment non-compliance with a payment of fees and associated penalties in the amount of two ATTACHMENT G Page 2846 of 3559
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hundred thousand three hundred sixty-eight dollars and forty-eight cents ($200,368.48). The Respondent was given no later than thirty (30) days to cure the default, however, the default was not timely cured.

On August 3, 2021, the Building & Safety Division issued Permit No. 8308 (Attachment I) for an electrical panel and circuit.

On October 19, 2021, the City sent the Respondent a Final Demand Letter (Attachment J) due to payment non-compliance, informing the Respondent that fees and penalties had accumulated to two hundred forty thousand one hundred seventy-nine dollars and forty-eight cents ($240,179.48). This letter included a list of prior efforts by the City to achieve compliance. The Respondent was given no later than thirty (30) days to cure default, however, the default was not timely cured.

On December 6, 2022, the City Manager presented the City Council with a proposed a Cannabis Deferment and Payment Program ("Payment Agreement”) to assist cannabis operators with the accumulated non-operating and other fees by deferring and providing additional time for payment without penalty. The City Council directed the City Manager to offer the Payment Agreement to Respondents who have defaulted on their payment obligations, which was approved by the City Council. On December 7, 2023, the City presented the Payment Agreement to the Respondent (Attachment K). All cannabis operators interested in participating in this program were given no later than January 31, 2023, to execute the Payment Agreement. The City received interest from the Respondent and due to their good-faith negotiations the City extended the deadline to execute a Payment Agreement.

From January 2022 through November 2022, the City’s Building & Safety Division received the following plan check submittals and/or issued building permits for the Site:
• On January 4, 2022, the Respondent submitted building permit plans for interior tenant improvements at the Site to the City’s Plan Check Consultants as demonstrated in Figure 3 below and Attachment L. The Respondent submitted these plans for approval without first obtaining a Zoning Clearance from the Planning Division. The Respondent was required to submit all required plan check fees but did not do so. The plan check submittal received approval for on October 10, 2022. Furthermore, the plans submitted by the Respondent to the City’s Plan Check Consultants do not conform to the original Site Plan and Floor Plan approved by the City in the Respondent’s CCP and DA as shown in Figures 1 and 2 above. Further, the plans indicated 200 square feet of cannabis distribution activities, which is outside of the scope of activities the Respondent was approved for (Attachment L). The Respondent was authorized by the City for commercial cannabis cultivation activities only. Prior to undertaking any operational or construction-related activity which is not expressly described in the CCP conditions, the Respondent shall first contact the City Manager, or his designee, to determine if the proposed activity requires a modification of their CCP. The City Manager may, at his sole discretion, require the Respondent to file a written and/or mapped description of the proposed activity in order to determine if a permit modification is required. • Plumbing Permit (Installation of new toilet and sink) issued by the City’s Building & Safety Division on February 9, 2022. (Attachment I.)
• Building Permit No. 8548 (Installation of metal panels on the exterior of the facility) issued by the City’s Building & Safety Division on May 4, 2022 (Attachment I.) • Building Permit No. 8451 (For the demolition of interior partition walls) issued by the City’s Building & Safety Division on November 4, 2022 (Attachment I.) ATTACHMENT G Page 2847 of 3559
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On February 1, 2023, the City’s Finance Department presented the Respondent with a Letter Agreement agreeing to a payment plan to forbear outstanding payment due on the DA (Attachment M).

The Respondent accepted the proposed terms on February 2, 2023, and agreed to begin payments on March 1, 2023. The Respondent also 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 Respondent is in status’ on its obligations under its 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 Respondent is in full compliance with all terms of its Development Agreement.” The Letter Agreement also provided that if the Respondent is more than thirty (30) days late on any of the forbearance payments due under the Letter Agreement or fees and costs under the Development Agreement would be deemed a material breach of the Letter Agreement. The Letter Agreement also provided that if the Respondent is more than thirty (30) days late on any of the forbearance payments due under the Letter Agreement or fees and costs under the Development Agreement would be deemed a material breach of the Letter Agreement.” The Letter Agreement that in the event of an uncured default under the Letter Agreement, the Letter Agreement would terminate without further notice to the Respondent allowing the City to “exercise any and all rights and remedies under the Development Agreement and revocation of the CCP.” The Respondent accepted the proposed terms on February 2, 2023, and agreed to begin payments on March 1, 2023.

Between April 2023 and June 2023, the City notified the Respondent with three (3) separate Notices of Delinquency (Attachment N) and provided an opportunity to cure outstanding payments due. The notices sent in April and May provided the Respondent thirty (30) days to cure the default, while the June 2023 notice provided ten (10) days to cure, otherwise the Letter Agreement would be terminated.

The City also provided the Respondent with statements reflecting a summary of the amounts due on April 6, 2023, and May 15, 2023. However, the default on the Letter Agreement was not timely cured and therefore the Letter Agreement was terminated and no longer in full force and effect as of June 16, 2023. Accordingly, the total of all past due fees at the time the Letter Agreement was terminated and an amount of $478,747.18 was due and owed.

On June 23, 2023, the City sent a Final Demand Letter (Attachment O) demanding Respondent to respond to the following demands: 1) Proof of the revival (or request for revival) of the LLC’s entity status with the California Secretary of State; 2) Forwarding your payment for the total past due amount; 3) Contact City staff for a meeting to revise CCP’s Schedule of Performance and for further information to become compliant with DA18-014C and CCP18-0014. The Respondent did not respond in a timely manner and failed to make any attempt to cure the defaults within the thirty (30) day period.

On August 9, 2023, the City issued an Escrow Account Letter (Attachment P) requiring all cannabis Respondents to open an escrow account by September 15, 2023, to ensure payment of Cost Recovery Fees consistent with the escrow accounts required to be opened and maintained by all cannabis Respondents within the City. As of the writing of this report, the Respondent has not opened an escrow account nor made any payments into the account.

Under Section 5 of DA18-014C the City Manager or his/her designee(s) have the right to enter all Site from time to time unannounced for the purpose of making reasonable inspections to observe and enforce compliance with the Development Agreement and state and local laws and regulations without the requirement of a search warrant, subpoena, or court order. On October 10, 2023, the City staff from the Building and Safety Division conducted an inspection of the Site and posted a stop work notice due to unpermitted construction (Attachment Q). During the inspection the following building and fire code violations were observed: (1) installation of a double door and roll up door; and (2) installation of fire sprinkler lines. All violations observed were constructed without obtaining property permits and/or ATTACHMENT G Page 2848 of 3559
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inspections. The Respondent has failed to take necessary actions to correct the stop work notice. To correct the actions, the Respondent is required to obtain requisite approvals and permits from the City Planning Division, Building & Safety Division, and the County Fire Department. As of the writing of this report, the Respondent has not obtained requisite approvals and permits from the City Planning Division, Building & Safety Division, or the County Fire Department.

On October 24, 2023, the City issued a letter (Attachment R) 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 $14,950.50. As of December 1, 2023, the Respondent owes the City five hundred twelve thousand seven hundred twenty-nine dollars and one cent ($512,729.01).

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 the hearing and beyond.

On November 27, 2023, the City issued to the Respondent a Notice of Review Hearing (Attachment S) with the hearing date, time, and place.

As of December 18, 2023, the website for the California Department of Cannabis Control shows no record of a cannabis license issued to StarCraft, LLC See https://search.cannabis.ca.gov/results?searchQuery=starcraft or (Attachment T).

PROCEDURAL ISSUES
As noted, Respondent did not participate and was not represented at the hearing. No evidence was submitted by Respondent.

Evidence submitted prior to the hearing by City staff and testimony and statements made at the hearing by City staff are incorporated herein by reference, including the City’s Staff Report dated January 8, 2024, including all attachments previously mentioned.

The City engaged this Hearing Officer to conduct an impartial, independent review of the evidence in this matter and determine whether Respondent is in compliance with its CCP and DA between itself and the City.

No objections or other procedural issues were raised.

Presenting City Staff members were sworn in prior to giving testimony.

EVIDENCE
Cecilia Madrigal-Gonzalez, Senior Planner, provided an overview of the City’s Staff Report. Ms.

Madrigal-Gonzalez asked the Hearing Officer to make the recommended findings to repeal and revoke Respondent’s portion of the CCP and their DA in its entirety based on the City’s Staff Report and the testimony by City staff at the hearing.

Joshua Calhoun, Finance Director, testified as to the accuracy of amounts owed by Respondent and that Respondent had failed to make their required payments.

Ms. Madrigal-Gonzalez stated that Respondent did not have a current cannabis license from the state as required by the DA.

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Raul Diaz, Building Official, testified that no permits were issued for any site improvements and no certificate of occupancy had been issued to Respondent. Ms. Madrigal-Gonazalez also confirmed that no zoning clearances were issued.

Richard Iglesias, City Clerk, testified that all documents were true and correct copies and all mailing procedures under the CMC were followed.

ANALYSIS
Pursuant to the CMC Section 5.20.080(6)(a), “[a]ny material violations of this chapter or any other relevant city law by a cannabis permittee, or cannabis permittee’s agent, is grounds for suspending or revoking the relevant cannabis permit.” To suspend or revoke a cannabis permit the City Manager must determine “that the cannabis permittee has failed to comply with any conditions of approval, or any agreement or covenant.”
Under Section 19 of the Development Agreement, if the “City finds and determines based on substantial evidence that, Owner or Landlord executing [the] Agreement, or successor in interest thereto, has not complied in good faith with the terms or conditions of the Agreement, City may terminate or modify [the] Agreement (except that no modification shall increase Owner’s liability nor reduce Owner’s rights).”
The City asserts that Respondent has made several material violations of the CCP and/or DA as outlined in the City’s Staff Report and testimony, which will be discussed as follows.

1. Breach of Payment Obligations
Pursuant to the DA Section 5.b (Community Benefit Fees), Section 7.c (Operating Fees) and Section 8 (Cost Recovery Fees), the Respondent must pay the City an annual Community Benefit Fee in the amount of $66,667.00 ($13,333.40 down payment and monthly payments in the amount of $5,333.36), a Cost Recovery Ree, and an Operating [or Non-Operating] Fee each year since 2018. The Respondent is also obliged to make payments for these fees under Condition of Approval No. 45; the obligation for Non-Operating Fees is also repeated in Condition of Approval No. 8 for cultivation activities. The Respondent has not made the required timely payments and as of December 1, 2023, is past due in the amount of $503,912.82 as shown in Table 1 of the City’s Staff Report. Past-due payments continue to accumulate, including late payment penalties. The Respondent must pay all required DA fees in accordance with DA terms.

The evidence shows that on December 18, 2018, Respondent executed DA18-014C, which is a legally binding contract between the Respondent and the City and requires payment of fees pursuant to DA Section 5.b (Community Benefit Fees), Section 7.c (Operating Fees), Section 8 (Cost Recovery Fees).

In addition, in accordance with Section 7.c(1), late payment of Non-Operating Fees are subject to penalties that begin to accrue once a payment is more than thirty (30) days late. In December 2022, the City offered a Payment Agreement to the Respondent which was accepted through the execution of a Letter Agreement with the first payment due on March 1, 2023. Despite the City’s multiple notices and attempts to get the Respondent in compliance, the Respondent did not make a single required payment in March, April, and May of 2023. The Respondent did not cure the delinquency and as a result, the payment plan was null and void as of June 16, 2023. (See, 10-day Notice of Intention to Terminate Letter Agreement (Attachment N).) Proper notice of default was given with the opportunity to cure, but the Respondent has failed to fulfill its monetary obligations owed to the City. (See, Final Demand Letter ATTACHMENT G Page 2850 of 3559
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and Notice of Default with 30-day Opportunity to Cure (Attachment O).) This failure is a material breach of the DA and grounds for termination of the DA.

The City Staff Report theorizes several potential defenses that Respondent may assert and discusses how each defense would fail. The Hearing Officer agrees but finds no need for further analysis as Respondent has made no such arguments itself, as Respondent failed to provide any evidence contrary to that presented by the City. Respondent knew and accepted the terms of the DA, including all payment provisions, willingly and voluntarily. In fact, Respondent explicitly acknowledged and agreed that the past due amounts owed to the City were true and correct and that Respondent was in default status when Respondent accepted the proposed terms of the City’s Letter Agreement on February 2, 2023. Respondent’s failure to make the payments as required resulted in the termination of the Letter Agreement, making all past payments due, including all future accumulating unpaid payments.

Based on the evidence provided by the City above, and the failure of Respondent to provide any evidence to the contrary, a preponderance of the evidence shows that Respondent has materially breached the terms of DA No. 18-014C by failing to make all required payments to the City as required.

Similarly, the Respondent has failed to comply with Conditions of Approval No. 1(a) and (b) of the CCP, which required the Respondent to pay all City-issued invoices within 30 days of receipt thereof.

The City approved Development Agreement No. 18-014C subject to Conditions of Approval, which are incorporated under Section 18 of Development Agreement No. 18-014C. Condition of Approval 1(b) provides that the Respondent is required to pay all City-issued invoices within 30 days of receipt thereof. The City has sent the Respondent regular monthly invoices for Community Benefit Program fees, Cost Recovery fees, Non-Operating fees, and late penalties since 2019 (Attachment U). The current outstanding fees owed by the Respondent have been owed to the City for longer than thirty (30) days. Despite demand and after proper notice of default and opportunity to cure, the Respondent has failed to cure its monetary obligations owed to the City.

Additionally, pursuant to Condition of Approval Nos. 8 and 14, the Respondent’s failure to pay all fees constitutes a cross-breach of Development Agreement No. 18-014C and is grounds for revocation of the CCP. Similarly, based on the same evidence, the Respondent’s non-payment of Non-Operating Fees due under the Development Agreement and all fees due under the Development Agreement, respectively in violation of Condition Nos. 14 and 19 and constitute grounds for revocation of the Respondent's interest in the CCP for the Site.

Also, under the Letter Agreement, “[t]he failure to pay the past due delinquency as required by the notice shall be deemed an uncured event of default and a basis for termination of the Development Agreement. Nothing in this provision abrogates any other remedies available to the City under the Development Agreement for an event of default.” The Letter Agreement contained language in which the Respondent, Respondent “acknowledge[d] and agree[d] that past due amounts stated are true and correct and are in fact presently due and owing.” As such, the Respondent’s non-payment of fees due under the Letter Agreement are grounds for termination of DA18-014C.

Again, based on substantial and unrefuted evidence presented by the City above, a preponderance of the evidence shows that Respondent breached multiple payment conditions of their DA and CCP.

Despite multiple attempts and notices by the City to gain compliance, the evidence shows that Respondent failed to comply with their payment obligations, which constitutes the necessary grounds for termination of the DA and revocation of the CCP under CMC 5.20.080(6)(a).

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2. Breach of Conditions of Approval No. 20 (Time Limits) under CCP19-0014 CCP Condition No. 20.A. states the approval decision for this CCP becomes effective upon the expiration of the 15-day appeal period following the approval decision, or when any appeals of the decision are finally resolved. The CCP effective date for the Development Agreement was December 18, 2018. No appeal was ever filed and thus CCP Condition No. 20.A.i sets a 90-day time limit from the effective date of the CCP for the Permittee to obtain a Zoning Clearance. CCP Condition No. 20A.ii sets a 90-day time limit from the effective date of the CCP for the Permittee to complete construction of Phase I, or until March 18, 2019. CCP Condition No. 20A.iii sets a 180-day time limit from the effective date of the CCP for the Permittee to complete all Tenant Improvements and construction and to obtain a Certificate of Occupancy from the City Building Department, or until June 16, 2019. The City Manager may grant an extension of time if the Permittee has made a diligent effort to implement the Project.

In this case, the Respondent has obtained four (4) permits for the following: (1) an electrical permit for an electrical panel and circuit; (2) a plumbing permit for a toilet and sink; (3) a building permit for the installation of metal panels on the exterior of the facility; and (4) a demolition permit for the demolition of interior partition walls. The Respondent did not submit all required permits in a timely manner in order to accomplish the full tenant improvements required to complete Phase I of construction as described in CCP Condition No. 20. Within the time limits set forth in Condition of Approval No. 20. Without an extension, the deadlines expired in 2019. The City has no record of any request by the Respondent to the City Manager for an extension of time. Despite the Respondent submitting for building plan check the Respondent remains in breach of its conditions of approval by failing to implement the Project within the time limits set forth in the Conditions for Approval No. 20. In order for the Respondent to complete tenant improvements or otherwise obtain a certificate of occupancy the Respondent is required to remove all improvements made illegally as outlined in Attachment P.

To the extent the Respondent has obtained building permits and constructed any improvements, these permits were obtained in violation of Condition of Approval No. 18 under CCP18-0014. The Respondent has not obtained a Zoning Clearance pursuant to Chapter 20.84 of the CMC, Respondent but has obtained permits for (1) an electrical permit for an electrical panel and circuit; (2) a plumbing permit for a toilet and sink; (3) a building permit for the installation of metal panels on the exterior of the facility; and (4) a demolition permit for the demolition of interior partition walls. In order for the Respondent to complete tenant improvements or otherwise obtain a certificate of occupancy the Respondent is required to remove all improvements made illegally as outlined in (Attachment Q) and submit complete plans for plan check to complete tenant improvements.

Based on the above, the Respondent breached its conditions of approval for CCP18-0014 by failing to implement the Project within the time limits set forth in Conditions of Approval No. 20.

3. Breach of Conditions of Approval No. 18 (Construction Activities) under CCP 18- 0014
CCP18-0014 Condition of Approval No. 18 states that prior to any construction, the Respondent shall obtain a Zoning Clearance for construction from the Planning Division and a Building Permit from the Building and Safety Division.

The City has no record of any requisite approvals, inclusive of a Zoning Clearance, for permits obtained by the Respondent for some limited work described above. Additionally, the City contacted the Los Angeles Fire Department, Special Occupancy Inspection Unit and no building permits record were found for the fire sprinklers (Attachment W). In accordance with the DA, the Owner shall not operate ATTACHMENT G Page 2852 of 3559
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any facility, and no permit, license, or other approval issued by City shall be valid unless and until the Los Angeles County Fire Department has approved Owner's site plan, floor plan, safety plan, and any other plans that require its approval.

The Respondent failed to obtain any requisite approvals, inclusive of a Zoning Clearance, and permits from the City Planning Division and Building & Safety Division prior to the installation of interior nonstructural walls, metal framing, fire sprinkler lines, and a restroom remodel in the facility. Therefore, the Respondent breached Conditions of Approval No. 28 CCP18-0014.

4. Breach of Conditions of Approval No. 17 (Commercial Cannabis Permit Modification) Under CCP 18-0014
CCP Condition of Approval No. 17 states prior to undertaking any operational or construction-related activity which is not expressly described in the CCP conditions, the Respondent shall first contact the City Manager, or his designee, to determine if the proposed activity requires a modification of the CCP.

The City Manager may, at his sole discretion, require the Respondent to file a written and/or mapped description of the proposed activity in order to determine if a permit modification is required.

On January 4, 2022, the Respondent submitted building permit plans for interior tenant improvements at the Site to the City’s Plan Check Consultants without first obtaining a Zoning Clearance from the Planning Division and payment of the required fees. Furthermore, the plans submitted by the Respondent to the City’s Plan Check Consultants do not conform to the original Site Plan and Floor Plans approved by the City in the Respondent’s CCP and DA and include plans for distribution activities which the Respondent was not approved for. The Respondent was authorized by the City for commercial cannabis cultivation activities only. The Respondent never filed a written or mapped description of the design changes made to the facility plans nor made the City Manager aware that such changes would be made. The City Manager has not approved any changes to the facility that do not conform to the original Site Plan and Floor Plan approved by the City in the Respondent’s CCP and DA. Therefore, the Respondent breached its conditions of approval for CCP18- 0014 by failing to receive City Manager approval for the design changes made to the facility set forth in Condition of Approval No. 17.

5. Noncompliance with State Law
Recital I of the DA states the Owner has applied for one (1) license: cultivation. Section 21 of the DA states that the facility shall not operate unless the Owner is the holder of a State-issued Cannabis license for the type of commercial cannabis facility or business operation that is the subject of the DA.

The Respondent has breached the DA because the Owner has not obtained a State-issued Cannabis license for the facility. A search of the term “StarCraft” on the Cal Cannabis website shows that the Respondent’s cannabis manufacturer license issued by the state has been withdrawn (Attachment T).

Based on the evidence presented by the City as noted above, Respondent has failed to maintain all its necessary licenses to operate under the DA, which constitutes a breach of Article 21 of the DA.

DECISION AND ORDER
Based on the evidence and analysis discussed above, this Hearing Officer finds that a preponderance of the evidence shows that Respondent, despite considerable notice and opportunities to cure any ATTACHMENT G Page 2853 of 3559
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issues, has breached the terms and conditions of DA 18-014C and recommends that the Planning Commission and/or City Council repeal Ordinance No. 701 and terminate DA 18-014C and revoke respondent’s interest under CCP 18-0015.

This decision does not affect the payments and penalties outlined in the City’s Staff Report, which are still accumulating, owed and due to City from Respondent.

Submitted February 15, 2024 by Steve Napolitano, Esq., Administrative Hearing Officer.

Steve Napolitano, Esq.

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Page | 1
5220 Santa Ana Street
Cudahy, CA, 90201
Phone: (323) 773-5143
Fax: (323) 771-2072
www.cityofcudahy.com
Mayor
Jose R. Gonzalez
Vice Mayor
Elizabeth Alcantar
Councilmember
Martin U. Fuentes
Councilmember
Cynthia Gonzalez, Ed. D
Councilmember
Daisy Lomeli
City Manager
Alfonso Noyola, ICMA-CM
Incorporated November 10, 1960
June 13, 2024
Via U.S. Mail and Email:

Starcraft, LLC
Attn: Jeff Winders, Manager
4925 Cecilia Street
Cudahy, CA 90201
Re: DA 18-014C
Dear Owner/Operator:

Below is a summary of past and current amounts due under Development Agreement DA 18-014C for Ordinance No 701, with an Effective date of March 5, 2019.

Fee Type Payment
Amount
Payment Period City
Code
Community Benefit Program $274,668.04
$90,667.12
Outstanding balance as of January
31, 2023.

February 2023 to June 2024.

Monthly installments ($5,333.36) CBP
Cost Recovery Fee $89,845.18
$26,558.63
($14,950.50)
$6,027.93
Outstanding balance as of
January31, 2023.

City Labor from February 2023 to
May 2024.

Reimbursement Expense Credit applied
on 10/24/2023.

Escrow Deposit Beginning Charge
URBF1
Non-Operating Fee $56,585.76
$21,862.68
$25,463.59
Outstanding balance as of January
31, 2023.

February 2023 to June 2024.

The monthly non-operating fee is
$1,286.04 (3,062 square footage of
the premises x .42).

Penalties Aug 2022 – June 2024
OPFEE
Total Fees
Escrow Deposit Beginning Charge
$570,700.50
$6,027.93
Due July 1, 2024
ATTACHMENT I Page 2856 of 3559
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Community Benefit Program
The Community Benefit Program (CBP) payment amount is due the first day of each month and is considered late if payment is received on or after the fifth day of the month. All CBP outstanding balance as of January 31, 2023, and current CBP monthly installments from February 2023 to June 2024 totaling $365,335.16 are due July 1, 2024.

Cost Recovery Fee
The outstanding balance as of January 31, 2023, the City labor, and third-party contractors from February 2023 to May 2024 totaling $101,453.31 are due July 1, 2024.

Escrow Account
Effective September 15, 2023, the City will require Starcraft, LLC to make an upfront payment of assessed quarterly fees into a deposit to open an escrow account to obtain timely payment of those fees. By this invoice, the Department of Finance is informing you that your beginning charge of your escrow deposit is $6,027.93 This beginning charge of your escrow deposit is based on the average amount of cost recovery fees from July 2022 to June 2023 ($24,111.73) and it will be used to repay fees assessed by the City on a monthly basis beginning in the fourth quarter of 2023 and escrow will be replenished quarterly, as needed. Please see attached worksheet.

Non-Operating Fees
The outstanding balance as of January 31, 2023, and the current monthly non-operating fees from February 2023 to June 2024 totaling $78,448.44 are due July 1, 2024.

Late Payment Penalties
Penalties totaling $25,463.59 from August 2022 to June 2024 are due July 1, 2024. Per the Development Agreement, amounts that are more than 30 days late after the due date shall result in a penalty equal to the sum of 25% of the non-operating/operating fees. In addition, a 10% shall be added to the first day of each calendar month following the month of the imposition of the 25% penalty if the fees remain unpaid in whole or in part-up to a maximum of 100% of the fee payable. The City will be enforcing these penalties for amounts due from July 2022 to present, as appliable. No penalties will be imposed on amounts outstanding prior to this date. This will be separately listed on current and future invoice letters provided by the City. Should you wish to avoid penalties, ensure that either amounts payable are paid timely or contact the City to discuss entering into a payment plan on prior amounts outstanding.

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Please pay no later than July 1, 2024, to avoid any penalties. If you have any questions related to these items, please contact Joshua Calhoun at [email protected] .

Sincerely,
Joshua Calhoun, CPA
Finance Director

See supporting detail attached of monthly billings and payments as of June 4, 2024, along with escrow deposit beginning balance worksheet.

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CBP URBF1 OPFEE OPFEE
Operator Comm Benefit Cost Recovery Non Operating Fees Penalties Outstanding Starcraft, LLC
Balance as of January 31, 2023 274,668.04 89,845.18 56,585.76 421,098.98 Penalties from Aug 2022 to Apr 2023 7,459.03 7,459.03

BILLINGS
Feb 2023 5,333.36 2,504.00 1,286.04 - 9,123.40
Mar 2023 5,333.36 1,975.08 1,286.04 - 8,594.48
Apr 2023 5,333.36 2,066.85 1,286.04 - 8,686.25
May 2023 5,333.36 1,848.55 1,286.04 1,286.04 9,753.99
Jun 2023 5,333.36 2,078.29 1,286.04 1,286.04 9,983.73
Jul 2023 5,333.36 428.13 1,286.04 1,286.04 8,333.57
Aug 2023 5,333.36 2,374.86 1,286.04 1,286.04 10,280.30
Sep 2023 5,333.36 1,313.77 1,286.04 1,286.04 9,219.21
Oct 2023 5,333.36 519.50 1,286.04 1,286.04 8,424.94
Nov 2023 5,333.36 910.75 1,286.04 1,286.04 8,816.19
Dec 2023 5,333.36 3,766.04 1,286.04 1,286.04 11,671.48
Jan 2024 5,333.36 1,517.49 1,286.04 1,286.04 9,422.93
Feb 2024 5,333.36 1,180.32 1,286.04 1,286.04 9,085.76
Mar 2024 5,333.36 926.00 1,286.04 1,286.04 8,831.44
Apr 2024 5,333.36 1,189.41 1,286.04 1,286.04 9,094.85
May 2024 5,333.36 1,959.59 1,286.04 1,286.04 9,865.03
June 2024 5,333.36 pending 1,286.04 1,286.04 7,905.44

PAYMENTS
Feb 2023
Mar 2023
Apr 2023
May 2023
Jun 2023
Jul 2023
Aug 2023
Sep 2023
Oct 2023
Nov 2023
Dec 2023
Jan 2024
Feb 2024
Mar 2024
Apr 2024
May 2024
June 2024
Expense Reimbursement - 10-2023 (14,950.50) (14,950.50) Balance as of June 4, 2024 365,335.16 101,453.31 78,448.44 25,463.59 570,700.50 ATTACHMENT I Page 2859 of 3559
Operator
Starcraft, LLC
As of September 15, 2023 $ 6,027.93
Sep-23 $ 6,027.93
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
May-24
Jun-24
Total as of June 4, 2024 $ 6,027.93
Billings Deposits to
Escrow Account
Cost Recovery
Monthly Fees
Escrow Ending
Balance
Escrow Beginning
Balance
ATTACHMENT I Page 2860 of 3559
Public Hearing - Repeal Ordinance and DA - Page 1 of 2
Long Beach Press-Telegram
5150 E. Pacific Coast Highway Suite 200
Long Beach, California 90804
(562) 499-1236
City of Cudahy
5220 Santa Ana Street
Cudahy, California 90201
FILE NO. 0011678076

PROOF OF PUBLICATION
(2015.5 C.C.P.)

STATE OF CALIFORNIA
County of Los Angeles
I am a citizen of the United States and
a resident of the County aforesaid; I
am over the age of eighteen years, and
not party to or interested in the aboveentitled matter. I am the principal clerk of the printer of Long Beach PressTelegram, a newspaper of general circulation, printed and published in the
City of Long Beach*, County of Los
Angeles, and which newspaper has
been adjudged a newspaper of general
circulation by the Superior Court of the
County of Los Angeles, State of
California, under the date of March 21,
1934, Case Number 370512. The
notice, of which the annexed is a
printed copy, has been published in
each regular and entire issue of said
newspaper and not in any supplement
thereof on the following dates, to wit:
06/28/2024
I certify (or declare) under the penalty
of perjury that the foregoing is true and
correct.

Executed at Long Beach, California,
this 28th day of June, 2024.
______________________________
Signature
*Long Beach Press-Telegram, a newspaper of general circulation, is delivered to and available in but not limited to the following cities: Long Beach, Lakewood, Bellflower, Cerritos, Downey, Norwalk, Artesia, Paramount, Wilmington, Compton, South Gate, Los Alamitos, Seal Beach, Cypress, La Palma, Lynwood, San Pedro, Hawaiian Gardens, and Signal Hill.

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Public Hearing - Repeal Ordinance and DA - Page 2 of 2
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Official website of the State of California Contact us
CA.gov home
Conditions of Use
Privacy Policy
Department of
Cannabis Control

C A L I F O R N I A
License Search
3 Customize Results 3 Filters (0)
Total Results Found: 0
New Search
File a complaint about a cannabis business
starcraft U Search
Export
License
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Business
Name County
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Last update of license data: 07/09/2024
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“Serving The People” "Sirviendo A La Comunidad"
Staff Report
07/16/2024 Page 1 of 14

STAFF REPORT
Date: July 16, 2024
To: Honorable Mayor and City Council Members
From: Alfonso Noyola, City Manager
By: Juan Arauz, AICP, Community Development Director
Prepared by: Jessica Guillen, Assistant Planner
Reviewed by: Cecilia Madrigal-Gonzalez, Senior Planner and Paloma McEvoy, Assistant City Attorney
Subject: Introduction and Adoption by First Reading of Ordinance No. 755 Repealing Ordinance No. 700, Terminating Development Agreement No. 18-015C between the City of Cudahy and Staple Room, LLC.

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

1. Open the public hearing and receive public comment and testimony; and

2. Make a determination that Staple Room, LLC (“Operator”) is not in compliance with the terms and conditions of Development Agreement (“DA”) No. 18-015C with the City and find that the Operator is in default of contractual obligations set forth in the DA; and

3. Introduce and adopt by first reading Ordinance No. 755 (Attachment A) repealing Ordinance No. 700 terminating DA No. 18-015C between the City and Staple Room, LLC; and

4. Schedule the second reading of Ordinance No. 755 at the next regularly scheduled meeting on August 20, 2024; and

5. Determine that these actions are exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15321 (Enforcement Actions by Regulatory Agencies).

Item Number
13F

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07/16/2024 Page 2 of 14

SUMMARY
Pursuant to the terms and conditions of DA No. 18-015C and Commercial Cannabis Permit (“CCP”) No. 18-0015, 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 thirdparty hearing officer (“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. 700 and DA No. 18-015C through the adoption of Planning Commission Resolution No. 2024-16. Therefore, City staff recommends the City Council adopt Ordinance No. 755 repealing Ordinance No. 700 terminating DA No. 18-015C.

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 November 19, 2018, the Planning Commission conducted a properly noticed public hearing to consider a commercial cannabis permit application for cannabis manufacturing at 4931 Cecelia Street (“Subject Site”) shown in Figure 1, below. On a 2-1 vote, the Planning Commission continued the item to a date uncertain.

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Staff Report
07/16/2024 Page 3 of 14
Figure 1 – Aerial of the Subject Site.

1. On December 4, 2018, the City Council adopted Resolution No. 18-59 to hear an application for a development agreement by Operator. The City Council also instructed the Planning Commission to make a final decision and recommend to the City Council regarding the CCP no later than December 17, 2018. The minutes are provided in Attachment C.

2. On December 4, 2018, the City Council introduced and conducted the first reading to adopt Ordinance No. 700 (Attachment D) approving DA No. 18-015C (Attachment F, pp. 83-130) inclusive of Exhibits A-F (Attachment F, pp. 132-161) between Operator and the City authorizing commercial cannabis manufacturing and distribution activities at the Subject Site as illustrated in Figures 2 and 3, below. The City Council minutes are provided in Attachment C. The CCP and the DA require the Operator to make timely payments for Community Benefit Fees; Cost Recovery Fees; and Non-Operating Fees.1

3. On December 18, 2018, the City Council adopted Ordinance No. 700 by second reading approving Development Agreement No. 18-015C and authorizing the Mayor to execute the DA on behalf of the City. The minutes are provided in Attachment M.

4. On October 2, 2019, the City provided the Operator with a Notice of Delinquency (Attachment F, p. 163) due to failure to pay the various fees due under CCP No. 18-0015 and DA No. 18-015C, prior to placing the Operator in default status due to payment noncompliance, inclusive of the non-payment of Community Benefit Fees, Cost Recovery Fees, and Non-Operating Fees in the amount of $57,442.80. The Operator was given no later than October 17, 2019, to cure the amount, however, the delinquency was not timely cured.
1 As used herein, the term Non-Operating Fees and Operating Fees are used interchangeably.

Site
4931 Cecilia Street

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07/16/2024 Page 4 of 14

5. On May 4, 2021, the City provided the Operator with a Notice of Default (Attachment F, pp. 165-166) due to non-compliance with the payment of fees (Community Benefit Fees, Cost Recovery Fees, and Non-Operating Fees) and associated penalties in the amount of $212,684.61. The Operator was given no later than 30 days to cure the default, however, the default was not timely cured.

6. From May 2021 through August 2021, the City’s Building & Safety Division received the following plan check submittals and/or issued the building permits for the Site:
• On May 19, 2021, the Building and Safety Division issued Building Permit No. 8220 (Attachment F, p. 168) for the installation of a perimeter fence. • Building Permit plan check #514 was received on July 12, 2021, for interior tenant improvements at the Site as demonstrated in Figures 4 and 5, below. (Attachment F, pp. 172-207) The plan check submittal received approval on February 8, 2022.

However, the plans submitted by the Operator do not conform to the original site plan and floor plan approved by the City in the Operator’s CCP and DA as shown in Figures 2 and 3 above. Additionally, as shown in Figures 4 and 5 below, the non-conforming plans submitted included 7,419 sf of cultivation space inclusive of areas for nurseries, flowering plants, trimming and drying. However, the submitted plans were outside of the scope of the Operator’s approvals because the Operator was authorized to conduct cannabis manufacturing and distribution only. City staff would like to clarify that the Administrative Record did not contain the correct attachment for the building permit plans referenced in Administrative Record, Attachment F, pp. 171-207. As such, City staff has included the correct attachment as part of this report included as Attachment K. The above statements made during the Review Hearing remain true and correct.

Figure 4 – Non-Conforming Floor Plan

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07/16/2024 Page 5 of 14
Figure 5 - Non-Conforming Site Plan
• On August 3, 2021, the Building and Safety Division issued Electrical Permit No. 8308 for the installation of an electrical panel and circuit. • On August 9, 2021, the Building and Safety Division issued Plumbing Permit No. 8318 for the installation of trench drains, floor drains, plumbing pipes.

7. On October 19, 2021, the City provided the Operator with a Final Demand Letter (Attachment F, pp. 209-210) due to payment non-compliance informing the Operator that Community Benefit Fees, Cost Recovery Fees, Non-Operating Fees and any applicable penalties had accumulated to $231,046.35. This letter included a list of prior efforts by the City to achieve compliance. 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. Pursuant to City Council direction, on December 7, 2022, the City Manager offered a Deferment and Payment Program (Attachment F, pp. 212-213) to assist cannabis operators with accumulated Community Benefit, 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 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 and participate in the Deferment and Payment Program (Attachment F, pp. 212-213). The City received interest from the Operator and due to the good faith negotiations between both parties, the City extended

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07/16/2024 Page 6 of 14
the opportunity for the Operator to participate.

9. On February 1, 2023, the City presented the Operator with a Letter Agreement agreeing to the Deferment and Payment Program to forbear the outstanding payments due (“Letter Agreement”) pursuant to the terms of the Deferment and Payment Program described above (Attachment F, pp. 215-222). 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 Letter Agreement stated that the Operator had an outstanding balance of $402,707.00 in past due fees. By signing the Letter Agreement, the Operator also 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, p. 217).

Pursuant to the terms of the Letter Agreement, the Operator agreed to maintain current payments for Community Benefit Fees and Cost Recovery Fees as they become due under the Development Agreement, effective March 1, 2023, and to commence a 12-month payment schedule for past-due Community Benefit Fees and Cost Recovery Fees beginning April 1, 2023. As stated above, all past due and accruing Non-Operating Fees were deferred until six months after the Operator was first issued a Temporary Certificate of Occupancy.

10. The Operator executed the Letter Agreement on February 2, 2024 (Attachment F, pp. 215- 222).

11. Between April and June 2023, the City provided the Operator with three Notices of Delinquency (Attachment F, pp. 224-238) under the Letter Agreement 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. (See Attachment F, pp. 234-235) Accordingly, the total of all past due amounts at the time the Letter Agreement was terminated and an amount of $446,339.79 was due and owing. (Attachment E)

12. 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 Final Demand Letter provided 30 days for the Operator to comply, so that no further action would be necessary. The Operator did not respond in a timely manner and has failed to make any attempt to cure the defaults.

13. On August 9, 2023, the City issued an Escrow Account Letter (Attachment F, pp. 244-245) 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

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07/16/2024 Page 7 of 14
not opened an escrow account nor made any payments into the account.

14. Under Article 5(d) of DA No. 18-015C, the City Manager, his/her designee(s), and the Sheriff’s Department designee have the right to enter the Site from time to time unannounced for the purpose of making reasonable inspections to observe and enforce compliance with the Development Agreement and state and local laws and regulations without the requirement of a search warrant, subpoena, or court order. Condition of Approval 23 also permits the City Building Official, City Cannabis Enforcement staff, and Planning Department staff the authority to conduct periodic site inspections to ensure compliance with CCP conditions (Attachment F, p. 72).

15. On October 10, 2023, the City staff from the Building and Safety Division conducted an inspection of the Site and posted a stop work notice due to unpermitted construction (Attachment F, pp. 247-249). During the inspection, the following building and fire code violations were observed: (1) installation of plumbing pipes; (2) installation of interior non-structural walls; (3) installation of metal framing; (4) installation of fire sprinkler lines; and (5) completion of restroom remodel. All violations observed were constructed without obtaining the proper permits and/or inspections. The Operator has failed to take necessary actions to correct the stop work notice. To correct the actions, the Operator is required to obtain requisite approvals and permits from the City Planning Division, Building & Safety Division, and the County Fire Department. As of the writing of this report, the Operator has not obtained requisite approvals and permits from the City Planning Division, Building & Safety Division, or the County Fire Department.

16. On October 24, 2023, the City issued a letter (Attachment F, pp. 251-252) 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 the Operator a credit in the amount of $14,950.50, which was applied to the Operator’s outstanding balance of $467,345.76 as of October 1, 2023.

17. On November 27, 2023, the City issued the Operator a Notice of Review Hearing (Attachment F, pp. 254-255) with the hearing date, time, and place. The notice informed the Operator that the Review Hearing was being held pursuant to Article 19 of DA No. 18- 014C, requesting the Operator to timely submit evidence of compliance and to submit payment for an estimated cost2 of the Review Hearing (Attachment F, pp. 257-258). The City did not receive any response, reply, documents evidencing compliance, or payment for the cost of the Review Hearing.

18. As of December 18, 2023, the website for the California Department of Cannabis Control shows that the Operator’s provisional manufacturing license had been withdrawn and was no longer active. As of the writing of this report, the Department of Cannabis Control shows that the license has expired. (Attachment L)
2 Pursuant to Article 19(a) of the DA, Operators must submit an annual review and administration fee deposit based on the City’s estimated cost, upon the City’s reasonable notice in advance of the review. The City provided over 30 days’ notice of the estimated cost.

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07/16/2024 Page 8 of 14

19. On December 29, 2023, the City sent a follow-up to the Notice of Review (“Follow Up Notice”) to the Operator confirming that the City 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.

20. On January 8, 2024, the duly appointed third-party Hearing Officer, Steve Napolitano, conducted a Review Hearing as authorized under CMC Section 5.20.080(7) and Section 19 of the DA No. 18-014C 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.

21. On February 15, 2024, the Hearing Officer issued a written decision and order (Attachment G) 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. 700 terminating DA No. 18-015C and revoke the related interest in CCP No. 18-0015.

22. As of the writing of this report, Operator has continuously failed to make payments and as of June 13, 2024, owes $531,431.44 (Attachment I).

23. On May 14, 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. 700 and terminate DA No. 18-015C. 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. 2024-16 (Attachment N), recommending the City Council repeal Ordinance No. 700 and terminate related DA No. 18-015C.

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 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

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Staff Report
07/16/2024 Page 9 of 14
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 and only subject to appeal pursuant to Civil Code Section 1094.5.

As it relates to the CCP, pursuant to 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 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 “Hearing Officer” to conduct a review of the Operator’s compliance with CCP No. 18-0015 and DA No. 18-015C. 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 G, the Hearing Officer issued a written decision making several findings of fact and conclusions and determined that Staple Room, LLC breached the terms and conditions pursuant to DA No. 18- 015C and CCP No. 18-0015, 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. 24; and timely payment for non-operating fees pursuant to Condition of Approval No. 8 and 16 (Attachment F, pp. 54-74). The Operator’s obligation to make timely payments of the Community Benefit Fees, Cost Recovery Fees and Operating Fees under the DA is also restated in CCP Conditions of Approval 1(a) and 1(b), which require the Operator to pay all City-issued invoices within 30 days of receipt; timely payment for Operating Fees pursuant to Condition of Approval No. 8 for manufacturing activities; timely payment for Operating Fees pursuant to Condition of Approval No. 16 for distribution activities; and payment of all fees due under DA pursuant to the DA terms under Condition of Approval No. 24. (Attachment F, pp. 63). Pursuant to the terms of the DA, Operators that are more than 30 days past due with 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 Operator’s duty to comply with the CCP conditions of approval are incorporated into the DA No. 18-015C under Section 18.3 Conditions 1(a) and 1(b) require the Operator to pay all City-issued invoices within 30 days of receipt. Conditions 8, 16, and 24 all require 3 Section 18 of DA No. 18-015C states “Owner shall comply with all conditions of approval of the Regulatory Permit approved by City Council.” The Regulatory Permit is CCP No. 18-0015.

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timely payment of fees due under the Development Agreement. The City has regularly sent monthly invoices for Community Benefit Fees, Cost Recovery Fees, Non-Operating Fees, and applicable late penalties since 2019 (Attachment F, pp. 272-380).

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 a single timely payment in the three months that followed the execution of the Letter Agreement between March to May 2023. As of December 1, 2023, the City reported that the Operator was past due in the amount of $482,639.65 and past-due payments continue to accumulate, including late payment penalties. The Operator continues to fail to make payments and as of June 13, 2024, $531,431.44 is due and owing.

Table 1. Summary of Past and Current Amounts Due as of June 13, 2024 Fee Type Payment Amount Due
Community Benefit Program $365,335.16
Cost Recovery Fees $101,516.66
Non-Operating Fees $48,754.53
Penalties (Late Payments) $15,825.09
TOTAL $531,431.44
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 payment conditions of their 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

5.20.080(6)(a)” (Attachment G). The Hearing Officer’s determination was ratified by the Planning Commission through the adoption of Resolution No. 2024-16 which recommends that the City Council find that Operator is in default of the terms set forth in DA No. 18-015C and repeal Ordinance No. 700 and terminate the related DA.

2. Violation #2: Failure to Implement the Project Under Prescribed Time Limits under CCP No. 18-0015. The Operator’s duty to comply with the CCP’s conditions of approval are incorporated into DA No. 18-014C under Section 18. CCP Condition of Approval No. 30(A)(i) sets a 90-day time frame in which the Operator needed to obtain a Zoning Clearance.

Condition of Approval No. 30(A)(ii) sets a 90-day time frame in which the Operator must complete construction of Phase I of the Project. CCP Condition of Approval 30(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. Failure to obtain a Zoning Clearance within 90 days of the effective date of the CCP, renders the CCP to “expire and become null and void” (Attachment F, p. 73). The

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City Manager’s ability to grant an extension of time for a Zoning Clearance if the Operator has made diligent efforts to implement the project is stated in Conditions of Approval 30(A)(i), (ii), and (iii). The Operator was notified of the failure to implement the project within the prescribed timelines and provided an opportunity to cure pursuant to the City’s Final Demand Letter (Attachment E).

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 demonstrated substantial progress to 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.

Based on the evidence submitted by the City, the Hearing Officer found that “[t]o the extent the [Operator] has obtained building permits and constructed any improvements, these permits were obtained in violation of Condition of Approval No. 28 under CCP No. 18-0015. The [Operator] has not obtained a Zoning Clearance pursuant to Chapter 20.84 of the CMC, nor has the [Operator] applied for all the required building permits to complete tenant improvements or otherwise obtained a certificate of occupancy. In order for the [Operator] to complete tenant improvements or otherwise obtain a certificate of occupancy the [Operator] is required to remove all improvements made illegally as outlined in [Attachment F, pp. 247-249]. Based on the evidence above, the City has shown that the [Operator] breached its conditions of approval for CCP No. 18-0015 by failing to implement the Project within the time limits set forth in Conditions of Approval No. 30” (Attachment G, pp. 7-8). As previously stated, the CCP conditions of approval are incorporated into the DA through Section 18. The Hearing Officer’s determination was ratified by the Planning Commission through the adoption of Resolution No. 2024-16 which recommends that the City Council find that Operator is in default of the terms set forth in DA No. 18-015C and repeal Ordinance No. 700 and terminate the related DA.

3. Violation #3: Breach of Condition of Approval No. 28 (Construction Activities) under CCP No. 18-0015. The Operator’s duty to comply with the CCP’s conditions of approval are incorporated into DA No. 18-014C under Section 18. CCP No. 18-0015 Condition of Approval No. 28 states that “prior to any construction, the [Operator] shall obtain a Zoning Clearance for construction from the Planning Division and a Building Permit from the Building and Safety Division.” The City’s Planning Division and Building and Safety Division have no record of any requisite applications, approvals, or permits obtained by the Operator. Additionally, the City contacted the Los Angeles Fire Department, Special Occupancy Inspection Unit and no building permits record were found for the fire sprinklers (Attachment F, pp. 382-383). In accordance with the DA, the Owner shall not operate any facility, and no permit, license, or other approval issued by City shall be valid unless and until the Los Angeles County Fire Department has approved Operator’ssite plan, floor plan, safety plan, and any other plans that require its approval.

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Based on the evidence submitted by the City, the Hearing Officer found that “[t]he [Operator] failed to obtain any requisite approvals, inclusive of a Zoning Clearance, and permits from the City Planning Division and Building & Safety Division prior to the installation of interior nonstructural walls, metal framing, fire sprinkler lines, and a restroom remodel in the facility. Therefore, the [Operator] breached Conditions of Approval No. 28.” (Attachment G. pp. 8-9). As previously stated, the CCP conditions of approval are incorporated into the DA through Section 18. The Hearing Officer’s determination was ratified by the Planning Commission through the adoption of Resolution No. 2024-16 which recommends that the City Council find that Operator is in default of the terms set forth in DA No. 18-015C and repeal Ordinance No. 700 and terminate the related DA.

4. Violation #4: Failure to Obtain State-Issued Cannabis Licenses for Cultivation and Manufacturing. Recital I of the DA states the Owner has applied for two (2) cannabis licenses for 1) manufacturing; and 2) distribution activities. Section 21 of the DA states that the facility shall not operate unless the Owner is the holder of a State-issued Cannabis license for the type of commercial cannabis facility or business operation that is the subject of the DA. The Operator breached the DA because the Owner does not hold a state-issued Cannabis license for the facility. A search of the term “Staple Room” on the DCC website shows that the Operator’s cannabis manufacturer license issued by the state has been withdrawn (Attachment F, pp. 257-258).

Based on the unrefuted evidence submitted by the City, the Hearing Officer found that “the [Operator] has failed to maintain all its necessary licenses to operate under the DA, which constitutes a breach of Article 21 of the DA” (Attachment G. p. 9). The Hearing Officer’s determination was ratified by the Planning Commission through the adoption of Resolution No. 2024-16 which recommends that the City Council find that Operator is in default of the terms set forth in DA No. 18-015C and repeal Ordinance No. 700 and terminate the related DA.

5. Violation #5: Breach of Conditions of Approval No. 27 (Commercial Cannabis Permit Modifications) under CCP No. 18-0015. CCP No. 18-0015 Condition of Approval No. 27 states “prior to undertaking any operational or construction-related activity which is not expressly described in the CCP conditions, the [Operator] shall first contact the City Manager, or his designee, to determine if the proposed activity requires a modification of the CCP. The City Manager may, at his sole discretion, require the Operator to file a written and/or mapped description of the proposed activity in order to determine if a permit modification is required.”
On July 12, 2021, the Operator submitted building permit plans for interior tenant improvements at the Subject Site without first obtaining a Zoning Clearance from the Planning Division and payment of the required fees. The plan check submittal received approval on February 8, 2022. However, the plans submitted by the Operator do not conform to the original Site Plan and Floor Plan approved by the City in the Operator’s CCP and DA. Additionally, the non-conforming plans submitted include cultivation rooms which

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is a cannabis activity the Operator was not approved for. The Operator was authorized by the City for commercial cannabis manufacturing and distribution only. The Operator never filed a written or mapped description of the design changes made to the facility plans nor made the City Manager aware that such changes would be made. The City Manager has no record of a request or approval of any changes to the facility that do not conform to the original site plan and floor plan approved by the City in the Operator’s CCP and DA.

Based on the evidence submitted by the City, the Hearing Officer found that “the [Operator] breached its conditions of approval for CCP NO. 18-0015 by failing to receive City Manager approval for the design changes made to the facility set forth in Condition of Approval No. 27 (Attachment G, p. 9-10). As previously stated, the CCP conditions of approval are incorporated into the DA through Section 18. The Hearing Officer’s determination was ratified by the Planning Commission through the adoption of Resolution No. 2024-16 which recommends that the City Council find that Operator is in default of the terms set forth in DA No. 18-015C and repeal Ordinance No. 700 and terminate the related DA.

City staff would like to clarify that the Administrative Record did not contain the correct attachment for the building permit plans referenced in Administrative Record, Attachment F, pp. 171-207. As such, City staff has included the correct attachment as part of this report included as Attachment O. The above statements made during the Review Hearing remain true and correct.

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 newspaper (Attachment J). 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. 755 to repeal Ordinance No. 700 and terminate DA No. 18-015C, it would be an enforcement action. Therefore, the action(s) are categorically exempt from the provisions of CEQA.

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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. 700 and DA No. 18-015C through the adoption of Planning Commission Resolution No. 2024-16. 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. 755 repealing Ordinance No. 700 and terminating DA No. 18-015C.

ATTACHMENT(S)
A. Proposed Ordinance No. 755
B. Ordinance No. 673
C. City Council Minutes – December 4, 2018
D. Ordinance No. 700
E. Final Demand Letter dated June 23, 2023
F. Administrative Record for Staple Room, LLC
G. Decision and Order for Staple Room, LLC
H. Review Hearing Waiver dated December 29, 2023
I. Staple Room, LLC Invoice dated June 13, 2024
J. Newspaper Publication
K. Building Permit Plan Check #515 Plans
L. State Cannabis Unified Search Results for Staple Room, LLC M. City Council Minutes - December 18, 2018
N. Planning Commission Resolution No. 2024-16

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ORDINANCE NO. 755

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
CUDAHY REPEALING ORDINANCE NO. 700 AND

TERMINATING RELATED DEVELOPMENT AGREEMENT
NO. 18-015C BETWEEN STAPLE ROOM, 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 agreements 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 November 19, 2018, the City Planning Commission (“Planning Commission”) conducted a properly noticed public hearing to consider an application by Staple Room, LLC (“Operator”) for approval of a Commercial Cannabis Permit to allow non-store front commercial cannabis manufacturing activities at 4931 Cecilia Street (“Site”); and
WHEREAS, at this hearing, the Planning Commission heard and considered verbal and written testimony and evidence, and recommended on a 2-1 vote to continue the item to a date uncertain; and
WHEREAS, on November 23, 2018, the City received a formal written correspondence in the nature of an appeal from the Operator requesting that the City Council hold an immediate hearing on their applications for a Commercial Cannabis Permit ATTACHMENT A Page 2917 of 3559
Ordinance No. 755

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and a Development Agreement; and
WHEREAS, on December 4, 2018, the City Council conducted a properly noticed public hearing to consider the issuance of the Commercial Cannabis Permit (“CCP”) No. 18-0015 and Development Agreement (“DA”) No. 18-015C at which the City Council heard and considered both written and oral testimony and evidence and subsequently approved, and adopted Resolution No. 18-65 for CCP No. 18-0015; and WHEREAS, at the same hearing the City Council considered and approved CCP No. 18-0015, it also conducted the first reading of Ordinance No. 700 which authorized the execution of DA No. 18-015C between the Operator and the City; and WHEREAS, on December 18, 2018, the City Council adopted, on second reading, Ordinance No. 700 approving DA No. 18-015C and authorizing the Mayor to execute the DA on behalf of the City; and
WHEREAS, the effective date of the Development Agreement is January 18, 2018 (“Effective Date”); and
WHEREAS, upon the Effective Date of Ordinance No. 700, the Operator was granted the permission to conduct commercial cannabis manufacturing and distribution 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 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 November 27, 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- 015C, 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 29, 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 January 8, 2024, Steve Napolitano, Esq., a duly appointed thirdparty hearing officer for the City (“Hearing Officer”), conducted a properly noticed Review Hearing; and
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Ordinance No. 755

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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 evidence compiled 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 February 15, 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 Operator’s noncompliance with the DA and CCP based on a preponderance of the evidence; and WHEREAS, the CCP’s conditions of approval are incorporated into the DA through Article 18 of DA No. 18-015C; and
WHEREAS, the Hearing Officer determined that the Operator breached the DA and CCP in five material respects; 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 $482,639.65, 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 June 13, 2024 is $531,431.44 and WHEREAS, the Operator had breached its obligation to implement the project within the prescribed time periods contained within CCP No. 18-0015 Condition of Approval No. 30 (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 Operator breached CCP No. 18-0015 Condition of Approval No. 28 (Construction Activities) for failing to obtain any requisite approvals from the City Planning Division and Building & Safety Division prior to conducting construction activities; and
WHEREAS, the Operator breached CCP No. 18-0015 Condition of Approval No. 27 (Commercial Cannabis Permit Modification) due to the Operator’s failure to receive City Manager approval for the design changes made to the facility; and WHEREAS, the Operator failed to comply due to the Operator’s failure to maintain all its necessary licenses to operate in the state of California, in violation of Article 21 of the DA; and
WHEREAS, the Hearing Officer has recommended that the City Council adopt an ordinance repealing Ordinance No. 700 terminating DA18-015C and revoke the related ATTACHMENT A Page 2919 of 3559
Ordinance No. 755

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interest in CCP No. 18-0015; and
WHEREAS, pursuant to state law and the CMC, the Planning Commission duly noticed, agendized, and conducted a public hearing on this matter on May 14, 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. 700; and
WHEREAS, after the close of such public hearing, the Planning Commission adopted Resolution No. 2024-16, attached hereto and incorporated by reference as Exhibit “C”, recommending the City Council repeal Ordinance No. 700 and terminate related DA No. 18-015C; 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 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. 700; and
WHEREAS, after the close of such public hearing, the City Council introduced and adopted by first reading Ordinance No. 755, repealing Ordinance No. 700 and terminating related DA No. 18-015C.

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 “B”) issued on February 15, 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 Staple Room, LLC is not in compliance with the terms and conditions of the Development Agreement No. 18-015C and finds that Staple Room, LLC is in default of its contractual obligations set forth in said Development Agreement and has breached its Conditions of Approval for CCP No. 18-0015 by a showing of the preponderance of the evidence.

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Ordinance No. 755

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SECTION 3. TERMINATION OF DEVELOPMENT AGREEMENT
Pursuant to Article 19(d) of the Development Agreement, the City Council may terminate Development Agreement No.18-015C 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. 700 terminating DA No. 18-015C 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.

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. 700 and termination of DA No. 18-015C 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.

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Ordinance No. 755

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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
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Ordinance No. 755

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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. 755 was introduced for a first reading on the _____ day of ____ 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
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Ordinance No. 755

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EXHIBIT “A”
EVIDENCE SUBMITTED BY THE CITY (“ADMINISTRATIVE RECORD”) ATTACHMENT A Page 2924 of 3559
Ordinance No. 755

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EXHIBIT “B”

HEARING OFFICER DECISION AND ORDER
ATTACHMENT A Page 2925 of 3559
Ordinance No. 755

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EXHIBIT “C”

PLANNING COMMISSION RESOLUTION
ATTACHMENT A Page 2926 of 3559
ORDINANCE NO. 673

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
CUDAHY AMENDING TITLE 5 (BUSINESS LICENSES AND
REGULATIONS) AND TITLE 20 (ZONING) OF THE

CUDAHY MUNICIPAL CODE TO PROHIBIT CANNABIS

RETAILERS/DISPENSARIES CITYWIDE AND TO

ESTABLISH REGULATIONS AND A DISCRETIONARY

REVIEW PROCESS FOR THE ALLOWANCE OF

MEDICINAL-ONLY COMMERCIAL CANNABIS ACTIVITIES
(CULTIVATION, DISTRIBUTION, MANUFACTURING,

DELIVERIES, MICROBUSINESS, AND LABORATORY

TESTING) IN A SPECIFIED OVERLAY ZONE THROUGH A

DEVELOPMENT AGREEMENT
WHEREAS, in 1996, the California Legislature approved Proposition 215, also known as the Compassionate Use Act (the "CUA"), which was codified under Health and Safety Code Section 11262.5 et sec. and was intended to enable persons in need of medical marijuana for specified medical purposes, such as cancer, anorexia, AIDS, chronic pain, glaucoma and arthritis, to obtain and use marijuana under limited circumstances and where recommended by a physician. The CUA provides that "nothing in this section shall be construed or supersede legislation prohibiting persons from engaging in conduct that endangers others, or to condone the diversion of marijuana for non-medical purposes.";
WHEREAS, in 2004, the California Legislature enacted the Medical Marijuana Program Act (Health & Saf. Code, § 11362.7 et seq.)(the "MMP"), which clarified the scope of the CUA, created a state-approved voluntary medical marijuana identification card program, and authorized cities to adopt and enforce rules and regulations consistent with the MMP. Assembly Bill 2650 (2010) and Assembly Bill 1300 (2011) amended the MMP to expressly recognize the authority of counties and cities to "[a]dopt local ordinances that regulate the location, operation, or establishment of a medical marijuana cooperative or collective" and to civilly and criminally enforce such ordinances;
WHEREAS, the Federal Controlled Substances Act (21 U.S. C., § 801 et seq.) makes it unlawful under federal law for any person to cultivate, manufacture, distribute or dispense, or possess with intent to manufacture, distribute, or dispense marijuana.

Despite such federal prohibition, on August 29, 2013, the United States Department of Justice issued a memorandum (the "Cole Memo") stating that, notwithstanding the federal classification of marijuana as a schedule 1 controlled substance, jurisdictions that have legalized marijuana in some form are less likely to be subject to federal enforcement under the Controlled Substances Act if they have implemented strong and effective regulatory and enforcement systems to follow eight guiding principles: (1) preventing the distribution of marijuana to minors; (2) preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels; (3) preventing the

Page 1 ends

ATTACHMENT B Page 2927 of 3559
diversion of marijuana from states where it is legal under state law in some form to other states; (4) preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity; (5) preventing violence and the use of firearms in the cultivation and distribution of marijuana; (6) preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; (7) preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and (8) preventing marijuana possession or use on federal property;
WHEREAS, in September 2015, the California State Legislature enacted, and Governor Brown signed into law three bills - Assembly Bill 243, Assembly Bill 266, and Senate Bill 643 - which together comprise the Medical Marijuana Regulation and Safety Act (the "MMRSA"). The MMRSA created a comprehensive dual state licensing system for the cultivation, manufacture, retail, sale, transport, distribution, delivery, and testing of medical cannabis;
WHEREAS, on August 22, 2016, the City Council of the City of Cudahy (the "City Council" of the "City") adopted Interim Urgency Ordinance No. 656U to establish a temporary moratorium on medical "commercial cannabis activities," as defined under the MMRSA, for a period of 45 days and extended such moratorium for an additional period of 22 months and 15 days under Interim Urgency Ordinance No. 661, on September 26, 2016;
WHEREAS, the MMRSA was renamed the Medical Cannabis Regulation and Safety Act (the "MCRSA") under Senate Bill 837 in June 2016, which also made substantive changes to the applicable state laws, which affect the various state agencies involved in regulating cannabis businesses as well as potential licensees; WHEREAS, on November 8, 2016, the Control, Regulate, and Tax Adult Use of Marijuana Act ("AUMA") was approved California voters as Proposition 64 and became effective on November 9, 2016, pursuant to the California Constitution (Cal. Const., art.

II, § 10(a).). Proposition 64 legalized the nonmedical use of cannabis by persons 21 years of age and over, and the personal cultivation of up to six (6) cannabis plants. On November 14, 2016, the City Council adopted Urgency Ordinance No. 663 to prohibit outdoor personal marijuana cultivation and establish regulations and a permitting process for indoor personal marijuana cultivation;
WHEREAS, AUMA also created a state regulatory and licensing system j governing the commercial cultivation, testing, and distribution of nonmedical cannabis, and the manufacturing of nonmedical cannabis products. On January 9, 2017, Interim Urgency Ordinance No. 666 was adopted by the City Council to establish a temporary moratorium on nonmedical "commercial cannabis activities" for a period of 45 days and extended such moratorium for an additional period of 22 months and 15 days under Interim Urgency Ordinance No. 667, on February 27, 2017; Page2
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WHEREAS, on June 27, 2017, Governor Brown signed the Legislature-approved Senate Bill 94. SB 94 combined elements of the MCRSA and AUMA to establish a streamlined singular regulatory and licensing structure for both medical and nonmedical cannabis activities given that there were discrepancies between the MCRSA and AUMA. The new consolidated provisions under SB 94 is now known as the Medicinal and Adult-Use Cannabis Regulation and Safety Act ("MAUCRSA") to be governed by the California Bureau of Cannabis Control. MAUCRSA refers to medical cannabis as "medicinal cannabis" and nonmedical/recreational cannabis as "adult-use cannabis"; WHEREAS, on June 27, 2017, the as part of an Economic Development Ad Hoc Committee presentation on revenue-generating opportunities, commercial cannabis regulations and strategies were offered to and discussed by the City Council; WHEREAS, the City seeks to establish an overlay zone in the City in which certain medicinal-only commercial cannabis activities can be conducted in accordance with MAUCRSA and the City's police power under Section 7 of Article XI of the California Constitution;
WHEREAS, it is the purpose and intent of the City to regulate medicinal cannabis in a manner that is consistent with the Cole Memo and promotes the health, safety, and general welfare of the residents and businesses within the City, while limiting any negative impacts;
WHEREAS, the City intends to be on the forefront of groundbreaking research, science, innovation, and development of treatment for symptoms and cures in the field of medicinal cannabis, as scientific research, studies, and data have established that medicinal cannabis can help patients with a vast array of medical conditions; WHEREAS, the City desires to reduce the illegal market for cannabis while minimizing the chances of social harm and creating jobs and revenue for the City; and WHEREAS, nothing in this Ordinance shall be construed to allow persons to engage in conduct that violates the law, endangers others, causes a public nuisance, allows the illegal use or diversion of cannabis, or allows any activity relating to cannabis that is otherwise illegal under California state law, as amended.

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

SECTION 1. The above recitals are true and correct and are incorporated herein.

SECTION 2. Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended by the addition of a new Chapter 20.120 (Commercial Cannabis Overlay Zone), which shall read as follows:

Chapter 20.120 - Commercial Cannabis Overlay Zone.

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20.120.010 Definitions
For purposes of this Chapter 20.120, the following definitions shall apply:
"Commercial cannabis activities" mean the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery or sale of cannabis and cannabis products. ) "Cannabis" means all parts of the Cannabis sativa Linnaeus, Cannabis indica, or j Cannabis ruderalis, whether growing or not; the seeds thereof; the resin, whether crude or purified, extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. "Cannabis" also means the separated resin, whether crude or purified, obtained from cannabis. "Cannabis" also means marijuana as defined by Section 11018 of the California Health and Safety Code as enacted by Chapter 14017 of the Statutes of 1972. Cannabis does not include the mature stalks of the plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of the plant which is incapable of germination. For the purpose of this Chapter, cannabis does not mean industrial hemp as that term is defined by Section 81000 of the California Food and Agricultural Code or Section 11018.5 of the California Health and Safety Code.
"Cannabis product" means cannabis that has undergone a process whereby the plant material has been transformed into a concentrate, or other cannabis derivative, including, but not limited to, concentrated cannabis, or an edible or topical product containing cannabis or concentrated cannabis and other ingredients. "Day care center" means any child day care facility other than a family day care home, and includes infant centers, preschools, extended day care facilities, and schoolage child care centers.
"Overlay Zone" means the commercial cannabis overlay zone, whose area and boundaries are attached to City Council Ordinance No. 673 as Exhibit "A" "MAUCRSA" means the Medicinal and Adult-Use Cannabis Regulation and Safety Act, as may hereinafter be amended.
"Youth center" means any public or private facility that is primarily used to host recreational or social activities for minors, including, but not limited to, private youth membership organizations or clubs, social service teenage club facilities, video arcades, or similar amusement park facilities.

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20.120.020 Prohibitions.

Adult-use commercial cannabis activities and medicinal commercial cannabis activities, as both are described in state law, including, but not limited to MAUCRSA, are hereby prohibited unless otherwise allowed in this Chapter.

20.120.030 Overlay zone.

Medicinal commercial cannabis activities, except retail dispensaries that are open to the public for point-of-sale purchases, shall be allowed within the Overlay Zone pursuant to a development agreement adopted in accordance with the Development Agreement Law (Gov. Code, § 65864 et seq.) and Cudahy Municipal Code Chapter

20.28 (Development Agreements). No such activities shall be permitted without a development agreement within or outside of the boundaries of the Overlay Zone.

The City may approve or deny such a development agreement in its sole and absolute discretion.

20.120.040 Particular restrictions for Atlantic Avenue.

Section 20.120.030 notwithstanding, no cannabis-related business shall be located within the Overlay Zone and on Atlantic Avenue with a storefront facing Atlantic Boulevard unless such business employs and effectuates a business model with a primary entertainment purpose.

20.120.050 Indoor Horticulture.

Indoor horticulture, excluding cannabis horticulture shall be permitted by-right within the Overlay Zone.

20.120.060 Prohibition on new schools, day cares, and youth centers in overlay zone.

The establishment of public or private schools providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center is prohibited within the Overlay Zone, or within 600 feet of the boundaries of the Overlay Zone, is hereby prohibited, unless otherwise mandated under state or federal law. An existing public or private school providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center located within the Overlay Zone, or within 600 feet of the boundaries of the Overlay Zone shall be considered legal nonconforming, in accordance with Chapter 20.24 (Legal Nonconforming) of Title 20 (Zoning) of the Cudahy Municipal Code.

20.120.070 Temporary permits for local events - rights reserved.

The City reserves the right to issue temporary permits for onsite cannabis sales to, and consumption by, persons 21 years of age or older at a county fair, district agricultural association event, or other similar event authorized under state law, which is located within the Overlay Zone, pursuant to the provisions of Subdivision (e) of Business and Professions Code Section 26200.

SECTION 3. Subsection (3)(p) of Section 20.64.090 (Uses Permitted in Residential Zones by Conditional Use Permit) of Chapter 20.64 (Residential Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:

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(p) Schools, public and private, excluding schools providing instruction in kindergarten or any grades 1 through 12 located within 600 feet of a residential zone located within the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise mandated under state or federal law.

SECTION 4. Subsection (24) of Section 20.68.100 (Uses Permitted in Residential Zones by Conditional Use Permit) of Chapter 20.68 (Commercial and Professional Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:
(24) Day care centers, excluding those occupying any portion of the CC zone located within 600 feet of the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise mandated under state or federal law.

SECTION 5. Subsection (49) of Section 20.68.100 (Uses Permitted in Residential Zones by Conditional Use Permit) of Chapter 20.68 (Commercial and Professional Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:
(49) Schools, colleges, and universities, accredited, including appurtenant facilities that offer instruction required to be taught by the Education Code of the state of California and in which no pupil is physically restrained, excluding schools which provide instruction in kindergarten or any grades 1 through 12 that occupy any portion the CC zone located within 600 feet of the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise mandated under state or federal law.

SECTION 6. Subsection (50) of Section 20.68.100 (Uses Permitted in Residential Zones by Conditional Use Permit) of Chapter 20.68 (Commercial and Professional Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:
(50) Schools, business and professional, including art, barber, beauty, dance, drama, music, and swimming, excluding schools which provide instruction in kindergarten or any grades 1 through 12 that occupy any portion the CC zone located within 600 feet of the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise mandated under state or federal law.

SECTION 7. Subsection (46) of Section 20.68.150 (Uses by conditional use permit in C-M Zone) of Chapter 20.68 (Commercial and Professional Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:
(46) Schools, colleges, and universities, accredited, including appurtenant facilities which offer instruction required to be taught by the Education Code of the state and in which no pupil is physically restrained, excluding schools which provide instruction in kindergarten or any grades 1 through 12 that occupy any portion the C-M zone located within 600 feet of the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise

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mandated under state or federal law.

SECTION 8. Subsection (47) of Section 20.68.150 (Uses by conditional use permit in C-M Zone) of Chapter 20.68 (Commercial and Professional Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:
(47) Schools, business and professional, including art, barber, beauty, dance, drama, music, and swimming, excluding schools which provide instruction in kindergarten or any grades 1 through 12 that occupy any portion the C-M zone located within 600 feet of the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise mandated under state or federal law.

SECTION 9. Title 5 (Business License and Regulations) of the Cudahy Municipal Code is hereby amended by the addition of a new Chapter 5.20 (Cannabis Permitting and Regulation), which shall read as follows:

Chapter 5.20 - Cannabis Permitting and Regulation.

5.20.010 Section Intent and Purposes.

The intent and purpose of this Chapter is to regulate Commercial Cannabis Activity (as defined below) in accordance with State Law (as defined below) to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law, including, but not limited to, MAUCRSA. The goals of this regulation for Commercial Cannabis Activity include:
(a) To comply with the goals and guidance set forth in the Cole Memo. (b) To minimize the size of the illegal market for Cannabis in the City and the surrounding regions.
(c) To create jobs, revenue, and economic growth for the City and its residents. (d) To enable law enforcement and regulators to have sufficient rights to inspect and audit Cannabis Permittees and take expeditious action against Cannabis Permittees who violate the requirements of this Chapter. (e) To minimize social harms which may arise from Cannabis including youth consumption or intoxicated driving.
(f) To regulate the manner of advertising and location of Cannabis Permittees such that public nuisance is minimized.

5.20.020 Definitions.

For purposes of this Chapter, the following definitions shall apply, unless the context clearly indicates otherwise:
(a) "Applicant" means an Owner seeking a Cannabis Permit pursuant to this Chapter.
(b) "Cannabis" means all parts of the Cannabis sativa Linnaeus, Cannabis indica, or Cannabis ruderalis, whether growing or not; the seeds thereof; the resin, whether crude or purified, extracted from any part of the plant; and every

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compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. Cannabis also means the separated resin, whether crude or purified, obtained from cannabis. Cannabis also means marijuana as defined by Section 11018 of the California Health and Safety Code as enacted by Chapter 14017 of the Statutes of 1972. Cannabis does not include the mature stalks of the plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of the plant which is incapable of germination. For the purpose of this Chapter 5.18, Cannabis does not mean industrial hemp as that term is defined by Section 81000 of the California Food and Agricultural Code or Section 11018.5 of the California Health and Safety Code.
(c) "Cannabis Permit" means a permit issued by the City to conduct a Commercial Cannabis Activity, including, but not limited to a Cultivation Permit, Distribution Permit, Manufacturing Permit, Microbusiness Permit, Retail Delivery Permit, or Testing.
(d) "Cannabis Permittee" means a Person who holds a Cannabis Permit. (e) "Cannabis Product" means cannabis that has undergone a process whereby the plant material has been transformed into a concentrate, or other cannabis derivative, including, but not limited to, concentrated cannabis, or an edible or topical product containing cannabis or concentrated cannabis and other ingredients.
(f) "City" shall mean the City of Cudahy.
(g) "City Coden means the City of Cudahy Municipal Code. (h) "City Manager" means the City Manager of the City of Cudahy. (i) "Cole Memo" means the August 29, 2013 United States Department of Justice memorandum offering guidance on federal enforcement priorities regarding Cannabis.

U) "Commercial Cannabis Activity(ies)" means the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery or sale of Cannabis and/or Cannabis Products. (k) "Cultivation" means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of Cannabis.
(I) "Cultivation Permit" means a Cannabis Permit for the Indoor Cultivation of Cannabis in accordance with the terms and conditions of this Chapter and the Development Agreement for the applicable Cannabis Permit issued to the particular Cultivation Permittee.
(m) "Cultivation Permittee" means an applicant who has applied for and has been issued a Cultivation Permit by the City pursuant to the terms and conditions of this Chapter.

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(n) "Day Care Center" means any child day care facility other than a family day care home, and includes infant centers, preschools, extended day care facilities, and schoolage child care centers.
(o) "Development Agreement" means an agreement adopted pursuant to the Development Agreement Law (Gov. Code, § 65864 et seq.) and Cudahy Municipal Code Chapter 20.28 (Development Agreements), which provides agreed upon community benefits to the City.
(p) "Distribution" means the procurement, sale, and transport of cannabis and cannabis products between persons authorized to engage in permitted commercial cannabis activities pursuant to this Chapter. (q) "Distribution Permit" means, with respect to a Distribution Permittee, a Cannabis Permit for Distribution in accordance with the terms and conditions of this Chapter and the Development Agreement for the applicable Cannabis Permit issued to such Distribution Permittee.
(r) "Distribution Permittee" means a Person that has been issued a Distribution Permit by the City pursuant to the terms and conditions of this Chapter. (s) "Fully Enclosed and Secure Structure" means a space within a building or other structure which has a complete roof enclosure supported by connecting walls extending from the ground to the roof, which is reasonably secure against unauthorized entry, provides complete visual screening or is behind fencing or other features providing complete visual screening, and which is accessible only through one or more lockable doors and is inaccessible to minors. (t) "Good Cause" for purposes of refusing or denying a Cannabis Permit, for revoking a Cannabis Permit, or for refusing or denying a Cannabis Permit renewal or reinstatement means: (i) the Applicant has not obtained approval by the City Council of a Development Agreement setting forth the general terms for the operation of commercial cannabis activity or breaches a term or terms of a Development Agreement approved by the City Council pursuant to this Chapter; (ii) The Applicant or Cannabis Permittee has violated the terms, conditions, or provisions of this Chapter, of state law, of any regulations or rules promulgated pursuant to state law or this Chapter, any applicable local rules, regulations, or conditions placed upon its state license or Cannabis Permit; (iii) the licensed Premises have been operated in a manner that adversely affects the public health, safety, or welfare or the safety of the immediate neighborhood in which the Commercial Cannabis Activity is being conducted; (iv) the Applicant or Cannabis Permittee has knowingly made false statements, misrepresentations, or material omissions on an application form, renewal form, or other document submitted to the City; (v) the Applicant or Cannabis Permittee's criminal history does not indicate that the Applicant or Cannabis Permittee is of Good Moral Character or the Applicant or Cannabis Permittee has been convicted of an offense that is substantially related to the qualifications, functions, or duties of the Applicant or Cannabis Permittee. However, if the City has issued a Cannabis Permit to the Applicant or Cannabis Permittee, the City shall not consider any

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criminal history of the Applicant or Cannabis Permittee that was disclosed to or discovered by the City prior to issuance of the Cannabis Permit and is confirmed by the Applicant or Cannabis Permittee. For any criminal history that was not disclosed to or discovered by the City prior to issuance of a Cannabis Permit, or that arose after the issuance of the Cannabis Permit, the City shall conduct a thorough review of the nature of the crime, conviction, circumstances, and evidence of rehabilitation of the Applicant or Cannabis Permittee, and shall evaluate the suitability of the Applicant or Cannabis Permittee based upon such review. In determining which offenses are substantially related to the qualifications, functions, or duties of the Applicant or Cannabis Permittee, the City shall consider factors set forth in Business and Professions Code Section 26057; (vi) the Applicant or Cannabis Permittee is employing or allowing to volunteer any person whose criminal history indicates that such person is not of Good Moral Character; (vii) the Applicant or Cannabis Permittee fails to allow inspection by City officials of the security recordings, activity logs, business records, or other accessible records pertaining to the activities conducted on the applicable Premises; or (viii) the Applicant or Cannabis Permittee allows for Physician Services to be conducted on the applicable Premises. (u) "Good Moral Character" means having a personal history that demonstrates the propensity to serve the public in a manner that reflects openness, honest, fairness, and respect for the law and rights and well-being of others. In determining Good Moral Character, the following standards shall apply: (i) a judgment of guilt in a criminal prosecution or a judgment in a civil action shall not be used, in and of itself, as proof of an individual's lack of Good Moral Character.

Such judgment, however, may be used as evidence in the determination and when so used, the individual shall be notified and shall be permitted to rebut the evidence by showing that, at the current time, he or she has the ability to, and is likely to serve the public, in a fair, honest, and open matter, that he or she is rehabilitated, and/or that the substance of the former offense is not substantially related to the applicable Commercial Cannabis Activity; and (ii) a prior conviction where the sentence, including any term of probation incarceration, or supervised release is completed for the possession of, possession for sale, sale, manufacture, transportation, or cultivation of a controlled substance, is not considered substantially related, and shall not be the sole ground for denial of a Cannabis Permit, except that any of the convictions set forth in Business and Professions Code Section 26057(b)(4), as may be amended, shall be deemed substantially related to applicable Commercial Cannabis Activity. (v) "Health and Safety Code" means the California Health and Safety Code, as amended from time to time.
(w) "Indoor" means within a Fully Enclosed and Secure Structure. (x) "Manufacture" or "Manufacturing" means to compound, blend, extract, infuse, or otherwise make or prepare a Cannabis Product from such blends, extractions, or infusions.

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(y) uManufacturing Permit" means a Cannabis Permit to Manufacture in accordance with the terms and conditions of this Chapter and the conditions of approval for the applicable Cannabis Permit issued to the particular Manufacturing Permittee.
(z) "Manufacturing Permittee" means a Person that has been issued a Manufacturing Permit by the City pursuant to the terms and conditions of this Chapter.
(aa) "Medicinal Permittee" means a Person who is issued a Cannabis Permit to engage in Commercial Cannabis Activity with respect to medicinal Cannabis in accordance with applicable City law and State Law, including MAUCRSA. (bb) "Microbusiness" means a commercial medicinal cannabis business facility of cultivation of medicinal cannabis on areas less than 10,000 square feet and also acts as a licensed distributor, manufacturer, and Delivery-only retailer, pursuant to State Law, including MAUCRSA. Microbusinesses shall not be open to the public for point-of-sale retail Cannabis sales.
(cc) "Microbusiness Permit" means a Cannabis Permit to establish and conduct a Microbusiness in accordance with the terms and conditions of this Chapter and the conditions of the Development Agreement for the applicable Cannabis Permit issued to the particular Microbusiness Permittee. (dd) "Microbusiness Permittee" means a Person who has been issued a Microbusiness Permit by the City pursuant to the terms and conditions of this Chapter.
(ee) "Outdoors" means any location within the City that is not within a Fully Enclosed and Secure Structure.
(ff) "Owner" means any of the following: (i) a Person with an aggregate ownership interest of 20% or more in the Person applying for a Cannabis Permit, unless the interest is solely a security, lien, or encumbrance; (ii) the chief executive officer of a nonprofit or other entity; a member of the boards of directors of a nonprofit; (iv) an individual who will be participating in the direction, control, or management of the person applying for a Cannabis Permit. (gg) "Permit Zone" means, with respect to a Person holding a Cannabis Permit, the overlay zone described in Cudahy Municipal Code Chapter 20.120 where such Cannabis Permit type is permitted to operate pursuant to a Development Agreement with the City.
(hh) "Person" includes any individual, entity, firm, co-partnership, joint venture, association, corporation, limited liability company, estate, trust, business trust, receiver, syndicate, or any other group or combination acting as a unit, and the plural as well as the singular.
(ii) "Physician Services" means the consultation by a State-licensed physician of a patient with the possible recommendation by such physician of medicinal Cannabis for such patient.

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OD "Premises" means the designated structure or structures and land specified in the application that is owned, leased, or otherwise held under the control of the Cannabis Permittee applicant or Cannabis Permittee where the Commercial Cannabis Activity will be or is conducted. The premises shall be a contiguous area and shall only be occupied by one Cannabis Permittee. (kk) "Retail Delivery" means the commercial transfer or delivery of Cannabis or Cannabis Products to a customer, patient, primary caregiver or Cannabis Permittee.
(II) "Retail Delivery Establishment" means a location where Cannabis or Cannabis Products are, either individually or in any combination, Delivered pursuant to State Law, including MAUCRSA. Retail Delivery Establishments shall not be open to the public for point-of-sale retail sales. (mm) "Retail Delivery Permit" means a Cannabis Permit to Deliver Cannabis and Cannabis Products to customers, patients, and primary caregivers in accordance with the terms and conditions of this Chapter and the conditions of the Development Agreement for the applicable Cannabis Permit issued to the particular Retail Delivery Permittee.
(nn) "Retail Delivery Permittee" means a Person that has been issued a Retail Delivery Permit by the City pursuant to the terms and conditions of this Chapter. (oo) "State" means the State of California.
(pp) "State Law" means all laws of the State of California, including, but not limited to, all rules and regulations adopted by State agencies and State regulatory entities, including subsequent amendments to such laws, rules, and regulations.
(qq) "State Medicinal license" means a State license for medicinal Commercial Cannabis Activities issued pursuant to State Law. (rr) "Testing" means the activities conducted by a Testing Laboratory. (ss) "Testing Laboratory" means an accredited laboratory, facility, or entity in the City that offers or performs tests of medicinal cannabis or medicinal cannabis products in accordance with State Law and City law:
(tt) "Testing Permit" means a Cannabis Permit for Testing the quality and makeup of Cannabis and Cannabis Products pursuant to the terms and conditions of this Chapter and the conditions of the Development Agreement for the applicable Cannabis Permit issued to the particular Testing Permittee. (uu) "Testing Permittee" means a Person who has been issued a Testing Permit by the City pursuant to the terms and conditions of this Chapter. (vv) "Volatile Solvent" means a Class I Flammable liquid as defined by the National Fire Protection Association, including butane and propane. (ww) "Youth Center" means any public or private facility that is primarily used to host recreational or social activities for minors, including, but not limited to,

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private youth membership organizations or clubs, social service teenage club facilities, video arcades, or similar amusement park facilities.

5.20.030 Commercial Cannabis Activity Prohibited.

All Commercial Cannabis Activity within the City is prohibited except as permitted by this Chapter.

5.20.040 Certain Commercial Cannabis Activity Permitted. Medicinal Commercial Cannabis Activities, except retail dispensaries that are open to the public for point-of-sale purchases, shall be allowed within the area set forth in the overlay zone/Permit Area illustrated in Exhibit "A" to City Council Ordinance No. 673 pursuant to a development agreement adopted in accordance with the Development Agreement Law (Gov. Code,§ 65864 et seq.) and Cudahy Municipal Code Chapter

20.28 (Development Agreements). No such activities shall be permitted without a Development Agreement within or outside of the boundaries of such overlay zone.

The City may approve or deny such a Development Agreement in its sole and absolute discretion. The City Manager is authorized to develop and promulgate policies and procedures consistent with the intent and spirit of this Chapter concerning the applications, application process, including, but not limited to, the information required of Applicants, and application review procedures, which shall inform the administration and protocols to be used and followed by the City in the application and hearing processes.

5.20.050 Business standards.

Commercial Cannabis Activity within the City shall be in conformance with the standards set forth in this Section, in addition to those additional standards that may be imposed through negotiated Development Agreement. The City Manager is hereby authorized to formulate and impose additional Business Requirements applicable to Cannabis Permittees in furtherance of the public health, safety, and/or welfare.
(a) Commercial Cannabis Activity shall only be allowed upon application and issuance of a Cannabis Permit and a Development Agreement by the City in accordance with the criteria and process set forth in this Chapter and City Code. (b) Zoning and Land Use.
(1) Operation Near Schools, Day Cares, and Youth Centers. Following the enactment of this Chapter, no new Premises shall be established, developed, or operated within 600 feet of a Day Care Center, Youth Center, or public or private school providing instruction in kindergarten or any grades 1 through 12 that is in existence at the time the Cannabis Permit is issued. All distances shall be measured in a straight line, without regard to intervening structures, from the nearest point of the building or structure in which the Premises are, or will be, located to the nearest property line of those uses describe in this Subsection. The restrictions set forth in this Subsection shall not apply to Premises which operate within 600 feet of any Day Care Center, Youth Center, or public or private school

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providing instruction in kindergarten or any grades 1 through 12, if such Premises existed prior to the establishment of the applicable Day Care Center, Youth Center, or school that is located within 600 feet of such Premises.
(2) Co-Location. All Commercial Cannabis Activity shall fully comply with all l mandates set forth in State Law. To the extent not prohibited under State Law, a Cannabis Permittee may be located within the same unit of the same Premises or building, facility or real property parcel as another Cannabis Permittee.
(3) Development Agreement.
a) Prior to commencing operations, all Cannabis Permittees shall enter into a Development Agreement with the City.
b) All Premises shall be operated in accordance with the terms of the applicable Development Agreement for the specified parcel of real property (or sub-portion thereof) upon which the Premises is located. c) Except as specified, Commercial Cannabis Activities shall not exceed the square footage authorized pursuant to the applicable Development Agreement.
d) All Premises shall be located in the Permit Zone pursuant to the applicable Development Agreement.
(c) Commercial Cannabis Activity is allowed only within Fully Enclosed and Secure Structures that are inaccessible to minors.
(d) Signage for any business must be applied for through the City's Planning Division, which shall require review and approval prior to installation. Business identification signage shall be limited to that needed for identification only, and shall not contain any logos or information that identifies, advertises, or lists the services or the products offered. No Cannabis Permittee shall advertise by having a person holding a sign and advertising the business to passersby, whether such person is on the Premises of the Cannabis Permittee or elsewhere including, but not limited to, the public right-of-way. (e) From any public right-of-way, there shall be no visible evidence of the consumption of any Cannabis Products. Commercial Cannabis Activity shall not adversely affect the health or safety of the nearby residents by creating dust, glare, heat, noise, smoke, traffic, vibration, odor or other impacts, and shall not be hazardous due to use or storage of materials, processes, products, or wastes. (f) Hours of operation limits, if any, shall be specified in terms mutually agreed upon in a Development Agreement.
(g) All Cannabis and Cannabis Products shall be kept in a secured manner during all business and nonbusiness hours.
(h) All Commercial Cannabis Activities shall operate within Premises that are compliant with all applicable State Laws and local laws.

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(i) Cannabis Permittees must pay all applicable taxes pursuant to all federal, State, and local laws, including, but not limited to, fees relating to infrastructure improvements within the Permit Zone.

U) Cannabis Permittees shall provide sufficient odor absorbing ventilation and exhaust systems so that odors outside the applicable Premises are not a nuisance on any adjacent property of public right-of-way. Any violation of this Section shall be remedied within thirty (30) days of the Cannabis Permittee receiving notice of such violation.
(k) Cannabis Permittees shall utilize product and inventory tracking software and accounting software that is consistent with reasonable business practices within the industry and the seed-to-sale tracking software being developed by the State. (I) Except permitted in this Chapter, on-site smoking, ingestion, or consumption of Cannabis or Cannabis Products shall be prohibited on Premises. Except to the extent otherwise permitted pursuant to this Chapter, the entrance of the Premises shall be clearly and legibly posted with a notice indicating that smoking, ingesting, or consuming Cannabis, Cannabis Products or alcohol on such Premises is prohibited.
(m) Signage for all Premises shall be in compliance with the City's sign code and application for all signs must be submitted to the City's Planning Division and comply with its sign permitting protocol.
(n) Alcoholic beverages and tobacco shall not be sold, stored, distributed, or consumed on the Premises. Cannabis Permittees shall not hold or maintain a license from the State Department of Alcohol Beverage Control to sell alcoholic beverages, or operate a business that sells alcoholic beverages or tobacco with respect to the Premises. In addition, alcohol shall not be provided, stored, kept, located, sold, dispensed, or used on the Premises.
(o) Physician Services shall not be provided at any Premises. (p) The Premises shall fully comply with all applicable rules, regulations, and laws including, but not limited to, zoning and building City Codes, the City's business license ordinances, the Revenue and Taxation Code, the Americans with Disabilities Act, and MAUCRSA.
(q) Each Cannabis Permittee shall provide the City Manager, or the City Manager's designee, with the name, phone number, facsimile number, and email address of an on-site representative of such Cannabis Permittee to whom the City and the public can provide notice if there are any operational problems associated with such Cannabis Permittee's Premises. Each Cannabis Permittee shall make reasonable and good faith efforts to encourage residents and the public to call this representative to resolve any operational problems before any calls or complaints are made to the City or law enforcement. (r) All Cannabis Permittees must comply with the following security requirements:
(1) General Security Requirements.

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a) Security cameras shall be installed and maintained in good working condition and used in a format approved by the City Manager. The cameras shall be in use 24 hours per day, 7 days per week. The areas to be covered by the security cameras include areas as determined by the City Manager, including, but not limited to, the area in which the primary Commercial Cannabis Activity occurs, e.g. the Cultivation area for a for a cultivator.
b) The Premises shall be alarmed with a reliable commercial alarm system that is operated and monitored by a security company or alarm business in a manner satisfactory to the City Manager.
c) Entrance to any storage areas shall be locked at all times and under the control of staff of the Cannabis Permittee.
d) The business entrance(s) and all window areas shall be illuminated during evening hours. The Applicant shall comply with the City's lighting standards regarding fixture type, wattage, illumination levels, shielding, etc., and secure the necessary approvals and permits, as necessary. e) All windows on the Premises shall be appropriately secured with all Cannabis and Cannabis Products securely stored.
f) Each Cannabis Permittee shall implement track and trace protocols, as noted above in this Section, in order to prevent diversion of Cannabis or Cannabis Products.
g) All waste and disposal containers shall be locked at all times and stored ins a secure area and, at all times, under the control of the Cannabis Permittee.
(2) Security Alarm Systems - Minimum Requirements.
a) Each Premises shall have a security alarm system installed by a licensed alarm company on all perimeter entry points and perimeter windows.
b) Each Premises must ensure that its location is continuously monitored. Premises may engage the services of outside vendors to fulfill this requirement, such as a private security firm.
c) Each Premises shall maintain up to date and current records and existing contracts on the Premises that describe the location and operation of each security alarm system, a schematic of security zones, the name of the licensed alarm company, and the name of any vendor monitoring the Premises.
(3) Lock Standards. At a minimum, all points of ingress and egress shall be secured with commercial-grade, non-residential door locks. (4) Video Surveillance Requirements.

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a) Prior to exercising the privileges of a Cannabis Permit issued under this Chapter, an Applicant must install fully operational video surveillance and camera recording system. The recording system must record in digital format and meet the requirements outlined herein.
b) All video surveillance records and recording must be stored in a secure area that is only accessible to the management staff of the Cannabis Permittee.
c) Video surveillance records and recordings must be made available upon request to the City Manager or designee for a purpose authorized by this Chapter or for any other State or local law enforcement purpose. d) Video surveillance shall be held in confidence by all employees and representatives of the City Manager, except that the City Manager may provide such records and recordings to any State or local law enforcement agency for any purpose authorized under this Chapter for any State or local law enforcement purpose.
e) A sign shall be posted in a conspicuous place near each point of public access, which shall not be less than 12 inches wide and 12 inches long, composed of letters not less than one inch in height, stating that "All Activities Monitored by Video Camera" or "These Premises Are Being Digitally Recorded" or otherwise advising of all persons entering the Premises that a video surveillance and camera recording system is in operation and recording all activity as provided in this Section. f) The Premises shall utilize video surveillance equipment and a camera system that shall be remotely accessible by the City and Los Angeles County Sheriff's Department.
(5) Video Surveillance Equipment.
a) Video surveillance equipment shall, at a minimum, consist of digital or network video recorders, cameras capable of meeting the recording requirements described in this Section, video monitors, digital archiving devices, and a color printable capable of delivering still photos. b) All video surveillance systems must be equipped with a failure notification system that provides prompt notification to a Cannabis Permittee of any prolonged surveillance equipment interruption and/or the complete failure of the surveillance.
c) Cannabis Permittees are responsible for ensuring that all surveillance equipment is properly functioning and maintained so that the playback quality is suitable for viewing and the surveillance equipment is capturing the identity of all individuals and activities in the monitored Premises.
d) All video surveillance equipment shall have sufficient battery backup to support a minimum of four hours of recording in the event of a power outage.

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(6) Placement of Cameras and Required Camera Coverage.
a) Camera placement shall be capable of identifying activity occurring within 20 feet of all points of ingress and egress and shall allow for the clear and certain identification of any individual and activities on the Premises.
b) All entrances and exits to the Premises shall be recorded from both indoor and outdoor vantage points.
c) The system shall be capable of recording all pre-determined surveillance areas in any lighting conditions. If the Premises has a medicinal cannabis cultivation area, a rotating schedule of lighted conditions and zero-illumination can occur as long as ingress and egress points to those areas remain constantly illuminated for recording purposes.
d) Areas where medicinal cannabis is grown, tested, cured, manufactured, or stored shall have a camera placed in the room facing the primary entry door at a height that will provide a clear unobstructed view of activity without sight blockage from lighting hoods, fixtures, or other equipment.
e) Cameras shall also be placed at each location where weighing, packaging, preparation, tagging activities occur, or other distribution preparation activities occur.
f) At least one camera must be dedicated to record the access points to the secured surveillance recording area.
(7) Location and Maintenance of Surveillance Equipment. a) Surveillance recording equipment must be housed in a designated, locked, and secured room or other enclosure with access limited to authorized employees, the City Manager or designee, Los Angeles County Sheriff's Department, as authorized by this Chapter, other State or local law enforcement purpose, and service personnel or contractors. b) Premises must keep a current list of all authorized employees and service personnel who have access to the surveillance system and/or surveillance system room on the Premises. Premises must keep a surveillance equipment activity log on the Premises to record all service activity, including the identity of all individuals performing services on system service, the service date and time, and the reason for such service to the surveillance system.
c) Off-site monitoring and video recording storage of the Premises by an independent third party may be authorized so long as standards exercised at the remote location meets or exceeds all of the standards applicable to onsite monitoring.

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d) Each Premises located in a common or shred building must have a separate surveillance room/area that is dedicated to that specific Premises. The facility that does not house the central surveillance room is required to have a review station, printer, and map of camera placement on the Premises. All minimum requirements for equipment and security standards as set forth in this Section apply to such review station. (8) Video Recording Retention Requirements.
a) All camera views of all recorded areas must be continuously recorded 24 hours a day.
b) All surveillance recordings must be kept for a minimum of 30 days and be in a format that can be easily accessed for viewing. Video recordings must be archived in a format that ensures authentication of the recording as legitimately-capture video and guarantees that no alteration of the recorded image has taken place.
c) The surveillance system or equipment must have the capabilities to produce a color still photograph form any camera image, live, or recorded, of the Premises.
d) The date and time must be embedded on all surveillance recordings without significantly obscuring the picture. e) Time is to be measured in accordance with the official United States time established by the National Institute of Standards and Technology and the U.S. Naval Observatory at www.time.gov. f) After the 30-day surveillance retention schedule has lapsed, surveillance video recordings must be erased or destroyed prior to being discarded or disposed of for any other purpose. Surveillance video recordings shall not be destroyed if the Cannabis Permittee knows or should have known of a pending criminal, civil, or administrative investigation or any other proceeding sfor which the recording may contain relevant information.
(9) Other Records. All records applicable to the surveillance system and cannabis tracking system shall be maintained on the Premises. At a minimum, Premises shall maintain a map of the camera locations, directions of coverage, camera numbers, surveillance equipment maintenance activity log, user authorization list and operating instructions for the surveillance equipment.
(s) Audit. Each Cannabis Permittee shall maintain accurate books and records in an electronic format, which detail all revenues and expenses of the business, including, but not limited to, all assets and liabilities. On no less than an annual basis, or at any time upon reasonable request of the City, each Cannabis Permittee shall file a sworn statement detailing business activity during the previous 12-month period (or shorter period based upon the timing of the request). The statement shall include gross sales for each month and all

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applicable taxes and fees paid or due to be paid. On an annual basis, each owner and operator shall submit to the City a financial audit of the business's operations conducted by an independent certified public accountant. Each Cannabis Permittee shall be subject to a regulatory compliance review and financial audit as determined by the City Manager or designee. (t) Inspections. The City Manager, or designee, or Los Angeles County Sheriff's Department shall have the right to enter all Premises from time to time unannounced during a Cannabis Permittee's hours of operation for the purpose of making reasonable inspections to observe and enforce compliance with this Chapter, to inspect and copy records required to be maintained under this Chapter, or to inspect, view, and copy recordings made by security cameras, all without requirement for a search warrant, subpoena, or court order, and subject to appropriate fees, as specified in the Development Agreement, or adopted by the City.

5.20.060 Application and fee requirements.
(a) All applicants wishing to obtain a Cannabis Permit from the City shall file an application with the City upon a form approved by the City Manager and shall pay a permit application fee as established by the City. The fee may vary depending on the type of Cannabis Permit. The City Manager or designee may require and conduct background checks, as necessary, to process and evaluate Cannabis Permit applications.
(b) Prior to operating in the City, each Cannabis Permittee shall timely and fully pay all fees associated with the establishment of Commercial Cannabis Activity.

The fees shall be as set forth in the schedule and fees and charges established by the City Council, including, but not limited to, the following:
(1) Application fee for accepting a registration application, due and payable in full at the time an application is submitted;
(2) Processing fee for the cost to the City of processing an application and reviewing, investigating, and scoring each application in accordance with any evaluation system to determine eligibility for issuance of a Cannabis Permit, due and payable in full at the time a registration application is submitted;
(3) Permit issuance fee for the cost to the City of preparing a Development Agreement, Planning Commission and City Council review of the Development Agreement and the Cannabis Permit, and preparation and issuance of the Cannabis Permit, as authorized by the Cannabis Permit; (4) Amended registration fee for the cost to the City of reviewing amendments or changes to the registration form previously filed on behalf of an Applicant, due and payable in full at the time amendments or changes to any Cannabis Permit form is submitted to the City;

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(5) Permit renewal fee for the cost ot the City of processing an application to renew a Cannabis Permit, due and payable in full at the time application is made to renew a Cannabis Permit; and
(6) Any fees set forth in the applicable Development Agreement.

5.20.070 Permit conditions.
(a) A Cannabis Permit application may be denied and not awarded by the City if:
(1) The Applicant or the Applicant's agent(s) has made one or more false or misleading statements or omissions in the application or during the application process.
(2) The proposed Premises or Commercial Cannabis Activity at the Premises is not allowed by State Law or City law.
(3) The Applicant is not a legal representative of the proposed Cannabis Permittee.
(4) The Applicant or any of its officers, directors, owners, managers, or employees is under 21 years of age.
(5) The Applicant's facility or its location is in violation of any building, zoning, health, safety, or other provision of this Chapter or of any State or local law that substantially affects the public health, welfare, safety, or morals, or the facility or its location is not permitted in the proposed area, or the issuing or continuation of a Cannabis Permit would be contrary ro the public health, welfare, safety, or morals.
(6) The Applicant or any of its officers, directors, owners, managers, or employees has been sanctioned by the City, State, or any county for unauthorized cannabis activities or has had a registration revoked under this Chapter in the previous 3 years.
(7) The Applicant or the Applicant's agent(s) have engaged in unlawful, fraudulent, unfair, or deceptive business acts or practices. (8) The Applicant has not been or is not in good standing with the City related to other or previous business activities operated in the City. (9) The Applicant has not satisfied all requirement of this Chapter. (10) For Good Cause, as defined in this Chapter.
(b) A Cannabis Permit shall be awarded by the City to Applicants in accordance with the process established by the City Manager.
(c) Before a Cannabis Permit can be issued to an applicant, a Cannabis Permit fee must be paid to offset all related costs to the City, and the proposed Premises must pass all applicable inspections.

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(d) Each Cannabis Permit is subject to the conditions of approval in the applicable Development Agreement for the parcel of real property upon which the Premises is located.
(e) Each Cannabis Permit is subject to any additional conditions that may be applied by the City at the time of issuance or renewal as necessary to properly regulate the applicable Commercial Cannabis Activities and to protect the public. (f) Each Cannabis Permittee shall execute a Development Agreement with the City to, among other things, fully reimburse the City for all fiscal impacts, costs, expenses, fees, and attorneys' fees incurred by the City related to the Cannabis Permit and the related Commercial Cannabis Activity of such Cannabis Permittee.
(g) Each Cannabis Permittee shall:
(1) Carry liability insurance in the amounts and types set by the City Manager or the City Manager's designee, and name the City as an additional insured on all such insurance policies.
(2) Execute an Indemnification Agreement prepared by the City that fully indemnifies the City for all liabilities associated with the Cannabis Permit, the Cannabis Permittee's Commercial Cannabis Activities, and any action taken by the Cannabis Permittee pursuant to this Chapter. Such indemnification may be set forth in the applicable Development Agreement.
(3) Defend the City, at the Cannabis Permittee's sole expense, in any action against the City or its agents, officers, officials, or employees associated with the Cannabis Permit, the Cannabis Permittee's Commercial Cannabis Activities, or any action taken by the Cannabis Permittee pursuant to this Chapter. The City may, at its sole discretion, participate in the defense of any such action, but such participation shall not relieve the Cannabis Permittee of its indemnification and reimbursement obligations. (4) Reimburse the City for all costs, expenses, fees, and attorney's fees incurred by the City related to any action against the City or its agents, officers, or employees associated with the Cannabis Permit, the Cannabis Permittee's Commercial Cannabis Activity, or any action taken by the Cannabis Permittee pursuant to this Chapter.
(h) A Cannabis Permittee shall keep the City and law enforcement updated with the names, addresses, and relevant criminal histories of the Applicant's Agents.

Relevant criminal histories shall include any drug-related or felony convictions, the nature of such offenses, and the sentences received for such convictions. (i) Transfer.
(1) Any Cannabis Permittee may not sell, transfer, pledge, assign, grant an option, or otherwise dispose of his or her ownership interest in the Commercial Cannabis Business authorized pursuant to the Cannabis Permit.

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(2) In order for a Cannabis Permittee to transfer its Cannabis Permit to any Person, such Cannabis Permittee must submit a transfer application to the City Manager or City Manager's designee. The City Manager or designee may create a transfer application and reasonable transfer application process, including mandatory fee, that Cannabis Permittees and the City must follow and pay for Cannabis Permit transfer requests. Each transfer request of a Cannabis Permit and the related transfer application is subject to the prior approval of the City Manager or designee. (3) Applicants for Cannabis Permits must show proof of lawful possession of the applicable location. Evidence of lawful possession consists of properly executed deeds of trust, leases, and other written instruments, as may be accepted by the City.
(4) The location shall only be the geographical area that is specifically and accurately described in executed documents verifying lawful possession.

No Cannabis Permittee is authorized to relocate to other areas or units within a building structure without first filing a change of location application and obtaining approval form the City regardless of any possessory interest or right to possession to such additional space. No Cannabis Permittee shall add additional contiguous units or areas, thereby altering initially-approved Premises without filing an application to modify the location on forms prepared by the City Manager, including any applicable processing fee.
(5) No Cannabis Permittee is authorized to sublet any portion of any Premises for any purpose unless all necessary forms and applications to modify the existing location to accomplish any subletting have been approved by the City.
(6) The City Manager shall develop and promulgate a process for the renewal of Cannabis Permits and the establish related fees, in accordance with applicable laws.

U) To the fullest extent permitted by law, the City does not assume any liability, and expressly does not waive sovereign immunity, with respect to any Commercial Cannabis Activities, or for the other activities of any Cannabis Permittee or for any other activities taking place at Premises. (k) Changing, Altering, or Modifying Location.
(1) After issuance of a Cannabis Permit, the Cannabis Permittee shall not make any physical change, alteration, or modification to the Premises that materially or substantially alters the location, production estimates, and/or usage of the location form the plans originally approved under the applicable Development Agreement, without the prior written approval of the City Council or designee. The Cannabis Permittee whose Premises are to be materially or substantially changed is responsible for filing an application with the City in order to obtain requisite approval.

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(2) Material or substantial changes, alterations, or modifications requiring approval include, but are not limited to, the following: (i) an increase or decrease in the total physical size or capacity of the location; (ii) the sealing off, creation of or relocation of a common entryway, doorway, passage, or other such means of public ingress and/or egress, when such common entryway, doorway, or passage alters or changes limited access areas; or (iii) the installation or replacement of electric fixtures or equipment, the lowering of a ceiling, or electrical modifications made for the purpose of increasing power usage ..
(3) The City Council or designee may grant approval for the types of changes, alterations, or modifications described herein upon the filing of an application by the Cannabis Permittee and payment of any applicable fee, subject to any requisite amendments to the applicable Development Agreement. The Cannabis Permittee must submit all information requested by the City Council or designee including, but not limited to, documents that verify the following: (i) the Cannabis Permittee will continue to have the exclusive possession of the Premises, as changed, by ownership, lease, rental agreement, or other means, and sole control over all activities; and (ii) the proposed change conforms to any and all City restrictions related to the time, manner, and place of regulation of the applicable Commercial Cannabis Activity.
(I) To the fullest extent permitted by law, the City does not assume any liability, and expressly does not waive sovereign immunity, with respect to any Commercial Cannabis Activities, or for the other activities of any Cannabis Permittee or for any other activities taking place at Premises.

5.20.080 Enforcement and Appeals.
(a) Any Commercial Cannabis Activity within the City in violation of this Chapter is hereby declared to be unlawful and a public nuisance. (b) Any Person who willfully or knowingly (i) engages in a violation of this Chapter or (ii) owns, possesses, controls, or has charge of any parcel of real property in the City upon which a violation of this Chapter is maintained and who has actual knowledge of such violation ( or would have actual knowledge of such violation after a reasonable inquiry), shall be subject to the penalties and remedies provided by this Chapter.
(c) Any violation of this Chapter shall constitute a separate offense for each and every day the violation occurs or persists.
(d) Any Person in violation of any provision of this Chapter or who causes another Person to be in violation of this Chapter shall have committed a misdemeanor. In addition which shall be punishable by a fine of up to one thousand dollars ($1,000) for each violation and for each day the applicable violation continues to persist.

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(e) Any person in violation of any provision of this Chapter shall be punishable by an administrative fine of up to a $1,000 per offense.
(f) Any material violation of this Chapter or any other relevant City law or State Law by a Cannabis Permittee, or a Cannabis Permittee's agent, is grounds for suspending or revoking the relevant Cannabis Permit. In addition, the City Manager or the City Manager's designee may suspend or revoke a Cannabis Permit, disqualify an Applicant from the application process, or elect not to renew a Cannabis Permit if any of the following occur:
(1) The City Manager or the City Manager's designee determines that the Cannabis Permittee has failed to comply with this Chapter, any condition of approval, or any agreement or covenant as required pursuant to this Chapter.
(2) The Cannabis Permittee's Commercial Cannabis Activities cease for more than ninety (90) calendar days.
(3) Ownership of the Cannabis Permittee is changed without approval from the City.
(4) The licensed Commercial Cannabis Activity moves from the licensed Premises to a different, unauthorized location.
(5) The Cannabis Permittee fails to provide remote access to the security cameras to the City Manager, the City Manager's designee, or Los Angeles County Sheriff's Department, or fails to allow inspection of the security recordings, the activity logs, or of the Premises by authorized City officials.
(g) Any decision regarding the suspension or revocation of a Cannabis Permit, disqualification of an Applicant from the application process, or election not to renew a Cannabis Permit may be appealed to an independent neutral third-party administrative hearing officer appointed by the City Manager or the City Manager's designee (the "Hearing Officer"). Said appeal shall be made by a notice of appeal from the Person appealing within thirty (30) days from the date of the City's decision. The appeal shall be accompanied by a written verified declaration setting forth the basis for the claim that the City's decision was improper. The Hearing Officer's decision shall be final and binding upon the City and the appellant Cannabis Permittee or Applicant. Alternatively, the City Manager may provide for the appeal to be made to the City Council, in lieu of a hearing officer. In such case, the City Council's decision shall be final and binding upon the City and the appellant.
(h) These penalties and remedies are cumulative, and in addition to any other penalties and remedies available to the City.

5.20.090 State Medicinal License Requirement.
(a) Cannabis Permittees must obtain a State Medicinal License in accordance with State Law, including, but not limited, to the temporary and permanent State Medicinal Licenses provided for in MAUCRSA.

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(b) Each Cannabis Permittee must expeditiously provide proof of receipt of the applicable State Medicinal License by such Cannabis Permittee to the City Manager or designee.

5.20.100 Medicinal Cannabis Cultivation.
(a) Purpose. The purpose and intent of this Section is to permit and regulate the medicinal Cannabis Cultivation in order to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law. (b) Scope; Medicinal Cannabis. This Section permits and regulates the medicinal Cannabis Cultivation pursuant to State Law, including MAUCRSA.

Subject to the terms of this Chapter, Cultivation Permits may be issued by the City for medicinal Cannabis Cultivation pursuant to and in accordance with State Law, including MAUCRSA.
(c) Outdoor Cultivation is prohibited within the City.
(d) Indoor Cultivation is permitted only on properties within the applicable Permit Zone with a valid Cultivation Permit and other requisite permits and entitlements. (e) Indoor Cultivation may include growing Cannabis plants, harvesting Cannabis plants, and drying Cannabis flowers but shall not include the Manufacturing or of Cannabis Products, unless otherwise authorized pursuant to this Chapter. (f) Entrance to the Cultivation area, and all storage areas, of the applicable Premises shall be locked at all times and under the control of the staff of such Premises.

5.20.110 Medicinal Cannabis Products Manufacturing.
(a) Purpose. The purpose and intent of this Section is to permit and regulate the medicinal Cannabis Products Manufacturing to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law. (b) Scope; Medicinal Cannabis. This Section permits and regulates medicinal Cannabis Products Manufacturing pursuant to State Law, including MAUCRSA.

Subject to the terms of this Chapter, Manufacturing Permits may be issued by the City for medicinal Cannabis Products Manufacturing, pursuant to and in accordance with State Law, including MAUCRSA.
(c) Medicinal Cannabis Products Manufacturing is a permitted use only on properties within the applicable Permit Zone with a valid Cultivation Permit and other requisite permits and entitlements.
(d) A Manufacturing Permittee must employ at least one (1) member of its personnel dedicated full time to quality control.
(e) The Manufacturing Permittee must establish standard operating procedures and batch records that comply with current good manufacturing practices and applicable State Law, including MAUCRSA.

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(f) All Cannabis Products produced by a Manufacturing Permittee must be labeled in compliance with applicable State Law, including MAUCRSA. (g) All Cannabis Products produced by a Manufacturing Permittee must be packaged in child resistant containers prior to leaving the Premises fOf such Manufacturing Permittee in accordance with applicable State Law, including MAUCRSA.
(h) Manufacturing Permittees may conduct Manufacturing using any type of solvents, including Volatile Solvents, or Manufacturing processes if such Manufacturing complies with the requirements of this Chapter and State or local law, including but not limited to Health and Safety Code Section 11362.775 (or any successive State Law) all applicable fire and building codes in the City and any other laws of the City designed to ensure the safety of such operation. (i) Manufacturing Permittees using Volatile Solvents for Manufacturing Cannabis Products must operate in a manner to reduce the risk of explosion or danger to public health, including through the use of a close-loop · or solvent dispersion system consistent with the requirements of Health and Safety Code Section 11362.775 (or any successive State Law).

U) If hazardous materials, flammable gas, flammable liquefied gas, flammable and combustible liquids, or other flammable material, as those terms are defined in California Fire Code Section 202, are to be used in the processing of medicinal Cannabis, then the provisions of California Fire Code Section 407 shall be applicable where hazardous materials are subject to permits under California Fire Code Section 50 (Hazardous Materials) are located on the Premises or where required by the applicable building or fire official.
(k) Storage, use, and handling of compressed gases in compressed gas containers, cylinders, tanks, and systems shall comply with California Fire Code Chapter 53. Partially full compressed gas containers, cylinders, or tanks containing residual gases shall be considered as full for the purposes of the controls required. Compressed gases classified as hazardous materials shall also comply with California Fire Code Chapter 50 for general requirements and California Fire Code Chapter 53 addressing specific hazards, including California Fire Code Chapter 58 (Flammable Gases), California Fire Code Chapter 60 (Highly Toxic and Toxic Materials), California Fire Code Chapter 63 (Oxidizers, Oxidizing Gases and Oxidizing Cryogenic Fluids, and California Fire Code Chapter 64 (Pyrophoric Materials). Prevention, control, and mitigation of dangerous conditions related to storage, use, dispensing, mixing, and handling of flammable and combustible liquids shall be in accordance with California Fire Code Chapters 50 and 57.
(I) Labeling Requirements - Edibles.
(1) Before a Manufacturing Permittee prepares any edible Cannabis or edible Cannabis Product for retail sale, it shall be labeled and placed in tamperevident packaging which at least meets the requirements of State Law, including, but not limited to, MAUCRSA.

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(2) All items to be sold or distributed shall be individually wrapped at the original point of preparation by the Cannabis Permittee. (3) Labeling must include a warning if nuts or other known allergens are used, and must include the total weight (in ounces or grams) of Cannabis in the package, not to exceed ten (10) milligrams of tetrahydrocannabinol (THC) per serving.
(4) A warning that the item is a medication and not a food must be clearly legible on the front of the package and/or must comply with state packing requirements.
(5) The package must have a label warning that the product is to be kept away from children.
(6) The label must also state that the product contains Cannabis and must specify the date of Manufacture and the Manufacture Permittee's information, including, but not limited to, address, and phone number. (7) Distributions must be in a properly labeled opaque package when distributed.
(8) The City Manager, or designee, may impose additional packaging and labeling requirements on Cannabis or Cannabis Products.

5.20.120 Medicinal Cannabis and Cannabis Products Retail Delivery (Retail Delivery Only, Dispensaries Prohibited).
(a) Purpose. The purpose and intent of this Section is to regulate the Retail Delivery of medicinal Cannabis and Cannabis Products in order to promote the health, safety, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to the State Law. (b) Scope; Medicinal Cannabis Only. This Section permits and regulates the Retail Delivery of medicinal Cannabis and Cannabis Products pursuant to State Law, including MAUCRSA. Subject to the terms of this Chapter, Retail Delivery Permits may be issued by the City for the Retail Delivery of medicinal Cannabis and Cannabis Products pursuant to and in accordance with State Law, including MAUCRSA. The point-of-sale sale of Cannabis or Cannabis Products is strictly prohibited.
(c) Retail Delivery of Cannabis and Cannabis Products is a permitted use only on properties within the applicable Permit Zone with a valid Retail Delivery Permit and other requisite permits and entitlements.
(d) The Retail Delivery of medicinal Cannabis and Cannabis Products may only include the Retail Delivery of Cannabis and Cannabis Products by a Retail Delivery Permittee to a customer, patient or primary caregiver, in accordance with State Law, including MAUCRSA.
(e) Retail Delivery Permittees shall implement sufficient security measures to both deter and prevent unauthorized entrance into areas containing Cannabis

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and Cannabis Products and theft of Cannabis and Cannabis Products from the Retail Delivery Establishment or employees participating in Retail Delivery. (f) All Cannabis and Cannabis Products shall be stored in a secured and locked room, safe, or vault, and in a manner as to prevent diversion, theft, or loss. (g) Individuals shall not be allowed to remain on the Premises comprising of the Retail Delivery Establishment unless they are engaging in activity expressly related to the operations of the Retail Delivery Establishment or are a customer. (h) A Retail Delivery Permittee shall notify the City Manager or the City Manager's designee within 24 hours of discovering any of the following:
(1) Significant discrepancies identified during inventory. The level of significance shall be determined by the City Manager or the City Manager's designee.
(2) Diversion, theft, loss, or any criminal activity involving the Retail Delivery Establishment or any agent or employee of the Retail Delivery Establishment.
(3) The loss or unauthorized alteration of records related to Cannabis, Cannabis Products, registered qualifying patients, primary caregivers, or Retail Delivery Establishment agents or employees.
(4) Any other material breach of security.
(i) The Retail Delivery of medicinal Cannabis and Cannabis Products shall comply with all State and local Law, including all laws requiring presentment of government-issued identification card, physician's recommendation, or medicinal Cannabis identification card at the time of initial purchase.

U) With respect to medicinal Cannabis, physicians' recommendations for medicinal cannabis use shall be verified by a Retail Delivery Permittee prior to the Retail Delivery any medicinal Cannabis to a qualified patient or primary caregiver and at least every six months thereafter.
(k) A Retail Delivery Establishment may not employ or enter into any agreements with any physicians who recommend medicinal Cannabis; Physician Services are prohibited from any and all Retail Delivery Establishments. (I) A Retail Delivery Permittee shall inspect all Cannabis and Cannabis Products received for quality assurance prior to the Retail Delivery to any Person. (m) The Retail Delivery of Cannabis and Cannabis Products shall occur only after such Cannabis and Cannabis Products have been inspected and quality tested in accordance with applicable State Law, including MAUCRSA. (n) Each Retail Delivery Establishment shall do regular monthly inventories and record the total quantity of Cannabis and Cannabis on the Premises. These records shall be maintained for three years from the date created and shall be open to inspection by the City Manager, the City Manager's Designee, and law enforcement.

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(o) A Retail Delivery Permittee shall register with the City each location where Cannabis or Cannabis Products are stored for purposes of Retail Delivery by such Retail Delivery Permittee within the City.
(p) A Retail Delivery Establishment shall maintain customer and patient and other business records in a secure location (including electronically or cloud-based) j. that is compliant with, as applicable, HIPAA and other federal and state privacy laws.
(q) During the Retail Delivery of Cannabis or Cannabis Products, each vehicle driver shall carry a copy of the Retail Delivery Permit, a copy of the Retail Delivery request, a form of government-issued identification, and all other information required by State and local Law. The driver shall present these documents upon the request of law enforcement, the City Manager, or the City Manager's designee.
(r) Prior to Retail Delivery of Cannabis and Cannabis Products, such Cannabis and Cannabis Products shall be labeled and placed in a tamper-evident package.

Labels and packages of Cannabis and Cannabis Products shall, at minimum, meet the requirements specified under State Law, including MAUCRSA. (s) All Retail Delivery vehicles shall:
(1) Be equipped with, and utilize, a vehicle alarm system. (2) Have and utilize a direct communication system with the related Retail Delivery Establishment.
(3) Keep all Cannabis and Cannabis Products in a secure and locked container.
(4) Have an internal partition between the driver and all passengers from the Cannabis and Cannabis Products storage containers that prevents access by the driver and passengers to all cannabis products from inside the vehicle.
(5) Not carry more Cannabis and Cannabis Products than allowed by State and local Law and required to fulfill all immediate Retail Delivery requests (6) Not display any logo, signage, or other information that identifies, advertises, or lists the services or the products offered.

5.20.130 Medicinal Cannabis and Cannabis Products Distribution. (a) Purpose. The purpose and intent of this Section is to permit and regulate the Distribution of Cannabis and Cannabis Products between Cannabis Permittees in order to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law.
(b) Scope; Medicinal Cannabis Only. This Section permits and regulates the Commercial Cannabis Activity of Distribution of medicinal Cannabis and Cannabis Products pursuant to State Law, including MAUCRSA. Subject to the terms of this Chapter, Distribution Permits may be issued by the City for the

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Distribution of medicinal Cannabis and Cannabis Products pursuant to and in accordance with State Law, including MAUCRSA. Distribution of Cannabis and Cannabis Products requires a Development Agreement with the City and must be located within the applicable Permit Zone. -,
(c) Distribution activities includes the receiving and releasing of Cannabis and Cannabis Products for inspection, Testing, and quality assurance, as required under applicable State Law and such other activities as are permitted pursuant to State Law.
(d) A Distribution Permittee shall only Distribute Cannabis and Cannabis Products between Cannabis Permittees or to facilities or portions of facilities wholly controlled by such Distribution Permittee to the extent permitted by State Law.
(e) A Distribution Permittee shall inspect all Cannabis and Cannabis Products received by it for quality assurance prior to Distributing to any Cannabis Permittee, as required under applicable State Law.
(f) In addition to the application requirements in Section 0, a Distribution Permittee shall register with the City each location within the City where Cannabis and Cannabis Products are stored for purposes of Distribution activities within the City.
(g) A Distribution Permittee shall Distribute Cannabis and Cannabis Products to Cannabis Permittees only after such Cannabis and Cannabis Products have been inspected and quality tested in accordance with applicable State Law, including MAUCRSA.
(h) A Distribution Permittee may also hold any other Permit type to the extent permitted by State Law. To the extent permitted by State law, a Distribution Permittee that also holds another Permit type may self-distribute its Cannabis Products.

5.20.140 Medicinal Cannabis and Cannabis Products Microbusiness. (a) Purpose. The purpose and intent of this Section is to permit and regulate the medicinal Cannabis and Cannabis Products Microbusiness in order to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law, including MAUCRSA.
(b) Scope; Medicinal Cannabis Only. This Section permits and regulates Microbusinesses, pursuant to State Law, including MAUCRSA. Subject to the terms of this Chapter, Microbusiness Permits may be issued by the City pursuant to and in accordance with State Law, including MAUCRSA. (c) All Microrobusinesses shall require a Development Agreement with the City and must be located within the applicable Permit Zone.
(d) All components of a Microbusiness (i.e., Cultivation, Manufacturing, etc.) must be in compliance with the provisions of this Chapter and State Law, including MAUCRSA.

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(e) The City may authorize the smoking, vaporizing, and ingestion of Cannabis or Cannabis Products on the Premises of a Microbusiness if all of the following are met:
(1) Access to the area where Cannabis consumption is allowed is restricted to persons 21 years of age and older.
(2) Cannabis consumption is not visible from any public place or nonagerestricted area. (3) Sale or consumption of alcohol or tobacco is not allowed on the Premises.

5.20.140 Medicinal Cannabis and Cannabis Products Testing. (a) Purpose. The purpose and intent of this Section is to permit and regulate the Testing of medicinal Cannabis and Cannabis Products in order to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City intends to be on the forefront of medicinal Cannabis research and Testing. The City is authorized to regulate this activity pursuant to State Law.
(b) Scope; Medicinal Cannabis Only. This Section permits and regulates Cannabis and Cannabis Products Testing, pursuant to State Law, including MAUCRSA. Subject to the terms of this Chapter, Testing Permits may be issued by the City for the Testing of medicinal Cannabis and Cannabis Products pursuant to and in accordance with State Law, including MAUCRSA. (c) Testing of Cannabis and Cannabis Products requires a Development Agreement with the City and must be located within the applicable Permit Zone. (d) Each Testing Permittee must employ at least one (1) full time quality control personnel employee.
(e) Testing Permittees must operate, and all Cannabis and Cannabis Products must be properly tested by Testing Permittees, in accordance with applicable State Law.
(f) All Testing devices used by a Testing Permittee must be "UL listed," and/or otherwise approved for the intended use by the City's Building Official, the Fire Department or other person designated by the City Manager or designee. (g) Each Testing Permittee must notify the State Department of Public Health and the City Manager, or the City Manager's designee, within one business day after the receipt of notice of any kind that its accreditation has been denied, suspended, or revoked.

SECTION 10. Recognizing that there is a potential conflict between federal and State law, it is the City Council's intention that this Ordinance shall be deemed to comply with applicable State Law and shall defer to such applicable State Law through preemption.

SECTION 11. The City Council determines that it is in the best interest of the residents of the City to allow Commercial Cannabis Activities in compliance with applicable State Law, including MAUCRSA, to be established and operated as permitted uses within certain areas of the City subject to the regulations and restrictions provided in this

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Ordinance. It is the City Council's intention that nothing in this Ordinance shall be construed to:

1. Allow a Person to engage in conduct that endangers others or causes a public nuisance.

2. Allow any activity relating to Cannabis that is otherwise not permitted under State law.

SECTION 12. The City Council finds that the actions contemplated by this Ordinance are exempt from the California Environmental Quality Act pursuant to Section 15061 (b )(3) and 15305 of the Guidelines, in that the Ordinance alone does not have the potential for causing a significant effect on the environment. Further permits and approvals will be required before any activity that will affect the environment will be permitted. In addition, Business and Professions Code Section 26055 exempts local ordinances from CEQA that authorizes commercial cannabis activity through discretionary review and approval.

SECTION 13. If any section or provision of this Ordinance is for any reason held to be invalid, unconstitutional, illegal, or unenforceable by any court of competent jurisdiction, or contravened by reason of any preemptive legislation, then such section or provision shall be severed and shall be inoperative, and the remainder of this Ordinance shall remain in full force and effect.

SECTION 14. By regulating Commercial Cannabis Activity, the City is only undertaking to preserve the general welfare through implementing the MAUCRSA. The City Council is not assuming, nor is it imposing on its officers and employees, an obligation for which a breach thereof would expose the City to liability in money damages to any Person who claims that such breach proximately caused injury. To the fullest extent permitted by law, the City shall assume no liability whatsoever, and expressly does not waive sovereign immunity, with respect to any provision of this Ordinance or for the activities of any Cannabis Permittee. To the fullest extent permitted by law, any actions taken by a public officer or employee under the provisions of this Ordinance shall not become a personal liability of any public officer or employee of the City. Nothing in this Ordinance shall be deemed or considered in any respects to constitute authorization to violate any law.

SECTION 15. Inconsistent Provisions. Any provision of the Cudahy Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to the extent necessary to implement the provisions of this Ordinance.

SECTION 16. Severability. If any section, subsection, subdivision, paragraph, sentence, clause or phrase of this Ordinance, or any part thereof is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance or any part thereof. The City Council hereby declares that it would have passed each section, subs,ection, subdivision, paragraph, sentence, clause or phrase thereof,

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irrespective of the fact that any one or more section, subsection, subdivision, paragraph, sentence, clause or phrase would be subsequently declared invalid or unconstitutional.

SECTION 17. Publication and Effective Date. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in a newspaper of general circulation within fifteen (15) days after its adoption. This Ordinance shall become effective thirty (30) days after adoption.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Cudahy at the / ." ,_, regular meeting of this 11th day of September, 2017. ,.,_,,,_ /4. ~VY

STATE OF CALIFORNIA

COUNTY OF LOS ANGELES

CITY OF CUDAHY
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)
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SS:

Chris Garcia
Mayor
I, Richard Iglesias, Deputy City Clerk of the City of Cudahy, hereby certify that the foregoing Ordinance No. 673 was introduced for a first reading on the 14th day of August 2017 and approved for a second reading and adopted by said Council at its regular meeting held on the 11th day of September, 2017 by the following vote, to-wit:

AYES: Markovich, Hernandez, Garcia
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NOES: Guerrero
ABSTAIN: None
ABSENT: Sanchez
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Richard lgles~a~ / 7 · · · ·-:---___ __
Deputy City B r:I<
ATTACHMENT B Page 2960 of 3559
EXHIBIT "A": OVERLAY ZONE
IIABI! NA~ l'!ATIJRl!B
,-.... I._.J Cuclohy Boundary
-Railroad, EXISTING ZONING - Boundaries of Overlay Zone .,r Portion of High Density Residential Zone which shall be available for Medicinal Commercial Cannabis Activity upon rezoning by the City Council by General Plan Amendment, Zoning Map Amendment, or other means.

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CUDAHY GENERAL PLAN
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ATTACHMENT C

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ORDINANCE NO. 700

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
CUDAHY, CALIFORNIA, APPROVING: (1) A DEVELOPMENT
AGREEMENT [NO. DA18-001C] BY AND BETWEEN THE CITY OF

CUDAHY AND STAPLE ROOM, LLC, A CALIFORNIA LIMITED
LIABILITY COMPANY AND (2) THE ISSUANCE OF A COMMERCIAL

CANNABIS PERMIT
WHEREAS, to strengthen the public planning process, encourage private participation in comprehensive planning and reduce the economic risk of development, the Legislature of the State of California 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 property development agreement with any person having legal or equitable interest in real property for the development of such property in order to establish certain development rights; and WHEREAS, in accordance with California law, the City of Cudahy has adopted Municipal Code Chapter 20.28 (Development Agreements) [Renumbered as Part 9 of the Zoning Code §§20.84.530-20.84.640 adopted by the City Council on 7/17/18] establishing the procedures and requirements for the consideration of development agreement with the City; and WHEREAS, on September 11, 2017, the City Council for the City of Cudahy passed Ordinance No. 673 establishing regulations and a discretionary review process for the allowance of medicinal-only commercial cannabis activities (cultivation, distribution, manufacturing, deliveries, micro-business and laboratory testing) in a specified Overlay Zone through a development agreement; and
WHEREAS, all procedures of the California Environmental Quality Act ("CEQA"), California Public Resources Code §21000 et seq., and the CEQA guidelines, title 14 of the California Code of Regulations, chapter 3, §15000 et seq. have been satisfied. The City has found that the proposed Project is Categorically Exempt from California Environmental Quality Act (CEQA) requirements under provisions of CEQA Guidelines Section 15301 - Existing Facilities.

This exemption applies to projects characterized as alterations to existing facilities meeting the conditions described in Section 15301;
WHEREAS, the City of Cudahy Planning Commission ("Planning Commission") conducted a properly noticed public hearing to consider approval of a Commercial Cannabis Permit and a Development Agreement (as defined below), at which testimony and evidence, both written and oral, were presented to and considered by the Planning Commission; and WHEREAS, the City Council shall approve a development agreement by ordinance; and WHEREAS, subsequent to receipt of a report on the Planning Commission's actions, the City Council conducted a properly noticed public hearing to consider the approval of a Commercial Cannabis Permit and Development Agreement, at which testimony and evidence, both written and ATTACHMENT D Page 2971 of 3559
Ordinance No. 700

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oral, were presented to and considered by the City Council.

NOW THEREFORFE, 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. APPROVAL OF DEVELOPMENT AGREEMENT
That the City Council hereby approves the Development Agreement By and Between the City of Cudahy and Staple Room, LLC, a California limited liability company ("Development Agreement") [DA#18-015C], a copy of which is attached hereto and incorporated herein by this reference as Exhibit "A," subject to the terms and conditions stated therein.

SECTION 3. APPROVAL OF COMMERCIAL CANNABIS PERMIT
That the City Council hereby approves Commercial Cannabis Permit No. CCP18-0015, subject to the terms and conditions stated therein, to allow a Commercial Cannabis Facility for the Site located at4931 Cecelia Street, City of Cudahy, CA as set forth in the Development Agreement. A copy of the permit is attached hereto and incorporated herein by this reference as Exhibit "B." The Commercial Cannabis Permit shall be issued upon execution by the City of the Development Agreement.

SECTON 4. SEVERABILITY
That the City Council declares that, should any provision, section, paragraph, sentence or word of this Ordinance be rendered or declared invalid by any final court action in a court of competent jurisdiction or by reason of any preemptive legislation, the remaining provisions, sections, paragraphs, sentences or words of this Ordinance as hereby adopted shall remain in full force and effect.

SECTION 5. EFFECTIVE DATE OF ORDINANCE
That this Ordinance shall take effect thirty (30) days after its second reading by the City Council.

SECTION 6. EXECUTION OF DEVELOPMENT AGREEMENT
The Development Agreement shall not be executed by the City until on or after the effective date of the Ordinance.

SECTION 7. RECORDATION OF DEVELOPMENT AGREEEMENT
That the City Clerk is hereby directed to record the fully executed Development l
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Ordinance No. 700

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Agreement with the County Recorder for the County of Los Angeles no later than ten (10) days after its execution.

SECTION 8. CERTIFICATION
That the City Clerk shall certify to the passage of this Ordinance and shall cause the same to be published, in full or in summary format, according to law.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Cudahy at the regular meeting of this 18th day of December, 2018.

ATTEST:

Chris Garcia
Mayor
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Ordinance No. 700

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ST ATE OF CALIFORNIA

COUNTY OF LOS ANGELES

CITY OF CUDAHY
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)
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CERTIFICATION
SS:

I, Richard Iglesias, Deputy City Clerk of the City of Cudahy, hereby certify that the foregoing Ordinance No. 700 was introduced for a first reading on the 4th day of December, 2018 and approved for a second reading and adopted by said Council at its regular meeting held on the 18th day of December, 2018 by the following vote, to-wit:

A YES: Gonzalez, Hernandez, and Garcia
NOES: Sanchez
ABSENT: None
ABSTAIN: Markovich
fi-~ ~~ ~ ~
· Richard IglesiasY
Deputy City Clerk
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ATTACHMENT D Page 2974 of 3559
Ordinance No. 700
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EXHIBIT "A"

DEVELOPMENT AGREEMENT

BY AND BETWEEN

THE CITY OF CUDAHY

AND VM EVERGREEN, LLC

A WYOMING LIMITED LIABILITY COMPANY

SEE ATTACHMENT
ATTACHMENT D Page 2975 of 3559
Ordimmce No. 700

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EXHIBIT "B"

COMMERCIAL CANNABIS PERMIT

SEE ATTACHMENT
[Th e Permit will be based upon the Staff Report with
Conditions of Approval in a Letter to Follow]
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ATTACHMENT E

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ADMINISTRATIVE RECORD FOR

REVIEW HEARING
Staple Room, LLC
January 8, 2024
1 of 385 ATTACHMENT F Page 2981 of 3559

REVIEW HEARING STAFF REPORT
Date:

To:

From:

January 8, 2024
Hearing Officer, Steve Napolitano
Juan Arauz, AICP, Community Development Director
Prepared By: Jessica Guillen, Assistant Planner
Concurrence: Cecilia Madrigal-Gonzalez, Senior Planner, Joshua Calhoun, Finance Director, Glenn Ward Calsada, Special Counsel, Raul Diaz, Building Official and Paloma McEvoy, Assistant City Attorney.

Subject: Compliance Hearing relating to Commercial Cannabis (“CCP”) 18-0015 and Development Agreement (“DA”) 18-015C between Staple Room, LLC (“Operator”) and the City of Cudahy (“City”).

RECOMMENDATION
Staff recommends that the Hearing Officer take the following action(s):

1. Hear the evidence presented by the City and the Operator; and

2. Make a determination that the Operator is not in compliance with the terms and conditions of DA18-015C with the City and find that the Operator is in default of contractual obligations set forth in the DA; and

3. Make a determination that the Operator is not in compliance with the Conditions of Approval set forth in CCP18-0015; and

4. Make a recommendation to the City Manager for Planning Commission and City Council to adopt an ordinance repealing Ordinance No. 700 and terminate DA18-015C and revoke the Operator’s interest under CCP18-0015.
2 of 385 ATTACHMENT F Page 2982 of 3559

On November 19, 2018, the Planning Commission recommended the City Council to approve CCP18-0015 to permit cannabis manufacturing and distribution activities at 4931 Cecilia Street (“Site”), subject to the approval of a development agreement between the City and Operator for cannabis manufacturing and distribution.

On December 4, 2018, the City Council adopted Resolution No. 18-65 (Attachment B) approving the issuance of CCP18-0015 (Attachment C) that imposed conditions of approval upon the Operator subject to the execution of a development agreement with the City.

On December 4, 2018, the City Council conducted the first reading to adopt Ordinance No. 700 (Attachment D) approving DA18-015C (Attachment E). The second reading was conducted on December 18, 2018, approving Ordinance No. 700 inclusive of Exhibits A-F (Attachment F) between Operator and the City authorizing commercial cannabis manufacturing and distribution activities at 4931 Cecilia Street (“Site”) as illustrated in Figures 1 and 2 below. The Site Plan and Floor Plan are incorporated by reference in Section 3.c of DA18-015C. Recital I of DA18-015C permits the Operator to utilize an approximately 8,525 square foot (“sf”) building, inclusive of 2,933 sf dedicated to cannabis manufacturing and 3,689 sf dedicated to cannabis distribution activities.
3 of 385 ATTACHMENT F Page 2983 of 3559
FIGURE 1 – AERIAL OF SITE
FIGURE 2 – FLOOR PLAN
On October 2, 2019, the City provided the Operator with a Notice of Delinquency (Attachment G) prior to placing the Operator in the default status due to payment non-compliance with the Development Agreement and Commercial Cannabis Permit, inclusive of the payment of Community Benefit Fees, Cost Recovery Fees, and Non-Operating Fees1 in the amount of fiftyseven thousand four hundred forty-two dollars and eighty cents ($57,442.80). This letter included 1 As used herein, the terms Operating Fees and Non-Operating Fees are used interchangeably.

Site
4931 Cecilia Street
4 of 385 ATTACHMENT F Page 2984 of 3559
a list of prior efforts by the City to achieve compliance. The Operator was given no later October 17, 2019, to pay the past due amounts, however, the default was not timely cured.

On May 4, 2021, the City provided the Operator with a Notice of Default (Attachment H) due to payment non-compliance with the payment of fees due in the amount of two hundred twelve thousand six hundred eighty-four dollars and sixty-one cents ($212,684.61). The Operator was given no later than thirty (30) days to cure the default, however, the default was not timely cured.

From May 2021 through August 2021, the City’s Building & Safety Division received the following plan check submittals and/or issued the building permits for the Site (Attachment I):
• Building Permit No. 8220 (Installation of perimeter fence) issued by the City’s Building & Safety Division on May 19, 2021.
• Building Permit plan check was received on July 12, 2021, for interior tenant improvements at the Site as demonstrated in Figure 3 below and Attachment J. The plan check submittal received approval on February 8, 2022. However, the plans submitted by the Operator to the City’s Plan Check Consultants do not conform to the original Site and Floor plans approved by the City in the Operator’s CCP and DA as shown in Figures 1 and 2 above. Additionally, the non-conforming plans submitted included 4,139 sf cultivation space located in Flower Room 1, 2,3 and Vegetation Room 1, which is outside of the scope the Operator was approved for (Attachment J). The Operator was authorized by the City for commercial cannabis manufacturing and distribution only.

FIGURE 3 – NON-CONFORMING FLOOR PLAN
5 of 385 ATTACHMENT F Page 2985 of 3559
• Plumbing Permit No. 8318 (Installation of trench drains, floor drains, plumbing pipes) issued by the City’s Building and Safety Division on August 9, 2021. • Electrical Permit No. 8308 (Installation of an electrical panel and circuit) issued by the City’s Building & Safety Division on August 3, 2021.

On October 19, 2021, the City sent the Operator a Final Demand Letter due to payment noncompliance (Attachment K) due to payment non-compliance, informing the Operator that fees and penalties had accumulated to two hundred thirty-one thousand forty-six dollars and thirtyfive cents ($231,046.35). The Operator was given no later than thirty (30) days to cure default, however, the default was not timely cured.

On December 6, 2022, the City Manager presented the City Council with a proposed Cannabis Deferment and Payment Program (“Payment Agreement”) to assist cannabis operators with the accumulated non-operating and other fees by deferring and providing additional time for payment without penalty. The City Council directed the City Manager to offer the Payment Agreement to Operators who have defaulted on their payment obligations. On December 7, 2023, the City presented the Payment Agreement to the Operator (Attachment L). All cannabis operators interested in participating in this program were given no later than January 31, 2023, to execute the Payment Agreement. The City received interest from the Operator and due to their good-faith negotiations the City extended the deadline to execute a Payment Agreement.

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 accumulated NonOperating 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.

On February 1, 2023, the City’s Finance Department presented the Operator with a Letter Agreement agreeing to a payment plan to forbear outstanding payment due on DA18-015C (Attachment M). The Operator accepted the proposed terms on February 2, 2023, and agreed to begin payments on March 1, 2023. The Operator also 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 status’ on its obligations under its 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.” The Letter Agreement also provided that if the 6 of 385 ATTACHMENT F Page 2986 of 3559
Operator is more than thirty (30) days late on any of the forbearance payments due under the Letter Agreement or fees and costs under the Development Agreement would be deemed a material breach of the Letter Agreement. The Letter Agreement also provided that if the Operator is more than thirty (30) days late on any of the forbearance payments due under the Letter Agreement or fees and costs under the Development Agreement would be deemed a material breach of the Letter Agreement.” The Letter Agreement that in the event of an uncured default under the Letter Agreement, the Letter Agreement would terminate without further notice to the Operator allowing the City to “exercise any and all rights and remedies under the Development Agreement and revocation of the CCP.” The Operator accepted the proposed terms on February 2, 2023, and agreed to begin payments on March 1, 2023.

Between April 2023 and June 2023, the City provided the Operator with three (3) Notices of Delinquency (Attachment N) and provided an opportunity to cure outstanding payments due.

The notices sent in April and May provided the Operator thirty (30) days to cure the default, while the June 2023 notice provided ten (10) days to cure, otherwise the Letter Agreement would be terminated. The City also provided the Operator with statements reflecting a summary of the amounts due on March 6, 2023 and April 6, 2023. However, the default on the Letter Agreement was not timely cured and therefore the Letter Agreement was terminated and no longer in full force and effects as of June 16, 2023. Accordingly, the total of all past due fees at the time the Letter Agreement was terminated and an amount of $446,399.79 was due and owed.

On June 23, 2023, the City sent a Final Demand Letter (Attachment O) demanding Operator to respond to the following demands: 1) Proof of the revival (or request for revival) of the LLC’s entity status with the California Secretary of State; 2) Forwarding your payment for the total past due amount; 3) Contact City staff for a meeting to revise CCP’s Schedule of Performance and for further information to become compliant with DA18-015C and CCP18-0015. The Operator did not respond in a timely manner and failed to make any attempt to cure the defaults within the thirty (30) day period.

On August 9, 2023, the City issued an Escrow Account Letter (Attachment P) requiring all cannabis Operators to open an escrow account by September 15, 2023, to ensure payment of Cost Recovery Fees consistent with the escrow accounts required to be opened and maintained by all cannabis operators within the City. As of the writing of this report, the Operator has not opened an escrow account nor made any payments into the account.

Under Section 5 of DA18-015C the City Manager or his/her designee(s) have the right to enter all Site from time to time unannounced for the purpose of making reasonable inspections to observe and enforce compliance with the Development Agreement and state and local laws and regulations without the requirement of a search warrant, subpoena, or court order. On October 10, 2023, the City staff from the Building and Safety Division conducted an inspection of the Site and issued a stop work notice due to unpermitted construction. During the inspection the 7 of 385 ATTACHMENT F Page 2987 of 3559
following violations of building, fire, and plumbing codes were observed: (1) Installation of interior nonstructural walls (2) Installation of plumbing pipes (3) Installation of metal framing (4) Installation of fire sprinkler lines (5) Completion of restroom remodel (Attachment Q). All violations observed were constructed without obtaining property permits and/or inspections, the City has no record of the Operator submitting applications for building permits for the unpermitted work. The Operator has failed to take necessary actions to correct the stop work notice. To correct the actions, the Operator is required to obtain requisite approvals and permits from the City Planning Division, Building & Safety Division, and the County Fire Department. As of the writing of this report, the Operator has not obtained requisite approvals and permits from the City Planning Division, Building & Safety Division, or the County Fire Department.

On October 24, 2023, the City issued a letter (Attachment R) 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 $14,950.50. As of December 1, 2023, the Operator owes the City four hundred eighty-two thousand six hundred thirty-nine dollars and sixty-five cents ($482,639.65). 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 the Review Hearing on January 8, 2023.

On November 27, 2023, the City issued to the Operator a Notice of Review Hearing (Attachment S) with the hearing date, time, and place.

As of December 18, 2023the website for the California Department of Cannabis Control shows that Staple Room, LLC’s cannabis manufacturer license has been withdrawn and is no longer active, there is no record for on the website for cannabis manufacturing activities. (Attachment T.) or see https://search.cannabis.ca.gov/results?searchQuery=staple%20room.

Pursuant to the CMC Section 5.20.080(6), “[a]ny material violations of this chapter or any other relevant city law by a cannabis permittee, or cannabis permittee’s agent, is ground for suspending or revoking the relevant cannabis permit.” To suspend or revoke a cannabis permit the City Manager must determine “that the cannabis permittee has failed to comply with any conditions of approval, or any agreement or covenant.” (CMC § 5.20.080(6)(a).) 8 of 385 ATTACHMENT F Page 2988 of 3559
City staff recommends that the Hearing Officer review the material violations and evidence and make the following findings in support of finding the Operator to be in default of DA18-015C and in violation of the conditions of approval for CCP18-0015.

Violation #1. Breach of Payment Obligations. Pursuant to the DA Section 5.b (Community Benefit Fees), Section 7.c (Operating Fees) and Section 8 (Cost Recovery Fees), the Operator must pay the City an annual Community Benefit Fee in the amount of $66,667.00 ($13,333.40 down payment and monthly payments in the amount of $5,333.36), a Cost Recovery Fee, and an Operating [or Non-Operating] Fee each year since 2018. The Operator is also obliged to make payments for these fees under Condition of Approval No. 24; the obligation for Non-Operating Fees is also repeated in Condition of Approval Nos. 8 and 16 for manufacturing and distribution activities. The Operator has not made the required payments and as of December 1, 2023, is past due in the amount of $482,639.65 as shown in Table 1 below. Past-due payments continue to accumulate, including late payment penalties. The Operator must pay all required DA fees in accordance with DA terms. Failure to pay fees constitutes a breach of the DA and may result in suspension or immediate revocation of the DA. Accordingly, the Operator is in breach of its payment obligation under DA No. 18-015C.

TABLE 1 – SUMMARY OF PAST AND CURRENT AMOUNTS DUE AS OF DECEMBER 1, 20232 Fee Type Payment Amount Due
Community Benefit Program $ 333,335.00
Cost Recovery Fees $ 94,315.79
Non-Operating Fees $ 43,959.15
Penalties (Late Payment) $ 11,029.71
TOTAL: $ 482,639.65
Finding 1. The Operator breached the terms of Development Agreement No. 18-015C by failing to make all required payments to the City that are required pursuant to the terms of Development Agreement No. 18-015C.

Evidence: On December 18, 2018, Operator executed DA18-015C, which is a legally binding contract between the Operator and the City of Cudahy pursuant to DA Section 5.b (Community Benefit Fees), Section 7.c (Operating Fees), Section 8 (Cost Recovery Fees). In addition, in accordance with Section 7.c(1), late payment of Non-Operating Fees are subject to penalties that begin to accrue once a payment is more than thirty (30) days late. In December 2022, the City offered a Payment Agreement to the Operator which was accepted through the execution of a 2 The amount due at the time of the Review Hearing may differ than the amount presented in Table 1. The City reserves the right to present updated information reflecting the actual amounts owed at the time of the Review Hearing.
9 of 385 ATTACHMENT F Page 2989 of 3559
Letter Agreement with the first payment due on March 1, 2023. Despite the City’s multiple notices and attempts to get the Operator in compliance, the Operator did not make a single required payment in March, April, or May of 2023. The Operator did not cure the delinquency and as a result, the payment plan was null and void as of June 16, 2023. (See, 10-day Notice of Intention to Terminate Letter Agreement (Attachment N). Proper notice of default was given with the opportunity to cure, but the Operator has failed to fulfill its monetary obligations owed to the City. (See, Final Demand Letter and Notice of Default with 30-day Opportunity to Cure (Attachment O).) This failure is a material breach of the DA and grounds for termination of the DA.

First, if the Operator asserts that City Officials previously made representations that nonretail cannabis operators would not have to pay Non-Operating Fees – no such authority is granted under the CMC nor the Development Agreement. Forgiveness of fees due to a government agency, if not for a public purpose, constitutes an unlawful gift of public funds in violation of Article XVI, Section 6 of the California Constitution. The Operator agreed to pay the NonOperating Fees through the execution of DA18-015C, which is further reinforced through Conditions of Approval Nos. 8, 16, and 24. Further the Operator acknowledged the amounts due under the Letter Agreement.

Second, if the Operator asserts that it was unable to move forward with its project due to closures at City Hall caused by the COVID-19 pandemic, and performance under DA18-015C is excused under Section 23.i (Force Majuere), this argument would also fail. Further any argument that the Operator was it was unable to move forward with its project due to closures at City Hall caused by the COVID-19 pandemic also fails. 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 U.) Lastly, the Operator’s default and failure to comply with DA18-015C and CCP18-0015 began prior to the onset of the COVID-19 pandemic and continues as of the writing of this report.

Third, if the Operator asserts that any of the fees due under DA18-015C are subject to and violate the Mitigation Fee Act, such assertion is not supported by the law. The 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 (Gov. Code §§ 65864-65869.5). Fees imposed by development agreements are expressly exempt from the Mitigation Fee Act. Gov.

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 DA 18-015C and subsequent Letter Agreement are not subject to the Mitigation Fee Act.
10 of 385 ATTACHMENT F Page 2990 of 3559

Further, even if the Mitigation Fee Act was applicable to the Contested Fees, to properly contest the Contested 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. (Gov. 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 March 5, 2019. The 90-day statute of limitations to protest such fees ended on June 3, 2019, and has Operator 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.

Fourth, if the issue is raised by the Operator, the holdings in Nollan v. California Coastal Commission and Dolan v. City of Tigard do not apply to the Contested Fees. Nollan, (1987) 483 U.S. 825; Dolan, (1994) 512 U.S. 374. The U.S. Supreme Court holding in Nollan requires exactions to (1) bear a nexus to the burdens imposed by development; and (2) substantially advance a legitimate state interest. The 5-4 U.S. Supreme Court decision in Dolan refines the second prong of the Nollan test and requires development conditions to have a “rough proportionality” to a proposed development’s impact. Dolan at p. 391. However, the holdings in these cases are inapplicable to fees due under DA18-015C, which was adopted by ordinance. Here, the Court notably limited the holding to adjudicative decisions, and not legislative decisions. Id., at p. 385; see also Lingle v. Chevron U.S.A., (2005) 544 U.S. 528, 547 (reaffirming that the rough proportionality requirement applies to adjudicative decisions and not legislative decisions), Leroy Land Development v. Tahoe Regional Planning Agency (1991) 939 F.2d 696, 698 (holding that separately negotiated agreements are not subject to an unconstitutional “takings” analysis because the agreements were entered into voluntarily, in good faith and supported by consideration). In consideration for the fees due under the development agreement, Operator received a ten (10) year term with an option to renew for another ten (10) year term to operate a medicinal commercial cannabis facility.

Finding 2: The Operator has failed to comply with Conditions of Approval No. 1(a) and (b) of the CCP, which required the Operator to pay all City-issued invoices within thirty (30) days of receipt thereof.

Evidence: The City approved Development Agreement No. 18-015C subject to Conditions of Approval, which are incorporated under Section 18 as part of Development Agreement No. 18- 015C. Condition of Approval 1(b) provides that the Operator is required to pay all City-issued invoices within thirty (30) days of receipt thereof. The City has sent the Operator regular monthly invoices since 2019 (Attachment V). The current outstanding fees owed by the Operator have been owed to the City for longer than thirty (30) days. Despite demand and after proper notice of default and opportunity to cure, the Operator has failed to cure its monetary obligations owed to the City.
11 of 385 ATTACHMENT F Page 2991 of 3559
Finding 3: Pursuant to Condition of Approval Nos. 8, 16, and 24 the Operator’sfailure to pay NonOperating Fees due under the Development Agreement and all fess due under the Development Agreement, respectively, constitutes a cross-breach of Development Agreement No. 18-015C and is grounds for revocation of the Operator’s interest in the CCP for the site.

Evidence. Pursuant to the foregoing evidence, the Operator’s non-payment of Non-Operating Fees due under the DA and grounds for revocation of the Operator's interest in the CCP for the Site.

Evidence: As stated above, the Letter Agreement contained language in which the Operator, Operator “acknowledge[d] and agree[d] that past due amounts stated are true and correct and are in fact presently due and owing.” Pursuant to the foregoing evidence, the Operator’s nonpayment of fess due under the Letter Agreement are grounds for termination of DA18-015C.

Violation #2. Breach of Conditions of Approval No. 30 (Time Limits) under CCP 18-0015. CCP Condition of Approval No. 30.A.i sets a 90-day time limit from the effective date of CCP18-0015 for the Permittee to obtain a Zoning Clearance. CCP Condition of Approval No. 30A.ii sets a 90- day time limit from the effective date of the CCP for the Permittee to complete construction of Phase I, otherwise CCP18-0015 expires and becomes null and void pursuant to Condition of Approval 30.i. The Operator had until March 18, 2019, to satisfy these requirements. CCP Condition of Approval No. 30A.iii sets a 180-day time limit from the effective date of the CCP for the Permittee to complete all Tenant Improvements and construction and to obtain a Certificate of Occupancy from the City Building Department, or until June 16, 2019.

Further, Condition of Approval No. 28 requires the Operator to obtain a Zoning Clearance from the Planning Division prior to any construction.

Condition of Approval No. 30.A states the approval decision for this CCP becomes effective upon the expiration of the 15-day appeal period following the approval decision, or when any appeals of the decision are finally resolved. The CCP effective date for the Development Agreement was December 18, 2018. No appeal was ever filed and thus CCP Condition No. No appeal was ever filed and thus, as previously stated, the Operator had until March 18, 2019, and June 16, 2019, to satisfy the foregoing requirements. The City Manager may grant an extension of time if the Permittee has made a diligent effort to implement the Project, but the Operator has made no such efforts.

Finding 5: The Operator has not obtained a Zoning Clearance pursuant to Chapter 20.84 of the 12 of 385 ATTACHMENT F Page 2992 of 3559
CMC, nor has the Operator applied for all the required building permits to complete tenant improvements or otherwise obtained a certificate of occupancy. Therefore, the Operator breached its Conditions of Approval under CCP18-0015 by failing to implement the project within the time frames set forth in Conditions of Approval No. 30.

To the extent the Operator has obtained building permits and constructed any improvements, these permits were obtained in violation of Condition of Approval No. 28 under CCP18-0015. The Operator has not obtained a Zoning Clearance pursuant to Chapter 20.84 of the CMC but has obtained permits for (1) a building permit for a perimeter fence; (2) a plumbing permit for installation of trench drains, floor drains, and plumbing pipes; and (3) an electrical permit for an electrical panel and circuit.

In order for the Operator to complete tenant improvements or otherwise obtain a certificate of occupancy the Operator is required to remove all improvements made illegally as outlined in Attachment Q. Therefore, the Operator breached its conditions of approval for CCP18-0015 by failing to implement the Project within the time limits set forth in Conditions of Approval No. 30.

Evidence:

Operator has obtained three (3) permits for the following: (1) a building permit for a perimeter fence; (2) a plumbing permit for installation of trench drains, floor drains, and plumbing pipes; and (3) an electrical permit for an electrical panel and circuit. The Operator did not submit all required permits in a timely manner in order to accomplish the full tenant improvements required to complete Phase I of construction as described in CCP Condition No. 30. Within the time limits set forth in Condition of Approval No. 30. Without an extension, the deadlines expired in 2019. The City has no record of any request by the Operator to the City Manager for an extension of time. Despite the Operator submitting for building plan check the Operator remains in breach of its conditions of approval by failing to implement the Project within the time limits set forth in the Conditions for Approval No. 30.

In order for the Operator to complete tenant improvements or otherwise obtain a certificate of occupancy the Operator is required to remove all improvements made illegally as outlined in Attachment Q. Therefore, the Operator breached its conditions of approval for CCP18-0015 by failing to implement the Project within the time limits set forth in Conditions of Approval No. 30.

Violation #3. Breach of Conditions of Approval No. 28 (Construction Activities) under CCP 18- 0015. CCP18-0015 Condition of Approval No. 28 states that prior to any construction, the Operator shall obtain a Zoning Clearance for construction from the Planning Division and a Building Permit from the Building and Safety Division.

Finding 6: The Operator failed to obtain any requisite approvals, inclusive of a Zoning Clearance, and permits from the City Planning Division and Building & Safety Division prior to the installation of interior nonstructural walls, metal framing, fire sprinkler lines, and a restroom remodel in the facility. Therefore, the Operator breached Conditions of Approval No. 28 CCP18-0015. 13 of 385 ATTACHMENT F Page 2993 of 3559
Evidence: The City’s Planning Division and Building & Safety Division have no record of any requisite approvals or permits obtained by the Operator. Additionally, the City contacted the Los Angeles Fire Department, Special Occupancy Inspection Unit and no building permits record were found for the fire sprinklers (Attachment W). In accordance with the DA, the Owner shall not operate any facility, and no permit, license, or other approval issued by City shall be valid unless and until the Los Angeles County Fire Department has approved Owner's site plan, floor plan, safety plan, and any other plans that require its approval.

Violation #4: Failure to Obtain State-Issued Cannabis Licenses for Cultivation and Manufacturing. Recital I of the DA states the Owner has applied for two (2) licenses: 1) Manufacturing; and 2) Distribution. Section 21 of the DA states that the facility shall not operate unless the Owner is the holder of a State-issued Cannabis license for the type of commercial cannabis facility or business operation that is the subject of the DA.

Finding 7: The operator has breached the DA because the Owner has not obtained a State-issued Cannabis license for the facility. A search of the term “Staple Room” on the Cal Cannabis website shows that the Operator’s cannabis manufacturer license issued by the state has been withdrawn.

Evidence: See https://search.cannabis.ca.gov/results?searchQuery=staple%20room (Attachment T).

Violation #5. Breach of Conditions of Approval No. 27 (Commercial Cannabis Permit Modification) under CCP 18-0015.

CCP18-0015 Condition of Approval No. 27 states prior to undertaking any operational or construction-related activity which is not expressly described in the CCP conditions, the Operator shall first contact the City Manager, or his designee, to determine if the proposed activity requires a modification of the CCP. The City Manager may, at his sole discretion, require the Operator to file a written and/or mapped description of the proposed activity in order to determine if a permit modification is required.

Finding 8: On July 12, 2021, the submitted building permit plans for interior tenant improvements at the Site without first obtaining a Zoning Clearance from the Planning Division and payment of the required fees. The plan check submittal received approval on February 8, 2022. However, the plans submitted by the Operator to the City’s Plan Check Consultants do not conform to the original Site Plan and Floor Plan approved by the City in the Operator’s CCP and DA. Additionally, the non-conforming plans submitted include cultivation rooms which is a cannabis activity the Operator was not approved for. The Operator was authorized by the City for commercial cannabis manufacturing and distribution only. The Operator never filed a written or mapped description of the design changes made to the facility plans nor made the City Manager aware that such changes would be made. The City Manager has not approved any changes to the facility that do not conform to the original Site Plan and Floor Plan approved by the City in the Operator’s CCP 14 of 385 ATTACHMENT F Page 2994 of 3559
and DA. Therefore, the Operator breached its conditions of approval for CCP18-0015 by failing to receive City Manager approval for the design changes made to the facility set forth in Condition of Approval No. 27.

Evidence:

The Operator has not filed a written or mapped description of the design changes made to the facility as Condition of Approval No. 27 requires. The City Manager has not approved any changes to the facility that do not conform to the original Site Plan and Floor Plan approved by the City in the Operator’s CCP and DA. The Operator remains in breach of its conditions of approval by failing to file the required documentation for the City Manager to approve such changes as expressly described in the Conditions of Approval No. 27.

ENVIRONMENTAL ANALYSIS
The action(s) have been assessed in accordance with the California Environmental Quality Act (“CEQA”) and the environmental regulations of the City. The Project is expected to be categorically exempt from the requirements to prepare additional environmental documentation per CEQA Section 15321. Class 21 (Enforcement Actions by Regulatory Agencies) is applicable to “Actions 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.” Therefore, the action(s) are categorically exempt from the provisions of CEQA.

CONCLUSION
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 Cannabis laws. (CMC § 5.20.010.) Cannabis Operators with development agreements are obligated to comply with all provisions of the CMC, obligations under DA18-015C and Conditions of Approval under CCP18-0015. As discussed above and based on the evidence attached to this report, the Operator has failed to comply with their obligations despite being provided with ample notice and opportunities to achieve compliance. Therefore, staff recommends the Hearing Officer after independent review, consideration, analysis of staff’s report and the information presented, oral and written testimony by all parties and their witnesses, and the record as a whole – make a determination the Operator, Staple Room, LLC, has breached the terms and conditions DA No. 18-015C and recommend that the Planning Commissioner and City Council repeal Ordinance No. 700 and terminate DA18-015C and revoke the interest under CCP18-0015.
15 of 385 ATTACHMENT F Page 2995 of 3559

ATTACHMENT(S)
A. Ordinance No. 673
B. City Council Resolution No. 18-65
C. CCP18-0015 Conditions of Approval
D. Ordinance No. 700
E. Development Agreement No. 18-015C
F. Exhibit A-F of Development Agreement No. 18-015C
G. Correspondence Letter- Notice of Delinquency dated October 2, 2019 H. Correspondence Letter- Notice of Default dated May 4, 2021 I. Issued Building Permits and Submittals
J. Facility Plans Approved by 3rd Party Consultant
K. Correspondence Letter- Final Demand dated October 19, 2021 L. Correspondence Letter- Notice of Cannabis Deferment and Payment Program dated December 7, 2022
M. Letter of Agreement (Payment Plan) dated February 2, 2023 N. Correspondence Letter- April, May, and June Delinquency notices.

O. Final Demand Letter dated June 23, 2023
P. Correspondence – Notice of Escrow Account dated August 9, 2023 Q. Pictures- Unannounced Inspection conducted October 10, 2023 R. Correspondence – Notice of updated payment of fees dated October 24, 2023 S. Notice of Hearing dated November 27, 2023
T. State Cannabis Unified Search Results for Staple Room, LLC U. Executive Order N-33-20
V. Invoices from 2019 to December 1, 2023
W. LA County Fire Department Project Corrections
X. Proof of certified Mailing of Review Hearing
16 of 385 ATTACHMENT F Page 2996 of 3559
ATTACHMENT A.

Ordinance No. 673
17 of 385 ATTACHMENT F Page 2997 of 3559
ORDINANCE NO. 673

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
CUDAHY AMENDING TITLE 5 (BUSINESS LICENSES AND
REGULATIONS) AND TITLE 20 (ZONING) OF THE

CUDAHY MUNICIPAL CODE TO PROHIBIT CANNABIS

RETAILERS/DISPENSARIES CITYWIDE AND TO

ESTABLISH REGULATIONS AND A DISCRETIONARY

REVIEW PROCESS FOR THE ALLOWANCE OF

MEDICINAL-ONLY COMMERCIAL CANNABIS ACTIVITIES
(CULTIVATION, DISTRIBUTION, MANUFACTURING,

DELIVERIES, MICROBUSINESS, AND LABORATORY

TESTING) IN A SPECIFIED OVERLAY ZONE THROUGH A

Page 1 ends

18 of 385 ATTACHMENT F Page 2998 of 3559
diversion of marijuana from states where it is legal under state law in some form to other states; (4) preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity; (5) preventing violence and the use of firearms in the cultivation and distribution of marijuana; (6) preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; (7) preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and (8) preventing marijuana possession or use on federal property;
WHEREAS, in September 2015, the California State Legislature enacted, and Governor Brown signed into law three bills - Assembly Bill 243, Assembly Bill 266, and Senate Bill 643 - which together comprise the Medical Marijuana Regulation and Safety Act (the "MMRSA"). The MMRSA created a comprehensive dual state licensing system for the cultivation, manufacture, retail, sale, transport, distribution, delivery, and testing of medical cannabis;
WHEREAS, on August 22, 2016, the City Council of the City of Cudahy (the "City Council" of the "City") adopted Interim Urgency Ordinance No. 656U to establish a temporary moratorium on medical "commercial cannabis activities," as defined under the MMRSA, for a period of 45 days and extended such moratorium for an additional period of 22 months and 15 days under Interim Urgency Ordinance No. 661, on September 26, 2016;
WHEREAS, the MMRSA was renamed the Medical Cannabis Regulation and Safety Act (the "MCRSA") under Senate Bill 837 in June 2016, which also made substantive changes to the applicable state laws, which affect the various state agencies involved in regulating cannabis businesses as well as potential licensees; WHEREAS, on November 8, 2016, the Control, Regulate, and Tax Adult Use of Marijuana Act ("AUMA") was approved California voters as Proposition 64 and became effective on November 9, 2016, pursuant to the California Constitution (Cal. Const., art.

II, § 10(a).). Proposition 64 legalized the nonmedical use of cannabis by persons 21 years of age and over, and the personal cultivation of up to six (6) cannabis plants. On November 14, 2016, the City Council adopted Urgency Ordinance No. 663 to prohibit outdoor personal marijuana cultivation and establish regulations and a permitting process for indoor personal marijuana cultivation;
WHEREAS, AUMA also created a state regulatory and licensing system j governing the commercial cultivation, testing, and distribution of nonmedical cannabis, and the manufacturing of nonmedical cannabis products. On January 9, 2017, Interim Urgency Ordinance No. 666 was adopted by the City Council to establish a temporary moratorium on nonmedical "commercial cannabis activities" for a period of 45 days and extended such moratorium for an additional period of 22 months and 15 days under Interim Urgency Ordinance No. 667, on February 27, 2017; Page2
19 of 385 ATTACHMENT F Page 2999 of 3559
\
I
)
WHEREAS, on June 27, 2017, Governor Brown signed the Legislature-approved Senate Bill 94. SB 94 combined elements of the MCRSA and AUMA to establish a streamlined singular regulatory and licensing structure for both medical and nonmedical cannabis activities given that there were discrepancies between the MCRSA and AUMA. The new consolidated provisions under SB 94 is now known as the Medicinal and Adult-Use Cannabis Regulation and Safety Act ("MAUCRSA") to be governed by the California Bureau of Cannabis Control. MAUCRSA refers to medical cannabis as "medicinal cannabis" and nonmedical/recreational cannabis as "adult-use cannabis"; WHEREAS, on June 27, 2017, the as part of an Economic Development Ad Hoc Committee presentation on revenue-generating opportunities, commercial cannabis regulations and strategies were offered to and discussed by the City Council; WHEREAS, the City seeks to establish an overlay zone in the City in which certain medicinal-only commercial cannabis activities can be conducted in accordance with MAUCRSA and the City's police power under Section 7 of Article XI of the California Constitution;
WHEREAS, it is the purpose and intent of the City to regulate medicinal cannabis in a manner that is consistent with the Cole Memo and promotes the health, safety, and general welfare of the residents and businesses within the City, while limiting any negative impacts;
WHEREAS, the City intends to be on the forefront of groundbreaking research, science, innovation, and development of treatment for symptoms and cures in the field of medicinal cannabis, as scientific research, studies, and data have established that medicinal cannabis can help patients with a vast array of medical conditions; WHEREAS, the City desires to reduce the illegal market for cannabis while minimizing the chances of social harm and creating jobs and revenue for the City; and WHEREAS, nothing in this Ordinance shall be construed to allow persons to engage in conduct that violates the law, endangers others, causes a public nuisance, allows the illegal use or diversion of cannabis, or allows any activity relating to cannabis that is otherwise illegal under California state law, as amended.

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

SECTION 1. The above recitals are true and correct and are incorporated herein.

SECTION 2. Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended by the addition of a new Chapter 20.120 (Commercial Cannabis Overlay Zone), which shall read as follows:

Chapter 20.120 - Commercial Cannabis Overlay Zone.

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20 of 385 ATTACHMENT F Page 3000 of 3559

Page4
21 of 385 ATTACHMENT F Page 3001 of 3559
l

20.120.020 Prohibitions.

20.120.030 Overlay zone.

20.28 (Development Agreements). No such activities shall be permitted without a development agreement within or outside of the boundaries of the Overlay Zone.

The City may approve or deny such a development agreement in its sole and absolute discretion.

20.120.040 Particular restrictions for Atlantic Avenue.

20.120.050 Indoor Horticulture.

Indoor horticulture, excluding cannabis horticulture shall be permitted by-right within the Overlay Zone.

20.120.060 Prohibition on new schools, day cares, and youth centers in overlay zone.

20.120.070 Temporary permits for local events - rights reserved.

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Cudahy City CouncilJuly 16, 2024

Cudahy City Council
July 16, 2024