Second Reading – Cannabis Business License Ordinance Amendments and Cannabis Business Tax Updates

Agenda Item A.4

CONSENT CALENDAR
Meeting Date: December 5, 2023
TO: Mayor and Councilmembers
FROM: Luke Rioux, Finance Director
CONTACT: Cecilia Rubio, Finance Management Assistant
SUBJECT: Second Reading – Cannabis Business License Ordinance Amendments and Cannabis Business Tax Updates
RECOMMENDATION:

A. Conduct second reading (by title only) and adopt Ordinance No. 23-__, entitled “An Ordinance of the City of Goleta , California Amending Chapter 3.08 of Title 3 of the City of Goleta Municipal Code Entitled Cannabis Business Tax and Amending Chapter

5.09 of Title 5 of the City of Goleta Municipal Code Entitled Commercial Cannabis Businesses;” and
B. Find that the adoption of the Ordinance is exempt from the California Environmental Quality Act under Guideline 15301(c) and direct staff to file a Notice of Exemption within five business days.

BACKGROUND:

On July 17, 2018, the City Council adopted licensing procedures and regu lations to regulate commercial cannabis businesses. These regulations were codi fied as Chapter

5.09 into the Goleta Municipal Cod e (GMC). After implementation, the City determined that amendments were necessary to the existing regulations.

On November 6, 2018, the voters passed Measure Z2018, establishing a tax on cannabis business operations within the City of Goleta. This ballot measure subjects cannabis businesses to taxation on gross receipts of cannabis based on classifications up to a maximum of 10 percent.

On May 7, 2019 , the City Council amended Chapter 5.09 to include a more robust application review process, add noticing requirements for retail applications, and conform with new State law since 2018. In addition, the amendment introduced a requirement for every owner, agent, manager, supervisor, or employee of a cannabis business to undergo a Department of Justice (DOJ) “Live Scan” background check. 1 2
On July 20, 2021, the City Council authorized organizational changes . This included transitioning the licensing review and approval functions , previously under the Neighborhood Services and Public Safety Department (NSPS) to the Finance Department. These functions encompass cannabis business license review and approval, as well as the Live Scan review of all applicants, owners, supervisors, and employees.

On March 31, 2022, the City Council held a revenue enhancement workshop, which included a report and analysis on the City’s current cannabis tax rates and business types.

The City Council directed staff to adjust the medical retail tax rate from 0% to 5% .

Additionally, the Council supported updating operational hours for cannabis retailers and streamlining procedural requirements.

Following the March 31, 2022, workshop, City staff gathered additional information from the California Department of Cannabis Control (DCC), our cannabis consultants , and feedback from local cannabis operators and stakeholders on the City’s cannabis ordinances and process. During annual site inspections, staff discussed operations with cannabis businesses seeking further feedback on the City’s ordinance and regulations.

Staff then drafted proposed ordinance changes to reflect input from these various groups and make efforts towards increasing the efficiency and ef fectiveness of the City’s cannabis business tax and licensing process, align with State regulations, and provide flexibility for cannabis business owners on their operations.

On November 7, 2023, the City Council conducted the first reading of an ordinan ce amending the existing GMC Chapter 3.08 (Cannabis Business Tax) and the existing GMC Chapter 5.09 (Commercial Cannabis Businesses). The proposed ordinance, with a minor revision removing the operating hours for the cannabis manufacturing business (already in effect since May 7, 2019), underwent its first reading. Following discussion, the City Council voted to introduce the amended ordinance and proceed with the first reading.

Attachment 3 contains a copy of the sta ff report from that meeting, while Attachment 4 provides a copy of the final proposed Ordinance in its entirety.

DISCUSSION:

The amended ordinance recommended for second reading and adoption increases the medical cannabis retail tax rate in GMC Chapter 3 .08 from 0% to 5% and updates the current cannabis business licensing program found in GMC Chapter 5.09 . For the ordinance to become effective, the City Council must conduct a second reading of the ordinance prior to adopting it. That action is now before the City Council, and accordingly, if the City Council conducts the second reading and adopts the ordinance, it takes effect on January 5, 2024. Staff recommends that the City Council conduct the second reading (by title only) and adopt the ordinance.

FISCAL IMPACTS:

While no immediate fiscal impacts are associated with the recommended actions, the proposed ordinance aims to streamline the cannabis business license application process and provide flexibility for operators on the direction of their business. In addition, these changes will align more closely with State regulations, and help ensure compliance on 2 3
both sides. The change in the medical retail tax rate will ensure parity with the cannabis retail rate and align with nearby jurisdictions. Any fees associated with future changes to their business are recoverable and supported by user fees paid by the applicant.

ALTERNATIVES

The City Council may wish to forego any amendments to GMC Chapter s 3.08 and 5.09 or provide different directions to staff.

Reviewed By: Legal Review By: Approved By:

___________________ ___________________ _________________ Kristine Schmidt Megan Garibaldi Robert Nisbet
Assistant City Manager City Attorney City Manager

ATTACHMENTS:

1. Ordinance No. 18-07 entitled “An Ordinance of the People of the City of Goleta, California, Adding Chapter 3.08 to Title 3 (Revenue and Finance) of the Goleta Municipal Code Establishing a Tax on Cannabis Businesses Operating Within the City of Goleta.”

2. Ordinance No. 19-07 entitled “ An Ordinance of the City of Goleta, California, Amending Chapter 5.09 of Title 5 of the Goleta Municipal Code to Establish Standards and Regulations for Cannabis Businesses.”

3. GMC Chapter 3.08 and 5.09 Proposed Amendments Staff R eport from the November 7, 2023 City Council Meeting.

4. Ordinance No. 23 -__, entitled “An Ordinance of the City Council of the City of Goleta, California, Amending Chapter 3.08 of Title 3 of the City of Goleta Municipal Code Entitled Cannabis Business Tax and Amending Chapter 5.09 of Title 5 of the City of Goleta Municipal Code, Entitled Commercial Cannabis Businesses.”

3 ATTACHMENT 1
Ordinance No. 18-07 entitled “An Ordinance of the People of the City of Goleta, California, Adding Chapter 3.08 to Title 3 (Revenue and Finance) of the Goleta Municipal Code Establishing a Tax on Cannabis Businesses Operating Within the City of Goleta.” 4 ORDINANCE NO. 18-07
MEASURE "Z2018"

AN ORDINANCE OF THE PEOPLE OF THE CITY OF GOLETA,
CALIFORNIA, ADDING CHAPTER 3.08 TO TITLE 3 (REVENUE

AND FINANCE) OF THE GOLETA MUNICIPAL CODE

ESTABLISHING A TAX ON CANNABIS BUSINESSES
OPERATING WITHIN THE CITY OF GOLETA.

THE PEOPLE OF THE CITY OF GOLETA, CALIFORNIA DO HEREBY
ORDAIN AS FOLLOWS:

SECTION 1. Chapter 3.08 is hereby added to Title 3 (Revenue and Finance) of the Goleta Municipal Code and shall read as follows:
"CHAPTER 3.08
CANNABIS BUSINESS TAX.

3.08.010 - Definitions.

For purposes of this Chapter:

A. "Cannabis" means all parts of the plant Cannabis sativa Linnaeus, Cannabis indica, or Cannabis ruderalis , whether growing or not; the seeds thereof; the resin, whether crude or purified, extracted from any part of the plant; and every· compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. "Cannabis" also means the separated resin, whether crude or purified, obtained from cannabis. "Cannabis" also means the term as defined in California Health and Safety Code Section 11018 and is not limited to medical cannabis . "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 defined by Section 11018.5 of the California Health and Safety Code.

B. "Cannabis business" means any business, organization or facility, regardless of form, whether operating for profit or not for profit, that cultivates, processes, stores, tests, packages, labels, distributes, transports, and/or sells, dispenses or delivers cannabis, cannabis products and/or devices for the use of cannabis or cannabis products. "Cannabis business" does not include personal medical or adult use cannabis cultivation authorized by State law and this Code.

A cannabis business shall not be considered to be a religious, social or charitable organization exempt from the payment of business taxes under this Chapter. 65266.00001 \31197178. l 1
5 C. "Cannabis cultivation" means the seeding, planting, watering , warming, cooling, growing, harvesting, drying, curing, grading or trimming of cannabis.

D. "Cannabis distribution" or "Cannabis transport" means any activity involving the commercial procurement, sale, transfer and/or transport of cannabis and cannabis products from one cannabis business to another cannabis business for purposes authorized pursuant to state law.

E. "Cannabis nursery" means a cannabis business that produces only clones, immature plants, seeds and other agricultural products used specifically for cannabis cultivation.

F. "Cannabis processing/manufacturing" shall mean any activity involving the holding, storing, sorting, preparation, labeling and packaging of raw cannabis for retail sale; or involving the production, preparation, propagation, labeling, packaging or compounding of cannabis products either directly or indirectly or by extraction methods, or independently by means of chemical synthesis.

G. "Cannabis product" means cannabis that has undergone a process whereby the raw agricultural product has been transformed into a concentrate, an edible product, or a topical product. "Cannabis product" also means cannabis products as defined by California Health and Safety Code Section 11018.1 and is not limited to medical cannabis products.

H. "Cannabis testing" means any activity involving the testing of cannabis or cannabis products by a facility that is both of the following:

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

2. Registered with the California State Department of Public Health.

I. "Engaged in a cannabis business" means the commencing, conducting , operating, managing or carrying on of a cannabis business and the exercise of corporate, franchise or other business powers, whether done as owner, or by means of an officer , agent, manager, employee, or other representative, within the City, whether operating from a fixed location within the City or coming into the City from an outside location to engage in cannabis business activities . By way of example, a person shall be deemed "engaged in cannabis business" within the City if such person or the person's officer, agent, manager, employee, or other representative acting on behalf of such person:

1. maintains a fixed place of cannabis business within the City; 65266.00001\31197178.1 2
6 2. owns, leases or otherwise has the legal right to occupy real property within the City for cannabis business purposes;

3. regularly maintains a stock of tangible personal property within the City in the ordinary course of cannabis business;

4. performs work or renders cannabis business services to other cannabis businesses or to retail cannabis customers located within the City.

J. "Gross receipts" means, except as otherwise provided in this Chapter, the total amount of monetary consideration actually received or receivable by a cannabis business for performance of any act or service in providing, at wholesale or retail, cannabis and/or cannabis products, for which a charge is made or credit allowed including, but not limited to: membership dues, the value of monetary and in-kind contributions, payments, reimbursement of fees for cultivation, processing/manufacturing, distribution, delivery, retail, storing, exchanging, delivering, making available, or transmitting of cannabis or cannabis products, any payments made, and anything else of value obtained by a cannabis business. Included in "gross receipts" shall be all receipts, cash, credits, and property of any kind without deduction of the cost of the property sold, the cost of the materials used, labor or service costs, interest paid or payable, or losses or other expenses whatsoever. Gross receipts shall not include the following:

1. Cash discounts where allowed and taken on sales;

2. Sales or other applicable state or local tax required by law to be added to the purchase price of cannabis or cannabis products and collected from the purchaser;

3. Such part of the sales price of any property returned by purchasers to the seller as refunded by the seller by way of cash or credit allowances or return of refundable deposits previously included in gross receipts; or

4. Whenever there are included within gross receipts amounts which reflect sales for which credit is extended and such amount proved uncollectable in a subsequent year, those amounts may be excluded from gross receipts in the year they prove to be uncollectable, provided, however, if all or any portion of such amounts excluded as uncollectible are subsequently collected they shall be included in gross receipt for the period when they are recovered.

K. "Medical cannabis retail" means any cannabis business activity involving the retail sale or dispensing to qualified patients or their qualified caregivers of cannabis, cannabis products, or devices for the use of cannabis or cannabis products, either individually or in any combination, for the ultimate consumption or use by qualified patients in accordance with California Health and Safety Code Sections 11362.7 et. seq., the California Medical Marijuana Program 65266.00001 \31197178.1 3
7 Act ("MMPA") , and any other applicable State law authorizing activities related to the medical possession and use of cannabis . "Medical cannabis retail" shall include any medical cannabis delivery to a customer as part of a retail sale.

L. "Non-medical cannabis retail" means any cannabis business activity involving the retail sale or dispensing to customers of cannabis, cannabis products, or devices for the use of cannabis or cannabis products, either individually or in any combination; for any purpose other than medical cannabis retail. "Non medical cannabis retail" shall include any non-medical cannabis delivery to a customer as part of a retail sale.

M. "Person" means any individual, firm, partnership, joint venture, association, social club, fraternal organization, joint stock company, corporation, estate, trust, business trust, receiver, trustee, syndicate or any other group or combination acting as a unit, which is conducting itself as a cannabis business.

N. "State" means the State of California.

0. "Tax Administrator" is the City's Director of Finance, or his or her designee.

3.08.020 - Purpose of Tax.

This tax is a general tax, the revenues from which may be used for unrestricted general revenue purposes of the City.

3.08.030 - Imposition of Tax.

A. Every person engaged in a cannabis business within the City of Goleta, and regardless of whether such business has a permit to operate pursuant to the Goleta Municipal Code, shall pay a cannabis business tax at the following initial rates:

1. Non-medical cannabis retail - 5% of gross receipts ;

2. Medical cannabis retail - 0% of gross receipts;

3. Cannabis cultivation - 4% of gross receipts;

4. Cannabis processing/manufacturing - 2% of gross receipts;

5. Cannabis testing - 0% of gross receipts ;

6. Cannabis nursery - 1 % of gross receipts;

7. Cannabis distribution/transport - 1 % of gross receipts.

8. Multiple Operations. In no event shall any person conducting multiple of the above operations pay more tax than 10% of gross receipts .

B. The rates set forth above may be adjusted by the City Council from time to time, by ordinance or resolution, pursuant to Section 3.08 .050 below , subject to a maximum rate of ten percent (10%) of gross receipts. 65266.00001\31197178.1 4
8 C. If a cannabis business is engaged in retail sales and/or delivery of both medical and a non-medical cannabis, it shall pay the higher applicable business tax rate between the two classes, unless the cannabis business identifies to the City, by reasonable and verifiable standards, the portions of its activities that are tied to medical cannabis retail and those that are tied to non-medical cannabis retail, through the cannabis business' books and records kept in the regular course of business, and in accordance with generally accepted accounting principles, and not specifically created and maintained for tax purposes. The cannabis business has the burden of proving the proper apportionment of taxes under this subsection (C).

D. If a c~nnabis business is engaged in both retail sales and/or delivery and cannabis cultivation, processing/manufacturing, nursery, testing or distribution, it shall pay the highest business tax rate for any class that applies to that cannabis business, unless the cannabis business identifies to the City, by reasonable and verifiable standards, the portions of its activities that are tied to cannabis retail and those that are tied to cultivation, processing/manufacturing, nursery, testing or distribution, through the cannabis business' books and records kept in the regular course of business, and in accordance with generally accepted accounting principles, and not specifically created and maintained for tax purposes. The cannabis business has the burden of proving the proper apportionment of taxes under this subsection (D). No cannabis business engaged in both retail sales and/or delivery and cannabis cultivation, processing/manufacturing, nursery, testing or distribution shall pay more than the maximum 10% rate on gross receipts from its combined activities as set forth in subsection (B) above.

E. No cannabis business shall be deemed to be exempt from the payment of the taxes identified above by any other provision of this Code, unless expressly exempted under this Chapter. ·

3.08.040 - Payment Obligation.

All taxpayers subject to this Chapter must pay the full tax imposed by this Chapter regardless of any rebate, exemption, incentive, or other reduction set forth elsewhere in this Code, except as required by California or Federal law. Failure to pay the tax shall be subject to penalties, interest charges, and assessments as the City Council may establish and the City may use any or all other code enforcement remedies provided in this Code. No provision in this Code can lower the tax rate set forth in this Chapter or otherwise reduce the amount of taxes paid hereunder unless the provision specifically states that the reduction applies. 65266.00001\31197178. l 5
9 3.08.050 - City Council Authorization to Adjust Tax Rate and/or Methodology.

This Chapter authorizes a maximum business tax rate of ten percent (10%) for each of those classes of cannabis business identified in Section 3.08.030(A)(1) through (7) above. The City Council may, by ordinance or resolution, upwardly or downwardly adjust the rate of the tax imposed by this Chapter and may otherwise repeal or amend this Chapter without a vote of the People. However, as required by California Constitution Article XlllC (Proposition 218), voter approval is required for any amendment that would increase the ten percent (10%) maximum rate or methodology of any tax levied pursuant to this Chapter. The People of the City of Goleta affirm that the following actions shall not constitute an increase of the maximum rate or methodology of the tax requiring subsequent voter approval:

A. The upward adjustment of the tax rate applicable to any or all classes of cannabis business, provided the rate does not exceed the ten percent (10%) maximum set forth by this voter-approved Chapter;
B. The restoration of the rate of the tax to a rate that is no higher than the ten percent (10%) maximum set by this voter-approved Chapter, if the City Council has previously acted to reduce the rate of the tax; C. An action that interprets or clarifies the methodology of the tax, or any definition applicable to the tax, so long as interpretation or clarification (even if contrary to some prior interpretation or clarification) is not inconsistent with the language of this Chapter;
D. The establishment of a class of person or service that is exempt or excepted from the tax or the discontinuation of any such exemption or exception; and
E. Resuming collection of the tax imposed by this Chapter, even if the City had, for some period of time, either suspended collection of the tax or otherwise failed to collect the tax, in whole or in part.

3.08.060 - Payment of Tax Does Not Authorize Illegal Activity.

The payment of the tax required pursuant to this Chapter shall not be construed as authorizing the conduct or continuance of any illegal business or of a legal business in an illegal manner. Nothing in this Chapter implies or authorizes that any activity connected with the distribution or possession of cannabis is legal unless otherwise authorized and allowed in strict and full conformance to the provisions of State law and this Code.
65266.00001\31197178. I 6
10 3.08.070 - Cannabis Business Tax Is Not a Sales Tax.

The tax provided for under the provisions of this Chapter is not a Sales, Transactions or Use Tax and shall not be calculated or assessed as such. The tax established under this Chapter shall not be separately identified or otherwise specifically assessed or charged to any customer or client of a cannabis business.

3.08.080 - Amendments and Administration.

A. This Chapter was submitted to the voters for approval. Any amendment to this Chapter to increase the tax above the maximum rate expressly provided in Section 3.08.030(8) shall not become effective until such amendment is approved by the voters. The voters expressly authorize the City Council to amend, modify, change, or revise any other provision of this Chapter as the City Council deems in the best interest of the City, as set forth in Section 3.08.050.

B. The Tax Administrator shall promulgate rules, regulations and procedures to implement and administer this Chapter to ensure the efficient and timely collection of the tax imposed by this Chapter, including without limitation, formulation and implementation of penalties and interest to be assessed for failure to pay the tax as provided.

C. Pursuant to California Constitution Article Xlll8, the appropriation limit for the City is increased to the maximum extent over the maximum period of time allowed under law consistent with the revenues generated by the tax established by this Chapter.

3.08.090 - Returns and Remittances.

The Tax shall be due and payable as follows:

A. The tax established by this Chapter shall be collected quarterly.

Each person owing tax shall prepare and file a tax return to the Tax Administrator setting out the total amount of tax owed for the preceding calendar quarter during which the tax was in effect. The return shall be filed not later than thirty (30) calendar days following the last day of the preceding each calendar quarter. At the time the tax return is filed, the full amount of the tax owed for the preceding calendar quarter shall be remitted to the Tax Administrator.

8. All tax returns shall be completed on forms provided by the Tax Administrator.

C. Tax returns and payments for all outstanding taxes owed the City are immediately due to the Tax Administrator upon cessation of business for any reason.
65266.00001 \31197178.1 7
11 D. Whenever any payment, statement, report, request or other communication received by the Tax Administrator is received after the time prescribed by this Section for the receipt thereof, but is in an envelope bearing a postmark showing that it was mailed on or prior to the date prescribed in this Section for the receipt thereof, or whenever the Tax Administrator is furnished substantial proof that the payment, statement, report, request, or other communication was in fact deposited in the United States mail on or prior to the date prescribed for receipt thereof, the Tax Administrator may regard such payment, statement, report, request, or other communication as having been timely received. If the due date falls on Friday, Saturday, Sunday, or a holiday, the due date shall be the next regular business day on which the City Hall is open to the public.

E. Unless otherwise specifically provided under other provisions of this Chapter, the taxes required to be paid pursuant to this Chapter shall be deemed delinquent if not paid on or before the due date specified in Subsection (A) of this Section.

F. The Tax Administrator is not required to send a delinquency or other notice or bill to any person subject to the provisions of this Chapter and failure to send such notice or bill shall not affect the validity of any tax or penalty due under the provisions of this Chapter.

3.08.100 - Failure to Pay Tax.

A. Any person who fails or refuses to pay any tax required to be paid pursuant to this Chapter on or before the due date shall pay penalties and interest as follows:

1. A penalty equal to twenty-five percent (25%) of the amount of the tax in addition to the amount of the tax, plus interest on the unpaid tax calculated from the due date of the tax at a rate established by resolution of the City Council; and

2. An additional penalty equal to twenty-five percent (25%) of the amount of the tax if the tax remains unpaid for a period exceeding one calendar month beyond the due date, plus interest on the unpaid tax and interest on the unpaid penalties calculated at the rate established by resolution of the City Council.

B. Whenever a check is submitted in payment of a tax and the check is subsequently returned unpaid by the bank upon which the check is drawn, and the check is not redeemed prior to the due date, the taxpayer will be liable for the tax amount due plus penalties and interest as provided for in this Section plus any amount allowed under State law.
65266.00001 \311971 78.1 8
12 C. The tax due shall be that amount due and payable from January 1, 2019 or the first date on which the cannabis business first engaged in business in the City, whichever date occurred last, together with applicable penalties and interest calculated in accordance with Subsection (A) of this Section.

0. The Tax Administrator may waive the first and second penalties of twenty-five percent (25%) each imposed upon any person if:

1. The person provides evidence satisfactory to the Tax Administrator that failure to pay timely was due to circumstances beyond the control of the person and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect, and the person paid the delinquent tax and accrued interest owed the City prior to applying to the Tax Administrator for a waiver.

2. The waiver provisions specified in this Subsection shall not apply to interest accrued on the delinquent tax and a waiver shall be granted only once during any twenty-four (24) month period.

3.08.110 - Refunds.

A. No refund shall be made of any tax collected pursuant to this Chapter, except as provided in this Section.

B. No refund of any tax collected pursuant to this Chapter shall be made because of the discontinuation, dissolution, or other termination of a cannabis business.

C. Whenever the amount of any tax, penalty, or interest has been overpaid, paid more than once, or has been erroneously or illegally collected or received by the City under this Chapter, such amount may be refunded to the person who paid the tax provided that a written claim for refund is timely filed with the City, pursuant to this Code. The period for filing a claim for refund shall be one (1) year from the time the tax was paid or erroneously or illegally collected; provided however, that in no event shall the period to file such claim expire prior to the shortest period allowable for filing a tax refund claim under Government Code Section 911.2. Such claim must clearly establish claimant's right to the refund by written records showing entitlement thereto, and must clearly set forth the facts and legal theories under which the claimant believes he or she has right to a refund. Where the amount of any individual refund claim is in excess of the amount set by ordinance or resolution of the City Council relating to the settlement of general liability claims against the City by the City Manager, City Council approval shall be required.

D. The filing of a written claim pursuant to Government Code Section 935 is a prerequisite to any suit thereon.
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13 E. The Tax Administrator shall have the right to examine and audit all the books and business records of the claimant in order to determine the eligibility of the claimant to the claimed refund. No claim for refund shall be allowed if the claimant refuses to allow such examination of claimant's books and business records after request by the Tax Administrator to do so.

F. Any person entitled to a refund of taxes paid pursuant to this Chapter may elect in writing to have such refund applied as a credit against a cannabis business's taxes for the next calendar quarter.

G. In the event that the tax was erroneously paid and the error is attributable to the City, the amount of the tax erroneously paid shall be refunded to the claimant. If the error is attributable to the claimant, the City shall retain the amount set forth in this Chapter from the amount to be refunded to cover expenses.

H. The Tax Administrator shall initiate a refund of any tax which has been overpaid or erroneously collected whenever the overpayment or erroneous collection is uncovered by a City audit of tax revenues.

3.08.120 - Enforcement.

A. It shall be the duty of the Tax Administrator to enforce each and all of the provisions of this Chapter.

B. For purposes of administration and enforcement of this Chapter generally, the Tax Administrator, with the concurrence of the City Attorney, may from time to time promulgate administrative rules and regulations.

C. The Tax Administrator shall have the power to audit and examine all books and records of cannabis businesses as well as persons engaged in the operation of cannabis businesses, including both state and federal income tax returns, California sales tax returns, or other evidence documenting the gross receipts of or the transaction prices charged by a cannabis business or persons engaged in the operation of a cannabis business, for the purpose of ascertaining the amount of tax, if any, required to be paid by the provisions of this Chapter, and for the purpose of verifying any statements or any item thereof when filed by any person pursuant to the provisions of this Chapter. If such cannabis business or person, after written demand by the Tax Administrator, refuses to make available for audit, examination or verification such books, records, or equipment as the Tax Administrator requests, the Tax Administrator may, after full consideration of all information within the Tax Administrator's knowledge concerning the cannabis business and its business and activities of the person so refusing, make an assessment in the manner provided in Section 3.08.130.
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14 D. The conviction and punishment of any person for failure to pay the required tax shall not excuse or exempt such person from any civil action for the tax debt unpaid at the time of such conviction. No civil action shall prevent a criminal prosecution for any violation of the provisions of this Chapter or of any State law requiring the payment of all taxes.

E. Any person violating any of the provisions of this Chapter or any regulation or rule passed in accordance herewith, or knowingly or intentionally misrepresenting to any officer or employee of the City any material fact in procuring the a cannabis business certificate or permit from the City shall be deemed guilty of a misdemeanor.

3.08.130 - Debts, Deficiencies and Assessments.

A. The amount of any tax, penalties, and interest imposed by the provisions of this Chapter shall be deemed a debt to the City and any person operating a cannabis business without having paid any applicable tax, penalties, and interest shall be liable in an action in the name of the City in any court of competent jurisdiction for the amount of the tax, and penalties and interest imposed on such cannabis business.

B. If the Tax Administrator is not satisfied that any statement filed as required under the provisions of this Chapter is correct, or that the amount of tax is correctly computed, the Tax Administrator may compute and determine the amount to be paid and make a deficiency determination upon the basis of the facts contained in the statement or upon the basis of any information in his or her possession or that may come into his or her possession. One or more deficiency determinations of the amount of tax due for a period or periods may be made.

When a person discontinues engaging in a cannabis business, a deficiency determination may be made at any time within three (3) years thereafter as to any liability arising from engaging in such business whether or not a deficiency determination is issued prior to the date the tax would otherwise be due. Whenever a deficiency determination is made, notice shall be given to the person concerned in the same manner as notices of assessment are given under Subsections (C), (D), and (E) of this Section.

C. Under any of the following circumstances, the Tax Administrator may make and give notice of an assessment of the amount of tax owed by a person under this Chapter:

1. If the person has not filed any statement or return required under the provisions of this Chapter;

2. If the person has not paid any tax due under the provisions of this Chapter;
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15 3. If the person has not, after demand by the Tax Administrator, filed a corrected statement or return, or furnished to the Tax Administrator adequate substantiation of the information contained in a statement or return already filed, or paid any additional amount of tax due under the provisions of this Chapter;

4. If the Tax Administrator determines that the nonpayment of any tax due under this Chapter is due to fraud, a penalty of twenty-five percent (25%) of the amount of the tax shall be added thereto in addition to penalties and interest otherwise stated in this Chapter.

5. The notice of assessment shall separately set forth the amount of any tax known by the Tax Administrator to be due or estimated by the Tax Administrator, after consideration of all information within the Tax Administrator's knowledge concerning the business and activities of the person assessed, to be due under each applicable section of this Chapter, and shall include the amount of any penalties or interest accrued on each amount to the date of the notice of assessment.

D. The notice of assessment shall be served upon the person either by handing it to him or her personally, or by a deposit of the notice in the United States mail, postage prepaid thereon, addressed to the person at the address of the location of the cannabis business appearing on the face of the business license issued under this Code, or to such other address as he or she shall register with the Tax Administrator for the purpose of receiving notices provided under this Chapter; or, should the person have no business license issued and should the person have no address registered with the Tax Administrator for such purpose, then to such person's last known address. For the purposes of this section, a service by mail is complete at the time of deposit in the United States mail.

E. Within ten (10) calendar days after the date of service the person may apply in writing to the Tax Administrator for a hearing on the assessment. If application for a hearing before the City is not made within the time herein prescribed, the tax assessed by the Tax Administrator shall become final and conclusive.

F. If the person requests a hearing, the Tax Administrator shall cause the matter to be set for hearing, which shall be held within thirty (30) calendar days after receipt of the written request for hearing. Notice of the time and place of the hearing shall be mailed by the Tax Administrator to such person at least ten (10) calendar days prior to the hearing, and, if the Tax Administrator desires said person to produce specific records at such hearing, such notice may designate the records requested to be produced.

G. At the time fixed for the hearing, the Tax Administrator shall hear all relevant testimony and evidence, including that of any other interested parties. At 65266.00001 \31197178.l 12
16 the discretion of the Tax Administrator, the hearing may be continued from time to time for the purpose of allowing the presentation of additional evidence. Within a reasonable time following the conclusion of the hearing, the Tax Administrator shall issue a final assessment (or non-assessment), by confirming, modifying or rejecting the original deficiency determination, and shall mail a copy of such final assessment to the person owing the tax. The decision of the Tax Administrator may be appealed pursuant to Section 3.08.140 of this Chapter.

H. Unless appealed, payment of the final assessment shall become delinquent if not received by the Tax Administrator on or before the thirtieth (30th) calendar day following the date of receipt of the notice of final assessment. The penalty for delinquency shall be at the rates set forth herein, along with interest at the rate as set forth by resolution of the City Council, on the amount of the tax, exclusive of penalties, from the date of delinquency, until paid. The applicable statute of limitations regarding a claim by the City seeking payment of a tax assessed under this Section shall commence from the date of delinquency as provided in this subsection.

3.08.140 - Appeals.

A. The provisions of this section apply to any deficiency determination, assessment, or administrative ruling of the Tax Administrator. Any person aggrieved by any decision, deficiency determination, assessment, or administrative ruling of the Tax Administrator, shall be required to comply with the appeals procedure of this section. Compliance with this section shall be a prerequisite to a suit thereon. [See Government Code Section 935(b).]

8. If any person is aggrieved by any deficiency determination, assessment, or administrative ruling of the Tax Administrator; he or she may appeal to the City Manager by filing a notice of appeal with the City Clerk within ten (10) calendar days of the date of the deficiency determination, assessment, or administrative ruling of the Tax Administrator which aggrieved the person.

C. If the person requests an appeal, the City Clerk shall cause the matter to be set for hearing, which shall be held within thirty (30) calendar days after receipt of the written request for appeal. Notice of the time and place of the appeal hearing shall be mailed by the City Clerk to such person at least ten (10) calendar days prior to the hearing, and, if the City Manager desires said person to produce specific records at such hearing, such notice may designate the records requested to be produced. For the purposes of this section, a service by mail is complete at the time of deposit in the United States mail.

D. At the time fixed for the hearing, the City Manager shall hear all relevant testimony and evidence, de novo, including that of any other interested parties. At the discretion of the City Manager, the hearing may be continued from time to time for the purpose of allowing the presentation of additional evidence. 65266.0000 I \31197178.1 13
17 Within a reasonable time following the conclusion of the hearing, the City Manager shall issue a final decision confirming, modifying or rejecting the Tax Administrator's deficiency determination, and shall mail a copy of such final decision to the person owing the tax. The City Manager's decision shall be final and subject only to judicial review shall be pursuant to California Code of Civil Procedure Section 1094.6. Payment of the final assessment shall become delinquent if not received by the Tax Administrator on or before the thirtieth (30th) calendar day following the date of receipt of the City Manager's decision.

3.08.150 - No Injunction/Writ of Mandate.

No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action, or proceeding in any court against this City or against any officer of the City to prevent or enjoin the collection under this Chapter of any tax or any amount of tax required to be collected and/or remitted.

3.08.160 - Future Amendment to Cited Statute.

Unless specifically provided otherwise, any reference to a state or federal statute in this Chapter shall mean such statute as it may be amended from time to time; provided, that such reference to a statute herein shall not include any subsequent amendment thereto, or to any subsequent change of interpretation thereto by a state or federal agency or court of law, to the extent that such amendment or change of interpretation would require voter approval under California law, or to the extent that such change would result in a tax decrease. Only to the extent voter approval would otherwise be required or a tax decrease would result, the prior version of the statute (or interpretation) shall remain applicable. For any application or situation that would not require voter approval or would not result in a decrease of a tax, provisions of the amended statute (or new interpretation) shall be applicable to the maximum possible extent. To the extent that the City's authorization to collect or impose any tax imposed under this Chapter is expanded or limited as a result of changes in state or federal law, no amendment or modification of this Chapter shall be required to conform the tax to those changes, and the tax shall be imposed and collected to the full extent of the authorization up to the full amount of the tax imposed under this Chapter." SECTION 2. Effective Date. Pursuant to California Constitution Article XlllC §(2)(b) and California Elections Code §9217, if a majority of the qualified voters voting in the election on Measure "Z2018" vote in favor of the adoption of such Measure, this ordinance shall be deemed valid and binding and shall be considered as adopted upon the date that the vote is declared by the City Council, and shall go into effect ten (10) days after that date.

SECTION 3. Severability. If any section, sentence, clause or phrase of this ordinance 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 provisions of this ordinance. The People of the City of Goleta hereby 65266.00001\31197178 .J 14
18 declare that they would have adopted this ordinance and each section, sentence, clause or phrase thereof, irrespective of the fact that any one or more section, subsections, sentences, clauses or phrases be declared invalid or unconstitutional.

SECTION 4. Certification/Summary. Following the City Clerk's certification that the citizens of Goleta have approved this Ordinance, the Mayor shall sign this Ordinance and the City Clerk shall cause the same to be entered in the book of original ordinances of said City; and shall cause the same, or a summary thereof, to be published as required by law.

PASSED, APPROVED and ADOPTED by the People of the City of Goleta this 5th day of November, 2018.

ATTEST:
65266.00001 \31197178.l 15
r~<~

PAULA PEROTTE
MAYOR
APPROVED AS TO FORM:
19 ATTACHMENT 2

Ordinance No. 19-07 entitled “ An Ordinance of the City of Goleta, California, Amending Chapter 5.09 of Title 5 of the Goleta Municipal Code to Establish Standards and Regulations for Cannabis Businesses.”
20 ORDINANCE N0.19-07

AN ORDINANCE OF THE CITY OF GOLETA, CALIFORNIA,
AMENDING CHAPTER 5.09 OF TITLE 5 OF THE GOLETA

MUNICIPAL CODE TO ESTABLISH STANDARDS AND

REGULATIONS FOR COMMERCIAL CANNABIS BUSINESSES

THE CITY COUNCIL OF THE CITY OF GOLETA DOES HEREBY ORDAIN AS FOLLOWS:

SECTION 1: FINDINGS
A. In 1996, the California electorate approved Proposition 215, the Compassionate Use Act which allows a patient, with a doctor's recommendation, to use cannabis for medicinal purposes without the fear of prosecution or arrest; and
B. In 2003, the California legislature passed Senate Bill 420 (Medical Marijuana Program Act) which amended the Health and Safety Code to permit the establishment of medicinal cannabis dispensaries for the distribution of cannabis for medicinal purposes; and
C. In 2005, the California Board of Equalization began issuing seller's permits for sales consisting of medicinal cannabis; and
D. In 2008, the California Attorney General issued guidelines for the security and non-diversion of cannabis grown for medical use; and
E. In 2015, the Governor signed into law Senate Bill 643, Assembly Bill 266, and Assembly Bill 243, collectively referred to as the Medical Marijuana Regulation and Safety Act ("MMRSA") further amended by Senate Bill 837in 2016 as the Medicinal Cannabis Regulation and Safety Act ("MCRSA"), which established regulations and a state licensing system for medical cannabis cultivation, manufacturing, delivery, and dispensing; and F. In 2016, the voters of the State of California approved and passed Proposition 64 also known as the Adult Use of Marijuana Act ("AUMA "); and G. In 2017, the Governor signed into law Senate Bill 94 also known as Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA); and H. Pursuant their police power and land use authority under Article 11, Section 7 of the California Constitution, cities are free to adopt and enforce local ordinances that regulate the location, operation, or establishment of medicinal cannabis; and
I. After studying various alternatives for the regulation of commercial cannabis considering input from stakeholders and a public hearing, and reviewing the legal status of cannabis under applicable law, the City Council finds that the regulation of commercial cannabis activities is necessary to protect the public health, safety, and welfare by mitigating the adverse secondary effects from the operations of these uses; and
J. The City of Goleta ("City") has a compelling interest in ensuring that cannabis is not distributed in an illicit manner, in protecting the public health, safety and welfare of its residents and businesses, in preserving the peace and quiet of the neighborhoods in which these uses may operate, and in providing access of cannabis to residents; and
21 K. Chapter 5.09 of Title 5 of the Goleta Municipal Code regulates and requires licensure of cannabis businesses within the City.

L. The City desires to amend Chapter 5.09 to add more requirements to the licensure of cannabis businesses within the City.

M. The proposed Ordinance has been reviewed by City staff in accordance with the Environmental Checklist Form (Appendix G of the CEQA Guidelines) to determine if there would be any possibility that the proposed ordinance would create any significant environmental impacts, and the City has determined that the establishment of regulations for commercial cannabis businesses do not meet any of the thresholds contained in the Checklist that would trigger a significant environmental impact, and thus according to the "general rule exemption" (Section 15061 (b)(3) of the CEQA Guidelines, projects which have no potential for causing a significant effect on the environment are not subject to CEQA, no further environmental analysis is required.

SECTION 2: LAND USE REFERENCE
This Chapter corresponds with City Ordinance 19-_ (Cannabis Land Use Ordinance) and will be taken together with the provisions of the City Ordinance 19-_ to determine whether a cannabis business is permitted. Any commercial cannabis business in the City must also operate in compliance with the City's zoning regulations.

SECTION 3: AUTHORITY
This Ordinance is adopted pursuant to the authority granted by state law, including but not limited to, Article XI, Section 7 of the California Constitution, the Compassionate Use Act of 1996, as amended, (Health and Safety Code Section 1 1362.5), the Medical Marijuana Program, as amended, (Health and Safety Code Section 11362.7 et seq.), the Medical Marijuana Regulation and Safety Act, as amended, (Business and Professions Code Section 144, 2525, 2220.05, 2241 .5, 2242.1, 19302.1, 19319-19325, 19331, 19335, 19337, 19348 et seq.; AB 266, AB 243, and SB 643; hereafter "MMRSA"), the Adult Use of Marijuana Act (Business and Professions Code Section 14235.5, 1 1362.775, 26001, 26053, 26070, 26100, 26110, 26130; Proposition 64), and the Medicinal and Adult Use Cannabis Regulation and Safety Act (Fish and Game Code Section. 1602 and 1617 et seq.; Business and Professions Code Section 26000-26220 et seq.; Food and Agricultural Code Section 37104, 54036, and 81010 et seq.; Health and Safety Code Section 1 1006.5-11553 and 109925 et seq.; Revenue and Taxation Code Section 34010-34021.5 et seq.; Vehicle Code Section 2429.7 et seq.; SB 94; hereafter "MAUCRSA"); and any other state statutes regulating cannabis (hereinafter collectively referred to as "State Law").

SECTION 4: AMENDMENT OF CHAPTER 5.09
Chapter 5.09 is hereby amended as follows:

5.09.010 COMPLIANCE WITH STATE AND LOCAL LICENSING

REQUIREMENTS
Commercial cannabis activity as defined by the State of California or the City shall operate in conformance with all regulations and standards set forth in this Ordinance No. 19-07 Cannabis Business License Ordinance 22 Chapter of the Municipal Code to assure that the operations of the retailer, cultivation facility, manufacturing facility, distribution facility, testing facility, microbusiness or any other commercial cannabis activity as defined by the State of California or allowed by the City are in compliance with local and state law and are established to mitigate any adverse secondary effects from its operations.

Cannabis operators shall be required to obtain a State license and shall comply with any applicable State licensing requirements, such as operational standards and locational criteria. Multiple cannabis uses and licenses proposed on any one site shall occur only if authorized by the State and the City and only if all uses proposed are allowed under the City's zoning regulations.

5.09.020 DEFINITIONS
When used in this Chapter, the following words are defined as follows. If a word is not defined in this Section, other provisions of the Goleta Municipal Code, or City ordinance, the definitions shall be as in state law or, in case where a definition is not provided in state law, as determined by the Director of Neighborhood Services and Public Safety.

A. "Cannabis Business" means a person operating any or all commercial activities relating to cannabis that requires a license under State law.

B. "Cannabis Business License" ("CBL") means a license issued by the City under this Chapter.

C. "City Manager'' shall mean the City of Goleta City Manager, or designee.

D. "Director" shall be the Director of Neighborhood Services and Public Safety or designee.

E. "Fire Chief' shall mean the Santa Barbara County Fire Department Fire Chief, or designee.

F. "Person" means any natural person, partnership, cooperative, association, corporation, personal representative, receiver, trustee, assignee, or any other legal entity.

G. "Police Chief' means thE;? City of Goleta Police Chief, or designee.

H. "Seller's Permit" means a state business license that allows a business to make sales of tangible personal property in California.

I. "State Law" means the codified sections promulgated by the California State Legislature related to commercial cannabis businesses.

5.09.030 GENERAL PROVISIONS FOR COMMERCIAL CANNABIS

ACTIVITIES IN THE CITY
A. Prohibitions. It shall be unlawful for any person to engage in, conduct or carry on, in or upon any premises within the City a Cannabis Business without a CBL from the City.

B. Cannabis Business License Required.

1. Each Cannabis Business shall have a CBL specific to the business activity defined by State law regardless of whether the business activity is for medicinal or adult-use purposes. The following is a list of current license types under State law:
a. Cultivation
b. Retail
c. Delivery
d. Distribution
Ordinance No. 19-07 Cannabis Business License Ordinance 23 e. Manufacturing
f. Nurseries
g. Testing
h. Microbusiness

2. The following are the commercial cannabis activities currently authorized by the City of Goleta:
a. Retail
b. Nonstorefront Retail (Delivery)
c. Cultivation
d. Manufacturing
e. Testing
f. Distribution
g. Microbusiness

3. A CBL shall be valid for a period of one year from January 1 through December 31 of each year, unless sooner revoked. No permit granted herein shall confer any vested right to any person for more than the above-referenced period.

4. The CBL shall be issued only to the specific person listed on the CBL application.

5. A CBL may not be transferred from one person to another person. A CBL does not run with the land. Except as provided in Goleta Municipal Code Sections 5.01.300 and 5.01.310, any change to the organizational structure or ownership of the cannabis business will require a new CBL.

5.09.040 CANNABIS BUSINESS LICENSE APPLICATION PROCEDURES

AND REQUIREMENTS
A. Application Requirements.

1. An applicant may submit one or multiple applications for the various cannabis permit types. Applicants may apply for no more than one permit per category of Cannabis Business.

2. A separate application must be filed for each location or premise for which an applicant proposes to operate a Cannabis Business.

3. An applicant shall pay all the fees required by this Chapter.

4. A CBL applicant shall submit the following information, which will be more particularly defined in an administrative regulation by the City Manager:
a. Completed CBL Application form and applicable fees;
b. Copy of OMV-issued driver's license or identification card or passport for each owner, officer, employee, or agent;
c. Copy of Social Security card for each owner, officer, employee, or agent;
d. Proof of insurance as required by this Chapter;
e. An executed release of liability and hold harmless in the form set forth in the City's application form;
f. Authorization for the City to verify the information and representations contained in the application;
g. In the event the applicant is not the owner of record of the real property upon which the cannabis business is or will be located, a notarized statement and consent from the owner of the property acknowledging that a Cannabis Business is or will be located on the Ordinance No. 19-07 Cannabis Business License Ordinance 24 property and copy of the lease or rental agreement pertaining to the property on which the Cannabis Business is or will be located; h. Business entity documents, including but not limited to articles of incorporation, articles of organization, certificate of limited partnership, or statement of partnership authority.
i. Fee for background checks as required by this Chapter. j. The following plans, the contents of which will be promulgated by administrative regulation by the City Manager:
i. Site Plan;
ii. Business Plan;
iii. Green Business Plan;
iv. Odor Abatement Plan;
v. Safety plan; and
vi. Security plan.

B. Application Evaluation.
1 . The City Manager will promulgate an administrative regulation on the CBL application evaluation process.

2. Applications will be accepted, reviewed, and determined for a CBL by the Director.

3. Applications will be evaluated by the Director and scored for having provided all the information required by the application and that the plans meet minimum requirements.

4. If the Director determines that application requirements are not met, the Director shall provide a letter to the applicant outlining all the deficiencies in the application and require deficiencies to be met within 30 days, unless good cause is shown for a greater time period. If the applicant does not respond within the stated time period in the Director's letter, the application shall be returned to the applicant for incompleteness.

5. An application may be returned for failure to meet the requirement of this chapter, including but not limited to any of the following reasons:
a. A decision by the director to return an application based on this section is not appealable.
b. Application does not include information necessary to meet application requirements.
c. Information requested in Director's letter of deficiencies was received after state timed for the provision of information. d. Information submitted in response to Director's letter of deficiencies is not fully responsive to Director's request for more information.

6. Site Inspection.
a. The Director shall inspect the site of the proposed Cannabis Business for compliance with local and State law requirements and conformance with information provided in the application.

C. Public Notice for Storefront Retail Applications.

1. The Director shall provide notice by First Class mail for all Storefront Retail CB Ls at least 10 calendar days before a decision on the CBL applications is made to property owners and, if feasible, tenants, located within 500 feet of the parcel on which the Cannabis Business is or is proposed to be located.

Ordinance No. 19-07 Cannabis Business License Ordinance 25 2. Phase Three: Site Inspection and Issuance of Permit. a. Preliminary Approval. A Preliminary Approval of the CBL will be issued by the Director after the applicant has meet all of the requirements of this chapter, which would allow for an applicant to apply for a State license.
b. Final Approval. A Final Approval of a CBL will be issued only after an applicant presents a copy of their State license for the Cannabis Business subject to the CBL application and all site inspections have occurred by the Director or any other necessary City Departments and other local agencies.

I. No Cannabis Business can be operated until the City has issued a Final Approval of the CBL.

D. The City's Reservation of Rights.

1. The City reserves the right to reject any or all applications. Prior to STET issuance, the City may also modify, postpone, or cancel any request for applications, or the entire program under this Chapter, at any time without liability, obligation, or commitment to any party, firm, or organization, to the extent permitted under State law. Persons submitting applications assume the risk that all or any part of the program, or any particular category of permit potentially authorized under this Chapter, may be cancelled at any time prior to permit issuance.

5.09.050 FEES
A. All applicants shall pay all fees associated with an application, including the fees as established by resolution of the City Council for all costs incurred by the City in processing an application, which may include one or more of the following:

1. CBL Application Fees. The applicant shall submit a nonrefundable fee to cover the cost of processing an application for the Cannabis Business and ensuring all operating requirements are adhered to.

2. CBL Application Renewal Fees. The 'Business Owner shall submit a nonrefundable fee to cover the cost of processing an application renewal. a. If any fee required by this Chapter is not paid prior to the delinquency date, in addition to such fee the applicant shall pay a penalty equal to one-half of the fee; provided, however, that such penalty shall not attach in the case of renewals of annual licenses until 30 days after the delinquency date.

5.09.060 DENIAL. SUSPENSION OR REVOCATION GROUNDS AND APPEAL A. Grounds for Denial, Suspension, and Revocation

1. Denial of a New or Renewal CBL. An application may be denied upon any of the following:
a. Failure to meet the application requirements of this Chapter and any resolutions adopted pursuant to this Chapter;
b. Failure to meet the time requirements of requests for additional information by the Director while a CBL application is under review; Ordinance No. 19-07 Cannabis Business License Ordinance 26 c. The applicant knowingly, willfully or negligently made a false statement of material fact or omitted a material fact from the application;
d. Any applicant, owner, manager, supervisor, employee or agent that has not passed the Background Check requirements of this Chapter; e. The applicant failed to obtain and/or maintain a valid Seller's Permit; f. The applicant does not comply with the provisions of this Chapter or State law relating to operation of a Cannabis Business; g. The applicant has not received all necessary land use entitlements as required by the City's zoning regulations;
h. The applicant has denied City access to the business location to conduct an inspection;
i. Failure to pay the required fees as required in this Chapter; j. An outstanding balance of any taxes or fees owed to the City; k. Presence of a code violation on the premises on which the Cannabis Business is or is to be located; or
I. For a renewal application, if the application is not made within 60 days of expiration.
m. For a renewal application, if the licensee has failed to conform to plans submitted during the initial application process or the operational requirements of this Chapter.

B. Grounds for Suspension and Revocation.

1. The licensee fails to conform to the requirements of this Chapter and the plans submitted during the initial application process.

2. The licensee's Cannabis Business fails to become operational within six (6) months of obtaining its CBL, unless the Director has granted an extension for good cause.

3. Once operational, the Cannabis Business ceases to be in regular and continuous operation for ninety (90) days.

4. State law permitting the use for which the license was issued is amended or repealed resulting in the prohibition of such use, or the City receives credible information that the federal government will commence enforcement measures against such businesses and/or local governments that permit them.

5. Circumstances under which the license was granted have significantly changed and the public health, safety and welfare require the suspension, revocation, or modification.

6. The license was granted, in whole or part, on the basis of a misrepresentation or omission of a material statement in the CBL application.

7. The operator/licensee business has an outstanding balance on City taxes or fees.

8. There is an outstanding code violation on the premises on which the Cannabis Business is located;

9. The licensee's State license for the Cannabis Business for which a CBL was issued is suspended or revoked. The Director shall not reinstate the CBL until documentation is received showing that the State license has been reinstated or reissued.

C. Notice and Appeal.

Ordinance No. 19-07 Cannabis Business License Ordinance 27 1. The Director must give notice of intention to deny, suspend or revoke to a licensee or applicant in writing. Within 10 days thereafter, the licensee or applicant may request in writing a hearing before the City Council.

2. The approval of a CBL can be appealed by an aggrieved party to the City Council. Such appeal must be filed within 10 days of the Director's issuance of a CBL.

3. The City Council shall hold a hearing in accordance with Goleta Municipal Code sections 5.01.710 and 5.07.720.

4. If the licensee does not timely request a hearing, the notice of intention to deny, suspend or revoke shall constitute a final decision on the CBL application.

Records shall be produced within 24 hours of a request by an authorized City representative. Records shall be kept in a manner that allows the records to be produced for the City in either hard copy or electronic form, whichever the City requests.

B. The Cannabis Business shall obtain and maintain a valid Seller's Permit from the State Board of Equalization or its successor agency.

C. The Cannabis Businesses shall maintain financial records that include, but are not limited to: bank statements, sales invoices, receipts, tax records, and all records required by the California State Board of Equalization under Title 18 California Code of Regulations Section 1968.

D. The printed full name, date of birth, and present address and telephone number of the licensed individual, as well as for all persons with any financial interest in the commercial Cannabis Business.

E. Personnel records, including each employee's full name, address, phone number, date of beginning employment, and date of termination of employment if applicable.

F. Training records, including but not limited to the content of the training provided and the names of the employees that received the training.

G. Contracts with other licensees regarding cannabis activity.

H. Permits, licenses, and other local authorizations to conduct the licensee's STET cannabis activity.

I. Proof of building ownership or written permission from the landlord permitting the Cannabis Business type to be operated on the leased premises.

J. Proof of insurance.

K. Security records.

5.09.080 OPERA TING REQUIREMENTS FOR ALL COMMERCIAL CANNABIS

BUSINESSES
A. Cannabis Businesses may operate only during the hours specified in this Chapter.

B. Restriction on Consumption.

1. Cannabis shall not be consumed by any employee or any other person on the premises of any Cannabis Business.

Ordinance No. 19-07 Cannabis Business License Ordinance 28 C. No free samples of any cannabis or cannabis product may be distributed at any time at the premises of the Cannabis Business.

D. Odor Control.

1. Cannabis odors shall not be detectable off-site.

2. Cannabis Businesses shall provide a sufficient odor absorbing ventilation and exhaust system so that odor generated inside the Cannabis Business that is distinctive to its operation is not detected outside of the facility, anywhere on adjacent property or public rights-of-way, on or about the exterior or interior common area walkways, hallways, breezeways, foyers, lobby areas, or any other areas available for use by common tenants or the visiting public, or within any other unit located inside the same building as the Cannabis Business. As such, Cannabis Businesses must install and maintain the following equipment, or any other equipment which the Director determine is a more effective method or technology:
a. An exhaust air filtration system with odor control that prevents internal odors from being emitted externally;
b. An air system that creates negative air pressure between the Cannabis Business's interior and exterior, so that the odors generated inside the Cannabis Business are not detectable on the outside of the Cannabis Business.

E. Security.

1. Interior and exterior locations of the business property shall be monitored at all times by closed circuit cameras for security purposes. The cameras and recording system shall be of adequate quality, color rendition and resolution to allow the sufficient identification of any individual committing a crime on the location premises. Cameras shall record 24 hours a day at a minimum of 20 frames per second. Video recordings shall be maintained by the business and kept available to local police for a minimum period of 90 days.

2. The surveillance system storage device or cameras shall be transmission control protocolfTCP capable of being accessed through the internet by the Director on request.

3. All controlled access areas, security rooms and all points of ingress/egress to limited access areas and all point of sale (POS) areas shall have fixed camera coverage capable of identifying activity occurring within a minimum of twenty (20) feet. Camera video recordings shall be maintained unaltered in a secure location for a period of not less than ninety (90) calendar days and be available for inspection at any time. The Director or Police Chief may request the recordings in connection with an investigation. If the recordings are not voluntarily provided, the Director or Police Chief may seek a warrant or court order for the recordings.

F. Display of CBL and Badge.

1. A copy of the CBL shall be displayed at all times in a place visible to the public.

2. All agents, private security officers or other persons acting for or employed by a licensee shall display a laminated identification badge at least 2" X 2" in size, issued by the licensee. The badge, at a minimum, shall include the licensee's "doing business as" name and license number, the employees Ordinance No. 19-07 Cannabis Business License Ordinance 29 first and last name, and a color photo of the employee that shows the full front of the employee's face.

G. Reporting and Tracking of Product and of Gross Sales.

1. Each Cannabis Business shall have in place a point-of-sale or management inventory tracking system to track and report on all aspects of the Cannabis Business including, but not limited to, such matters as cannabis tracking, inventory data, gross sales (by weight and by sale) and other information which may be deemed necessary by the City. The Cannabis Business shall ensure that such information is compatible with the City's record-keeping systems and with the state's METRC track-and trace software. In addition, the system must have the capability to produce historical transactional data for review. Furthermore, any system selected must be approved and authorized by the Director prior to being used by the permittee. In the event of system failure, the business shall keep a hard copy record and transfer the information to the track and trace system within 24 hours of the system being available.

H. An updated floor plan consistent with State regulations must be submitted to the Director.

I. No physical modification of the permitted premises is allowed without written amendment to the CBL by the Director and payment of any additional fees required by the City.

J. The Cannabis Business shall comply with all State regulations regarding testing, labeling and storage of all cannabis products.

K. The Cannabis Business shall meet all State and local regulations for the disposal of all cannabis materials and materials used in conjunction with processing, distributing and cultivating of cannabis as well as any unsold cannabis or cannabis products.

L. The Cannabis Business shall conform to all State regulations regarding the use of appropriate weighing devices.

M. The Cannabis Business shall conform to all State and local regulations regarding water usage. No liquids of any kind shall be discharged into a public or private sewage or drainage system, watercourse, body of water or into the ground, except in compliance with applicable regulations of the California Regional Water Quality Control Board (California Administrative Code, Title 23, Chapter 27) and Title 13 of the Goleta Municipal Code.

N. The Cannabis Business' electrical and plumbing shall comply with State and local regulations, including the Building Code.

0. Insurance.

1. The Cannabis Business shall maintain comprehensive general liability combined single occurrence insurance policy issued by an "A" rated insurance carrier in an amount no less than two (2) million dollars and name the City as an additional insured. Such insurance shall be primary and not contributing to any other insurance maintained by the City.

P. The Cannabis Business shall have separate and independent centrally monitored fire and burglar alarm systems, which shall include all perimeter entry points and perimeter windows.

Q. A licensee shall ensure a licensed alarm company operator or one or more of its registered alarm agents installs and maintains the alarm system.

Ordinance No. 19-07 Cannabis Business License Ordinance 30 R. All licensees hiring employees shall document compliance with the following employee safety practices:
1 . Emergency action response planning as necessary

2. Employee accident reporting and investigation policies

3. Fire prevention

4. Hazard communication policies, including maintenance of material safety data sheets.

5. Materials storage and handling policies

6. Personal protective equipment policies

7. Operation manager contacts

8. Emergency responder contacts

9. Poison control contacts

10. Department of Justice "Live Scan" for all employees S. All persons with ownership interest, and all employees, agents, officers and other persons acting on behalf of a licensee must be at least 21 years of age.

T. Emergency Contact.

1. An emergency contact that is either an on-site employee, manager, or owner with 24/7 availability shall be made available to the City Manager, Fire Chief, and Police Chief, and shall be updated with the City and other agencies when such contact changes. Both a land line and a mobile or cell number shall be designated.

U. A CBL shall not be issued to a person with felony convictions as reported by a Department of Justice "Live Scan", as specified in subdivision (c) of Section 667.5 of the Penal Code and subdivision (c) of Section 1192.7 of the Penal Code; with criminal convictions that substantially relate to the qualifications, functions, or duties of a business or profession, including a felony conviction involving fraud, deceit, or embezzlement, or with a criminal conviction for the sale or provision of controlled substances, with the exception of cannabis.

V. A CBL shall not be issued to a person who employs any individuals with felony convictions as reported by a Department of Justice "Live Scan", as specified in subdivision (c) of Section 667.5 of the Penal Code and subdivision (c) of Section 1192.7 of the Penal Code; with criminal convictions that substantially relate to the qualifications, functions, or duties of a business or profession, including a felony conviction involving fraud, deceit, or embezzlement, or with a criminal conviction for the sale or provision of controlled substance, with the exception of cannabis.

W. Minors.

1. Persons under the age of twenty-one (21) years shall not be allowed on the premises of a Cannabis Business and shall not be allowed to serve as a driver for a nonstorefront (Delivery) service. It shall be unlawful and a violation of this Chapter for any person to employ any person at a Cannabis Business who is not at least twenty-one (21) years of age.

2. Nothwithstanding V(1), persons aged 18-20 who are in possession of a doctor's recommendation shall be allowed on the premises of a Cannabis Business, solely for the purpose of addressing the medical need cited in the physician's recommendation.

3. The entrance to the Cannabis Business shall be clearly and legibly posted with a notice that no person under the age of twenty-one (21) years of age is permitted to enter upon the premises of the Cannabis Business.

Ordinance No. 19-07 Cannabis Business License Ordinance 31 X. Zoning.

1. All Cannabis Businesses must comply with the applicable zoning regulations.

Y. Monitoring and Compliance.
1 . The Director shall monitor a licensee for conformance to the operational standards of this chapter for all CBL types, including but not limited to conducting site inspections after a CLB has been issued. If any violation of this Chapter, including conformance to plans submitted to the City during application process, the Director may suspend or revoke a license.

5.09.090 OPERA TING REQUIREMENTS FOR STOREFRONT CANNABIS

RETAILERS
A. Display of cannabis products shall be limited to only an amount necessary to provide a visual sample for customers.

B. All cannabis products available for sale shall be securely locked and stored.

C. At all times the cannabis retailer is open, the retailer shall provide at least one security guard who is registered with the Bureau of Security and Investigative Services and possesses a valid and current security guard registration card on their person while on-duty.

D. The licensee shall monitor the site and the immediate vicinity of the site to ensure that patrons immediately leave the site and do not consume cannabis in the vicinity of the retailer or on the property or in the parking lot.

E. The licensee shall comply with all State regulations regarding testing, labeling and storage of all cannabis products.

F. The licensee shall maintain the full name, address and telephone number(s) of all patient members to whom the business provides medicinal cannabis, and a copy of a physician-issued recommendation card or State-issued card for all patient members.

G. Licensees shall also record on the video surveillance system point-of-sale areas and areas where cannabis goods are displayed for sale.

H. Business hours of operation shall occur only from 10:00 am to 8:00 pm, 7 days a week.

I. On-site consumption of cannabis or cannabis products is specifically prohibited on the premises at all times. The following information shall be provided on a sign posted in a conspicuous location inside the cannabis retailer: "Smoking, ingesting or consuming cannabis on this property or within 100 feet of the business is prohibited."
J. There shall be no on-site sales of alcohol or tobacco products, and no on site consumption of alcohol or tobacco by patrons.

K. Inventory that is not required for a single day's sales shall be secured and locked in a room, safe, or vault, and in a manner reasonably designed to prevent diversion, theft, and loss during nonbusiness hours. Additional product needed for daily sales may be stored in a secured, locked area to which customers, vendors and visitors shall not have access.

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

M. All required labelling shall be maintained on all products, as required by State regulations, at all times.

N. Only commercially prepackaged, shelf-stable edible cannabis products may be sold.

Ordinance No. 19-07 Cannabis Business License Ordinance 32 0. The use of vending machines (i.e. a machine that dispenses articles when a coin, bill, or token is inserted) to dispense cannabis is prohibited.

5.09.100 OPERATING REQUIREMENTS FOR NONSTOREFRONT
RETAILERS (DELIVERY).

A. All Cannabis Businesses that have their business location outside of the City but make deliveries into the City shall be required to obtain a CBL. 1 . These Cannabis Businesses shall be subject to a separate fee for a CBL.

B. Operating hours of the nonstorefront retailer Cannabis Business shall be limited to the hours of 9:00 a.m. through 9:00 p.m., seven days a week.

C. A nonstorefront retailer may only have on-site that quantity of cannabis and cannabis products reasonably anticipated to meet the weekly demand for which they may need to be readily available for sale.

D. Prior to commencing operations, a nonstorefront retailer shall provide the following information to the Director.

1. Proof of ownership of the vehicle or a valid lease for any and all vehicles that will be used to deliver cannabis or cannabis products.

2. The year, make, model, license plate number, and numerical Vehicle Identification Number {VIN) for any and all vehicles that will be used to deliver cannabis goods.

3. Proof of insurance for any and all vehicles being used to deliver cannabis goods.

4. The licensee shall provide the Director with the information required by this Chapter in writing for any new vehicle that will be used to deliver cannabis goods prior to using the vehicle to deliver cannabis goods.

5. The licensee shall notify the Director of any changes to the information required by this Chapter in writing within thirty (30) calendar days.

E. The nonstorefront retailer licensee shall provide the City with the names and driver's license numbers of all the business' delivery drivers, and evidence verifying that criminal background checks have been conducted for all the business' drivers. Any driver that has been convicted of driving under the influence or reckless driving within the past five (5) years shall be prohibited from delivering cannabis to any location within the City.

F. All employees who deliver cannabis shall have valid identification and a copy of the retailer's CBL at all times while making deliveries.

G. The Cannabis Business shall comply with State law regarding testing, labeling and storage of all cannabis products.

H. All nonstorefront retailer licensee shall provide proof of insurance in a minimum amount of $1,000,000 for bodily injury liability and property injury for any and all vehicles being used to transport cannabis goods.

I. A Cannabis Business shall only deliver cannabis in aggregate amounts as ordered by the customer. A Cannabis Business shall ensure compliance with State delivery limits as regards the amount of cannabis and cannabis products.

J. The maximum limit of any cannabis goods carried by the delivery vehicle may not exceed the limit set by State law.

Ordinance No. 19-07 Cannabis Business License Ordinance 33 5.09.110 OPERATING REQUIREMENTS FOR CANNABIS MANUFACTURING

BUSINESSES
A. Any manufacturing activity that will be conducted by the licensee shall be included on the application. No additional manufacturing activity can be conducted without applying for and receiving written permission from the Director for that additional activity.

B. The Cannabis Business shall comply with all State law regarding testing, labeling and storage of all cannabis products.

C. The licensee must allow inspections to be done by the Director or Fire Chief at any time during the hours of operation.

D. All cannabis manufacturing activities shall occur indoors within a fully enclosed and secured structure.

E. Outdoor manufacturing of cannabis is prohibited.

F. Any compressed gases used in the manufacturing process shall not be stored on any property within the City in containers that exceed the amount which is approved by the County of Santa Barbara Fire Department and authorized by the CBL. Each site or parcel subject to a CBL shall be limited to a total number of tanks as authorized by the County of Santa Barbara Fire Department on the property at any time.

G. Cannabis manufacturing facilities may use heat, screens, presses, steam distillation, ice water, ethanol and other methods without employing solvents or gases to create keef, hashish, bubble hash, or infused dairy butter, or oils or fats derived from natural sources, and other extracts.

H. If an extraction process uses a professional grade closed loop C02 gas extraction process system, every vessel must be certified by the manufacturer for its safe use. The C02 must be of at least ninety-nine percent purity.

I. Closed loop systems for compressed gas extraction systems must be manufactured and bear a permanently affixed and visible serial number.

J. Certification from an engineer licensed by the State of California, or by a certified industrial hygienist, must be provided to the City for a professional grade closed loop system used by any commercial cannabis manufacturing manufacturer to certify that the system was commercially manufactured, is safe for its intended use, and was built to codes of recognized and generally accepted good engineering practices, including but not limited to:

1. The American Society of Mechanical Engineers (ASME);

2. American National Standards Institute (ANSI);

3. Underwriters Laboratories (UL); or

4. The American Society for Testing and Materials (ASTM) K. The certification document must contain the signature and stamp of the professional engineer or industrial hygienist and serial number of the extraction unit being certified.

L. Professional closed loop systems, other equipment used, the extraction operation, and facilities must be approved for use by the local fire code official and comply with any required fire, safety, and Ordinance No. 19-07 Cannabis Business License Ordinance 34 building code requirements related to the processing, handling, and storage of the applicable solvent or gas.

M. Cannabis manufacturing licensees may use food grade glycerin, ethanol, and propylene glycol solvents to create or refine extracts. Ethanol should be removed from the extract in a manner to recapture the solvent and ensure that it is not vented into the atmosphere.

N. Cannabis manufacturing licensees creating cannabis extracts must develop standard operating procedures, good manufacturing practices, and a training plan prior to producing extracts for the marketplace.

0. Any person using solvents or gases in a closed looped system to create cannabis extracts must be fully trained on how to use the system, have direct access to applicable material safety data sheets and handle and store the solvents and gases safely.

P. Parts per million for one gram of finished extract cannot exceed state standards for any residual solvent or gas when quality assurance tested.

5.09.120 OPERATING REQUIREMENTS FOR CANNABIS CULTIVATION

BUSINESSES
A. Only indoor cultivation as a Cannabis Business is allowed.

B. A Cultivation Cannabis Business shall operate the business so that no evidence of cannabis cultivation, except for signage authorized by City regulations, can be visible from the public right-of-way.

C. The canopy size shall be limited to 5,000 square feet.

D. Only one Cultivation Cannabis Business may be located in any building.

E. Energy Use.

1. Any applicant for indoor cultivation under this Ordinance must provide proof of consultation with Southern California Edison (SCE) prior to application submittal including a copy of a completed and submitted SCE Customer/Project Information Sheet.

2. Applicant must show proof of participation in energy use assessments as follows:
a. If available, participation in the Resource Innovation lnstitute's Calculate Powerscore tool.
b. If available, participation in SCE's Savings By Design program.

F. Generators. The use of generators for cultivation is prohibited, except for temporary use in the event of a power outage or for emergency use.

G. For purposes of this subsection, emergency use is defined in accordance with 17 California Code of Regulations Section 93115, as may be amended.

H. For purposes of this subsection, the limit on use of a generator in an emergency is 90 days.

I. Indoor cultivation activities, including materials and equipment storage, must occur solely in fully enclosed buildings.

J. The Cannabis Business shall register with the Department of Pesticide Regulation if using any pesticides.

K. The Building Official may require additional specific standards to meet the California Building Code.

Ordinance No. 19-07 Cannabis Business License Ordinance 35 L. The Cannabis Business shall comply with Section 13149 of Water Code as enforced by the State Water Resources Control Board.

M. The Cannabis Business shall comply with all State law regarding testing, labeling and storage of all cannabis products.

5.09.130 OPERATING REQUIREMENTS FOR CANNABIS TESTING

LABORATORIES
A. Testing Labs shall be required to conduct all testing in a manner pursuant to Business and Professions Code Section 26100 and shall be subject to State law. Each Testing Lab shall be subject to additional regulations as determined from time to time as more regulations are developed under this Chapter and any subsequent State of California legislation regarding the same.

B. Testing Labs shall conduct all testing in a manner consistent with general requirements for the competence of testing and calibrations activities, including sampling using verified methods.

C. All cannabis testing laboratories performing testing shall obtain and maintain ISO/IEC 17025 accreditation as required by the Bureau of Cannabis Control ("Bureau").

D. Testing labs shall destroy any harvest batch whose testing sample indicates noncompliance with health and safety standards required by the Bureau unless remedial measures can bring the cannabis or cannabis products into compliance with quality standards as specified by law and implemented by the bureau.

E. Each operator shall ensure that a testing laboratory employee takes the sample of cannabis or cannabis products from the distributor's premises for testing required by State law and that the testing laboratory employee transports the sample to the testing laboratory.

F. Except as provided by State law, a testing laboratory shall not acquire or receive cannabis or cannabis products except from a licensee in accordance with State law, and shall not distribute, sell, or dispense cannabis, or cannabis products, from the licensed premises from which the cannabis or cannabis products were acquired or received. All transfer or transportation shall be performed pursuant to a specified chain of custody protocol.

G. A testing laboratory may receive and test samples of cannabis or cannabis products from a qualified patient or primary caregiver only if the qualified patient or primary caregiver presents the qualified patient's valid physician's recommendation for cannabis for medicinal purpose . A testing lab shall not certify samples from a qualified patient or primary caregiver for resale or transfer to another party or licensee. All tests performed by a testing laboratory for a qualified patient or primary caregiver shall be recorded with the name of the qualified patient or primary caregiver and the amount of the cannabis or cannabis products received.

H. Testing laboratories shall otherwise comply with all applicable State regulations.

Ordinance No. 19-07 Cannabis Business License Ordinance 36 I. A licensed cannabis testing licensee, its owners, employees and agents may not hold an interest in any other Cannabis Business except another testing business.

J. The licensee must allow inspections to be done by the Director or Fire Chief at any time during hours of operation.

5.09.140 OPERATING REQUIREMENTS FOR CANNABIS DISTRIBUTORS A. A distributor shall not store non-cannabis goods or non-cannabis accessories that are to be sold to another party on any licensed premises.

Additionally, a distributor shall not distribute non-cannabis goods or non cannabis accessories at a licensed premise. For the purposes of this Chapter, non-cannabis goods are any goods that do not meet the definition of cannabis goods as defined in Title 16 of the California Code of Regulations, Section 5000(c).

B. After taking physical possession of a cannabis goods batch, the distributor shall contact a testing laboratory and arrange for a laboratory employee to come to the distributor's licensed premises to select a representative sample for laboratory testing.

C. A distributor shall ensure that all cannabis goods batches are stored separately and distinctly from other cannabis goods batches on the distributor's premises.

D. The distributor shall ensure that the batch size from which the sample is taken meets the requirements of State law, specifically the testing provisions within the California Code of Regulations.

E. A distributor or an employee of the distributor shall be physically present to observe the laboratory employee obtain the sample of cannabis goods for testing and shall ensure that the increments are taken from throughout the batch. The sampling shall be video-recorded, and the recording kept available to state and local authorities for a minimum of 90 days, pursuant to Section 5305 of the California Code of Regulations.

F. A distributor shall not transport cannabis or cannabis products to a licensed retail facility until and unless it has verified that the cannabis or cannabis products have been tested and certified by a testing lab as being in compliance with state health and safety requirements pursuant to Sections 5705, 571 O and 5714 of the California Code of Regulations.

G. Any cannabis distribution facility shall provide proof of a bond of at least five thousand dollars ($5,000) to cover the costs of destruction of cannabis or cannabis products if necessitated by a violation of licensing requirements or cannabis or cannabis products rejected by testing.

H. The licensee must allow inspections to be done by the Director or Fire Chief at any time during the hours of operation.

I. A licensee shall ensure that all cannabis goods batches are stored separately and distinctly from other cannabis goods batches on the distributor's premises.

J. A licensee shall ensure a label with the following information is physically attached to each container of each batch:

Ordinance No. 19-07 Cannabis Business License Ordinance 37 1 . The manufacturer or cultivator's name and license number;

2. The date of entry into the distributor's storage area;

3. The unique identifiers and batch number associated with the batch;

4. A description of the cannabis goods with enough detail to easily identify the batch; and

5. The weight of or quantity of units in the batch.

K. A distributor shall store cannabis goods in a building designed to permit control of temperature and humidity and shall prevent the entry of environmental contaminants such as smoke and dust. A distributor may not store cannabis goods outdoors.

L. Employee breakrooms, eating areas, changing facilities, and bathrooms shall be completely separated from storage areas.

M. All cannabis distribution activities shall occur within a fully enclosed and secured structure and shall conform to the requirements of applicable area, community, specific and design plans.

N. All loading and unloading activities shall take place within a secured area.

5.09.150 OPERATING REQUIREMENTS FOR MICROBUSINESSES
All Cannabis Business uses that comprise the microbusiness must adhere to the applicable requirements of this Chapter.

5.09.160 LIMITATIONS ON THE CITY'S LIABILITY
To the fullest extent permitted by law, the City shall not assume any liability whatsoever, with respect to approving any CBL pursuant to this Chapter or the operation of any property on which a Cannabis Business is located pursuant to this Chapter. Before obtaining a CBL, the applicant or its legal representative shall:

A. Execute an agreement indemnifying the City from any claims, damages, injuries or liabilities of any kind associated with the registration or operation of the commercial cannabis facility or the prosecution of the applicant or permittee or its members for violation of federal or State laws; B. Agree to defend, at its sole expense and with legal representation selected by the City, any action against the City, its agents, officers, and employees related to the approval of CBL; and
C. Agree to reimburse the City for any court costs and attorney fees that the City may be required to pay as a result of any legal challenge related to the City's approval of a CBL. The City may, at its sole discretion, participate at its own expense in the defense of any such action, but such participation shall not relieve the operator of its obligation hereunder.

5.09.170 ENFORCEMENT
A. A violation of the regulations in this Chapter by an act, omission, or failure of an agent, owner, officer or other person acting with or employed by a licensee within the scope of their employment or office, shall be deemed the act, omission, or failure of the licensee.

B. A licensee shall notify the City upon discovery of any of the following situations:

Ordinance No. 19-07 Cannabis Business License Ordinance 38 1. A discrepancy of more than $1,000 in inventory over a period of 24 hours or $3,000 over period of 7 days.

2. A reason to suspect diversion, loss, theft or any other criminal activity pertaining to the operation of the licensed Cannabis Business.

3. The loss or alteration of records related to cannabis goods, registered medicinal cannabis patients, caregivers or retailer employees or agents.

4. Any other reason to suspect any other breach of security.

C. Each and every violation of this Chapter shall constitute a misdemeanor.

D. Each and every violation of this Chapter shall constitute a separate violation and shall be subject to all remedies and enforcement measures authorized by the Goleta Municipal Code Chapter 1.02. Additionally, as a nuisance per se, any violation of this Chapter shall be subject to injunctive relief, revocation of the business's CBL, disgorgement and payment to the City of any and all monies unlawfully obtained, costs of abatement, costs of investigation, attorney fees, and any other relief or remedy available at law or equity. The City may also pursue any and all remedies and actions available and applicable under local and State laws for any violations committed by the Cannabis Business and/or any owner, agent, officer, or any other person acting with or employed by the Cannabis Business.

E. City staff, code compliance officers, Police Chief, Fire Chief, and any other agents or employees of the City requesting admission for the purpose of determining compliance with this Chapter shall be given unrestricted access to the property on which the Cannabis Business is or is to be located. A person engaging in Cannabis Business without a permit and associated unique identifiers required by this Chapter shall be subject to civil penalties of up to twice the amount of the CBL fee for each violation, and the Director, state or local authority, or court may order the destruction of cannabis associated with that violation. A violator shall be responsible for the cost of the destruction of cannabis associated with the violation, in addition to any amount covered by a bond required as a condition of licensure. Each day of operation shall constitute a separate violation of this Chapter.

Ordinance No. 19-07 Cannabis Business License Ordinance 39 SECTION 5: EFFECTIVE DATE.

This ordinance shall take effect on the 31st day following adoption by the City Council.

INTRODUCED ON the 15th day of April 2019.

PASSED, APPROVED, AND ADOPTED this 7th day of May 2019.

ATTEST:

MICHAEL JENKINS

CITY ATTORNEY
Ordinance No. 19-07 Cannabis Business License Ordinance 40 STATE OF CALIFORNIA
COUNTY OF SANTA BARBARA) SS.

CITY OF GOLETA
I, DEBORAH S. LOPEZ, City Clerk of the City of Goleta, California, do hereby certify that the foregoing Ordinance No. 19-07 was introduced on April 16, 2019, and adopted at a regular meeting of the City Council of the City of Goleta, California, held on the 7th day of May, 2019 by the following vote of the City Council:

AYES: MAYOR PEROTTE, MAYOR PRO TEMPORE RICHARDS,

COUNCILMEMBERS ACEVES, KASDIN AND KYRIACO
NOES: NONE
ABSENT: NONE
ABSTENTIONS: NONE
Ordinance No. 19-07 Cannabis Business License Ordinance DEBORAH S. [

CITY CLERK
41 42
ATTACHMENT 3

GMC Chapter 3.08 and 5.09 Proposed Amendments Staff Report from the November 7, 2023 City Council Meeting
43 Agenda Item C.1

PUBLIC HEARING
Meeting Date: November 7, 2023

TO: Mayor and Councilmembers

FROM: Luke Rioux, Finance Director

CONTACT: Cecilia Rubio, Finance Management Assistant

SUBJECT: First Reading – Cannabis Business License Ordinance Amendments and Cannabis Business Tax Updates

RECOMMENDATION:

A. Introduce and conduct first reading (by title only) and waive further reading of Ordinance No. 23-__, entitled “An Ordinance of the City of Goleta , C alifornia Amending Chapter 3.08 of Title 3 of the City of Goleta Municipal Code Entitled Cannabis Business Tax and Amending Chapter 5.09 of Title 5 of the City of Goleta Municipal Code Entitled Commercial Cannabis Businesses;” and

B. Find that the adoption of the Ordinance is exempt from the California Environmental Quality Act under Guideline 15301(c) and direct staff to file a Notice of Exemption within five business days.

BACKGROUND:

On July 17, 2018, the City Council a dopted licensing procedures and regulations to regulate commercial cannabis businesses. These regulations were codi fied as Chapter

5.09 into the Goleta Municipal Cod e (GMC). After implementation, the City determined that amendments were necessary to the existing regulations.

On May 7, 2019 , the City Council amended Chapter 5.09 to include a more robust application review process , noticing requirement for retail applications and updates to existing regulations to conform with new State law since 2018. In addition, it introduced a requirement for every owner, agent, manager, supervisor or employee of a cannabis business to undergo a Department of Justice (DOJ) “Live Scan” background check.

1 44
2 On July 20, 2021, the Ci ty Council authorized organizational changes . This included transitioning the licensing review and approval functions , previously under the Neighborhood Services and Public Safety Department (NSPS) to the Finance Department. These functions encompass cannabis business license review and approval, as well as the Live Scan review of all applicants, owners, supervisors, and employees.

On March 31, 2022, the City Council held a revenue enhancement workshop, which included a report and analysis on the City’s current cannabis tax rates and business types.

The City Council directed staff to adjust the medicinal retail tax rate of 0% to the retail rate of 5% . They also showed support for updating the allowable hours of operation s for cannabis operators and considering other recommendations to streamline the process.

Since the March 31, 2022, workshop, City staff received additional information from the California Department of Cannabis Control (DCC), our cannabis consultants and feedback from cannabis operators and stakeholders within the City related to our cannabis ordinances and process . During annual site inspections , staff discussed cannabis operations and solicited additional feedback on the City’s ordinance and regulations. The proposed ordinance changes summarized and detailed below reflect input from these various groups and have been reviewed by both the City Attorney’s Office and the Finance Department.

DISCUSSION:

The purpose of this public hearing is for City Council consideration of an ordinance amending Chapter 3.08 Cannabis Business Tax and amending Chapter 5.09 Commercial Cannabis Business . The following section summarizes the proposed amendments by chapter.

Chapter 3.08 Cannabis Business Tax – Proposed Amendments As stated above, on November 6, 2018, the voters passed Measure Z2018, establishing a tax on cannabis business operations within the City of Goleta. The measure taxes cannabis businesses on gross receipts , with classifications capped at 10 percent. Initial rates were established at the time of passing and codified as Chapter 3.08 into GMC.

In 2021, City staff collaborated with its cannabis consultants, HdL to evaluate these rates.

The analysis confirmed that the City’s rates are competitive both with nearby jurisdictions and common rates statewide. The analysis and report were then discussed with City Council at a workshop held on March 31, 2022. At the conclusion of the workshop, City Council directed staff to move forward with i mplementing a change to the medicinal cannabis retail rate to be set at the non-medical cannabis retail rate of 5% . This adjustment ensures parity with cannabis retail rates and aligns with rates in nearby jurisdictions. A copy of this analysis is provided as Attachment 4 to this report.

In accordance with GMC Section 3.08.050 entitled “City Council Authorization to Adjust Tax Rate and/or Methodology”, the initial rates may be adjusted by the City Council from time to time, by ordi nance or resolution, subject to a maximum rate of 10% of gross receipts, without a vote of the people . The following table summarizes the current tax rates and proposed tax rate update.
2 45

3 Cannabis Business Classification
Activities
Taxed
Current Tax
Rate
Proposed
Tax Rate
Non-Medical Cannabis Retail Gross Receipts 5% 5%
Medical Cannabis Retail Gross Receipts 0% 5%
Cultivation Gross Receipts 4% 4%
Processing/Manufacturing Gross Receipts 2% 2%
Testing Gross Receipts 0% 0%
Nurseries Gross Receipts 1% 1%
Distribution/Transport Gross Receipts 1% 1%
Maximum Tax Limit Gross Receipts 10% 10%
Maximum Cap for Multiple Operations Gross Receipts 10% 10%

Further details of the cannabis business tax rates can be found in GMC Section 3.08.030 entitled “Imposition of Tax” in Attachment 1. In addition, staff is recommending the tax rate change be effective January 1, 2024, to align with the quarterly tax remittance requirement. At the time of preparing this report, five operators report and track a portion of sales under the medical cannabis retail rate.

Chapter 5.09 Commercial Cannabis Businesses – Proposed Amendments

The following table summarizes the proposed amendments to Chapter 5.09, followed by additional information on significant revisions.

GMC
Section
GMC Section Name Summary of Proposed Amendments

5.09.020 Definitions 1. Added and revised various definitions. These definitions include “Director”, “Financial Interest”, “Financial Interest holder”, “Owner”, “Person”, and “Premise”, which aligns with the City process and the State.

5.09.030 General Provisions
for Commercial
Cannabis Activities in
the City

2. Updated license types to include a table that compares the State license types and Goleta’s license types for
transparency and comparison purposes, and clarified the City does not allow events per GMC section 17.41.090.

3. Updated section on license issuance and changes in
organizational structure or ownership, to include a
process for changes in ownership, as separate section

5.09.045 (see below for more detail).

5.09.040 Cannabis Business
License Application
Procedures and
Requirements

4. Removed Social Security Card requirement.

5. Updated background check language to be specific on
receiving copies of Department of Justice Live Scan
receipts for all applicants, owners, persons having at
least twenty percent financial interest, managers, and
supervisors of a cannabis operation and removed all
employees– to match State requirements.

5.09.045
(new)
Changes to Licensed
Commercial
Cannabis Businesses

6. Added Change in Ownership section.

7. Added Change in Premise section.

5.09.070 Maintenance of
Records and
Reporting

8. Updated information needed to be retained for all
persons with any financial interest in commercial
cannabis business.
3 46

4 GMC
Section
GMC Section Name Summary of Proposed Amendments

9. Added section that operators to retain their completed employee criminal history checks and subject to
inspection by the City.

5.09.080 Operating
Requirements for All
Commercial
Cannabis Businesses

10. Updated comprehensive general liability insurance to require $1 million per each occurrence and $2 million per aggregate.

11. Updated language on Department of Justice “Live Scan” to remove all employees, and only applicable to
applicants, owners, persons having at least twenty
percent financial interest, managers, and supervisors.

12. Moved the paragraph related to physical modification of the permitted premises to its own section under 5.09.045.

13. Added language that operators will be responsible for their own criminal background check policy and
procedures for all employees. The criminal background
check will be equivalent to, and may include the use of, live scan, or other as approved by the City.

5.09.090 Operating
Requirements for
Storefront Cannabis
Retailers

14. Updated hours of operation from 10:00 a.m. to 8:00 p.m. to 6:00 a.m. to 10:00 p.m. to align with both the State and the County.

5.09.100 Operating
Requirements for
Non-Storefront
Retailers (Delivery)

15. Updated and clarified language for businesses located outside of the City but make deliveries into the City, and listed requirements.

16. Updated hours of operation from 9:00 a.m. to 9:00 p.m. to 6:00 a.m. to 10:00 p.m. to align with both the State and the County.

17. Updated section on criminal background checks to be consistent with proposed requirements for employees
under 5.09.080.

18. Updated section on quantity of cannabis and cannabis products that only meet the weekly demand to maximum
limit set by State law. (The State currently does not set limits on inventory quantity but allows the operator to conduct its business accordingly. It’s stated this way if the State ever considers limits in the future).

5.09.110 Operating
Requirements for
Cannabis
Manufacturing
Businesses

19. Updated hours of operation from 10:00 a.m. to 8:00 p.m. to 6:00 a.m. to 10:00 p.m. to align with both the State and the County.

The specific amended Chapter 5.09 sections are provided in detail in Attachment 3. The following sections discuss some of the more significant revisions in more detail, primarily related to a change in ownership and a change in premise. In efforts to align with State regulations and provide flexibility for cannabis busi ness owners, staff is recommending updates that provide a mechanism for local operators, staff is recommending a separate Section 5.09.045, “Changes to Licensed Commercial Cannabis Business ” to address a change in ownership and a change in premises.

Changes in ownership and organizational structure are common in all business sectors.

The City’s current regulations on changes in ownership and organizational structure are found in GMC Section 5.09.030, which requires that any change to ownership and any change to the organizational structure will require a new CBL. In other words, any change 4 47

5 to the ownership, regardless of how minimal, requires a new application package, pre- license site inspection and becomes costly and burdensome to both City staff an d operators. In addition, this will allow the City to be consistent with State regulations.

Staff is also recommending updates to clarify the process for operators that request changes to their licensed premises outside the renewal application period . Currently, applicants would wait until the annual renewal period or submit for a new application. The recommended updates will give applicants an option and more flexibility on their operations and will not have to wait until the annual renewal period . Additionally, the proposed changes will align with State regulations. In summary, the process includes the operator submitting an updated proposed site plan and premises diagram, security/video surveillance plan, and obtaining an update zoning conformit y determination letter. Prior to final approval of the change, a pre -license inspection of the premises will be required and payment of fee.

 Section 5.09.045, “ Changes to Licensed Commercial Cannabis Business ,” was added to read as follows:

A. Change in Ownership.

1. A CBL is not transferrable or assignable to another person or owner and automatically terminates upon transfer or change of ownership unless the transfer or change of ownership complies with this Section. In the event of the sale or o ther transfer of the business or operations covered by the licensee, changes in ownership shall be made in accordance with the following.
a. If one or more of the owners change, the new owners shall submit the information required under sections 5.09.040 and 5.09.080 for each new owner , and or other necessary information to the Finance Department. The ow nership change shall not be effective until approved by the City.
b. The business may continue to operate under the active license while the Department reviews the qualifications of the new owner(s) in accordance with these regulations to determine whether the change would constitute grounds for denial of the license, if at least one existing owner is not transferring their ownership interest and will remain as an owner under the new ownership structure.
c. If all owners will be transferring their ownership interest, the business shall not operate under the new ownership structure until a new license application has been submitted to and approved by the Department, and all application and license fees for the new application have been paid. The former owner’s inventory shall be transferred to the new owner’s track and trace account upon issuance of the license. The ownership change shall not be effective until approved by the City.

2. A change in ownership does not occur when one or more owners leave the business by transferring their ownership interest to the other existing owner(s).
a. In cases where one or more owners leave the business by transferring their ownership i nterest to the other existing owner(s), the owner or owners that are transferring their interest shall provide a signed 5 48

6 statement to the City confirming that they have transferred their interest within 14 calendar days of the change.

3. For any changes in own ership, resulting from death, incapacity, receivership, assignment of creditors, or other event rendering an owner incapable of performing the duties associated with the license, the owner or owners’ successor in interest (e.g., appointed guardian, executo r, administrator, receiver, trustee, or assignee) shall notify the City in writing, within 14 calendar days, by submitting a form provided by the City. a. To continue operations or surrender the existing license, the successor in interest shall submit to the City the following:
i. The name of the successor in interest;
ii. The name of the owner(s) for which the successor in interest is succeeding and the license number;
iii. The phone number, mailing address, and email address of the successor in interest; and
iv. Documentation demonstrating that the owner(s) is incapable of performing the duties associated with the license such as a death certificate or a court order, and documentation demonstrating that the person making the request is the owner or owners’ successor in interest such as a court order appointing guardianship, receivership, or a will or trust agreement.
b. The City may give the successor in interest written approval to continue operations on the licensed business premises for a period of time specified by the City:
i. If the successor in interest or another person has applied for a license from the Department for the licensed premises and that application is under review;
ii. If the successor in interest needs additional time to destroy or sell cannabis or cannabis products; or
iii. At the discretion of the City.
iv. The successor in interest is held subject to all terms and conditions under which a CBL is held pursuant to the Goleta Municipal Code. v. The approval creates no vested right to the issuance of a CBL.

B. Financial Interest in a Commercial Cannabis Business.

1. When there is a change in financial interest holder(s) in the commercial cannabis business who do not meet the requirements for a new license application under this section, the licensee shall submit the information required by section 5.09.2020 to the Department within 14 calendar days of the change.

a. A complete list of every financial interest holder of the commercial cannabis business, including who is not an owner. The list of financial interest holders shall include:

i. For financial interest holders that are individuals, the first and last name of the individual, a contact phone number and email address, and the type and number of the individual’s government -issued identification, such as a driver’s license.

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7 ii. For financ ial interest holders that are entities, the legal business name, the name and phone number and email address of the entity’s primary contact, and the federal taxpayer identification number of the entity.

2. When any of the following changes occur, the licensee shall notify the City within 14 calendar days of the change on a form provided by the City:
a. Any change to contact information from the information provided to the Department in the original application.
b. Any change in name if the licensee is an individual, or any change in legal business name if the licensee is a business entity. c. Any change in business trade names, fictitious business names, or doing business as (“DBA”).

C. Change in Premises.

1. No physical modification of the permitted premises is allowed without written amendment to the CBL by the Director and payment of any additional fees required by the City. To obtain approval of a change in premises, the licensee shall submit a request for change in premises on a form provided by the City, including the following information:
a. A physical modification of the permitted premises includes but is not limited to a substantial increase or decrease in total area of the licensed premises, any other p hysical modification resulting in substantial change in the mode or character of business operations. b. To obtain City approval of a change in premises the licensee shall submit a new site plan and premises diagram, security/video surveillance plan, a written zoning conformity determination letter from the Planning and Environmental Review Department, and other additional information that may be requested by the Director to evaluate the licensee’s request to modify the licensed premises.

2. Prior to final approval of the change in premises, a pre-license inspection of the premises will be required and payment of fee.

Fees for Cannabis Business Licenses

The following table summarizes the current cannabis business license related fees at the current rates. As part of the recommended ordinance updates, staff is recommending one additional fee be included in the Citywide User Fees and Charges Schedule, related to a change in premises as outlined under “Proposed Additional Fees”. This fee will be applicable for th ose licensed operators who would like to have a change made to their licensed premises prior to the annual renewal period. The fee has been calculated at full cost recovery for both consultant costs and staff time at the fully burdened hourly labor rate an d includes reviewing the new site plan and premises diagram, security/video surveillance plan, and physical site inspection of the premise area. Pending approval of this ordinance, staff will include this additional user fee as part of the Citywide User Fees and Charges Schedule Update that Finance staff plans to bring to the City Council on December 5, 2023, that will consider its annual CPI adjustment.

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8 Current Cannabis Business License Fee Types: Current Fee:

Cannabis Business License – New $15,463.00
Cannabis Business License – Additional for Accessory Use $113.00 Cannabis Business License – Renewal $12,527.00
Cannabis Business License – Outside City Limits Delivery Services – New
$451.00
Cannabis Business License – Outside City Limits Delivery Services – Renewal
$451.00
Cannabis Business License Appeal $4,965.00
Cannabis Additional Staff Time Actual Costs
Cannabis Business License Letter (Cannabis Zoning
Conformity Determination)
$685.00
Proposed Additional Fees:

Request to Modify a Cannabis Business License – Change in Premises
$4,530

Staff support the proposed amendments to ordinances and recommend that City Council Conduct first reading (by title only) and waive further reading of the Ordinance.

Future Amendments

The cannabis business licensing program continues to evolve . Staff anticipate future amendments to address additional stakeholder concerns including other emerging issues that may arise.

FISCAL IMPACTS:

While there are no immediate fiscal impact s associated with the recommended actions, the proposed ordinance aim s to streamline the cannabis business license application process and provide flexibility for operators on the direction of their business. In addition, these changes will align more closely with State regulations, and help ensure compliance on both sides. Any fees associated with future changes to their business is cost recoverable and supported by user fees paid by the applicant.

ALTERNATIVES

The City Council may wish to forego any amendments to GMC Chapter 5.0 9, GMC Chapter 3.08 and provide different direction to staff.

Reviewed By: Legal Review By: Approved By:

___________________ ___________________ _________________ Kristine Schmidt Megan Garibaldi Robert Nisbet
Assistant City Manager City Attorney City Manager

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9 ATTACHMENTS:

2. Ordinance No. 19-07 entitled “An Ordinance of the City Council of the City of Goleta, California, Adopting Chapter 5.09 of Title 5 of the Goleta Municipal Code Relating to Establish Standards and Regulations for Commercial Cannabis Businesses.”

3. Ordinance No. 23 -__, entitled “An Ordinance of the City Council of the City of Goleta, California, Amending Chapter 3.08 of Title 3 of the City of Goleta Municipal Code Entitled Cannabis Business Tax and Amending Chapter 5.09 of the City of Goleta Municipal Code, Entitled Commercial Cannabis Businesses.”

4. Fiscal Analysis of the Commercial Cannabis Industry

5. Staff Presentation

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ATTACHMENT 1

Ordinance No. 18-07 entitled “An Ordinance of the People of the City of Goleta, California, Adding Chapter 3.08 to Title 3 (Revenue and Finance) of the Goleta Municipal Code Establishing a Tax on Cannabis Business Operating within the City of Goleta. 10 53
ORDINANCE NO. 18-07
MEASURE "Z2018"

AN ORDINANCE OF THE PEOPLE OF THE CITY OF GOLETA,
CALIFORNIA, ADDING CHAPTER 3.08 TO TITLE 3 (REVENUE

AND FINANCE) OF THE GOLETA MUNICIPAL CODE

ESTABLISHING A TAX ON CANNABIS BUSINESSES
OPERATING WITHIN THE CITY OF GOLETA.

THE PEOPLE OF THE CITY OF GOLETA, CALIFORNIA DO HEREBY
ORDAIN AS FOLLOWS:

SECTION 1. Chapter 3.08 is hereby added to Title 3 (Revenue and Finance) of the Goleta Municipal Code and shall read as follows:
"CHAPTER 3.08
CANNABIS BUSINESS TAX.

3.08.010 - Definitions.

For purposes of this Chapter:

A cannabis business shall not be considered to be a religious, social or charitable organization exempt from the payment of business taxes under this Chapter. 65266.00001 \31197178. l 1
11 54
C. "Cannabis cultivation" means the seeding, planting, watering , warming, cooling, growing, harvesting, drying, curing, grading or trimming of cannabis.

E. "Cannabis nursery" means a cannabis business that produces only clones, immature plants, seeds and other agricultural products used specifically for cannabis cultivation.

H. "Cannabis testing" means any activity involving the testing of cannabis or cannabis products by a facility that is both of the following:

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

2. Registered with the California State Department of Public Health.

1. maintains a fixed place of cannabis business within the City; 65266.00001\31197178.1 2
12 55

2. owns, leases or otherwise has the legal right to occupy real property within the City for cannabis business purposes;

3. regularly maintains a stock of tangible personal property within the City in the ordinary course of cannabis business;

4. performs work or renders cannabis business services to other cannabis businesses or to retail cannabis customers located within the City.

1. Cash discounts where allowed and taken on sales;

2. Sales or other applicable state or local tax required by law to be added to the purchase price of cannabis or cannabis products and collected from the purchaser;

K. "Medical cannabis retail" means any cannabis business activity involving the retail sale or dispensing to qualified patients or their qualified caregivers of cannabis, cannabis products, or devices for the use of cannabis or cannabis products, either individually or in any combination, for the ultimate consumption or use by qualified patients in accordance with California Health and Safety Code Sections 11362.7 et. seq., the California Medical Marijuana Program 65266.00001 \31197178.1 3
13 56
Act ("MMPA") , and any other applicable State law authorizing activities related to the medical possession and use of cannabis . "Medical cannabis retail" shall include any medical cannabis delivery to a customer as part of a retail sale.

N. "State" means the State of California.

0. "Tax Administrator" is the City's Director of Finance, or his or her designee.

3.08.020 - Purpose of Tax.

This tax is a general tax, the revenues from which may be used for unrestricted general revenue purposes of the City.

3.08.030 - Imposition of Tax.

1. Non-medical cannabis retail - 5% of gross receipts ;

2. Medical cannabis retail - 0% of gross receipts;

3. Cannabis cultivation - 4% of gross receipts;

4. Cannabis processing/manufacturing - 2% of gross receipts;

5. Cannabis testing - 0% of gross receipts ;

6. Cannabis nursery - 1 % of gross receipts;

7. Cannabis distribution/transport - 1 % of gross receipts.

8. Multiple Operations. In no event shall any person conducting multiple of the above operations pay more tax than 10% of gross receipts .

B. The rates set forth above may be adjusted by the City Council from time to time, by ordinance or resolution, pursuant to Section 3.08 .050 below , subject to a maximum rate of ten percent (10%) of gross receipts. 65266.00001\31197178.1 4
14 57
C. If a cannabis business is engaged in retail sales and/or delivery of both medical and a non-medical cannabis, it shall pay the higher applicable business tax rate between the two classes, unless the cannabis business identifies to the City, by reasonable and verifiable standards, the portions of its activities that are tied to medical cannabis retail and those that are tied to non-medical cannabis retail, through the cannabis business' books and records kept in the regular course of business, and in accordance with generally accepted accounting principles, and not specifically created and maintained for tax purposes. The cannabis business has the burden of proving the proper apportionment of taxes under this subsection (C).

E. No cannabis business shall be deemed to be exempt from the payment of the taxes identified above by any other provision of this Code, unless expressly exempted under this Chapter. ·

3.08.040 - Payment Obligation.

3.08.050 - City Council Authorization to Adjust Tax Rate and/or Methodology.

3.08.060 - Payment of Tax Does Not Authorize Illegal Activity.

3.08.070 - Cannabis Business Tax Is Not a Sales Tax.

3.08.080 - Amendments and Administration.

3.08.090 - Returns and Remittances.

The Tax shall be due and payable as follows:

A. The tax established by this Chapter shall be collected quarterly.

8. All tax returns shall be completed on forms provided by the Tax Administrator.

C. Tax returns and payments for all outstanding taxes owed the City are immediately due to the Tax Administrator upon cessation of business for any reason.
65266.00001 \31197178.1 7
17 60
D. Whenever any payment, statement, report, request or other communication received by the Tax Administrator is received after the time prescribed by this Section for the receipt thereof, but is in an envelope bearing a postmark showing that it was mailed on or prior to the date prescribed in this Section for the receipt thereof, or whenever the Tax Administrator is furnished substantial proof that the payment, statement, report, request, or other communication was in fact deposited in the United States mail on or prior to the date prescribed for receipt thereof, the Tax Administrator may regard such payment, statement, report, request, or other communication as having been timely received. If the due date falls on Friday, Saturday, Sunday, or a holiday, the due date shall be the next regular business day on which the City Hall is open to the public.

3.08.100 - Failure to Pay Tax.

A. Any person who fails or refuses to pay any tax required to be paid pursuant to this Chapter on or before the due date shall pay penalties and interest as follows:

B. Whenever a check is submitted in payment of a tax and the check is subsequently returned unpaid by the bank upon which the check is drawn, and the check is not redeemed prior to the due date, the taxpayer will be liable for the tax amount due plus penalties and interest as provided for in this Section plus any amount allowed under State law.
65266.00001 \311971 78.1 8
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C. The tax due shall be that amount due and payable from January 1, 2019 or the first date on which the cannabis business first engaged in business in the City, whichever date occurred last, together with applicable penalties and interest calculated in accordance with Subsection (A) of this Section.

0. The Tax Administrator may waive the first and second penalties of twenty-five percent (25%) each imposed upon any person if:

2. The waiver provisions specified in this Subsection shall not apply to interest accrued on the delinquent tax and a waiver shall be granted only once during any twenty-four (24) month period.

3.08.110 - Refunds.

A. No refund shall be made of any tax collected pursuant to this Chapter, except as provided in this Section.

B. No refund of any tax collected pursuant to this Chapter shall be made because of the discontinuation, dissolution, or other termination of a cannabis business.

D. The filing of a written claim pursuant to Government Code Section 935 is a prerequisite to any suit thereon.
65266.00001\31197178.1 9
19 62
E. The Tax Administrator shall have the right to examine and audit all the books and business records of the claimant in order to determine the eligibility of the claimant to the claimed refund. No claim for refund shall be allowed if the claimant refuses to allow such examination of claimant's books and business records after request by the Tax Administrator to do so.

3.08.120 - Enforcement.

A. It shall be the duty of the Tax Administrator to enforce each and all of the provisions of this Chapter.

C. The Tax Administrator shall have the power to audit and examine all books and records of cannabis businesses as well as persons engaged in the operation of cannabis businesses, including both state and federal income tax returns, California sales tax returns, or other evidence documenting the gross receipts of or the transaction prices charged by a cannabis business or persons engaged in the operation of a cannabis business, for the purpose of ascertaining the amount of tax, if any, required to be paid by the provisions of this Chapter, and for the purpose of verifying any statements or any item thereof when filed by any person pursuant to the provisions of this Chapter. If such cannabis business or person, after written demand by the Tax Administrator, refuses to make available for audit, examination or verification such books, records, or equipment as the Tax Administrator requests, the Tax Administrator may, after full consideration of all information within the Tax Administrator's knowledge concerning the cannabis business and its business and activities of the person so refusing, make an assessment in the manner provided in Section 3.08.130.
65266.00001 \31197178.1 10
20 63
D. The conviction and punishment of any person for failure to pay the required tax shall not excuse or exempt such person from any civil action for the tax debt unpaid at the time of such conviction. No civil action shall prevent a criminal prosecution for any violation of the provisions of this Chapter or of any State law requiring the payment of all taxes.

3.08.130 - Debts, Deficiencies and Assessments.

C. Under any of the following circumstances, the Tax Administrator may make and give notice of an assessment of the amount of tax owed by a person under this Chapter:

1. If the person has not filed any statement or return required under the provisions of this Chapter;

2. If the person has not paid any tax due under the provisions of this Chapter;
65266.0000 l \31197178. I 11
21 64

3. If the person has not, after demand by the Tax Administrator, filed a corrected statement or return, or furnished to the Tax Administrator adequate substantiation of the information contained in a statement or return already filed, or paid any additional amount of tax due under the provisions of this Chapter;

G. At the time fixed for the hearing, the Tax Administrator shall hear all relevant testimony and evidence, including that of any other interested parties. At 65266.00001 \31197178.l 12
22 65
the discretion of the Tax Administrator, the hearing may be continued from time to time for the purpose of allowing the presentation of additional evidence. Within a reasonable time following the conclusion of the hearing, the Tax Administrator shall issue a final assessment (or non-assessment), by confirming, modifying or rejecting the original deficiency determination, and shall mail a copy of such final assessment to the person owing the tax. The decision of the Tax Administrator may be appealed pursuant to Section 3.08.140 of this Chapter.

3.08.140 - Appeals.

D. At the time fixed for the hearing, the City Manager shall hear all relevant testimony and evidence, de novo, including that of any other interested parties. At the discretion of the City Manager, the hearing may be continued from time to time for the purpose of allowing the presentation of additional evidence. 65266.0000 I \31197178.1 13
23 66
Within a reasonable time following the conclusion of the hearing, the City Manager shall issue a final decision confirming, modifying or rejecting the Tax Administrator's deficiency determination, and shall mail a copy of such final decision to the person owing the tax. The City Manager's decision shall be final and subject only to judicial review shall be pursuant to California Code of Civil Procedure Section 1094.6. Payment of the final assessment shall become delinquent if not received by the Tax Administrator on or before the thirtieth (30th) calendar day following the date of receipt of the City Manager's decision.

3.08.150 - No Injunction/Writ of Mandate.

3.08.160 - Future Amendment to Cited Statute.

SECTION 3. Severability. If any section, sentence, clause or phrase of this ordinance 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 provisions of this ordinance. The People of the City of Goleta hereby 65266.00001\31197178 .J 14
24 67
declare that they would have adopted this ordinance and each section, sentence, clause or phrase thereof, irrespective of the fact that any one or more section, subsections, sentences, clauses or phrases be declared invalid or unconstitutional.

PASSED, APPROVED and ADOPTED by the People of the City of Goleta this 5th day of November, 2018.

ATTEST:
65266.00001 \31197178.l 15
r~<~

PAULA PEROTTE
MAYOR
APPROVED AS TO FORM:
25 68
ATTACHMENT 2

Ordinance No. 19-07 entitled “An Ordinance of the City Council of the City of Goleta, California, Adopting Chapter 9 of Title 5 of the Goleta Municipal Code Relating to Establish Standards and Regulations for Commercial Cannabis Businesses.”
26 69
ORDINANCE N0.19-07

AN ORDINANCE OF THE CITY OF GOLETA, CALIFORNIA,
AMENDING CHAPTER 5.09 OF TITLE 5 OF THE GOLETA

MUNICIPAL CODE TO ESTABLISH STANDARDS AND

REGULATIONS FOR COMMERCIAL CANNABIS BUSINESSES

THE CITY COUNCIL OF THE CITY OF GOLETA DOES HEREBY ORDAIN AS FOLLOWS:

SECTION 1: FINDINGS
A. In 1996, the California electorate approved Proposition 215, the Compassionate Use Act which allows a patient, with a doctor's recommendation, to use cannabis for medicinal purposes without the fear of prosecution or arrest; and
B. In 2003, the California legislature passed Senate Bill 420 (Medical Marijuana Program Act) which amended the Health and Safety Code to permit the establishment of medicinal cannabis dispensaries for the distribution of cannabis for medicinal purposes; and
C. In 2005, the California Board of Equalization began issuing seller's permits for sales consisting of medicinal cannabis; and
D. In 2008, the California Attorney General issued guidelines for the security and non-diversion of cannabis grown for medical use; and
E. In 2015, the Governor signed into law Senate Bill 643, Assembly Bill 266, and Assembly Bill 243, collectively referred to as the Medical Marijuana Regulation and Safety Act ("MMRSA") further amended by Senate Bill 837in 2016 as the Medicinal Cannabis Regulation and Safety Act ("MCRSA"), which established regulations and a state licensing system for medical cannabis cultivation, manufacturing, delivery, and dispensing; and F. In 2016, the voters of the State of California approved and passed Proposition 64 also known as the Adult Use of Marijuana Act ("AUMA "); and G. In 2017, the Governor signed into law Senate Bill 94 also known as Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA); and H. Pursuant their police power and land use authority under Article 11, Section 7 of the California Constitution, cities are free to adopt and enforce local ordinances that regulate the location, operation, or establishment of medicinal cannabis; and
I. After studying various alternatives for the regulation of commercial cannabis considering input from stakeholders and a public hearing, and reviewing the legal status of cannabis under applicable law, the City Council finds that the regulation of commercial cannabis activities is necessary to protect the public health, safety, and welfare by mitigating the adverse secondary effects from the operations of these uses; and
J. The City of Goleta ("City") has a compelling interest in ensuring that cannabis is not distributed in an illicit manner, in protecting the public health, safety and welfare of its residents and businesses, in preserving the peace and quiet of the neighborhoods in which these uses may operate, and in providing access of cannabis to residents; and
27 70
K. Chapter 5.09 of Title 5 of the Goleta Municipal Code regulates and requires licensure of cannabis businesses within the City.

L. The City desires to amend Chapter 5.09 to add more requirements to the licensure of cannabis businesses within the City.

SECTION 4: AMENDMENT OF CHAPTER 5.09
Chapter 5.09 is hereby amended as follows:

5.09.010 COMPLIANCE WITH STATE AND LOCAL LICENSING

REQUIREMENTS
Commercial cannabis activity as defined by the State of California or the City shall operate in conformance with all regulations and standards set forth in this Ordinance No. 19-07 Cannabis Business License Ordinance 28 71
Chapter of the Municipal Code to assure that the operations of the retailer, cultivation facility, manufacturing facility, distribution facility, testing facility, microbusiness or any other commercial cannabis activity as defined by the State of California or allowed by the City are in compliance with local and state law and are established to mitigate any adverse secondary effects from its operations.