City of Huntington Beach
Policy discussion concerning
Cannabis Business Taxation &
Regulation
Study Session
July 5, 2022
Meeting Date:_ 7/5/2027
Agenda Item No.: * 1(22-579)
Background - City of Huntington Beach
• Two private parties have filed separate cannabis petitions requesting that the City prepare documents allowing their proposed regulations to be placed before the voters of Huntington Beach for consideration.
• November 3, 2021 - Huntington Beach Cannabis Taxation and Regulation Act • December 2, 2021 - Huntington Beach Cannabis Regulation & Land Use Measure • On December 21, 2021 Study Session, the City Council formed an ad-hoc subcommittee, consisting of Councilmembers Bolton, Kalmick and Peterson, to further assess, research and present a balanced cannabis regulatory framework for the Council's consideration.
• On February 15, 2022 Study Session, the Subcommittee presented the preliminary framework to the City Council.
July 5, 2022 Study Session
Background - Continued
• On March 1, 2022, the City Council voted to place a measure on the 2022 Primary Election ballot, Measure A, asking voters whether to adopt a special tax levied on cannabis retail and non-retail businesses if they were to be permitted. • The City Council directed staff and the Subcommittee members to discuss the implications of various unresolved policy and regulatory matters associated with cannabis and report back to the City Council.
• The City has solicited input from residents,
businesses, and community stakeholders on
the proposed regulatory framework through
various channels:
* Individual meetings and site tours of
permitted cannabis facilities in other cities
* Community forum held on June 9, 2022
* By accepting written comments via email
and the City website.
Background - Continued
MEASURE A:
• YES •NO
Cannabis Business Tax
• Retail tax: up to 6%
• Non-retail tax: up to 1%
• Special Tax with revenues being restricted 35.42%
to Police and Homeless & Behavioral
64.58%
Services
• 100% cost recovery on city expenses
through fees, approved by the City Council
via resolution.
→ Failed to reach 2/3 of voters
required to pass. June 7, 2022 Primary Election - HB Voters July 5, 2022 Study Session
Cannabis laws adopted by Voters and Council
City staff is recommending that the City:
• Place two ballot measures on the November 2022 General Election asking voters whether the City should allow and regulate a limited number of retail and non-retail cannabis businesses; and if allowed, impose local excise taxes on such commercial activities as General Tax.
• Develop regulatory and zoning ordinances for City Council adoption and the City's Commercial Cannabis Regulations for Council resolution adoption. * Extend to voters authority as to whether and how commercial cannabis activities are permitted.
* Maintain the City Council's ability to develop policy positions while allowing timely flexibility to respond to the ever-evolving State's laws and market condition without necessitating the delay and expense of conducting a municipal election.
July 5, 2022 Study Session 5
Key Features of Cannabis Regulatory Framework
**IMPORTANT: These key features of working draft are based on the Subcommittee's recommendations and subject to change**
Cannabis Industry Types
PERMITTED PROHIBITED
• Retailers - Storefront dispensaries • Sales on vehicles/mobile stores, kiosk, or (w/delivery) temporary structures
• Retailers - Non-storefront, delivery- • Sale by vending machine only facilities
• Non-Retailers - Indoor Cultivation • Outside cultivation • Non-Retailers - Manufacturing • microbusinesses
• Non-Retailers - Testing Labs • Cannabis events/event organizers • Non-Retailers - Distribution • Drive-in or drive-through (per the State) Key Features of Cannabis Regulatory Framework
Permitted Cannabis Business Types in the Supply Chain
X MICROBUSINESS
A combination of these types
of business at one location
X EVENT ORGANIZERS
Indoor only TESTING LAB Holding an event where
cannabis will be sold
1 TESTING LAB
CULTIVATOR
MANUFACTURER
DISTRIBUTOR
RETAIL CONSUMER
Key Features of Cannabis Regulatory Framework
Number of Permits:
• Retailers up to 10 permits
• Non-retailers controlled by zoning restrictions without a cap > A separate permit will be required for each type of commercial cannabis activity. > Limit 1 license type per owner (e.g. 1 owner can apply for 1 retailer and 1 manufacturer permit)
> No more than 1 application per property, per license type > A permit will be valid for 1 year from the date of issuance and expires unless renewed annually.
• A no-warehousing provision, requiring that permittee must begin operation within 1 year after permit is granted, otherwise the license will be revoked. • Non-transferable to others in 3 years but transferees must submit the same permit application information to the City and pay applicable fees.
July 5, 2022 Study Session 8
Key Features of Cannabis Regulatory Framework
Zones & Buffer Restrictions
Retail
Commercial Locations
• Retailers
• Storefront dispensaries: allowed in the
Commercial and Specific Plan Areas with
buffer restrictions
• Non-storefront/delivery-only retailers
(Type 9): allowed only in the Industrial
Zone with buffers
Exclude Downtown (SP5) and Sunset Converca Gened - 189 prene Beach Specific Plan (SP17)
Exclude Coastal Overlay Zone
Day Care
July 5, 2022 Study Session
Key Features of Cannabis Regulatory Framework
Zones & Buffer Restrictions
• Retailers - Continued Retail
Commercial Locations
• Permitted in multi store-front buildings
• No buffer requirement between shops
Established businesses will be
grandfathered to continue operation even
if a new sensitive receptor opens within
existing buffers
Buffer Distance:
> 1,000 ft. from high & middle schools; and
> 600 ft. from K-5 schools (inclusive of all
public, private, and charter schools); and
600 ft. from parks, licensed commercial
mercial Day Care
daycare centers, and youth centers.
July 5, 2022 Study Session 10
Key Features of Cannabis Regulatory Framework
Zones & Buffer Restrictions
Non-Retail
• Non-Retailers Industrial Locations
• Allowed in the Industrial Zone with buffer
restrictions that are same as retailers.
> 1,000 ft. from high & middle schools;
> 600 ft. from K-5 schools; and
> 600 ft. from parks, licensed
commercial daycare centers, and
youth centers.
CITY OF HUTT
July 5, 2022 Study Session 11
Key Features of Cannabis Regulatory Framework
SECURITY MEASURE AND OPERATIONAL REQUIREMENTS
21+
CiAo
City Comprehensive
24/7 Video Extensive No Customer
personnel
security monitoring background consumption check-in state and local may access
guards on inside & checks for allowed and age permitting surveillance
the outside of owners & onsite or near verification process videos at any
premises building employees premises (21+)
time
July 5, 2022 Study Session 12
Key Features of Cannabis Regulatory Framework
FIRE SAFETY REQUIREMENTS
• HBFD inspection required prior to occupancy
requirement.
• Commercial cannabis facilities must submit plans
demonstrating compliance with CA Fire Code,
identify any hazardous processes, and fire
protection systems.
• / Commercial cannabis facilities are subject to
routine fire and life safety inspections at the
frequency identified in the HBFD's Community Risk
Assessment. M
July 5, 2022 Study Session 13
Key Features of Cannabis Regulatory Framework
CODE ENFORCEMENT
• All owners/operators must remedy any expired building permits for the subject tenant space before being in operation.
Permittees must carry and display a copy of the issued permits for public view.
Refrain from displaying cannabis products or graphics to be visible from the exterior. • The City shall board any doors and windows associated with illegal cannabis businesses.
• The City may shut off the electric or water service to businesses in violation, in addition to criminal and administrative penalties.
July 5, 2022 Study Session 14
Key Features of Cannabis Regulatory Framework
Permit Application and Selection Process:
> Merit-based (RFQ/RFA) application process to identify highest quality operators and make the permitting process efficient and streamlined.
STEP 1 2 3
PRE-APPLICATION APPLICATION SITE PLAN REVIEW
SCREENING REVIEW AND INSPECTIONS
This review is required to Applicants on the Eligibility Applicants must meet all fire, determine if applicants List are evaluated by a set planning and building meet minimum of criteria and meet requirements and pass all requirements set by the additional requirements inspections before final City. and must be above a permits/certificates of occupancy certain score (e.g. 70- are granted. A State cannabis
license and HB business license
80%).
will be required
Key Features of Cannabis Regulatory Framework
Permit Application and Selection Process:
STEP 1 to screen applicants for Eligibility List:
• Complete application with applicable fees paid to the City on time • Sworn affidavit that the proposed location meets the zoning criteria • Proof of ownership or control of the site upon which the cannabis business is to operate
• Proof of having at least 4 current permits or licenses in CA, one of which must be retail if applying for retail permits
• Refundable security deposit of a fixed amount set by the Council (e.g. $250K) • Proof of having an identified local philanthropy partner that benefits the City • No past violations
July 5, 2022 Study Session 16
Key Features of Cannabis Regulatory Framework
Permit Application and Selection Process:
STEP 2 to evaluate applications on the Eligibility List based on a set of evaluation criteria including:
• Ownership structure
• Owner qualifications including prior successful experience • Capitalization plan
• Business and Operation plan that may include employee training, standard operating procedures, ordering systems, etc.
• Traffic/Circulation/Parking Plan
• Safety and Security plan for the Commercial Cannabis Facility • Labor Peace Agreement
• Community Benefit Plan
Local Hire/Sourcing programs
Other criteria established by the City's Commercial Cannabis Regulations.
July 5, 2022 Study Session 17
Additional Community Feedback
I. Medicinal cannabis businesses and customers:
a. Allow medicinal cannabis sales to medical patients under 21(18+ with a valid medical card and ID) similar to the State; and/or b. Differentiate tax rates and apply a lower tax rate for medicinal cannabis products than adult-use, recreational cannabis sales; and/or c. Permit cannabis businesses for compassionate donation of medical cannabis products to veterans per SB34.
S NURIETON
July 5, 2022 Study Session 18
Additional Community Feedback
II. Operation Hours:
• Extend the operation hours of storefront retailers from 6am to 10pm following the State requirement. This will be consistent with retail deliveries.
III. Buffer measurements:
a. From property line to property line, instead of the occupied premises to the property line; or
b. From premises to premises.
July 5, 2022 Study Session 19
Additional Community Feedback
IV. Local residency requirement and/or preference:
Support local residents and business owners by adding the following components:
a. Requiring that business owners) have been Huntington Beach residents for at least 3 years and/or at least 51% of their employees are residents; and/or
b. Allocating 2 permits out of total 10 permits or allow 2 additional permits (total of 12) to "Locals only-Equity" businesses that get processed after the first ten and lower the entry points/less restrictive requirements.
July 5, 2022 Study Session 20
Additional Community Feedback
V. Pre-application requirement to have at least 4 local permits or State licenses, one of which must be retail for retailers for retail applicants:
> Consider the number of required permits to a lower threshold or alternatives to measure applicants' qualification such as years of operating successful businesses.
TINGTON BE
July 5, 2022 Study Session 21
Additional Community Feedback
VI. Location/Property Requirement:
Consider not requiring a proof of ownership or site control of a property > It could lower entry barriers for small businesses and widen the application pool
> It may create a situation where applicants go through vigorous application process but cannot open a business due to lack of the viable property in areas zoned for cannabis commercial activity within the City limit.
July 5, 2022 Study Session 22
The City's Approach to Cannabis Businesses
Ballot Measures approved by Voters
Ordinances by City Council
Ballot Measures
Regulation by City
1. Permit and regulate a 1. Regulatory Business
limited number of cannabis Resolution
retailers and non-retailers Ordinances
Commercial Cannabis
in areas zoned?
Regulation that specifics
2. Land Use Ordinances and governs:
2. Impose a local excise tax - Application and renew
on commercial cannabis procedures
activities as a General Tax
- Operational Standards
- Other necessary
administrative components
HUNTINGTON
INCORPORATED
BEACH
QUESTIONS?
COUNTY CALIFORN 100000odic.os