REPORT TO CITY COUNCIL
To:Honorable Mayor and Members of the City Council
From:Jason Simpson, City Manager
Prepared by:Nancy Huynh, Principal Planner
Date:June 24, 2025
Subject:Request to Amend Development Agreements for Six Existing Cannabis Businesses to Revise the Community Benefit Fees
Applicants:Modern Leaf Culture (PA-2018-37), Alba Systems (PA-2019-33), LE Community Investment (PA-2018-39), IE Licensing (PA-2018-34), Green Origins LE (PA-2018-33), and The Healing Tree (PA-2018-38) Recommendation
1. Find that the proposed projects are exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15301 (Existing Facilities);
2. Introduce by title only and waive further reading of AN ORDINANCE OF THE CITY COUNCIL
OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING THE DEVELOPMENT AGREEMENT (DA-2024-03) FOR MODERN LEAF CULTURE (DBA MODERN LEAF AND EMBR) LOCATED AT 31877 CORYDON ROAD, UNITS 120 AND 150 (APN: 370-051-016 AND 370-051-030);
3. Introduce by title only and waive further reading of AN ORDINANCE OF THE CITY COUNCIL
OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING THE DEVELOPMENT AGREEMENT AMENDMENT (DA-2025-01) FOR ALBA SYSTEMS LOCATED AT 31879 CORYDON ROAD, UNIT 150 (APN: 370-051-025);
4. Introduce by title only and waive further reading of AN ORDINANCE OF THE CITY COUNCIL
OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING THE DEVELOPMENT AGREEMENT AMENDMENT (DA-2025-02) FOR LE INVESTMENT GROUP (DBA MR.
NICE GUY) LOCATED AT 311 W MINTHORN STREET (APN: 377-220-021); Cannabis Businesses – DA Amendments
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5. Introduce by title only and waive further reading of AN ORDINANCE OF THE CITY COUNCIL
OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING THE DEVELOPMENT AGREEMENT AMENDMENT (DA-2025-04) FOR GREEN ORIGINS LE (DBA THE SYNDICATE 1) LOCATED AT 504 CENTRAL AVENUE, BUILDING O (APN: 377-420-002);
6. Introduce by title only and waive further reading of AN ORDINANCE OF THE CITY COUNCIL
OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING THE DEVELOPMENT AGREEMENT AMENDMENT (DA-2025-05) FOR IE LICENSING (DBA THE SYNDICATE 2) LOCATED AT 31885 CORYDON ROAD, UNITS 130, 140, AND 150 (APN: 370-031-017, 370- 031-018 AND 370-031-019); and
7. Introduce by title only and waive further reading of AN ORDINANCE OF THE CITY COUNCIL
OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING THE DEVELOPMENT AGREEMENT AMENDMENT (DA-2025-06) FOR THE HEALING TREE LOCATED AT 480 3RD STREET (APN: 377-140-033).
Planning Commission Action
On May 20, 2025, the Planning Commission conducted a duly noticed Public Hearing at their regular meeting and recommended approval of the Development Agreements (DAs) to the City Council with a 5-0 vote. Members of the public, including several cannabis business owners/operators, provided public comments in favor of the proposed amendments.
Project Location
Pursuant to Lake Elsinore Municipal Code (LEMC) Section 17.156.040, cannabis businesses are permitted only within the M-1 (Limited Manufacturing) and M-2 (General Manufacturing) zoning districts. The subject cannabis businesses are all currently located in either the M-1 or M-2 zoning districts. Three of the businesses are located within an existing industrial complex along Corydon Road near Mission Trail in the East Lake District neighborhood. The other three businesses are generally located near the main commercial corridor area along Collier Avenue and Central Avenue in the Business District neighborhood.
CANNABIS BUSINESS ZONING DISTRICT ADDRESS
Modern Leaf/Ember M-1 31877 Corydon Road, Unit 120 and 150 Alba Systems M-1 31879 Corydon Road, Unit 150
Mr. Nice Guy M-1 311 W Minthorn Street
The Syndicate 1 M-1 31885 Corydon Road, Units 130, 140, and 150
The Syndicate 2 M-2 504 Central Avenue, Building O
The Healing Tree M-2 480 3rd Street
Table 1: Project Location
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Background
On November 28, 2017, the City Council adopted Ordinance No. 1383 (Cannabis Ordinance) to establish land use regulations and permitting requirements for cannabis businesses in LEMC Section 17.156. The Cannabis Ordinance includes regulations such as, but not limited to, allowed types of cannabis businesses, permitted zoning districts, location requirements, and maximum number of cannabis business permits.
In order to operate a cannabis business in the City, a business must have an approved conditional use permit, a City business license, and applicable State license(s). The cannabis businesses also enter into a Development Agreement (DA) with the City pursuant to LEMC Chapter 19.12 and Government Code Sections 65864 through 65869.5. The DAs provide a uniform approach to safeguard the City from certain known and unknown impacts and costs on City infrastructure, services, and neighborhoods related to the establishment of cannabis related land uses. As such, the DAs include public benefits for the community in the form of payment of Community Benefit Fees (CBF). Under the current terms of the DA, the cannabis businesses are obligated to pay the CBF to the City annually, and the fees are assessed based on the floor area square footage for each business at $18 per square foot, with an annual four percent (4%) increase in the CBF rate.
Requested DA Amendments
The subject six cannabis businesses are requesting to amend their DA to revise the CBF and establish a separate CBF rate for retail (e.g., storefront, delivery to customers) versus non-retail (e.g., cultivation, distribution, manufacturing, and testing laboratory) cannabis operations. The requested amendments are a result of the City Council Cannabis Subcommittee’s response to the cannabis business owners’ concerns with operating a viable and successful cannabis business in the City.
In addition to the proposed DA amendments, the Cannabis Ordinance will also be amended; for further details, refer to Code Amendment Case No. ZC-2025-01 (Amendment to Chapter 17.156 Cannabis Uses).
Discussion
Since adopting the Cannabis Ordinance, other surrounding cities, as well as Riverside County, have allowed cannabis uses within their jurisdiction, which has created a competitive market for the cannabis businesses in Lake Elsinore. Due to the growing competition, stringent land use regulations and permitting requirements, and costs associated with operating and managing a cannabis business. The businesses have expressed concerns about their ability to remain in operation.
Cannabis Businesses – DA Amendments
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The Cannabis Subcommittee reviewed these concerns and directed staff to amend the Cannabis Ordinance and DAs to alleviate these issues while still ensuring compatible land uses and protecting the general welfare and safety of the community. The proposed DA amendments also include revisions to the definitions and general provisions. All other terms and provisions of the previously adopted DA would remain unchanged and would still be applicable.
The following is a summary of the proposed DA amendments:
•Revised CBF for Cannabis Retail: The CBF rate for cannabis retail would be capped at $25 per square foot. Once it reaches this level, the 4% annual increase will no longer apply.
•Revised CBF for Cannabis Non-Retail: The CBF rate for cannabis non-retail would be reduced to $5 per square foot with no 4% annual increase. •CBF Payments: Cannabis businesses would now have the option to pay their CBF payments in 12 (monthly) equal payments instead of a lump sum payment annually (that was due at the time of City business license renewal).
•Floor Area Definition: The definition of “floor area” is proposed to be revised to mean the interior gross floor area square footage of a cannabis facility. In addition, the definition would be clarified to distinguish between cannabis retail and non-retail business floor areas. This revised definition is to create a clear delineation between the types of cannabis uses within a cannabis facility for purposes of calculating a cannabis business’ revised CBF.
•Floor Plan Exhibit(s): An updated floor plan exhibit of the cannabis facility would be included to clearly delineate the retail and non-retail floor areas.
The new CBF rates would become effective in 2025 and would not be retroactive. Any cannabis business that has not yet paid its 2025 CBF would be subject to the revised CBF rates.
Should the City Council approve the DA and Cannabis Ordinance amendments, it is anticipated that several cannabis businesses will amend their conditional use permit (CUP) to modify their floor area because of the less stringent land use regulation and reduced CBF. Any future changes to the cannabis facility’s floor plan layout would require an amendment to the previously approved CUP, subject to the Planning Commission’s review at a separate public hearing. Any CUP amendment that revises the DA floor plan exhibit will be formalized through an Operating Memorandum pursuant to the terms of the cannabis business’s DA.
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Environmental Determination
The proposed project is exempt from the California Environmental Quality Act (Cal. Pub. Res.
Code §§21000 et seq.: “CEQA”) and the CEQA Guidelines (14 C.C.R. §§ 15000 et seq.) pursuant to Section 15301 (Class 1, Existing Facilities). Class 1 consists of the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of use beyond that existing at the time of the lead agency's determination. The proposed projects are existing cannabis businesses that operate in fully developed sites and buildings. The proposed amendments to the businesses’ development agreements would not result in new construction, additional square footage, or expansion of the existing uses.
Public Notice
Notice of the public hearing for all six (6) applications has been published in the Press-Enterprise newspaper and mailed to property owners within 300 feet of the subject properties. As of the writing of this report, no written comments concerning these applications have been received by staff.
Fiscal Impact
The time and costs related to the processing of this application have been covered by the application fees paid by the applicants. No General Fund budgets have been allocated or used in the processing of these applications.
Attachments
Attachment 1 – DA-2024-03 Ordinance
Attachment 2 – DA-2025-01 Ordinance
Attachment 3 – DA-2025-02 Ordinance
Attachment 4 – DA-2025-04 Ordinance
Attachment 5 – DA-2025-05 Ordinance
Attachment 6 – DA-2025-06 Ordinance
Attachment 7 – GIS Exhibits
Attachment 8 – Public Notice Materials
Community Development