City Council Agenda Report
TO: Mayor McCord and Members of the City Council
FROM: Ken Irwin, City Manager
BY: Nubia Goldstein, City Attorney
MEETING DATE: May 3, 2022
ITEM NO: 7.2
SUBJECT: Discuss and Provide City Staff Direction Regarding Authorizing and Regulating the Operation of Lounges for On-Site Cannabis Consumption by Cannabis Dispensaries.
RECOMMENDATION
Discuss and Provide City Staff Direction Regarding Authorizing and Regulating the Operation of Lounges for On-Site Cannabis Consumption by Cannabis Dispensaries.
BACKGROUND
On June 27, 2017, the California legislature enacted the Medical and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”), which created a single regulatory scheme for both medicinal and adult-use cannabis businesses. MAUCRSA granted local jurisdiction control over whether businesses engaged in commercial cannabis activity may operate in their jurisdiction.
In compliance with enacted State law, and consistent with direction provided to staff, the City of Patterson (“City”) City Council (“City Council”) adopted an ordinance on November 7, 2017, to establish a Cannabis Business Pilot Program to regulate cannabis businesses (the “Cannabis Business Pilot Program”). The Cannabis Business Pilot Program imposes zoning restrictions based on the type of cannabis business and requires all cannabis businesses to obtain approval from the City pursuant to a development agreement and a conditional use permit prior to commencing operations. The Cannabis Business Pilot Program permits up to three (3) cannabis dispensaries. The Cannabis Business Pilot Program did not address the operation of lounges for on-site cannabis consumption.
On December 5, 2017, the City approved a development agreement with KP Patterson Management, LLC to operate a cannabis dispensary. KP Patterson Management, LLC has expressed interest in expanding its cannabis dispensary operations to include the operation of a lounge for on-site cannabis consumption.
ANALYSIS
MAUCRSA allows the City to authorize the operation of lounges for the on-site consumption of cannabis by State-licensed retailers or micro-businesses. The operation of lounges must comply with the following conditions:
1) Access to the area where cannabis consumption takes place is restricted to persons 21 years of age and older.
2) Consumption of cannabis may not be visible from any public place or be viewed by persons under 21 years of age.
3) Sale or consumption of alcohol or tobacco is not allowed on the same premises.
Since the Cannabis Business Pilot Program does not address the operation of lounges, if the City wishes to permit KP Patterson Management, LLC to operate a lounge, the Cannabis Pilot Program must be amended.
City staff seeks direction as to whether the Cannabis Business Pilot Program should be amended to authorize the operation of lounges for the on-site cannabis consumption by dispensaries. If the City Council agrees to permit the operation of lounges for the on-site cannabis consumption, City staff seeks direction as to the parameters for the operation of such lounges. City staff will return to City Council with an ordinance amending the Cannabis Business Pilot Program in accordance with City Council direction. Any ordinance amending the Cannabis Business Pilot Program should contain the requirements imposed by State law on lounges for the on-site consumption of cannabis as well as any other requirement the City Council wishes to include.
Further, any ordinance amending the Cannabis Business Pilot Program will not automatically authorize the operation of lounges for on-site cannabis consumption by dispensaries.
Dispensaries wishing to operate lounges for on-site cannabis consumption will need to obtain approval from the City prior to operation, either through obtaining a cannabis lounge permit or through a modification to their development agreement and a conditional use permit.
The following cities have permitted the operation of lounges for the on-site cannabis consumption and regulate them as follows:
· City of Santa Rosa:
o The City of Santa Rosa approves lounges for dispensaries through the conditional use permit process. Cannabis dispensaries must include a statement as to whether there will be a lounge on their application for a conditional use permit. o The conditional use permit application must include an operational plan, security protocols and how the cannabis lounge would comply with city and State regulations. The city can reject or approve an application for the conditional use permit based on the content of the application.
· National City
o National City requires dispensaries to obtain a separate permit to operate a lounge. The City Manager may establish conditions for approval of the permit, including a parking plan, ventilation plan, anti-drugged driving plan, design plan and set hours of operation.
o Cannabis lounges must be well ventilated.
o Cannabis dispensaries must adopt procedures to ensure that customers only gain access to the lounge once they purchased products from the dispensary. o Cannabis dispensaries must maintain sufficient staff to verify the identity and age of all patrons admitting to the lounge.
o Cannabis dispensaries must maintain a state-licensed security guard during operating hours of the cannabis dispensary.
· City of Perris
o City of Perris requires cannabis dispensaries to apply and obtain a separate permit to operate a lounge. The application requires including the names of employees of the cannabis lounge, evidence of compliance with all applicable laws, a site plan, floor plan, a security plan that includes security cameras and alarm system, and a safe consumption plan.
o Only pre-packaged cannabis products and purchased cannabis products may be purchased and consumed at the lounge.
o The amount of cannabis products that can be sold to customers must be reasonable for on-site consumption.
o The cannabis dispensary must provide city, law enforcement, and all neighbors within one hundred (100) feet the contact information of a “community relations employee” who can be notified if there are operational problems with the adultuse retailer. o Cannabis lounges may only operate during the regular hours of the cannabis dispensary.
o A licensed security guard must be present at the lounge during hours of operation. o Adequate security and lighting must be provided on-site to ensure safety. o Odor must be adequately controlled to prevent detectable odor at the property line of the premises. Any complaint concerning odors must be responded to within twenty-four (24) hours. Further, the dispensary must timely file a written disclosure to the city documenting all actions taken and planned to address the odor complaint.
· City of Palm Springs
o The City of Palm Springs authorizes cannabis lounges as an accessory to a cannabis dispensary.
o Only cannabis products purchased at the cannabis dispensary can be consumed. o There must be an adequate odor control plan to prevent any detectable odor at the property line of the premises. Any complaint concerning odors must be responded to within twenty-four (24) hours. Further, the dispensary must timely file a written disclosure to the city documenting all actions taken and planned to address the odor complaint.
o Adequate security and lighting must be provided on-site to ensure safety. o Only a reasonable amount of cannabis products may be provided to customers. o Law enforcement and all neighbors within one hundred (100) feet must be provided the contact information of the “community relations employee” to notify if there are problems with the cannabis lounge.
o Adequate solid waste receptacles and bins must be provided and the area at least one hundred (100) feet of the lounge must be free of any waste or litter.
FISCAL IMPACT
Taxes and fees on the sale of cannabis products are imposed by the State and the City but there is no separate fee or tax imposed on lounges. The State imposes a tax of fifteen percent (15%) of the average market price on any retail sale of a cannabis product. The City collects fees from the sale of cannabis products through the development agreement process and is authorized to impose a cannabis tax of seven percent (7%) of gross receipts on the retail sale of cannabis products. Authorizing the operation of lounges for on-site cannabis consumption by dispensaries would potentially increase revenue for the City. Further, if the City chooses to require a separate permit to operate a lounge, the City can obtain additional revenue through the imposition of a permit fee to offset staff costs.
ENVIRONMENTAL REVIEW
Discussing and providing City staff direction regarding authorizing the operation of lounges for on-site cannabis products by dispensaries does not constitute a “project” under the California Environmental Quality Act. (Pub. Resources Code, § 21065.)