City Council Agenda Report
TO: Mayor Clauzel and Members of the City Council
FROM: Ken Irwin, City Manager
BY: Nubia Goldstein, City Attorney
MEETING DATE: August 15, 2023
ITEM NO: 8.2
SUBJECT: Approve First Reading and Introduction of Ordinance No. 870, Reading by Title Only, Waiving Further Reading, an Ordinance of the City Council of the City of Patterson, Confirming the Termination of the Development Agreement By and Between the City of Patterson and Central ValleySierra Associates and Authorizing the Recording of a Notice of Termination.
RECOMMENDATION
Motion to Approve First Reading and Introduction of Ordinance No. 870, Reading by Title Only, Waiving Further Reading, an Ordinance of the City Council of the City of Patterson, Confirming the Termination of the Development Agreement By and Between the City of Patterson and Central Valley-Sierra Associates and Authorizing the Recording of a Notice of Termination.
BACKGROUND
Following consideration and recommendations from the City Planning Commission (“Planning Commission”), on December 5, 2017 the City adopted Ordinance No. 812 approving the Development Agreement (“DA”) for the operation of a cannabis dispensary business located at 100 West Las Palmas Avenue, Suite H, Patterson CA 95363, Assessor’s Parcel Number 131- 003-012 (the “Site”). On December 21, 2017, the Planning Commission voted to adopt Resolution 2017-14, approving Conditional Use Permit No. 17-21 (the “CUP”), associated with CVSA’s application for a cannabis dispensary (the “Project”) to be located at the Site.
Section 4.2 of the DA requires CVSA to pay to the City certain amounts to offset the impacts to City infrastructure, services, and neighborhoods, commensurate with the private benefits conferred on CVSA (the “Public Benefit Amount”), pursuant to the terms stated therein. CVSA failed to make the required Public Benefit Amount payments (the “Delinquent Public Benefit Amount”) by the agreed-upon terms, resulting in a default of the DA, pursuant to Section 4.3 and
8.1(a).
On June 17, 2022, following discussions between the City and CVSA in an attempt to the resolve the default and bring the Project current, City wrote a letter to CVSA, in accordance with Section
8.1 of the DA, which specifies the nature of the default and the manner in which the default may be cured, included an offer to settle the Delinquent Public Benefit Amount and cure CVSA’s default, and provided 10 days’ notice that if the default was not cured during that period, the City would commence proceedings to revoke the CUP and terminate the DA. CVSA did not accept the City’s offer but proposed a counteroffer with additional terms. The parties did not reach a resolution.
In or around January 2023, CVSA engaged a new company, Catalyst Cannabis Company (“Catalyst”) to assist with operation and management of the Project. Catalyst and the City engaged in further discussions but did not reach an agreement to resolve the Delinquent Public Benefit Amount, cure the default, or extend the term of the DA.
Thus, the City and CVSA ultimately did not reach an agreement to resolve the Delinquent Public Benefit Amount or to extend the term of the DA, and CVSA failed to cure the default. The DA, by its own terms, expired on or about July 4, 2022.
ANALYSIS
Under Section 9.3 of the Development Agreement, the City has no further obligation to comply with the DA, or any portion thereof, upon its termination. The City’s obligations to CVSA stopped as of July 4, 2022, when the DA terminated pursuant to Section 1.7. On March 29, 2023, City sent notice to CVSA of its intent to revoke the CUP, pursuant to Section 8.1(b) of the DA, and no response was received within the required 10 days.
Section 9.1. of the DA provides that upon termination, the City shall record a notice of such termination (“Notice of Termination”), and the DA shall be of no force or effect. Section 9.3. provides that termination of the DA does not eliminate the City’s right to seek any applicable and available remedies or damages based on acts or omissions occurring before termination, including recovery of the Delinquent Public Benefit Amounts due as of the termination date.
On July 13, 2023, the Planning Commission adopted Resolution No. 2023-07, revoking the CUP associated with this Project, No. 17-21, for failure to comply with Conditions of Approval. The Planning Commission found that the DA terminated on July 4, 2022, that CVSA was in default of the DA at the time of termination and had failed to cure the default. Also on July 13, 2023, following a public hearing, the Planning Commission passed Resolution No. 2023-06 recommending that the City Council adopt an Ordinance to confirm the termination of the DA.
With the CUP now revoked, the cannabis dispensary can no longer legally operate.
This Ordinance will (1) confirm that the DA was terminated on July 4, 2022; (2) authorize staff to record a Notice of Termination, drafted in accordance with the requirements stated in the DA; and (3) confirm that the DA shall be of no force or effect except as otherwise set forth therein.
The proposed Notice of Termination is attached as Exhibit A.
The City Council’s options are:
1. Introduce the Ordinance No. 870 for a first reading;
2. Continue introduction of the Ordinance No. 870 for a first reading to the next regular City Council meeting with changes or revisions as provided by the City Council;
3. Reject the introduction of Ordinance No. 870 for first reading.
RECOMMENDED ACTION
Waive first reading, read by title only, and introduce an ordinance confirming the termination of the development agreement by and between the City and CVSA and authorizing the recording of a Notice of Termination.
ATTACHMENTS
Proposed Ordinance No. 870
Proposed Notice of Termination
FISCAL IMPACT
The City would lose potential tax revenue due to the closing of the cannabis dispensary at the Site, which would result from termination of the Development Agreement with CVSA.