City Council Agenda Report
TO: Mayor Clauzel and Members of the City Council
FROM: Fernando Ulloa, Interim City Manager
BY: Nubia Goldstein, City Attorney
MEETING DATE: October 1, 2024
ITEM NO: 6.1
SUBJECT: Approve First Reading and Introduction of Ordinance No. 877 Reading by Title Only, Waiving Further Reading, an Ordinance of the City Council of the City of Patterson to approve an Amended and Restated Development Agreement for the “Cali Kosher” cannabis dispensary located at 520 Park Center Drive.
RECOMMENDATION
Motion to Approve First Reading and Introduction of Ordinance No. 877 Reading by Title Only, Waiving Further Reading, an Ordinance of the City Council of the City of Patterson to approve an Amended and Restated Development Agreement for the “Cali Kosher” cannabis dispensary located at 520 Park Center Drive.
BACKGROUND
Green Catalyst Enterprises, Inc. (“Developer”) is the operator of the cannabis dispensary “Cali Kosher” located at 520 Park Center Drive (“Property”). The Property is shown in Attachment 1 to this report, and is located in the West Patterson Business Park Master Plan.
All cannabis businesses operating in the City of Patterson are subject to Chapter 6.56 of the Patterson Municipal Code, known as the “Cannabis Business Program” ordinance. This ordinance provides a comprehensive set of rules applicable to cannabis dispensaries operating in the City. The rules include the following:
1. All cannabis businesses are required to enter into a Development Agreement with the City.
2. All cannabis businesses must obtain a Conditional Use Permit approved by the Planning Commission.
3. The ordinance limits the number of cannabis businesses that are allowed to operate within the City.
4. There are different requirements applicable to each different type of cannabis business, such as retail dispensaries, cultivation, laboratories, and manufacturing. The rules specify conditions such as allowed zoning districts, security requirements, odor control, waste management, and compliance with all applicable state requirements.
The Developer obtained its original project approvals during the time of 2017-2018:
Ø The Development Agreement for Cali Kosher was first approved on December 5, 2017, and was later amended on May 10, 2018.
Ø On May 10, 2018, the Planning Commission approved the Conditional Use Permit and Architectural & Site Plan review for the Cali Kosher project.
Ø After development and construction, the Cali Kosher dispensary commenced operation in 2020.
All cannabis development agreements require the operator to pay a “Public Benefit Amount” to the City, to offset impacts to City infrastructure, services, and neighborhoods. The Developer in this case failed to remit multiple payments required by the Public Benefit Amount obligations, resulting in a default of the Development Agreement.
Following a period of discussions between the City and the Developer in an attempt to resolve the default and bring the project account current, the parties have reached a resolution to settle the delinquent Public Benefit Amount and bring the project current and back into good standing.
The term of the original development agreement is also close to expiring and requires an extension.
The settlement terms and the incorporation of the applicable tax rate are contained in the Amended and Restated Development Agreement (“Development Agreement”), which is Exhibit A to the attached City Council Ordinance.
DISCUSSION
Major amendments to a development agreement require hearings before the Planning Commission and the City Council. On August 22, 2024, the Planning Commission recommended approval of the Development Agreement.
The following provides a summary of the terms and conditions contained in the Development Agreement, which includes proposed settlement terms for the delinquent Public Benefit Amount:
1. Cali Kosher is allowed to conduct the following cannabis operations, in accordance with its state licenses for cannabis: Indoor Cultivation, Manufacturing, Retail, and Distribution.
2. Cali Kosher has agreed to pay Twenty-Two Thousand Five Hundred Eighty-Six Dollars and Twenty-Four Cents ($22,586.24) to the City to offset the entire outstanding Public Benefit Amount, due in full after the City Council approves the Development Agreement.
3. On July 6, 2021, the City Council adopted a new business license tax on cannabis businesses operating in the City, which implemented an initiative measure passed by City voters on November 6, 2018 (Measure Y). The requirements of the business license tax must be applied to the new Public Benefit Amount going forward, which provides as follows:
Each month, the Developer must pay the City the greater of the following:
Seven Thousand Dollars ($7,000.00), OR what the City would have collected from the project pursuant to the business license tax (ranging from 2.5% - 7% of the project’s gross receipts, depending on the type of cannabis business).
4. The term of the Development Agreement will be extended for five (5) years, subject to additional short-term extensions approved by the City Manager. The term is structured so that the Development Agreement must be extended again by the City Council after expiration of the five-year period.
5. Also of note is that prior to Cali Kosher commencing operation in 2020, the Developer acquired the Property from the City of Patterson. The Developer makes regular payments to the City pursuant to a promissory note. Part of the settlement includes an extension of the promissory note, to allow the Developer more time to satisfy the amount owed. The Developer has made regular payments on the promissory note, and the City has not claimed a default of the promissory note. The City Council authorized extension of the promissory note at its meeting on August 20, 2024.
FISCAL IMPACT
As established in the Development Agreement, the City gains public benefit revenues from the operation of cannabis businesses. The revenue can be spent on neighborhood impacts, public facilities and improvements, and public services.
ALTERNATIVE ACTIONS
The City Council’s options regarding the Ordinance include:
1. Adopt Ordinance No. 877;
2. Continue the item to a later meeting of the City Council and provide direction to staff for any changes.
ATTACHMENTS
1. Site Map for Cali Kosher
2. Planning Commission Resolution
3. City Council Ordinance No. 877
EXHIBIT A: Amended and Restated Development Agreement