Administrative
Report
N.3., File # 24-1687 Meeting Date: 10/15/2024
To: MAYOR AND CITY COUNCIL
From: ELIZABETH HAUSE, COMMUNITY SERVICES DIRECTOR
TITLE
DISCUSSION AND POSSIBLE ACTION ON THE CITY’S DRAFT CANNABIS REGULATORY
ORDINANCE
DIRECTION ON THE APPLICATION SCORING AND SELECTION PROCESS SECTIONS OF THE
ORDINANCE
EXECUTIVE SUMMARY
On September 6, 2022, the City Council adopted cannabis regulatory ordinances for both inland and coastal areas of Redondo Beach, permitting no more than two storefront commercial cannabis retailers to operate within the City. The Inland Ordinance became effective 30 days after adoption, while the Coastal Ordinance took effect upon certification by the California Coastal Commission on March 9, 2023.
At its December 19, 2023 meeting, the City Council directed staff to engage Tierra West Advisors, Inc. (TWA) to review the final cannabis regulatory ordinances, draft Commercial Cannabis Business (CCB) permitting guidelines, and assist with application processing. TWA’s recommended revisions to the City’s regulatory ordinances were presented at the May 14, 2024 and September 17, 2024 Council meetings, at which time Council provided guidance on several key aspects of the Ordinance.
At the September meeting, the Council specifically instructed staff to review the retail permit application scoring and evaluation criteria and determine which items should be evaluated on a pass/fail basis and which should be graded on a range. At the October 8, 2024 City Council meeting, Council reviewed Sections 1 through 3, and Section 7 of the drafted criteria, and provided direction to staff.
Attached to this report is the updated evaluation criteria, incorporating Council’s September 17 comments as well as guidance provided by Council at the October 8 meeting. The criteria are presented in a table format for easy viewing. Following Council review and final direction, the revised language will be included in the draft Ordinance.
This staff report offers the City Council an opportunity to review the draft retail permit application scoring and evaluation criteria in Sections 4 through 6 and direct staff to make additional modifications, as desired.
BACKGROUND
The analysis and identification of cannabis regulations most appropriate for Redondo Beach began in
N.3., File # 24-1687 Meeting Date: 10/15/2024
The analysis and identification of cannabis regulations most appropriate for Redondo Beach began in 2018 with the appointment of a Cannabis Steering Committee. Following Planning Commission consideration and several City Council discussions on this topic, the current Cannabis Regulatory Ordinances were adopted on September 6, 2022. The current Ordinances allow no more than two storefront commercial cannabis retailers to operate in the City.
At the December 19, 2023 Council meeting, portions of the regulatory ordinances and the permit application process were identified as needing further review. At that time, the City Council provided direction to engage TWA to review the City’s existing cannabis regulatory Ordinances and assist with development and review of the cannabis permit application process.
At the May 14, 2024 and September 17, 2024 Council meetings, TWA presented its recommended changes to the Ordinances, and the Council provided direction in several areas, including:
· Business Types Permitted by Ordinance
o The Ordinance will allow only retail storefront and delivery services, excluding all other types of cannabis businesses
· Business Relocation After Permit Issuance
o Business relocation will require City Council approval, contingent upon compliance with location and zoning requirements
· Permit Selection and Appeals Process
o Update current process so that applications are reviewed, and Permittees are selected by an application evaluation committee appointed by the Permit Administrator.
Applications will be evaluated on a scoring matrix composed of pass/fail criteria, as well as qualitative criteria scored on a well-defined range. Any appeal to the Committee’s selection of Permittee(s) will be made to the City Council · Permit Term Length
o A 5-year permit term will be established with the option to renew for two additional 2- year terms (done by the Permit Administrator); permits that are extended twice administratively may request an extension of up to five years by application to the City Council
· Community Benefit Plan in the Application Process
o A Community Benefit Plan will not be part of the application process, but applicants will be required to provide a history of Community Benefit Plan compliance in other cities in which they operate
· Retail Cannabis Sales Tax Rate
o The sales tax rate will be either 4% or 5%
· Site Selection Requirement
o Applicants must secure a property as part of the permit application process Following the September 17 discussion, staff has focused on refining the retail permit application scoring and evaluation criteria section of the Ordinance. At the October 8, 2024 meeting, Council provided guidance to staff on Sections 1 through 3 and Section 7 of the drafted criteria. These have been included in the attached updated evaluation criteria matrix. This staff report offers the City Council an opportunity to review the draft retail permit application scoring and evaluation criteria in Sections 4 through 6 and to identify and provide any desired revisions. Once finalized and approved by Council, staff will work with the City Attorney’s Office to incorporate the criteria into the Ordinance
N.3., File # 24-1687 Meeting Date: 10/15/2024
by Council, staff will work with the City Attorney’s Office to incorporate the criteria into the Ordinance using typical formatting.
In addition to the criteria listed in the attached evaluation table, staff recommends requiring the following two items from all applicants. As proposed, failure to provide these items would result in automatic disqualification. Currently these items are not included in the Draft Regulatory Ordinance and would be added following Council and review concurrence. · A Cannabis Zoning Verification Letter (ZVL)
To be obtained from the Community Development Department. This letter is specific to the Commercial Cannabis Business permit, and is separate and distinct from the standard zoning letter from the City. To secure this letter, an Applicant must make a written request to the Community Development Department (via a specific email address) which should specify the intended use of the building, the proposed building location, and any non-compliance of the site with buffer requirements. The deadline to submit a request for a ZVL shall be one week prior to close of application period.
· LiveScan Check
Each Owner, as defined in RBMC Section 10-2.1626, must undergo a criminal history background check to demonstrate their record does not provide good cause for denial of a Commercial Cannabis Business permit. Cause for denial of a CCB permit includes, but is not limited to, conditions identified in Section 26057 of the California Business and Professions Code. Applications with Owners who do not meet the criminal history eligibility requirements will be disqualified.
COORDINATION
This agenda item was prepared by the Community Services Department in coordination with the City Attorney’s Office, City Manager’s Office, along with the Fire, Police, Finance and Community Development Departments. The Ordinance was drafted by TWA, updated by staff, and will be prepared by the City Attorney’s Office in final form for Council consideration.
FISCAL IMPACT
The fiscal impact to the City for CCB application processing and management is unknown at this time, though a fee study in this area will be completed soon. The application fees are expected to provide full City cost recovery for the processing of all license applications, including any related consulting services costs. Preliminary estimates indicate an application fee between $12,000 and $16,000 per applicant. An annual regulatory fee is anticipated to be within the same range for each CCB permittee doing business in the City. These estimates are expected to change depending on final staff resource allocation.
Notwithstanding the above, staff’s estimate is that each licensed site in Redondo Beach could provide $150,000 to $300,000 in additional annual General Fund cannabis business tax revenue, provided the City moves forward with the adoption of a regulatory ordinance and the tax rate of 3%.
A 4% tax rate could provide $200,000 to $400,000 in total General Fund revenue, and 5% would provide approximately $250,000 to $500,000 in total General Fund revenue. It is difficult to determine at this time what impact taxing cannabis delivery will have on General Fund revenue.
The preparation of the Ordinances and staff report are within the workplan and annual budgets of the
N.3., File # 24-1687 Meeting Date: 10/15/2024
The preparation of the Ordinances and staff report are within the workplan and annual budgets of the Community Services Department, Community Development Department, City Manager’s Office, and the City Attorney’s Office.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
· Revised Evaluation Criteria (for comparative purpose, the Red Headings Represent the Existing Criteria and the Green Headings Illustrate the Proposed Updates) · Draft Cannabis Regulatory Ordinance (with the previous retail permit application scoring and evaluation criteria section highlighted)