Susana Alcala Wood, City Attorney Jorge Oseguera, City Auditor Mindy Cuppy, City Clerk Howard Chan, City Manager John Colville, City Treasurer Budget and Audit Committee Report
915 I Street, 1st Floor
Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2022-00119 February 1, 2022 Consent Item 01
Title: Establishing an Extension Fee for Cannabis Business Operating Permit (BOP) Applications and Appeal Fee for Illegal Cultivation of Cannabis
Location: Citywide
Recommendation: 1) Consider the establishment of an extension fee for the continuation of cannabis BOP applications through the permitting process and an appeal fee for administrative penalties issued for illegal cannabis cultivation; and 2) forward to City Council for approval.
Contact: Davina Smith, Cannabis Manager (916) 808-4772, [email protected] ;
Zarah Cruz, Program Specialist, (916) 808-8925, [email protected], Office of Cannabis Management, Office of the City Manager
Presenter: Davina Smith, Cannabis Manager (916) 808-4772, [email protected]
, Office of the City Manager
Attachments:
1-Description/Analysis
2-Proposed Fees
3-Proposition 26
File ID: 2022-00119 Consent Item 01
February 1, 2022
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City of Sacramento
Description/Analysis
Issue Detail: On January 4, 2022, the Law and Legislation Committee (Committee) reviewed a proposed ordinance amending sections of Sacramento City Code (SCC) Chapter 5.150 relating to the regulations for cannabis businesses and 8.132.020 relating to appeal fees for illegal cannabis cultivation. This item will establish the fees proposed in the ordinance (Attachment 2).
Establishing a Fee to Reactivate an Expiring BOP Application Under current code, BOP applications are valid for 180 days from submission. The proposed amendments to Chapter 5.150 would deem an application “abandoned” if it is incomplete after 180 days, an extension has not been requested, and an extension fee has not been paid. An abandoned application will be voided and would no longer be processed, instead of being subject to denial procedures. The addition of an “abandoned” status aligns with the State’s process and discourages “parking” of applications on properties with a cannabis conditional use permit. Applicants who are actively pursuing the steps towards obtaining their BOP can request that their application be reactivated for another 180 days by submitting a request and submitting a fee. An extension fee of $500 is proposed, which will cover staff time to review, evaluate and update the application.
Establishing an Appeal Fee for Administrative Penalties for Illegal Cultivation The appeal fee for administrative penalties related to the illegal cultivation of cannabis is currently set at Level B ($250) as listed in SCC Section 1.28.101(D)(4)(b). However, each administrative hearing costs the City $1,500 on average for hearing examiners, court reporters and other related expenses. The proposed amendment to Section 8.132.050 would remove all references to a Level B appeal fee and establish a separate appeal fee set by resolution of the City Council. This fee is proposed to be set at $500.
Policy Considerations: Chapter 5.150 contains the regulations for the business operations of all cannabis businesses in the City. The proposed amendment to 5.150 will create a section on “abandoned” applications and a process to extend the life of an application before it is deemed abandoned.
Chapter 8.132.050 contains the provisions for violations and the appeal process for the illegal cultivation of cannabis. The proposed amendment to this section will establish an appeal fee for illegal cultivation of cannabis set by resolution of the Council, instead of being a Level B appeal fee, in order to cover the costs associated with the appeal process.
Economic Impacts: None.
File ID: 2022-00119 Consent Item 01
February 1, 2022
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City of Sacramento
Environmental Considerations: This action is not a project subject to CEQA because it involves the establishment, modification, structuring, restructuring, or approval of rates, tolls, fares, or other charges by public agencies which the public agency finds are for the purpose of meeting operating expenses; and because it is an administrative activity that will not result in direct or indirect physical changes in the environment. (Pub. Res. Code §21080; CEQA Guidelines §15378(b)(5).)
Sustainability: Not applicable.
Commission/Committee Action: On January 4, 2022, the Committee considered the proposed ordinance amending Chapters 5.150 and 8.132.050. This item contains the fee- related components of the proposed ordinance.
Rationale for Recommendation: The proposed extension fee for a BOP application will cover the staff costs in reviewing, evaluating and updating an application instead of deeming it abandoned 180 days after submission and it is incomplete. The extension fee is also intended serve as an incentive to applicants to take the necessary steps to complete a project and to discourage applicants from submitting an application before location requirements are completed or “parking” an application for an extended period.
Establishing separate appeal fees for administrative penalties for illegal cultivation, instead of defaulting to the existing Level B appeal fees will allow the City to recover more of the costs associated with conducting a hearing, including the fees for a hearing examiner, a court reporter and the staff time involved in the preparation of a case. The appeal fee does not exceed the reasonable costs of handling the appeal and it is not cost prohibitive.
Financial Considerations: The proposed extension fee for a BOP application will cover the staff costs in reviewing, evaluating and updating an application instead of deeming it abandoned 180 days after submission when a BOP has not been issued. The appeal fees will cover the administrative costs of holding an appeal hearing before a hearing examiner.
Local Business Enterprise (LBE): Not applicable
Attachment 2
Proposed Fees
Purpose Amount
Extension fee for expiring BOP applications $500
Appeal fee for Appeal Hearings on Administrative Penalties for Illegal Cultivation
$500
Attachment 3
Proposition 26
Proposition 26, the “Stop Hidden Taxes Initiative,” was passed by the voters on November 2, 2010, to amend Article XIII C of
the State Constitution. According to the
ballot measure, the intent of the measure is to ensure the effectiveness of Propositions 13 and 218 by providing a definition of a “tax” for state and local purposes “so that neither the Legislature nor local governments can circumvent these restrictions on increasing taxes by simply defining new or expanded taxes as ‘fees.” Accordingly, under Proposition 26 a tax has been very broadly defined.
Tax Defined:
“Tax” now means “any levy, charge, or exaction of any kind imposed by a local government, except for the following seven categories of charges:
Exception 1 – Benefit Conferred or Privilege Granted
A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege
Examples:
o Residential parking permit fees
o Professional licenses
o Business improvement assessments
Exception 2 – Government Service or Product
A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product Examples:
o User fees for park and recreation programs
o Weed abatement fees
o Sidewalk curb repairs
Exception 3 – Licenses and Permits
A charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof
Examples:
o Building inspections
o Cardroom license
o Business licenses
Exception 4 – Use of City property
A charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property
Examples:
o City-owned parking lots
o Swimming pools
o Convention Center rentals
o Golf green fees
Exception 5 – Fines and Penalties
A fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation of law Examples:
o City Code fines and penalties (e.g., 1.28.020)
o Parking fines
Exception 6 – Property Development Charges
A charge imposed as a condition of property development Examples:
o Development impact fees
Exception 7 – Proposition 218 Fees
Assessments and property related fees imposed in accordance with the provisions of Proposition 218, Article XIII D
Examples:
o Utility fees for water, sewer, drainage, and solid waste o Street lighting assessments
Burden of Proof:
The paragraph following the seven enumerated exceptions states:
“The local government bears the burden of proving by a preponderance of the evidence [1] that a levy, charge, or other exaction is not a tax, [2] that the amount is no more than necessary to cover the reasonable costs of the government activity, and [3] that the manner in which those costs are allocated to a payor bears a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.” The latter two requirements only apply to the first three exceptions.
Thus, with the burden of proof now shifted to the City, that requires each department to take into consideration how it aims to prove that a proposed fee or fee increase is not a tax. The following analytical framework can assist in this regard.
Burden of Proof: A 3-step Analysis
1. The City must make a threshold determination whether one of the exceptions applies.
o If none apply, it is a tax subject to voter approval.
2. If Exceptions 1, 2, or 3 apply, the City must also show that the fee revenue will not exceed the reasonable costs of providing the related governmental activity (at the aggregate level).
3. Finally, the City must show that the costs are fairly allocated to the individual payors.