City of Sacramento
Law and Legislation Committee Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2023-00102 2/21/2023 Discussion Item 3.
Update on Cannabis Policy Development and Programs
File ID: 2023-00102
Location: Citywide
Recommendation: Receive and file.
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 Cannabis Management, Office of the City Manager
Attachments:
1-Description/Analysis
Additional Description/Analysis
Issue Detail:
This item is intended to provide an update on the status of Council directions, pending policy proposals, and current projects and programs undertaken by the Office of Cannabis Management (OCM), including the Cannabis Opportunity Reinvestment and Equity (CORE) Program.
In Fall 2021, the City commissioned the Comprehensive Cannabis Study (Study) to collect and analyze data on the City’s cannabis regulatory program and the Sacramento cannabis industry, including, tracking the evolution of industry trends, evaluating the City’s existing regulatory framework, and providing recommendations to guide future policy development in regulating cannabis. Economics & Planning Systems, Inc. (EPS) completed the Study in March of 2022 and presented the results to the Law and Legislation Committee (Committee), between March and May, in the following four workshops: 1) Ownership; 2) Land use issues; 3) Fiscal issues and taxation; and 4) Summary and policy recommendations from the three prior workshops. During the last workshop, after public comment and a robust discussion, the Committee voted to advance a slate of policy recommendations to Council for consideration.
On May 31, 2022, OCM presented the slate of policy recommendations to Council and Council gave direction.
File ID: 2023-00102 2/21/2023 Discussion Item 3.
The following table includes a summarized list of that direction and its current status:
Council Direction Status
A. Ownership
Develop an ordinance proposing changes to
ownership, which will: · Clarify the definition of
ownership · Create a tracking mechanism for
ownership · Allow transfers of ownership occurring
not more than two times per year · Create an
enforcement action against the permit for failure to
complete transfer requirements within 90 days ·
Replace one-person-one-dispensary rule for
storefront dispensaries with ability to own up to 5% in an unlimited number of storefront dispensaries ·
Create regulations for franchises
In progress. OCM staff anticipates
bringing this item before the
Committee no later than Summer
2023.
II. Land Use
A. Request the Planning and Design Commission
(PDC): 1. Review current cannabis business zoning
and sensitive uses to determine if they continue to
serve the purposes for which they were adopted. 2.
Consider additional zones for storefront and delivery-
only dispensaries and non-volatile manufacturing
(including infusion and packaging). 3. Consider
storefront dispensaries as an allowed use in
Residential Mixed Use (RMX) or C-3 zones. 4.
Consider limiting cannabis sensitive uses to schools,
youth centers, drug and alcohol treatment centers,
neighborhood and community parks, and faith-based
institutions. 5. Consider reviewing suitability of mixed light cannabis uses in industrial/manufacturing zones
and whether new mixed light facilities should be
constructed with the ability to be re-purposed. 6.
Consider a zoning and permit type for cannabis
research and development (R&D) facilities. 7.
Consider removing distribution from the current uses
subject to a district-based square-footage cap.
On August 25, 2022, the PDC conducted a workshop at a regularly scheduled meeting. The workshop purpose was: (1) to introduce the PDC to the Study; and (2) receive direction on the approach and scope for evaluating each point of direction, including community engagement. Individual commissioner comments provided included: · Dispensaries don’t belong in industrial zones. for mixed-lite buildings. · Interest to reevaluate buffers and their merits given the study’s findings.·
mixed-lite buildings including their ability to be repurposed over time. · Community engagement will be very important.
the City Council direction. In September 2022, the Community Development Department (CDD) on-boarded two new planners to support legislative work, including City Code amendments related to the cannabis study. At present, they are preparing housing and other code amendments in response to the 2022 State legislative session as well as facilitating work on three separate digital signage amendments. The current 2023 CDD work program identifies this cannabis legislative work returning to the commission in second quarter 2023 with Council action in the third quarter. Based on in- progress work, it is anticipated this schedule will be delayed by three months.
A. B. Allow district-based cap of 50 on Delivery
businesses in the Southeast Industrial Area of the 6th
District to remain expired
No further action taken. The current number of delivery businesses in D6 is 37, including 31 delivery-only, 5 storefronts and 1 microbusiness
C. Expand opportunities for shared cannabis facilities Staff continues to engage with the Department of Cannabis Control (DCC) regarding changes to their regulations to allow for more types of shared cannabis facilities (manufacturing is the only shared use currently allowed by State law). Staff has increased efforts to encourage shared manufacturing facilities in Sacramento. A joint stakeholder meeting with the DCC on this topic was held on December 1, 2022. Since then, two manufacturing facilities have opened their businesses for shared manufacturing, while a third one is currently underway.
III. Taxes (Fiscal/Economic Issues)
III. A. Monitor Tax Legislation The State has suspended their cultivation tax as of July 1, 2022. As of January 1, 2023, the State has transferred the responsibility of collecting taxes from each of the businesses in the supply chain from the distributor to the retailer. Equity-qualified retailers can now apply to the State to retain 20% of cannabis tax due. Additionally, qualified equity cannabis businesses may receive a tax credit of $10,000 through the Cannabis Equity Tax Credit for taxable years beginning January 1, 2023 through December 31, 2027. No federal tax measures for cannabis have been signed into law.
IV. B. Put a measure on the November ballot to
provide flexibility for the Council to adjust Business
Operating Tax (BOT) depending on what happens
with state and federal tax rates
Not needed as the City Code already allows Council to adjust tax rates as needed up to the current maximum of 4%. Additionally, Measure L, the Sacramento Children and Youth Health and Safety Act, which was passed by the necessary number of voters, provides that the equivalent of 40% of cannabis BOT be used for youth- oriented programs. Any change to the current cannabis tax rate would affect the amount of funding for Measure L-funded programs and activities.
File ID: 2023-00102 2/21/2023 Discussion Item 3.
Council Direction Status
A. Ownership
Develop an ordinance proposing changes to
ownership, which will: · Clarify the definition of
ownership · Create a tracking mechanism for
ownership · Allow transfers of ownership occurring
not more than two times per year · Create an
enforcement action against the permit for failure to
complete transfer requirements within 90 days ·
Replace one-person-one-dispensary rule for
storefront dispensaries with ability to own up to 5% in an unlimited number of storefront dispensaries ·
Create regulations for franchises
In progress. OCM staff anticipates
bringing this item before the
Committee no later than Summer
2023.
II. Land Use
A. Request the Planning and Design Commission
(PDC): 1. Review current cannabis business zoning
and sensitive uses to determine if they continue to
serve the purposes for which they were adopted. 2.
Consider additional zones for storefront and delivery-
only dispensaries and non-volatile manufacturing
(including infusion and packaging). 3. Consider
storefront dispensaries as an allowed use in
Residential Mixed Use (RMX) or C-3 zones. 4.
Consider limiting cannabis sensitive uses to schools,
youth centers, drug and alcohol treatment centers,
neighborhood and community parks, and faith-based
institutions. 5. Consider reviewing suitability of mixed light cannabis uses in industrial/manufacturing zones
and whether new mixed light facilities should be
constructed with the ability to be re-purposed. 6.
Consider a zoning and permit type for cannabis
research and development (R&D) facilities. 7.
Consider removing distribution from the current uses
subject to a district-based square-footage cap.
On August 25, 2022, the PDC conducted a workshop at a regularly scheduled meeting. The workshop purpose was: (1) to introduce the PDC to the Study; and (2) receive direction on the approach and scope for evaluating each point of direction, including community engagement. Individual commissioner comments provided included: · Dispensaries don’t belong in industrial zones. for mixed-lite buildings. · Interest to reevaluate buffers and their merits given the study’s findings.·
mixed-lite buildings including their ability to be repurposed over time. · Community engagement will be very important.
the City Council direction. In September 2022, the Community Development Department (CDD) on-boarded two new planners to support legislative work, including City Code amendments related to the cannabis study. At present, they are preparing housing and other code amendments in response to the 2022 State legislative session as well as facilitating work on three separate digital signage amendments. The current 2023 CDD work program identifies this cannabis legislative work returning to the commission in second quarter 2023 with Council action in the third quarter. Based on in- progress work, it is anticipated this schedule will be delayed by three months.
A. B. Allow district-based cap of 50 on Delivery
businesses in the Southeast Industrial Area of the 6th
District to remain expired
No further action taken. The current number of delivery businesses in D6 is 37, including 31 delivery-only, 5 storefronts and 1 microbusiness
C. Expand opportunities for shared cannabis facilities Staff continues to engage with the Department of Cannabis Control (DCC) regarding changes to their regulations to allow for more types of shared cannabis facilities (manufacturing is the only shared use currently allowed by State law). Staff has increased efforts to encourage shared manufacturing facilities in Sacramento. A joint stakeholder meeting with the DCC on this topic was held on December 1, 2022. Since then, two manufacturing facilities have opened their businesses for shared manufacturing, while a third one is currently underway.
III. Taxes (Fiscal/Economic Issues)
III. A. Monitor Tax Legislation The State has suspended their cultivation tax as of July 1, 2022. As of January 1, 2023, the State has transferred the responsibility of collecting taxes from each of the businesses in the supply chain from the distributor to the retailer. Equity-qualified retailers can now apply to the State to retain 20% of cannabis tax due. Additionally, qualified equity cannabis businesses may receive a tax credit of $10,000 through the Cannabis Equity Tax Credit for taxable years beginning January 1, 2023 through December 31, 2027. No federal tax measures for cannabis have been signed into law.
IV. B. Put a measure on the November ballot to
provide flexibility for the Council to adjust Business
Operating Tax (BOT) depending on what happens
with state and federal tax rates
Not needed as the City Code already allows Council to adjust tax rates as needed up to the current maximum of 4%. Additionally, Measure L, the Sacramento Children and Youth Health and Safety Act, which was passed by the necessary number of voters, provides that the equivalent of 40% of cannabis BOT be used for youth- oriented programs. Any change to the current cannabis tax rate would affect the amount of funding for Measure L-funded programs and activities.
Other Cannabis-Related Updates:
A. Cannabis Opportunity and Reinvestment and Equity (CORE) Program A1. Cannabis Equity Study
A Cannabis Equity Study (Equity Study) to review and evaluate the effectiveness of the Cannabis Opportunity Reinvestment and Equity (CORE) Program in achieving the City’s goal of increasing equity in cannabis business ownership and surveying the state of equity in the Sacramento cannabis industry is currently underway. Applied Memetics LLC (AM), is the contractor conducting the Equity Study.
File ID: 2023-00102 2/21/2023 Discussion Item 3.
As of the beginning of February, research and data collection, including one-on-one interviews, about enforcement, the War on Drugs, and social equity program best practices have been completed. In addition, a comprehensive survey, which aims to seek feedback on the strengths and weaknesses of the CORE program and to identify potential opportunities for improvement, has been disseminated to over 500 stakeholders, which include CORE Program participants, non-CORE businesses, social equity advocates, and City staff.
The survey will be followed by one-on-one interviews with participants who volunteered for a more in-depth discussion of their experience or have additional suggestions to share.
OCM staff has reported twice to the Racial Equity Committee on the progress of the Equity Study and anticipates that the Equity Study will be completed by the end of the first quarter of 2023.
A2. CORE Marketing Campaign
OCM and the City’s Office of Media and Communications are working with UpperCloud, a marketing and communications consultant, to design a strategic and comprehensive communications, marketing, and public awareness campaign for the CORE program. As of September 2022, UpperCloud has completed the design of the CORE logo following a collaborative process with CORE participants. The logo has been shared with CORE businesses that intend to use it for their marketing and branding as a cannabis social equity business.
As of February 7, 2023, UpperCloud has also completed the photoshoot and video editing aspect of the project. The photos and videos will be part of the content for the CORE microsite on the City’s website as well as used in advertisements to encourage visibility of the CORE entrepreneurs and the program. The microsite is expected to be completed before April 2023. Also, as part of the campaign, a CORE (re)launch and participants’ networking event is being scheduled in March.
A3. CORE Loans and Grants
Since 2019, OCM has competed for and been awarded more than $11 million in grants from the DCC and the Governor’s Office of Business and Economic Development (GO-Biz). OCM was recently notified by GO-Biz that it will receive $1.56 million in cannabis equity grant funds for CORE participants in 2023. This is the third largest grant awarded this year and only the Cities of Oakland and Los Angeles received more funding.
The awarded funds have been or are currently being distributed to CORE participants through grant programs administered by OCM. To date, more than 90 CORE participants have benefitted from these grants. In addition to grants, OCM also administers a six-year interest-free loan program for CORE businesses. To date, 99 loans have been funded for 58 CORE participants since the loan program launched in 2021.
File ID: 2023-00102 2/21/2023 Discussion Item 3.
A4. CORE Cannabis Business Education and Technical Services OCM is currently in the procurement process for cannabis direct technical services as the contracts expired with OCM’s vendors for this service. A Request for Proposals will be issued with the expectation that a vendor for these services will be under contract by Summer, 2023. In addition, OCM is working with staff from the Los Rios Community College District to negotiate a contract on a cannabis small business education curriculum for CORE members that will provide cannabis regulatory and business knowledge, as well as business skills that all small business owners need.
Further discissions are being had on developing a pipeline for paid internships for those who complete the course. It is anticipated that coursework could begin in Spring, 2023.
B. Onsite Consumption and Events
Onsite consumption was one of the topics that the EPS had found to be of strong interest to the cannabis stakeholders in Sacramento, but due to a majority of the Committee’s concerns on the topic, it was not included in the package of recommendations for Council consideration.
Councilmember Valenzuela requested during Council consideration that further information be provided on onsite consumption.
On August 31, 2022, the Committee hosted a workshop on onsite consumption at which representatives from jurisdictions that currently regulate that business type, including the City and County of San Francisco and the cities of Palm Springs and West Hollywood made a presentation and responded to the Committee’s questions.
The Committee workshop provided an opportunity to hear from other municipalities and their experience with onsite consumption, specifically how concerns from the community were addressed, enforcement challenges and lessons learned, as well as revenues from this type of business model.
Some of the jurisdictions also spoke about their experiences with permitted cannabis events at locations approved by their Councils where consumption occurred and that many of the challenges and concerns were similar to those at stand-alone social consumption venues. At the conclusion of the workshop, the Committee directed staff to continue its research on the subject and develop a package of options for future consideration.
In an effort to gauge community support and receive additional ideas and input, OCM is in the process of hosting a series of community meetings, including one virtual and one in-person session with stakeholders and community groups, as well as a meeting with the City’s property-based business improvement districts and Chambers of Commerce in the month of April. From these series of meetings, insights from other jurisdictions, and research on the limitations under State law, staff will develop a set of options for the Committee’s consideration by Summer 2023.
File ID: 2023-00102 2/21/2023 Discussion Item 3.
C. Cannabis Business Permitting
One of OCM’s core missions is to review cannabis business operating permit (BOP) applications to determine if they qualify for issuance or renewal of a BOP. Currently, the City has 285 permitted cannabis businesses and 142 applications for new cannabis businesses. If the business is issued a BOP, they must apply for a BOP renewal each year in order to continue to operate. OCM, through the City’s Accela portal, sends automated reminder renewal notices at 90, 60, and 30 days before the permit expires. Permit applications and renewals are reviewed by at least two different OCM staff members to ensure that all the documentation supporting the application is in the file and current.
OCM has three staff members who work exclusively on cannabis business permitting and assistance.
One of those positions is vacant, but a recruitment will soon be underway to fill the position. Given the current numbers of permits, which account for more than one renewal each working day, and the number of applications that have been submitted, OCM is reviewing its staffing plan and fees to determine if a position can be added to assist with permitting work.
D. Youth Cannabis Prevention Education
At Council direction, OCM allocated $250,000 annually for cannabis youth education outreach and prevention efforts starting in 2018. The objective in utilizing these funds has been to educate and inform parents and young people about the hazards of cannabis use by adolescents and teens.
These funds had been used for informational flyers, newspaper inserts, bringing speakers to youth cannabis prevention events, and similar items prior to the COVID shutdowns in 2020. At that time, requests for funding were minimal and it was clear that in order to achieve a greater impact, OCM needed to apply its funding towards a youth cannabis prevention program. Listening sessions with a panel of youth cannabis prevention experts brought together by Councilmember Guerra helped OCM better understand the areas of greatest need and the costs associated with the development of programing.
In January 2022, OCM partnered with the Office of Youth Development (OYD) on its #SacYouthWorks: Futures (#Futures) program. Using the City’s successful #SacYouthWorks program framework, "Connect, Earn, Learn," #Futures integrates underage cannabis and substance use prevention education and advocacy into a work-based learning model. The goal of #Futures is to increase knowledge and awareness among youth, families, and the community with clear messaging regarding the impacts of cannabis use - particularly the impact on youth brain development. #Futures is primarily funded by a three-year grant from the California Board of State and Community Corrections (BSCC) Proposition 64 Public Health and Safety Grant Program-Cohort 2 with supplemental funding provided by OCM. In the first year, these funds supported seven community- based organizations with engaging 100 youth in direct programming and reached many more youth more through campaign activities. Now in its second year of programming, #Futures will expand to support 10-15 community-based organizations with engaging 350 youth in direct programming.
File ID: 2023-00102 2/21/2023 Discussion Item 3.
Policy Considerations: None, as this item is submitted is for informational purposes only.
Economic Impacts: None.
Environmental Considerations: This item is exempt from the California Environmental Quality Act (CEQA) because it does not have the potential for causing a significant effect on the environment (CEQA Guidelines section15061(b)(3)) and it is not a ‘project’ as defined by CEQA Guidelines as it is continuing administrative or maintenance activities (CEQA Guidelines sections 15378(b)(2)).
Sustainability: Not applicable.
Commission/Committee Action: None. This item is a receive-and-file only and does not require any action from the Committee.
Rationale for Recommendation: None as this item is receive-and-file only.
Financial Considerations: None.
Local Business Enterprise (LBE): Not applicable.