CITY OF SAN MATEO
City Council Special Meeting
October 2, 2023
6:00 PM
City Hall Council Chamber 330 W.
20th Avenue San Mateo CA 94403
Entrance is on O’Farrell Street
COUNCIL MEMBERS
Amourence Lee, Mayor
Lisa Diaz Nash, Deputy Mayor
Rich Hedges
Adam Loraine
Rob Newsom Jr.
AGENDA
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PUBLIC COMMENTS WILL BE ACCEPTED BOTH IN PERSON AND REMOTEL Y.
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October 2, 2023
To join via telephone: (408) 638-0968
Webinar ID: 841 0232 4503 Passcode: 731793
CALL TO ORDER
Roll Call
STUDY SESSION
The public will have an opportunity to comment during the consideration of these items.
1. Commercial Cannabis Ordinance and Permit Options – Discussion Receive information on various commercial cannabis permits and policies to consider and provide direction on which cannabis-related priorities, policies, and permits, if any, are desired in the City.
CEQA:
This item is not a project subject to CEQA, because it can be seen with certainty that it will not cause a physical change in the environment. (Public Resources Code Section 21065.)
ADJOURNMENT
----------------------------------------------------------------------------------------------------------------------------- AGENDAS:
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www.cityofsanmateo.org
. Any supplemental material distributed to the Council after the posting of the agenda will be made part of the official record.
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Send comments to:
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until 4 p.m. the day of the meeting.
During the meeting
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By Zoom:
Click the link at the top of the agenda and you’ll be added to the meeting. All attendees are muted by default. When the item of interest is open for consideration, select the “Raise Your Hand” icon and you will be called on at the appropriate time.
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Call (408) 638-0968 and enter the conference ID found at the top of the meeting agenda. When the item of interest is open for consideration, select *9 to raise your hand. When called upon, press *6 to unmute, state your name and provide your comments.
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At the meeting complete a “Request to Speak” form, submit a request at the speaker kiosk or scan the QR code.
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In compliance with the Americans with Disabilities Act, those with disabilities requiring special accommodations to participate in this meeting may contact the City Clerk’s Office at (650) 522-7040 or [email protected]
. Notification 48 hours prior to the meeting will
enable the City to make reasonable arrangements to ensure accessibility to this meeting.
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CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 1 Section Name: STUDY SESSION Account Number: 10-1311 File ID: 23-7837 TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: City Manager's Office
MEETING DATE: October 2, 2023
SUBJECT:
Commercial Cannabis Ordinance and Permit Options – Discussion RECOMMENDATION:
Receive information on various commercial cannabis permits and policies to consider and provide direction on which cannabis-related priorities, policies, and permits, if any, are desired in the City.
BACKGROUND:
In 2016, California voters passed Proposition 64 legalizing cannabis recreational use for adults 21 and over. In San Mateo County, 63% of voters approved the measure. Proposition 64 also allows local jurisdictions to regulate or prohibit commercial cannabis activities within their borders.
Proposition 64 and later clarifying regulations legalized personal cultivation of up to six plants and delivery of cannabis to adults 21 years or older throughout the State. Therefore, even if a local jurisdiction prohibits all types of cannabis businesses, local jurisdictions cannot prohibit cannabis deliveries into their city borders from an outside delivery service.
In 2017, the City Council passed Ordinance No. 2017-4, which added Chapter 7.45 to the San Mateo Municipal Code to prohibit the commercial cultivation, processing, or sale of marijuana, which will be referred to as cannabis throughout this report. Current San Mateo law prohibits all recreational commercial cannabis operations. Per State law and City Ordinance No. 2017-4, residents are allowed to have up to six cannabis plants indoors at their private residences.
During the 2022-2023 City Council Goal Setting Workshop on January 29, 2022, the Council approved the following priority: Adopt a Retail Cannabis Ordinance with restrictions around schools and significant public benefits including license fees and safety standards. While discussing the goal, councilmembers mentioned a need for an equity approach, the possibility of revenue, and neighboring cities newly allowing retail cannabis. During this fiscal year’s Goal Setting Workshop on February 11, 2023, the City Council voted to keep the retail cannabis priority on the Council’s Strategic Plan but did not engage in further discussion on the matter.
Permitting commercial cannabis operations does provide an opportunity for new tax revenue. However, revenue is dependent on how many businesses the city allows to operate within its jurisdiction. A revenue measure would need to be placed on an upcoming general election ballot and would need to be approved by San Mateo voters, in order for the City to collect a local tax on commercial cannabis activities.
Establishing and implementing a thoughtful and successful commercial cannabis business program requires significant staff time from many City departments including: the City Manager’s Office, City Attorney’s Office, City Clerk’s Office, Community Development Department, Police Department, Finance Department, Public Works-transportation, and the San Mateo Consolidated Fire Department. The steps needed to establish a program include: placing a cannabis revenue
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measure on the ballot, conducting community outreach, developing and adopting a commercial cannabis ordinance, determining appropriate locations through a zoning ordinance amendment, establishing and implementing an application and screening process, , selecting operators, hearing appeals from applicants regarding City selection decisions, and handling potential litigation due to the selection process. Once businesses open, program implementation includes processing annual license renewals, conducting financial audits, site visits and ongoing enforcement.
Status of the Cannabis Industry
Staff reached out to a local cannabis industry expert with the Silicon Valley Cannabis Alliance who provided staff with a current industry snapshot (state of the market). Currently, the cannabis industry is experiencing a recession/correction from the industry's peak during the height of the COVID-19 Pandemic. The industry is down approximately 25-35% in sales from its peak a few years ago. This is due to a number of factors including the reduction in overall cannabis consumption, tax laws, a growing competition from the black market and unlicensed, unregulated businesses, and a weakened debt market which limits lines of credit and access to capital for operators in order to continue their business expansion efforts.
These factors have the commercial cannabis industry hunkering down at this time and there is a reduced demand from operators to establish new retail cannabis businesses. However, according to the industry expert, a retail storefront businesses' location is a determining factor whether a business will be successful during these times.
This report summarizes research on the type of permits approved by the State and the evaluation criteria for determining which, if any, types of permits the City Council could explore allowing. This report includes other non-retail commercial cannabis permits for background information and consideration.
Other Cities and Types of Permits
Many cities in San Mateo County and the Bay Area have successfully implemented commercial cannabis programs, with twelve jurisdictions in San Mateo County permitting at least one type of commercial cannabis activity. In total there are six primary types of commercial cannabis licenses, and all require approval from the local jurisdiction as well as a state license. There are currently 35 active state licenses across San Mateo County. A full list of where commercial cannabis activities are permitted in the Bay Area is provided in Attachment 1, while the six types of permits are summarized below, along with data on where they are issued in San Mateo County:
1. Retail (storefront): A storefront retailer has a physical location where cannabis goods are sold directly to consumers. They are also sometimes referred to as “dispensaries.” Cities can allow a subset of these permits, known as “consumption cafes,” where cannabis products can be consumed onsite. Four cities in San Mateo County allow for storefront retail, however, no cities in San Mateo County permit onsite consumption.
2. Retail (non-storefront): A non-storefront retailer sells cannabis goods to customers only through delivery but has a physical premise where its business activities take place. Six cities in San Mateo County allow for non-storefront (delivery) retail and there are nine active licenses across the County. Recently, there has been less interest from businesses in this permit type. For example, while Burlingame and Mountain View both allow delivery-only retail, neither has any businesses in operation.
3. Distribution: Procurement, sale, and transport of cannabis and cannabis products between other licensed businesses. This is distinct from delivery or non-storefront retail as they have no direct interaction with customers.
For example, they transport cannabis from growers to manufactures, or from manufacturers to retailers. Four cities in San Mateo County allow for cannabis distribution and there are four active permits across the County.
4. Testing: A laboratory or facility that tests cannabis or cannabis products. While allowed in six jurisdictions in the County, none are currently operating.
5. Manufacturing: Production, preparation, propagation, or compounding of cannabis or cannabis products. While allowed in four jurisdictions in the County, none are currently operating.
6. Cultivation: Small, medium, and large-scale indoor, outdoor, and combined indoor/outdoor commercial
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(nonpersonal) cultivation of cannabis. California currently has 14 different permit types for cultivation depending on the scale and type of light. There are 11 active cultivation licenses but primarily in the agricultural area of unincorporated San Mateo County.
If the Council is interested in pursuing a cannabis program in San Mateo, it could consider an ordinance that allows all six types of permits or a subset of these permit types.
Given the lack of interest from businesses to pursue testing or manufacturing operations elsewhere in San Mateo County, San Mateo is unlikely to attract these businesses either. Additionally, San Mateo does not have the appropriate infrastructure to be appealing in terms of cultivation (lack of agricultural zoned land) nor distribution (limited industrial space away from residential communities). Should the Council be interested in allowing commercial cannabis operations, the main areas of business interest locally according to the industry expert is in the retail brick and mortar cannabis storefronts or a combination of retail storefronts and delivery services within the same footprint. Therefore, the rest of this report will primarily focus on retail and delivery cannabis permits.
Attachment 2 details how the permits are deployed in San Mateo County cities.
Evaluation Criteria
When considering how and which, if any, permits to implement, staff or Council may utilize evaluation criteria such as revenue, zoning, public safety, and staff time. For example, while delivery-only permits require less staff time and fewer zoning considerations, there is little business interest and, therefore, little to no revenue. Storefront retail requires substantially more staff time to regulate, but has the opportunity for increased revenue.
Revenue:
The state imposes a 15% excise tax on retail sales of cannabis or cannabis products, now collected by the retailers.
Most cities that allow commercial cannabis have a voter approved revenue measure, especially cities that allow storefront retail or “dispensaries.” The tax rates vary significantly across cities in San Mateo County from 0.6% to 6%. The revenue measures adopted by cities typically have built in flexibility with sliding scales between 0% to 10% which the City Council can determine or change the tax rate as they see fit. Cities often have different tax rates for different commercial cannabis activities. See Attachment 2 for the current tax rates of San Mateo County jurisdictions by type of permit.
If the Council is interested in a specific tax on cannabis businesses, a revenue measure would have to go to the voters for approval at an upcoming general election, possibly by a simple majority, depending on the nature of the measure. The following table summarizes Bay Area cities, their tax rates and estimated revenue:
City Tax Rate Revenue Year # of
Businesses
Oakland 0.12% - 5% $13,470,000 2021 187 Established
Cannabis
Programs Pacifica 6% $850,000 2023 5
Redwood City 4% $1,250,000
(projected) 2023 6Recently Created
Storefront
Programs San Bruno 5% >$100,000
(projected) 2024 2
South San
Francisco 0.1% - 5% >$100,000 2021 4
Burlingame 5% $0 - No Permits 2023 0
Non-Storefront
Only
San Carlos 6% $0 - No Permits 2023 0
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Permitting commercial cannabis operations does provide an opportunity for revenue. However, thoughtful implementation can require significant staff time and revenue is dependent on how many businesses choose to operate within the jurisdiction. Tax laws and ongoing competition from the black market have hindered financial success of the legal cannabis industry in California in recent years.
Some city cannabis programs require cannabis retailers to provide community benefits to local community-based organizations and nonprofits. For example, in Redwood City, retail cannabis providers will provide annual community benefit contributions to a range of activities such as educational, and children and youth serving programs. Redwood City also requires retailers to provide a $10,000 annual contribution for youth cannabis prevention education programs.
Cannabis advocates are pushing for lower tax rates at the state and local level to give smaller businesses more ability to sustain themselves.
Zoning:
Like with most business types, cities can determine in which zoning designations cannabis businesses can operate. Given their different needs, the zoning designations vary by type of permit or license. For example, storefront retailers are often in retail areas, while delivery-only retailer need large warehouse spaces located in light industrial zones. Some cities such as Daly City and Pacifica developed specific “Cannabis Eligibility Zones” or “Cannabis Operation Overlay Districts” to specify where retail operations are allowed.
Additionally, many cities, such as Redwood City, San Bruno, or Berkeley, cap the number of retail operators, both storefront and delivery, in their city. For example, Redwood City allows six storefront retail permits in all areas that allow retail in their zoning code while San Bruno allows just one.
Under state law, cannabis businesses, regardless of use type, must be at least 600 feet from sensitive receptors such as all K-12 schools, day care centers and youth centers. Jurisdictions can also add additional sensitive uses to the separation requirements such as libraries, parks, or residential areas. Many jurisdictions also require buffers between retail cannabis locations to avoid concentration.
Public Safety:
Under the current ordinance, San Mateo already does face public safety concerns from commercial cannabis activities originating in other jurisdictions. In the last year, San Mateo has experienced significant crimes of violence associated with cannabis businesses, the majority of which involved cannabis delivery. In those cases, the victims, employees of the cannabis delivery companies, were followed into San Mateo before being accosted and robbed. In one such instance, the suspects shot several times at the victim as the victim drove away to flee (fortunately the victim and no other community members were hit).
In another of these cases, the suspects forced the victim from their car at gunpoint before fleeing in the victim’s vehicle with cannabis goods. In each of the cannabis delivery robberies, the crimes were clearly premeditated by criminal groups that were armed, ready to engage in violence, and specifically targeted the cannabis deliveries.
One of the other crimes involving cannabis business involved the home invasion of a subject that had traveled from Southern California to San Mateo to sell cannabis. The suspects in that case laid in wait for the victims, were able to force entry into the home, and held the victims at gunpoint while taking their large amount of cannabis. All four of these crimes had in common suspects that were criminally sophisticated, armed, violent, and motivated by the value that cannabis offers.
Storefront cannabis businesses have specific public safety concerns, especially as they historically often rely more heavily on cash. There are also concerns of minors under 21 years old accessing cannabis. However, with well-designed ordinances with specific safety and security guidance, the risks can be mitigated, and many cities reported relatively few issues.
Therefore, the state has specific security requirements for licensees including, but not limited to:
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•Alarm system (excluding cultivation)
•Onsite security personnel (storefront retail only)
•Video surveillance systems (in stores and in delivery vehicles) •Limited access areas
Some cities add additional security requirements such as requiring certain types of vaults or locks, restricting signs on the outside of delivery locations, street visibility requirements, unfettered access to the business by police, or restricting operation hours beyond the state requirements. All cities reviewed by staff require a security plan to be submitted to and reviewed by the local Police Department to ensure public safety.
Cannabis Regulation Implementation:
All the criteria above greatly impact the amount of staff time required to research and implement a commercial cannabis ordinance. Between research, application review, selection, and appeals, a commercial cannabis ordinance can require significant staff time. For example, Redwood City’s process took four phases over six years, with upwards of 90 hours per permit application. Redwood City’s fee study found the cost of just reviewing one application to be $22,604, excluding background checks. This does not include the opportunity cost of staff working on other priority projects for the city.
Additionally, there are future costs related to enforcement of the various provisions laid out above.
Any commercial cannabis program would require substantial staff time from the Police Department, San Mateo Consolidated Fire, the Community Development Department, Finance Department, Public Works Department, the City Attorney’s Office, the City Manager’s Office and various other departments depending on the specific ordinance.
Staff time is particularly dependent on the approval process determined by the City Council. For cities that restrict the number of permits, the jurisdiction must establish a permit issuance criteria and application process. Cities can do a lottery open to all applications that passed an initial review process or offer permits on a first-come, first-serve basis. In order to have more control and input over the applications selected, other cities do a more time-consuming comprehensive multi- round selection process based on pre-determined criteria. Criteria can include Business Plan, Community Benefit Plan, Location, Security Plan, Safety Plan, Owners Qualifications, and Diversity, Equity and Inclusion Plan.
Next Steps
Considering the information provided and the substantial upfront cost, staff requests the City Council clarify whether it would like to move forward with having staff continue its exploration of establishing a retail cannabis program at this time.
As part of the critical path to develop a local program, staff would need to begin reviewing and developing a commercial cannabis tax revenue measure for potential placement on the November 2024 ballot. Alternatively, staff can move forward with a wait and see approach (come back in 12 to 24 months) and wait for the data to come in from our local neighbors currently embarking on their retail cannabis storefront program (Redwood City) and see the amount of tax revenue generated and community benefits distributed to local groups once their program is fully up and running in the next year. This also allows additional time to observe how the cannabis industry responds to the current recession it is in.
BUDGET IMPACT:
There is no budget impacted associated with this administrative action.
ENVIRONMENTAL DETERMINATION:
This item is not a project subject to CEQA, because it can be seen with certainty that it will not cause a physical change in the environment. (Public Resources Code Section 21065.)
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
Att 1 - Cannabis Permits by Type in the Bay Area
Att 2 - Cannabis Permits by Type in San Mateo County (Detailed)
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STAFF CONTACT
Alex Khojikian, CIty Manager
[email protected]
Katie Wysong, Graduate Student Intern
[email protected]
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Attachment 1 - Cannabis Permits by Type in the Bay Area City Storefront Retail Delivery Retail Distribution Testing Manufacturing Cultivation Revenue Measure (Approved Tax) Definition
A storefront retailer has
a physical location
where cannabis goods
are sold. Storefront
retailers can also deliver
cannabis goods.
A non-storefront retailer
sells cannabis goods to
customers only through
delivery but has a
physical premise where
its business activities
take place.*
Procurement, sale, and
transport of cannabis
and cannabis products
between other licensed
businesses
A laboratory or facility
that tests cannabis or
cannabis products.
Production, preparation,
propagation, or
compounding of
cannabis or cannabis
products.
Small, medium, and
large-scale indoor,
outdoor, and combined
indoor/outdoor
commercial
(nonpersonal)
cultivation of cannabis.
Tax approved by voters
Total 34 42 36 41 16 39 37
San Mateo County X
Brisbane X X X X X
Burlingame X X
Daly City X X X X
Foster City X
Half Moon Bay X X
Pacifica X X X X X
Portola Valley X
Redwood City X X X X
San Bruno X X X
San Carlos X X X X X
South San Francisco X X X X X X
Alameda County X X X X X X
Alameda X X X X X
Berkeley X X X X X X X
Emeryville X X X X X X
Hayward X X X X X X X
Oakland X X X X X X X
San Leandro X X X X X X
Union City X X X X X X
San Francisco X X X X X X X
Contra Costa County X X X X X X
Antioch X X X X X X
Concord X X X X X X
El Cerrito X
Martinez X X X X X
Pittsburg X X X X
Richmond X X X X X X X
Marin County**
Fairfax X
Novato X X X X
San Rafael X X X X X
Note: The table only includes jursdictions that permit commerical cannabis activity. Jursdictions not listed prohibite all commerical cannabis businesses.
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Attachment 1 - Cannabis Permits by Type in the Bay Area City Storefront Retail Delivery Retail Distribution Testing Manufacturing Cultivation Revenue Measure (Approved Tax) Napa County**
American Canyon X X X X
Napa X
Yountville X
Santa Clara County**
Mountain View X X
San Jose X X X X X X
Solano County** X
Benicia X X X X X X
Dixon X X X X X
Fairfield X X X X X
Rio Vista X X X X X X
Suisun City X X X X X X
Vacaville X X X X X X
Vallejo X X X X X X X
Sonoma County X X X X X X X
Cloverdale X X X X X X X
Cotati X X X X X X X
Healdsburg X X X X X X
Petaluma X X X X
Santa Rosa X X X X X X
Sebastopol X X X X X
Sonoma X X X X X X
****Microbusinesses are a businesses that engages in multiple areas of commercial cannabis activity. In order to hold a microbusiness license, a licensee *California Law already allows delivery into all jurisdictions. The Delivery Retail license is for the retailer to have a physical space in the city. **Marin, Napa, Santa Clara and Solano County prohibit commerical cannabis on the county level applying to just unincorporated County land. *** There is an additional category of on-site cannabis consumption (i.e. cannabis cafes). However, there is no specific state license category for cannabis consumption businesses and no city in San Mateo County allows
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Attachment 1 - Cannabis Permits by Type in the Bay Area San Mateo County Overview
City Storefront Retail Delivery Retail Distribution Testing Manufacturing Cultivation Revenue Measure (Approved Tax) Definition
A storefront retailer has a
physical location where
cannabis goods are sold.
Storefront retailers can also
deliver cannabis goods.
A non-storefront retailer
sells cannabis goods to
customers only through
delivery but has a physical
premise where its business
activities take place.*
Procurement, sale, and
transport of cannabis and
cannabis products between
other licensed businesses
A laboratory or facility that
tests cannabis or
cannabis products.
Production, preparation,
propagation, or
compounding of cannabis
or cannabis products.
Small, medium, and large-
scale indoor, outdoor,
and combined
indoor/outdoor
commercial (nonpersonal)
cultivation of cannabis.
Tax approved by voters
San Bruno X X X
Brisbane X X X X X
Burlingame X X
Daly City X X X X**
Foster City X
Half Moon Bay X X
Pacifica X X X X X
Portola Valley X
Redwood City X X X X
San Carlos X X X X X
South San Francisco X X X X X X
San Mateo County X
Number of Cities in SMC 4 6 4 6 4 5 8
Percent of SMC Jurisdictions 19% 29% 19% 29% 19% 24% 38% Total Licenses:
# of Active Licenses in SMC 11 9 4 0 0 11 35
# of Expired Licenses in SMC 0 2 0 0 1 1 4
# of Surrendered Licenses in SMC*** 0 4 1 0 1 0 6
*California Law already allows delivery into all jurisdictions. The Delivery Retail license is for the retailer to have a physical space in the city. **Council authorized to set a cannabis business tax not to exceed ten percent, but no tax in effect *** There is an additional category of on-site cannabis consumption (i.e. cannabis cafes). However, there is no specific state license category for cannabis consumption businesses and no city in San Mateo County allows them. ****Microbusinesses are a businesses that engages in multiple areas of commercial cannabis activity. In order to hold a microbusiness license, a licensee must engage in at least three of the following commercial cannabis activities: cultivation, manufacturing, distribution, and retail sale. ***Surrendered – The licensee voluntarily relinquished or abandoned their license and the license is no longer Active
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City Daly City Pacifica Redwood City San Bruno
Fees $621.00 annual fee
$425 initial filling fee to PD
$750 Security Plan review fee
$10,000 deposit for reviewing Cannabis
Permit Application
$22,604 Application fee
$1,259 per owner Background Check fee
$19,599 Annual Operating Permit
$11,161 deposit
$2,745 annual fee
Tax Rate
Not in effect, but council authorized to set a
cannabis business tax not to exceed ten
percent 6% -- authorized to tax up to 10% 4% - voters authorized up to 10% 5% --but voter approved to go up to 10% Lead Department Economic Development Finance City Manager's Office Planning Active State Permits 2 5 4 0
# of Permits
6 retail permits (one in each of 6 specified
zones)
6 retail permits with restriction on # in
specific cannabis operation overlay district 6 storefront retail permits One retail permit How Permits Are Distributed
Lottery after one month open application
period
Chronological order of completion of Phase
II/III (previously lottery)
Multi-stage evaluation and selection
process by City Manager based on
published evaluation criteria
Initial Pass/Fail Review, then selection by
City Council up to limit allowed by
ordinance
Criteria of Selection
Lottery of eligible applicants per Eligibility
Zone
Phase I: Background Check
Phase II: Security Plan Application (after
successfully background check)
Phase III: Planning Department Application
(may be submitted concurrently with Phase
II)
Phase IV: Police Chief Issues Cannabis Public
Safety License
1) Business Plan
2) Labor, Diversity, Equity, and Inclusion
Plan
3) Safety Plan
4) Neighborhood Compatibility
5) Security Plan
6) Qualifications of Owners
7) Community Benefits and Investment Plan
8) Proposed Location
1) Business Plan
2) Labor and Community Benefit Plan
3) Neighborhood Compatibility Plan & Odor
Control Plan
4) Safety and Hazardous Materials Plan
5) Security Plan
6) Location and Site Plans
Zoning Districts Allowed
Six Specific "Cannabis Eligibility Zones" --
Junipero Serra Blvd, Skyline Plaza, St Francis
Square, Geller Blvd, King Dr, City Lights
Cannabis Operation Overlay District (CO)
Precise Plans, Commercial, Mixed Use, or
Industrial zoning, that allows retail and/or
distribution uses
In Transit Corridors Plan areas (TOD1,
TOD2, P-Ds) Multi Use - Residential Focus
District
Separations Required
Specific eligibility zones (likely already
defined with separations from sensitive
areas)
600 feet from a school or youth center that
is in existence at the time the cannabis
activity permit is issued, or within 200 feet
of a day care center
600 feet from schools, childcare facilities,
public parks, youth centers and libraries
(need to disclose all sensitive uses within
1500 feet)
600 feet from Youth Centers, K-12 Schools
and Day Care operations; parks (excepting
pocket parks)
Alarm System X X X
Limited Access Area X X X
Nuisance Provision X X X
Odor Management X X
Panic Buttons X X
Restricted Hours of Operation X
Security Guard X X X
Security Plan X X X X
Vault/Safe X X X
Video System X X X X
Attachment 2 - Cannabis Permits by Type in San Mateo County (Detailed) Permit Type: Retail (storefront)
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Permit Type: Retail (delivery)
City Brisbane Burlingame Daly City Pacifica Redwood City South San Francisco Fees Use permit: $1,190
Operator's Permit Application:
$1,492.00
Operator’s Permit Application –
fixed location, non-storefront retail
delivery: $5,976.00
Conditional Use Permit: $3,006.00
Operator’s Permit Renewal –
delivery only, no fixed location:
$373.00
Operator’s Permit Renewal – fixed
location, non-storefront retail
delivery: $1,492.00 $621.00 annual fee
$425 initial filling fee to PD
$750 Security Plan review fee
$10,000 deposit for reviewing
Cannabis Permit Application
$22,604 Application fee
$1,259 per owner Background
Check fee
$19,599 Annual Operating Permit
$4,693 Review Delivery Plan
Requirements
$552 Delivery Vehicle Inspection
$8,344 Cannabis Operator Permit
Application
$16,931 Annual Cannabis
Operator Permit
$399 Cannabis Business Inspection
$4,807 Conditional Use Permit
$5,000 City Attorney Review Fees
Tax Rate 3% 5%
authorized to set a cannabis
business tax not to exceed ten
percent 6% -- authorized to tax up to 10% 4% - voters authorized up to 10% 3% of gross receipts (up to 5%) Lead Department Economic Development/ Planning Planning Department Economic Development Finance City Manager's Office Finance/Planning # of Permits No limit 4
6 retail permits (one in each of 6
specified zones)
6 retail permits with restriction on
# in specific cannabis operation
overlay district No limit No limit
How Permits Are
Distributed If meet eligibility requirements First come, first served Lottery after one month open
application period
Chronological order of completion
of Phase II/III (previously lottery)
ordinance and regulations by City
Manager's office after limited
application period
Meets conditions for Operator
Permit and Conditional Use Permit
Zoning Districts Allowed
Crocker Industrial Park (TC-1
District), and lab testing in the
Southwest Bayshore area (SCRO-1
District) with the approval of a Use
Permit
Innovation Industrial (I-I) Zoning
District
Six Specific "Cannabis Eligibility
Zones" -- Junipero Serra Blvd,
Skyline Plaza, St Francis Square,
Geller Blvd, King Dr, City Lights
Cannabis Operation Overlay
District (CO)
Industrial Restricted (IR), Light
Industrial Incubator (LII), Industrial
Park (IP), and General Industrial
(GI) and conditionally permitted in
the Commercial Office (CO) zoning
districts.
East of Highway 101 in the
following zoning districts: Business
Commercial (BC), Business
Technology Park (BTP), and Mixed
Industrial (MI).
Separations Required
600 feet from K-12 schools, youth
centers and day care operations
600 feet from residential uses,
schools, day care centers, and youth
centers
Specific eligibility zones (likely
already defined with separations
from sensitive areas)
600 feet from a school or youth
center that is in existence at the
time the cannabis activity permit
is issued, or within 200 feet of a
day care center
600 feet from schools, childcare
facilities, public parks, youth
centers and libraries (need to
disclose all sensitive uses within
1500 feet)
600 feet from residential uses,
schools, day care centers and
youth centers
Alarm System X X X X X X
Odor Management X X X X X
Restricted Hours of
Operation X X X X
Security Guard X X X X
Security Plan X X X X X X
Signage Restricted X X
Vault/Safe X X X
Vehicle Permits X X X
Video System X X X X X X
Visibility Restricted X X X
Delivery Log/Manifest X X
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Permit Type: Distribution
City San Bruno Brisbane San Carlos South San Francisco
Fees
$11,161 deposit
$2,745 annual fee Use permit: $1,190
Zoning Clearance/Minor Use Permit:
Actual Cost with $1,500/$2,500
deposit
Phase 1 Application Fee: Actual Cost
with $3,500 deposit
Phase 2 Application Fee: Actual Cost
with $10,500 deposit
Annual Monitoring/Compliance Fee:
Actual Cost with $4,500 deposit
Renewal Application Fee: Actual Cost
with $3,000 deposit
$8,344 Cannabis Operator Permit
Application
$16,931 Annual Cannabis Operator
Permit
$399 Cannabis Business Inspection
$4,807 Conditional Use Permit
$5,000 City Attorney Review Fees
Tax Rate
5% --but voter approved to go up to
10%
1% for commercial cannabis
distribution operations
6% of gross receipts for all
commercial cannabis activities 3% of gross receipts (up to 5%) Lead Department Planning Economic Development Planning/Finance Finance/Planning # of Permits
2 (one distribution only and one
distribution or retail)
No limit No limit No limit
How Permits Are Distributed
Initial Pass/Fail Review, then
selection by City Council up to limit
allowed by ordinance If meet eligibility requirements If meet eligibility requirements Meets conditions for Operator
Permit and Conditional Use Permit
Zoning Districts Allowed
In M-1 Zone north of San Bruno
Avenue
Crocker Industrial Park (TC-1
District), and lab testing in the
Southwest Bayshore area (SCRO-1
District) with the approval of a Use
Permit
Certain industrial and commercial
zoning districts, as well as planned
development zones that have the
equivalent General Plan land use
designations of industrial and
commercial
East of Highway 101: Mixed
Industrial Zoning District (MI)
Separations Required
600 feet from Youth Centers, K-12
Schools and Day Care operations;
parks (excepting pocket parks)
600 feet from K-12 schools, youth
centers and day care operations
600 feet from R zoning districts and
school, day care or youth center
600 feet from residential uses,
schools, day care centers and youth
centers
Alarm System X X X X
Employee Training X
Hazardous Materials Plan X X
Limited Access Area X X X X
Nuisance Provision X
Odor Management X X X X
Panic Buttons X
Restricted Hours of
Operation X X
Security Guard X X
Security Plan X X X
Signage Prohibited X X
Vault/Safe X X X X
Vehicle Registration X X
Visibility Restrictions X X X
Video System X X X X
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Permit Type: Testing
City Brisbane Daly City Foster City Pacifica San Carlos South San Francisco Fees
Use permit: $1,190
Building permit:
or Business license application fee; $621.00 annual fee Business License Tax between $100
and $28,597 depending on gross
receipts
$425 initial filling fee to PD
$750 Security Plan review fee
$10,000 deposit for reviewing
Cannabis Permit Application
Zoning Clearance/Minor Use Permit:
Actual Cost with $1,500/$2,500
deposit
Phase 1 Application Fee: Actual Cost
with $3,500 deposit
Phase 2 Application Fee: Actual Cost
with $10,500 deposit
Annual Monitoring/Compliance Fee:
Actual Cost with $4,500 deposit
Renewal Application Fee: Actual Cost
with $3,000 deposit
$8,344 Cannabis Operator Permit
Application
$16,931 Annual Cannabis Operator
Permit
$399 Cannabis Business Inspection
$4,807 Conditional Use Permit
$5,000 City Attorney Review Fees
Tax Rate
1% for commercial cannabis testing
operations (up to two percent of gross
receipts)
Not in effect, but council authorized
to set a cannabis business tax not to
exceed ten percent No specific cannabis tax
6% of gross total receipts --
authorized to tax up to 10%
6% of gross receipts
One percent (0.01) of gross receipts
for cannabis testing operations
Lead Department Economic Development Economic Development Planning Department Finance Planning/Finance Finance/Planning # of Permits No limit No limit No limit No limit No limit No restriction How Permits Are Distributed If meet eligibility requirements If meet eligibility requirements If meet eligibility requirements If meet eligibility requirements If meet eligibility requirements Meets conditions for Operator
Permit and Conditional Use Permit
Zoning Districts Allowed
By right (no Use Permit required) in the
M-1 Manufacturing District, Sierra Point
(SP-CRO District), Crocker Industrial Park
(TC-1 District), and Southeast Bayshore
Trade Commercial District (TC-2 District)
Southwest Bayshore area (SCRO-1
District) with the approval of a Use
Permit
Any commercial or industrial zone
where a similar medical
or testing facility is allowed.
Commercial Mixed Districts North of
State Route 92 and Light Industrial
Districts, Subject to Conditional Use
Permit
C-2 (Community Commercial) or the
C-3 (Service Commercial) Districts
Certain industrial and commercial
zoning districts, as well as planned
development zones that have the
equivalent General Plan land use
designations of industrial and
commercial
East of Highway 101 in the following
zoning districts: Business Commercial
(BC), Business Technology Park (BTP),
Bay West Cove Specific Plan District
(BWCSPD), Gateway Specific Plan
(GSPD), Mixed Industrial (MI), and
Oyster Point Specific Plan District
(OPSD)
Separations Required
600 feet from K-12 schools, youth
centers and day care operations Not specified
Six-hundred-foot radius from a
school, day care home, recreational
center, youth center, library, or
public park
600 feet from a school or youth
center that is in existence at the time
the cannabis activity permit is issued,
or within 200 feet of a day care
center
600 feet from R zoning districts and
school, day care home, recreational
center, youth center, library, or
public park
600 feet from residential uses,
schools, day care centers and youth
centers
Alarm System X X X X X X
Hazardous Materials Plan X X X
Nuisance Provision X X
Odor Management X X X
Panic Buttons X
Security Guard X
Security Plan X X X X X
Signage Prohibited X
Vault/Safe X X X X X
Visibility Restrictions X X
Video System X X X X X X
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Permit Type: Manufactoring
City Brisbane Pacifica San Carlos South San Francisco
Fees
Use permit: $1,190
Building permit:
or Business license application fee;
$425 initial filling fee to PD
$750 Security Plan review fee
$10,000 deposit for reviewing Cannabis
Permit Application
Zoning Clearance/Minor Use Permit: Actual
Cost with $1,500/$2,500 deposit
Phase 1 Application Fee: Actual Cost with
$3,500 deposit
Phase 2 Application Fee: Actual Cost with
$10,500 deposit
Annual Monitoring/Compliance Fee: Actual
Cost with $21,500 deposit
Renewal Application Fee: Actual Cost with
$3,000 deposit
$8,344 Cannabis Operator Permit
Application
$16,931 Annual Cannabis Operator Permit
$399 Cannabis Business Inspection
$4,807 Conditional Use Permit
$5,000 City Attorney Review Fees
Tax Rate
3% for commercial cannabis testing
operations (up to two percent of gross
receipts)
6% of gross total receipts-- authorized to
tax up to 10% 6% of gross receipts 3% of gross receipts (up to 5%) Lead Department Economic Development Finance Planning/Finance Finance/Planning # of Permits No limit No limit No limit No limit
How Permits Are Distributed If meet eligibility requirements If meet eligibility requirements If meet eligibility requirements Meets conditions for Operator Permit and
Conditional Use Permit
Zoning Districts Allowed
Crocker Industrial Park (TC-1 District), and
lab testing in the Southwest Bayshore area
(SCRO-1 District) with the approval of a Use
Permit C-3 (Service Commercial) District
Certain industrial and commercial zoning
districts, as well as planned development
zones that have the equivalent General Plan
land use designations of industrial and
commercia
East of Highway 101: Mixed Industrial
Zoning District (MI)
Separations Required
600 feet from K-12 schools, youth centers
and day care operations
600 feet from a school or youth center that
is in existence at the time the cannabis
activity permit is issued, or within 200 feet
of a day care center
600 feet from R zoning districts and school,
day care home, recreational center, youth
center, library, or public park
600 feet from residential uses, schools, day
care centers and youth centers
Alarm System X X X X
Hazardous Materials Plan X X X
Nuisance Provision X X
Odor Management X X X
Panic Buttons
Security Guard X
Security Plan X X X
Signage Prohibited X
Vault/Safe X X X
Visibility Restrictions X X
Video System X X X X
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Permit Type: Cultivation
City Half Moon Bay Portola Valley Redwood City San Carlos South San Francisco San Mateo County Fees
Commercial Cannabis PA: $1958
Commercial Cannabis Business License: $7276
Conditional Use Permit
Current Deposit: $6,000
Current Fee: $872
$22,604 Application fee
$1,259 per owner Background Check fee
$19,599 Annual Operating Permit
Zoning Clearance/Minor Use Permit: Actual Cost
with $1,500/$2,500 deposit
Phase 1 Application Fee: Actual Cost with $3,500
deposit
Phase 2 Application Fee: Actual Cost with $10,500
deposit
Annual Monitoring/Compliance Fee: Actual Cost
with $21,500 deposit
Renewal Application Fee: Actual Cost with $7,500
deposit
$8,344 Cannabis Operator Permit Application
$16,931 Annual Cannabis Operator Permit
$399 Cannabis Business Inspection
$4,807 Conditional Use Permit
$5,000 City Attorney Review Fees
Commercial Cannabis Cultivation License fee =
$6,574
Commercial Cannabis Cultivation License
Renewal/Amendment fee = $1,643
Commercial Cannabis Cultivation License
Termination of Operations fee = $200
Tax Rate
Adjusted with inflation
i. Ten dollars ($10.00) annually per square foot
of canopy space in a facility that uses
exclusively artificial lighting.
ii. Seven dollars ($7. 00) annually per square
foot of canopy space in a facility that uses a
combination of natural and supplemental
artificial lighting.
iii. Four dollars ($4.00) annually per square foot
of canopy space in a facility that uses no
artificial lighting.
iv. Two dollars ($2. 00) annually per square foot
of canopy space for any nursery.
None
2.5% of gross receipts for Cannabis Nursery
Businesses
6% of gross receipts for all commercial cannabis
activities Two percent (0.02) of gross receipts for cannabis No taxes Type of Cultivation Nursery
"Specialty cottage outdoor"; "Specialty cottage
indoor"; "Specialty cottage mixed-light tier 1
and 2": all limit to 12 mature plants Indoor Nursery
Indoor Nursery or a component of a
microbusiness (artificial or mixed lighting) Indoor commercial cannabis cultivation Mixed-light (i.e. greenhouse) cultivation and
greenhouse nursery cultivation operations
Lead Department City Manager's Office Planning Commission City Manager's Office Planning/Finance Finance/Planning Planning # of Permits No limit 10 permits (only allow 5 to be issued a year) No limit No limit No limit No limit How Permits Are Distributed If meet eligibility requirements Planning Commission shall conduct a hearing
on the permit and make the initial decision
If meet eligibility requirements determined by
City Manager If meet eligibility requirements
Meets conditions for Operator Permit and
Conditional Use Permit If meet eligibility requirements Zoning Districts Allowed
A- 1 Agricultural Land Use/ Exclusive
Floriculture Zoning District Residential zoning district Conditionally permitted in the Commercial Office
(CO) Industrial Restricted (IR), Light Industrial
Incubator (LII), Industrial Park (IP), and General
Industrial (GI)
Certain industrial and commercial zoning districts,
as well as planned development zones that have
the equivalent General Plan land use designations
of industrial and commercia
East of Highway 101 in the following zoning
districts: Business Commercial (BC), Business
Technology Park (BTP), Bay West Cove Specific
Plan District (BWCSPD), Gateway Specific Plan
(GSPD), Mixed Industrial (MI), and Oyster Point
Specific Plan District (OPSD)
“Agriculture” on the San Mateo County. General
Plan and where commercial agricultural use has
been conducted for
the three (3) years preceding the effective date
of the ordinance.
Separations Required
1000 feet from K-12 school, daycare center,
youth center
200 feet from parcel with land use or primary
zoning designation for residential use
200 feet from a Premises parcel boundary that
fronts directly onto Highway 1
600-foot radius of a schools providing
education to K-12 grades, day care centers,
youth centers, public parks
600 feet from schools, childcare facilities, public
parks, youth centers and libraries (need to
disclose all sensitive uses within 1500 feet)
600 feet from R zoning districts and school, day
care home, recreational center, youth center,
library, or public park
600 feet from residential uses, schools, day care
centers and youth centers
Minimum of 1,000 feet from any parcels
designated for residential use by the San Mateo
County General Plan (or the general plan of a
neighboring city), schools catered to K-12
grades, youth center, playground, and any
alcohol/drug treatment facility
Alarm System X X X X X X
Emergency Power X
Hazardous Materials Plan X X X X
Light Pollution X X X
Locked Facility X X X X X
Nuisance Provision X X X X
Odor Management X X X X X X
Security Guard X (potential) X
Security Plan X X X X
Signage Prohibited X
Video System X X X X X
Visibility Restrictions X X X X
Energy Use Limits X X X
Water Requirements X X X X
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Slide 1 of 14
Commerical Cannabis
Ordinance and
Permit Options
Alex Khojikian
City Manager
Katie Wysong
Graduate Intern
1 City Manager's Office
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Questions for
City Council
Staff is seeking guidance on which option
City Council would like staff to proceed with:
1) Continue its exploration of
establishing a retail cannabis
program at this time.
a) This would require a revenue measure
on the November 2024 ballot
2) Move forward with a wait and see
approach and wait for the data to
come in from our local neighbors
currently embarking on their retail
cannabis storefront program
Slide 2 of 14
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Slide 3 of 14
Recreational Cannabis Background
2016
Proposition 64 legalizes
recreational cannabis for
those over 21 years of age
2017
San Mateo City Council
passes Ordinance No. 2017-4
to prohibit the commercial
cultivation, processing, or
sale of cannabis
2022
City Council adds goal to
adopt a retail cannabis
ordinance as part of Goal
Setting Workshop
2023
City Council voted to keep
retail cannabis goal on the
2023-2024 Strategic Plan
3/12
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Permit Types
Slide 4 of 14
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Slide 5 of 14
Cultivation
• Small, medium,
and large-scale
indoor, outdoor,
and combined
indoor/outdoor
commercial
(nonpersonal)
cultivation of
cannabis.
Distribution
• Procurement,
sale, and
transport of
cannabis and
cannabis
products
between other
licensed
businesses
Testing
• A laboratory or
facility that
tests cannabis
or cannabis
products.
Manufacturing
• Production,
preparation,
propagation, or
compounding
of cannabis or
cannabis
products.
Storefront Retail
• A physical
location where
cannabis goods
are sold directly
to consumers.
• Sometimes
referred to as
“dispensaries.”
Delivery Retail
• Sells cannabis
goods to
customers only
through
delivery but has
a physical
premise where
its business
activities take
place.
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Slide 6 of 14
Revenue
6/12
A revenue measure would need to be placed on an upcoming general election ballot and would need to be approved by San Mateo voters, in order for the city to collect a local tax on commercial cannabis activities.
Most cities have revenue measures that give the City Council the authority to set the tax within a given range, such as 0-10% of gross revenue. California imposes a statewide 15% excise tax on recreational cannabis products However, revenue projections are dependent on what type and how many businesses the city allows to operate within its jurisdiction, as well as the state of the cannabis market.
According to a local cannabis industry expert, the cannabis industry is facing a recession or correction, with a decrease of approximately 25-35% in sales from its peak a few years ago Permitting commercial cannabis operations does provide an opportunity for new revenue.
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Slide 7 of 14
City Tax Rate Revenue Year
# of
Businesses
Established
Cannabis
Programs
Oakland 0.12% - 5% $13,470,000 2021 187
Pacifica 6% $850,000 2023 5
New
Storefront
Programs
Redwood City 4%
$1,250,000
(projected) 2023 6
San Bruno 5%
>$100,000
(projected) 2023 2
Non-
storefront
Programs
South San
Francisco 0.1% - 5% $100,000 2021 4
Burlingame 5% $0 - No Permits 2023 0
7/12
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Public Safety
• Zoning
• 600 foot separation
from sensitive uses
defined as K-12
schools, day care
centers, and youth
centers
• Jurisdictions
allowed to reduce
or extended
• Security and Safety
• Cities generally require cannabis
businesses to provide security and
safety plans to be vetted by the
Police and Fire Departments
• Additional requirements include,
but are not limited to:
• On-site security personnel
• Limits on signage
• Vault and door lock requirements
• Security camera specific guidelines
• Odor Control Plan
Example: San Bruno’s Map of Cannabis
Qualifying Zones and Sensitive Use Sites
(includes parks and libraries)
Slide 8 of 14
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Departments involved:
• City Manager’s Office
• City Attorney’s Office
• City Clerk’s Office
• Community Development Department
• Finance Department
• Public Works Department
• Police Department
• San Mateo Consolidated Fire
As seen in other localities in California, this process can also be highly litigious.
The application review process alone can take around 90 staff hours per application (not including consultant hours) and cost $22,604, according to Redwood City's fee study.
Placing a cannabis revenue
measure on the ballot
Conducting community outreach
Developing and adopting a
commercial cannabis ordinance
Establishing and implementing an
application and screening process
Selecting operators
Hearing appeals from applicants
regarding City selection decisions
Ongoing enforcement
Implementation
Slide 9 of 14
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Slide 10 of 14
Status of the Cannabis Industry
10 • The cannabis industry is currently experiencing a recession/correction • Down approximately 25-35% in sales from its peak a few years ago in the pandemic • Factors include:
• Reduction in overall cannabis consumption
• Tax laws
• Growing competition from the black market and unlicensed, unregulated businesses • Weakened debt market
• There is a reduced demand from operators to establish new retail cannabis businesses, but a retail storefront businesses' location is a determining factor whether a business will be successful during these times.
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Slide 11 of 14
Next Steps
11 Option 1: Continuing its exploration of establishing a retail cannabis program at this time.
• As part of the critical path to develop a local
program, staff would need to begin reviewing and
developing a commercial cannabis tax revenue
measure for potential placement on the November
2024 ballot.
Option 2: A wait and see approach (come back in 12
to 24 months) and wait for the data to come in from
our local neighbors currently embarking on their
retail cannabis storefront program
• This also allows additional time to observe:
• the amount of tax revenue generated
• the impact of community benefits distributed to
local groups once their program is fully up and
running in the next year.
• how the cannabis industry responds to the current
recession it is in
Considering the information provided and the substantial upfront cost, staff requests the City Council clarify whether it would like staff to move forward with:
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Summary
• Permitting commercial cannabis operations does provide an opportunity for revenue.
• However, thoughtful implementation can require significant staff time and revenue is dependent on how many businesses choose to operate within the jurisdiction.
• Tax laws and ongoing competition from the black market have hindered financial success of the legal cannabis industry in California in recent years.
• Slide 12 of 14
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Questions for
City Council
Staff is seeking guidance on which option City
Council would like staff to proceed with:
1) Continue its exploration
of establishing a retail
cannabis program at this time.
a) This would require a revenue
measure on the November 2024 ballot
2) Move forward with a wait and
see approach and wait for the
data to come in from our local
neighbors currently embarking on
their retail cannabis storefront
program
Slide 13 of 14
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Katie Wysong
Intern | City Manager’s Office
[email protected]
Thank You
Alex Khojikian
City Manager | City Manager’s Office
[email protected]
Slide 14 of 14
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