City of Santa Monica
CANNABIS POLICY
STUDY SESSION
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JUNE 13, 2023
About
HdL
Municipal finance consulting firm, dedicated
to providing revenue and economic insights
to local governments
HdL Serves:
‒ 303 cities
‒ 48 counties
‒ 108 transaction districts
Core services include sales tax, property tax,
business licensing, economic development,
and cannabis business regulation
HdL has provided consulting services to over
175 local agencies that wanted to develop
cannabis policies
Team consists of former policymakers, law
enforcement and cannabis regulators with
State, County and local level experience
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OBJECTIVES OF STUDY SESSION
• Engage community and Council in a policy discussion of adult-use cannabis
• Provide overview of cannabis policy in California, neighboring cities, and Santa Monica
• Highlight considerations in developing an adult-use cannabis ordinance
• Get Council direction on key policy questions
• Identify next steps and goals for developing an adult-use cannabis program
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Business
Types
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CULTIVATOR
MANUFACTURER
TESTING LAB
DISTRIBUTOR
RETAIL
TESTING LAB
CONSUMER
CANNABIS BUSINESS CATEGORIES
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State/ Regional
Environment
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CA CANNABIS LICENSES AS OF 2023/ Q2
6,716 Cultivation
836 Manufacturer
1,142 Retailers
490 Retailers Non-Storefront
1,258 Distributors
178 Distributor Transport Only
392 Microbusinesses
45 Testing Labs
62 Cannabis Event Organizers
11,119 Total
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CA CANNABIS RETAIL MARKET LICENSE SHORTAGE
8 Los Angeles
County
-6
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STATUS OF OTHER AGENCIES IN THE REGION:
• Culver City (City Manager) – Retail, Cultivation,
Manufacturing, Distribution, Testing
• Long Beach (City Manager) – Retail, Cultivation,
Manufacturing, Distribution, Testing (City
• Los Angeles (Dept. of Cannabis Reg) – Retail, Cultivation, Manufacturing, Distribution, Testing
• Malibu (Planning) – Retail
• Pasadena (Planning & Comm. Dev) – Retail, Cultivation, Testing • Pomona (Dev. Services) – Retail, Cultivation, Manufacturing, Distribution, Testing, Microbusiness
• Redondo Beach (City Manager) – Retail (Pending)
• West Hollywood (Econ Dev.) – Retail, Consumption Lounge 9 ITEM 7.A.
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Santa Monica
Cannabis
Program
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SANTA MONICA CANNABIS LEGISLATIVE HISTORY
• June 2015 – Santa Monica authorizes two medicinal cannabis retailers
• November 2016 – Proposition 64
• October 2017 – Interim Zoning Ordinance adopted establishing selection and permitting process for medicinal cannabis retail and permitting light manufacturing (expired in January 2023) • November 2022 – Measure HMP cannabis business license tax • June 2023 – Study session on adult-use cannabis
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SANTA MONICA LICENSE TYPES – RETAIL
12 Non-Storefront Retail
(Delivery Only)
Storefront Retail
(On-Site Sales)
Medicinal Adult-Use Medicinal Adult-Use
Includes up to
350 sq. ft. indoor
cultivation
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SANTA MONICA LICENSE TYPES – MANUFACTURING
13 Non-Volatile Volatile
(Light Manufacturing)
Medicinal Adult-Use Medicinal Adult-Use
( Expired)
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SANTA MONICA PROHIBITED ACTIVITIES
14 CULTIVATION LABORATORY TESTING DISTRIBUTION
Other Prohibited Commercial Cannabis Activities:
• CONSUMPTION LOUNGES
• TEMPORARY EVENTS
• MICROBUSINESSES
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LICENSED/ OPERATING CANNABIS RETAILERS
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CANNABIS DELIVERY SERVICES
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Cannabis
Regulations
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A REGULATORY SYSTEM CAN
INCLUDE:
1. Location requirements
2. Operating restrictions
3. Authority over licensing decisions
4. Revenue generation
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(1) LOCATION REQUIREMENTS – NONRESIDENTIAL
19 Santa Monica
Nonresidential
Zoning Districts
Mixed-Use and
Commercial Districts MUBL, MUB, NC, GC
Employment Districts IC, OC, HMU
Beach & Ocean Front
Districts OF
Downtown Districts LT, NV, BC, TA, OT, WT
Bergamot Area Plan
Districts MUC, CCS, CAC, BTV
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(1) LOCATION REQUIREMENTS – MEDICAL ZONES
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• Cannabis businesses cannot be
located within 600 feet of a
“sensitive use,” defined as a school,
day care center, or youth center.
• Local jurisdictions have the
authority to increase/decrease
buffer distances, and/or expand the
definition of “sensitive use.”
(1) LOCATION REQUIREMENTS – STATE BUFFERS
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• Cannabis businesses cannot be located within 600 feet of the following:
(1) LOCATION REQUIREMENTS – LOCAL BUFFERS
22 • Child Care Facility
• Early Education
Facility
• Family Day Care
Facility
• Park
• School
• Library
• Social Service Center
• Other Cannabis
Retailer
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(2) OPERATING RESTRICTIONS – PRIORITIES
1 2 3 4
Public Safety Public Health Neighborhood
and Land Use
Protection
Preventing
Youth Access
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• Existing State Law:
• Security personnel on-site during
all hours of operation
• 24-hour video surveillance
• Alarm systems monitored by third- party
• Limited access areas
• Sign-in/sign-out procedures
• Employee badge requirement
• Criminal background checks of
owners
(2) OPERATING RESTRICTIONS – PUBLIC SAFETY
• City Regulatory Authority:
• Motion sensor lighting
• On-site safe/vault
• Security patrol or presence when
closed
• Annual compliance inspections/
financial audits
• Limitations on amount of cannabis
goods in retail space
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(2) OPERATING RESTRICTIONS – PUBLIC HEALTH
• Existing State Law:
• Third-party testing for mold,
pesticides, and other contaminants
• Product labeling / dosing
• THC concentration limits
• Daily purchase limits for customers
• No public consumption
• Dedicated public health program
funding through cannabis tax
revenue
• City Regulatory Authority:
• Display of CDPH health pamphlets
• Visibility restrictions
• Budtender training program
• Annual public health
fee/inspections
• Allocation of tax revenues to fund
local public health programs
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(2) OPERATING RESTRICTIONS – LAND USE
• Existing State Law:
• Sensitive use buffer requirements
• Cannabis waste disposal
requirements
• Cannabis goods display only in
retail area
• Shipment of cannabis goods may
only be accepted during business
hours
• Mandatory 10PM closure
• City Regulatory Authority:
• Exterior lighting + landscaping
• Stringent facility design standards
• Strict enforcement of odor control
• Exterior waste receptacles and
scheduled cleaning
• Prohibition on queue outside
facility
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(2) OPERATING RESTRICTIONS – YOUTH ACCESS
• Existing State Law:
• Retailers cannot sell cannabis to
persons under 21 (or 18 with
medical ID card)
• ID verification prior to entry
• Employee presence at all times
• Track and trace of cannabis goods
• Tamper-evident child-resistant
packages
• Product warning labels
• Universal cannabis symbol:
• City Regulatory Authority:
• Underage decoy program
• Routine inspections
• Funding of youth prevention
services using cannabis tax
revenues
• Annual license renewals with
automatic revocation for underage
sales
• Prohibition on temporary signage
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• Types of businesses
• Retail vs. wholesale
• Number of businesses
• Benchmark of one retailer for every 10-20K population • Translates to 4 – 10 retailers for Santa Monica
• Out-of-city visitors may create additional demand
(3) LICENSING DECISION – TYPE/ NUMBER
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(4) REVENUE GENERATION – TAXES/ FEES
Standard fees to
recover City
administrative
costs
Cannabis business
license tax
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(4) REVENUE GENERATION – SCENARIOS
30 Annual Retail Tax Revenue Scenarios*:
(8%): $2,000,000 - Plus $400,000 in local sales/ use tax (Total $2.4M) (4%): $1,000,000 - Plus $400,000 in local sales tax (Total $1.4M) (2%): $500,000 – Plus $400,000 in local sales tax (Total $900K) *Assumes 5 storefront retailers with an average of $5M in annual revenues each. Actual revenues may be higher or lower, depending on multiple factors.
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Cannabis
Equity
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Impact of Federal and State criminalization of cannabis on minority communities:
What is Cannabis Equity?
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What is Cannabis Equity?
33 • Proposition 64
• Local Equity Programs
• Oakland, Los Angeles, San Francisco, Sacramento
• Portland, Seattle, Detroit, Denver
• New York, Illinois, Washington, Michigan
• Goal of Cannabis Equity
• Economic inclusion for individuals who were disproportionately impacted by the enforcement of federal and state cannabis laws ITEM 7.A.
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Equity Program Components
34 • Equity Study
• Eligibility Criteria
• Informed by findings of equity study
• Program Benefits
• Priority application + licensing benefits
• Employment opportunities
• Community reinvestment by cannabis businesses
• Investment of cannabis tax revenues
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Equity Program Challenges
35 • Potential Challenges
• Predatory/ manipulative behavior by non-equity applicants • Sunk costs of equity applicants
• Limited staff resources
• Barriers to entry into cannabis market
• Capital intensive market
• Intense competition to secure finite number of licenses • Limited availability of “green zone” properties
• Community engagement key to successful program
• Input received through equity study will inform development ITEM 7.A.
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POLICY
DISCUSSION
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POLICY QUESTION #1
Should consumer access to legal adult-use cannabis in Santa Monica be permitted, or should the City maintain the
restriction of medicinal-only cannabis?
MEDICAL ADULT-USE
• 18+ with MMID or doctor’s
recommendation
• Only applicable to retail licensees
• 21+ with identification
• Distinction between M and A no
longer relevant for non-retail
businesses
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POLICY QUESTION #2
What types of cannabis uses should be allowed?
CONSUMER BASED WHOLESALE
• Storefront retail
• Non-Storefront retail-delivery
• Consumption lounge
• Temporary special event
• Cultivation
• Manufacturing
• Distribution
• Laboratory Testing
• Microbusiness*
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POLICY QUESTION #3
Should the City set a limit to the number of retailers and other uses?
CAP NO CAP
• Limit number of businesses
through licensing process
• Most common for retail license
types (e.g. storefront retail)
• Requires City to adopt an
application selection process
• Total number of licenses
determined by other factors (e.g.
consumer demand, zoning, buffers,
etc.)
• Most common for wholesale
license types
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POLICY QUESTION #4
Should only the two medicinal cannabis retailers be allowed to expand into the adult-use market, or should the City allow new cannabis retailers?
EXISTING NEW
• Allow previously selected medical
cannabis retailers to engage in
adult-use sales
• Permit new businesses to operate
as adult-use retailers in the City of
Santa Monica
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POLICY QUESTION #5
Where in the City should cannabis uses be allowed to operate?
STANDARD ZONING DISTRICTS CANNABIS OVERLAY ZONES
• Employment (HMU, IC, OC)
• Beach & Ocean Front (OF)
• Mixed Use (MUB, MUBL, NC, GC)
• Downtown (LT, NV, BC, TA, OT, WT)
• Bergamot Area Plan (MUC, CCS, CAC, BTV)
• Wilshire
• Santa Monica Blvd
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POLICY QUESTION #6
Which land uses should be recognized as sensitive uses
requiring a distance buffer from cannabis uses above and beyond state requirements?
STATE DEFAULT LOCALLY DEFINED
• 600-foot distance from all
sensitive uses
• State sensitive uses include
schools, daycare centers, and
youth centers
• 600-foot distance
• Local sensitive uses include: childcare
facilities, early education facilities,
family day care facilities, parks, schools,
libraries, social service centers, other
cannabis retailers
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Zoning/ Buffer Map – Current Medicinal Buffers
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Zoning/ Buffer Map – State Default Buffers
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POLICY QUESTION – FUTURE DECISION
Social equity study?
STATE GRANT FUNDED LOCALLY FUNDED
• Apply for GO-Biz grant funding
to develop cannabis equity study
• Initiate cannabis equity study
without grant funding
• Partner with local community
group to conduct outreach
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POLICY QUESTION – FUTURE DECISION
Application selection process?
MERIT EQUITY FIRST IN LINE LOTTERY HYBRID
• Application/
interview
ranking
• Discretionary
approval
• Defined by
the equity
study
• First-come,
first serve
• Online or inperson
• Random
selection
• Combination
of multiple
processes
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Ajay Kolluri
Director of Cannabis Services
[email protected]
(714) 879-5000
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KEY POLICY QUESTIONS
Initial Questions:
• Confirming Adult-Use as Permitted Land Use
• Retail and Non-Retail Uses
• Number of Retailers
• Existing Businesses
• Allowable Locations
• Buffer Requirements
Future Key Decisions:
• Social Equity
• Selection Process
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