TO: PLANNING COMMISSION
FROM: BRAD JOHNSON, COMMUNITY DEVELOPMENT DIRECTOR
DATE: FEBRUARY 6, 2024
SUBJECT:
Title
CANNABIS INFORMATIONAL SESSION AND REGULATORY REVIEW
Body
SUMMARY
In 2022, The Claremont City Council placed a cannabis business tax measure on the November 8, 2022, General Election ballot. The measure passed with 61 percent support from the Claremont voters. The City currently prohibits commercial cannabis businesses, but allows the delivery of cannabis from businesses located outside of Claremont, pursuant to State law. Last year the City Council requested staff engage the community in a discussion focused on cannabis regulations. In summer 2023, staff held a series of Listen and Learn workshops; during these sessions, staff shared topical presentations and received input from community members. Staff has prepared a summary of those workshops as well as items for discussion by the Planning Commission before a cannabis business ordinance can be prepared.
RECOMMENDATION
Recommended Action
Staff recommends the Planning Commission provide input to staff regarding cannabis zoning regulations.
Body
ALTERNATIVES TO RECOMMENDATION
In addition to the recommendation, there is the following alternative:
• Request additional information.
FINANCIAL REVIEW
In June 2023, the City of Claremont was awarded a Local Jurisdiction Retail Access Grant for $195,000 by the California Department of Cannabis Control. The grant program aims to provide California consumers with reliable access to regulated, tested cannabis in the legal market, and reduce demand in the illicit market. The funding may be used to support the development and implementation of a cannabis licensing program. Therefore, there will be no impact on the General Fund for the development of this program.
Because the City of Claremont does not currently permit cannabis businesses (except cannabis deliveries originating from non-Claremont businesses), it is difficult to estimate the tax revenue from cannabis businesses. If the City permits cannabis businesses in the future, tax revenues would vary greatly depending on the number and type of businesses allowed. The City’s previous consultant, HdL, conservatively estimated that the City could generate approximately $300,000 per retail store annually in revenue.
The staff cost to prepare this report and administer this program is estimated at $7,500 and is included in the operating budget of the Community Development Department.
ANALYSIS
Claremont Cannabis Regulatory History
California’s history of cannabis law spans nearly twenty years of propositions and regulatory actions. The Claremont City Council first adopted a ban on commercial cannabis businesses in 2006. On October 9, 2015, Governor Jerry Brown signed the Medical Marijuana Regulation and Safety Act (MMRSA), which generally authorized local agencies to allow and regulate cannabis businesses. On January 26, 2016, the City Council adopted an ordinance to clarify that, notwithstanding the newly adopted MMRSA, the City’s preexisting ban on cannabis businesses continued to prohibit cannabis dispensaries, cultivation, and delivery services in the City. Proposition 64, the Adult Use of Marijuana Act (AUMA), was adopted by California voters on November 8, 2016. The AUMA immediately legalized possession, transport, purchase, use, and transfer of recreational marijuana for individuals 21 years of age or older. Beginning in January 2018, the AUMA also established a State regulatory and licensing program for nonmedical commercial cannabis cultivation, testing, distribution, and manufacturing.
Proposition 64 stipulated that if a city did not enact local cannabis commercial licensing restrictions or a ban by January 1, 2018, commercial cannabis businesses could operate with a valid State license. Therefore, until local regulations and interests could be analyzed and identified for implementation, the City of Claremont adopted ordinances to regulate the personal use and cultivation of cannabis and restrict commercial cannabis activities in the City.
On October 25, 2016, the City Council adopted Ordinance No. 2016-11 prohibiting commercial cannabis operations, including retail dispensaries, cultivation, and manufacturing facilities, as well as delivery services within the City. While Proposition 64 allows cities to ban these commercial enterprises, it is important to note that cities cannot prohibit personal cultivation of six plants or fewer for personal use. Cities also cannot prohibit deliveries from other municipalities' cannabis retail locations to their residents. Any restriction on individual adults from possessing or purchasing certain amounts of cannabis or cannabis products for personal use is unenforceable under AUMA. On February 12, 2019, the City Council adopted Ordinance No. 2019-01 to reaffirm the ban on commercial cannabis operations.
On January 26, 2021, the City Council requested staff engage the community in a discussion on the consideration of cannabis regulations. The City engaged the services of HdL Companies to assist as a consultant in the community outreach process. In March 2022, staff held two virtual cannabis community workshops. Following those meetings the City Council directed staff to prepare and place a cannabis business tax on the November 8, 2022, General Election ballot for voter approval. The measure passed with 61 percent support from Claremont voters. In January 2023, the City Council set the cannabis tax rates within the Claremont voter-approved ranges. The City Council also requested that staff initiate additional community input meetings to discuss cannabis business regulations and policies.
Community Listen and Learn Sessions
Staff held three community Listen and Learn Community sessions between June and September 2023. During these sessions, staff gave a brief presentation regarding the history of cannabis regulations in Claremont and California, and shared policy decisions available to cities if they decide to permit cannabis businesses. Staff also presented a map with the state’s minimum zoning requirements and a 1000-foot buffer from the Pomona-Claremont border. After the presentation, attendees had the opportunity to provide comments and input regarding cannabis regulations in Claremont.
There was a mixture of support from those in attendance. There was general support of cannabis retail businesses in Claremont with sufficient regulations and policies in place. The attendees that were not in support, or had conditional support of cannabis businesses, had three primary concerns: crime, parking demands, and the potential adverse impact on the community from cannabis use. Community members who identified themselves as from south Claremont shared apprehensions regarding a potential increase in criminal activities around cannabis establishments. They also held concerns about the impact on local parking resources that cannabis businesses may bring, referencing the high parking demand at cannabis retail stores located in Pomona. Additionally, community members raised concerns regarding the perceived negative effects of cannabis use on an individual’s well-being and the dynamics of the community.
Cannabis Regulatory Decision Points
The State of California gives significant authority to local jurisdictions to regulate cannabis business within their jurisdiction. Below are the primary issues for the Planning Commission to consider for a Claremont cannabis ordinance to be developed.
Allowable Cannabis Uses
The State offers various types of licenses for cannabis businesses including retail (storefront vs non-storefront), manufacturing, indoor/outdoor cultivation, distribution, testing laboratories, and microbusinesses. The City’s previous cannabis consultant, HdL, identified retail as the most supported and demanded business type in Claremont. Retail includes both storefront (dispensary) and non-storefront (delivery) businesses. Typically storefront businesses, in addition to their physical store, may also conduct deliveries from their location, whereas non-storefront businesses may only conduct deliveries and will not have a physical storefront location. Due to the limited availability of commercial buildings in the City, staff recommend only permitting retail.
Currently, approximately two out of three cannabis purchases are made in the illicit market. One of the primary issues that has caused the illicit sales to continue to grow is the lack of access to safe regulated cannabis retailers. In an effort to push local jurisdictions to allow regulated cannabis retailers and reduce the competition with the black and grey market, the proposed 2019 California Assembly Bill 1356 aimed to mandate local jurisdictions with no legal cannabis retailers to issue one cannabis retail license for every 15,000 residents. As of 2023, cities of comparable size to Claremont have a median of one storefront retail location for every 16,000 residents. These figures suggest that the City of Claremont could viably support two to three cannabis storefront retail businesses.
Cities that permitted an excess of cannabis retailers have faced market oversaturation, leading to the closure of some businesses. When new cannabis retailers are introduced in a jurisdiction, they often attract few new consumers. Instead, customers typically shift their purchasing habits from the illicit market or from cannabis retailers located farther away. If cities permit an excessive number of retailers, it can result in the cannibalization of sales for other retailers within their jurisdictions.
It is important to note that the City can allow a reasonable number of retailers to reduce purchases in the illicit market, while providing a sustainable business opportunity for the select retailers. Given the current lack of cannabis storefront retailers in neighboring cities, there may be higher demand initially, until those cities permit cannabis storefront retailers in their jurisdictions. Due to the City of Claremont’s competitive cannabis sales tax, the Planning Commission may consider permitting a limited number of non-storefront businesses to conduct regional deliveries, serving customers beyond Claremont.
Zoning Districts and Buffer Zones
The City may limit cannabis businesses to certain zones or districts, including the Business/Industrial Park District, mixed-use districts, commercial districts, or specific plans. Cities also may create overlay zones to restrict cannabis businesses to certain areas in a city.
California State law requires that cannabis businesses not be located within a 600 foot radius of a school, day care, or youth center, as measured property line to property line. Cities may add other sensitive areas such as residential zones, or create buffers from other retail locations. Cities can increase or decrease buffers as needed or change the measurement, such as from door to door instead of from property line to property line. The City may limit the number of permits issued in certain areas, so one retail businesses may only be allowed in the north of the City and one in the south.
Additionally, when the City of Pomona was developing their cannabis regulations, the City of Claremont requested a 1000-foot buffer from the Claremont-Pomona border. The City of Pomona has made a reciprocal request asking for a 1000-foot buffer from the Claremont-Pomona border.
Application Process
Due to the limited number of cannabis licenses and high demand, cities have to select a method of distributing their licenses. Licenses are usually distributed through a competitive merit-based method or a lottery method. A competitive process reviews all areas of the cannabis businesses’ operations, requiring businesses to submit an application with their business plan, neighborhood compatibility, security plan, and qualifications of the owners and operators. The reviews may either be conducted by city staff, consultants, or elected officials. While a competitive process may give cities the ability to select the best operators, its subjective nature can create a risk of liability. Some cities have experienced litigation due to cannabis business applicants questioning the review criteria, or those who were conducting the review. This can delay the issuing of a license and may create an additional cost for the cities.
A lottery system allows any interested business that meets the minimum qualifications to apply. The City could then conduct a lottery to select businesses at random. While a lottery method may reduce exposure to liability, it does not ensure that the best businesses will be selected. Alternatively, some cities utilize a hybrid approach whereby a business submits an application and receives either a pass or a fail based on certain criteria, which could include whether an applicant has experience operating a successful cannabis businesses. The applicants that receive a pass would then be entered into a random lottery. Ultimately the City Council will consider and determine the appropriate selection process if this initiative moves forward.
Transferability
Transferability may occur upon a new owner, operator, location, or investor/partner. During the early stages of cannabis regulations many local jurisdictions prohibited transfers altogether, whereas more recent cannabis ordinances have allowed for approval of transfer with a different application process and background check.
Hours of Operation
California State law limits cannabis retail and delivery business operations to 6:00 AM to 10:00 PM. Local jurisdictions may further limit these hours depending on local conditions, such as from 9:00 AM to 9:00 PM.
Security Measures
Cannabis business security measures are highly regulated by the Department of Cannabis Control (DCC). These include access control, video surveillance, alarm systems, and track and trace. The DCC, however, does not have requirements for security guards. Cannabis retail business security guards will typically patrol the inside and outside of the businesses. In addition to providing a safe place to purchase cannabis, they ensure that cannabis products are not opened or consumed on the premises. Most cities require cannabis businesses to have security guards on the premises. A city may decide whether the guards should be armed or unarmed. A city may also require security guards be present 24 hours, seven days a week, or only during operational hours. If the City were to permit both storefront and non-storefront retail, then the City would need to determine whether security was required for both types.
Size Restrictions
The City may establish a maximum size for cannabis retailers to ensure proportionality within the community. Cannabis retail businesses can adapt to the community and their designated retail space. Some retailers may operate in smaller urban environments like those found in Pasadena and West Hollywood, while others in busy commercial corridors or areas with less competition may occupy larger buildings.
Aesthetics and Advertising
The State provides advertising and marketing to reduce exposure to those under 21 years old but allows cities to have additional regulations on the aesthetics and signage of cannabis businesses. The City may apply existing sign code standards, or develop separate requirements. The City may also establish a design review criteria, separate from the cannabis permit, to ensure that the retail businesses are high quality and conform to their surroundings.
RELATIONSHIP TO CITY PLANNING DOCUMENTS
Staff has evaluated the agenda item in relationship to the City’s strategic and visioning documents and finds that it applies to the following City Planning Documents: Council Priorities, Economic Sustainability Plan, General Plan, 2023-24 Budget.
CEQA REVIEW
This item is not subject to environmental review under the California Environmental Quality Act (CEQA).
PUBLIC NOTICE PROCESS
The agenda and staff report for this item have been posted on the City website and distributed to interested parties. If you desire a copy, please contact the City Clerk’s Office.
Submitted by: Prepared by:
Brad Johnson Alex Cousins
Community Development Director Management Analyst