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ORDINANCE AMENDING TITLE 5, CHAPTER 5.98.020 RELATED TO THE CANNABIS REGULATORY PROGRAM’S WORKFORCE DIVERSITY PROGRAM
recommended action
RECOMMENDATION
It is recommended that the City Council:
1. Select Cannabis Regulatory Program’s Workforce Diversity Program Eligibility Map Option
2. Adopt the proposed ordinance amending the Stockton Municipal Code, Title 5, Chapter 5.98, Section 5.98.020, related to the City of Stockton Cannabis Regulatory Program’s Workforce Diversity Program
3. Authorize the City Manager to take appropriate and necessary actions to carry out the purpose and intent of this ordinance
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Summary
On July 16, 2019, Stockton City Council approved the Workforce Diversity Component of the Commercial Cannabis Equity Program. To participate in this program, Commercial Cannabis businesses need to employ at least 50% of their workforce from the SB 535 Disadvantaged area or “Kelley Drive Neighborhood” to receive a 50% discount on their annual business license fees.
During the implementation of the Workforce Diversity Program, it was discovered that further analysis was needed to outline specific parameters for local hires who reside in the “Kelley Drive Neighborhood.” On February 3, 2020, staff presented this issue to the Legislative and Environmental Committee to discuss options for clarifying boundaries. Based on feedback received at said meeting, staff has prepared two possible options for interpretation of the area. Staff requests direction regarding the boundaries of said “Kelley Drive Neighborhood” based on these options:
• Option 1 (939 Residential Parcels in Boundary), which includes properties adjacent to Kelley Drive and additional properties adjacent to nearby arterial streets.
• Option 2 (1,480 Residential Parcels in Boundary), which includes properties included in Option A as well as additional residential properties south of Mosher Slough, west of Don Avenue, and north of Hammer Lane.
DISCUSSION
Background
On June 27, 2017, the Governor signed into law Senate Bill 94, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), which established a single system of administration for cannabis laws in California combining the Medical Cannabis Regulation and Safety Act and the Adult Use of Marijuana Act of 2016 (Proposition 64) into a single system and provided for additional clarification on the siting of adult-use dispensaries (storefront retailers).
On November 7, 2017, City Council adopted Ordinance 2017-11-07-1502, which made changes relative to the City’s medical cannabis businesses permitting program; including bans on non-medical cannabis businesses, outdoor personal cultivation, and any cannabis business engaged in delivery, distribution, manufacturing or testing of the product, and certain restrictions on indoor cultivation.
On January 9, 2018, the County of San Joaquin approved an agreement to provide consulting services for the development and implementation of a sustainable regulatory structure for commercial and personal cannabis. The County selection process deemed Freedman and Koski, Inc. as the best-suited consultant to conduct this analysis. The County’s agreement allowed other jurisdictions to enter cooperative agreements with the vendor to perform the same cannabis policy services. On April 17, 2018, the City approved a Cooperative Agreement between the City and Freedman and Koski, Inc. to conduct a review of the City’s current policy, conduct public engagement, and provide recommendations to improve the City’s current cannabis regulatory program. At this meeting, City Council directed the City Manager to explore the plausibility of allowing current medical dispensaries (storefront retailers) to also sell adult-use cannabis while maintaining the current allowable dispensaries (storefront retailers) limit of four (4) dispensaries (storefront retailers), pending further review and analysis.
The scope of the project was to develop a proposed ordinance after extensive public outreach and to address the following issues:
• Expansion of the current program to include adult-use cannabis businesses.
• Expansion of the current program to allow distribution, testing laboratories, manufacturing, and delivery (non-storefront retail).
• Development of an equity program to either mitigate the impact of those persons disproportionately affected by cannabis sales in neighborhoods and/or lower barriers of entry to the industry
• Exploring special event permitting and on-site consumption
On July 18, 2018, the City hosted two community meetings to launch the public engagement for the project and begin gathering data from the community on a variety of topics.
On August 2, 2018, the Planning Commission received a presentation on the scope of the entire policy project, along with a summary of the feedback received from community meetings held in July. The phases of the project were reviewed, and questions regarding public education and general enforcement of potential new policies were discussed.
On August 23, 2018, the Planning Commission recommended approval of Phase 1’s proposed ordinance and resolution pertaining to Title 16 and offered modifications for City Council consideration. On September 18, 2018, the City Council adopted Ordinance 2018-09-18-1502 and Resolution 2018-09-18-1502 with the Planning Commission’s modifications. This allowed for current cultivation sites to grow and current dispensaries (storefront retail) to sell adult-use cannabis as a by-right use (no amendment to existing Use Permits) in addition to medical cannabis. Council also increased the number of allowable dispensaries (storefront retail) to five (5).
Three additional community meetings were conducted between October 17 and 19, 2018, in various locations throughout the City. The topics discussed included cultivation, distribution, testing laboratories, manufacturing, delivery (non-storefront retailer), and issues related to equity. On November 15, 2018, a presentation of the community meeting findings was provided to the Planning Commission.
On February 14, 2019, at the regularly scheduled Planning Commission meeting, the proposed recommendations as related to Title 16 were presented to the Commission for consideration. The Commission unanimously approved a recommendation to forward the proposed ordinance and resolution to Council with the following modifications:
• Include a definition of equity,
• Include language regarding the reason why an Equity Program is needed in Stockton,
• Allow existing cultivators and storefront retailers (dispensaries) vertical integration of all proposed cannabis business types by-right,
• Allow existing storefront retailers (dispensaries) to deliver cannabis products, and
• Allow incubators as a part of the Equity Program.
On March 5, 2019, City Council approved an expansion of the Cannabis Regulatory Program. New business types were introduced, including manufacturing, distribution, testing laboratories, delivery-only non-storefront retailers, and microbusinesses. The program also included additional cultivators and storefront retailers (dispensaries) as well as an equity program. The changes were aligned with the Medical Cannabis Regulation and Safety Act and the Adult-Use of Marijuana Act of 2016 (Proposition 64).
The most significant change to the program is the elimination on the limit (i.e. caps) on the total number of Operator Permits. For certain permit types where there is concern about the potential impact on public safety, public health, or community character, a controlled expansion component was initiated. A controlled expansion program allows the City and the existing industry to adapt to an evolving industry and gives the City ongoing flexibility to accelerate or decelerate industry expansion over time. The controlled expansion also has the benefit of allowing the City to give preference to equity applicants.
On an annual basis, the City allows for the following numbers of new cannabis business types:
a. Two (2) storefront retailer permits
b. Two (2) cultivation permits
c. Two (2) volatile-manufacturing permits
d. Two (2) microbusinesses, which include storefront retail and/or cultivation business types
This phased approach protects the City from oversaturation, provides time to analyze effects of business expansion and ensures adequate oversight.
The equity program creates opportunities for Stockton residents from disadvantaged neighborhoods to obtain cannabis business permits. Applicants for new permits are evenly selected from 1) a general pool of applicants and 2) an equity pool of applicants. Equity pool applicants must meet certain criteria and are also eligible to be a part of the general pool.
New commercial cannabis business applicants are required to obtain a Commission or Administrative Use Permit (excluding Testing Laboratories), an Operators Permit, a City Business License and a State Annual License. Land-use requirements for each vary based on the type of business line, and consistent land uses.
On July 16, 2019, Council approved (Ordinance 2019-07-16-1504) additional items for the Cannabis Regulatory Program:
• Establish the Workforce Diversity Incentive Program
• Adjust commercial cannabis business tax rates from product type to business type
• Adjust location requirements to align with State regulations
• Include additional permitted by-right allowances
• Streamline City and State approval processes.
The Workforce Diversity Incentive Program is a voluntary program that provides a 50% reduction to the amount owed for business tax annually. To qualify for this program, commercial cannabis business must hire at least 50% Stockton residents who reside within either the SB535 Disadvantaged Area or “Kelley Drive Neighborhood.”
The Commercial Cannabis business tax was adjusted from 10% adult-use and 5% medical to a tax rate based on business type, with no distinction from use type. The rates are 5% for Retail, Cultivation, and Microbusiness; 3% for Manufacturing; 1% for Distribution; and 0% for Testing Laboratory.
The Location Requirements for a Use Permit with the City of Stockton was adjusted to 300 feet from Residential and 600 feet from K-12 Schools, Parks, childcare centers, Family daycare centers, religious facilities, and drug-abuse and alcohol treatment facilities. These are aligned more closely with the State Requirements and provides a more streamlined approach to the Use Permit application process.
The additional by-right allowances to existing and future Commercial Cannabis Businesses, where businesses could expand to include another business type without having to apply for the lottery or fill out a planning application, were expanded to include the following: Existing Cultivation Businesses may operate a Retail storefront business by-right if the location is within Industrial Zones and Existing Retail Storefront businesses may operate as a Distribution business and as a non-volatile manufacturing business by-right if the location is within Industrial Zones.
The City approval process for commercial cannabis businesses update includes the process where the Operators Permit can be issued prior to the Certificate of Occupancy being issued. The Certificate of Occupancy is required prior to the business opening their doors to the public and/or conducting business. The cannabis business is, however, able to proceed with seeking approval for their State Annual License concurrently while they proceed with their tenant improvements and/or construction of their project.
Additional items approved by Council include the following: updating the parking requirement for Cultivation cannabis businesses, eliminating security and lighting plans redundancy, require a Retail Non-Storefront (delivery) delivery drivers to possess a valid CA driver’s license, adding the Microbusiness definition to Title 5 of the Stockton Municipal Code, Clarification that Testing Laboratories are unable to provide vertical integration, and Clarification in Title 16 indicating that Administrative Guidelines referenced in Section 5.100.300 of the Code also apply to Section 16.80.195.
On February 3, 2020, staff requested feedback and clarification of the boundaries of the “Kelley Drive Neighborhood” from the Legislative and Environmental Committee.
Present Situation
As a result of the recent expansion of the Cannabis Regulatory Program approved on July 16, 2019; it was discovered that further clarification is needed regarding the requirements for the workforce diversity component specific to hiring eligibility. Clarification is needed to define the parameters that identify where the “Kelley Drive Neighborhood” area is located within the City.
On February 3, 2020, staff presented this issue to the Legislative and Environmental Committee to discuss options for clarifying boundaries. Based on feedback received at said meeting, staff has prepared two possible options for interpretation of the area. Staff requests City Council direction regarding the boundaries of said “Kelley Drive Neighborhood” based on these options:
Option 1 (Attachment B) includes 939 residential parcels. It includes parcels located on Bancroft Way, Kelley Drive, and Plymouth Road, as well as several cul-de-sacs directly off Kelley Drive and Plymouth Road within the bounds of Otto Drive to the north and W. Benjamin Holt Drive to the south. It also includes properties to the west of the following streets: West Creek Drive, Yarmouth Drive, Beaufort Drive, Wentworth Drive, Montgomery Avenue, Amherst Drive, and all properties west of Richland Way.
Option 2 (Attachment C) includes 1,480 Residential Parcels in Boundary, which includes all properties from Option A as well as an additional 541 residential properties bounded by Mosher Slough to the north, Don Avenue to the east, Option 1 parcels to the west, and Hammer Lane to the south.
Option 2 expands the area of Kelley Drive to include more residential areas. The volume of residential parcels increases the pool of local hires for Commercial Cannabis Business Owners to meet the requirements for the Workforce Diversity Inventive Program.
Once an option is selected and approved by Council, the boundaries for the “Kelley Drive Neighborhood” will be updated in the Cannabis Program Administrative Guidelines that are referred to in the Municipal Code Section 5.100.300.
Staff recommends that the City Council select a Workforce Diversity Program Eligibility Map Option, adopt an Ordinance amending the Stockton Municipal Code to amend the City’s Cannabis Regulatory Program’s Workforce Diversity Program;, and authorize the City Manager to take appropriate and necessary actions to carry out the purpose and intent of this ordinance and resolution.
FINANCIAL SUMMARY
If Commercial Cannabis businesses qualify for the Workforce Diversity Incentive Program, they receive a 50% discount on the Business License tax amount owed to the City. The Business License tax amount is based on revenue earned during the year. This program is relatively new and has not had any participants since its inception.
Attachment A - Proposed Ordinance - Redline Version
Attachment B - Option 1 Eligibility Area
Attachment C - Option 2 Eligibility Area