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ADOPT A RESOLUTION AMENDING TITLE 16, CHAPTER 16.20, SECTION 16.20.020 AND CHAPTER 16.80, SECTION 16.80.195 RELATED TO THE CANNABIS REGULATORY PROGRAM
recommended action
RECOMMENDATION
Staff recommends that the Planning Commission adopt a Resolution forwarding a recommendation to the City Council to adopt Option 2 of an Ordinance Amending Title 16, Chapter 16.20, Section 16.20.020 and Chapter 16.80, Section 16.80.195 of the Stockton Municipal Code, amending the Cannabis Regulatory Program.
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SUMMARY
On February 2, 2021, City Council provided direction to evaluate the cannabis regulatory program and develop recommendations to improve the current program. The City conducted an Equity Assessment and researched best practices. Community outreach was also conducted to gather feedback from the community and stakeholders as well as mulitple study sessions with both the Council Legislative and Environmental Committee and Planning Commission. As a result, recommendations have been developed and are being presented as three (3) options for the Planning Commission’s review and recommendation to the City Council.
The proposed ordinance fulfills City Council directive and:
• Aligns program with best practices
• Implements recommendations from equity assessment and addresses equity program gaps
• Cleans-up and aligns Code language to allow for consistent and clear application of the Code
• Establishes balance between geography, resident quality of life, desired business types, and economic development
These changes are being proposed to address
• Overconcentration concerns
• Location Waiver seen as arbitrary rather than flexible
• Separation distance between cannabis storefront retail establishments
• Public safety considerations
• Lack of applications for businesses other than Retail Storefront (dispensary)
• Equity concerns: length of residency, applicant eligibility, procedures
It is recommended that the Planning Commission select option 2 and forward a recommendation that Council adopt the proposed ordinance.
DISCUSSION
Background
On March 5, 2019, City Council approved changes to the City’s cannabis regulatory program to: (a) align state/local regulation; (b) allow additional business types; (c) establish a method to control the pace of new business openings; and (d) establish a method to address historic racial inequities.
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 to align local regulation with the Medical Cannabis Regulation and Safety Act and the Adult-Use of Marijuana Act of 2016 (Proposition 64). In addition to achieving regulatory consistency, the program was changed to eliminate the limit (i.e. caps) on the total number of Operator Permits regulated by the Stockton Police Department under Stockton Municipal Code (SMC) Chapter 5.100.
For certain permit types (storefront retailer, cultivation, volatile-manufacturing, and microbusiness) where there is concern about the potential impact on public safety, public health, or community character, a controlled expansion was established. 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.
The controlled expansion is accomplished on an annual basis through a lottery process for the following business types:
a. storefront retailer
b. cultivation
c. volatile-manufacturing
d. microbusinesses, which include storefront retail and/or cultivation business types
Applicants for the above business types are evenly selected by the lottery process from two pools for a total of eight (8) applications per year, as described below:
Equity Pool
a. One (1) storefront retailer permit
b. One (1) cultivation permit
c. One (1) volatile-manufacturing permit
d. One (1) microbusiness permit
General Pool
a. One (1) storefront retailer permit
b. One (1) cultivation permit
c. One (1) volatile-manufacturing permit
d. One (1) microbusiness permit
The lottery includes an equity component to enable Stockton residents from disadvantaged neighborhoods to obtain cannabis business permits. Applicants for the above business types 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. To qualify as an equity applicant, an applicant must own more than 50 percent of the business, be a resident of Stockton, and meet one of the following:
• be an Minority Business Enterprise (MBE)/Women Owned Business Enterprise (WBE),
• live in an opportunity zone,
• live in the Senate Bill 535 disadvantaged area, or
• live in a Housing and Urban Department (HUD) designated area.
On July 16, 2019, City Council approved additional amendments to the Cannabis Regulatory Program that allowed additional by-right allowances for eight (8) existing cannabis businesses (five (5) retail storefront and three (3) cultivator). If located in the appropriate zone, existing cannabis businesses are allowed to add additional business types, such as retail storefront (dispensary), non-volatile manufacturing, and cultivation. The businesses are still required to amend the Operator’s Permit to include the additional business types.
Amendments to location requirements were also approved and aligned further with State requirements. The approved changes require all cannabis businesses to be located at least 300 feet away from any existing residential zone, and 600 feet away from any childcare center, childcare, in-home (family daycare home), religious facilities, drug abuser, or alcohol recovery/treatment facility, school (K-12), daycare center, or youth center.
In addition, the tax rate structure was adjusted to reflect the current market. Originally, the City required businesses to report based on sales of medical and adult-use products. The tax rate structure was changed to delineate revenue based on business type (cultivation, manufacturing, distribution, testing, retail, and microbusiness). The percentage due varies based on business type (see Table 1). Lastly, Council adopted a Workforce Diversity Incentive Program. Cannabis businesses can opt into the Program when they apply or renew their annual business license. Businesses qualify to participate in the Program if at least 50% of their employees are Stockton residents and reside in the SB 535 disadvantaged areas of the City or in the “Kelley Drive” neighborhood. If eligible, Cannabis business owners receive a 50% discount on the amount owed for the Business License tax.
Table 1
|
Business Type |
Percent of Gross Receipts Per Year |
|
Cultivator |
5% |
|
Distributor |
1% |
|
Non-volatile manufacturer |
3% |
|
Volatile manufacturer |
3% |
|
Testing laboratory |
0% |
|
Retail storefront |
5% |
|
Retail non-storefront (delivery only) |
5% |
|
Microbusiness |
5% |
SMC 5.99.030
During the development of the Cannabis Regulation Program, event promoters identified the allowance of Cannabis Temporary Events as an additional item to consider for adoption. On June 23, 2020, the City Council approved a code amendment to SMC chapter 12.72 (Special Events) to allow temporary cannabis events (which include on-site sales and consumption of cannabis and cannabis goods/products) at the Stockton Municipal Civic Auditorium, Weber Point Event Center, and the County of San Joaquin Fairgrounds. Other amendments included a cannabis-related definition and establishment of a Temporary Cannabis Event Permit and associated fee.
On February 2, 2021, City Council provided direction to evaluate the cannabis regulatory program and develop recommendations to improve the current program. City Council expressed concern with overconcentration, encouragement of certain business types, location requirements and issues related to the equity program. On March 17, 2021, Staff provided a presentation on a preliminary cannabis amendment project to the City Council Legislation and Environmental Committee where additional feedback for the project was received.
On March 17, 2021, Staff provided a presentation on the cannabis amendment project to the Legislation and Environmental Committee where additional feedback for the project was received. Additionally, the City’s cannabis equity consultant hosted a virtual community meeting on May 3, 2021, where public feedback and suggestions were received. Over 700 e-mails were distributed to notify the public of the virtual community meeting and sixteen (16) members of the public participated in the virtual community meeting. In addition, the consultant interviewed twelve (12) stakeholders. Feedback received included the following:
• Desire for:
o financial and technical assistance for equity applicants,
o Increased outreach efforts,
o Creation of an incubator program,
o Minimum equity ownership requirements,
o Increased lottery awards and priority processing to/for equity applicants,
o Assistance with the legal process for record expungement, and
o Additional staff support/guidance.
• Issues with:
o over-restrictive zoning requirements,
o confirmation of proposed location consistency with Code,
o Planning Commission consideration of location waivers, and
o LiveScan requirements for employees.
On June 23, 2021, a proposed ordinance incorporating all feedback to date was presented to the Legislation and Environmental Committee for review and input. The Committee requested that all three location requirement options be presented to the City Council for their review and adoption as well as language be added to allow a struggling equity-owned business to sell or close prior to the minimum 5-year ownership requirement. That direction was incorporated in the proposed ordinance amendment.
The updated policy proposal was then presented in a workshop format to the Planning Commission on July 22, 2021, for further feedback and input. During that meeting, the Planning Commission requested, that in addition to the recommended location requirements based on those from the state Department of Alcoholic Beverage Control, location requirements continue to include minimum distances from churches (places of worship only - not church owned facilities) and drug abuse, or alcohol recovery/treatment facilities.
A follow-up presentation was made to the Legislation and Environmental Committee on September 15, 2021, where an update on the ordinance amendment progress was provided, including the Planning Commission’s July feedback. The Committee was satisfied with the progress made thus far and directed staff to finalize the definition of Religious Facilities and Places of Worship with the Planning Commission.
A study session was held during the September 23, 2021, Planning Commission meeting to further discuss the definition of Religious Facilities and Places of Worship as they relate to the Cannabis Regulatory Program. It was found that the distinction of worship versus other religious uses is inconsistent with federal law and that the City’s current definition is consistent with case law; therefore an amended definition was not recommended. The Planning Commission understood staff’s recommendation and asked that the current location waiver portion of the Cannabis Regulatory Program remain in place in order to address unique situations such as those involving religious facilities.
Present Situation
The proposed Ordinance options (Attachments A1-3) provide recommendations as a result of extensive research conducted to provide enhancements to the City’s Commercial Cannabis Regulatory Program. Several areas will be addressed as a result of this update, including location requirements, equity lottery program, enhancing the customer experience, balancing oversaturation with economic development efforts, and zoning allowances. The proposed recommendations are summarized in the Recommendation Summary Matrix (Attachment B).
The recommendations were based, in part, on an analysis of location requirement scenarios (Attachment C), which provides three (3) options for consideration. The City also conducted an analysis of the current statewide best practices to assist with data driven decision making. The report includes zoning information for seven (7) jurisdictions (Attachment D) known for their robust programs. They include the Cities of Adelanto, Greenfield, Long Beach, Los Angeles, Oakland, San Francisco, and Santa Rosa. The report also includes zoning requirements for local jurisdictions, including the Cities of Ceres, Elk Grove, Modesto, Tracy, Turlock, Sacramento, and San Joaquin, Stanislaus, and Sacramento Counties.
Lastly, the City, through a consultant, conducted an equity assessment to determine areas of improvement for the City’s Commercial Cannabis Equity Lottery Program. The details and results of the assessment are found in the Equity Analysis Report (Attachment E). The recommendations in the proposed Ordinance balance the results found in the Best Practices Report, the Equity Analysis Report, and the feedback received by City Council, Legislation and Environmental Committee, Planning Commission, and the Public.
Proposed Amendment
Excluding the varying location requirements in Options 1-3 (see Table 3 below), the following chart illustrates the proposed changes to Title 16 of the Stockton Municipal Code (SMC).
Table 2
|
SMC Section |
Change |
|
16.20.020 (Table 2-2) |
Allowance for Retail, Distribution, Manufacturing (RDM) microbusinesses to be located within Commercial, Office (CO), Commercial, General (CG), Commercial, Large-Scale (CL) zoning districts if the retail component of the business floor area is 50% or more and no cultivation activities take place. |
|
|
Removal of Cannabis retailer storefronts and non-storefront retail (delivery) from the Commercial Neighborhood (CN) zone |
|
16.80.195.A Storefront retailer |
Consolidation of by-right allowance language for pre-existing business |
|
|
Removal of CN zoning district from allowed zoning districts |
|
|
Addition of residential use to location requirements |
|
|
Alignment of location requirements with ABC regulations (retaining religious facilities and recovery/treatment facilities)* |
|
|
Addition of 1,000-foot separation between storefront retailers and microbusinesses with a retail component* |
|
|
Clarification that distances are measured from nearest property lines |
|
|
Removal of location waiver option |
|
|
Clarification of what ‘Established and in Operation” means in terms of existing uses |
|
|
Allowance for transfer to a new location with obtaining a new use permit and surrendering the previous use permit for former location |
|
16.80.195.B Non-Storefront Retail (Delivery) |
Clarification of AUP requirement for new businesses after 7/16/2019. |
|
|
Addition of residential use to location requirements |
|
|
Alignment of location requirements with ABC regulations (retaining religious facilities and recovery/treatment facilities)* |
|
|
Exemption from 600-foot separation for religious facilities in IL and IG zones* |
|
|
Clarification that distances are measured from nearest property lines |
|
|
Removal of location waiver option |
|
|
Clarification of what ‘Established and in Operation” means in terms of existing uses |
|
|
Allowance for transfer to a new location with obtaining a new use permit and surrendering the previous use permit for former location |
|
16.80.195.C Cultivator |
Removal of lottery requirement |
|
|
Consolidation of by-right allowance language for pre-existing business |
|
|
Addition of residential use to location requirements |
|
|
Alignment of location requirements with ABC regulations (retaining religious facilities and recovery/treatment facilities)* |
|
|
Exemption from 600-foot separation for religious facilities in IL and IG zones* |
|
|
Clarification that distances are measured from nearest property lines |
|
|
Removal of location waiver option |
|
|
Clarification of what ‘Established and in Operation” means in terms of existing uses |
|
|
Allowance for transfer to a new location with obtaining a new use permit and surrendering the previous use permit for former location |
|
16.80.195.D Volatile Manufacturer |
Removal of lottery requirement |
|
|
Addition of residential use to location requirements |
|
|
Alignment of location requirements with ABC regulations (retaining religious facilities and recovery/treatment facilities)* |
|
|
Exemption from 600-foot separation for religious facilities in IL and IG zones* |
|
|
Clarification that distances are measured from nearest property lines |
|
|
Removal of location waiver option |
|
|
Clarification of what ‘Established and in Operation” means in terms of existing uses |
|
|
Allowance for transfer to a new location with obtaining a new use permit and surrendering the previous use permit for former location |
|
16.80.195.E Non-Volatile Manufacturer and 16.80.195.F Distributor |
Addition of residential use to location requirements |
|
|
Alignment of location requirements with ABC regulations (retaining religious facilities and recovery/treatment facilities)* |
|
|
Exemption from 600-foot separation for religious facilities in IL and IG zones* |
|
|
Clarification that distances are measured from nearest property lines |
|
|
Removal of location waiver option |
|
|
Clarification of what ‘Established and in Operation” means in terms of existing uses |
|
|
Allowance for transfer to a new location with obtaining a new use permit and surrendering the previous use permit for former location |
|
16.80.195.G Testing Laboratory |
Addition of residential use to location requirements |
|
|
Alignment of location requirements with ABC regulations (retaining religious facilities and recovery/treatment facilities)* |
|
|
Exemption from 600-foot separation for religious facilities in IL and IG zones* |
|
|
Clarification that distances are measured from nearest property lines |
|
|
Removal of location waiver option |
|
|
Clarification of what ‘Established and in Operation” means in terms of existing uses |
|
16.80.195.H Microbusiness |
Allowance for RDM microbusinesses to be located within Commercial, Office (CO), Commercial, General (CG), Commercial, Large-Scale (CL) zoning districts if the retail component of the business floor area is 50% or more and no cultivation activities take place. |
|
|
Addition of residential use to location requirements |
|
|
Alignment of location requirements with ABC regulations (retaining religious facilities and recovery/treatment facilities)* |
|
|
DCM Microbusiness exemption from 600-foot separation for religious facilities in IL and IG zones* |
|
|
Addition of 1,000-foot separation between storefront retailers and microbusinesses with a retail component (RDC, RDM, and RCM types)* |
|
|
Clarification that distances are measured from nearest property lines |
|
|
Removal of location waiver option |
|
|
Clarification of what ‘Established and in Operation” means in terms of existing uses |
|
|
Allowance for transfer to a new location with obtaining a new use permit and surrendering the previous use permit for former location |
|
16.80.195.K Equity Program |
Updated language to reflect that the Equity Program now exists (deleted “The City shall create…”) |
|
|
Added 5-year residency requirement |
|
|
Removed MBE/WBE, Opportunity Zone/HUD designated area residency as eligibility options for equity applicants |
|
|
Removed Cultivators and Volatile Manufacturers from controlled roll-out (annual limit) requirement. |
|
|
Clarified that there are no annual limits on Non-storefront retail (delivery only), Cultivator, Volatile Manufacturer, Non-Volatile Manufacturer, Distributor, and Testing Laboratory business types. |
|
|
Clarified lottery process to include a lottery application form which will include proposed business address for use permit. Said address shall meet all location requirements. |
|
|
Additional language stating that lottery deadlines will be publicly advertised by the City. |
|
|
Removed Cultivators and Volatile Manufacturers from lottery process |
|
|
Additional language to clarify that lottery winners must then apply for a use permit in accordance with SMC 16.168. |
|
|
New language clarifying that lottery winners are entitled to one (1) use permit submittal and if the use permit is denied that the lottery winner status expires. |
|
|
New language requiring that lottery winners must submit their land use applications (i.e. use permit applications) within 90-days of notification that they won the lottery and that nonsubmittal within that time frame is grounds for revocation of lottery winner status. |
|
|
Clarifying language regarding lottery winners’ good faith efforts towards obtaining a use permit. |
|
|
Clarifying language regarding next steps if a lottery winner’s status is revoked, denied, or withdrawn. |
|
|
New language requiring an equity applicant maintain over 50% ownership of business for a minimum of 5 years. Includes a sales provision for hardship situations. |
|
|
New language requiring annual metrics and annual submittal for 5 years starting at operator’s permit approval. |
|
|
New language providing resources/assistance to equity applicants if they are available. |
|
|
New language requiring all equity applicants that received resources (either lottery or assistance) to follow ownership and metric reporting requirements. |
*Does not apply to Option 1 and Option 3’s location requirements only apply to parks and K-12 schools.
The following table provides a comparison of the location requirements between each Option.
Table 3
|
Requirement |
Option 1 |
Option 2 |
Option 3 |
|
Elimination of location waiver option |
ü |
ü |
ü |
|
300-foot separation from residential zone 300-foot separation from residential zone or use |
ü |
ü |
|
|
600-foot separation from: Parks K-12 School Day care center Youth center Childcare center Child care In-home (family day care home) Religious facilities Drug abuse or alcohol recovery/treatment facility |
ü ü ü ü ü ü ü ü ü |
ü ü ü ü ü ü ü ü* ü |
ü ü |
|
1,000-foot separation between all cannabis storefront retailers and/or microbusinesses with a retail component |
|
ü |
ü |
* Excludes religious facilities in IG/IL zones (for business types other than storefront retail and microbusinesses with a retail component)
Feedback from all public meetings, study sessions, stakeholders, and related research have been incorporated into the proposed ordinance amendment and is being presented for the Planning Commission’s review and recommendation. The suggested amendments are recommended to create a more simplified, transparent, and objective application and decision-making process.
Environmental Clearance
The proposed SMC amendments are exempt from the California Environmental Quality Act (CEQA) under the “general rule” that CEQA applies only to projects that have the potential for causing significant environmental effects, as specified in section 15061(b)(3). Approval of the required amendments constitutes an administrative action that will not result in direct or indirect physical changes in the environment, and any future projects that would rely on these amendments will require further case-specific environmental review under CEQA.
Attachment A1 - Proposed Ordinance - Redlines Option 1
A2 - Proposed Ordinance - Redlines Option 2
A3 - Proposed Ordinance - Redlines Option 3
Attachment B - Recommendation Summary Matrix
Attachment C - Location Requirement Options
Attachment D - Best Practices Report
Attachment E - Equity Analysis Report
The staff report was prepared by Stephanie Ocasio, Assistant Director, (209) 937-8544; stephanie.ocasio@stocktonca.gov.