Honorable Mayor and Members of the Hermosa Beach City Council
Regular Meeting of December 14, 2021
Title
CONSIDERATION OF THE CITY’S OPTIONS
IN LIGHT OF THE CANNABIS INITIATIVE FILED BY
COLTON CHACKER WITH THE HERMOSA BEACH
CITY CLERK ON NOVEMBER 17, 2021
(City Attorney Michael Jenkins and Deputy City Manager Angela Crespi)
Body
Recommended Action:
Recommendation
Staff recommends City Council consider the City’s options, in light of the cannabis initiative filed with the City Clerk by Colton Chacker on November 17, 2021, and provide direction regarding next steps.
Body
Executive Summary:
As requested by City Council at its regular meeting of November 23, 2021, this report: (1) summarizes the current state of cannabis law in California; (2) summarizes the salient provisions of the Chacker initiative petition filed with the City Clerk on November 17, 2021; (3) delineates the City’s obligations to process the initiative if it qualifies; (4) addresses whether the Council should consider directing staff to prepare a ballot measure for a cannabis business tax should the initiative qualify; (5) addresses the option of Council adopting a cannabis ordinance prior to the November 2022 election or simply maintaining its existing ban on all cannabis business operations; and (6) allows Council to consider any other potential associated actions or direction.
Background:
State and City Law Governing Medical Cannabis
In 1996, the voters of the State of California approved Proposition 215, entitled the Compassionate Use Act, the intent of which was to enable persons who are in need of medical marijuana to use it without fear of prosecution under limited, specified circumstances.
In 2004, the Legislature enacted Senate Bill 420 (referred to as the Medical Marijuana Program) to clarify the scope of Proposition 215 and to provide qualifying patients and primary caregivers who cultivate marijuana with a limited defense to certain specified State criminal statutes. Assembly Bills 2650 (2010) and 1300 (2011) amended the Medical Marijuana Program to expressly recognize the authority of counties and cities to “[a]dopt local ordinances that regulate the location, operation, or establishment of a medical marijuana cooperative or collective” and to civilly and criminally enforce such ordinances.
In 2013, in City of Riverside v. Inland Empire Patients Health and Wellness Center, Inc., the California Supreme Court held that “[n]othing in the [Compassionate Use Act] or the [Medical Marijuana Program] expressly or impliedly limits the inherent authority of a local jurisdiction, by its own ordinances, to regulate the use of its land….” Additionally, in Maral v. City of Live Oak, the Court of Appeal affirmed the ability of local government entities to prohibit the cultivation of marijuana under its land-use authority, holding that “there is no right - and certainly no constitutional right - to cultivate medical marijuana….”
On October 9, 2015, Governor Brown signed three bills into law - Assembly Bills 266 and 243, and Senate Bill 643 - collectively referred to as the Medical Marijuana Regulation and Safety Act (“MMRSA”). Prior to the passage of the MMRSA, State law provided no legal mechanism for commercial cultivation of marijuana for medicinal purposes and Federal law prohibited all cultivation of marijuana. Until the MMRSA was passed, cultivation of marijuana for medicinal purposes in California was restricted to individual qualified patients or their primary care givers for non-commercial purposes and limited to personal quantities. The MMRSA became effective on January 1, 2016 and contained provisions to govern the cultivating, processing, transporting, testing, and distributing of medical marijuana to qualified patients. The MMRSA also contained statutory provisions that:
• Set up a “dual licensing” scheme which requires dispensaries and cultivators to obtain a local license prior to requesting and obtaining a license from the State; no dispensary or cultivation activity may lawfully operate without both a State and local license;
• Allow the City to completely prohibit the delivery of marijuana by requiring a local government that wishes to prevent marijuana delivery activity from operating within the local government’s boundaries to enact an ordinance affirmatively banning such delivery activity (see Business & Professions Code § 19340(a));
• Preserves the ability of a qualified patient and/or primary caregiver to cultivate for personal, non-commercial purposes, sets new limits on such cultivation, and excepts such personal cultivation from State cultivation licensing requirements. Furthermore, the MMRSA allows local governments to enact ordinances expressing their intent to prohibit the cultivation of marijuana and their intent not to administer a conditional permit program for the cultivation of marijuana (see Health & Safety Code § 11362.777(c)(4));
• Expressly provide that the MMRSA does not supersede or limit local law enforcement activity, enforcement of local ordinances, or enforcement of local permit or licensing requirements regarding marijuana (see Bus. & Prof. Code § 19315(a)); and
• Expressly provide that the MMRSA does not limit the authority or remedies of a local government under any provision of law regarding marijuana, including but not limited to local governments’ right to make and enforce within its limits all police regulations not in conflict with general laws (see Bus. & Prof. Code § 19316(c)).
The MMRSA, however, also stated that if a city or county had not adopted land use regulations by March 1, 2016, to either regulate or ban cultivation of marijuana for medicinal purposes, the State would become the sole authority to issue cultivation licenses in that jurisdiction, meaning no local license would be required.
At its March 8, 2016 meeting, City Council adopted Ordinance 16-1362 (Attachment 1) amending sections 17.42.110 and 17.26.030 of the Hermosa Beach Municipal Code (HBMC) to expressly prohibit all commercial medical marijuana uses in the City, cannabis deliveries to any location within the city, and prohibit cultivation for medical use by a qualified patient or primary caregiver. This ordinance codified the long-standing rule that since cannabis uses were not listed as a permitted use in the HBMC, medical marijuana uses were not permitted in the City.
State and City Law Governing Recreational Cannabis
On November 8, 2016, Proposition 64 was adopted for adult use of marijuana act (AUMA). In addition to other items, AUMA regulated the use of marijuana for personal and commercial purposes, including the recreational use of marijuana by adults over 21 years of age. Ultimately, AUMA expanded the permissions under MMRSA. Proposition 64 retains the local control that was clarified by the courts whereby cities can determine whether to allow or prohibit commercial cannabis activity in its jurisdiction and under what terms those uses would be permitted. Cities throughout California rushed to adopt local ordinances by January 1, 2018. Without a local ordinance specifying what activities were permitted or prohibited, a valid State license would be the only requirement to open and operate any commercial marijuana business in any commercial zone in the City.
At its November 28, 2017 meeting, the City Council adopted Ordinance 17-1380 (Attachment 2) amending Title 17 of the HBMC to expressly prohibit all commercial cannabis activities in the City and prohibit outdoor cannabis cultivation for personal use. A person may cultivate no more than six (6) living cannabis plants inside a private residence in accordance with Health and Safety Code Section 11362.2.
Since that time, many California cities have embarked on the complex process of permitting, selecting, and licensing cannabis businesses for this newly regulated cannabis industry. Many of those cities have adopted local cannabis taxes, while other have chosen to retain bans on the use. It is a purely local decision.
The Chacker Initiative Petition
On November 17, 2021, the Hermosa Beach City Clerk received a “Notice of Intent to Circulate Initiative Petition for the Hermosa Beach Cannabis Regulation and Public Safety Measure” for the purposes of adopting an initiative that would repeal Hermosa Beach’s existing ban on all commercial cannabis business operations and allow commercial cannabis operations in the City (Attachment 3). The purpose of this initiative is to place on an upcoming local election ballot a proposed ordinance that would amend the HBMC to repeal the current prohibition on commercial cannabis activities in all areas of the City and instead authorize up to two commercial cannabis retail locations “by right” in the C-3 General Commercial Zones or SPA-7 Specific Plan Area 7 zones, subject to City-issued Cannabis Business Permit and any other license required by State Law.
An initiative is a process provided by the California Constitution and Elections Code that allows the residents of a community to propose new law. The process allows any for the circulation of a petition for a period of 180 days proposing the adoption of an ordinance. To qualify, the petition must be signed by 10 percent of the City’s registered voters. After submittal, if the petition is determined by the City Clerk to qualify, the City Council is obliged either to adopt the ordinance or place it on the ballot at an election. If the Council chooses to place the ordinance on the ballot, it would become law if approved by a majority vote of the City’s electorate. The Elections Code was recently amended to allow the proponent of an initiative to withdraw it at any time after it qualifies up until 83 days before an election. Unless specified otherwise in the initiative ordinance, an ordinance adopted through the initiative process may not be amended or repealed except by a vote of the people.
At City Council’s regular meeting on November 23, 2021, Mayor Detoy requested, and a unanimous vote of the City Council supported, directing staff to place on the next regular session agenda an item addressing the City’s options, including directing preparation of a ballot measure for a cannabis business tax, directing staff to prepare a cannabis ordinance for Council consideration, addressing how the City may maintain its existing ban on cannabis retail, and any other potential associated actions.
Past Council Actions
|
Meeting Date |
Description |
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March 8, 2016 (Regular Meeting) |
City Council adopted Ordinance 16-1362 amending sections 17.42.110 and 17.26.030 of the Hermosa Beach Municipal Code (HBMC) to expressly prohibit all commercial medical marijuana uses in the City and prohibiting cultivation for medical use by a qualified patient or primary caregiver. |
|
November 28, 2017 (Regular Meeting) |
City Council adopted Ordinance 17-1380 amending Title 17 of the HBMC to expressly prohibit all commercial cannabis activities in the City and prohibit outdoor cannabis cultivation for personal use. |
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November 23, 2021 (Regular Meeting) |
Under Future Agenda Items, Mayor Detoy requested City Council consider directing staff to place on the December 14, 2021 agenda an item addressing the City’s options in light of the cannabis initiative filed with the City Clerk. The request was supported by a unanimous vote of the City Council. |
Discussion:
Summary of the Chacker Initiative Ordinance
The proposed ordinance contained in the “Notice of Intent to Circulate Initiative Petition for the Hermosa Beach Cannabis Regulation and Public Safety Measure” would repeal Hermosa Beach’s existing ban on all commercial cannabis business operations and allow commercial cannabis operations in the City as described below:
• The mandatory issuance of licenses of indefinite terms for a maximum of two retail cannabis storefront businesses, to be selected by the City Manager by way of an objective ranking process with scoring to be based on specified criteria detailed in the ordinance;
• The retail businesses to be located only in the C-3 (General Commercial) and Specific Plan Area-7 zones, generally located along the Pacific Coast Highway and Aviation Boulevard corridors, and would be permitted in these zones the same as other retail establishments;
• The retail businesses to be located 600 feet or more from day care centers and youth centers, 1,000 feet or more from schools, and 1,500 feet from Clark Stadium and the Hermosa Beach Community Center (with the initial list of these existing sensitive uses included in the ordinance);
• The retail and delivery businesses to operate in accordance with specified operating and security requirements to avoid adverse impacts to neighbors such as odor and crime;
• Delivery of cannabis products permitted exclusively by the retail businesses located in the City unless otherwise required by State law; and
• Sale of both adult cannabis products to persons over 21 years of age and medical cannabis to patients with a doctor recommendation.
The proposed ordinance would also allow the City Council, in its discretion to allow
cannabis cultivation, manufacturing, distribution and testing operations (but not microbusinesses) subject to such rules and limitations as may be determined by the Council at a later date.
Overall, the ordinance sets up a fairly typical process for granting a limited number of retail cannabis licenses and setting out operating requirements for the use. The proposed ordinance would require establishment of a cannabis retailer application and permitting procedure that would require the City Manager to approve or reject any applications. The permitting procedure also outlines a point-based ranking system for reviewing applications. Once approved, each cannabis business would be required to adhere to operating and recordkeeping requirements and implement security measures.
The overlay map attached to this report (Attachment 4) shows the permissible locations where the two storefront retail cannabis businesses may be located, taking into account the buffering from sensitive uses. As shown in the map, cannabis retail would be allowed on approximately 35 properties on Pacific Coast Highway near the northerly and southerly boundaries of the City.
A. Licensing Process
The ordinance vests the City Manager with authority to administer the application process, score the applications, and issue the licenses. The ordinance dictates that points should be awarded based on eight objective categories, with a range of points to be awarded in subcategories (seemingly a subjective review process). The points categories are: (1) qualifications; (2) site plans; (3) business and operations plan; (4) security plan; (5) safety plan; (6) neighborhood compatibility plan; (7) community benefits plan; and (8) labor and employment plan.
The most points are awarded for the applicant’s qualifications and labor and employment plans. Specifically, extra points are awarded to a very specific and limited category of applicants for which part of the ownership teams has an existing cannabis business that already has a collective bargaining agreement with a labor organization before May 31, 2021. Additionally, a significant point advantage is given to an applicant with part of the ownership team already functioning as an owner of a cannabis retail operation that has generated $3,500,000 in gross receipts in a consecutive six-month period in the year before application. On the one hand, these point allocations ensure that the top scoring applicants have experience in this highly regulated industry. On the other hand, these point requirements significantly limit the pool of applicants that could achieve a high enough score to obtain a license. Additionally, one component of the application and scoring is that the applicant has a lease or another commitment for a site and points are awarded based on the site plan. Given that there are so few sites available under the sensitive use map, this creates a significant advantage to any potential applicant who is able to secure a location.
The ordinance is somewhat confusing insofar as it describes the scoring process as “ministerial.” The word “ministerial” means there is no discretion or subjectivity and the City has a duty by law to act. While it does appear that the ordinance contemplates that the City has a duty to allow two retail cannabis businesses to operate at all times, it is not accurate to describe the scoring process as ministerial, insofar as the City Manager is authorized to score applicants within a range of points. That process necessarily entails the exercise of some discretion. This internal inconsistency creates an ambiguity that could generate a challenge to the City Manager’s scoring determinations (for example alleging that somehow the City may have had a ministerial duty to award a different amount of points).
The proposed ordinance differs from merit-based competitive selection processes established in other jurisdictions that provide for scoring by multiple panelists. In this ordinance, the scoring is done solely by the City Manager. The practice of averaging multiple scores tends to produce more well-rounded scoring. This difference may be explained by the effort in the ordinance to describe the scoring as an objective, ministerial process, rather than a subjective one. The timelines for processing and scoring the applications are very tight and could create challenges if the City receives a significant number of applications that require review.
Lastly on this topic, under the proposed ordinance, the decision of the City Manager is not subject to any appeal; which means that any aggrieved party’s recourse is to immediately file a petition for writ of mandate challenging the decision. As a practical matter, without any appeals or flexibility in the “ministerial” timeframes, it is unclear whether top scoring applicants would be awarded licenses and begin operating while the licensing decision is being challenged in court. Ultimately, an ordinance without appeals or flexibility on timing deprives the City of its normal tools to resolve licensing disputes in advance of litigation and invites frequent legal challenges from those dissatisfied with the process.
B. Zoning Code, Location, and Planning Approval
Next, the ordinance treats cannabis retail as a use “permitted by right” under the zoning ordinance, just like all other retail. Notwithstanding the term “by right,” all retail must still comply with zoning code requirements, including parking requirements. Therefore, there would be some level of review by the Community Development department prior to tenant buildout of spaces and operation. The retail businesses may be located only in the C-3 (General Commercial) and Specific Plan Area-7 zones, generally located along the Pacific Coast Highway and Aviation Boulevard corridors.
The ordinance goes above and beyond State law requirements to distance cannabis uses from sensitive uses. Specifically, under the ordinance cannabis uses would not be permitted within 600 feet from any day care center or youth center (same as State law); 1,000 feet from any school (exceeds State law); or 1,500 feet from Clark Stadium or the Hermosa Beach Community Center (exceeds State law). The ordinance includes a precise list of existing sensitive uses that apply to the initial licensing process. See Section 9 of the ordinance (Attachment 3) for the complete list.
Applying the buffers from sensitive uses, approximately 35 properties in the City would be eligible to host a retail cannabis business, as shown on the attached map. These properties are located near the northerly and southerly boundaries of the City, along Pacific Coast Highway. Based on these very limited locations, it is possible that the two permitted retail stores would be in close proximity to one another.
C. Delivery
The ordinance would allow delivery in the City only by the two permitted retail businesses. If State law requires cannabis delivery into the City by companies outside the City, then those businesses must comply with local operating requirements.
The Bureau of Cannabis Control (now the Department of Cannabis Control) adopted California Code of Regulations, title 16, section 5416, subdivision (d), allowing delivery statewide. Regulation 5416 (d) can arguably be interpreted to mean that delivery of cannabis goods is authorized in any city within California, regardless of whether the city regulates or bans deliveries within its borders. Most recently, the litigation challenging this regulation as violative of AUMA was dismissed as not ripe for adjudication because the court found the Bureau’s regulation did not conflict with a city’s right to control or ban delivery. Delivery and transport of commercial cannabis remains an issue.
A local jurisdiction cannot ban transport of cannabis on public roads. However, delivery of cannabis must comply with local law. Accordingly, the most reasonable position on this issue (and that put out by the League of California Cities City Attorney’s Department Cannabis Regulation Committee) is that cities can ban or regulate deliveries within their borders. However, cities cannot prevent a delivery service from using public roads to pass through its jurisdiction.
D. Operating and Security Regulations
The ordinance contains operating and security regulations for the retail and delivery activities. The ordinance does not limit hours of operation for cannabis businesses. Under State law, the retail business can only engage in sales and deliveries from 6:00 am to 10:00 pm. Typically, cities could limit these hours further through a discretionary licensing process. The ordinance states that the hours of operation would be as specified in the cannabis permit and in compliance with State law but, the ordinance does not provide express authority for the City Manager to place any business or site-specific operating conditions (such as hours of operation) on the permits when they are issued as would be typical in a regulatory business license process.
Accordingly, this is a not a licensing program for which the City has institutional experience in implementing-this would all be new. The ordinance does allow the City Manager to promulgate regulations with additional licensing and operational standards. Customers may be under 21 if permitted by State law (medical cannabis patients can be 18 years of age and younger with a parent). Employees and anyone else entering the business must be 21 years of age or older.
The operations plan would include information on construction/tenant improvements, sources of capital/financial statements, and a description of the following elements of the operation: (1) products sold; (2) marketing plan; (3) day-to-day operations; (4) cash handling procedures; (5) inventory control/track and trace system; and (6) distribution, loading/unloading and delivery procedures. Additionally, the initiative includes operating requirements regulating such things as: prohibiting issuance of doctor’s recommendations on-site; providing business contact information to city manager; prohibiting odors that can be detected outside the business; prohibiting loitering; requiring criminal background check for owners, managers, supervisors, and employees; and prohibiting products and graphics from being visible from the exterior.
Similarly, the security plan would be prepared by professional security consultants and would show security procedures and equipment, description of the alarm and monitoring system and description of onsite security personnel and their responsibilities. The initiative also requires any business to implement sufficient security measures to deter and prevent unauthorized access and to deter and prevent theft. Cannabis must be stored in a secured and locked room. The business must have 24-hour surveillance cameras and the footage must be remotely accessible to the police department. The ordinance requires sensors and panic buttons and a designated security representative/liaison to the City, in addition to other requirements.
E. Permit Term
The ordinance provides that the cannabis retail permits would be issued for an indefinite term. This is unusual in business licensing practice. Business licenses and permits are more typically issued for a term of one year and renewed annually. Instead, this ordinance places the onus on the City to conduct an annual review and initiate suspension or revocation proceedings if problems are identified. This could be a burden on the City, although with only two businesses operating in the City, it should not be an overwhelming one. Suspension and revocation decisions are appealable to the City Council. Notably, permit modification does not appear to be an available remedy.
F. CBD
The ordinance states that it should not be construed to permit CBD from industrial hemp, which is consistent with the City’s existing policy based on past guidance from the State Department of Public Health. This type of hemp CBD is widely commercially available and is different from the cannabis CBD sold at licensed cannabis retailers. A recent bill, AB 45, recently created some State regulations for hemp-based CBD products and staff is analyzing the bill. Nevertheless, the initiative does not change City policy on CBD and that would remain in the discretion of the City Council, subject to any applicable State laws.
G. Alcohol, Tobacco and Onsite Consumption
Under State law, alcohol and tobacco cannot be consumed or sold on-site. Additionally, State law only permits cannabis to be consumed on-site if the local jurisdiction permits it and certain requirements are met. The operating requirements in the initiative prohibit onsite cannabis consumption.
H. Future Changes to the Ordinance
Unless expressly allowed in the initiative ordinance, voter-approved ordinances cannot be changed by the City Council and require voter approval to change. Since this would be a voter-approved ordinance, the ordinance is quite clear which topics can be revised by the City Council in the future and which would require a vote of the people to change. The proposed ordinance would allow the City Council, in its discretion to allow cannabis cultivation, manufacturing, distribution and testing operations subject to such rules and limitations as may be determined by the Council at a later date. Microbusinesses would not be allowed and the City Council can never increase or decrease the number of retail licenses.
I. Other Miscellaneous Provisions
The ordinance includes provisions limiting the City’s liability from issuance of cannabis business permits and contains enforcement provisions and requires the businesses to have a community relations representative and to create a public education plan for youth organizations and schools related to drugs and drug addiction.
The ordinance requires a commitment to hire 30 percent of employees locally and to pay workers a living wage.
The ordinance requires that permittees with two or more employees enter into a labor peace agreement. California’s Assembly Bill 1291, which went into effect on January 1, 2020, mandates that all cannabis license applicants employing more than 20 employees must enter into a “labor peace agreement,” as defined by Business and Professions Code Section 26001(x), that prohibits a union from engaging in strikes, work stoppages and other economic interferences. Employers without a qualifying labor peace agreement do not qualify for a State cannabis license.
The four key elements of a Labor Peace Agreement (Bus. & Prof. Code, § 26001(x)) are as follows:
• prohibits labor organizations and members from engaging in picketing, work stoppages, boycotts, and any other economic interference with the cannabis business’ operations;
• the cannabis business agrees not to disrupt efforts by the bona fide labor organization to communicate with, and attempt to organize and represent, the business’ employees;
• a bona fide labor organization must have access at reasonable times to areas in which the business’ employees work, for the purpose of meeting with employees to discuss their right to representation, employment rights under State law, and terms and conditions of employment; and
• the Labor Peace Agreement need not mandate any particular method of election or certification of the bona fide labor organization.
Some cities have adopted ordinances that reduce the minimum number of employees of cannabis businesses from 20 employees to a lower number. This ordinance lowers the number of employees to two.
J. Enforcement
While licensing is described as the City Manager’s responsibility, this would be delegated to appropriate departments of Finance and Community Development. There would also be necessary review and inspections by Community Development for any tenant improvements along with collaboration with HBPD for review and implementation of the security plans. Enforcement of illicit businesses would have a significant impact on the City and would almost certainly require additional staffing.
The Community Development code enforcement division would investigate and follow up on local compliance and code violations, in partnership with the Hermosa Beach Police Department (HBPD), and the HBPD could investigate any criminal activity and other serious violations of the ordinance. The ordinance provides a process for suspension and revocation of the permits by the City Manager and appealable to the City Council.
Since every licensee must have a State license to operate, the State would provide some needed enforcement resources. According to the Department of Cannabis Control (DCC) website, DCC partners with cities, counties, law enforcement and other State agencies to uphold California’s commercial cannabis laws and regulations. DCC supports the integrity of the legal cannabis market through:
• Regular inspections;
• Careful investigations; and
• Coordinated enforcement actions.
DCC’s Compliance and Enforcement Divisions works with law enforcement and other State agencies to enforce the law. Officers:
• Investigate complaints of unlicensed or illegal cannabis activity;
• Stop the sale of cannabis to minors; and
• Prevent unsafe products from entering the cannabis market.
The State also has a portal for residents to file anonymous complaints against the businesses.
The Initiative Process
Based on the November 17, 2021 filing date, the City Attorney prepared the Title and Summary and the City Clerk provided it to the proponent by the required deadline of December 2, 2021. The next step in the petition process would be for the petitioner to provide the City Clerk with proof of publication. Upon receipt of the proof of publication, the proponent would have 180 days to secure the required number of signatures of registered voters within the City.
If the signatures are obtained, the City Clerk would accept the petition and complete a prima fascia count of the signatures and forward the petition to the Registrar of Voters for official verification. If the initiative petition is signed by not less than 10 percent of the voters of the City at the time of the notice of intent to circulate was published, City Council would be required to take one of the following actions:
1. Adopt the ordinance, as submitted, at the regular City Council meeting at which the certification of the petition is presented, or within 10 days after it is presented;
2. Call for the ordinance, as written, to be placed on the ballot at the next scheduled local election occurring not less than 88 days after the date of the order of election (tentative November 2022 general municipal election); or
3. Call for a report on the impacts of the proposed ordinance. When the report is presented to City Council, City Council must either adopt the ordinance within 10 days or call for the ordinance to be placed on the ballot.
The City Council’s Options
1. Hold for Ballot Qualification
The Council may opt to take no action and instead wait to see if the filed cannabis initiative qualifies for the ballot.
2. Request an Advisory Committee
If the Council desires to gauge the community’s opinion regarding a cannabis program, the City Council could direct the City Manager to establish an advisory committee and appoint members such as residents, community-based organizations, and other key stakeholders. The advisory committee would perform a deep-dive of the proposed ordinance, hold community workshops, and provide feedback.
3. Adopt the Initiative Ordinance
If the majority of the City Council supports the initiative, it can be adopted by the Council and need not go to the voters. This would avoid the costs associated with a ballot measure.
4. City Initiated Cannabis Ordinance
If the City Council is inclined to allow some type of cannabis business activity in the City, but differently than as proposed in the initiative, the City Council could direct staff to prepare such an ordinance for Council adoption. Alternatively, the ordinance could be placed on the ballot to compete with the initiative and drafted in such a way that the ordinance with the most votes would control. As noted above, voter approved ordinances cannot be repealed or revised in the future by the City Council unless they expressly allow it. This option is only advisable if the Council desires to allow cannabis operations in a different manner or scope than allowed by the initiative-for example, reducing the number of allowed retail businesses or limiting cannabis sales to delivery only.
6. Ballot Measure for a Cannabis Business Tax
The proposed ordinance does not provide for a tax on cannabis operations separate and apart from the City’s standard business tax. Many cities that have allowed commercial cannabis uses have asked their voters to approve a corresponding local cannabis tax; under Proposition 218, such a tax must be approved by the voters. Hence, if the ordinance qualifies for the ballot, the City Council may want to consider placing a cannabis business tax on the ballot as well. The deadline to place the tax measure on the ballot with this initiative would be early August for the November 2022 election.
The taxes on cannabis products in other cities vary widely, but typically range from 2.5 percent to 20 percent of gross receipts or are based on square footage. Commonly, the taxes are general taxes meaning that the revenues can be used for unrestricted general revenue purposes of the City.
Additional Considerations
1. Maintaining the City’s Existing Ban on Cannabis Retail
If the initiative qualifies for the ballot and a majority of the voters reject the ordinance the existing ban would remain in place. No action is required by the Council to retain the City’s existing ban.
2. Limits on the Expenditure of Public Funds.
Public funds may not be used to campaign or advocate for or against a ballot measure. They may, however, be used to provide objective and educational information to the electorate about the impact of a measure on the community. The law does allow the City Council to take an official position on a measure and to communicate that position to the community. In addition, nothing prevents individual Councilmembers from advocating for or against a measure at their own expense.
General Plan Consistency:
This report and associated recommendation have been evaluated for their consistency with the City’s General Plan. Relevant Policies are listed below:
Governance Element
Goal 1. A high degree of transparency and integrity in the decision-making process.
Policy:
• 1.1 Open Meetings. Maintain the community’s trust by holding meetings in which decisions are being made, that are open and available for all community members to attend, participate, or view remotely.
Fiscal Impact:
There is no immediate fiscal impact associated with the recommended action. Fiscal impacts associated with any option that may be explored by Council would be evaluated upon receiving further direction.
Attachments:
1. Ordinance 16-1362
2. Ordinance 17-1380
3. Notice of Intent to Circulate Initiative Petition for the Hermosa Beach Cannabis Regulation and Public Safety Measure
4. Sensitive Use and Permitted Location Map
Respectfully Submitted by: Angela Crespi, Deputy City Manager
Concur: Ken Robertson, Community Development Director
Noted for Fiscal Impact: Viki Copeland, Finance Director
Legal Review: Mike Jenkins, City Attorney
Approved: Suja Lowenthal, City Manager