Cannabis Regulations October 10, 2017 Item 7-A

Introduction March 7, 2017 Study Session Create a Regulatory Permit and Selection Process Prohibit Non-Medicinal Cannabis Business Activities Council Defined this as Temporary to Allow for Public Process Consider Options for Light Manufacturing Amend SMMC to Address Changes in State Law June 27, 2017 SB 94 “MAUCRSA” Adopted Consolidated Medicinal & Non-Medicinal Regulations Clarified Some Regulations (e.g. Open Container) Authorized Retail Sales via Deliver Only (no store front) State Draft Regulations – November 2018 (est.) State Licenses - January 1, 2018 Medicinal and Adult Use Cannabis Regulation and Safety Act

Interim Zoning Ordinance Align with Comprehensive State Regulations Repeal sub-sections I, K, and L of Section 9.31.185 of the SMMC I. Staffing and Securing (State Law and Local Operational Regulations) K. Patron Notification / On Site Posting (State Law) L. Prohibited Activities / No alcohol or tobacco sales (State Law) Re-Alignment, not Reduction Definitions Replace “Medical Marijuana Dispensary” with “Medicinal Cannabis Retailer” Update Industry, Limited Classification Allows for Medicinal Cannabis Light Manufacturing Prohibits Non-Medicinal Commercial Activities Provides Time to Initiate Public Process Medicinal and Adult Use Cannabis Regulation and Safety Act

Statewide Regulations – Overview Medicinal and Non-Medicinal Personal Cultivation and Use Commercial Activities Retail Sales Distribution Testing Cultivation Manufacturing Commercial On-Site Consumption Special Event Permits for On-Site Sale & Use at Temporary Events Local Regulation Authorized Complete Local Control Short Overview 1. Personal Use 2. Established regulatory framework for commercial activties “Nonvolatile solvent” means any solvent used in the extraction process that is not a volatile solvent, including carbon dioxide. “Volatile solvent” means any solvent that is or produces a flammable gas or vapor that, when present in the air in sufficient quantities, will create explosive or ignitable mixtures. The state’s examples of volatile solvents include, butane, hexane, propane, and ethanol. A Type 6 cannabis manufacturing licensee can only use nonvolatile solvents, but a Type 7 licensee can use both nonvolatile and volatile solvents in its extractions and infusions. 4

Medicinal and Non-Medicinal Tonight’s Discussion Medicinal and Non-Medicinal Personal Cultivation and Use Distribution Testing On-Site Consumption Special Event Permits for On-Site Sale & Use Retail Sales Only 2 ≤ 2,500 sq ft Within a Limited Zone Distancing Commercial Cultivation ≤ 375 sq ft (15%) Only by City Authorized Retailer within the Retail Location Manufacturing Light Manufacturing, No Volatile Solvents Assembly Only, No Extractions Office Campus Zone (with CUP) Industrial Conservation Zone 5

Retail Sales and Cultivation Medicinal Cannabis Retail Sales and Cultivation 6

Medicinal Cannabis Retail Zones Prohibited within 600 Feet of a: Child Care Center Early Education Center Day Care Center Park School Library Social Services Center Other Medicinal Cannabis Retailer Challenges Limited Space Options “Surge” Lease Costs

Medicinal Cannabis Retail Sales Operational Approval Phases Operational Review Selection Process Land Use Process Compliance Review Permit Issuance 8

Medicinal Cannabis Retail Sales Phase 1: Operational Review Selection Process Request for Applications Defined Application Period Objective Standards with Ratings Evaluation Committee Rankings Selection Decision Made by Director of Planning or Designee Preliminary Selection Letter Issued Appeal Period List Expiration Land Use Process Identify Location Conditional Use Permit Process Other Entitlement Processes (e.g ARB, Landmarks) 9

Medicinal Cannabis Retail Sales Phase 2: Compliance Review (Overlap with Entitlement Period) State Licensing Bureau of Cannabis Control (BCC) Retailers (M-Type 10) Department of Food and Agriculture (DFA) Specialty Indoor, Small, <500 sq. ft. (M-Type 1A) Tenant Improvement/Build Out Standard Development Review Process B&S Fire Water Resources Santa Monica Business License Application Submittal Fees State Permit Verification Other State or County Permits (e.g. Health Dept., Board of Equalization) 10

Medicinal Cannabis Retail Sales Phase 3: Permit Issuance Pre-Permit Issuance Compliance Inspection Permit and Business License Issuance 11

Medicinal Cannabis Light Manufacturing 12

Medicinal Cannabis Light Manufacturing Proposed IZO Light Manufacturing No Volatile Solvents / Extractions Volatile Solvents (e.g. Butane) Concentrates (e.g. Oils, Shatter, Budder/Wax) Assembly Only 13

Medicinal Cannabis Light Manufacturing Updated Definition to Existing Classification Industry, Limited Light industrial activities producing minimal impacts on adjacent properties. Includes light manufacturing, such as packaging of foods for off-site consumption (e.g. wholesale bakery, frozen foods) Added: “medicinal cannabis, and medicinal cannabis products for off-site use or consumption using nonvolatile solvents, or no solvents” 14

Medicinal Cannabis Light Manufacturing Utilizing Existing Zones Office Campus Provides for office and advanced technology uses, scientific research, and administration, and limited manufacturing of related products which require large expanses of floor area. CUP Required Uses must be conducted within an enclosed building or an open enclosure screened from public view. In order to approve a CUP, a finding that proposed uses are compatible with abutting residential neighborhoods is required. Industrial Conservation Intended to preserve space for small-scale industrial and manufacturing businesses At this time….. 15

Medicinal Light Manufacturing 16 Proposed: Office Campus (OC) Industrial Cons. (IC) At this time….. 16

Medicinal Light Manufacturing Permit Issuance Regulatory Permit and Business License Zoning Conformance Review State Licensing Department of Public Health Manufacture 1 - Non Volatile or No Solvents (M-Type 6) Tenant Improvement/Build Out Standard Development Review Process B&S Fire Water Resources Discretionary review for land use is not contemplated (except ARB / Landmarks associated w/ exterior work). 17

Operating Permit Fees New Medicinal Cannabis Retailer Permits-Prorated Cost recovery Fee $99.58 Administrative Processing $361.88 Two Hour Compliance Inspection Proposed Annual Permit Fees Annual Medicinal Cannabis Retailer Permit $1,822.10 Annual Medicinal Cannabis Light Manufacturing Permit $ 99.58 New Medicinal Cannabis Retailer Permits-Prorated July – September (4 Inspections) $1,822.10 October – December (3 Inspections) $1,391.47 January – March (2 Inspections) $ 960.84 April – June (1 Inspection) $ 530.21 Sales tax exempt 18

Business License Taxes Current Retailers and Manufactures Tax Group I $75 on the first $60,000 $1.25 per $1,000 (.125%) Evaluate Community Impacts Increased Demands on Law Enforcement Public Health Education – Youth, Tourism Needed Funding, Resources, Programs Consider Ballot Initiative New Cannabis Classification(s) and Rates Sales tax exempt 19

Next Steps Extend IZO Within 60 Days of IZO’s Effective Date Draft Administrative Regulations Initiate Request for Application and Establish a Review Committee Provide State with Copy City’s Cannabis Ordinance Regulations and Contact Person Train Staff Evaluate Track and Trace Technologies with State, Identify Implementation Needs Initiate Public Process Consider Commercial Cannabis Adult Non-Medicinal Use Activities Consider Other Medicinal Commercial Use Activities Consider Commercial On-Site Consumption Evaluate Necessity for Additional Fees or Taxes to Fund Enforcement, Compliance, and Education Programs (e.g. Tourism and Youth) Return to Planning Commission and Council with Recommended Changes to the Zoning Ordinance Come back in 60 days Determine if we want to consider issuing licenses to non-profit cannabis businesses in accordance with 26070.5 20

Cannabis Regulations October 10, 2017 Item 7-A Questions?

-Public Health -Education -Tourism

Forms of Butane Hash Oils (BHO) Shatter Oil Budder/Wax 23