Municipal Code Amendments: Marijuana Regulations City Council November 6, 2017

Overview City staff has been evaluating existing local and state laws regarding commercial and medicinal marijuana related businesses with commissions, committees, and the public for over a year Regular bi-weekly meetings – Under City Manager’s direction, an inter-departmental task force represented by: City Manager’s Office, City Attorney’s Office, City Clerk’s Office, Police, Health, Finance, and Planning Staff has been developing a potential framework for a comprehensive regulatory scheme to permit, regulate, and tax marijuana related businesses

Overview Since the State is expected to begin issuing licenses for marijuana related businesses in January 2018, as outlined in the staff report, the unanimous recommendation from the task force, the Planning Commission, and Ed Tech is to clarify and strengthen the City’s current prohibition on all marijuana related activities At some time in the future, after we are able to evaluate best practices from other jurisdictions regarding the implementation of the new state laws, the City could comprehensively regulate and tax marijuana businesses

Background Pasadena currently prohibits all commercial marijuana activity under PMC Title 8 and Title 17 State Proposition 64 – Adult Use of Marijuana Act (“AUMA”) Legalizes the nonmedical or recreational use of marijuana by adults aged 21+ and the personal cultivation of up to 6 plants Creates a state regulatory and licensing system for the commercial cultivation, manufacturing, testing, and distribution of nonmedical marijuana Allows local governments to prohibit or regulate and license commercial nonmedical marijuana activities Took effect November 9, 2016

Timeline Ed Tech – October 19, 2016 Public Outreach – April 2017 Introduction to the regulation of recreational marijuana in the context of Prop. 64 Public Outreach – April 2017 Three community workshops on AUMA and possible regulations Planning Commission – May 24, 2017 Study session to seek guidance and feedback

Timeline Ed Tech – August 23, 2017 Considered options and regulations and provided policy direction Planning Commission – September 27, 2017 Presented with recommendation to: Prohibit personal outdoor cultivation and commercial marijuana activities Allow the delivery of marijuana and marijuana products into the City

Action Required State agencies will start to issue licenses for retail sale, commercial cultivation, etc. of nonmedical marijuana beginning January 1, 2018 Unless Pasadena adopts a local land use ordinance that expressly clarifies and re-states its position, the State may be obliged to issue licenses within the city limits If city regulations are in place before a business applies for a state license, the state license will either not be issued or will be subject to local regulations

Action Required Important issues for the City to consider: Personal outdoor cultivation of marijuana Commercial marijuana uses Taxation of commercial sales and cultivation Status of current illegal marijuana operators

History of Marijuana Regulations 1996 – Prop. 215, Compassionate Use Act, exempted patients and primary caregivers from criminal liability under state law for possession and cultivation of marijuana for medical purposes 2003 – SB 420, Medical Marijuana Program Act, clarified Prop. 215 and extended legal protections to “collectives” cultivating marijuana for medical purposes 2005 – City banned marijuana dispensaries under Ordinance No. 7018 2013 – California Supreme Court confirmed a local jurisdiction’s ability to prohibit medical marijuana dispensaries 2015 – Medical Cannabis Regulation and Safety Act (“MCRSA”) further clarified and established statewide regulations re: the use and cultivation of medical marijuana (effective Jan. 1, 2016) 2016 – City Council adopted Ordinance No. 7272 confirming that marijuana cultivation is a prohibited use in the City and that delivery services cannot originate from within Pasadena

History of Marijuana Regulations 2016 – Prop. 64, Control, Regulate and Tax Adult Use of Marijuana Act (“AUMA”), legalized the recreational use of nonmedical marijuana for adults aged 21+ June 2017 – SB 94, Medicinal and Adult-Use Cannabis Regulation and Safety Act, merged medical and nonmedical marijuana/cannabis regulations into a single regulatory scheme

Key Differences: MCRSA & AUMA/SB 94 Medical Cannabis Regulation & Safety Act (MCRSA) Adult Use of Marijuana Act (AUMA) / SB 94 Focus Regulates medical marijuana Regulates nonmedical/recreational marijuana Taxation Authorizes counties to impose excise taxes Exempts medical marijuana from state/local sales tax Imposes state taxes on purchase and cultivation of marijuana Local taxation is not preempted, except for sales tax (medical cannabis) Local Regulations Local governments may allow, regulate, or prohibit commercial marijuana businesses within their jurisdictions This should be reflected in an ordinance that contains express language Personal Cultivation Does not alter local authority to prohibit all personal cultivation Local government can “reasonably” regulate, but cannot ban indoor cultivation for personal use (6 plants) Local government may still regulate or prohibit commercial cultivation

Personal Use and Cultivation AUMA/SB 94 allows personal cultivation of up to 6 marijuana plants per residence Local governments may “reasonably” regulate but not prohibit personal indoor cultivation Local governments may regulate or prohibit personal outdoor cultivation Given the accessibility of marijuana grown outdoors, there may be risks to public safety, health, and welfare associated with outdoor cultivation, including the potential for theft, increased youth exposure to marijuana, and odor

Personal Use and Cultivation Recommendation: It is recommended that personal outdoor cultivation be prohibited to minimize the potential negative impacts from marijuana cultivation in residential areas, including the potential for crime, youth exposure, and odor. It is also recommended that reasonable regulations be applied to indoor cultivation such as prohibiting in locations designated for vehicle parking.

Personal Use and Cultivation Indoor cultivation regulations: Up to 6 living plants per single private residence Permitted only within fully enclosed and secure structures inaccessible to minors and shall not be visible from a public right-of-way Must comply with Building Code; lighting not to exceed 1,000 watts per light; use of gas products prohibited; must have proper ventilation and shall not create a humidity or mold problem Cultivation shall not be conducted in a manner that constitutes a public nuisance (e.g., light, glare, heat, noise, odor, or vibration that interferes with the reasonable enjoyment of life or property) Shall not displace required off street parking Accessory structures must comply with setback requirements

Personal Use and Cultivation

Commercial Uses Pasadena has historically prohibited medical marijuana dispensaries and commercial cultivation Whether the City continues to prohibit or regulate commercial activities it must amend the Municipal Code to clarify and re-state its current ban so as to not rely on the current “permissive zoning” language It is illegal for a commercial marijuana business to operate without a state license

Commercial Uses Types of marijuana-related commercial activities: Cultivation – Producing and selling marijuana at wholesale to marijuana processors and other marijuana producers. Lab Testing – A facility or analytical laboratory that measures the potency and safety of all cannabinoid infused products and medicines. Manufacturing – Processing of marijuana into marijuana concentrates, useable marijuana, and marijuana-infused products, and selling of such products at wholesale to marijuana retailers. Retail Sale (Distribution) – Selling of marijuana concentrates, useable marijuana, and marijuana-infused products in a retail outlet. Delivery (Distribution) – Delivery of marijuana concentrates, useable marijuana, and marijuana-infused products from a retail outlet.

Commercial Uses Main issues related to AUMA/SB 94 and local regulations include: Impacts to the public health and safety of residents Neighborhood crime and security Odor control and neighborhood livability Environmental impacts, including increased water consumption Electricity consumption in the case of greenhouses and indoor grow operations Inconsistencies between state legislation and federal drug regulations

Health Impacts 2017 report from the National Academy of Sciences found conclusive, substantial, or moderate scientific evidence for therapeutic effects of cannabis: Treatment of chronic pain Treatment of chemotherapy-induced nausea Improving muscle spasms related to MS Improving short-term sleep outcomes

Health Impacts 2017 report from the National Academy of Sciences presented substantial or moderate evidence for risks related to cannabis use: Respiratory symptoms (bronchitis) Increased risk of motor vehicle crashes Lower birth weight for newborns of mothers who used cannabis while pregnant Increased risk for progression to problem cannabis use Increased risk of overdoes injuries among children Impaired learning, memory, and attention Increased mania in individuals with bipolar disorder Small increased risk for depression Increased risk of suicide Increased risk of social anxiety disorder

Taxation AUMA/SB 94 and Taxation of Marijuana Adds state excise tax of 15% on the purchase of marijuana at retail Cultivation tax is $9.25 per dry weight ounce Does not affect local governments’ authority to impose taxes Local tax would be in addition to state tax Medical marijuana is exempt from state/local sales tax Marijuana cultivated for personal use is exempt from cultivation tax

Taxation Should commercial uses be reconsidered and allowed, the City should consider a local excise tax on these products as commercial activity would be anticipated to have impacts on the community and without the collection of taxes on the use(s) the City would not have the resources to address those impacts.

Commercial Uses Recommendation: With potential negative externalities in mind, it is recommended that the City expressly prohibit commercial marijuana activities until such time when it can better understand the impacts of such uses. This approach would allow staff and City policymakers an opportunity to observe the rollout of the state licensing and regulatory mechanism and learn from the best practices of other jurisdictions. As well, it would allow the electorate an opportunity to vote on a tax on the sale and cultivation of marijuana that could be collected to offset any negative impacts from commercial marijuana activities in the City.

Marijuana Deliveries City currently prohibits deliveries to or from locations in Pasadena but cannot prohibit transportation through Pasadena Delivery itself is not an activity readily regulated under the Zoning Code; it is typically an ancillary activity of a land use Should the City involve itself in the ability of citizens to have the option to have marijuana delivered from legitimate retailers/dispensaries? Recommendation: It is recommended that marijuana deliveries be permitted through and to locations within the City from commercial marijuana operations in other jurisdictions.

Consistency Items Recommendation: It is recommended that the ban in Title 17 is to be clarified and strengthened to apply to every zone in the City, and to amend the tobacco prevention provisions in Title 8 as necessary to clearly apply to marijuana. Recommendation: It is recommended that staff be given authority to amend any other provision of the PMC that may be necessary to effectuate the ban.

Resolution of Intent City may in the future wish to allow and regulate commercial marijuana activity If so, the City will want to impose criteria for eligibility for approval to engage in such business, including possibly disqualifying current illegal marijuana operators from any future city permitting City may wish to put illegal operators on notice of its intent to disqualify illegal marijuana operators from any future City permitting process Recommendation: It is recommended that the Resolution of Intent to Legislate Regarding Disqualifying Current Illegal Marijuana Operators be adopted.

Recommendation Find that the action proposed herein is not a project subject to the California Environmental Quality Act (CEQA) in accordance with Section 21065 of CEQA and State CEQA Guidelines Sections 15060 (c)(2), 15060 (c)(3), and 15378, and that the proposed action is exempt from CEQA pursuant to State CEQA Guidelines Section 15061(b)(3), the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment; Adopt the Findings of Consistency with the General Plan in Attachment A;

Recommendation Approve the proposed Municipal Code Amendments as contained in this report, which are to: 1) amend Title 17 (Zoning Code) to prohibit citywide personal outdoor cultivation of marijuana and apply reasonable regulations on personal indoor cultivation, prohibit citywide commercial marijuana activities, including retail sales and cultivation for commercial purposes, and allow the delivery of marijuana and marijuana products into the City from commercial marijuana businesses in other jurisdictions; 2) amend Title 8 (Health and Safety) to amend the tobacco prevention provisions to include marijuana; and 3) any other portion of the Municipal Code as may be necessary to implement the recommendations set forth herein;

Recommendation Adopt a resolution of intent to legislate regarding disqualifying current illegal marijuana operators from any future city permitting; and Direct the City Attorney to prepare an ordinance within 60 days amending the Pasadena Municipal Code as presented in this report.

Next Steps Timeline for having regulations ready by January 1, 2018: November 6th – City Council public hearing November 6th – First Reading of ordinance November – Second Reading of ordinance November – Publication by City Clerk December – Effective date

End of Presentation City Council November 6, 2017

Survey of Other Cities Culver City – In the process of considering regulations; all commercial marijuana activity is currently prohibited El Monte – Recently approved (1st reading) cultivation, manufacturing, and testing, but prohibited retailers and delivery services Long Beach – Currently allows up to 32 medical marijuana dispensaries, as well as cultivation and manufacturing facilities Los Angeles – In the process of considering regulations; dispensaries currently prohibited except grandfathered businesses Sacramento – Allows cultivation, manufacturing, and testing, but prohibits dispensaries Santa Ana – Currently allows up to 20 medical marijuana dispensaries, but prohibits recreational sales and commercial cultivation Santa Monica – Allows 2 medical marijuana dispensaries and is considering regulations for other commercial marijuana businesses

Taxation City “general” tax measures where revenues are used for unrestricted purposes can be held as part of either a regularly scheduled election or a special election For a general tax, a simple majority approval (50% + 1) is required However, if the proposed tax is not part of a regularly scheduled election, then a unanimous declaration of an “emergency” by the City Council is required for simple majority approval at a special election Next special election that would coordinate with the County is in June 2018 Projected cost for a ballot measure on a regular or special election is estimated to range between $150,000 to $250,000