Cannabis Regulation, Data Collection and Management Services – California County JPA Solution January 2018

Cannabis Laws in California 1996 - Proposition 215 (Medical Marijuana) 2015 - MCRSA (Medical Regulatory Framework) 2016 - Proposition 64 (Recreational Cannabis) 2017 - SB 94/ AB 133 (One Med/Rec Framework) 2017/18 – Implementation (Duel Licensing System, Strong Local Control to Regulate & Tax)

Timeline Statutory requirement for the state to begin licensing January 1, 2018. No requirement that local jurisdictions have permitting program in place by 2018. Temporary state licensing for locally-permitted applicants began in January 2018. Likely to begin accepting permanent licensing applications later in the year with first licenses issued 6-12 months later. State agencies shall give priority in issuing state licenses to applicants operating in compliance with the Compassionate Use Act before September 1, 2016.

State Administrative Structure Bureau of Cannabis Control Distributors Retailers Microbusinesses Testing Labs Temporary Event Permits Department of Food & Agriculture Cultivators Track and Trace System Department of Public Health Manufacturing

Proposition 64 Vote

Local Regulation 18 counties have commercial ordinances in place. 8 counties are in the process of developing ordinances. 32 counties are banning commercial activity (although some of these bans are temporary).

Local Regulation – Dec. 2017 Permits & Regulates Commercial Cannabis Activity (18 Counties): Alameda, Calaveras, Humboldt, Imperial, Inyo, Marin*, Mendocino, Monterey, Santa Barbara, Santa Cruz, San Luis Obispo, San Mateo, Sonoma, Stanislaus, Trinity, Yolo, San Francisco, Ventura* In Process of Developing Ordinances (8 counties): Lake, Mono, El Dorado, Los Angeles, Nevada, Plumas, San Benito, San Joaquin Bans Commercial Cannabis Activity - May be Temporary Ban (32 counties): Alpine, Amador, Butte, Colusa, Contra Costa, Del Norte, Fresno, Glenn, Kern, Kings, Lassen, Madera, Mariposa, Merced, Modoc, Napa, Orange, Placer, Riverside, Sacramento, Shasta, San Bernardino, San Diego, Santa Clara, Sierra, Siskiyou, Solano, Sutter, Tehama, Tulare, Tuolumne, Yuba  *Allows Delivery Only

Humboldt County

Los Angeles County Strategic Permitting Phase-In Implement a phased-in approach to cannabis permitting in unincorporated areas that will initially allow a maximum of 20 cannabis stores, 20 delivery-only services, 10 cultivators, 10 manufacturers, 10 distributors, and 10 testing laboratories countywide. Permits for cannabis retail stores and delivery-only services will be allocated by Supervisorial District, based on unincorporated area population, with no more than one retail license per 52,000 unincorporated area residents and no more than one delivery-only license per 52,000 unincorporated area residents. Zoning Allow cannabis retail stores, delivery-only services, and testing laboratories in heavy commercial and manufacturing zones. Allow all other cannabis business types in manufacturing zones only. Prohibit commercial cannabis activity in all other zones, including agricultural and residential zones. Buffers from Sensitive Uses Require that cannabis retail stores be located at least 1,000 feet from schools (K-12); 600 feet from day cares (including preschools), public parks, public libraries, drug and alcohol treatment facilities, and other cannabis stores,; and 300 feet from offsite alcohol sales such as liquor stores. Require that all other cannabis businesses be located at least 1,000 feet from schools (K-12), and 600 feet from day cares (including preschools), public parks, and public libraries.

Yolo County Yolo County is in the process of expanding their program. Currently, Yolo County bans all commercial activity, except a grandfathered group of about 100 who are eligible to commercially cultivate medicinal cannabis. June 2018 Tax Measure –This measure, if approved by a majority of voters, would tax commercial cannabis businesses at levels from 1- 15% of gross receipts.  The Board agreed on 1/9 to an initial tax on cultivation businesses at 4% for each of the first two years and 5% for the third year. Fast Track Development Agreements – The County will enter into a limited number of development agreements with existing cultivation license holders.  Initial development agreements will be limited to locations that meet performance standards, such as odor mitigation.  The Board also decided to add additional license types within these development agreements, such as manufacturing and processing. Land Use Regulatory Framework – The County is developing land use regulations for siting and permitting commercial cannabis cultivation. Of note, this process will now include consideration of additional cannabis license categories. The approach will consider zoning, conditional use approval criteria, public noticing of potential sites and comprehensive programmatic environmental review. Upon completion of this process in March 2019, those seeking cannabis licenses will go through a process that will allow for public input and oversight. 

Sonoma County

County Tax Measures Tax Measures Calaveras   Calaveras $2/sq ft outdoor; 7% indoor and 7% retail Humboldt $1-3/sq foot cultivation Inyo Advisory votes on authorizing commercial recreational and medical cannabis businesses within the unincorporated areas of the county; imposes a 5% business tax on commercial cannabis businesses in the unincorporated areas of the county. Lake Any legally-authorized cannabis cultivation, with an exemption for personal medicinal use. Pay an annual tax of $1 per square foot of an outdoor cultivation site, $2 sq ft of a mixed-light cultivation site, and/or $3 sq ft of an indoor cultivation site. Mendocino A business tax on cannabis cultivation and dispensaries (not to exceed 10% of gross receipts) and cannabis distribution, delivery, manufacturing, nurseries, testing laboratories and transportation businesses. Monterey $25/sq ft on cultivators; $5/sq ft on nursery; up to 10% on gross receipts Santa Cruz 7% of gross receipts Solano Up to 15% on gross receipts Sonoma Up to 10% on gross receipts; up to $10 per sq ft on cultivation

Issues to Contemplate Coordination with Cities for Countywide Services Continuous Citizen Engagement Education and Outreach Programs Youth Prevention Campaigns Costs for Enforcement & Staffing Flexibility on Tax Rate Equity Incentives

National Cannabis Legalization Dark Green: Medical Cannabis Legal Light Green: Recreational Cannabis Legal

Federal Law Conflict Federal Statutes Conflict with State Law & Limit Banking Access/Services, Impacting Tax Collection & Compliance: Schedule 1 Drug: Controlled Substances Act The Money Laundering Control Act The Bank Secrecy Act

Federal Guidance The Department of Treasury’s FinCEN Guidance The Department of Justice “Cole Memo” The Department of Treasury’s FinCEN Guidance

Cole Memo Repealed 2018 Discretion of US Attorneys on what to prosecute "Today the Attorney General rescinded the Cole Memo on marijuana prosecutions, and directed that federal marijuana prosecution decisions be governed by the same principles that have long governed all of our prosecution decisions. The United States Attorney's Office in Colorado has already been guided by these principles in marijuana prosecutions -- focusing in particular on identifying and prosecuting those who create the greatest safety threats to our communities around the state. We will, consistent with the Attorney General's latest guidance, continue to take this approach in all of our work with our law enforcement partners throughout Colorado.“ – U.S Attorney Bob Troyer, Dist of Colorado

Impediments to Banking The largest impediment to providing access to banking services for cannabis related businesses (CRBs) is the demand on banking institutions to conduct enhanced due diligence. Banks that wish to work with CRBS must ensure that: CRBs are not engaging in money laundering, and; CRBs are complying with state and local laws regulating and taxing the industry.

A Path Forward State Treasurer's Cannabis Banking Working Group A larger role for CSAC & Local Government Coordinated Advocacy on Federal Issues The Need for Data and a Statewide Entity

Need for Data Banks needs accurate, ongoing, real-time data to comply with federal guidance. Ongoing and accurate data can also assist local governments with: Targeted data for code enforcement officers; Data on cannabis products, including origin and product flow; Land use data, including CRB business concentration and consumer trends.

Data Collection Solution Service Provided by One Data Platform: Standardized Data Collection with access provided to County Members, City Participants and Financial Institutions Cross Check of Point of Sale Information with Tracking Information Aggregate Information provided to state regulators to identify market trends and provide insight into Point of Sale and Gray/Black Market reduction Advantages of One Data Collection Platform for Local Government: Accessible to multiple local government agencies Established common metrics to measure impacts Access to information about CRBs operating in other jurisdictions

Data Collection Solution

JPA Governance The California Cannabis Authority (CCA) Joint Powers Authority: Members are comprised of counties that adopt an ordinance to join, as well as “participants” including state agencies, cities, and banking institutions who are directly involved in taxing or regulating the cannabis industry. Non-counties will be treated as Participants who, by contract, will participate in the JPA but without Board voting authority. The Board constitutes the governing body of the CCA and comprises each Member County choosing to sit on the Board and to designate a Board Member. The Board will designate an Executive Committee which will be responsible for hiring an Executive Director and General Counsel who will be responsible for running the Authority on a day-to-day basis.

JPA Costs/Revenue The JPA will be funded by a fee, calculated for each city or county, and dependent upon the total sales (retail, and/or cultivation) within the jurisdiction. This amount will be commensurate with the amount of data generated, and therefore equitable to each Member or Participant’s costs to the JPA. Initial costs will be 35 basis points = .35% of sales ($3500 for every $1 million in sales)

Process to Join To join as a member of the JPA, the Board of Supervisors must pass a resolution and amend/adopt an ordinance to require CRBs to submit certain information to the CCA. Members counties will appoint a representative to sit on the JPA’s Board of Directors.

Contact For more information, please contact: Cara Martinson, CSAC Senior Legislative Representative & Federal Affairs Manager, at 913-327-7500 or cmartinson@counties.org