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  Regular-General Government   #   42.    
Board of Supervisors County Administrator  
Meeting Date: 01/15/2019  
Brief Title:    Cannabis Update
From: Mindi Nunes, Assistant County Administrator, County Administrator's Office
Staff Contact: Susan Strachan, Cannabis Policy and Enforcement Manager, Department of Community Services, x4817

Subject
Adopt cannabis tax Citizens' Oversight Committee Code of Ethics and Values, adopt framework for developing a cannabis tax expenditure plan, and receive an update on proposed amendments to the interim cannabis ordinance. (No general fund impact) (Nunes/Strachan)
Recommended Action
  1. Adopt cannabis business tax Citizens' Oversight Committee Code of Ethics and Values;
     
  2. Adopt framework for developing a cannabis tax expenditure plan; and
     
  3. Receive an update on proposed amendments to the interim cannabis ordinance allowing for issuance of distributor licenses, broadening the scope of the penalty provisions, and provisions relating to Early Implementation Development Agreements.
Strategic Plan Goal(s)
Operational Excellence
Safe Communities
Sustainable Environment
 
Reason for Recommended Action/Background
Status of Cannabis Integration Program Approach
On January 9, 2018, the Board approved a three-pronged strategy for the County’s cannabis program, consisting of the June 2018 tax measure which was approved by 79% of the voters, the development of a Cannabis Land Use Ordinance, and Early Implementation Development Agreements.  Although complementary and part of an integrated program approach, each strategy operates on its own timeline.   The updated schedule for the comprehensive cannabis program is listed below and included in Attachment A.
  • June 2018 Tax Measure (Status: Board action on Code of Ethics and Values for the Cannabis Business Tax Citizens' Oversight Committee and final framework for the cannabis tax expenditure plan – January 15, 2019); 
  • Development of the cannabis land use ordinance (CLUO) (Status: Draft Program Environmental Impact Report (PEIR) to be released – April 2019; Public Outreach meetings to occur after release of Draft PEIR). The schedule for the development of the CLUO and CEQA PEIR is included in Attachment A.  
  • Early Implementation Development Agreements (Status: Final application due date July 26, 2018 - Complete; Schedule for processing the eight applications received is dependent on when the CEQA process begins and the type of CEQA compliance document required to be prepared. The timeframe could range from approximately March 2019 - September 2019.)
Cannabis Business Tax Citizens' Oversight Committee
On July 24, 2018, the Board approved a resolution to establish a cannabis business tax citizens' oversight committee to act in an advisory role to the Board of Supervisors in reviewing the annual revenue and expenditure of revenues from the cannabis tax, including an annual expenditure plan, and reviewing an annual accounting of the previous year’s expenditures.  At that meeting, the Board directed staff to bring back a means to address potential conflicts of interest related to members of the oversight committee. Based on input from the Board Cannabis Tax Subcommittee, staff recommends the adoption of the Cannabis Business Tax Citizens' Oversight Committee Code of Ethics and Values, attached as Attachment B.  

Adapted for use by the cannabis business tax Citizens' Oversight Committee, the Code of Ethics and Values is based in large part on the Code of Ethics and Values developed in 2009 by the Citizens’ Advisory Committee Procedures Subcommittee for use by the General Plan citizens' advisory committees.  The Code was developed to help ensure that those involved in making important decisions are independent, impartial, and accountable to the people they serve.  The Board adopted the Code to promote and maintain the highest standards of personal and professional conduct among those participating on citizens' advisory committees. Appointment vacancies will be noticed pursuant to the Maddy Act prior to Board nomination for the five Board appointments and prior to Committee nomination for the two Committee appointments.


In addition, the following timeline is suggested for appointing the cannabis business tax Citizens' Oversight Committee members:
  • March 2019 – After an application period, Board ratification of appointments made by each Board member (one appointment per Board member).
  • April/May 2019 – After an application period, the initial five Committee members meet to nominate two additional committee members.
  • June 2019 – Board appoints two at-large members nominated by the Committee. 
  • July-August 2019- Committee meets to review cannabis tax revenue and draft recommended expenditure plan prior to September budget hearings.
Final Framework for Cannabis Tax Expenditure Plan
Included in Attachment C is a final framework for developing an expenditure plan for cannabis tax revenues. The final framework is based on the general framework approved by the Board on July 24, 2018 and incorporates, after consultation with the Board Cannabis Tax Subcommittee, the direction given by Board at the July meeting.
 
Interim Cannabis Ordinance Update - Proposed Amendments
Staff is considering proposing amendments to the interim cannabis ordinance based on feedback from County licensed cultivators, experience in implementing the program, and Board approval of the Early Implementation Development Agreement program. Each of the amendments under consideration is described below.

Distribution Licenses
One of the amendments under consideration is to allow for the issuance of distribution licenses for existing County licensed cultivators. On July 24, 2018, the Board approved the issuance of distribution licenses in conjunction with projects under the nursery/processing pilot and the Early Implementation Development Agreement programs. Based on feedback provided by cultivators, the ability to distribute their own cannabis would provide them with more control over the testing of their product (distributors are responsible for testing of cannabis) and where their product is sold. It would also provide the County with more oversight regarding the disposition of the harvested cannabis.  The license would be limited to support the business activities of the individual cultivator and not to serve other licensees. The State offers two types of distributor licenses, both of which staff proposes to be allowed as ancillary activities under the proposed amendment. 
  • Distributor.  A distributor is responsible for transporting cannabis goods, arranging for testing of cannabis goods, and conducting quality assurance review of cannabis goods to ensure they comply with all packaging and labeling requirements.  
  • Distributor-Transport.  A distributor transport license allows a licensee to transport cannabis goods between licensed cultivators, manufacturers, and distributors.
Penalties
Staff proposes broadening the scope of penalties to provide greater deterrence for the majority of the violations that are occurring.  Under the existing ordinance, administrative penalties are as follows:
  1. Up to $500, per plant, per day; or
  2. Up to $25 per square foot of garden canopy that exceeds the garden canopy allowed by license of applicable law.
The scope of the penalties needs to be broadened to cover activities unrelated to plant count or garden canopy to include penalties for any non-compliance with a standard or condition.  The proposed amendment would add a penalty for such violations, to escalate with repeat violations.
 
Early Implementation Development Agreements
 The interim ordinance requires some procedural revisions to provide an onramp for the adoption of Early Implementation Development Agreements. The amendments will be similar to those previously adopted to authorize development agreements for nursery and processing facilities.  An ordinance including the amendments (and likely, the other amendments described above) will be presented for consideration and approval as CEQA review of individual projects proceeds.  It will be consistent with the adopted policy on Early Implementation Development Agreements.
 
Based on the Board’s direction on these three items, staff will bring back a proposed amendment to the interim ordinance for the Board’s consideration. 
Collaborations (including Board advisory groups and external partner agencies)
Board Cannabis Tax Subcommittee, Cannabis Task Force, Department of Community Services, County Counsel, County Administrator's Office.

Fiscal Information
No Fiscal Impact
Fiscal Impact of this Expenditure
Total cost of recommended action
Amount budgeted for expenditure
Additional expenditure authority needed $0
On-going commitment (annual cost)
Source of Funds for this Expenditure
General Fund $0
Attachments
Att. A. Cannabis Program Schedule
Att. B. Citizens' Oversight Comm. Code of Ethics
Att. C. Tax Expenditure Framework
Att. D. Presentation

Form Review
Inbox Reviewed By Date
Phil Pogledich Phil Pogledich 01/10/2019 01:45 PM
Leslie Lindbo Leslie Lindbo 01/10/2019 03:38 PM
Alexander Tengolics Alexander Tengolics 01/10/2019 03:43 PM
Elisa Sabatini Julie Dachtler 01/10/2019 04:05 PM
Form Started By: Mindi Nunes Started On: 10/31/2018 04:14 PM
Final Approval Date: 01/10/2019
Level double AA conformance,
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