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  Regular-General Government   #   30.    
Board of Supervisors County Administrator  
Meeting Date: 03/21/2017  
Brief Title:    Cannabis Policy Considerations
From: Mindi Nunes, Assistant County Administrator, County Administrator's Office
Staff Contact: Mindi Nunes, Assistant County Administrator, County Administrator's Office, x8329

Consider cannabis policy issues including, but not limited to, the ongoing state regulatory process and its effect on the timing of County policy discussions, a potential local cannabis tax measure, certain cannabis-related commercial activities such as research, manufacturing, distribution and sales; receive public input on all policy issues presented; and provide direction to staff. (No general fund impact) (Nunes)
Recommended Action
  1. Consider local policy discussion and State regulation development timelines;

  2. Direct staff with respect to a revenue ballot initiative and timing of election; and

  3. Consider policy options related to commercial cannabis, including research, manufacturing, distribution and sales.
Strategic Plan Goal(s)
Safe Communities
Reason for Recommended Action/Background
Both the Medical Cannabis Regulation and Safety Act (MCRSA), which implemented regulations for medical cannabis, and the Adult Use of Marijuana Act of 2016 (AUMA), which legalized recreational marijuana, provide for decision-making by local government agencies. At the February 21, 2017 Board meeting, staff presented a proposed calendar for the policy considerations Yolo County intends to address and the date staff anticipates providing the Board an opportunity to discuss. Many of the policy issues will be addressed at the State level with regulations currently being developed for implementation in January 2018. Thus, the question arose during the Board discussion as to whether or not it would be prudent to postpone our local policy discussions until the State regulations are approved. 

Staff recommends the Board continue with the calendar of policy discussions as outlined and wait for final State regulations before introducing local ordinances and regulations. The State has been very clear that allowed cannabis-related activity be primarily determined at the local level. Awaiting final State guidance places Yolo County in a position to try and catch up with that guidance without the benefit of time to effectively study the impacts and determine our response. Considering what activities to allow, and the method for allowing that activity, places us in a position to both advise State regulations as they proceed, as well as utilize the State's regulations to the County's advantage. Products developed locally would benefit from the input and guidance of Public and Environmental Health so holding discussions and providing guidance during this build-up phase ensures the market is in line with our local objectives for product safety. State regulations will not address the local impacts of cannabis production such as odor, labor, child support, traffic, addiction and crime. The indirect impacts of cannabis (public health education, law enforcement, code enforcement) will occur without regard to State regulation. The first step for this agenda item is to seek Board direction on proceeding with discussions or awaiting State regulations.

Funding the costs associated with issuing permits, inspections, compliance, etc. can be accomplished through the imposition of fees. In order to fund costs not attributable to a permittee, including those related to code enforcement, law enforcement, impacts to children, impacts to health, education and environmental cleanup, the County would need to utilize its general fund revenue. With the County's General Fund being relatively flat year after year, additional revenues will be needed to address the risk and adverse impacts of legalized cannabis in Yolo in order to maintain the existing general governmental services funded by the existing General Fund. Staff will be recommending the Board declare the existence of an emergency within the County thus allowing for a business tax to be placed on a non-General Election ballot. To do so requires a unanimous vote of the Board. Staff seeks direction from the Board on whether or not staff time and resources should be spent on preparing for a November 2017 revenue measure ballot initiative. In the absence of a cannabis tax or General Fund allocation, the County will not be able to operate a comprehensive cannabis regulatory framework that addresses the previously mentioned impacts and externalities not directly attributable to the permitting of cannabis cultivation. 

On February 21, 2017, the Board reviewed the Cannabis Policy Matrix which groups various cannabis issues by topic such as land use, cultivation, revenue, etc. and the timeline for a Board workshop on each policy area (Attachment A). If the Board decides to continue holding policy discussions throughout 2017, this first cannabis policy workshop which will include research, discussion, and where applicable, staff recommendations on value added processes and commercial sales of medicinal and recreational cannabis.

Value added processes and commercial cultivation of cannabis include, but are not limited to, the following:
  • Manufacturing
  • Distribution
  • Nurseries
  • Testing Labs
  • Deliveries
  • Dispensaries
Adopted Yolo County ordinances currently ban all commercial activity related to recreational cannabis and limit and regulate commercial activity related to medical cannabis cultivation. Staff provides the following as examples of definitions, and where applicable, associated regulations and best management practices.
As described in the January 2017 presentation to the Board, some counties such as Sonoma County, have been early adopters of comprehensive marijuana/cannabis programs and associated ordinances. These programs typically allow for personal use and cultivation in accordance with voter-approved state law. They also include components related to the regulation of commercial activities and have identified which activities are allowed (whether by right, or with a discretionary permit) by zoning designation. 
Other jurisdictions, such as Sacramento County and Colusa County, are recommending the wholesale prohibition of all commercial recreational cannabis activities – whether as an interim measure until the state’s regulations are released, or as a permanent measure remains to be seen.  
Calaveras County – A Case Study
Calaveras County initially allowed commercial cultivation of cannabis and adopted a permitting scheme and fee schedule in May 2016. Calaveras County collected over $4,000,000 in cannabis permitting fees in 2016. Calaveras County’s commercial cannabis permit fees typically cost about $5,000 per application; the county received approximately 800 applications for commercial cannabis permits in seven months. In January 2017 the Calaveras County Board was presented with over 3,500 signatures (in a county with 44,000 residents) demanding a ban on all commercial cannabis activities. The Board unanimously decided to send the issue to the voters. A special election will be held May 2, 2017 to decide the issue.
Yolo County Cannabis Steering Committee
The Cannabis Steering Committee (“CSC”) met on March 6, 2017 to discuss the County’s role in the regulation of commercial cannabis activities. The CSC is comprised of staff from Health and Humans Services, the District’s Attorney’s Office, the Environmental Health Division of the Community Services Department, the County Administrator’s Office, Department of Financial Services, Yolo County Sheriff’s Office, County Counsel and the Agriculture Department. A summary of the discussion and a staff recommendation, if applicable, is provided below.
Deliveries of cannabis and associated products are currently allowed in the County. The County has no regulation or ordinance prohibiting them for either recreational or medical use. As such, cannabis delivery is currently undefined in Yolo County Code. However, State law allows counties to impose a tax on deliveries of cannabis, even if all other forms of commercial cannabis activity are prohibited. 
Many jurisdictions, particularly for medical cannabis, simply rely on the definition of deliveries set forth in Section 19300.5 of the California Business and Professions Code:
“Delivery" means the commercial transfer of medical cannabis or medical cannabis products from a dispensary up to an amount determined by the Bureau of Medical Marijuana Regulation to a primary caregiver or a qualified patient as defined in Section 11362.7 of the California Health and Safety Code, or a testing laboratory, in accordance with the definition in California Business and Professions Code Section 19300.5, subdivision (m), as that section and subdivision may be amended or interpreted by the California courts or superseded by any successor statute.”
Best Management Practices
Several jurisdictions, including Sonoma County, allow cannabis deliveries in conjunction with an approved use permit for a commercial cannabis activity, usually dispensaries. Those jurisdictions typically require that a business that engages in deliveries of cannabis products track and differentiate between storefront retail sales and delivery sales. This information is then required to be reported to the licensing entity. 
Several jurisdictions, including Santa Cruz County, specifically prohibit any signage, lettering, or graphics on delivery vehicles. 
Cannabis Steering Committee
As noted by the Cannabis Steering Committee, delivery of medical cannabis (and recreational cannabis in 2018) will be legal by default unless a jurisdiction prohibits or opts to regulate it. There was also general discussion by the CSC regarding enforcement of a delivery ban, should one occur. The group unanimously agreed that enforcement would be extremely difficult. The County Health Officer recommended that, at a minimum, the Board regulate signage and advertising for cannabis and related products and activities in the same manner that  alcohol and tobacco advertising and signage are regulated. 
Staff recommendation: The consensus of the CSC was to leave this issue unchanged due to the extremely difficult nature of enforcement.
Cannabis use is now legal, in one form or another, in close to half of the states in the US. Regulating its production and sale in a safe and reasonable manner has been complicated by an almost complete lack of scientific research, and by the absence of guidance from the federal agencies that would normally provide expertise and oversight. Most states simply don’t have the scientific resources necessary to ensure the safety of a major agricultural crop that is used both medically and recreationally and that very little is known about.
In the absence of guidance from the USDA and the FDA, each state with a significant legal cannabis industry has tried, in its own way, to implement some kind of regulatory framework to protect public health. Many states have required some kind of pesticide testing, and many of them have produced lists of microorganisms to be tested for on Cannabis. Potency testing has become widespread, either because of market forces or state mandate or both. Certain states have other requirements, such as tests for heavy metals or for mycotoxins, or for residual solvents in extracts made from Cannabis.
In a white paper issued by the Cannabis Safety Institute (“CSI”), a non-profit organization comprised of an advisory board of scientists, doctors, and regulatory experts committed to providing the rigorous scientific data and expertise necessary to ensure the public safety of the legal cannabis industry, the difficulties of standardizing cannabis testing laboratories are summarized as follows: 
Prior to the legalization of recreational Cannabis in Washington and Colorado, a number of Cannabis testing laboratories were already in operation in those and several other states. These laboratories primarily served the market for potency testing of medical marijuana, although they had begun to offer such services as microbiology testing. They were entirely unregulated, and in some states even their legality was unclear. As Washington and Colorado began structuring their legal recreational Cannabis programs, these states included rules requiring safety testing of Cannabis. Oregon added similar rules to its medical marijuana program. In the absence of traditional analytical chemistry laboratories able or willing to test Cannabis, these states have turned to the existing Cannabis testing industry to meet their mandated testing requirements.  In response to this increase in demand, roughly 30 new Cannabis testing laboratories have opened in 2014. Washington and Colorado have introduced programs to inspect and certify these laboratories, but there has been a good deal of confusion over what tests the laboratories should perform and what standards they should be held to. No other state has put an oversight program into place. Oregon recently began to require that all medical Cannabis be tested, yet has failed to address the legality of the laboratories performing this work.  Faced with regulating an entirely new large-scale agricultural product in the absence of any guidance from the United States Department of Agriculture (USDA) and the Food and Drug Administration (FDA), many state regulatory agencies have determined that some safety testing is better than no safety-testing whatsoever.”
                                              -“Standards for Cannabis Testing”, Cannabis Safety Institute, 2014
 Best Management Practices
The Cannabis Safety Institute goes on to recommend that testing laboratories meet, at a minimum, the following standards:
  • ISO 17025 certification (provides for general requirements to ensure the competence of testing and calibration
  • Third-party accreditation (there are several laboratory accreditation services that offer cannabis lab accreditation, however, no state or federal guidance is yet adopted to standardize them)
  • Standardized testing for the following categories:
    • Pesticides
    • Cannabinoids, including THC, THCA, CBD, and CDBA
    • Microbiology testing (bacterial and fungal species)
    • Volatile Organic Compounds
    • Water Activity (differs from moisture content measurements)
  • The CSI recommends that all test results be conveyed as numerical accuracy percentages, not as PASS/FAIL results
In California, testing laboratories are often required as part of a retail storefront operation (dispensary) and/or cannabis distribution center as a condition of the discretionary use permit that is needed for these commercial activities (see Attachment B). The State is expected to issue regulations regarding testing standards and testing laboratories no later than January 2018. 
Cannabis Steering Committee Discussion
Testing laboratories will be needed to implement the Board’s current adopted policies regarding commercial cannabis activities (limited medical cannabis activities). The State is in the process of developing regulatory testing standards which are anticipated by January 1, 2018. In the absence of a locally adopted standard, the state’s regulations respective to laboratory testing will be the default standards. It appears that the County can establish regulations that would allow its staff to determine when testing is required and still rely on whatever standards are published by the state. The CSC was comfortable relying on the state’s future testing standards, whether for medical or recreational products. The consensus of the CSC was that the County should have some role in determining when testing is required (randomly, at certain intervals, and/or at certain point in the growing or manufacturing process). The CSC unanimously agreed that the Public Health Officer should be empowered to recall cannabis products that fail testing or are determined to be a threat to public safety or health.
Staff recommendation:
  • Provide the means for staff to have a prominent role in what products should be tested and when testing should occur, relying on the state’s future testing standard
  • Authorize the Public Health Officer to initiate and enforce recalls of cannabis products
Nurseries, Manufacturing and Distribution
Cannabis Distribution
“The location or a facility where a person conducts the business of procuring medical cannabis from licensed cultivators or manufacturers for sale to licensed dispensaries, and the inspection, quality assurance, batch testing by a Type 8 licensee, storage, labeling, packaging and other processes prior to transport to licensed dispensaries. This Facility requires a Type 11 license pursuant to the Medical Cannabis Regulation and Safety Act (MCRSA).” (Sonoma County)  This definition is extremely close to the definition in the California Business and Professions Code (Section 19300.5(p)) which is the most commonly used definition amongst jurisdictions with ordinance allowing for commercial cannabis activity.
Cannabis Nursery
“An establishment that produces only clones, immature plants, and seeds for wholesale distribution to permitted cultivators or dispensaries, used specifically for the planting, propagation, and cultivation of medical cannabis.” California Business and Professions Code (Section 19300.5 (ag)) 
It should be noted that several jurisdictions, including Sonoma County, differentiate between cooperative nurseries, wholesale nurseries, and retail nurseries. These jurisdictions typically apply more stringent standards to facilities that may be open to the public. 
Cannabis Manufacturing
““Manufacturing site” means the premises that produces, prepares, propagates, or compounds manufactured medical cannabis or medical cannabis products, directly or indirectly, by extraction methods, independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis, and is owned and operated by a licensee for these activities.” California Business and Professions Code (Section 19300.5 (ae))
Very few jurisdictions have ordinances pertaining to manufacturing, however, several, including the City of Sacramento and the counties of Sonoma and Santa Cruz, are developing draft ordinances concurrent with Yolo County’s efforts.  Staff will continue to track these parallel efforts.
Best Management Practices
Best management practices for commercial cannabis facilities include:
  • Not more than one facility per parcel
  • Requirement that all non-growing activities take place indoors only, with proper ventilation, lighting, and electrical capacity.  Note: The City of Santa Cruz requires all cannabis facilities to be powered solely by solar power generated on-site.
  • Establishing a maximum allowable square footage for distribution and manufacturing (typically ranges from 40,000 sf to 100,000 sf); several jurisdictions allow for an exception to permitted maximum with Board/Council approval
  • Nursery size is typically tied to land use zone and lot size, for example, larger growing areas are typically allowed in agricultural zones.  Indoor growing operations in commercial or industrial zones are typically limited to a maximum lot coverage (50 – 75%), up to a maximum square footage
  • Setbacks on outdoor growing from property lines (range from 100-300 ft)
  • Setback from parks, schools, daycare facilities, etc. (range from 500 – 1000 ft)
  • All ordinances reviewed included language that allowed for reasonable routine inspection with 24-hours advance notice
  • Many jurisdictions only issue permits for one or two year periods, with various options for extension or renewal. Some jurisdictions will automatically renew a permit, subject to fee and tax payment, if all conditions are met and no substantiated complaints are received
Cannabis Steering Committee
The CSC discussed all commercial cannabis activities at length. Amongst those members who supported an ordinance regulating commercial activity they felt strongly that robust regulations and enforcement are the keys to a successful commercial cannabis program. The CSC generally agreed that the Environmental Heath Division should have the lead role in overseeing these value added commercial cannabis activities regardless of the end use of the product (medical or recreational). 
Staff Recommendation:
  • Designate the Environmental Health Division as the lead enforcement agency for the purposes of regulating value added commercial cannabis activities. The Agriculture Department will have a role in the inspection and potential regulation of growing and cultivation facilities, if ultimately allowed.
  • Ensure that adequate testing facilities are required for all commercial cannabis activities
Dispensaries are defined by the state as “means a premises where medical cannabis, medical cannabis products, or devices for the use of medical cannabis or medical cannabis products are offered, either individually or in any combination, for retail sale, including an establishment that delivers, pursuant to BPC Section 19340, medical cannabis and medical cannabis products as part of a retail sale.”
Best Management Practices
  • The state of Colorado requires that dispensaries be owned by someone who owns and operates a cultivation facility and specifies that at least 70% of the products for sale be “owner grown”
  • Nearly all ordinances specify that the owner/operator is prohibited from having any sort of beer, wine, or liquor license (both in California and in other states) at the same location
  • Most ordinances require specific setbacks from schools, parks, daycare facilities, liquor stores, etc. These range from 300 – 1,000 ft.  Areas where children congregate tend to have larger setback requirements than any other use type
  • Several states require that an “owner of record” be filed and made available for public review.  Many jurisdictions prohibit a felon from applying, or require a certain amount of time for non-violent felons (5-10 years) to have passed since the felony conviction occurred
  • Many jurisdictions, and several states, prohibit licensed physicians or any law enforcement officer from owning or operating a dispensary
  • Distribution and manufacturing facilities are usually only allowed in the “industrial” land use zone, while dispensaries are typically only allowed in commercial or industrial zones.
  • Several states, including Alaska, require that any new permit or license for a cannabis dispensary be subject to a public notification procedure – all property owners within “X” feet of the proposed locations receive a public notice in the mail, prior to any issuance or public hearing, that details a protest procedure if one is available
  • Most jurisdictions issue permits for dispensaries for one or two year periods only, with various options for extensions
Cannabis Steering Committee
After considerable discussion, the CSC remains divided on the issue of permitting commercial dispensaries in the unincorporated areas of the County. Arguments in favor of allowing dispensaries include: revenue/tax capture; local control, regulation, and inspection; and serving rural markets. Arguments opposed to allowing dispensaries include: public safety; traffic and other land use impacts; potential social impacts; and the protection of the heath and welfare of children and other vulnerable populations.
An interesting idea did emerge from the discussion by the CSC on dispensaries: Development of a limited-time pilot program.  The pilot program could allow for a certain small number of dispensaries in certain locations for pre-determined amount of time (perhaps two years). A pilot program would allow staff to study the impacts, if any, of dispensaries but limit the number of such businesses which would ensure that any problems would be limited in scale and size. It would further allow staff to develop recommended solutions, in the form of standards, regulations, and/or land use limitations, etc., to issues that may not have been anticipated, or, alternatively, show that anticipated issues are not realized.
Staff Recommendation: The CSC did not achieve consensus on a recommendation to allow dispensaries. The CSC did agree that the policies and practices related to tobacco and alcohol designed to reduce the influence on children and youth be applied to cannabis.
Collaborations (including Board advisory groups and external partner agencies)
Cannabis Steering Committee (Ag, CAO, Community Services, County Counsel, DA, Financial Services, GSD-IT, Sheriff)

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
Att. A. Policy Consideration Matrix
Att. B. Commercial Cannabis Matrix

Form Review
Inbox Reviewed By Date
Mindi Nunes (Originator) Mindi Nunes 02/15/2017 02:13 PM
Mindi Nunes (Originator) Mindi Nunes 03/13/2017 04:59 PM
Elisa Sabatini Elisa Sabatini 03/14/2017 12:16 PM
Phil Pogledich Phil Pogledich 03/16/2017 09:39 AM
Form Started By: Mindi Nunes Started On: 01/24/2017 11:03 AM
Final Approval Date: 03/16/2017
Level double AA conformance,
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