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  Regular-General Government   #   38.    
Board of Supervisors County Administrator  
Meeting Date: 09/12/2017  
Brief Title:    Update on modifications to the interim cannabis cultivation ordinance and tax measure.
From: Mindi Nunes, Assistant County Administrator, County Administrator's Office
Staff Contact: Susan Strachan, Senior Management Analyst, County Administrator's Office, x8170

Receive updates and provide input regarding proposed modifications to the interim medical cannabis cultivation ordinance, the development of a competitive process for nursery and drying/hand-trimming pilot programs, and the development of further modifications to the medical cannabis cultivation program and the proposed schedule. Approve the Cannabis Tax Action Plan for the June 2018 tax measure and appoint an Ad Hoc Subcommittee on Cannabis Taxation. (No general fund impact) (Nunes/Strachan)
Recommended Action
  1. Receive updates and provide input on modifications to the interim medical cannabis cultivation ordinance, including the schedule for amending the ordinance;
  2. Receive an update and provide input on the development of a competitive process for nursery and drying/hand-trimming pilot programs;
  3. Receive an update and provide input on the development of further modifications to the medical cannabis cultivation program and the proposed schedule for those modifications;
  4. Approve the Cannabis Tax Action Plan for the development of a June 2018 tax measure; and
  5. Appoint an Ad Hoc Subcommittee on Cannabis Taxation.
Strategic Plan Goal(s)
Safe Communities
Sustainable Environment
Flourishing Agriculture
Reason for Recommended Action/Background
At the August 1, 2017 Board of Supervisors meeting regarding the County’s interim medical cannabis cultivation ordinance, staff committed to return to the Board with details regarding the proposed modifications to the existing medical cannabis cultivation ordinance based on input staff received from the Board and the experience of the County’s Medical Cannabis Cultivation Task Force (“Task Force”) in implementing the program. The proposed modifications below consist of changes staff would like to make as soon as possible.


The interim ordinance should be amended to include the buffer below:
Lands held in trust - The 1,000-foot setback to tribal lands is limited to lands held in trust for the Yocha Dehe Wintun Nation by the federal government. The distance shall pertain to outdoor grows and be based on the horizontal distance measured in a straight line from the closest point on the parcel where cannabis is present to the Yocha Dehe Wintun Nation land held in trust, without regard to intervening structures. 

Additional buffers, such as increasing the distances of outdoor grows to residences and incorporated city and town boundaries, and prohibiting medical cannabis cultivation in residential zoned areas are currently being addressed by staff and are discussed further below.

Application Filing Deadline
Amend Section 5-20.04 to state that after 5:00 p.m. on December 31, 2017, any new application to Yolo County for a medical cannabis cultivation license, for which a complete Notice of Intent was submitted to the Central Valley Regional Water Quality Control Board (CVRWQCB) by 5:00 p.m. on October 11, 2016, will no longer be accepted.
Staff recommends that the interim ordinance be amended to allow for the collocation of cultivators on the same parcel. Collocated sites would be limited to parcels 40 acres or greater and to no more than two licensed cultivators per parcel.

Fencing and Signage
Staff recommends that Section 5-20.05.A.3 be modified to state that the installation of a fence be discretionary, as determined by the Task Force. The decision would be based, for example, on the location of the cultivation site and security concerns given a particular location.
In addition, staff recommends that licensed cultivation sites be required to prominently display on the licensed parcel, the license issued by Yolo County. The license must be displayed where it can be viewed by the public and Task Force members.
Relocation of Grow Sites
Staff recommends that the interim ordinance be amended to enable a County medical cannabis license holder and/or those who submitted a Notice of Intent to the CVRWQCB by October 11, 2016, to relocate a cultivation site to a location with less community impact.  

Staff recommends that the interim ordinance be amended to address the following:
  •  Administrative Penalties – Modify interim ordinance Sections 5-20.10.1.e and 5-20.11. to increase the civil penalty for violations from $1,000 per day for each day the violation continues to $500 per day, per plant, for each day the violation continues.
It is important to also note that Section 5-20.10.C.1, of the interim ordinance as written, provides authority to the Agricultural Commissioner or his or he designee, after following the procedures specified in the interim ordinance, to cut or remove all cannabis plants from the property in the event of a violation that is not voluntarily abated by the cultivator after being issued a notice of violation.
  • Revocable License for Non-Compliance - Modify the interim ordinance to reiterate that a cultivation license may be revoked in the event of a violation to the ordinance.
  • Contamination standards with abatement/quarantine for violation – Amend the interim ordinance to include the contamination standards to be adopted by the State of California as the County’s standards (Attachment A). The ordinance would also be modified to state that should the standards be exceeded, the Task Force should have the authority to abate or quarantine the contaminated plant(s).
  • License Not Transferable or Sold – Amend the interim ordinance to state that the license issued by the County shall not be transferred or sold.
  • Exceeding the square foot limitation –Amend the interim ordinance to state that penalties will be imposed if the cannabis grow exceeds the size limitation specified in the license or permitted by County Code, whichever is less. Staff recommends that a penalty of $25.00 per square foot be imposed for violation of the square foot limitation.
The interim ordinance allows for a lien to be imposed on the property on which a violation has occurred and/or for the penalties to be placed on the tax roll. Below is a brief description of this process as specified in Sections 5-20.10 and 5-20.13 of the interim ordinance.
As stated in Section 5-20.10.A.2.h, in the event of a violation, notice is given providing details of the violation. These details include notification that abatement costs, including administration costs and the administrative penalty may be made a special assessment and added to the County assessment roll and be collected in the same manner as property taxes, and that the land be subject to sale for unpaid delinquent assessments.  
Within five days after the hearing officer’s decision requiring abatement, if the cultivator has not abated the nuisance, the County may abate the nuisance by cutting and/or removing all of the plants from the property. Section 5-20.10.C.2 states that the owner of the property on which the violation occurred is responsible for paying all of the County’s abatement costs and administrative costs.

Language Clarifications
The following language clarifications to the interim ordinance are proposed:
  • The word “premises” should be defined to make it consistent with the word “parcel”.
  • As currently written, the interim ordinance refers to the issuance of a “business license.” Staff recommends that this be changed to “cannabis license” to facilitate a shift to a new license type specific to cannabis cultivation (rather than continued reliance on County business licenses).
  • Section 5-20.4.B of the Interim ordinance prohibits all non-medical commercial cannabis activities in the unincorporated areas of Yolo County. This section should be amended to also expressly prohibit activities associated with medical cannabis that are not otherwise allowed under the interim ordinance. These include for example, production, storage, processing, manufacture, dispensing, delivery, distribution, labeling, provision, or sale of medical cannabis or medical cannabis products
 In addition to the specific modifications suggested above, staff also anticipates making clarifying amendments to the interim ordinance for consistency with state law (SB94/Medical and Adult Use Cannabis Regulation and Safety Act (MAUCRSA)). These non-substantive modifications are not discussed above since they are minor and would not change the intent of the provisions of the interim ordinance.

Interim Ordinance Modification Schedule
Based on the input received from the Board on the recommended modifications above, Staff will draft the amended interim ordinance. It will then be brought to the Board for first reading in October. The second reading would occur at the subsequent Board meeting, either at the end of October or early November.
Tax Measure
Included in Attachment B is a proposed action plan which details the approach to working through the policy issues associated with drafting a cannabis tax for the Board’s consideration. These policy issues include for example, determining the type of tax and tax structure. In addition, budget needs to mitigate negative externalities associated with cannabis must be also  determined. For example, the District Attorney's office proposes to launch a comprehensive enforcement program for cannabis, for which the estimated costs could exceed $900,000. In addition, First 5 and local school districts are quantifying their needs for drug/alcohol counseling, prevention, and intervention for their students.  

Given the aggressive timeline associated with placing such a measure on the June 2018 ballot and the requisite policy discussions necessary, staff recommends the Board form an ad hoc subcommittee on cannabis taxation to assist in guiding staff discussions and policy recommendations in connection with the proposed June 2018 ballot measure.  The proposed ad hoc subcommittee would sunset upon final Board action with respect to placing a measure on the ballot. As stated in the action plan, staff anticipates returning to the Board regularly in the next several months to receive feedback and guidance on policy proposals.

Pilot Programs
Staff recommends the creation of a pilot program to include up to two medical cannabis nurseries and up to two drying/hand trimming facilities. The facilities would be selected through a competitive process. That process would require applicants to fill out a detailed application addressing and including items such as:
  • Location – Address and map of the facility location, documenting that it is not within any of the buffers included in the interim ordinance. A site plan and floor plan must also be included.
  • Proof of property ownership or if not owner of record, proof of owner consent to operate a cannabis nursery or drying/hand-trimming facility on the property.
  • Business Plan – A plan which describes how the facility will operate in compliance with the interim ordinance and state law and regulations.
  • Neighborhood Compatibility Plan – A plan which describes how the facility will reduce potential impacts on the surrounding area.
  • Safety and Security Plan – This plan would describe the fire prevention and suppression for the site and identify the measures that would be taken to protect workers and property on the site.
  • Community Benefits Plan – This plan would describe what community benefits the facility would bring to Yolo County residents. This could include for example, employment of local residents, community contributions, or economic incentives to the County.
  • Energy source/energy efficiency measures – Identification of source of electricity for the business and what energy efficiency measures would be implemented.
  • Environmental Information – This consists of, for example, the proposed business’ water source, water efficiency measures, odor control, lighting, waste management measures, and hazardous material management.
  • Labor and Employment Opportunities
  • Qualifications of Business Principals
  • Results of Site inspection
  • Good standing with the County with respect to existing businesses
The Pilot Project application materials will be brought to the Board for approval prior to initiating the solicitation process.

A point system and evaluation criteria would be developed to rank the applications. A committee would be comprised of, for example, a Yolo County Farm Bureau representative, County Citizen Advisory Committee representative(s) from the areas in which the proposed facility sites are located, and County staff to evaluate the applications and select the businesses to be in the pilot program.
The businesses under the Pilot Program would be subject to a land use permitting (use permit) and environmental review process with the Planning Division of the Department of Community Services. The businesses would also need to obtain all other required permits through the Department of Community Services.  

In addition to the modifications above, Staff is also evaluating additional modifications to the medical cannabis cultivation program. These modifications are discussed below. Staff anticipates bringing the modifications to the Board for discussion and direction in October.
Staff is currently addressing prohibiting medical cannabis cultivation in residential zoned areas and the imposition of additional buffers. These include the following:
  • Outdoor Grows – Limit outdoor grows to parcels 40 acres or larger. In addition, they shall be located no less than 1000 feet from any residence, incorporated city, and urban growth boundary of any unincorporated town, as identified in the County’s General Plan.
  • Indoor Grows – Indoor grows using a greenhouse/hoop house shall be no less than 300 feet from any residence.
  •  Indoor cultivation not using a greenhouse (i.e. a warehouse) shall be no less than 150 feet from any residence.
The distances specified above shall be the horizontal distance measured in a straight line from the closest point on the parcel where cannabis is present to the residential structure, incorporated city, and urban growth boundary of any unincorporated town, as identified in the County’s General Plan, without regard to intervening structures. In the case of indoor grows utilizing a greenhouse/hoop house or non-greenhouse structure (i.e. warehouse), the distance shall be the horizontal distance measured in a straight line from the closest point of the greenhouse/hoop-house or non-greenhouse structure to the residential structure, without regard to intervening structures.

Future Land Use Ordinance
In the coming year, many aspects of the existing and interim ordinance will be replaced with a land use-based process that would function as part of the Zoning Code and be administered through the Department of Community Services. This process will be beneficial because it would provide an opportunity for greater public input by requiring cannabis cultivators and other cannabis businesses (i.e. nurseries and drying/hand-trimming facilities as part of the Pilot Program) to go through a more public process, where neighbors would be notified of the planned use. Each application would be subject to compliance with the California Environmental Quality Act (CEQA) and would likely require a public hearing before the Zoning Administrator or Planning Commission. Additionally, Development Agreements for all cultivation license holders would be part of the future land use based process.
In implementing this task, staff would first create guiding principles on the Zoning Ordinance modifications and process and seek input from the Board of Supervisors. Once that input is obtained, public outreach meetings would occur to obtain public input. 
Approval of the program and Zoning Ordinance modifications would require at least one Planning Commission meeting. Finally, it would also require Board of Supervisors approval.  Staff anticipates the new ordinance and program could be in place no later than July 2018, if not earlier, assuming the County elects not to perform CEQA review of the ordinance (as state law expressly allows).  

Lastly, at the August 1, 2017 Board meeting there were questions regarding sales taxes and property taxes as they relate to cannabis cultivation in Yolo County. Regarding sales tax, staff was asked whether there had been an increase in sales taxes due to the cultivation of cannabis in Yolo County. Sales tax is only applicable to dispensary sales. Since dispensaries are prohibited in Yolo County, the County does not currently receive any direct sales tax revenue from its cannabis cultivation program. It is also not likely that the County will receive sales taxes from the purchase of supplies and equipment for cannabis cultivation since most of these purchases would occur in the cities.
The second tax question pertained to whether there have been any changes to how property taxes are assessed on property where cannabis is cultivated, and if so, has there been an increase in property taxes as a result of the program. The County Assessor’s office receives information regarding cannabis business licenses issued by the County and the cities with a licensing program. Based on this information, the Assessor’s office is assessing improvements on the properties.  Thus far, these property improvements have resulted in a small increase (less than $500,000 taxable value) in property taxes.  However, it is anticipated this amount will increase over time. The California Assessors Association, which makes recommendations on how to approach new industries, is currently studying how cannabis should be assessed.
Collaborations (including Board advisory groups and external partner agencies)
County Administrator's Office, Agriculture Department, County Counsel, Community Services Department, District Attorney's Office, Department of Financial Services, and the Assessor's Office.

Fiscal Information
No Fiscal Impact
Fiscal Impact of this Expenditure
Total cost of recommended action $0
Amount budgeted for expenditure $0
Additional expenditure authority needed $0
On-going commitment (annual cost)
Source of Funds for this Expenditure
General Fund $0
Att. A. Contamination Standards
Att. B. Tax Measure Action Plan
Att. C. Presentation

Form Review
Inbox Reviewed By Date
Patrick Blacklock Patrick Blacklock 09/07/2017 12:38 PM
Phil Pogledich Lupita Ramirez 09/07/2017 01:10 PM
Form Started By: Mindi Nunes Started On: 08/04/2017 09:09 AM
Final Approval Date: 09/07/2017
Level double AA conformance,
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