On January 9, 2018, the Board approved a three-pronged strategy for the County’s cannabis program. Although complementary and part of an integrated program approach, each strategy will operate on its own timeline and staff have developed a schedule for Board consideration of each item. In summary, the initial schedule for the Board’s approach to developing a comprehensive cannabis program includes the steps listed below. The schedule is also depicted in table form in Attachment A:
- Placing a general tax measure on the June 2018 ballot (Schedule: Board actions on January 23, 2018 and February 6, 2018);
- Development agreement implementation in near- and long-terms. (Schedule: proposal for Board direction/action to be presented on February 6, 2018); and
- Completing the development of the comprehensive land use regulations, including consideration of additional licensure categories (Schedule: further public outreach through March 2018, Planning Commission and Board workshops in March-May, administrative draft environmental document release summer 2018, and subsequent ordinance revisions, public outreach, and CEQA compliance through adoption in early 2019).
The action recommended by this staff report pertains to the cannabis program general tax measure for the June 2018 ballot. However, this staff report begins with an update on development agreements and comprehensive land use regulations, followed by an update on the RFP process for a limited number of nursery and processing facility licenses.
Early Implementation Development Agreements
Consistent with Board direction on January 9, staff is developing a strategy to authorize development agreements and will present it for Board consideration on February 6. The strategy will focus on establishing a development agreement process for near-term projects that are capital intensive and that feature indoor cultivation or cultivation in greenhouses as a primary component. The strategy will also address other “vertical integration” project components such as processing and manufacturing uses in conjunction with cultivation. Among other things, the strategy will also:
- Describe a proposed application process that closely resembles the typical process for discretionary land use entitlements such as conditional use permits;
- Identify public notice and outreach requirements for each application, including notice to neighbors and all groups (e.g., the Yolo Farm Bureau) that typically receive notice of significant land use applications and environmental review documents;
- Explain how environmental review under the California Environmental Quality Act will proceed in conjunction with development agreement preparation, public outreach, and other aspects of application review;
- Provide at least general terms and provisions for development agreements to be negotiated with interested applicants. This will include consideration of terms set forth in development agreements executed by other local governments for cannabis enterprises within their jurisdictions. Staff do not expect to provide a full template agreement for Board consideration, but will instead outline the principal terms that could be standardized across all subsequent agreements negotiated with applicants;
- Summarize initial efforts to develop performance standards relating to facility operations, particularly with respect to odor control and other potential offsite impacts; and
- Describe the public hearing and approval process for development agreements in advance of the comprehensive land use regulations, as well as any ordinance amendments necessary to integrate this process into the County Code.
On February 6, as indicated above, the Board will have an opportunity to review the proposed strategy, provide input, and if appropriate direct staff to implement the strategy with any changes approved by the Board.
Comprehensive Land Use Regulations
The timeframe for developing comprehensive land use regulations remains largely the same as presented on January 9. That timeframe included various public outreach, ordinance drafting, environmental review, and Planning Commission and Board actions culminating in ordinance adoption in March 2019. Some of the initial tasks—in particular, preparation of a draft ordinance and a Planning Commission presentation on January 18—have been deferred slightly to accommodate adding a discussion of additional state licensure categories other than cultivation and to enable Tschudin Consulting to become further engaged. Staff continue, however, to plan to present an update on regulation development to the Board in March 2018, which will include a discussion on the consideration of other licensure categories as part of the regulation development process. No extension over the overall time period is anticipated.
Staff will include a further update on this process in the Board letter for the tax ordinance item on February 6. That update may include further detail on the content of the March 2018 presentation and identify any opportunities to shorten the overall timeframe for ordinance development and environmental review.
Nursery and Processing Facility RFP
The deadline for the submittal of applications in response to the County’s Request for Proposals (RFP) for up to three nursery licenses and up to three processing facility licenses was January 12 at 4:00 p.m. Although eight entities had submitted the mandatory Letters of Interest and attended the mandatory Applicant’s Conference, thus enabling them to submit an application, only four applications were received (two nurseries, one processing facility, and one application for both). The applications will be reviewed by County staff and representatives from the Yolo County Farm Bureau, Center for Land Based Learning, and the Yolo County Resource Conservation District.
Staff will look into accelerating the application review process schedule given the limited number of applications received. However, under the current schedule, the Phase 1 application review period is January 16 – January 30. The Phase 2 review period, which consists of an interview and site visit, is scheduled for February 6 – February 20. Staff anticipates providing the Board with the list of applicants recommended to proceed to the California Environmental Quality Act (CEQA) process by March 6th. As stated above, final action of the Board to approve the applications will occur after CEQA compliance is complete. The CEQA process could take between three and eight months (May – October), depending of the type of CEQA review required.
General Tax Measure for the June 2018 Ballot
Pursuant to Board direction at the January 9 cannabis workshop, staff has drafted an ordinance imposing a gross receipts tax at a rate range of 1-15% of gross receipts on all commercial cannabis activities. Under the ordinance, cultivation would be taxed at an initial rate of 4% of gross receipts, effective July 1, 2018, and automatically increasing to a rate of 5% of gross receipts on July 1, 2020. All other commercial cannabis activities including but not limited to nurseries, dispensing/retailing, processing, manufacturing, laboratory testing, distributing, or delivery of cannabis in the unincorporated area would be taxed at an initial rate of 5%, effective July 1, 2018. The Board would have discretion to set the rate anywhere within the previously described range, but the Board could not alter the rate more than once in a 12 month period or by more than two percentage points.
The ordinance also requires the Board to, by resolution, establish a citizen’s oversight committee to review the expenditure of funds generated by the tax. The resolution would establish the committee members’ terms, qualifications and duties, and the committee’s scope of authority. Staff can bring the resolution for Board direction in March, 2018, or after voter approval of the tax measure, at the July 10, 2018 Board meeting.
Revenue generated from the tax could be used for criminal enforcement of illegal cultivation, early childhood and youth education and development, substance abuse education and treatment for children and adults, rural infrastructure and programs and cannabis research, or any other expenditure per the Board’s discretion. Given uncertainty in the cannabis market, staff cannot provide a targeted revenue estimate, but rather anticipates annual tax revenue in the low millions of dollars at least initially.
The action the Board takes today with regards to the ordinances presented would be a first reading. That is, the Board may, by majority vote (3/5), introduce the ordinance by title only, consider waiving its reading and place it on the agenda on February 6 for a second reading. At the second reading, the Board would consider adopting an ordinance, which would require a 4/5 vote. |