Category: Cultivation

California Marijuana Cultivation

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Riverside County Takes Next Step Toward Legalization of Cannabis Businesses

Riverside County

On March 20, 2018, the Board of Supervisors of the County of Riverside, California, held a Workshop to consider a County-wide regulatory framework for the legalization of cannabis businesses.  The County previously banned medical cannabis and reinforced the ban of all commercial cannabis in September 2017.  However, two members of the Board, Chairman Chuck Washington and Supervisor Kevin Jeffries, were concurrently appointed to an ad-hoc committee of the Board to work with staff to research the potential marijuana licensing and revenue generation opportunities for the unincorporated areas of Riverside County.

According to the staff presentation, nearly 50% of the incorporated cities in Riverside County have adopted regulations permitting various cannabis businesses to obtain a cannabis license, including Blythe, Cathedral City, Coachella, Desert Hot Springs, and Perris.

Similar to statements made by Lori Ajax, Chief of the California Bureau of Cannabis Control in February 2017, County staff suggested to the Board of Supervisors that the first set of cannabis regulations may not resolve all of Riverside County’s issues and that an annual review of the processes and regulations is recommended.

County planning staff recommended a maximum of 19 marijuana dispensaries and 50 marijuana cultivation sites in the first year based on land use and permit processing concerns.  These recommended maximums do not comport with the primarily agricultural nature of unincorporated Riverside County which allegedly hosts hundreds of outdoor marijuana cultivation sites.  In addition, planning staff suggested limiting all cannabis cultivation to indoor sites of less than one acre.  (See the Riverside County Cannabis Businesses Board of Supervisors Submittal and Staff Report.)

On the other hand, County staff acknowledged the opportunity for legally established distribution and testing laboratories in the County to permit active participation of local businesses in the supply chain of the cannabis market both inside and outside the County of Riverside.  To their credit, County staff recommended the zoning for marijuana nurseries, manufacturing, distribution, and testing facilities mirror the zoning for similar non-cannabis businesses without any recommended maximum of locations.

Regarding financing, the County staff provided three distinct choices for the Board of Supervisors:

(1) Cannabis taxation requiring a vote of the people;

(2) an Annual License Fee limited to the recovery of costs of processing cannabis license applications and regulating conduct of licensed facilities; and

(3) negotiating cannabis development agreements through specific applications of potential cannabis licensees to secure a public/community benefit via a neutral point system.

County staff relied upon data from Cathedral City and estimated potential cannabis tax revenues from $8.7 million to $46.1 million annually depending on the number of licensed cannabis businesses and a tax rate between 2 and 4%.  A representative from the Riverside County Registrar of Voters presented an estimate of $750,000 for the County to place a cannabis tax measure on the ballot for November 2018.

Development agreements are legally exempt from a vote of the people.  However, according to County Counsel, a cannabis development agreement would generally require a protection of land use approvals for five to ten years, regardless of future decisions of the Board of Supervisors.

After a very thorough and thoughtful staff presentation on both the land use and financial opportunities of permitting medical and recreational marijuana in the jurisdiction, the Board of Supervisors directed staff to continue to work on the legalization of cannabis businesses by a vote of 4-1.  In addition, the Board directed staff by a vote of 3-2 to work toward a Development Agreement process through a Request for Proposals instead of placing a cannabis tax measure on the ballot for November 2018.

County staff intends to present an ordinance for permitting commercial cannabis in Riverside County to the Planning Commission in late Spring/early Summer with a hearing for final approval before the Board of Supervisors in July 2018.

Contact us to learn more about California state or local cannabis regulations, cannabis regulatory compliance, and cannabis litigation.

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Marijuana Licensing Update: City of Los Angeles

Marijuana Laws

As the Phase 1 permit window for Los Angeles Proposition D compliant Existing Medical Marijuana Dispensaries (EMMD) is about to close, the City of Los Angeles has not yet publicly announced the opening of the Phase 2 cannabis permit application window.

A Phase 2 applicant is a “Non-Retailer Commercial Cannabis Activity” who was “engaged prior to January 1, 2016, in the same Non-Retailer Commercial Cannabis Activity that it now seeks a License for and provides evidence and attests under penalty of perjury that it was a supplier to an EMMD prior to January 1, 2017.”  The LA marijuana business premises must also meet Los Angeles zoning and sensitive use requirements without any fire or life safety violations and pass a pre-license inspection.  Among other operational requirements, all outstanding Los Angeles City business tax obligations must be paid, and the City must be indemnified from any potential liability.  See the full text of the Los Angeles Municipal Code re Cannabis (Article 4 to Chapter X of the Los Angeles Municipal Code).

The immediate concern for Phase 2 Los Angeles marijuana business applicants is that the window for applications under Phase 2 closes on April 1, 2018, yet the City of Los Angeles has not announced when a Phase 2 LA marijuana business applicant can file an application.  The application period narrows every day for pre-existing non-retail Los Angeles cannabis businesses.

In addition, the City of Los Angeles has not yet publicly announced when the Phase 3 application process for general Los Angeles marijuana business applicants will begin or end.  However, the question becomes, what additional cannabis business locations, if any, will be available to Phase 3 LA City marijuana business applicants.  Of course, without a local license, marijuana businesses are precluded from applying for a California state cannabis license.

While most people familiar with the regulation of cannabis businesses are accustomed to zoning limitations and proximity to sensitive use regulations, the City of Los Angeles codified another marijuana regulation that will ultimately limit the number of LA cannabis businesses regardless of zoning or proximity restrictions – Undue Concentration.

Simply put, a Phase 3 marijuana business applicant may comply with all Los Angeles land use and zoning restrictions, but not receive a permit based on Undue Concentration of a particular type of marijuana license in a specific LA Community Plan area.  See the City provided Los Angeles Cannabis License Capacity list of maximum number of cannabis businesses per type including retail, microbusiness, cultivation, and manufacturing.

The City of Los Angeles states that this is a “Soft Cap”; however, an applicant for a cannabis business permit located in an area of Undue Concentration must request the LA City Council find that approval of the cannabis license application would serve public convenience or necessity.

Los Angeles is the largest US City in the United States to legalize recreational use cannabis businesses, but it remains to be seen how that legalization will progress.

Contact us to learn more about California state or local cannabis regulations, cannabis regulatory compliance, and cannabis litigation.