HomeMy WebLinkAboutItem 12 - Cannabis Business Program and Regulation Updates
Department Name: Administration
Cost Center:
For Agenda of: December 3, 2019
Placement: Public Hearing
Estimated Time: 60 minutes
FROM: Greg Hermann, Deputy City Manager
Prepared By: Charlene Rosales, Economic Development Manager
Georgina Bailey, Management Fellow
SUBJECT: CANNABIS BUSINESS PROGRAM AND REGULATION UPDATES
RECOMMENDATION
1. Receive an update on the City’s Cannabis Business Program; and
2. Adopt a resolution that updates the one-time application fee (Attachment A); and
3. Adopt a resolution that updates the merit criteria to be used in the evaluation of applications
for cannabis business operator permits and adopts a 70% of total available points minimum
threshold which applicants must score to be eligible for a contingent operator permit
(Attachment B); and
4. Introduce and adopt an ordinance amending Municipal Code Section 9.10 (Attachment D)
clarifying unsuccessful applicants’ ability to apply during separate application periods in the
same year.
REPORT-IN-BRIEF
The City of San Luis Obispo adopted regulations to implement a Cannabis Business Program
after the passage of Proposition 64 that were informed through public engagement, industry
outreach and Council direction. The initial regulations were adopted by the City Council on
November 27, 2018. After the adoption of the initial regulations, Council directed staff to return
with an update regarding the implementation of the Cannabis Business Program and potential
updates to the regulations in the next year.
This staff report intends to inform and recommend to the Council updates to the Cannabis
Business Program based on the experience over the last year. During that time, the City has
opened two rounds of cannabis business application periods;1) January 7-29, 2019, and 2) July
1-31, 2019. In parallel, staff worked to develop the administration and operational guidelines
necessary to fully implement the Cannabis Business Program. Staff has created a process to
comply with State mandates allowing operators licensed outside of the City to deliver into the
City, while enforcing compliance with the City’s Business License and Tax Ordinance. Staff has
conducted initial analysis on the application fees and is recommending a change to one-time
application fees paid by all applicants. In addition to other outreach and research, staff
researched Cottage Industry Programs (fee structures and regulations that would support a
cottage industry in a city or county). Staff found no established city programs throughout the
State of California and, as such, does not recommend the City of San Luis Obispo pilot a
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Cannabis Cottage Industry Program at this time.
Informed from two application scoring rounds and staff’s experience implementing Cannabis
Regulations, staff recommends adoption of an ordinance updating Municipal Code Section
9.10.070 to include an additional clarification that an unsuccessful applicant is allowed to apply
for cannabis operator permits during subsequent application periods in the same year.
Staff is also recommending minor updates and clarifications in the Cannabis Scoring Worksheet,
which will impact all types of cannabis applications, except storefront retail applications.
DISCUSSION
Background
Cannabis Business Program Update
Following the passage of Proposition 64 in 2016 with 57% Statewide voter approval, the
initiative to legalize cannabis in the state of California became law on November 9, 2016,
allowing for recreational cannabis sales as of January 1, 2018. Following the passage of the
City’s Cannabis Business Tax on November 6, 2018, by 80% of the City’s residents, on
November 27, 2018 the City Council approved the fee structure, application criteria and zoning
regulations to allow for cannabis businesses to operate in the City.
In order to choose the most qualified operators, the City Council established an application and
approval process for applicants wanting to operate cannabis businesses in the City. The City
received 12 applications from interested parties during the first application period from January
7-29, 2019 and issued five contingent operator permits on March 28, 2019. Three of the
contingent permits are for retail storefronts, one is for a delivery service and one is for a
microbusiness. Those businesses then began moving through the background investigation
process to receive final operator permits .
On September 5, 2019, the first two final operator permits were granted. One permit was
granted for a retail storefront business and the other operator permit was granted for a non-retail
storefront delivery business. On October 22, 2019, a second retail storefront business permit
was issued. The remaining contingent operator permit for a retail storefront business issued in
March did not receive final approval. As a result, the applicant with the fourth highest score
from the first application period was granted a contingent operator permit. The microbusiness
from the first application period was granted an operator permit the last week of November and
is now in the processes of being granted a land use permit.
During the second application window, July 1 to July 31, 2019, one operator applied for a retail
non-storefront delivery business permit. Because there were no other applicants, there was no
ability to set a 70% scoring threshold of the highest scoring applicant. As such, the applicant was
held to a 70% threshold of total available points, which was not met, and a contingent operator
permit was not granted.
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On November 13, 2019, two retail storefront applicants received the required conditional use
permits from the Planning Commission to complete their land use approvals process. Both
operators have applied for and are now in the process for a State license from the Bureau of
Cannabis Control. That process may take anywhere from two weeks to six months to issue,
depending on volume and completeness of applications. The applicants expect their businesses to
be open at the end of March and beginning of July respectively.
The regulations adopted on November 27, 2018, grant the City Manager the authority to adjust
application periods and to open new application periods on an as needed basis, in addition to the
annual application period of July 1 through July 31 of each calendar year. Following City
Manager direction, staff will open the next round of cannabis operator permit applications for all
business types, except Retail Storefront, from January 15, to February 15, 2020.
Administrative and Operation al Guidelines
The goal for implementation of the regulations for cannabis related businesses is to ensure
consumer access, realistic and equitable expectations of business owners, standardized
compliance measurements and enforcement procedures, legitimization of the industry and
support for business success while ensuring the continued safety of the public and pro tection of
quality of life. To this end, Section 9.10.250 of the City’s cannabis ordinance authorizes the City
Manager to determine any administrative regulations necessary to implement the requirements
and fulfill the purposes and policies of the City’s cannabis regulations. Throughout the
implementation of the program, several administrative and operational guidelines have been
developed to support the goals of the Cannabis Business Program and clarify processes outlined
in the Municipal Code. Those have included standards for security plans, background
investigation workflows and the development of other administrative process documents. These
guidelines and processes are updated as needed and are informed by other municipalities’ best
practices, internal multi-department staff teams and the direction of the City Manager.
Mobile Deliveries from Outside of the City
The State Bureau of Cannabis Control (BCC) has implemented rules that mandate cities to allow
delivery within their jurisdiction from licensed operators outside of the City, consistent with
Section 5416 (d) of the BCC’s cannabis regulations which states:
“(d) A delivery employee may deliver to any jurisdiction within the State of California
provided that such delivery is conducted in compliance with all delivery provisions of
this division.”
In spring 2019, the City began to develop a plan to both bring licensed delivery businesses into
compliance with City business license and tax provisions and to enforce City and State laws
against unlicensed and illegal businesses delivering in the City. Two rounds of “Notice to
Comply” letters were sent to out to City delivery operators in July and August 2019.
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The “Notice to Comply” letters included educational materials on City policies and regulations
regarding current cannabis delivery regulations and included instructions on becoming a
compliant delivery operator in the City. Cannabis delivery services can deliver in the City, even
if their business is not located within the City, provided they possess a valid California driver’s
license and satisfy the following conditions:
1. The cannabis delivery service has proof of a commercial cannabis business license from
another city or county;
2. The cannabis delivery service has proof of a license from the State of California; issued by
the Bureau of Cannabis Control (BCC).
The cannabis delivery service must then apply for and receive a valid business license and
cannabis tax certificate from the City of San Luis Obispo and remit applicable taxes to the City
for transactions that occur within the City.
To date, four businesses have come into compliance and the City continues to work on various
enforcement approaches for those operating outside of applicable regulations.
Application Fees
On November 11, 2018, City Council approved both application and operating license fees for
the Cannabis Business Program. These fees were based on estimated staff time and other costs
required to administer the adopted regulations and were developed by a consultant with specific
experience including work with other California cities in developing similar fees.
The one-time application fee for new cannabis businesses is $23,262 and includes costs
associated with the review of applications and subsequent background investigations. The fees
were based on assumptions for staff time and resources needed to recover the specific and
reasonable costs related to the review and evaluation of application and background information.
As was discussed during the adoption of the original fees, staff would track actual hours spent
against assumptions made to develop fees and updates would be recommended accordingly. In
addition, fees may also be updated to reflect process streamlining or other efficiencies gained
through experience implementing the regulations.
Staff has completed an analysis of original assumptions of staff hours compared to the actual
hours from the first application period until the present.
Staff found that time dedicated to the overall application process was significantly over the initial
assumptions. This, however, is not unusual as this was the City’s initial implementation of the
program and additional time was required to develop new procedures, create workflows and
processes and other policies and guidelines. Staff believes that the discrepancy between assumed
and actual hours will be reduced and will meet initial assumptions in subsequent application
periods as processes become more streamlined and staff have more experience working through
applications and background investigations. As such, no changes are recommended for the total
application fee at this time. Staff will continue tracking time and costs associated with the full
implementation of the Cannabis Business Program and return with recommended changes as
warranted.
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Staff does, however, recommend changes to the timing of payments of the application fee. Staff
recommends reducing the initial fee to $4,995 due at time of application. Currently, all
businesses other than retail are required to pay 33% of the total application fee, or $7,431, at the
time of application submittal. The balance of the fee is due and payable for the business to
receive a contingent operator permit. Retail applicants are required to pay the full application fee
at the time of submittal.
As previously stated, application fees consist of the costs associated with application review and
background investigations. Staff recommends that all future applicants pay an initial fee at the
time of application submittal associated with costs of reviewing the application and, if offered a
contingent operator permit, be required to pay the remaining balance which would cover costs
associated with the background investigation and permitting process. This change would result
in the following application fees in 2020:
Initial Application Fee: $4,955
Fee due when Contingent Operator Permit is Granted: $18,307
Total One Time Application Fees: $23,262
Staff also recommends that this approach to the application fee be consistent across all cannabis
business types for consistency and clarity. As such, the changes noted in Attachment A are
recommended to include retail businesses, as well as all other businesses.
No changes are currently recommended for annual operating license fees as the City needs to
complete one full year of operations, starting from the date the businesses open and fees are due,
to collect information on actual time spent and compare that to assumptions. Staff will bring that
information forward along any recommended changes as needed which may vary, as different
cannabis business types have different fees and planned opening dates.
Cottage Industry Regulations
City Council gave staff direction at the November 28, 2018 meeting to investigate an additional
set of lower fees to support cottage industry businesses. A cannabis cottage permit is defined by
the California Department of Food and Agriculture as an outdoor, indoor, or mixed lighting
cultivation site that can hold up to 25 mature plants for an outdoor permit, 500 sq. ft. of
cultivation for an indoor permit or up to 2,500 sq. ft. for a mixed light permit. Staff has
investigated and researched cottage permits and industries in other municipalities in the State of
California. Staff has not identified any cottage industry programs in other municipalities,
however, there are a limited number of cottage industry programs in some counties. Staff
researched cottage permits in relation to the City of San Luis Obispo’s comparable cities which
are: Davis, Monterey, Napa, Paso Robles, Santa Barbara, and Santa Cruz. Davis, Monterey,
Napa, Paso Robles, Santa Barbara, and Santa Cruz; none currently have cottage industry
programs, regulations, permits, or fees in their cannabis ordinances or regulations. In addition to
the City’s comparable cities, other surrounding municipalities with cannabis programs , such as
Grover Beach and Morro Bay, do not currently have cottage industry programs or fees. The City
of San Luis Obispo would be the first city in the county and potentially the first in the state to
pilot a cottage industry program and fee structure. Piloting a cottage industry in the City of San
Luis Obispo would require significant staff time and additional resources to develop a fee
structure, additional application, regulations and operations guide needed to support the success
of such a program.
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Staff recommends Council move forward with one year of Cannabis Business Program
implementation and then consider available resources to develop a cottage industry program in
the City.
Application Changes
Staff recommends Council adopt a resolution (Attachment B) to make minor updates and
clarifications to the merit criteria to be used in the evaluation of applications for cannabis
business operator permits. The recommended changes are identified and incorporated into the
updated Cannabis Scoring Worksheet (Attachment C). In addition to maintaining Council’s
initial direction and decision from November 28, 2018 staff is proposing minor updates and
clarifications to certain sections of the application criteria that are informed through feedback
from two application periods from the cannabis review panel, internal multi-department staff
teams, consultant recommendations and best practices from other municipalities.
The proposed changes will change the Cannabis Scoring Worksheet for all cannabis applications,
except Retail Storefront, and will apply to all following cannabis application periods. Staff
would recommend an additional, separate review of all Retail Storefront criteria in advance of
opening an application period for that business type which is not anticipated at this time.
In the Manufacturing, Distribution and Non-Storefront Retail Evaluation Criteria Worksheet
changes are recommended to the Community Benefit and Equity and Labor Merit Criteria as
summarized below and in Attachment C.
a. Community Benefit
i. Section 1.1B has been changed to remove the word “over” as it relates to 10-20 hours per
month of community services to make clear that the two points available will be given to
commitments in that range. Five points are available for commitment over 20 hours per
month.
ii. Section 1.3B has been changed to clarify what “a history of supporting local community
programs” means, which has been defined as “the past one year.”
iii. The maximum score for section Community Benefit B has been changed to 15 points to
correct a previous typographical error.
b. Equity and Labor
i. Section 2.4 has been eliminated as State laws surrounding “labor peace agreements” are
already triggered for businesses with 20 employees; meaning operational businesses will
already have this component of their business plan via state law and do not need to be
scored on merit.
ii. The elimination of Section 2.4 results in the maximum score for Equity and Labor
changing to 18 points. The total maximum points for Manufacturing, Distribution and
Non-Storefront Retail applications is now 83 points.
In the Cultivation Criteria Worksheet (Attachment C) the same changes are recommended to the
Community Benefit and Equity and Labor merit criteria. No additional changes are
recommended and the total maximum points for a Cultivation Application are now 113 points.
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Staff also recommends in the Merit Criteria Resolution (Attachment B), that a criteria be adopted
that requires all applicants to achieve a 70% scoring threshold from the total available points to
qualify for contingent operator permits. The clause would be included on the first page in
Attachment C, as rule 12, and will read:
For an applicant to qualify for a contingent operator permit, the applicant must score at or
above 70% of the of total available points on the application from an average of all
scorers.
The previous scoring threshold required applicants to score at least 70% of total points scored
from the highest scoring applicant within that business type, which assumes multiple applicants.
The amended language is recommended to avoid any ambiguity when only one application from
a business type is received during an application period, as was experienced in the last
application period. In addition, having a 70% threshold of total available points enhances
consistency across all application periods and does not rely on the strength of any particular
applicant pool to establish minimum thresholds.
Subsequent Applications by Unsuccessful Applicants
Currently the City’s Municipal Code could be interpreted to disallow an unsuccessful cannabis
applicant to re-apply for the same cannabis license type more than once in a one-year period.
Municipal Code Section 9.10.070 currently provides:
B. Application Submittal Timeframe. A person may only submit one application for a
commercial cannabis operator permit during the annual application period designated by
resolution of the City Council.
In the interest of economic development and equitable practices of the cannabis applications,
staff recommends Council adopts language for section 9.10.70 under Item A “Application” and
Item B “Application Submittal Timeframe” that clarifies that an applicant is not limited to
submitting an application only during the annual application period, but if any other application
period(s) are opened by the City Manager, the same applicant, previously not recommended for a
permit, may submit another application for a contingent operator permit (Attachment Ordinance
X Exhibit A Chapter 9.10).
Policy Analysis
The updates to the cannabis regulations are consistent with overall goals of cannabis regulations
in the Fiscal Health Response Plan, the City’s 2019-2021 Major City Goals and the applicable
sections of the Municipal Code. Cannabis regulations and fees are an important piece of the
Fiscal Health Response Plan and Fiscal Sustainability and Responsibility Major City Goal,
which seeks to bring in new revenue while sustaining economic development in the City, and the
updates to the fees and regulations support these goals. Likewise, the updates to the cannabis
regulations are consistent with Chapter 9.10 of the Municipal Code and Section 17.86.080 of the
Zoning Code, which outline that the provisions of each code are guided by principles to protect,
the health, safety, and welfare of the residents of the City. Furthermore, it is the general best
practice for the City to provide the most clear and concise regulations to benefit the community,
businesses, staff, and the City Council. Staff believes the recommended amendments will not
only provide more clarity to those applying for cannabis operator permits, but also potentially
bring more applicants with a different fee payment process and updated applications.
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Public Engagement
The current Ordinance and resolutions were considered and adopted City Council on May 15,
2018; October 16, 2018; and November 27, 2018. Since that time, staff have been in regular
communication with applicants, business operators and industry representatives, receiving
feedback on a wide range of issues related to the implementation of the Cannabis Business
Program. Staff has also met with applicants and operators to obtain input on the application and
permitting process in order to continuously improve the program.
CONCURRENCE
A Steering Committee of City staff members including Administration staff, City Attorney, the
Community Development Director, Finance Director, Fire Marshal, and Police Chief, was
convened to guide the process of developing updates and regulations for consideration by the
City Council.
ENVIRONMENTAL REVIEW
No updates staff are proposing for Cannabis Updates require a CEQA component and is exempt
from environmental review as a Statutory Exemption under Section 15262 of the CEQA
Guidelines, feasibility and planning studies.
FISCAL IMPACT
Fiscal Analysis:
Budgeted: Yes Budget Year: Ongoing
Funding Identified: Yes
Fiscal Analysis:
Funding Sources Current FY Cost
Annualized
On-going Cost
Total Project
Cost
General Fund
State
Federal
Fees
Other:
Total n/a n/a n/a
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In November 27, 2018, City Council was informed that tax revenues from cannabis businesses
were anticipated to generate up to $1,500,000 through full implementation of the program.
Cannabis business tax revenue estimates were included in the City’s Fiscal Health Response Plan
presented to Council on April 17, 2018. Due to various delays associated with the
implementation of the new Cannabis Business Program it is expected the revenue projections for
2019-2020 will need to be adjusted as actual tax remittances will not reflect the original
assumptions. At this time, staff believes the initial long-term assumptions of $1,500,000 in tax
revenue through the next several years as businesses mature is still an accurate forecast of tax
revenue. Updated projections on Cannabis Business Tax revenue will be presented to the City
Council at the Mid-Year Budget Update on February 18, 2019.
ALTERNATIVES
1. Do not adopt staff recommendations. This is not recommended as it does not align with the
City Council’s overall intention to enhance clarity and cost effectiveness in the application
process and Cannabis Regulations. Likewise, this is not recommended as it does not align
with the City Council’s overall intention to obtain qualified cannabis business operators in
the City.
2. Modify and Direct the Proposed Fee Recommendation and Application Criteria. The
City Council has the latitude to make modifications to the Cannabis Operator Permit
Application Requirements and Ranking Criteria and the proposed Fee Schedule. The Council
has the policy discretion to adjust fees and Staff will be prepared to offer any ideas for any
adjustments.
Attachments:
a - Draft Resolution Amended Fee Payment
b - Draft Resolution Merit Criteria
c - Exhibit A to Draft Resolution - Cannabis Scoring Worksheet
d - Draft Ordinance Amendment
e - Exhibit A to Draft Ordinance
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R ______
RESOLUTION NO. ______ (2019 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, AMENDING THE CITY’S MASTER FEE
SCHEDULE WITH UPDATED USER AND REGULATORY FEES FOR
VARIOUS COMMERCIAL CANNABIS BUSINESS ACTIVITIES
WHEREAS, it is the City’s policy (User Fee Recovery Goals - Financial Plan Section H)
to assess service charges based on specific policies for cost recovery of services provided; and
WHEREAS, on May 15, 2018, the City Council adopted Ordinance No. 1647 (2018
Series) establishing a comprehensive regulatory program for the evaluation and permitting of
commercial cannabis business operations within the City; and
WHEREAS, Section 9.10.050 of the Municipal Code says that the City Council shall
adopt fees necessary to implement the regulations in relation to Commercial Cannabis Operator
Permits; and
WHEREAS, the City has contracted with a consultant, MuniServices, to prepare cost and
resource allocation worksheets for the purpose of identifying appropriate fees to assess for various
activities and applications associated with the reviewing, ranking, permitting, and regulation of
commercial cannabis businesses in the City of San Luis Obispo; and
WHEREAS, the City has completed two Cannabis application windows from January
2019 to December 2019, upon which staff has concluded it is necessary to adjust the way in which
Cannabis Applicant’s for all application types pay for their one-time application fee;
WHEREAS, public outreach was conducted through outreach by staff members to
interested parties and through publication of the proposed fee schedule on the City’s website in
advance of the City Council’s consideration of the newly proposed fees; and
WHEREAS, on November 27, 2018, the City Council adopted a fee schedule; and
WHEREAS, on December 3, 2019, the City Council held a public hearing to review and
discuss the updated proposed fee schedule, receive public input, and consider the
recommendations of its staff.
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo
as follows:
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Resolution No. ______ (2019 Series) Page 2
R ______
SECTION 1. Findings. The City Council makes the following findings:
1. That the above recitals are true and correct.
2. That the proposed user and regulatory fees are consistent with the City’s cost recovery
goals (Financial Plan Section H), and that the established fees do not exceed the
estimated reasonable cost of providing the service or performing the activity for which
the fee is imposed.
SECTION 2. Action. The City Council takes the following actions:
1. The City’s Master Fee Schedule is hereby amended to include updated user and
regulatory fees for cannabis business operator applications and annual licenses as
provided in Exhibit A attached hereto.
2. This resolution supersedes Resolution 10965 (2018 Series) to the extent inconsistent
herewith.
Upon motion of Council Member ____________, seconded by Council Member _____________,
and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this _________day of _____________ 2019.
____________________________________
Mayor Heidi Harmon
ATTEST:
____________________________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
_____________________________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City
of San Luis Obispo, California, this __________ day of ____________________, ____________.
____________________________________
Teresa Purrington, City Clerk
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Resolution No. ________ (2019 Series) Page 3
EXHIBIT A
R ______
EXHIBIT A
CITY OF SAN LUIS OBISPO
Cannabis Fee Schedule
One Time Application Fees
All Commercial Cannabis Business Applicants:
Initial Application Fee $4,955 $7,431
Final Application Fee when permit issues $18,307 $15, 087
Total One Time Application Fees: $23,262
Yearly License Renewal Fees
Retail Businesses $93,564
Manufacturing Businesses $74,411
Cultivation $74,627
Other Business $68,064
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R ______
RESOLUTION NO. ______ (2019 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, APPROVING CANNABIS OPERATOR PERMIT
RANKING CRITERIA AND THE ANNUAL APPLICATION SUBMITTAL
PERIOD (CODE-1058-2017)
WHEREAS, in 2017, the California legislature passed, and Governor Brown signed
Senate Bill 94, which enacted the Medicinal and Adult-Use Cannabis Regulation and Safety Act
(“MAUCRSA”), repealed the Medical Cannabis Regulation and Safety Act (“MCRSA”) but
incorporated certain provisions of MCRSA into the licensing provisions established by Proposition
64; and
WHEREAS, the City Council of the City of San Luis Obispo conducted a public hearing
in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, on May 15,
2018 and adopted Ordinance 1647 that amended Title 17 (Zoning Regulations) of the Municipal
Code to establish land use regulations for the operation of commercial cannabis businesses, and
repealed and replaced Title 9, Public Peace, Morals and Welfare (Chapter 9.10.) of the Municipal
Code related to cannabis regulation; and
WHEREAS, the City Council of the City of San Luis Obispo conducted a public hearing
on October 16, 2018 in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo,
California, and continued the review of the Cannabis Operator Permit Ranking Criteria and the
annual application submittal period providing direction to staff on adjustments to be made to the
criteria; and
WHEREAS, the City Council of the City of San Luis Obispo adopted on November 27,
2018 in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, a
resolution that established the Cannabis Operator Permit Ranking Criteria (Exhibit A) and the
annual application submittal period; and
WHEREAS, the City Council of the City of San Luis Obispo conducted a public hearing
on December 3, 2019 in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo,
California, for the purpose of updating the Cannabis Operator Permit Ranking Criteria (Exhibit
A).
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo
as follows:
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Resolution No. ________ (2019 Series) Page 2
R _______
SECTION 1. Findings.
1. The proposed Cannabis Operator Permit Ranking Criteria (Exhibit B) establishes the
ranking criteria for individuals who apply for a Cannabis Operator Permit to operate a
cannabis business activity in the City consistent with Municipal Code Chapter 9.10,
Section 9.10.070 (A).
2. The proposed timeframe in which applications are submitted annually is consistent with
Municipal Code Chapter 9.10, Section 9.10.070 (B).
SECTION 2. Environmental Review. The project is exempt from environmental review
per the Business and Professions Code (Section 26055(h)) because the project includes the
adoption of ordinances, rules, or regulations for the purpose of regulating cannabis business
activity in the City. The City’s cannabis business regulations require discretionary review and
approval of permits, licenses, or other authorizations to engage in commercial cannabis activity.
Future applications for commercial cannabis business activities in the City will be subject to
CEQA, per the normal environmental review process.
SECTION 3. Action. The City Council hereby approves Cannabis Operator Permit
Ranking Criteria (Exhibit A) and annual application submittal timeframe subject to the following
conditions:
1. All Cannabis Businesses shall be evaluated by the Cannabis Operator Permit Ranking
Criteria as outlined in Exhibit A.
2. The first annual application submittal period coincided with the first three weeks of
2019 (January 7 through close of business on January 29, 2019). Following that initial
application period, the City Council delegates its authority to the City Manager to open
up new application periods on an as needed basis to include July 1 through July 31 of
each calendar year.
3. The City Manager is authorized to make minor modifications to this evaluation criteria
to ensure that the application process is implemented in a manner that is consistent with
the intent of Ordinance 1647. Any future changes to the criteria outlined in Exhibit A
will be published at least 10 days in advance of any application period opening.
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Resolution No. ________ (2019 Series) Page 3
R _______
4. This resolution supersedes Resolution 10966 (2018 Series) to the extent inconsistent
herewith.
Upon motion of Council Member __________, seconded by Council Member _____________,
and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this ______ day of ____________ 2019.
____________________________________
Mayor Heidi Harmon
ATTEST:
____________________________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
_____________________________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City
of San Luis Obispo, California, this __________ day of ____________________, ____________.
____________________________________
Teresa Purrington
City Clerk
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CITY OF SAN LUIS OBISPO
Cannabis Business License Operator Permit
1Scoring Guidelines
1. Applicant will provide one hard copy and a digital copy in a readable PDF form make three copies of each
application and proposal.
2. City will compile any additional information related to the applicant for consideration.
3. Discussion between the reviewers during the evaluation will be limited to clarification to ensure an equal
understanding of the application.
4. Questions can also be directed to the consultant.
5. Each reviewer will complete a score sheet for each proposal.
6. Points may be awarded in an amount up to the possible points in each scoring criteria.
7. Each completed score sheet will be given to the consultant.
8. The consultant will review all three the score sheets for each proposal.
9. If there is a scoring deviation between reviewers on any scoring criteria of more than 30%, the consultant
will discuss this specific score with the reviewers.
10. An adjusted score may be agreed upon by the reviewers and the consultant.
11. Once all criteria scores are reviewed and agreed upon, the total aggregate score for the all three-review
panel ers will be totaled then divided by the number of reviewers three to obtain the final score.
12. For an applicant to qualify for a contingent operator permit, the applicant must score from an average of
all scorers at or above 70% of the total available points on the application of that application period.
1 Changes made to this page for the Cannabis Business Operator Permit Scoring Guidelines to mirror language used on the
Commercial Cannabis Business Operator Permit Application and to correctly reflect the structure of the seven -member Review Panel.
Applicant:
Reviewer:
Automatic Fail Criteria:
·Application received after the final filing date.
·Application is incomplete or inaccurate.
·Facility does not meet City business licensing standards.
·Only one license applicant allowed per location. It is the applicant’s responsibility to verify that must
ask potential landlords do not if they have existing, competing cannabis business applicants.
Definitions:
An "applicant" is the entity petitioning for the Cannabis Business Operator Permit license and A "principal(s)" are
the individual members of the applicant team.
A "primary principal" is defined as an individual who has a 10% or greater ownership stake of the applicant
business.
An "operator" is an applicant that has been licensed and conducts or conducted active cannabis operations.
A "majority" is defined as a greater number; more than half. An equal number does not constitute a majority.
Packet Page 204
Item 12
Adult-Use Retail Cannabis Merit-Based Criteria and Possible Points
All applications for a license will be evaluated using the merit criteria outlined below. Applicants must submit
supplemental documentation or references with the application that support the statements below for review
by the City.
Packet Page 205
Item 12
Manufacturing, Distribution and Non-Storefront Retail Evaluation Criteria
Merit Criteria 1.0 - Community Benefit
Community Benefit (A): Applicant demonstrates a commitment to City through
local hiring and community support. Select all that apply within each category
and total score. (Up to 20 Points – Deviation Threshold 6 Points)
Possible
points
Applicant
score
1.1A
Over 90% of employees will be San Luis Obispo County residents. (10 points)
or 60% - 90% of employees will be San Luis Obispo County residents. (5 points)
10
1.2A
Over 80% of supply and equipment expense (non-labor, non-rent expense) will be
sourced from businesses within 90 miles. (10 points)
or 50% - 80% of supply and equipment expense (non-labor, non-rent expense)
will be sourced from local businesses within 90 miles. (5 points)
10
Total Community Benefit (A) 20
Community Benefit (B): Continued support of community programs in San Luis
Obispo (i.e. park cleanups, facility improvements, donating supplies/equipment to
youth programs). (Up to 10152 Points - Deviation Threshold 3 points)
Possible
points
Applicant
score
1.1B
Providing over 20 hours per month of community support. (5 points)
or Providing over3 10-20 hours per month of community support. (2 points)
5
1.2B
Provide over $1,000 per month for community support. (5 points)
or Provide up to $1,000 per month for community support. (2 points)
5
1.3B Applicant can demonstrate a history of supporting local community programs for
the past one year.4 (5 points) 5
Total Community Benefit (B) 15
Total Merit Criteria 1.0 35
2 Correction to possible points available in “Community Benefit (B)”.
3 Clarifies range between “over 20 hours” (worth 5 points) “and 10 -20 hours” (2 points).
4 Specifies the range for demonstrating a “history” of supporting local community programs. Packet Page 206
Item 12
Merit Criteria 2.0 - Equity and Labor
Applicant commits to equity ownership and competitive compensation in
comparison to other mainstream commercial businesses. Applicants commitment
will be confirmed during annual permit renewal process. Select all that apply and
total score. (Up to 20 Points – Deviation Threshold 9 Points)
Possible
points
Applicant
score
2.1
Applicant includes 3 or more principals with 2% equity or higher who have earned
at or below the median household income at the time of application. (8 points)
or Applicant includes 1 or 2 primary principals who have earned at or below the
median household income at the time of application. (4 points)
8
2.2
Business will have an average pay rate for entry and mid-level positions of at least
40% more than the median local income for similar positions in other mainstream
businesses. (8 points)
or Business will have an average pay rate for entry and mid-level positions of at
least 20% more than the median local income for similar positions in other
mainstream businesses. (4 points)
8
2.3
Base wages of employees exceed the minimum wage by at least $3.00/hr.
2
2.4
Business will allow "labor peace agreement" at 20 or more non-management
employees.5
2
Total Merit Criteria 2.0 20186
5 Eliminate the “labor peace agreement” for “non-management” points; state law triggers at 20 employees.
6 New total merit criteria points available in “2.0 Equity and Labor”. Packet Page 207
Item 12
Merit Criteria 3.0 - Financial Investment
Financial Investment: Applicant has plans and capital to support a vibrant
business within the City. (Up to 25 Points – Deviation Threshold 3 Points)
Possible
points
Applicant
score
3.1 Applicant demonstrates financial capacity to capitalize, start up, and sustain
business operations.
1-10
3.2 Applicant commits to develop raw land that has been zoned for commercial use
for a commercial cannabis facility.
1-10
3.3
Applicant commits to major improvements, including façade rehabilitation,
building expansion, site improvements and/or other investments in an
underutilized/underdeveloped site that has been zoned for commercial use for a
commercial cannabis facility.
1-5
3.4 The proposed cannabis business site can accommodate the required number of
parking spaces with safe and convenient access for customers/employees.
1-5
Total Merit Criteria 3.0 30
Totals
Total GENERAL Merit Criteria Points Available 8357
Total GENERAL Merit Criteria Points Awarded
Total %
Packet Page 208
Item 12
Cultivation Evaluation Criteria
Merit Criteria 1.0 - Community Benefit
Community Benefit (A): Applicant demonstrates a commitment to City through
local hiring and community support. Select all that apply within each category
and total score. (Up to 20 Points – Deviation Threshold 6 Points)
Possible
points
Applicant
score
1.1A
Over 90% of employees will be San Luis Obispo County residents. (10 points)
or 60% - 90% of employees will be San Luis Obispo County residents. (5 points)
10
1.2A
Over 80% of supply and equipment expense (non-labor, non-rent expense) will be
sourced from businesses within 90 miles. (10 points)
or 50% - 80% of supply and equipment expense (non-labor, non-rent expense)
will be sourced from local businesses within 90 miles. (5 points)
10
Total Community Benefit (A) 20
Community Benefit (B): Continued support of community programs in San Luis
Obispo (i.e. park cleanups, facility improvements, donating supplies/equipment to
youth programs). (Up to 10 158 Points - Deviation Threshold 3 points)
Possible
points
Applicant
score
1.1B
Providing over 20 hours per month of community support. (5 points)
or Providing over 10-20 hours per month of community support. (2 points)
5
1.2B
Provide over $1,000 per month for community support. (5 points)
or Provide up to $1,000 per month for community support. (2 points)
5
1.3B Applicant can demonstrate a history of supporting local community programs for the
past one year.9(5 points)
5
Total Community Benefit (B) 15
Total Merit Criteria 1.0 35
8 Correction to possible points available in “Community Benefit (B)”.
9 Specifies the range for demonstrating a “history” of supporting local community programs. Packet Page 209
Item 12
Merit Criteria 2.0 - Equity and Labor
Applicant commits to equity ownership and competitive compensation in
comparison to other mainstream commercial businesses. Applicants commitment
will be confirmed during annual permit renewal process. Select all that apply and
total score. (Up to 20 Points – Deviation Threshold 9 Points)
Possible
points
Applicant
score
2.1
Applicant includes 3 or more principals with 2% equity or higher who have earned
at or below the median household income at the time of application. (8 points)
or Applicant includes 1 or 2 primary principals who have earned at or below the
median household income at the time of application. (4 points)
8
2.2
Business will have an average pay rate for entry and mid-level positions of at least
40% more than the median local income for similar positions in other mainstream
businesses. (8 points)
or Business will have an average pay rate for entry and mid-level positions of at
least 20% more than the median local income for similar positions in other
mainstream businesses. (4 points)
8
2.3
Base wages of employees exceed the minimum wage by at least $3.00/hr.
2
2.4 Business will allow "labor peace agreement" at 20 or more non-management
employees.
2
Total Merit Criteria 2.0 201810
Merit Criteria 3.0 - Medical Retail Commitment
Medical Retail Commitment (up to 10 points) Possible
points
Applicant
score
3.1 Applicant commits to retain a California state medicinal cannabis cultivation
license. 10
Total Merit Criteria 3.0 10
10 New total merit criteria points available in “2.0 Equity and Labor”. Packet Page 210
Item 12
Merit Criteria 4.0 - Sustainability
Applicant demonstrates past experience in and/or commits to sustainable and
environmental business or building practices utilizing recognized industry
standards. Applicants actions will be confirmed during annual permit renewal
process. Select all that apply and total score. (Up to 20 Points – Deviation
Threshold 6 Points)
Possible
points
Applicant
score
4.1
Applicant will recycle waste water (utilize purple pipe when available).
5
4.2
Applicant will utilize certified organic practices.
3
4.3
Applicant will utilize carbon free power sources for majority of power.
5
4.4
Applicant will utilize energy efficient lighting.
4
4.5
Applicant has plan to reduce water waste.
3
Total Merit Criteria 4.0 20
Merit Criteria 5.0 - Financial Investment
Financial Investment: Applicant has plans and capital to support a vibrant
business within the City. (Up to 25 Points – Deviation Threshold 3 Points)
Possible
points
Applicant
score
5.1 Applicant demonstrates financial capacity to capitalize, start up, and sustain
business operations.
1-10
5.2 Applicant commits to develop raw land that has been zoned for commercial use
for a commercial cannabis facility.
1-10
5.3
Applicant commits to major improvements, including façade rehabilitation,
building expansion, site improvements, removing visual blight, and/or other
investments in an underutilized/underdeveloped site that has been zoned for
commercial use for a commercial cannabis facility.
1-5
5.4
The proposed cannabis business site can accommodate the required number of
parking spaces with safe and convenient access for customers/employees.
1-5
Total Merit Criteria 5.0 30
Packet Page 211
Item 12
Totals
Total Merit Criteria Points Available 113511
Total Merit Criteria Points Awarded
Total %
11 New total for “General Merit Criteria Points Available”. Packet Page 212
Item 12
Retail Ev a lua tion Crite ria
M eri t C ri ter i a 1 .0 - C o m m uni ty Benef i t
C om m un i t y B ene f i t ( A ) : A ppl i c ant dem onst r at es a c om m i t m ent t o C i t y t hr oug h
l oca l h i r i ng and c om m uni t y suppo r t . S el e ct al l t hat app l y w i t hi n ea ch c a t eg or y
and t o t a l sc or e . ( U p t o 20 P oi nt s – D ev i a t i o n T hr es ho l d 6 Poin t s )
P os si b l e
point s
A pp l i can t
sc ore
1.1A
O v er 90% o f em pl oy ee s wi l l b e San Lu i s Ob i sp o C oun t y r es i den t s. ( 10 po i nts )
10
or 60 % - 90% of em pl oy ee s wil l be S an Lu i s Ob i spo C ount y r es i den t s. ( 5 po i nt s )
1.2A
O v er 80% o f supp l y and e q ui pm ent exp ens e ( non - l abo r , non - r ent e xpen se ) w i l l be
sour c ed f r om busi n es se s wi t hi n 90 m i l es . ( 10 po i n t s)
10
or 50 % - 80% of supp l y and e qu i pm ent expe nse ( non - l abor , non - r ent exp ens e)
w i l l be s our c ed f r om l oca l busi n es s es w i t h i n 90 m i l e s. ( 5 po i nts )
T otal C o m m u n ity Bene f it ( A) 20
C om m un i t y B ene f i t ( B ) : C ont i n ued s uppo r t o f com m uni t y pr og r am s i n San Lu i s
O bi spo ( i . e. pa r k cl ea nups, f ac i l i t y i m pr ov em ent s, don at i ng suppl i es / equ i pm ent t o
y out h pr og r am s) . ( U p t o 10 Point s - D ev i at i on T h r es h o l d 3 po i n t s)
P os si b l e
point s
A pp l i can t
sc ore
1.1B
Prov i di ng ov er 20 ho ur s pe r m ont h of c om m uni t y suppor t . ( 5 po i nt s)
5
or Pr ov i di ng ov er 10 - 20 hour s p er m ont h o f com m un i t y suppo r t . ( 2 po i nt s)
1. 2B
Prov i de ov er $1, 000 p er m ont h f or com m uni t y suppor t . ( 5 p oi n t s)
5
or Pr ov i de up t o $1, 000 p er m ont h f o r com m uni t y suppor t . ( 2 p oi n t s)
1. 3B A ppl i c ant ca n dem onst r at e a hi s t o r y of supp or t i ng l oc a l com m uni t y pr og r am s. ( 5
poi n t s) 5
T otal C om m u n ity Bene f it ( B ) 15
To t a l M er i t C ri ter i a 1.0 35
Packet Page 213
Item 12
Merit Criteria 2.0 - Experience
Record of compliant current or previous business operations: Applicant has
previous record of operating a compliant cannabis operation (including medical).
A compliant operation is defined as having a substantially compliant record (may
have some minor resolved/corrected violations) without a documented history of
unresolved local or state level violations relating, but not limited to: business code,
public safety, environmental impacts, employment, and financial payments. (Up
to 30 Points – Deviation Threshold 9 Points)
Possible
points
Applicant
score
2.1
91% to 100% of the primary principals have operated a local compliant cannabis
operation for 5 or more years. 35
or 81% to 90% of the primary principals have operated a local compliant
cannabis operation for 5 or more years. 30
or 71% to 80% of the primary principals have operated a local compliant
cannabis operation for 5 or more years. 25
or 61% to 70% of the primary principals have operated a local compliant
cannabis operation for 5 or more years. 20
or 51% to 60% of the primary principals have operated a local compliant
commercial cannabis operation for 5 or more years. 15
2.2
10-50% of the primary principals operated a compliant cannabis operation outside
of SLO County for 5 or more years. 10
or 10-50% of the primary principals operated a compliant cannabis operation
outside of SLO County for less than 5 years. 5
Total Merit Criteria 2.0 35
Packet Page 214
Item 12
Merit Criteria 3.0 - Equity and Labor
Applicant commits to equity ownership and competitive compensation in
comparison to other mainstream commercial businesses. Applicants commitment
will be confirmed during annual permit renewal process. Select all that apply and
total score. (Up to 20 Points – Deviation Threshold 9 Points)
Possible
points
Applicant
score
3.1
Applicant includes 3 or more principals with 2% equity or higher who have earned
at or below the median household income at the time of application. (8 points)
8
or Applicant includes 1 or 2 primary principals who have earned at or below the
median household income at the time of application. (4 points)
3.2
Business will have an average pay rate for entry and mid-level positions of at least
40% more than the median local income for similar positions in other mainstream
businesses. (8 points)
8
or Business will have an average pay rate for entry and mid -level positions of at
least 20% more than the median local income for similar positions in other
mainstream businesses. (4 points)
3.3 Base wages of employees exceed the minimum wage by at least $3.00/hr. 2
3.4 Business will allow "labor peace agreement" at 20 or more non-management
employees. 2
Total Merit Criteria 3.0 20
Packet Page 215
Item 12
Merit Criteria 4.0 - Messaging
4.1 Applicant commits to responsible use messaging practices. Select all that apply
and total score. (Up to 10 Points – Deviation Threshold 3 Points)
Possible
points
Applicant
score
4.2 Business articulates strategy to keep cannabis from being diverted to minors
including advertising that is appropriately targeted to adult audiences. 1-5
4.3
Business promotes responsible use including messaging on packaging, offering
lower dose THC product options, offering to track use via "user determined
quotas", posting information on cannabis use disorder and cautions re:
development of the adolescent brain.
1-5
Total Merit Criteria 4.0 10
Merit Criteria 5.0 - Medical Retail Commitment
Medical Retail Commitment (up to 10 points) Possible
points
Applicant
score
5.1 Applicant commits to provide retail medical cannabis products to consumers. 10
Total Merit Criteria 5.0 10
Packet Page 216
Item 12
Merit Criteria 6.0 - Property Control
Control of business location: Applicant demonstrates control of a site to ensure a
successful and timely transition from being awarded a license to opening the
business. Incomplete purchase or lease agreements do not constitute site control.
(Up to 10 Points – Deviation Threshold 3 Points)
Possible
points
Applicant
score
Choose one:
6.1 Majority ownership in site property. 10
6.2 Minority ownership in site property. 8
6.3 10+ years future lease of site property. 8
6.4 5-10 years future lease of site property. 5
6.5 2-5 years future lease of site property. 3
6.6 Less than 2 years future lease of site property. 1
Total Merit Criteria 6.0 10
Merit Criteria 7.0 - Financial Investment
Financial Investment: Applicant has plans and capital to support a vibrant
business within the City. (Up to 25 Points – Deviation Threshold 3 Points)
Possible
points
Applicant
score
7.1 Applicant demonst rates financial capacity to capitalize, start up, and sustain
business operations. 1-10
7.2
Applicant commits to major improvements, including façade rehabilitation,
building expansion, site improvements, removing visual blight, and/or other
investments in an underutilized/underdeveloped site that has been zoned for
commercial use for a commercial cannabis facility.
1-5
7.3 The proposed cannabis business site can accommodate the required number of
parking spaces and safe and convenient access for customers/employees. 1-5
Total Merit Criteria 7.0 20
Packet Page 217
Item 12
Totals
Total Merit Criteria Points Availab le 140
Total Merit Criteria Points Awarded
Total %
Packet Page 218
Item 12
O ______
ORDINANCE NO. _____ (2019 SERIES)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, AMENDING THE MUNICIPAL CODE PUBLIC
PEACE, MORALS AND WELFARE (CHAPTER 9.10) REGULATIONS
FOR COMMERCIAL CANNABIS BUSINESS BUSINESSES AND
PERSONAL CULTIVATION
WHEREAS, the City of San Luis Obispo adopted on _____________, 2019, in the
Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California , an amendment to
the Municipal Code, Chapter 9.10, Regulations for Commercial Cannabis and Personal
Cultivation; and
NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis Obispo
as follows:
SECTION 1. Section 9.10.070, subsection A of the San Luis Obispo Municipal Code is
hereby amended as reflected in Exhibit A to read as follows:
A. Application. A person shall apply for a commercial cannabis operator permit by
submitting an application to the city during the annual application period or any other
period established by City Manager. The City Council will, by resolution, adopt criteria
by which all applications will be reviewed, applicants qualified and, in the case of retail
and cultivation businesses, also ranked. Those applicants that are selected will have the
opportunity to apply for a use permit as outlined in Section 17.86.080. Each application
shall designate at least one responsible party. If a person is not selected to receive a
commercial cannabis operator permit, the person may reapply during the next annual
application period or any subsequent application period established by the City
Manager.
SECTION 2. Section 9.10.070, subsection B of the San Luis Obispo Municipal Code is
hereby amended as reflected in Exhibit A to read as follows:
B. Application Submittal Timeframe. A person may only submit one application per
permit type, per application period, for a commercial cannabis operator permit, during the
annual application period designated by resolution of the city council or any subsequent
application period established by the City Manager. An Applicant who is unsuccessful in
any application period may submit another application in any subsequent application
period. The commercial cannabis operator permit will be valid for twelve months. Once a
permit is obtained, the applicant can apply annually for renewal. There is no guarantee that
an applicant will receive a commercial cannabis operator permit in the first instance. Due
to limitations on the number of certain permits, even a highly ranked applicant for a retail
or cultivation permit may not receive a commercial cannabis operator permit and even an
applicant who receives a commercial cannabis operator permit is not guaranteed that any
subsequent, required land use permit, as outlined in Section 17.86.080, will be approved.
Packet Page 219
Item 12
Ordinance No. _____ (2019 Series) Page 2
O ______
SECTION 3. Ordinance Number 1647 (2018 Series) is hereby amended and superseded
to the extent inconsistent herewith.
SECTION 4. Severability. If any subdivision, paragraph, sentence, clause, or phrase of
this Ordinance is, for any reason, held to be invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall not affect the validity or enforcement of the
remaining portions of this Ordinance, or any other provisions of the city' s rules and regulations.
It is the city' s express intent that each remaining portion would have been adopted irrespective of
the fact that any one or more subdivisions, paragraphs, sentences, clauses, or phrases be declared
invalid or unenforceable.
SECTION 5. A summary of this ordinance, together with the names of Council members
voting for and against, shall be published at least five (5) days prior to its final passage, in The
Tribune, a newspaper published and circulated in this City. This ordinance shall go into effect at
the expiration of thirty (30) days after its final passage.
INTRODUCED on the _______ day of __________ 2019, AND FINALLY ADOPTED
by the Council of the City of San Luis Obispo on the _______ day of ___________, 2019, on the
following vote:
AYES:
NOES:
ABSENT:
____________________________________
Mayor Heidi Harmon
ATTEST:
____________________________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
_____________________________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City
of San Luis Obispo, California, this ______ day of ______________, _________.
______________________________
Teresa Purrington, City Clerk
Packet Page 220
Item 12
EXHIBIT A
1
Chapter 9.10 Cannabis Regulations
9.10.010 Purpose and Intent.
9.10.020 Definitions
9.10.030 Personal Cultivation Limited
9.10.040 Commercial Cannabis/City Permit and State License Required
9.10.050 Regulations and Fees
9.10.060 Display and Production of Permits
9.10.070 Commercial Cannabis Operator Permit Application Procedures and Requirements.
9.10.080 Renewal of Permit
9.10.090 Suspension or Revocation of Permit
9.10.100 Appeal
9.10.110 Right to Occupy and Use Property for Commercial Cannabis Activity
9.10.120 Prohibition on Transfer of Commercial Cannabis Operator Permits.
9.10.130 Records and Reporting.
9.10.140 Inspection and Enforcement.
9.10.150 Outdoor Commercial Cannabis Cultivation and Activities Prohibited
9.10.160 Indemnification, Insurance, Reimbursement, Consent
9.10.170 Compliance with Laws
9.10.180 Permit Violation
9.10.190 Permit Compliance Monitoring
9.10.200 Permit Holder Responsible for Violations by Employees or Agents
9.10.210 Consumption or Use Prohibited On-site and In Public
9.10.220 Concurrent Alcohol Sales or Service Prohibited
9.10.230 Minors
9.10.240 Sale of Cannabis, Cannabis Products or Cannabis Accessories by Vending Machine
prohibited
9.10.250 Security Measures
9.10.260 Limitations on City’s Liability.
9.10.270 Fees Deemed Debt to City
9.10.280 Violation and Penalties
9.10.290 Severability
9.10.010 Purpose and Intent.
A. It is the primary purpose and intent of this Chapter to protect the health, safety, and welfare
of the residents of the City of San Luis Obispo from the negative impacts of illegal
commercial and non-commercial cannabis activity, and of state authorized cannabis
activity, by enforcing City ordinances, rules and regulations consistent with applicable
State law, including, but not limited to, the Compassionate Use Act, the Medical Marijuana
Program Act, the Adult Use of Marijuana Act, and the Medicinal and Adult Use of
Cannabis Regulatory and Safety Act.
Packet Page 221
Item 12
EXHIBIT A
2
B. This Chapter is not intended to, and shall not be construed to, prohibit or interfere with any
right, defense or immunity under Health and Safety Code Section 11362.5 (the
Compassionate Use Act), or under Health and Safety Code Section 11362.7 et. seq. (the
Medical Marijuana Program Act).
C. This Chapter is not intended to, and shall not be construed to, prohibit or interfere with any
right, defense or immunity of any person 21 years of age or older relating to the adult
personal possession or cultivation of cannabis or marijuana consistent with the provisions
of the Control, Regulate and Tax Adult Use of Marijuana Act, and the Medicinal and Adult
Use of Cannabis Regulatory and Safety Act.
D. Nothing in this Chapter shall be construed to authorize the cultivation, possession or use
of marijuana for any purpose inconsistent with state or local law.
E. Any reference to California statutes includes any regulations promulgated thereunder and
is deemed to include any successor or amended version of the referenced statute or
regulation.
9.10.020 Definitions
A. State defined terms. Words or terms used in this chapter that are defined words or terms in
Business and Professions Code Section 26001, or Health and Safety Code Section 11362.7 (the
Statutes”) shall have the meanings ascribed to them in the Statutes as they now read, or as they
may be amended to read. These state defined words and terms include, but are not limited to,
“cannabis,” “cannabis accessories,” “cannabis concentrate,” “cannabis products,”
“commercial cannabis activity,” “cultivation,” “delivery,” “distribution,” “license,” “live
plants,” “manufacture,” “operation,” “person,” “premises,” “sell,” “sale,” “to sell.” Some of
these terms are also set forth in Chapter 17.100 of this code. In the event of conflict in the
definitions, the definitions in Chapter 17.100 shall control; provided the terms defined in
subsection B below shall control over any other definition.
B. City defined terms. The following words or terms used in this chapter have the following
meanings:
1. “Commercial Cannabis Business” means any person or entity engaging in any business,
operation or activity which is Commercial Cannabis Activity under state law in the
City.
2. “Commercial Cannabis Operator Permit” means a permit required by the City of San
Luis Obispo pursuant to this chapter to conduct Commercial Cannabis Activity or a
Commercial Cannabis Business in the City.
Packet Page 222
Item 12
EXHIBIT A
3
3. “Responsible Party(ies)” shall be one or more individuals who have an ownership
interest in a Commercial Cannabis Activity and are designated to be personally
responsible for compliance with all terms and conditions of the Commercial Cannabis
Operator Permit, all other permits required by the City, and all ordinances and
regulations of the City. Any person having an ownership interest of more than fifty
percent in a Commercial Cannabis Activity shall be designated a Responsible Party on
the application. If no individual owns more than fifty percent of a Commercial
Cannabis Activity, the individual owning the largest share shall be a Responsible Party,
and if multiple individuals have the same percentage interest, each one shall be a
Responsible Party. More than one individual can be designated a Responsible Party.
4. “Cannabis Event” means a public or private event where compensation is provided or
exchanged, either directly or indirectly or as part of an admission or other fee for
service, for the provision, hosting, promotion or conduct of the event where
consumption of cannabis is part of the activities.
9.10.030 Personal Cultivation Limited
A. Maximum Six Plants Outdoors Per Parcel. It shall be unlawful for any person to plant,
cultivate, harvest, dry, process, maintain, possess or store outdoors, more than six (6) live
cannabis plants on any parcel containing one or more private residences. This limitation on
outdoor personal cannabis activities applies per parcel, regardless of the number of residents
in each private residence, and regardless of the number of residences on the parcel. This
limitation applies to cannabis live plants for either adult recreational use or medicinal purposes.
Outdoor personal cultivation shall comply with applicable provisions of chapter 17.99 of this
Code.
B. Maximum Six Plants Per Private Residence, Indoors and Outdoors. It shall be unlawful for the
cumulative total of cannabis plants per private residence, indoors and outdoors, to exceed six
(6) cannabis live plants, regardless of number of persons residing in the private residence. This
limitation applies to cannabis live plants for either adult recreational use or medicinal purposes.
Any live cannabis plants grown indoors shall comply with applicable provisions of Chapter
17.99 of this Code.
C. No Outdoor Cultivation on Parcel without Private Residence. It shall be unlawful for any
person to plant, cultivate, harvest, dry, process, maintain, possess or store any cannabis live
plants outdoors on a parcel that does not have a private residence used for residential dwelling
purposes by the person cultivating the cannabis live plants.
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D. Neighborhood Impacts of Personal Cultivation. There shall be no exterior evidence of cannabis
cultivation occurring at the property visible by normal unaided vision from a public place or
the public right-of-way and any outdoor cultivation shall comply with provisions of Chapter
17.99.040 of this code. Personal cultivation of cannabis, for recreational adult use or for
medicinal purposes, shall not create odors, dust, heat, noise, light, glare smoke or other impacts
to people of normal sensitivity living, working or lawfully present in the vicinity of the personal
cultivation site. Impacts that cross the nearest property line of any other parcel, beyond that
parcel on which the personal cultivation is conducted, or that are visible or noticeable with
normal unaided vision, from a public place or the public right of way, or from any separately
owned, leased or controlled private residence or business on the same parcel as the private
residence responsible for the personal cultivation, are unlawful.
E. No Hazardous Personal Cultivation. Personal cultivation, harvesting, drying, or processing of
cannabis, for recreational adult use or medicinal purposes, that uses or stores hazardous or
toxic chemicals or materials, creates hazardous or toxic products or wastes, or uses volatile
processes or other methods or substances that pose a significant risk to public health or safety,
is prohibited and unlawful.
9.10.040 Commercial Cannabis/City Permit and State License Required
A. City Commercial Cannabis Operator Permit Required. No person shall engage in Commercial
Cannabis Activity or have an ownership interest in, operate, or manage, a Commercial
Cannabis Business without obtaining and continuously maintaining a Commercial Cannabis
Operator Permit pursuant to this chapter.
B. Commercial Cannabis Operator Permit and State License(s) Required. It shall be unlawful for
any person to own, conduct, manage, operate, engage or participate in, work or volunteer at a
Commercial Cannabis Activity or Commercial Cannabis Business that does not have a valid
Commercial Cannabis Operator’s Permit issued pursuant to this chapter and other City permits
or licenses required by this Code, in addition to the appropriate license(s) required by state law
to conduct the Commercial Cannabis Activity. Any Commercial Cannabis Business or
Commercial Cannabis Activity conducted without all required City and state permits and
licenses is prohibited and unlawful and is hereby declared to be a public nuisance.
9.10.050 Regulations and Fees.
The City Council shall by resolution or ordinance adopt such forms, fees, regulations and
procedures as are necessary to implement this Chapter with respect to the application and
qualification for, and the selection, future selection, investigation, process, issuance, renewal,
revocation, and suspension of, Commercial Cannabis Operator Permits.
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9.10.060 Display and Production of Permits
A. Dual Permits Posted and Visible. A copy of the Commercial Cannabis Operator Permit issued
by the City of San Luis Obispo pursuant to this Chapter, together with a copy of the appropriate
state license(s) for the Commercial Cannabis Activity being conducted, shall be posted and
readily visible to the public at all times, at each location where Commercial Cannabis Activity
occurs.
B. Production of Originals for Inspection. Any owner, operator , employee or person in charge of
a Commercial Cannabis Activity shall produce for inspection and copying, upon request of a
City inspector, code enforcement officer, or City police officer during normal operating hours,
the original of the current and valid City of San Luis Obispo Commercial Cannabis Operator
Permit and the appropriate, current and valid license(s) of the State of California for the
Commercial Cannabis Activity(ies) or Commercial Cannabis Business(es) being conducted.
9.10.070 Commercial Cannabis Operator Permit Application Procedures and
Requirements
A. Application. A person shall apply for a commercial cannabis operator permit by submitting an
application to the city during the annual application period or any other period established by
City Manager. The Ccity Ccouncil will, by resolution, adopt criteria by which all applications
will be reviewed, applicants qualified and, in the case of retail and cultivation businesses, also
ranked. Those applicants that are selected will have the opportunity to apply for a use permit
as outlined in Section 17.86.080. Each application shall designate at least one responsible
party. If a person is not selected to receive a commercial cannabis operator permit, the person
may reapply during the next annual application period or any subsequent application period
established by the City Manager.
B. Application Submittal Timeframe. A person may only submit one application per permit type,
per application period, for a commercial cannabis operator permit, during the annual
application period designated by resolution of the city council or any subsequent application
period established by the City Manager. An Applicant who is unsuccessful in any application
period may submit another application in any subsequent application period. The commercial
cannabis operator permit will be valid for twelve months. Once a permit is obtained, the
applicant can apply annually for renewal. There is no guarantee that an applicant will receive
a commercial cannabis operator permit in the first instance. Due to limitations on the number
of certain permits, even a highly ranked applicant for a retail or cultivation permit may not
receive a commercial cannabis operator permit and even an applicant who receives a
commercial cannabis operator permit is not guaranteed that any subsequent, required land use
permit, as outlined in Section 17.86.080, will be approved.
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A. Grounds for Automatic Disqualification.
In addition to any other reason that may be established by the City Council as a basis for
disqualification, an applicant shall be disqualified from applying for, or obtaining, a
Commercial Cannabis Operator Permit if:
1. The applicant fails to timely file an application during the annual application period.
2. The Responsible Party refuses to sign the application and agree to be personally responsible
for compliance, and personally liable for failure to comply, with the provisions of this
chapter.
3. The applicant, or any of its officers, directors or owners, or any person listed in the
application, has been convicted of a felony or offense referenced in Business Professions
Code Section 26057; or has been subject to fines, penalties, or sanctions for cultivation or
production of a controlled substance on public or private lands or for unauthorized
commercial cannabis activities as specified in Business and Professions Code Section
26057; or has had a commercial cannabis license suspended or revoked by the State of
California or any city or county in any stat, within the three years preceding the date the
application is filed, or is ineligible to apply for a state cannabis license. No person who has
been convicted of such a felony or offense, or subject to such fines, penalties, sanctions,
suspension or revocation may be engaged (actively or passively) in the operation,
management or ownership of any Commercial Cannabis Business. A conviction within the
meaning of this Chapter means a plea or verdict of guilty or a conviction or diversion
following a plea of nolo contendere.
4. The applicant made one or more false or misleading statements or omissions in the
application process.
5. Any person listed on the application is a licensed physician making patient
recommendations for medical or medicinal cannabis pursuant to State law.
6. Any person listed in the application is less than twenty-one (21) years of age.
B. Duration and Activation of Permit. Each Commercial Cannabis Operator Permit issued
pursuant to this Chapter shall expire twelve (12) months after the date of its activation. The
permittee may apply for renewal prior to expiration in accordance with this chapter. Each
Commercial Cannabis Operator Permit must be activated within 12 months of issuance. The
permit is activated by the issuance of a use permit for the Commercial Cannabis Activity
pursuant to Chapter 17.99, together with all other applicable City permits and state licenses,
and the Commercial Cannabis Operator thereafter opening and continuously operating the
Commercial Cannabis Activity. Failure to timely activate the permit shall be deemed
abandonment of the permit and the permit shall automatically lapse.
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9.10.080 Renewal of Permit
A. Renewal Application Filing Deadline. An application for renewal of a Commercial Cannabis
Operator Permit shall be filed at least sixty (60) calendar days, but not more than one hundred
twenty (120) calendar days, prior to the expiration date of the permit with the City Manager or
his/her designee. If the complete application and fees are timely submitted but the City does
not act to approve or reject the renewal prior to expiration, the permittee may continue to
operate under the expired permit until the City approves or rejects the application for renewal.
B. Rejection of Renewal Application. An application for renewal of a Commercial Cannabis
Operator Permit shall be rejected if any of the following exists.
1. The Commercial Cannabis Operator Permit is revoked at the time of the application or
renewal.
2. The applicant conducted unpermitted commercial cannabis activities in the City or
continued to conduct formerly permitted commercial cannabis activities after
expiration of the permit, other than as expressly permitted by this section.
3. Any of the grounds for disqualification for prequalification set forth in Section
9.10.070(C) above, or as established by the City Council, exist at the time of application
for renewal, or date of renewal.
4. The permittee fails to renew any required State of California license(s), or the State
revokes or suspends the license. Revocation, termination, non-issuance or suspension
of a license issued by the State of California, or any of its departments or divisions,
shall immediately, concurrently revoke, terminate, or suspend, respectively, the
Commercial Cannabis Operator Permit. Such automatic suspension makes it illegal for
a Commercial Cannabis Business or Activity to operate within the City of San Luis
Obispo until the State of California, or its respective department or division, reinstates
or issues the State license.
An application for renewal of a Commercial Cannabis Operator Permit may be denied if any of
the following exists:
1. The application is filed less than sixty (60) days before its expiration.
2. The applicant has received an administrative citation for violating any provision of this
Code relating to its Commercial Cannabis Activity(ies) in the City during the last
twelve months, and the administrative citation has not been resolved in the applicant’s
favor by date of application for renewal. A pending, unresolved appeal of an
administrative citation shall not result in rejection of an otherwise timely and complete
application, but resolution of an appeal in a manner that upholds the violation against
the applicant during the application review period shall result in the immediate
rejection of the application.
3. The Commercial Cannabis Business has not been in regular and continuous operation
in the three (3) months immediately prior to the renewal application.
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4. The Commercial Cannabis Business fails to conform to the requirements of this
Chapter, any regulations adopted pursuant to this Chapter or the conditions imposed as
part of any Use Permit or zoning requirements under Chapter 17.99 of this Code.
5. The Commercial Cannabis Operator Permit is suspended at the time of application or
renewal.
C. Effect of Rejection of Application for Renewal. Operations to Cease Pending Appeals . If a
renewal application is rejected, the Commercial Cannabis Operator Permit expires on the
expiration date set forth in the permit, even if an appeal has been filed. All commercial cannabis
activities in the City under the expired permit must stop until all appeals have been exhausted.
A person or entity whose renewal application is rejected, and loses his/her/its appeal, must go
through the annual Commercial Cannabis Business Operator Permit application process.
9.10.090 Suspension or Revocation of Permit.
In addition to any other penalty authorized by law, a Commercial Cannabis Operator Permit may
be suspended or revoked if the City finds, after notice to the permittee and opportunity to be heard,
that the permittee or his or her agents or employees has violated any condition of the permit
imposed pursuant to, or any provision of, this chapter.
1. Upon a finding by the City of a first permit violation within any five-year period, the permit
shall be suspended for thirty days.
2. Upon a finding by the City of a second permit violation within any five-year period, the
permit shall be suspended for ninety days.
3. Upon a finding by the City of a third permit violation within any five-year period, the
permit shall be revoked.
9.10.100 Appeal.
A. Qualification. Ranking of Retailers and Cultivators. A decision of the City to not qualify an
applicant for a Commercial Cannabis Operator Permit, or to rank applicants for retail or
cultivation licenses, or to allow qualified applicants with the highest rankings the first
opportunity to apply for a Commercial Cannabis Operator Permit, shall be the final action of
the City and not appealable.
B. Non-renewal, Revocation or Suspension. A decision of the City to reject an application for
renewal, or to revoke or suspend a Commercial Cannabis Operator Permit, is appealable to the
City Manager. An appeal must be filed with the City Manager within ten working days after
the renewal has been denied, suspended or revoked. A decision of the City Manager or his or
her designee is appealable to the City Council in accordance with Chapter 1.20 of this Code.
C. Effect of Suspension. During a period of license suspension, the Commercial Cannabis
Business shall remove from public view, all cannabis and cannabis products, and shall not
conduct any Commercial Cannabis Activity.
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D. Revocation. Notice to State. Pursuant to Business and Profession Code Section 26200 (c), the
City Manager or his or her designee shall promptly notify the Bureau of Cannabis Control
within the Department of Consumer Affairs, upon City’s revocation of any local license,
permit, or authorization for a state licensee to engage in commercial cannabis activity within
the City.
9.10.110 Right to Occupy and to Use Property for Commercial Cannabis Activity.
As a condition precedent to the City’s issuance of a Commercial Cannabis Operator Permit
pursuant to this Chapter, any person intending to open and operate a Commercial Cannabis
Business shall provide evidence satisfactory to the City of the applicant’s legal right to occupy and
to use the proposed location for the proposed use, together with the approval of a use permit from
the City for cannabis activity at the location. In the event the proposed location is owned by or to
be leased from another person, the applicant for a permit under this Chapter shall provide a signed
and notarized statement from the property owner agreeing to the operation of a Commercial
Cannabis Business on the property.
9.10.120 Prohibition on Transfer of Commercial Cannabis Operator Permits.
A. Business Restriction to Location on Permit. It shall be unlawful for any person to transfer a
Commercial Cannabis Operator Permit to a location not specified on the permit, or to operate
a Commercial Cannabis Business at any place or location other than that identified on the
Commercial Cannabis Operator Permit issued pursuant to this Chapter.
B. Transfer or Assignment Prohibited. No person or entity shall encumber, mortgage, lien,
hypothecate, give, bequeath, sell, assign or transfer, by operation of law or otherwise, any
portion of the ownership or control of a Commercial Cannabis Business or a Commercial
Cannabis Operator Permit to any person who does not have a Commercial Cannabis Operator
Permit from the City prior to the effective date of any action described in this sen tence. The
Commercial Cannabis Operator Permit permittee proposing such an action shall:
1. Notify the City in writing of the proposed action, comply with applicable regulations
and provide such information as the City reasonably requests regarding the identity and
qualifications of persons involved, and pay all applicable fees and charges; and
2. Provide proof that the proposed lender, lienholder, recipient, heir, buyer, assignee,
transferee, or other potential recipient of any portion of the ownership or control, at the
time of the notice and effective date of the proposed action, is qualified by the City to
apply for a Commercial Cannabis Operator Permit and the proposed action is
conditioned on the City issuing to the person a new or amended Commercial Cannabis
Operator Permit.
3. Notify the city in writing within ten (10) calendar days of the action becoming final
with the names and contact information of the new persons involved, together with a
request that the City issue either a new or amended Commercial Cannabis Operator
Permit, as applicable.
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C. Assignment Null and Void. Any attempt to transfer, sell, assign, give, or lien, or any transfer,
sale, assignment, gift or lien, of a Commercial Cannabis Operator Permit issued pursuant to
this Chapter, by operation of law or otherwise, in violation of this chapter, is prohibited. Any
such action immediately voids, nullifies and terminates the Commercial Cannabis Operator
Permit, which shall be of no further force or effect.
9.10.130 Records and Reports.
A. City Access to Records. Subject to the Health Insurance Portability and Accountability Act
(HIPAA) regulations, each Commercial Cannabis Business shall allow City of San Luis
Obispo officials to have access to the Commercial Cannabis Business’s books, records,
accounts, and any and all data relevant to its permitted activities for the purpose of conducting
an audit, examination or inspection. Books, records, accounts, and any and all relevant data
will be produced no later than twenty-four (24) hours after receipt of the City’s request or
within a reasonable time as authorized in writing by the City.
B. Annual Audit. Each Commercial Cannabis Business shall file with the City Manager or his/her
designee an audit of its financial operations for the previous fiscal year, complete and certified
by an independent certified public accountant in accordance with generally accepted auditing
and accounting principles. The audit shall include but not be limited to a discussion, analysis,
and verification of each of the records required to be maintained pursuant to this Chapter. The
information contained in the audit shall be made available in standard electronic format which
shall be compatible with programs and software used by the City, and which can easily be
imported into either Excel, Access or any other contemporary software designated by the City
Manager.
C. Inventory Control system. All Commercial Cannabis Businesses shall maintain an inventory
control and reporting system that accurately documents the present location, amounts, and
descriptions of all cannabis and cannabis products for all stages of the growing and production
or manufacturing, laboratory testing and distribution processes until sold or distributed. All
Commercial Cannabis Businesses shall maintain records of all sales or transfers of cannabis
and cannabis products.
D. Employee Registry. Each owner and/or operator of a Commercial Cannabis Business shall
maintain a current register of the names and the contact information (including the name,
address, and telephone number) of all employees currently employed by the Commercial
Cannabis Business and shall disclose such register to any City of San Luis Obispo official upon
request.
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E. Reporting and Tracking of Product and of Gross Sales. Each Commercial Cannabis Business
shall have in place a point-of-sale tracking system to track and to report on all aspects of the
Commercial Cannabis Business including, but not limited to, such matters as cannabis
tracking, inventory data, and gross sales (by weight and by sale) and shall ensure that such
information is compatible with the City’s record-keeping systems. The system must have the
capability to produce historical transactional data for review by the City of San Luis Obispo.
All information provided to the City pursuant to this sub-Chapter shall be confidential and
shall not be disclosed, except as may otherwise be required under law.
F. Maintenance of Records. All records required by this Chapter shall be maintained by the
Commercial Cannabis Business for a period of not less than seven (7) years and shall otherwise
keep accurate records of all Commercial Cannabis Business activity and provide such records
for inspection consistent with this Code or any rules the City Council by resolution or
ordinance.
9.10.140 Inspection and Enforcement.
A. Unscheduled Inspection during Business Hours. The City Manager or his/her designee and any
other City of San Luis Obispo official or inspector charged with enforcing any provisions of
this Code, may enter a Commercial Cannabis Business at any time during the hours of
operation without notice for the purpose of inspecting the Commercial Cannabis Business for
compliance with the provisions of this Code, the terms and conditions of the Commercial
Cannabis Operator Permit or any other City permit or state license, including inspection of the
recordings and records maintained pursuant to this Chapter or the applicable provisions of
State law. The right to inspect under this inspection includes the right to copy recordings and
records.
B. Interference with Inspection. It is unlawful for any person who owns, operates, manages or is
employed by, or has any responsibility over the operation of, a Commercial Cannabis Business,
to refuse to allow, or to impede, obstruct, or interfere with, an inspection by the City, or the
City’s review or copying of recordings (including audio and video recordings) and records, or
to conceal, destroy, alter or falsify any recordings or records.
C. Obtaining Samples. The City Manager or his/her designee or any other person charged with
enforcing the provisions of this Chapter may enter the location of a Commercial Cannabis
Business at any time during the hours of operation and without notice to obtain samples of
cannabis and cannabis products to test for law enforcement and/or public safety purposes. Any
samples obtained by the City of San Luis Obispo shall be logged, recorded, and maintained in
accordance with City of San Luis Obispo Police Department standards for evidence. At all
other times, the City Manager or his/her designee may enter the location of a Commercial
Cannabis Business to obtain samples of cannabis upon reasonable notice, as otherwise
authorized by law or pursuant to a warrant.
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9.10.150 Outdoor Commercial Cannabis Cultivation and Activities Prohibited.
A. Outdoor Commercial Cultivation prohibited. Outdoor commercial cannabis cultivation,
including, but not limited to, cultivation in greenhouses, hoop structures, and by mixed light
(part daylight/part artificial light), is prohibited and unlawful. This section prohibits all outdoor
commercial cannabis cultivation, including cultivation for profit or not for profit cultivation,
and including commercial cultivation for adult recreational use or medicinal purposes. For
purposes of this section, outdoor cultivation of cannabis by cooperatives is prohibited. All
commercial cannabis cultivation shall be conducted only inside a fully enclosed structure by a
person or entity with a Commercial Cannabis Operator Permit, a City use permit, and
appropriate State license(s). See also Section 17.99.050 G 3 of this Code.
B. Outdoor Commercial Cannabis Activities Prohibited. Outdoor storage, harvesting, drying,
processing, or manufacturing of commercial cannabis or cannabis products is prohibited and
unlawful.
9.10.160 Indemnification, Insurance, Reimbursement, Consent.
As a condition of approval of any Commercial Cannabis Operator Permit issued pursuant to this
Chapter, the permittee shall, at a minimum:
A. Execute an agreement to protect, indemnify, defend (at its sole cost and expense with counsel
approved by City), and hold the City of San Luis Obispo and its officers, employees, attorneys,
representatives, and agents harmless from and against any and all claims, demands, losses,
damages, injuries, costs, expenses (including attorneys’ fees) fines, penalties, or liabilities
arising from, related to or associated with: the issuance of a Commercial Cannabis Operator
Permit or use permit; the permitting or approving the operation of a Commercial Cannabis
Activity; the collection of any fees, taxes, or charges from a Commercial Cannabis Business;
the Commercial Cannabis Business’s or any of its owners’, operators’, managers’, employees,
or agents’ violation of any federal, state or local laws; the City’s suspension, revocation or
refusal to renew the Commercial Cannabis Operator Permit.
B. Maintain insurance with standard City coverages and limits, but with additional conditions
thereon deemed necessary by the City Attorney.
C. Reimburse the City of San Luis Obispo for any and all costs, expenses, attorney fees, fines,
penalties and court costs that the City of San Luis Obispo may be required to pay as a result of
any legal challenge related to the City’s approval of a Commercial Cannabis Operator Permit
pursuant to this Chapter or any other City permit or the City of San Luis Obispo’s approval of
the operation of a Commercial Cannabis Activity. The City of San Luis Obispo may, at its
sole discretion, participate at its own expense in the defense of any such action, but such
participation shall not relieve the obligations imposed under this Chapter.
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D. Consent to unscheduled inspections, production of records and recordings, and obtaining of
samples of cannabis and cannabis products by authorized City officials during normal
operating hours as provided in this chapter.
9.10.170 Compliance with Laws.
The Commercial Cannabis Business shall operate all times in compliance with all applicable state
and local laws, regulations, and any specific, additional operating procedures or requirements
which may be imposed as conditions of approval of the Commercial Cannabis Operator Permit or
use permit or state license(s). Nothing in this Chapter shall be construed as authorizing any action
which violates state law or local law with respect to the operation of a Commercial Cannabis
Activity
9.10.180 Permit Violation.
Compliance with all local and state cannabis-related laws shall be a condition of a City
Commercial Cannabis Operator Permit and it shall be a violation of a Commercial Cannabis
Operator Permit for a permittee or his or her agents or employees to violate any local or state -
cannabis-related law.
9.10.190 Permit Compliance Monitoring.
Compliance with this chapter shall be monitored by the San Luis Obispo police department, Code
Enforcement staff and/or any other duly authorized agent of the City. Any compliance checks
pursuant to this chapter shall be in addition to any under any other ordinances, regulations or
permits. At least four compliance checks of each cannabis retailer shall be conducted during each
twelve-month period. At least two compliance checks of each commercial cannabis business other
than a retailer shall be conducted during each twelve-month period. The cost of compliance
monitoring shall be incorporated into the annual renewal fee.
9.10.200 Permit Holder Responsible for Violations By Employees or Agents.
The responsible person and any entity to whom a Commercial Cannabis Operator Permit is issued
pursuant to this Chapter shall be responsible for all violations of the regulations and ordinances of
the City of San Luis Obispo, committed by the permittee, any employee or agent of the permittee,
which violations occur in or about the premises of the Commercial Cannabis Business, even if the
responsible person is not present. Violations by an employee or agent may result in the termination
or non-renewal of the permit by City.
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9.10.210 Consumption or Use Prohibited On-site and in Public/Cannabis Event
Prohibited
A. It is unlawful for any person or entity:
1. To sell, give, exchange, dispense or distribute cannabis or cannabis products for on-site
consumption, use or sampling on any business premises; or
2. To consume or use cannabis or cannabis products, whether by smoking, vaping, inhaling,
eating, drinking or any other means:
a. in, on or about the premises of any Commercial Cannabis Business;
b. in, on or about any publicly owned or operated property; any place open to, or
accessible by the public; any place smoking is prohibited; or any place visible from
any public place with normal unaided vision.
c. in on or about any other business, club, cooperative or commercial event, regardless
if open to the public or only to members, ticket holders or event invitees;
d. any location where an entry or other fee is charged to attendees or to the host or where
a thing of value or consideration is received or exchanged, directly or indirectly, for
or related to the provision of cannabis.
B. It is unlawful for any person to conduct a Cannabis Event in the City.
9.10.220 Concurrent Alcohol or Tobacco Sales or Service Prohibited.
A. No person shall dispense, serve, store, give away or consume, or cause or permit the sale,
dispensing, serving, giving away or consumption of alcoholic beverages or tobacco in or on
the premises of a Commercial Cannabis Business.
B. No person shall conduct any Commercial Cannabis Activity at any location where alcohol is
sold or served.
9.10.230 Minors
A. Minors shall not be allowed on the premises of a commercial Cannabis Business having either
an “A” or “M” license, or both, even if accompanied by a parent or guardian.
B. No person under 21 years of age shall be allowed on the premises of a Commercial Cannabis
Business having either an “A” or “M” license or both.
C. Every entrance to an “A” or “M” licensed Commercial Cannabis Business shall be clearly and
legibly posted with the following notice: “ENTRY ONTO THESE PREMISES BY PERSONS
UNDER 21 YEARS OF AGE IS PROHIBITED BY LAW. VALID PHOTO ID REQUIRED.”
Each letter of the notice must be at least two inches high and clearly visible.
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D. No person, business, or other entity conducting a Commercial Cannabis Activity with either
an “A” or “M’ state license shall employ any person who is not at least twenty-one (21) years
of age.
9.10.240 Sale of Cannabis Products or Cannabis Accessories by Vending Machine
prohibited
A. No person shall locate, install, keep, maintain or use, or permit the location, installation,
keeping, maintenance or use on his, her or its premises of any cannabis vending machine used
or intended to be used for the purpose of selling any cannabis products or cannabis accessories
therefrom.
B. No person, business, or other entity shall sell, offer for sale, or display for sale any cannabis
product by means of a self-service display or vending machine. All cannabis products shall be
offered for sale exclusively by means of vendor/employee assistance.
C. “Vending machine” means any electronic or mechanical device or appliance the operation of
which depends upon the insertion of money, whether in coin or paper bill, or debit or credit
card, or other thing representative of value, which device or appliance dispenses or releases
cannabis, cannabis product(s) and/or cannabis accessories.
9.10.250 Security and Public Safety Measures.
A. The City Manager or his/her designee(s) is authorized to promulgate all regulations necessary
to implement the requirements and fulfill the purposes and policies of this Chapter, including
but not limited to enforcement, background checks for applicants, approval and enforcement
of a Commercial Cannabis Activity security plan, including audio and video recordings of
operations, and verification of compliance.
B. Every Commercial Cannabis Activity and every Commercial Cannabis Activity shall have a
security plan approved by the Chief of Police or designee prior to issuance of a City
Commercial Cannabis Operator Permit.
C. Hours of Operation.
a. Retail - Storefront. Retail-Storefront Commercial Cannabis Business shall not operate
between the hours of 8 PM and 9 AM.
b. Retail-Non-Storefront (Delivery Services). Retail-Non-Storefront (Delivery Services)
Commercial Cannabis Business shall not operate between the hours of 10 PM and 6 AM.
c. Commercial Other than Retail. All Commercial Cannabis Activity other than Retail is
prohibited between the hours of 10 PM and 7 AM.
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9.10.260 Limitations on City’s Liability.
The City shall not be liable for issuing, or failing or refusing to issue, suspending, revoking or
failing to renew a Commercial Cannabis Operator Permit pursuant to this Chapter or otherwise
approving or disapproving the operation of any Commercial Cannabis Business pursuant to this
Chapter.
9.10.270 Fees Deemed Debt to City.
The amount of any fee, cost or charge imposed pursuant to this Chapter shall be deemed a debt to
the City of San Luis Obispo that is recoverable in any court of competent jurisdiction.
9.10.280 Violation and Penalties.
A. Misdemeanor. Each violation of the provisions of this chapter shall be a misdemeanor and is
punishable as provided in Section 1.12.030 of this code; provided, that where the City attorney
determines that such action would be in the interest of justice, he/she may specify in the
accusatory pleading that the offense shall be an infraction. Any violation of the provisions of
this chapter by any person is also subject to administrative fines as provided in Chapter 1.24
of this code.
B. Infraction Violation. Where the City attorney determines that, in the interest of justice, a
violation of this chapter is an infraction, such infraction is punishable by a fine not exceeding
one hundred dollars for a first violation, a fine not exceeding two hundred dollars for a second
violation of the same provision within one year, and a fine not exceeding five hundred dollars
for each additional infraction violation of the same provision within one year.
C. The fine amounts set forth above may be modified, from time to time, by City Council
resolution. In no event shall such fine amounts exceed the amounts authorized by state law.
D. If the City of San Luis Obispo finds, based on substantial record evidence, that any person has
engaged in Commercial Cannabis Activity in violation of Chapter 9.10, the City shall fine that
person as follows. Each day that person without a Commercial Cannabis Operator Permit
offers cannabis or cannabis products for sale or exchange shall constitute a separate violation
and assessed a fine in accordance with Sections 1.12.080 and 1.24.070(A) of this code.
E. Each person committing, causing, or maintaining a violation of this chapter or failing to
comply with the requirements set forth herein shall be deemed guilty of a separate offense for
each and every day during any portion of which any violation of any provision of this chapter
is committed, continued, maintained, or permitted by such person and shall be punishable
accordingly.
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F. The violation of any provision of this chapter shall be and is hereby declared to be a public
nuisance and contrary to the public interest. Any public nuisance under this chapter may, at
the City’s discretion, be abated by the City by civil process by means of a restraining order,
preliminary or permanent injunction or in any manner provided by law for the abatement of
such nuisance. The City shall also be entitled to recover its full reasonable costs of abatement.
The prevailing party in any proceeding associated with the abatement of a public nuisance shall
be entitled to recovery of attorneys’ fees incurred in any such proceeding if the City has elected
at the initiation of that individual action or proceeding to seek recovery of its own attorneys’
fees.
G. In lieu of issuing a criminal citation, the City may issue an administrative citation to any person
responsible for committing, causing or maintaining a violation of this chapter. Nothing in this
section shall preclude the City from also issuing a citation upon the occurrence of the same
offense on a separate day.
H. The remedies set forth in this chapter are cumulative and in addition to any and all other l
remedies available at law or equity, whether set forth elsewhere in the San Luis Obispo
Municipal Code, or in state or federal laws, regulations, or case law. In addition to other
remedies provided by this chapter or by other law, any violation of this chapter may be
remedied by a civil action brought by the City attorney, including but not limited to
administrative or judicial nuisance abatement proceedings, civil or criminal code enforcement
proceedings, and suits for injunctive relief. The remedies provided by this chapter are
cumulative and in addition to any other remedies available at law or in equity.
9.10.290 Severability.
If any section, subsection, subdivision, paragraph, sentence, clause or phrase of this chapter is for
any reason held to be invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity or enforceability of the remaining sections, subsections, subdivisions, paragraphs,
sentences, clauses or phrases of this chapter or the rules adopted hereby. The City Council of the
City of San Luis Obispo hereby declares that it would have adopted each section, subsection,
subdivision, paragraph, sentence, clause or phrase hereof, irrespective of the fact that any one or
more other sections, subdivisions, paragraphs, sentences, clauses or phrases hereof be declared
invalid or unenforceable.
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