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HomeMy WebLinkAboutItem 6a. Introduce an Ordinance amending Title 17 to allow cannabis retail storefronts to conduct retail sales by delivery (CODE-0401-2024) Item 6a Department: Community Development Cost Center: 4001 For Agenda of: 9/3/2024 Placement: Public Hearing Estimated Time: 30 minutes FROM: Timmi Tway, Community Development Director Prepared By: Ivana Gomez, Cannabis Business Coordinator SUBJECT: INTRODUCE AN ORDINANCE TO AMEND TITLE 17 (ZONING REGULATIONS) OF THE MUNICIPAL CODE TO ALLOW CANNABIS RETAIL STOREFRONTS TO CONDUCT RETAIL SALES BY DELIVERY WITH APPROVAL OF A CONDITIONAL USE PERMIT OR BY AMENDMENT TO AN EXISTING CONDITIONAL USE PERMIT RECOMMENDATION Introduce a Draft Ordinance entitled, “An Ordinance of the City Council of the City of San Luis Obispo, California, approving an amendment to Table 2-1 (Uses Allowed by Zone) in Title 17 (Zoning Regulations) of the Municipal Code with an exemption from environmental review (CEQA) (CODE-0401-2024).” REPORT-IN-BRIEF The Community Development Director, on behalf of the City of San Luis Obispo, has initiated proposed text amendments to Table 2-1 (Uses Allowed by Zone, Section § 17.10.020) of the San Luis Obispo Municipal Code (SLOMC). These amendments are in response to prior City Council directives aimed at updating the City's Cannabis Program as discussed in the “Previous Council and Advisory Action” section below. Specifically, the proposed amendments to Table 2-1 will clarify that cannabis retail storefronts (“retail storefronts”) may engage in retail sales through delivery, subject to approval of a Conditional Use Permit (“CUP”) or by amendment to an existing Conditional Use Permit (Attachment A – Draft Ordinance). POLICY CONTEXT Pursuant to Chapter 17.24 (Amendments – Zoning Regulations and Zoning Map), the City Council may review the proposed text amendment s, including the Planning Commission’s recommendation, and take action based on consistency with the overall objectives of the City Council, the Major City Goals, and State Law. DISCUSSION Page 199 of 229 Item 6a Previous Council and Advisory Body Action On March 7, 2023, at the Annual Cannabis Business Program Update, the City Council provided direction to staff to update the Cannabis Program to allow retail storefronts to offer delivery services1. As a result, staff revised the program’s administrative regulations and application materials to allow retail storefronts to engage in delivery. These changes required thorough internal review and approval by the City Manager via City Manager Report. Staff has identified a need to provide clear guidance in the zoning table pertaining to allowable cannabis activity and the p rocesses for approval. Therefore, on August 14, 2024, the Planning Commission adopted Resolution No. PC-1089-24 recommending the City Council introduce and adopt an Ordinance amending Table 2-1 (Uses Allowed by Zone, Section § 17.10.020) of the Municipal Code to allow retail storefronts to conduct retail sales by delivery with the approval of a Conditional Use Permit, or by amendment to an existing Conditional Use Permit. The proposed amendments before the City Council for consideration implement Council’s previous direction to Staff, as well as the recommendation from the Planning Commission. Background There are two types of commercial cannabis retail activity – retail storefront and retail non-storefront (aka delivery-only). Retail storefronts, which are regulated under a Type 10 state license, sell cannabis goods directly to the public at their physical locations and may also provide delivery services under current state regulations. Pursuant to SLOMC Section § 17.86.080(E)(10)(b), the number of retail storefront permits is limited to three total within the City, and they are permitted in the Retail Commercial (C-R) and Service Commercial (C-S) Zones. However, the zoning regulations for commercial cannabis activity do not explicitly demonstrate that retail storefronts may also deliver in their respective zones. Retail non-storefronts (delivery-only businesses) operate under a Type 9 state license, conduct retail sales exclusively through delivery to physical locations within the state of California, and are permitted in the Service Commercial (C-S), Manufacturing (M), and Business Park (BP) Zones. In other words, although delivery-only businesses may only operate out of the allowable zones above, they may deliver to any jurisdiction within the state of California under state law, provided that such delivery is conducted in compliance with applicable regulations2. There is no limit on the number of these delivery-only businesses in the City, and there are currently no delivery-only businesses in the City. 1 City Council Meeting Agenda Packet (03-07-2023) 2 Pursuant to 4 CCR § 15416(d), operators engaging in delivery may deliver to any jurisdiction within the State of California provided that such delivery is conducted in compliance with all applicable laws and regulations. Page 200 of 229 Item 6a All cannabis businesses must be located within the Cannabis Business Zone Overlay (Section § 17.86.080E(5)(b)) and are subject to the requirements of SLOMC Chapter 9.10 (Cannabis Regulations) and Title 17 (Zoning Regulations). Currently, there are two operational commercial cannabis businesses in the City, both of which are retail storefronts: Megan’s Organic Market and SLOCAL Roots. An additional retail storefront has been issued a Contingent Operator Permit and is awaiting approval of a Conditional Use Permit to commence operations. This will be the final retail storefront permitted in the City. Proposed Amendments to Table 2-1 (Uses Allowed by Zone) The proposed amendments to Table 2-1, shown in underline in Figure 1, clarify the following:  Retail non-storefronts engaging in delivery only are permitted to operate out of the C-S, M and BP Zones, with approval of a Minor Use Permit (MUP).  Retail storefronts, with or without delivery services, are permitted to operate out of the C-R and C-S Zones with approval of a Conditional Use Permit (CUP) or by amendment to an existing Conditional Use Permit. Table 2-1: Uses Allowed By Zone Key: A = Allowed; MUP = Minor Use Permit approval required; CUP = Conditional Use Permit approval required       M/A = Minor Use Permit approval required on ground floor along street frontage, allowed on second floor or above Land Use Permit Requirement by Zoning District Specific Use Regulations AG C/OS R-1 R-2 R-3 R-4 PF O C-N C-C C-R C-D C-T C-S M BP CANNABIS ACTIVITY Cannabis See Section 17.86.080 Specialty Cultivator MUP MUP MUP Small Cultivator MUP MUP MUP Nursery MUP MUP MUP Manufacturing MUP MUP MUP Distributor MUP MUP MUP Microbusiness CUP MUP/ CUP MUP/ CUP MUP/ CUP See Sec. 17.86.080(E)(12) for specific requirements per zone. Testing CUP A A A Director’s action required. See also Sec. 17.86.080(E)(9). Retailer (Delivery Only) MUP MUP MUP Retailer (Storefront with or without Delivery) CUP CUP Existing retail storefronts that wish to provide delivery services shall modify their existing Conditional Use Permit to include delivery. Figure 1: Proposed Amendments to Table 2-1 Page 201 of 229 Item 6a PROJECT AN ALYSIS Public Engagement Each public hearing related to this item has been properly noticed in accordance with the City’s notification requirements for proposed text amendments . If the Ordinance for the proposed text amendment is adopted, retail storefronts will be permitted to conduct retail sales via delivery upon the granting of a CUP or the amendment of an existing CUP to allow delivery activity. The review process of a Conditional Use Permit application involves discretionary review, which requires legal notifications and a public hearing for each future project. Consistency with Major City Goals Economic Resiliency, Cultural Vitality and Fiscal Sustainability were prioritized as Major City Goals in the 2023-2025 Financial Plan to support a thriving and sustainable local economy and ensure fiscally responsible city operations. The proposed text amendments align with these goals by expanding retail sales options to include delivery for existing and future retail storefront businesses. This promotes economic well-being by providing more flexible sales avenues, thereby supporting the local economy and contributing to the city’s financial sustainability. Consistency with State Law The proposed amendments are consistent with current state regulations governing cannabis operations. State regulations permit retail storefronts to offer delivery services under a Type 10 license, provided they comply with specific operational and security requirements. By requiring retail storefronts to obtain a Conditional Use Permit or amend an existing permit to conduct delivery services, the proposed amendments ensure that local ordinances align with state-mandated standards, thereby ensuring that all cannabis delivery activities within the City adhere to stringent regulatory guidelines. Consistency with the Zoning Regulations Retail Commercial (C-R) Zone The proposed amendments to Table 2-1 (Uses Allowed by Zone Section § 17.10.020) of the Municipal Code align with the purpose of the Retail Commercial (C -R) Zone to serve the entire community and the region, as well as tourists and travelers. By allowing retail storefronts to offer delivery services, the proposed amendments increase flexibility and convenience for residents, regional customers, and visitors. This supports economic vitality by enabling businesses to meet evolving market demands, promoting resilience and stability within the C-R Zone. Service Commercial (C-S) Zone The proposed amendments to Table 2-1 (Uses Allowed by Zone Section § 17.10.020) of the Municipal Code align with the purpose of the Service Commercial (C-S) Zone to provide services to meet local needs and demands of the region, including services and limited retail. By allowing retail storefronts to offer delivery services, the proposed amendments enhance the ability of businesses in the C-S Zone to adapt to market needs and expand their service offerings. This supports the zone’s objective of catering to both the community and the broader region, while promoting economic vitality and improving service accessibility. Page 202 of 229 Item 6a Next Steps Following introduction of the Draft Ordinance, the proposed amendments may be ordered to a second reading at a future City Council meeting and subsequently adopted. Existing retail storefronts who wish to engage in delivery may apply for an amendment to their existing Conditional Use Permit, which is subject to Departmental Review and Pla nning Commission approval. Future retail storefronts in the City may apply for a Conditional Use Permit to establish and operate a retail storefront and may opt to engage in storefront sales only or storefront and delivery sales at the time of application. CONCURRENCE The City has a designated steering committee comprised of representatives from the City Attorney’s Office, Police Department, Finance Department, Community Development Department, and City Administration to support the City’s Cannabis Program. The proposed amendments contained within this report have been reviewed and are supported by the steering committee as consistent with previous Council direction. ENVIRONMENTAL REVIEW Adoption of the proposed amendments to Table 2-1 (Uses Allowed by Zone, Section § 17.10.020) of the Municipal Code has been reviewed in accordance with the California Environmental Quality Act (CEQA) Guidelines. It has been determined that the amendments are exempt from environmental review under CEQA Guidelin es Section § 15301(b)(3) (General Rule Exemption), which applies to activities that can be clearly seen to have no potential for significant environmental impact. The proposed amendments involve minor modifications to the regulations governing commercial c annabis retail storefront operations and are not expected to have any significant effect on the environment. However, project-specific environmental review will be required for any new commercial cannabis activity. Any new or existing cannabis retail storefront seeking a Conditional Use Permit or an amendment to an existing permit to engage in delivery services will be required to comply with all applicable state and local laws, including CEQA requirements. FISCAL IMPACT Budgeted: N/A Budget Year: 2023-25 Funding Identified: N/A Page 203 of 229 Item 6a Fiscal Analysis: Funding Sources Total Budget Available Current Funding Request Remaining Balance Annual Ongoing Cost General Fund $0 $0 $0 $0 State Federal Fees Other: Total $0 $0 $0 $0 There is no fiscal impact associated with the proposed amendments to the Municipal Code. ALTERNATIVES 1. Modify the Ordinance. The City Council may modify the Draft Ordinance and introduce the revised ordinance. 2. Continue review. An action to continue the item should include a detailed list of additional information or analysis required to adopt the recommended changes. 3. Do not introduce and adopt the Ordinance. This is not recommended because this would be inconsistent with previous direction from the City Council on March 7, 2023 to allow cannabis retail storefronts to also deliver. ATTACHMENTS A - Draft Ordinance adopting an amendment to Table 2-1 of the Zoning Regulations to allow cannabis retail storefronts to deliver. Page 204 of 229 O ______ ORDINANCE NO. _____ (2024 SERIES) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, APPROVING AMENDMENTS TO TABLE 2-1 (USES ALLOWED BY ZONE) IN TITLE 17 (ZONING REGULATIONS) OF THE MUNICIPAL CODE TO ALLOW CANNABIS RETAIL STOREFRONTS TO CONDUCT RETAIL SALES BY DELIVERY WITH APPROVAL OF A CONDITIONAL USE PERMIT OR BY AMENDMENT TO AN EXISTING CONDITIONAL USE PERMIT. THE PROJECT IS EXEMPT FROM ENVIRONMENTAL REVIEW (CEQA) (CODE-0401-2024) WHEREAS, the Planning Commission 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 August 14, 2024, for the purpose of recommending an amendment to Table 2-1 (Uses Allowed by Zone) in Title 17 (Zoning Regulations) of the Municipal Code, pursuant to a proceeding under CODE-0401-2024; City of San Luis Obispo, applicant; 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 September 3, 2024, for the purpose of introducing an ordinance to amend Table 2-1 (Uses Allowed by Zone) in Title 17 (Zoning Regulations) of the Municipal Code, pursuant to a proceeding under CODE-0401-2024; City of San Luis Obispo, applicant; and WHEREAS, notices of said public hearing were made at the time and in the manner required by law; and WHEREAS, the City Council has duly considered all evidence, including the testimony of interested parties and the evaluation and recommendation by staff, presented at said hearing. NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis Obispo as follows: SECTION 1. Findings. Based upon all the evidence, the City Council makes the following findings: 1. The proposed amendments to Table 2-1 (Uses Allowed by Zone, Section § 17.10.020) of the Municipal Code are consistent with the State of California’s Department of Cannabis Control regulations. 2. The proposed amendments to Table 2-1 (Uses Allowed by Zone, Section § 17.10.020) are consistent with previous City Council direction on March 7, 2023, to update the Cannabis Program to allow cannabis retail storefronts to offer delivery services. 3. The proposed amendments to Table 2-1 (Uses Allowed by Zone, Section § 17.10.020) are consistent with the City Council's broader goals of regulating cannabis businesses to ensure public safety and compliance with state laws. Page 205 of 229 Ordinance No. ______ (2024 Series) Page 2 O ______ 4. The proposed amendments to Table 2 -1 (Uses Allowed by Zone Section § 17.10.020) of the Municipal Code are consistent with the Major City Goal (Financial Plan 2023-2025) to implement initiatives that reinforce a thriving and sustainable local economy as well as to ensure fiscally responsible and sustainable city operations by strengthening existing cannabis businesses, promoting the economic well-being of the community. 5. The proposed amendments to Table 2 -1 (Uses Allowed by Zone Section § 17.10.020) of the Municipal Code are consistent with the purpose of the Retail Commercial (C-R) Zone to serve the entire community and the region, as well as tourists and travelers. 6. The proposed amendments to Table 2 -1 (Uses Allowed by Zone Section § 17.10.020) of the Municipal Code are consistent with the purpose of the Service Commercial (C-S) Zone to provide services to meet local needs and demands of the region, including services and limited retail. SECTION 2. The Land Use section entitled, “Cannabis Activity” of Table 2-1 (Uses Allowed by Zone, Section § 17.10.020) of the City of San Luis Obispo Municipal Code is hereby amended as follows: Table 2-1: Uses Allowed By Zone Key: A = Allowed; MUP = Minor Use Permit approval required; CUP = Conditional Use Permit approval required       M/A = Minor Use Permit approval required on ground floor along street frontage, allowed on second floor or above Land Use Permit Requirement by Zoning District Specific Use Regulations AG C/OS R-1 R-2 R-3 R-4 PF O C-N C-C C-R C-D C-T C-S M BP CANNABIS ACTIVITY Cannabis See Section 17.86.080 Specialty Cultivator MUP MUP MUP Small Cultivator MUP MUP MUP Nursery MUP MUP MUP Manufacturing MUP MUP MUP Distributor MUP MUP MUP Microbusiness CUP MUP/ CUP MUP/ CUP MUP/ CUP See Sec. 17.86.080(E)(12) for specific requirements per zone. Testing CUP A A A Director’s action required. See also Sec. 17.86.080(E)(9). Retailer (Delivery Only) MUP MUP MUP Retailer (Storefront with or without Delivery) CUP CUP Existing retail storefronts that wish to provide delivery services shall modify their existing Conditional Use Permit to include delivery. Page 206 of 229 Ordinance No. ______ (2024 Series) Page 3 O ______ SECTION 3. Environmental Determination. Adoption of the proposed amendments to Table 2-1 (Uses Allowed by Zone, Section § 17.10.020) of the Municipal Code has been reviewed in accordance with the California Environmental Quality Act (CEQA) Guidelines. It has been determined that the amendments are exempt from environmental review under CEQA Guidelines Section § 15301(b)(3) (General Rule Exemption), which applies to activities that can be clearly seen to have no potential for significant environmental impact. The proposed amendments involve minor modifications to the regulations governing commercial cannabis retail storefront operations and are not expected to have any significant effect on the environment. However, project -specific environmental review will be required for any new commercial cannabis activity. Any new or existing cannabis retail storefront seeking a Conditional Use Permit or an amendment to an existing permit to engage in delivery services will be required to comply with all applicable state and local laws, including CEQA requirements. SECTION 4. Action. The City Council hereby adopts an ordinance amending Table 2-1 (Uses Allowed by Zone, Section § 17.10.020) of the Municipal Code to allow cannabis retail storefronts to conduct retail sales by delivery with approval of a Conditional Use Permit or by amendment to an existing Conditional Use Permit. SECTION 5. 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 invalid or unenforceability shall not affect the validity or enforcement of the remaining provisions 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. Page 207 of 229 Ordinance No. ______ (2024 Series) Page 4 O ______ SECTION 6. 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 New Times, 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 _____ 2024, AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the ____ day of ____, 202 4, on the following vote: AYES: NOES: ABSENT: _____________________ Mayor Erica A. Stewart 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, on ______________________. _____________________ Teresa Purrington City Clerk Page 208 of 229 1 INTRODUCE AN ORDINANCE TO ALLOW CANNABIS RETAIL STOREFRONTS TO CONDUCT RETAIL SALES BY DELIVERY. SEPTEMBER 3, 2024 Recommendation Introduce and adopt an Ordinance entitled, “An Ordinance of the City Council of the City of San Luis Obispo, California, approving an amendment to Table 2-1 (Uses Allowed by Zone) in Title 17 (Zoning Regulations) of the Municipal Code with an exemption from environmental review (CEQA). Previous Planning Commission & City Council Action 3 •On March 7, 2023, at the Annual Cannabis Business Program Update, the City Council provided direction to staff to update the Cannabis Program to allow retail storefronts to offer delivery services. •On August 14, 2024, the Planning Commission adopted a resolution recommending adoption of an ordinance amending the code to allow cannabis retail storefronts to conduct retail sales by delivery with approval of a CUP or by amendment to an existing CUP. Two Types of Cannabis Retail Activity Retail Storefront 4 •Type 10 State license. •Conduct retail sales of cannabis goods to the public on site & may also deliver. •Limited to three (SLOMC 17.86.080(E)(10)(b). •Allowed in the C-R and C-S Zones. •On site retail sales allowed from 7AM to 9PM. Delivery from 6AM to 10PM. Retail Non-storefront (delivery-only) •Type 9 State license. •Conduct retail sales of cannabis goods to a physical location. •No numerical limit per SLOMC. •Allowed in C-S, M, and BP Zones. •Delivery allowed from 6AM to 10PM. Cannabis Operators in the City All are Retail Storefronts •There are two retail storefronts in the City. •Potential for one more to open in S. Broad area. 6 Current: Table 2-1: Uses Allowed by Zone (17.10.020) 7 Proposed: Table 2-1: Uses Allowed by Zone (17.10.020) Consistency with the Major City Goals 8 Economic Resiliency, Cultural Vitality and Fiscal Sustainability (2023-25 Financial Plan) •Support a thriving and sustainable local economy and ensure fiscally responsible city operations. Consistency with the Allowable Zones Commercial Retail (C-R) Zone •Purpose: Serve the entire community and the region, as well as tourists and travelers. Service Commercial (C-S) Zone •Purpose: To provide services to meet local needs and demands of the region, including services and limited retail. Environmental Review •Adoption of the proposed amendments to Table 2-1 was reviewed in accordance with the California Environmental Quality Act (CEQA) Guidelines and is determined to be exempt from environmental review pursuant to CEQA Guidelines Section § 15301(b)(3) (General Rule Exemption), which exempts activities that can be seen with certainty to have no possibility for causing a significant effect on the environment. Recommendation Introduce and adopt an Ordinance entitled, “An Ordinance of the City Council of the City of San Luis Obispo, California, approving an amendment to Table 2-1 (Uses Allowed by Zone) in Title 17 (Zoning Regulations) of the Municipal Code with an exemption from environmental review (CEQA) (CODE-0401-2024).”