HomeMy WebLinkAboutO-1722 amending Chapter 9.10 (Cannabis Regulations) of the Municipal Code for Commercial Cannabis Business Businesses and Personal CultivationO 1722
ORDINANCE NO. 1722 (2022 SERIES)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, AMENDING CHAPTER 9.10 (CANNABIS
REGULATIONS) OF THE MUNICIPAL CODE FOR COMMERCIAL
CANNABIS OPERATOR PERMITS AND PERSONAL CULTIVATION
WHEREAS, on November 8, 2016, California voters approved Proposition 64, the
Adult Use of Marijuana Act, which created a comprehensive regulatory and dual licensing
system for commercial cannabis activity in the State of California effective January 2018;
and
WHEREAS, Proposition 64 was passed by a sixty-seven percent (67%) of the
voters in the City of San Luis Obispo; and
WHEREAS, prior to the passage of Proposition 64, the City took the position that
commercial cannabis activity was prohibited in the city under the principles of permissive
zoning, which holds that uses that are not expressly allowed or conditionally allowed
under zoning regulations are prohibited within the City; and
WHEREAS, after the passage of Proposition 64, the City Council of the City of San
Luis Obispo adopted on April 4, 2017 in the City Council Chamber of City Hall, 990 Palm
Street, San Luis Obispo, California, an Ordinance No. 1633 (2017 Series), amending
Chapter 9.10 of the Municipal Code to maintain the status quo while the City conducted
public outreach; and
WHEREAS, the City Council of the City of San Luis Obispo adopted on May 22,
2018 in the City Council Chamber of City Hall, 990 Palm Street, San Luis Obispo,
California, an Ordinance No. 1647 (2018 Series), amending Title 9 (Public Peace, Morals,
and Welfare) and Title 17 (Zoning Regulations) of the Municipal Code allowing for
Commercial Cannabis Business and personal cultivation activities in the city; and
WHEREAS, the City Council of the City of San Luis Obispo adopted on January
14, 2020 in the City Council Chamber of City Hall, 990 Palm Street, San Luis Obispo,
California, an Ordinance No. 1673 (2019 Series), amending Chapter 9.10 (Cannabis
Regulations) of the Municipal Code modifying the Commercial Cannabis Operator Permit
application procedures and requirements; and
WHEREAS, the City Council of the City of San Luis Obispo adopted on February
2, 2021 in the City Council Chamber of City Hall, 990 Palm Street, San Luis Obispo,
California, an Ordinance No. 1691 (2021 Series), amending Chapter 9.10 (Cannabis
Regulations) and Chapter 5.10 (Cannabis Business Tax) of the Municipal Code
establishing an expiration date and registration requirements for all cannabis Operator
permits; and
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WHEREAS, after administration and operation of the commercial cannabis
program, staff has identified necessary changes to Chapter 9.10 of the Municipal Code
to clarify the application and operational requirements for commercial cannabis permit
holders; and
WHEREAS, the City Council of the City of San Luis Obispo on September 20,
2022 in the City Council Chamber of City Hall, 990 Palm Street, San Luis Obispo,
California, considered the recommended changes to Chapter 9.10 of the Municipal Code
and held a public meeting to review and discuss the proposed changes.
NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis
Obispo as follows:
SECTION 1. Section 9.10.020, subsection B of the San Luis Obispo Municipal
Code is hereby amended to read as follows:
B. City defined terms. The following words or terms used in this chapter have the
following meanings:
1. “Applicant” means the individual or entity applying for the Commercial
Cannabis Business Operator Permit, including each entity or individual
identified as part of the Applicant team or who is an Owner or Principal of an
entity applying for a Permit.
2. “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.
3. “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.
4. “Financial Interest Holder” means a person or entity (other than a Social
Equity Owner) who has less than a 10% aggregate ownership interest in the
Commercial Cannabis Business, has no active or passive direction, control,
or management of the Commercial Cannabis Business, and otherwise
meets the definitions of Financial Interest Holder as set forth in the
Department of Cannabis Control Medicinal and Adult -Use Commercial
Cannabis Regulations California Code of Regulations Title 4 Division 19.
Department of Cannabis Control. For purposes this Chapter, the aggregate
ownership threshold herein shall supersede any current (20%) or
subsequently amended State threshold for a Financial Interest Holder.
5. “Majority “means more than half. An equal number does not constitute a
Majority.
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6. “Operator” means an Applicant that has been permitted and conducts or
conducted active cannabis operations in the City.
7. "Owner" means any of the following:
a. A Primary Principal
b. A Social Equity Owner
c. Any person or entity engaged actively or passively in the direction,
control, or management of any Commercial Cannabis Business
d. If available evidence indicates that an individual qualifies as an
Owner, the City may notify the Applicant or licensee that it must either:
1) disclose the individual or entity as an Owner and submit written
acknowledgement that the Owner will be subject to the requirements
of the application and this Chapter 9.10; or, 2) produ ce a written
attestation under oath, along with any supporting documentation,
demonstrating that the individual does not qualify as an Owner.
8. “Principal(s)” means the individual(s), entities, and/or individual members of
any entity, identified as part of the Applicant team in the Commercial
Cannabis Operator Permit application.
9. “Primary Principal” means an individual or entity that has a 10% or greater
ownership interest, or has an immediately actionable entitlement to such
interest, in the Applicant business, Commercial Cannabis Business,
including, but not limited to partners, members, officers, directors, and
stockholders of every corporation, limited liability company, or general or
limited partnership that owns, or has an immediately actionable entit lement
to, at least 10% of the stock, capital, profits, voting rights, or membership
interest of the Commercial Cannabis Business or that is one of the partners
in the Commercial Cannabis Business. Managers of a Commercial Cannabis
Business with the authority to establish, modify or control operational and
policy directives and/or business operations plans for the business, whether
by means of ownership or contractual authority, shall also be considered
Primary Principals. On site retail managers without su ch authority shall be
considered employees and not Primary Principals.
10. “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.
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11. “Social Equity Owner” means the Principal(s) of a Commercial Cannabis
Business with 2% equity or higher who earned at or below the median
household income at the time the Operator’s Commercial Cannabis
Operator Permit application was approved by the City.
12. “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.
SECTION 2. Section 9.10.070, subsections A, B, C, and D of the San Luis Obispo
Municipal Code are hereby amended 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.
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 except as otherwise prohibited by this
Chapter.
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, except as otherwise prohibited
by this Chapter. The Commercial Cannabis Operator Permit will be valid for
twelve months. Once a permit is activated, 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.
C. 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:
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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 and Professions Code Section 26057, or of any other crime related
to the application for or operation of a cannabis business; 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 for any other criminal misconduct related to the
application for or operation of a cannabis business; or has been disqualified
from obtaining, or has had a commercial cannabis license suspended or
revoked by the state of California or any city or county in any state for
misconduct related to a cannabis business. The foregoing restrictions shall
apply within the five (5) years preceding the date the application is filed, and
for any additional period of time during which an Applicant 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,
disqualification, suspension or revocation of a cannabis permit or license,
may be engaged (actively or passively) in the application for, or 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. The foregoing shall result in immediate
notice of automatic disqualification of the application, and/or revocation of
any permit issued to the Applicant as the result of the misleading statements
or omissions.
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.
D. 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 twenty-four (24) months of issuance. The permit is activated
by the issuance of a use permit for the Commercial Cannabis Activity pursuant
to Chapter 17.86, together with all other applicable City permits and state
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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. In the event that a permit holder fails to timely activate
the permit and the permit lapses, the cannabis business shall be required to
submit a new application, unless otherwise prohibited from doing so under this
Chapter.
SECTION 3. Section 9.10.090, subsections D and E of the San Luis Obispo
Municipal Code are hereby amended to read as follows:
D. Notwithstanding the foregoing, upon finding, at any time following activation of
a permit and operation of a cannabis business, of any violation of criminal or
regulatory misconduct that would have precluded the issuance of a cannabis
permit or state license, or upon a finding that the Applicant or Owner provided
false or misleading information in the Commercial Cannabis Operator Permit
application that resulted in the issuance of any Operator permit, the permit and
right to operate a cannabis business shall be revoked immediately, subject to
appeal as set forth in Section 9.10.100(B).
E. Notwithstanding the foregoing, upon finding, at any time prior to activation of a
permit, of any violation of criminal or regulatory misconduct that would have
precluded the issuance of a cannabis permit or state license, or upon a finding
that the Applicant or Owner provided false or misleading information in the
Commercial Cannabis Operator Permit application that resulted in the issuance
of any Operator permit, the permit shall be revoked immediately, subject to
notice and informal appeal as set forth in Section 9.10.100(E).
SECTION 4. Section 9.10.100, subsection E of the San Luis Obispo Municipal
Code is hereby amended to read as follows:
E. Revocation – Prior to Operator Permit Activation. A decision of the city to void,
nullify or terminate an Operator permit before the Operator permit has been
activated in accordance with 9.10.080(E), shall be the final action of the city
and not appealable, except as set forth in this Section. If the date of discovery
is prior to activation of the Operator permit, the Applicant shall be provided
notice of automatic disqualification and voidance/nullification/termination of the
Operator Permit and given an opportunity to respond to the determinations in
writing and/or in an informal hearing before the City Manager, upon written
request within ten days following notification. The determination of the City
Manager shall be final with no further right of appeal.
SECTION 5. Section 9.10.120, subsection B, C, D, E, F, and G of the San Luis
Obispo Municipal Code are hereby amended to read as follows:
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B. Transfer or Assignment Prohibited. It shall be unlawful and a violation of this
Chapter to encumber, mortgage, lien, hypothecate, give, bequeath, sell, assign
or transfer, by operation of law or otherwise, any portion of the ownership ,
financial interest, 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 transfer or other action described in this section. The Commercial
Cannabis Operator 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.
C. Three Year Moratorium on Majority Transfer of Ownership. Notwithstanding any
other provision of this subsection, for three years fol lowing the date on which
the Commercial Cannabis Business activates its Commercial Cannabis
Operator Permit in accordance with 9.10.070(D), no transfer of an aggregate
ownership interest of 50% or more in a Commercial Cannabis Operator Permit
will be permitted to any person or combination of persons who were not
Applicants, Owners or Financial Interest Holders of the permit at the time that
a Commercial Cannabis Operator Permit was awarded. This restriction shall
be cumulative, as to each Commercial Cannabis Operator Permit. No transfer
of any interest is permitted in a Commercial Cannabis Business prior to
activating the Commercial Cannabis Operator Permit is allowed.
D. Prohibition against obtaining ownership in more than one storefront cannabis
dispensary. Notwithstanding any other provision of this subsection, it shall be
unlawful and a violation of this Chapter for an Owner, permit holder, or Financial
Interest Holder of a commercial cannabis retail storefront in the City to be a
Owner, permit holder, or Financial Interest Holder in any other commercial
cannabis retail storefront in the City.
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E. Prohibition against Social Equity Owner reductions. Notwithstanding any other
provision of this subsection, any transfer of ownership within three years of
permit activation that will result in the reduction or elimination of the total
number of Social Equity Owners or percentage interest of Social Equity
Ownership in a Commercial Cannabis Business from the number or ownership
percentage proposed in the original Commercial Cannabis Operator Permit
applications is prohibited. This prohibition shall include the internal transfer of
ownership from one currently permitted Operator to another, and transfers of
Social Equity Owner interests of any kind require both prio r notice and approval
of the City to verify compliance with this section. Thereafter, any transfer, at
any time, that would result in reduction of the total number of Social Equity
Owners proposed in the original application, or that would result in the to tal
Social Equity Ownership percentage in a Commercial Cannabis Business to be
reduced below a minimum of 2%, shall be prohibited.
F. Owner and Financial Interest Disclosure. Notwithstanding any other provision
of this subsection, all Owners and Financial Interest Holders in any Commercial
Cannabis Business shall be disclosed to the City in the application for the
Operator permit. Any changes to Commercial Cannabis Business Owners or
Financial Interest Holders shall be disclosed to the City when notification is
given to the State.
G. Assignment Null and Void. Any attempt to transfer, sell, assign, give, or lien, or
any transfer, by operation of law or otherwise, or any failure to disclose
information as required by this Chapter, is prohibited and a violation of this
Chapter, subject to such penalties provided under this Chapter or as otherwise
provided for violation of the Municipal Code. Any completed transfer, sale,
assignment, gift, or lien, of a Commercial Cannabis Operator Permit issued
pursuant to the Chapter, is prohibited. Any such action immediately shall void,
nullify and/or terminate the Commercial Cannabis Operator Permit, which shall
be of no further force or effect as of the date of any prohibited transfer, sale,
assignment, gift or lien.
SECTION 6. Section 9.10.140, subsection D of the San Luis Obispo Municipal
Code is hereby amended to read as follows:
D. Violation and enforcement anytime during application and permitting process .
Notwithstanding any initial verification of compliance of the Commercial
Cannabis Operator Permit application and commercial cannabis activity with
the provisions of this Chapter, any Commercial Cannabis Business later found
to be in violation of any of the requirements of this Chapter at any time during,
throughout and after the application and permitting process is subject to the
enforcement provisions provided in this chapter.
SECTION 7. Ordinance No. 1691 (2021 Series) is hereby amended and
superseded to the extent inconsistent herewith.
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SECTION 8. Environmental Review. The California Environmental Quality Act
(CEQA) does not apply to the recommended action in this repot because the action does
not constitute a “Project” under CEQA Guidelines Sec. 15378. The adoption of the
cannabis regulatory changes is an administrative activity of a government agency that will
not result in direct or indirect physical impact on the environment.
SECTION 9. 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.
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SECTION 10. A summary of this ordinance, together with the names of Council
members voting for and against, shall be published at least five (5) d ays 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 18th day of October 2022, AND FINALLY ADOPTED by the
Council of the City of San Luis Obispo on the 1st day of November 2022, on the following
vote:
AYES: Council Member Marx, Pease, Shoresman, Vice Mayor
Christianson, and Mayor Stewart
NOES: None
ABSENT: None
___________________________
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
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