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  1.       
Meeting Date: 03/01/2021  
Submitted By: Roy N. Ramsland, Jr., Planning Manager

RECOMMENDATION:

That the City Council:
A.  APPROVE THE FIRST READING OF ORDINANCE NO. ____ ENTITLED:  AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LA HABRA, COUNTY OF ORANGE, CALIFORNIA, APPROVING ZONE CHANGE 21-01 AMENDING LA HABRA MUNICIPAL CODE TITLE 18 ("ZONING"), CHAPTER 18.22 (“COMMERCIAL CANNABIS ACTIVITY”) TO MODIFY EXISTING DEVELOPMENT STANDARDS (See Attachment 11); and

B.  Approve a motion of the City Council of the City of La Habra approving the application evaluation process and the distribution of assistance information exhibits as attached to this staff report.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA):
The proposed amendment to Chapter 18.22 are exempt from the California Environmental Quality Act pursuant to Business and Professions Code Section 26055(h), “Without limiting any other statutory exemption or categorical exemption, Division 13 (commencing with Section 21000) of the Public Resources Code does not apply to the adoption of an ordinance, rule, or regulation by a local jurisdiction that requires discretionary review and approval of permits, licenses, or other authorizations to engage in commercial cannabis activity.  To qualify for this exemption, the discretionary review in any such law, ordinance, rule, or regulation shall include any applicable environmental review pursuant to Division 13 (commencing with Section 21000) of the Public Resources Code.  This subdivision shall become inoperative to July 1, 2021."
DISCUSSION:
The Planning Commission, at their regular meeting of February 10, 2020, recommended that the City Council approve Zone Change 19-03 to La Habra Municipal Code Title 18 (Zoning), Chapter 18.22 (Commercial Cannabis Activity) to allow for two non-storefront cannabis retail (delivery only dispensary) facilities and modifications to existing development standards (see Attachment 1).  On March 2, 2020, the City Council denied the draft ordinance (see Attachment 2).

On August 3, 2020, the City Council considered a ballot measure to authorize the City Council to adopt an ordinance authorizing up to a six percent gross receipts tax on commercial cannabis businesses and authorize up to four licenses for cannabis non-storefront retail facilities (delivery only dispensaries).  After receiving testimony from the public and from staff responding to Council questions, it was the consensus of the City Council to allow the public to decide the issue of cannabis use within the community. The City Council, by a 4-1 vote, placed on the November 3, 2020, General Municipal Election ballot, a measure to establish a cannabis business tax and allow for four non-storefront cannabis retail facilities (delivery only dispensaries) (Attachment 3).  On November 3, 2020, Measure W (City of La Habra Cannabis Business Tax/Regulation Ordinance of 2020), received 67.46% (17,726) votes in favor of the measure while 32.54% (8,550) voted in opposition to the measure.  Therefore, Measure W was approved by the La Habra voters.

Due to the approval of Measure W, the City Council on December 7, 2020, reconsidered their action on Zone Change 19-03.  The City Council on a 3-0 vote approved Zone Change 19-03 to allow for four cannabis non-storefront retail (delivery only dispensary) facilities, per Measure W, along with modifications to Chapter 18.22 to recognize the approval of the Cannabis Business Tax (see Attachment 4).

Zone Change 21-01: 

Zone Change 21-01 involves an amendment to Section 18.22.050.A, “Disqualification of Applications” of Chapter 18.22 (Commercial Cannabis Activity).  A proposed subsection 10 will be added that requires the applicant to comply with all rules and regulations promulgated by the City relating to the application process.  Failure to submit a complete application in compliance with the application form and related administrative policies prepared pursuant to Section 18.22.040(A) will result in the disqualification of the application (see Attachment 5). 

Included in the City Council packet for formal approval in conjunction with the Zone Change is the “Cannabis Business Permit Application,” “Cannabis Business Permit Checklist,” “Commercial Cannabis Business Opportunity Activity Summary Sheet,” and “Step by Step Guide-Application for Cannabis Business Permit” handouts (see Attachments 6, 7, 8 and 9).  Versions of these documents were created and successfully utilized for the submittal, evaluation and ultimate approval of the existing cannabis distribution (warehouse) facilities currently located in La Habra.  Given the degree of interest in the soon to be available non-storefront cannabis retail (delivery only dispensary) facility licenses, it is very likely more applications will be received than the four available licenses.   

The proposed Zone Change allows for these documents to be incorporated as part of the City's Commercial Cannabis Activity Business Standards criteria.  Failure to adhere to the requirements established within the handouts will result in the rejection of the application during the initial application period.  Re-submittal of an application will be permitted after the initial application period is completed should non-storefront cannabis retail facility licenses be available

Application Process: 

The application process for a non-storefront cannabis retail facility license will remain the same as utilized for the review and approval of the existing cannabis distribution and/or cannabis laboratory testing license.  Staff will establish an initial 30-day submittal window for applicants wishing to obtain a non-storefront cannabis retail license.  Applicants must complete the “Cannabis Business Permit Application” and attach all required documentation identified within the “Cannabis Business Permit Submittal Checklist,” “Step by Step Guide-Cannabis Business Permit Application,” and “Chapter 18.22” (Commercial Cannabis Activity).  Failure to submit the required elements identified in the handouts and by Ordinance will result in the application not being accepted.  Re-submittal of an incomplete application will not be accepted during the initial application period.  Should non-storefront cannabis retail facility licenses remain after the initial application period, applications will be accepted on a first come-first serve basis.

All accepted applications will result in background checks being conducted of the ownership groups.  Successful applicants will then have their submittal package forwarded to the City’s consultant for independent evaluation and scoring.  HdL is the City’s revenue consultant, as approved by the City Council in 2017 (Attachment 10), and has assisted over 150 local agencies to develop regulatory and tax policies related to cannabis operations, in addition to conducting fiscal analysis, compliance inspections, and financial audits.  HdL staff consist of former policy makers, law enforcement and cannabis regulators with Federal, State, County and local level experience.  HdL has reviewed and evaluated over 2,500 cannabis business applications, participated in hundreds of interviews and have been involved in over 17,000 cannabis compliance inspections in California, Colorado and Nevada.  HdL only works for local governments and neither supports nor opposes cannabis activities or operations. 

Assuming there are more accepted applications than there are available permits, the top five scoring applications will be forwarded to the Cannabis Review Board for interviews and their individual scoring of the applications.  The top four applicants will then proceed to the Development Agreement stage.  Upon completion of that phase, a Conditional Use Permit application can then be submitted for consideration by the Planning Commission.  The draft Development Agreement would be scheduled for City Council consideration upon the successful completion of the Conditional Use Permit phase by the applicant.  Upon the successful completion of the Conditional Use Permit and Development Agreement phase, building permits can be issued for improvements to the property and ultimately the issuance of a Cannabis Business License.

Applications that were accepted, successfully completed the background check but were not successful in obtaining one of the four non-storefront licenses will be placed on a waiting list should a license become available.   

Staff is prepared to finalize the cannabis business permit application process and assistance guides, post the application submittal deadlines, and begin accepting applications in May 2021, upon approval of Zone Change 21-01 and accompanying action.  The staff report and accompanying attachments have all been reviewed by the City Attorney’s office.
ANALYSIS:
See Discussion above.
PLANNING COMMISSION ACTION:
On February 8, 2021, the Planning Commission conducted a public hearing on Zone Change 21-01 to amend provisions of Chapter 18.22 (Commercial Cannabis Activity) of Title 18 (Zoning Code) to modify existing development standards to require applicants to comply with all rules and regulations promulgated by the City relating to the application process.  The Chair asked for public comment and Mr. Tony Desimone, operator of the Canna America cannabis distribution facility in La Habra asked that local existing cannabis operators be given preference for a non-storefront cannabis retail license due to the investment they have already made within the community.  There were no speakers in opposition to Zone Change 21-01.  The Planning Commission approved by a 5-0 vote a Resolution recommending that the City Council adopt an Ordinance amending provisions of Chapter 18.22 (Commercial Cannabis Activity) of Title 18 (Zoning Code) to modify existing development standards to require applicants to comply with all rules and regulations promulgated by the City relating to the application process. (Attachment 12).
FISCAL IMPACT/SOURCE:
On April 2, 2018, the City Council established fees for the processing of Commercial Cannabis activities that recover the full cost of processing such applications through the screening, Development Agreement, and Conditional Use Permit process.
GENERAL PLAN RELEVANCE:
Action on the Commercial Cannabis Ordinance implements the following General Plan Policies:

LU 4.1 Development Compatibility
LU 6.3 High-Impact Uses
LU 16.1 Diversity of Uses
ED 2.1 Business Attraction
Attachments
1.PC Minutes 2-10-20
2. CC Minutes 3-2-20
3. City Council Minutes 8-3-20
4. CC Minutes 12-7-20
5. Marked Up Version of Chapter 18.22
6. Draft Cannabis Business Permit Application
7. Draft Cannabis Business Permit Submittal Checklist
8. Draft Commercial Cannabis Business Opporunity Activity Summary Sheet
9. Draft Step by Step Guide-Application for Cannabis Business Permit
10. City Council Minutes 12-18-17
11. ZC 21-01 Cannabis Facilities Ordinance
12. PC Minutes 2-8-2021 Draft
13. Legal


    

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