COUNTY ADMINISTRATION OFFICE - R. ESPINOSA

a) PUBLIC HEARING - Conduct public hearing regarding the draft ordinance regulating cannabis business permitting in San Benito County (amending Chapter 7.02); and

b) Consider adoption of resolution recommending that the Board of Supervisors adopt an Ordinance amending Chapter 7.02 of the San Benito County Code relating to cannabis business permitting, making 2035 General Plan consistency findings and determinations, and making appropriate findings and determinations under the California Environmental Quality Act (“CEQA”); or

c) continue this item to another date and time certain.

Executive Summary:

Commercial cannabis activity is currently prohibited in the unincorporated area of San Benito County. On June 6, 2018 voters approved Measure C creating a tax on cannabis businesses and Board of Supervisors directed staff to establish the necessary ordinances to allow certain commercial cannabis activity within the unincorporated area of San Benito County.

HdL Companies was contracted to assist the County's development and implementation of a cannabis business regulatory program, to provide input and direction to draft an ordinance establishing the regulatory structure for cannabis business operations and the permitting thereof.

As directed by the Board of Supervisors, County staff and Cannabis consultant HDL companies are proposing amendments to the Zoning Code to accomplish the following:

• Allow cannabis businesses to engage in the following commercial cannabis activities :
• Cultivation (including Nursery),
• Manufacturing (Volatile and Non-Volatile),
• Laboratory testing,
• Distribution,
• Microbusiness (Non-Retail), and
• Delivery only via Out-of-County Delivery Services.

• Establish Cannabis Business Permits for the duration of one year.
• Amend other zoning code language to aid in consistency and clarification of cannabis business activity specifically title 7.02, 25.07, and 25.17 and add Chapter 19.43 to the San Benito County Code which sets forth the development and operational standards for cannabis businesses.

State Law

The Compassionate Use Act, Proposition 215 was adopted in 1996 by California voters allowing the use of marijuana for medicinal purposes by qualified patients and for caregivers to provide medical marijuana and obtain compensation for the costs. In 2004, SB 420 established a County Health ID card program, collective and cooperative cultivation, and safe harbor amounts for cultivation and possession. Subsequently these developments resulted in new land use, but the interaction between federal, state, and local law was unsettled.

In 2015, the California Legislatures enacted the Medical Cannabis Regulation and Safety Act (MCRSA). Then, in 2016 California voters approved Proposition 64, passing the Adult Use of Marijuana Act (AUMA). MCRSA and AUMA provide local control of medical and non-medical marijuana businesses and certain related activities through licensing and land use regulations. The laws allow local jurisdictions to regulate marijuana businesses and activities or to impose reasonable regulations. On June 27, 2017, Senate Bill 94 was passed by the state consolidating the regulations in Medical Cannabis Act and Adult Use Cannabis Act into the Medicinal and Adult-Use Cannabis Regulation and Safety Act (Cannabis Act). The Cannabis Act created one regulatory system for medicinal and adult-use cannabis. The three state cannabis licensing authorities, California Bureau of Cannabis Control, CalCannabis Cultivation Licensing, and the Manufactured Cannabis Safety Branch, issued their comprehensive emergency regulations on November 16, 2017 creating the current cannabis regulatory structure.

San Benito County Laws

The Board of Supervisors previously adopted a limited Cannabis Businesses Ordinance (Ordinance No. 964) on December 12, 2017, set forth in Chapter 7.02 of the San Benito County Code, pending the results of an initiative measure regarding taxing cannabis businesses. On June 6, 2018, San Benito County voters approved Measure C to create a tax for cannabis businesses located in unincorporated San Benito County. The Board further directed staff to address ways to mitigate known and unknown impacts of cannabis business through cost recovery (fees) and revenues (taxes), to continue to develop a cannabis business ordinance to bring back to the Board.

HdL has been recognized as the leader in helping California government agencies, they have developed a Cannabis Management Program with former professional government marijuana policy experts with extensive knowledge in this area. HdL has a specialized division of Cannabis expert staff that have been working closely with the Department of Consumer Affairs, Department of Food and Agriculture, Department of Public Health and the California Department of Tax and Fee Administration in the implementation of the Medical Cannabis Regulatory and Safety Act (MCRSA). Their experts work closely with the League of California Cities, California State Association of Counties (CSAC), and the Police Chiefs Association to develop policy and regulatory strategies to manage the Cannabis Industry in California, offering the resources and expertise to assist with the design and implementation of Cannabis regulatory and taxation policies and programs.

Staff Recommendation

Staff recommends the San Benito County Planning Commission adopt a resolution amending 7.02 to allow certain commercial cannabis activities. All commercial cannabis activity requires prospective cannabis businesses to obtain a County-issued Cannabis Business Permit, State License, and a Conditional Use Permit.

Any person who intends to engage in commercial cannabis activity in the unincorporated area of the County is required to obtain a County-issued Cannabis Business Permit in conjunction with applicable State cannabis License. It is unlawful for any person to conduct, engage in, or allows be conducting or engaging in a commercial cannabis activity in the unincorporated area of the County, unless the County has issued such person a Cannabis Business Permit under this Chapter 7.02 of the County Code and the Cannabis Business Permit is valid. 

The regulatory ordinance (Chapter 7.02) would categorize commercial cannabis activities into six permit types  and requires each person or entity to obtain a separate Cannabis Business Permit for each fixed location in which the commercial cannabis activity is to occur and for each type of commercial cannabis activity noted below prior to commencing operations. The six Cannabis Business Permit types are as follows: Cultivation (including Nursery), Manufacturing (Volatile and Non-Volatile), Testing, Distribution, Microbusiness (Non-Retail), and Retail (Out-of-County delivery only).

Cannabis Business Permit application availability may vary depending on whether the commercial cannabis activity is prohibited or limited, e.g., cultivation is limited to fifty (50). All Cannabis Business Permits shall be valid for twelve months from the date of issuance by the CAO, unless suspended or revoked by the County.

All commercial cannabis activity requires prospective cannabis businesses to obtain a County-issued Cannabis Business Permit, State License, and a Conditional Use Permit. The zoning and land use regulations ordinances would establish the zones in which certain commercial cannabis operations is a conditional use and those development standards to mitigate potential negative impacts from operating a cannabis business. The ordinances also establish development standards to mitigate potential negative impacts from cannabis operations.

Environmental Review.  Exempt, including, but not limited to, California Business and Professions Code section 26055, subd. (h) and State CEQA Guidelines section 15308. This Ordinance is not subject to review under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15308 Class 8: Actions by Regulatory Agencies for Protection of the Environment consists of actions taken by regulatory agencies, as authorized by state or local ordinance, to assure the maintenance, restoration, enhancement, or protection of the environment where the regulatory process involves procedures for protection of the environment, and pursuant to California Business and Professions Code Section 26055, subd. (h), which states in pertinent part, “[w]ithout limiting any other statutory exemption or categorical exemption, [CEQA] does not apply to the adoption of an ordinance . . . that requires discretionary review and approval of permits . . . 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 [CEQA].”

General Plan

1. Section 9 Health and Safety Element which “provides guidance for how to protect county residents, workers, visitors, and properties from unreasonable risks associated with natural and manmade hazards. One of the main strategies used by the County to maintain safety is to require distance between known hazards and places where people live, work, and congregate.” Goal HS-5.2, Sensitive Land Use Locations, states, “[t]he County shall ensure adequate distances between sensitive uses and facilities or operations that may produce toxic or hazardous air pollutants or substantial odors.” The Ordinance is consistent with Goal HS-5.2 in that setbacks are required from sensitive land use areas, as well as, from all boundary lines so as to reduce the exposure to and contact with odors from commercial cannabis activity on residential, or other sensitive use, properties; and

2. Section 3 Land Use Element, GOAL LU-3.1 Agricultural Diversification, states, “[t]he County shall support existing farms, vineyards, and other agricultural operations and encourage the agricultural industry to continue diversification that includes organic, value-added, small-scale, sustainable, and community-supported agricultural practices throughout the county.” The Ordinance is consistent with Goal LU-3.1 in that not prohibiting certain commercial cannabis activities, to wit, commercial cannabis cultivation, creates diversity of available agricultural-type opportunities and thereby promotes the diversification of use of agricultural and rangeland zones; and

3. Section 3 Land Use Element, GOAL LU-6.3 Industrial Uses, states, “[t]he County shall encourage industrial land uses to locate in areas that would not pose significant land use conflicts and in a manner appropriate to the type of industrial activity proposed, such as industry in direct support of agricultural operations in agricultural areas and general light industrial services nodes near existing and proposed major transportation infrastructure (e.g., highways like State Route 25 corridor in the North County, arterial roads, rail, and airports).” The Ordinance is consistent with Goal LU-6.3 in that the zones identified for commercial cannabis activities encompass all areas where the nodes have been identified, and that the ordinance allows commercial cannabis activity in industrial areas; and

4. Section 4, Economic Development Element, focuses on diversifying the local economy. GOAL ED-1.5 Quality of Life Improvements, states, “[t]he County shall focus economic development efforts on creating positive change in the county relative to residents and workers’ quality of life. This should include considering air quality, education opportunities, safety, water quality, scenic beauty, and recreational opportunities during economic development decisions.” The Ordinance is consistent with Goal ED-1.5 in that cannabis businesses will be subject to stringent regulations, including, but not limited to, limitation on operating hours, the prohibition of outdoor cultivation, odor filtration requirements, and a track-and-trace program which is intended to deter criminal activity and trespass; and

5. Section 4, GOAL ED-1.6 Agricultural Base Diversification, states, “[t]he County shall diversify the existing agricultural base by encouraging strong relationships between traditional agricultural industries and emerging agricultural-related industries, and emphasizing the expansion of value-added agricultural products in the county.” The Ordinance is consistent with Goal ED-1.5 in that the cannabis industry is an emerging agricultural-related industry with a local base of persons interested in entering the cannabis industry, as well as, persons and entities outside the County looking for cannabis business opportunities in San Benito County.

a) PUBLIC HEARING - Conduct public hearing regarding the draft ordinance regulating cannabis business permitting in San Benito County (amending Chapter 7.02); and

b) Consider adoption of resolution recommending that the Board of Supervisors adopt an Ordinance amending Chapter 7.02 of the San Benito County Code relating to cannabis business permitting, making 2035 General Plan consistency findings and determinations, and making appropriate findings and determinations under the California Environmental Quality Act (“CEQA”); or

c) continue this item to another date and time certain.