City Council Report 915 I Street, 1 st Floor Sacramento, CA

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1 City Council Report 915 I Street, 1 st Floor Sacramento, CA File ID: November 28, 2017 Public Hearing Item 21 Title: Establishing the Cannabis Equity Program and Ordinances Amending the Sacramento City Code Relating to Cannabis Cultivation, Nonvolatile Manufacturing and Distribution; Cannabis Manufacturing Businesses; and Interested Parties of a Cannabis Business (Noticed 11/17/2017; Passed for Publication 11/21/2017; Published 11/24/2017) Location: Citywide Recommendation: 1) Pass a Motion authorizing staff to move forward with establishing an Equity Program; 2) pass an Ordinance amending, deleting and adding various provisions of Title 17 of the Sacramento City Code (The Planning and Development Code) relating to Cannabis cultivation, Nonvolatile Manufacturing and Distribution; 3) pass an Ordinance amending Sections and of the Sacramento City Code relating to Cannabis Manufacturing Businesses to add tiered manufacturing; and 4) pass an Ordinance amending Section and deleting Section of the Sacramento City Code relating to interested parties of a cannabis business. Contact: Joe Devlin, Chief of Cannabis Policy and Enforcement, (916) ; Zarah Cruz, Program Specialist, Office of Cannabis Policy and Enforcement, Department of Finance (916) ; Joy Patterson, Principal Planner, Community Development Department. Presenter: Joe Devlin, Chief of Cannabis Policy and Enforcement, (916) , Department of Finance Attachments: 1-Description/Analysis 2-Cannabis Production Zoning Ordinance (Clean) 3-Cannabis Production Zoning Ordinance (Redline) 4-Tiered Manufacturing Ordinance (Clean) 5-Tiered Manufacturing Ordinance (Redline) 6-Interested Parties Ordinance (Clean) 7-Interested Parties (Redline) 8-Supplemental Amendment to Tiered Manufacturing Ordinance Matthew Ruyak, Interim City Attorney Mindy Cuppy, City Clerk John Colville, City Treasurer Howard Chan, City Manager Page 1 of 45

2 File ID: Public Hearing Item 21 Description/Analysis Issue Detail: On January 1, 2018, the State will begin issuing licenses for cannabis businesses as the Medicinal and Adult Use Cannabis Regulation Safety Act (MAUCRSA) takes effect. MAUCRSA is the combined regulatory framework for commercial cannabis signed into law by Gov. Brown in 2015 and Proposition 64 or the Adult Use Marijuana Act (AUMA) passed by California voters in November In the wake of these developments in California s cannabis law, the City Council has been taking steps to reasonably regulate cannabis businesses in the city. Early this year, the City Council adopted policies for cultivation, manufacturing and testing and is in the process of considering policies for delivery, distribution and adult use retail. Throughout this process, there has been a series of meetings between the City and stakeholders on the subject matter of equity participation in the cannabis market. By 2020 the legal cannabis business in California is expected to be in the billions of dollars. Large companies and investors are well positioned to control large portions of the legal cannabis market. Communities of color, negatively and disproportionally affected by the war on drugs, are currently not participating in the development of cannabis related business at the same rate of other communities. On November 14, 2017, the Law and Legislation Committee approved the framework and authorized staff to draft an ordinance establishing the Cannabis Opportunity, Reinvestment and Equity (CORE) program aimed at reducing the barriers to entry into the cannabis market. Any ordinance necessary for the implementation of this program will be presented to the City Council for consideration at a future meeting. The program framework approved by the Committee is being presented in this report along with ordinances to establish the cannabis production special use regulations (Attachments 2 and 3), tiered manufacturing business permits (Attachments 4 and 5) as well as new criminal history standards relating to interested parties (Attachments 6 and 7) that as a package creates multiple pathways for certain communities and individuals to participate in the cannabis industry by removing or reducing typical barriers to entry and facilitating business opportunities for those who otherwise do not have access due to lack of capital, business expertise, or criminal history. The package includes: A. CORE Program framework B. Tiered Manufacturing Business Permits C. Removing the conditional use permit (CUP) Requirement for Small Manufacturers D. Cannabis Production CUP City of Sacramento November 28, 2017 powered by Legistar Page 2 of 45

3 File ID: Public Hearing Item 21 E. Amendment of Background Check Requirements A. CORE Program Framework 1. Establish a small business support center and mentoring program to facilitate the development of cannabis businesses owned by minorities, women, and veterans. The program, which will be administered by a consultant selected through a request for proposals process, would provide technical assistance and access to other essential business services to new and growing business, in addition to facilitating an industry mentoring program. The two-year pilot program will be administered by a third-party business and technical support organization, with culturally competent staff with a history of successfully operating business development programs. CORE will serve as an incubator program, a small business support center and a hub that will link program participants and cannabis businesses that could include but are not limited to: Intensive cannabis specific business education and technical assistance training that includes individualized coaching, mentorship and apprenticeships. Host supplier diversity and matchmaking events with broader industry, and creating stronger ties among social equity applicants and those outside incubator program. Business plan development Establishing a legal entity City and state application completion Regulatory compliance Legal counsel Criminal record expungement Training on managing back-end business operations Development of cannabis social enterprise (CSE) collaboratives 2. Establish a CUP and Business Operations Permit (BOP) fee waiver/deferral system for qualified participants. After 12 months, fee deferral participants will make installment payments over a period of two years for CUP fees and shall pay the initial BOP fee upon renewal. Dissolved firms may be eligible for forgiveness of application fee debt. Staff is currently evaluating options for this component and will return to Council with a recommendation and ordinance as soon as possible. 3. Establish priority CUP and BOP processing for qualified participants. City of Sacramento November 28, 2017 powered by Legistar Page 3 of 45

4 File ID: Public Hearing Item Provide Non-Operational BOP to participants who have completed a business plan and the background check requirement. This type of permit will allow participants to attract capital and potential investors. 5. Engage local community-based business organizations in diverse neighborhoods (based on qualifying zip codes) to host free informational workshops or seminars to share information on licensing opportunities and assist with cannabis license application completion and compliance requirements. Eligibility Individuals to participating in the CORE program must meet one of the following qualifications: Type 1: Residing in a zip code of a priority neighborhood for at least 7 years, between 1994 and the date of application, or from the most negatively impacted zip code subject to disproportionate marijuana arrest rates (use or sales). Type 2: Economically disadvantaged status, as marked by income below 200% Federal Poverty Level and net worth below $250,000 Type 3: A women or veteran-owned business For businesses participating in the program: Type 4: Commitment to employ 51% transitional workers 1. Type 5: Business with equity incubator or CSE. A business that hosts an equity business, Type 1,2, or 3. Business host shall offer equity business free or greatly reduced rent, technical assistance, and general business guidance with prescribed goal of successfully transitioning equity business out of the incubator. Council may want to consider requiring equity applicants, solely or cumulatively with other equity applicants, to have at least 51% ownership in proposed business (this can include a cooperative structure). For medical marijuana non-profits, social equity applicants should compose the majority of the board of directors, cooperative leadership structure or executive leadership. 1 Transitional worker: having a prior arrest and conviction for a misdemeanor or felony; homeless; a custodial single parent; receiving public assistance; lacking a GED or high school diploma; suffering from chronic unemployment; having been emancipated from the foster care system; a veteran of the U.S. Military City of Sacramento November 28, 2017 powered by Legistar Page 4 of 45

5 File ID: Public Hearing Item 21 Program Benefits by Applicant Type Type 1: Eligible for services offered by the business support center including the expungement of criminal records, priority CUP and BOP processing and fee waiver/deferral. Type 2 & 3: Eligible for services offered by business support center, priority CUP and BOP processing and fee deferral. Type 4 & 5: Eligible for priority CUP and BOP processing. CSEs may be eligible for a fee waiver/deferral. Other components of the program, such as criteria to qualify for any of the services offered as well as the various levels of support available to participants, are still being developed through a collaborative effort with local community organizations. B. Tiered Manufacturing Business Permits On April 4, 2017, the City Council adopted Ordinance No relating to cannabis manufacturing businesses. The ordinance provides the regulations for all aspects of from extraction to production of edibles or topicals, to packaging and labeling. The BOP fee for a manufacturing business is currently $30,900. Through subsequent meetings with manufacturers, staff has determined that this is a one-size-fitsall permit that doesn t accurately reflect the needs of the industry. While larger manufacturers tend to be involved in all aspects of the manufacturing process, smaller ones intend to focus only on creating products that are infused with cannabis, while some are only interested in the packaging and labeling components. Given the variation in activity and size that has become evident in the manufacturing sector, the one-size-fits-all BOP fee is too costly for the smaller manufacturers and makes it difficult, particularly for small operators, to participate in the industry. The proposed amendment to the manufacturing ordinance will create a tiered permit system according to manufacturing activity as follows: a. Type 1 for manufacturing (all aspects) b. Type N for production of edibles, topicals, and other products c. Type P for packaging and labeling To further meet the needs of the smaller manufacturers, permits will also be tiered according to gross revenues with a corresponding sliding scale fee schedule. The fees associated with each permit type and class will be established by a fee resolution submitted under a separate report. City of Sacramento November 28, 2017 powered by Legistar Page 5 of 45

6 File ID: Public Hearing Item 21 C. Removing CUP Requirement for Small Manufacturers Cannabis manufacturers can be a large operation entity that performs all aspects of manufacturing from extraction to production or infusion, to packaging and labeling or to a one-to-two-person operation that only performs any single one of the above activities. The City's current policy on manufacturing requires all applicants, regardless of the size of operation, to obtain a CUP for the site at which they intend to locate their manufacturing activity. The cost for a CUP application ranges from 16,640 to $33,610 depending on the level of review or if it is required to go to the Planning and Design Commission (PDC) due to proximity to a neighborhood or community park or size of the property. This cost, paid upon submission of the application for a CUP is a costly investment, especially for small operators, who have to wait at least six months for a CUP approval and approximately another two months for a BOP before they can start operating and eventually recouping their initial investment. In addition, because the CUP runs with the land, operators who decide to relocate for whatever reason, must obtain a new CUP and pay the associated fees. The proposed amendment to Title 17 will remove the CUP requirement and make manufacturing a by-right activity for a small manufacturer, defined in the ordinance as one that complies with the following: The use is limited to only packing and labeling of cannabis or cannabis products, or producing edible or topical cannabis products using an infusion process Extraction processes are not to be conducted The gross revenue of the use is under $100,000 annually At Committee's direction, an option is being submitted for Council consideration to allow councilmembers to provide input on applications of cannabis businesses that will not go through a public hearing process if the CUP requirement is eliminated. This option, which includes increased noticing, and a call-up procedure on the BOP approval instead of on the CUP are being submitted as a supplemental amendment to the Tiered Manufacturing Ordinance (Attachment 8). D. Establishment of a Cannabis Production CUP Cannabis production will include cultivation, distribution and manufacturing under one CUP. This will eliminate the need for a separate CUP if an applicant proposes more than one type of cannabis business at a site. The establishment of a single CUP for cultivation, distribution and manufacturing will not only create an efficient way for a City of Sacramento November 28, 2017 powered by Legistar Page 6 of 45

7 File ID: Public Hearing Item 21 cannabis business to be vertically integrated within a single location, but more importantly, present a less expensive way for the industry to do business. E. Amending Background Check Ordinance The City s policies for cultivation, manufacturing and testing currently requires background checks for all owners, managers and employees and any other individuals with 10% interest. Individuals that have charged or convicted of a felony are not qualified to apply, but may qualify for an appeal process unless the prior conviction involves a violent offense, a crime involving minors, or is gang-related. The proposed amendment to the ordinance will: Change the definition of interested parties as owners, managers and individuals with 20% share in the business, and limit the background checks those individuals only. No background checks will be required for employees except for delivery drivers or drivers for distribution companies (if City Council adopts delivery and distribution regulations) Mirror the State s disqualifiers to only include: o Serious felony conviction o A felony conviction involving fraud, deceit, or embezzlement, a felony conviction for hiring, employing, or using a minor in transporting, carrying, selling, giving away, preparing for sale, or peddling any controlled substance to a minor; or selling, offering to sell, furnishing, offering to furnish, administering or giving any controlled substance to a minor; or a felony conviction for drug trafficking with enhancements. Mirror the State s appeal process to allow review and approval of those who don t automatically qualify. Policy Considerations: The proposals submitted in this report consist of a two-year pilot program with the specific goal of increasing access to the legal cannabis industry by removing barriers and support small business development. The program will be supplemented by amendments to already existing policies in order to achieve a fair, accessible and equitable cannabis program. The City s permit fees which are calculated based on the administrative and enforcement efforts that will be required in regulating the City s cannabis industry, including permitted and unpermitted businesses currently affecting Sacramento s residential neighborhoods. Coupled with the cost of a CUP application, fees become a deterrent for small manufacturers to seek appropriate permits and legalize their operation. City of Sacramento November 28, 2017 powered by Legistar Page 7 of 45

8 File ID: Public Hearing Item 21 If approved by the City Council, staff will take the next steps required to administer the program. The Business Operating Tax (BOT) from adult use are proposed to be allocated to fund the CORE program. If the fee resolution (submitted under a separate report) is approved, the fees for tiered manufacturing permits will take effect immediately, and will allow manufacturers to apply for permits for their specific type of manufacturing permit and/or gross revenues bracket. Small manufacturers who will be able to operate by right, will be able to apply directly for a BOP, saving them a minimum of $16,000 in CUP fees, and at least six months in the application process (the typical waiting period for a CUP approval). The option provided in the supplemental amendment will allow Councilmembers to provide input on applications of small manufacturers and testing facilities not subject to the CUP process. By amending the background check ordinance to limit the background check requirement to owners, managers and those with 20% share, the City will also be allowing more individuals to apply, including those who have prior convictions. Furthermore, individuals who do not automatically qualify because of prior convictions will have the opportunity to explain their criminal background through an informal procedure before the City Manager or his designee. Environmental Considerations: This action is exempt from CEQA because it is the adoption of an ordinance, rule, or regulation by a local jurisdiction that requires discretionary review, including environmental review, and approval of permits, licenses, or other authorizations to engage in commercial cannabis activity (CEQA Guidelines 15601(B)(1), Bus. and Prof. Code 26055(h)) and because it does not have the potential for causing a significant effect on the environment. (CEQA Guidelines 15061(b)(3).) Sustainability: Not applicable. Commission/Committee Action: On July 25, 2017, the Law and Legislation Committee (Committee) approved the framework for tiered manufacturing. On September 21, 2017, the Planning and Design Commission approved the Title 17 Production CUP ordinance, which also removes the CUP requirement for small businesses. On November 14, 2017, the Committee considered the proposed CORE Program and directed staff to continue working with the stakeholder group and bring the proposal, including a process for selecting providers, descriptions of the different levels of support and criteria for participation before Council on November 28, The Committee also directed staff to provide the City Council with options for a call-up provision on the BOP approval instead of on the CUP for the application of small manufacturers. Rationale for Recommendation: The cannabis industry is projected to be a multi-billion-dollar market in California. New business opportunities are emerging in anticipation of January 1, 2018 City of Sacramento November 28, 2017 powered by Legistar Page 8 of 45

9 File ID: Public Hearing Item 21 when commercial cannabis becomes legal in the State. Creating pathways for small business to enter the legal framework supports the City s goal of supporting small business development particularly among minority, women and veteran-owned businesses. The proposed equity program is a conscious effort to provide the training and support necessary to ensure that the emerging cannabis market is accessible to all, regardless of economic status, gender, racial and cultural background and criminal history. The proposed CORE program represents an expansive effort to ensure that the City s cannabis program is balanced, efficient and accessible to every segment of the community. Furthermore, it is a product of a collaborative effort between the City and stakeholders towards promoting equality in this new and still evolving industry. Financial Considerations: All cannabis businesses are required to pay a four percent BOT. With the addition of adult use retail, delivery and distribution, subject to City Council approval, the annual revenue from cannabis-related BOP and BOT is anticipated to increase substantially which will help the City in meeting its cannabis-related enforcement obligations and provide a resource to implement a cannabis equity program. Funding for the CORE program will be included in the FY2017/18 Midyear Report based on Council approval of adult use retail, delivery and distribution. Fee waivers/deferrals will be subject to funding availability and will be considered during the budget development process. Local Business Enterprise (LBE): Not applicable. City of Sacramento November 28, 2017 powered by Legistar Page 9 of 45

10 ORDINANCE NO. Adopted by the Sacramento City Council Date Adopted AN ORDINANCE AMENDING, DELETING, AND ADDING VARIOUS PROVISIONS OF TITLE 17 OF THE SACRAMENTO CITY CODE (THE PLANNING AND DEVELOPMENT CODE) RELATING TO CANNABIS CULTIVATION, NONVOLATILE MANUFACTURING, AND DISTRIBUTION BE IT ENACTED BY THE COUNCIL OF THE CITY OF SACRAMENTO: SECTION 1. The city council finds the following: 1. As amended by this ordinance, the Planning and Development Code complements, supports, and facilitates the implementation of the goals, policies, and other provisions of the general plan and the city s specific plans and transit village plans; and 2. The amendments in this ordinance promote the public health, safety, convenience, and welfare of the city. SECTION 2. A. Section ( C definitions) of the Sacramento City Code is amended as follows: 1. The definition of cannabis is added to read as follows: Cannabis has the same meaning as in California Business and Professions Code section The definition of cannabis cultivation is added to read as follows: Cannabis cultivation means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of cannabis. 3. The definition of cannabis distribution is added to read as follows: 1 Page 10 of 45

11 Cannabis distribution means the procurement, sale, and transport of cannabis and cannabis products between cannabis businesses. 4. The definition of cannabis is added to read as follows. "Cannabis " means the production, preparation, propagation, and compounding of cannabis and cannabis products, either directly or indirectly by extraction or chemical synthesis methods that are conducted without the use of a volatile solvent. Nonvolatile cannabis manufacturing includes but is not limited to the extraction of resin from a cannabis plant with solvents, the infusion or mixture of cannabis into another substance, the preparation of an edible item that includes cannabis, and the packaging and labeling of cannabis or cannabis products. Nonvolatile cannabis manufacturing does not include cannabis cultivation. 5. The definition of cannabis product is added to read as follows: Cannabis product has the same meaning as in California Health and Safety Code section B. Except as specifically amended in section A above, all other provisions of section remain unchanged and in full effect. SECTION 3. A. Section ( M definitions) of the Sacramento City Code is amended as follows: 1. The definition of marijuana is amended to read as follows: Marijuana has the same meaning as cannabis. 2. The definition of marijuana cultivation is deleted. 3. The definition of marijuana is deleted. 4. The definition of marijuana product is amended to read as follows: "Marijuana product" has the same meaning as cannabis product. B. Except as specifically amended in section A above, all other provisions of section 2 Page 11 of 45

12 remain unchanged and in full effect. SECTION 4. A. Section (A zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.2 (Industrial and Agricultural Cannabis cultivation 2. The row for marijuana cultivation in the table set forth in subsection B.2 (Industrial and Agricultural Uses) is deleted. B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 5. A. Section (C-2 zone Permitted Uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural 3 Page 12 of 45

13 Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 6. A. Section (C-4 zone Permitted Uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 4 Page 13 of 45

14 (Industrial and Agricultural Uses) is deleted. 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 7. A. Section (M-1 zone Permitted Uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. 5 Page 14 of 45

15 B. Except as specifically amended in subsections A and B above, the tables set forth in section remain unchanged and in full effect. SECTION 8. A. Section (M-1(S) zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Uses) of to read as follows: Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Uses) of to read as follows: Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Uses) of to read as follows: Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 9. 6 Page 15 of 45

16 A. Section (M-2 zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 10. A. Section (M-2(S) zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural 7 Page 16 of 45

17 Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 11. A. Section (MIP zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.1 (Industrial and Agricultural Cannabis distribution 2. A row is added to the table set forth in subsection B.1 (Industrial and Agricultural 8 Page 17 of 45

18 Cannabis 3. The row for marijuana in the table set forth in subsection B.1 (Industrial and Agricultural Uses) is deleted. B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 12. A. Section (MRD zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis 3. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 13. Section (marijuana cultivation) of the Sacramento City Code is deleted. SECTION Page 18 of 45

19 Section ( marijuana manufacturing) of the Sacramento City Code is deleted. SECTION 15. Article IX is added to chapter of the Sacramento City Code to read as follows: Article IX. Cannabis Cannabis production. A. For purposes of this section, cannabis production includes cannabis cultivation, cannabis distribution, and cannabis manufacturing. B. Cannabis production may only be established in the A, C-2, C-4, M- 1, M-1(S), M-2, M-2(S), MIP, and MRD zones, except as follows: MRD zones. in the A zone. 1. Cannabis cultivation may not be established in the MIP or 2. Cannabis distribution may not be established in the A zones. 3. Nonvolatile cannabis manufacturing may not be established C. A conditional use permit is required for cannabis production, except for cannabis manufacturing that complies with the following: 1. The use is limited to only packaging and labeling of cannabis or cannabis products, or producing edible or topical cannabis products using an infusion process; 2. Extraction processes are not being conducted; and 3. The gross revenue of the use is under $100,000 annually. D. Except as provided in subsection E, the conditional use permit, as required in subsection C, must be approved by the zoning administrator. E. A conditional use permit, as required in subsection C, must be approved by the planning and design commission where the production site is within 600 feet of: 1. A park identified as a neighborhood park or community 10 Page 19 of 45

20 park in the city s most recently adopted Parks and Recreation Master Plan; or 2. A park not yet identified in the city s most recently adopted Parks and Recreation Master Plan. F. The zoning decision-maker may approve a conditional use permit for cannabis distribution based on the following findings: 1. The findings set forth in section C; and 2. The proposed cannabis production will not result in undue concentration of cannabis production establishments. G. In any zone, cannabis production must comply with the following provisions: 1. Cannabis production must be within a fully enclosed building and must not be visible from the public right-of-way. 2. The cannabis production site cannot be located within 600 feet of a school. For purposes of this section, school means any public or private school providing instruction in kindergarten or grades 1 to 12, inclusive, but does not include any private school in which education is primarily conducted in private homes. 3. The cannabis production site cannot have more than one sign. The sign may be attached or detached. The sign cannot be illuminated and cannot exceed six square feet in area. 4. Cannabis production must comply with all applicable state and local laws. 5. Each property owner seeking a conditional use permit for cannabis production shall provide a neighborhood responsibility plan in order for the decision-maker to make the requisite findings identified in subsection F. The neighborhood responsibility plan must address the adverse impacts of cannabis distribution on the surrounding area. Compliance with the neighborhood responsibility plan shall be achieved through an agreement with the city, conditions of approval on the use permit, or through other means acceptable to the city. H. In the C-2 zone, cannabis production must comply with the following provisions: 11 Page 20 of 45

21 1. Cannabis distribution and cannabis manufacturing cannot exceed a total of 6,400 square feet in area. 2. Cannabis distribution cannot be the only cannabis production use on the site. I. Notice to city council. As soon as reasonably practicable after the planning and design commission makes a decision on a conditional use permit required to establish cannabis production, the planning director shall report that decision to the city council. J. Procedures for call-up review. The mayor or the councilmember in whose district the project is located may call up for city council review any decision described in subsection I by filing a written request with the planning director within 10 days of the planning and design commission s decision. If the tenth day is on a non-business day, the last day to file the request is the next business day. Once the request is filed, the council shall notice and set the matter for the hearing before it. Notice of the hearing shall be given in the manner provided in section A.2.a. The hearing before the city council shall be de novo, meaning that the city council shall hear the matter in the same manner that the planning and design commission heard the matter. K. Withdrawal of request for review. The requester under subsection J may withdraw that request. The withdrawal shall be noted on the next regularly scheduled meeting of the city council and shall be considered to have occurred on that date. Any other member of the city council shall have 10 days thereafter to file a request for call-up review. If the tenth day is a non-business day, the last day to file the request is the next business day. Noticing and hearing of the matter shall be as set forth in subsection J. 12 Page 21 of 45

22 ORDINANCE NO. Adopted by the Sacramento City Council Date Adopted AN ORDINANCE AMENDING, DELETING, AND ADDING VARIOUS PROVISIONS OF TITLE 17 OF THE SACRAMENTO CITY CODE (THE PLANNING AND DEVELOPMENT CODE) RELATING TO CANNABIS CULTIVATION, NONVOLATILE MANUFACTURING, AND DISTRIBUTION BE IT ENACTED BY THE COUNCIL OF THE CITY OF SACRAMENTO: SECTION 1. The city council finds the following: 1. As amended by this ordinance, the Planning and Development Code complements, supports, and facilitates the implementation of the goals, policies, and other provisions of the general plan and the city s specific plans and transit village plans; and 2. The amendments in this ordinance promote the public health, safety, convenience, and welfare of the city. SECTION 2. A. Section ( C definitions) of the Sacramento City Code is amended as follows: 1. The definition of cannabis is added to read as follows: Cannabis has the same meaning as in California Business and Professions Code section The definition of cannabis cultivation is added to read as follows: Cannabis cultivation means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of cannabis. 3. The definition of cannabis distribution is added to read as follows: 1 Page 22 of 45

23 Cannabis distribution means the procurement, sale, and transport of cannabis and cannabis products between cannabis businesses. 4. The definition of cannabis is added to read as follows. "Cannabis " means the production, preparation, propagation, and compounding of cannabis and cannabis products, either directly or indirectly by extraction or chemical synthesis methods that are conducted without the use of a volatile solvent. Nonvolatile cannabis manufacturing includes but is not limited to the extraction of resin from a cannabis plant with solvents, the infusion or mixture of cannabis into another substance, the preparation of an edible item that includes cannabis, and the packaging and labeling of cannabis or cannabis products. Nonvolatile cannabis manufacturing does not include cannabis cultivation. 5. The definition of cannabis product is added to read as follows: Cannabis product has the same meaning as in California Health and Safety Code section B. Except as specifically amended in section A above, all other provisions of section remain unchanged and in full effect. SECTION 3. A. Section ( M definitions) of the Sacramento City Code is amended as follows: 1. The definition of marijuana is amended to read as follows: Marijuana has the same meaning as cannabis. in section of the California Business and Professions Code, which includes marijuana as defined in California Health and Safety Code section The definition of marijuana cultivation is deleted. Marijuana cultivation means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of marijuana. 3. The definition of marijuana is deleted. "Marijuana " means the production, preparation, propagation, and compounding of marijuana and marijuana products, without the 2 Page 23 of 45

24 use of a volatile solvent to extract the resin or other substance from any part of a marijuana plant. Nonvolatile marijuana manufacturing includes but is not limited to the extraction of a substance from a marijuana plant with solvents, the infusion or mixture of marijuana into another substance, the preparation of an edible item that includes marijuana, and the packaging and labeling of marijuana or marijuana products. Nonvolatile marijuana manufacturing does not include marijuana cultivation. 4. The definition of marijuana product is amended to read as follows: "Marijuana product" has the same meaning as cannabis product. means an item containing marijuana. Marijuana product includes but is not limited to concentrates, extractions, edibles, and topicals. Marijuana product does not include accessories or paraphernalia that may be used with marijuana but do not contain any marijuana. B. Except as specifically amended in section A above, all other provisions of section remain unchanged and in full effect. SECTION 4. A. Section (A zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.2 (Industrial and Agricultural Cannabis cultivation 2. The row for marijuana cultivation in the table set forth in subsection B.2 (Industrial and Agricultural Uses) is deleted. Marijuana cultivation ZA B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 5. A. Section (C-2 zone Permitted Uses) of the Sacramento City Code is 3 Page 24 of 45

25 amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana cultivation ZA 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 6. 4 Page 25 of 45

26 A. Section (C-4 zone Permitted Uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana cultivation ZA 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 7. 5 Page 26 of 45

27 A. Section (M-1 zone Permitted Uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana cultivation ZA 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana B. Except as specifically amended in subsections A and B above, the tables set forth in section remain unchanged and in full effect. SECTION 8. 6 Page 27 of 45

28 A. Section (M-1(S) zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Uses) of to read as follows: Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Uses) of to read as follows: Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Uses) of to read as follows: Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana cultivation ZA 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 9. 7 Page 28 of 45

29 A. Section (M-2 zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana cultivation ZA 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION Page 29 of 45

30 A. Section (M-2(S) zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis cultivation 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 3. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis 4. The row for marijuana cultivation in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana cultivation ZA 5. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION Page 30 of 45

31 A. Section (MIP zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.1 (Industrial and Agricultural Cannabis distribution 2. A row is added to the table set forth in subsection B.1 (Industrial and Agricultural Cannabis 3. The row for marijuana in the table set forth in subsection B.1 (Industrial and Agricultural Uses) is deleted. Marijuana B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 12. A. Section (MRD zone Permitted uses) of the Sacramento City Code is amended as follows: 1. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural Cannabis distribution 2. A row is added to the table set forth in subsection B.3 (Industrial and Agricultural 10 Page 31 of 45

32 Cannabis 3. The row for marijuana in the table set forth in subsection B.3 (Industrial and Agricultural Uses) is deleted. Marijuana B. Except as specifically amended in subsection A above, the tables set forth in section remain unchanged and in full effect. SECTION 13. Section (marijuana cultivation) of the Sacramento City Code is deleted. SECTION 14. Section ( marijuana manufacturing) of the Sacramento City Code is deleted. SECTION 15. Article IX is added to chapter of the Sacramento City Code to read as follows: Article IX. Cannabis Cannabis production. A. For purposes of this section, cannabis production includes cannabis cultivation, cannabis distribution, and cannabis manufacturing. B. Cannabis production may only be established in the A, C-2, C-4, M- 1, M-1(S), M-2, M-2(S), MIP, and MRD zones, except as follows: MRD zones. in the A zone. 1. Cannabis cultivation may not be established in the MIP or 2. Cannabis distribution may not be established in the A zones. 3. Nonvolatile cannabis manufacturing may not be established 11 Page 32 of 45

33 C. A conditional use permit is required for cannabis production, except for cannabis manufacturing that complies with the following: 1. The use is limited to only packaging and labeling of cannabis or cannabis products, or producing edible or topical cannabis products using an infusion process; 2. Extraction processes are not being conducted; and 3. The gross revenue of the use is under $100,000 annually. D. Except as provided in subsection E, the conditional use permit, as required in subsection C, must be approved by the zoning administrator. E. A conditional use permit, as required in subsection C, must be approved by the planning and design commission where the production site is within 600 feet of: 1. A park identified as a neighborhood park or community park in the city s most recently adopted Parks and Recreation Master Plan; or 2. A park not yet identified in the city s most recently adopted Parks and Recreation Master Plan. F. The zoning decision-maker may approve a conditional use permit for cannabis distribution based on the following findings: 1. The findings set forth in section C; and 2. The proposed cannabis production will not result in undue concentration of cannabis production establishments. G. In any zone, cannabis production must comply with the following provisions: 1. Cannabis production must be within a fully enclosed building and must not be visible from the public right-of-way. 2. The cannabis production site cannot be located within 600 feet of a school. For purposes of this section, school means any public or private school providing instruction in kindergarten or grades 1 to 12, inclusive, but does not include any private school in which education is primarily conducted in private homes. 12 Page 33 of 45