BRIEF HISTORY OF MARIJUANA REGULATION

  • 1996
    • Voters Approved Prop 215 (Compassionate Use Act)
    • Medicinal Marijuana Use
  • 2015
    • Legislature Approved MCRSA (Medical Cannabis Regulation & Safety Act)
    • In Part, Created State’s 3 Cannabis Licensing Agencies
      • Bureau of Cannabis Control
      • CDFA – CalCannabis Cultivation Licensing
      • CDPH – Manufactured Cannabis Safety Branch
  • 2016
    • Voters Approved Prop 64 (Adult Use of Marijuana Act)
    • With Some Restrictions, Adults 21 & Over Can Grow-Possess-Use Marijuana for Non- Medicinal Purposes
    • As of 01-01-18, Legal to Sell-Cultivate-Manufacture-Distribute Marijuana Through Licensed Businesses (Must Have State & Local Licenses)
  • 2017
    • Legislature Approved MAUCRSA (Medicinal & Adult-Use Cannabis Regulation & Safety Act)
    • In Part, Now a Single Regulatory System for Medicinal & Adult-Use
  • 2018
    • State Agencies Began Issuing Temporary Licenses on 01-01-18
  • 2019
    • Final State Regulations Were Approved on 01-16-19

WHAT DOES MAUCRSA ALLOW?

  • LOCAL CONTROL
    • All Cities and Counties are Allowed to Ban or Regulate Commercial Recreational Marijuana Activities, in Whole or in Part
    • Deliveries Are Currently an Exception & Must be Allowed Under the State Regulations
      • But Litigation is Pending
  • IF A CITY/COUNTY CHOOSES, IT CAN ALLOW:
    • Cultivation – Outdoor & Indoor Plant-Grow-Harvest-Dry-Cure-Grade-Trim
    • Manufacturing – Compound-Blend-Extract-Infuse-Otherwise Make or Prepare-Package-Label
    • Distribution – Between Licensees: Procure-Sell-Transport
    • Testing Tabs – Test Cannabinoids-Content-Moisture-Etc (As Required by Regulations)
    • Retailers (Storefront) – Retail Sale to Medicinal and/or Adult-Use Recreational Customers
    • Retailers (Non-Storefront) – Retailers (Storefront)

LOCAL AGENCY AUTHORITY TO BAN OR REGULATE

MOST CITIES THROUGHOUT STATE CONTINUE TO BAN ALL RECREATIONAL MARIJUANA BUSINESSES. Some Trend Towards Regulation?

Riverside County

  • Prop 64 = 52.9% Voted Yes County-Wide
  • 21 of 28 Cities Voted Yes
    • Prop 64 = 9 of 21 Voted Yes by 53% or Less
  • Western Riverside County
    • Prop 64 = 12 of 18 Voted Yes
    • Prop 64 = 8 of 12 Voted Yes by 53% or Less
    • 11 of 18 Ban All Businesses
    • 1 Allows Limited (Riverside = Lab Only)
  • Eastern Riverside County
    • Prop 64 = 9 of 10 Voted Yes
    • Prop 64 = 3 of 9 Voted Yes by 61% or More
    • 8 of 10 Allow Some Businesses

SOME LOCAL AGENCIES REGULATING AT LEAST SOME BUSINESSES

  • Western Riverside County
    • Banning
    • Jurupa Valley
    • Lake Elsinore
    • Moreno Valley
    • Perris
    • Riverside
    • San Jacinto
    • Riverside County
  • Other Local Agencies
    • Chula Vista
    • Costa Mesa
    • Santa Ana
  • Of These, Most Began or Conditioned on Approved Ballot Measure
    • Lake Elsinore, Moreno Valley & Riverside County Began by Legislative Action
    • City of Riverside – Legislative Action to Allow Testing Only (Understand: 4 Apps; None Operating)

ARE CITIES EARNING “NET” TAX REVENUES?

  • STILL TOO EARLY TO TELL / DIFFICULT TO CALCULATE
  • POTENTIAL DOWNWARD PRESSURES ON PRICES & TAXES
    • Appears to be Excess Inventory
    • Pressure on State & Locals to Reduce Taxes & Allow Vertical Integration

THE SANTA ANA EXPERIENCE

  • 2014 Ballot Measure – Medicinal Use & Tax
  • 2017-18 Council Action – Recreational Use
  • 2017-18 Council Action – Recreational Use
  • 80+ Illegal Businesses at One Time
  • Still Early, But They Firmly Believe They Will Net Tax Revenues
  • 9 Corona Staff Members Spent the Day with Santa Ana Staff
    • Police
    • Planning
    • Code Enforcement
    • City Attorney’s Office
    • Building/Fire Inspector
    • Finance
  • Discussed Experiences & Toured 2 Retail Establishments & 1 Testing Lab
  • 2014 – 20 Retail Medicinal Authorized
  • 2018 -10 Additional Allowed (Medicinal & Recreational)
  • Currently – Only 18 Licensed Retail (Medicinal & Recreational)
  • 1 Licensed Manufacturer
  • 2 Distributors
  • 2 Labs
  • 12 Extraction Permits Issued (None Currently Open)
  • Publicly Stated – Believe 18 Retailers will Generate $6M – $7M
  • Our Ballpark Estimate of Santa Ana’s Retail Tax Revenues ——- $30,000/mo per Retailer

Corona – Different Market/Expectations

  • SA’s Population is Roughly Double in Fewer Square Miles
  • SA Currently Dominates South Orange County and Surrounding Market
  • Just Use Number as a “Hopeful” Frame of Reference – Don’t Use as Expected Revenue
  • These Numbers Are Educated Guesses
  • Corona’s Market is Not Likely as Robust
  • Downward Pressure on Prices/Taxes
  • Taxes on Other Marijuana Businesses?

LESSONS LEARNED

STATE CONFERENCE – CM STEINER AND CA DERLETH

  • Must Regulate for Policy Reasons – Not $$
  • Make Certain Public is in Support – Ballot Measure?
  • Regulating is Complicated
    • Planning, Licensing, Inspections, Legal, DWP Issues, Background Checks etc….
  • Social Justice Components Are Important to Many Communities But Are Complex to Regulate As Well
  • Make Sure License Process is Open & Fair – Lottery System
  • Take Time to Do it Right (12-18 Months)
  • Have Dedicated Personnel & One Primary Point of Contact (Consistency & Expertise)
  • Equipment, Support & Consultants (e.g. Auditors) Needed for Many Aspects
  • Banking No Longer Seems to be a Significant Impediment
  • You Will Have Increased Litigation – Take Steps to Reduce Number & Increase Likelihood of Success
  • Enforcement Against Illegal Dispensaries Will Significantly Increase
    • Compare – Current Ease/Low Cost

CONCLUSION

  • FOLLOW-UP STEPS/CONCERNS
    • Gauging Community Support – Ballot Measure
    • Opening Door to Regulation – Very Difficult to Go Back
    • Staffing & Enforcement Costs – “Net” Financial Impact
    • Secondary Effects
      • PD Concerns – Secondary Crime; Limited State Oversight; Cash Businesses; DUI & Other Calls for Service
    • Zoning Must Be Primary Concern
      • CD Concerns – Where to Site Businesses?
    • If Policy Decision is to Move Forward – Take Time to Plan – Still Time to Learn from Other Cities While Moving Forward