City Council Study April 24, 2019

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

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)

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

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)

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?

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