HomeMy WebLinkAbout75A - PH - CANNABIS UPDATEREQUEST FOR
COUNCIL ACTION
CITY COUNCIL MEETING DATE:
JULY 16, 2019
TITLE:
PUBLIC HEARING — APPROVE ORDINANCE
AMENDMENT NO.2019-01 TO AMEND
CERTAIN SECTIONS OF CHAPTERS 18, 21,
AND 40 OF THE SANTA ANA MUNICIPAL
CODE ALLOWING VERTICAL AND
HORIZONTAL INTEGRATION OF
CANNABIS BUSINESSES; UPDATING
OWNERSHIP TRANSFERS PROCEDURAL
STANDARDS AND REQUIREMENTS,
SECURITY DEPOSITS, AND VARIOUS
ADMINISTRATIVE PROCESSES; UPDATING
AND STREAMLINING REGULATORY
COMPONENTS; REDUCING CANNABIS
TESTING TAXES TO TWO PERCENT OF
GROSS RECEIPTS; AND ADOPTING A
CANOPY MEASUREMENT AND SQUARE
FOOTAGE ALLOCATION SERVICE FEE
(STRATEGIC PLAN NOS. 3, 2; 3, 3; 3, 5; 4, 3)
I'll CITNrMANAGER
RECOMMENDED ACTION
CLERK OF COUNCIL USE ONLY:
APPROVED
❑ As Recommended
❑ As Amended
❑ Ordinance on ls' Reading
❑ Ordinance on 2ntl Reading
❑ Implementing Resolution
❑ Set Public Hearing For
CONTINUED TO
FILE NUMBER
Adopt an ordinance allowing vertical integration of certain commercial cannabis businesses;
updating operational and procedural standards for implementing the City's medicinal and
commercial cannabis ordinances, decrease security deposit amount requirements, compute
square footage cannabis taxes based on allocation of gross square footage usage; and
reducing the commercial cannabis testing laboratory tax from five (5) to two (2) percent.
2. Adopt an ordinance amending various sections of Chapters 18 and 40 of the Santa Ana
Municipal Code addressing medicinal cannabis purchasing age, employee badge
requirement, manufacturing permit requirements, and ordinance administration and
implementation.
3. Adopt a resolution reducing the gross receipts tax on commercial cannabis testing
laboratories from five (5) to two (2) percent.
4. Adopt a resolution implementing a canopy measurement service fee and an allocated square
footage measurement service fee to cover the City's cost in independently verifying the
allocation of square footage usage by commercial cannabis businesses.
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Ordinance Amendment No. 2019-01 — Commercial Cannabis Ordinance Updates
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BACKGROUND
The City of Santa Ana permits a variety of types of cannabis business activity, which include
retail sales of medicinal and adult -use cannabis and cannabis cultivation, distribution,
manufacturing, and testing. These cannabis business activities were permitted through adoption
of multiple ordinances beginning with Measure BB (Ordinance NS-2684) in November 2014
ending with Ordinance NS-2944 in May 2018. In November 2018, Santa Ana voters approved
Measure Y (Ordinance NS-2962), which established commercial cannabis business license taxes
for adult -use cannabis retail sales, cannabis cultivation, distribution, manufacturing, and testing.
Medicinal cannabis retail sales taxes were not modified by Measure Y and continue to be subject
to taxes pursuant to Measure BB.
Multiple changes to State cannabis laws and changes in market demands prompted the City to
revisit its ordinances and tax collection to ensure that Santa Ana maintains its competitive
position in the region, remain compliant with applicable State laws, and streamline its
implementation of cannabis taxation. When added to Santa Ana's local cannabis taxes, the
State's assessments on cannabis goods, which include sales tax, excise cannabis tax, and
cultivation tax, result in legally -operating and permitted commercial cannabis businesses having
to confront a combined state and local tax rate exceeding 50 percent of the retail sale value of
their cannabis goods. This 50-percent rate discourages businesses from seeking the required
permits to operate legally and in tandem with a cumbersome and rapidly -changing regulatory
framework that can foster a continued illicit cannabis market, which is to the detriment of Santa
Ana's permitted operators.
DESCRIPTION AND BACKGROUND
Table 1 (Proposed Amendments to Chapter 21) describes the finance -related ordinance
amendments. Additional details are provided in the subsections that follow.
Table 1: Proposed Financial Amendments
Item
Impact
Vertical and Horizontal
Amendment:
Integration (SAMC
Sections 21-131.2 and 21-
Allow vertical and horizontal integration of business structures for
142)
businesses engaging in multiple types of commercial cannabis business
activity. Includes allowance for vertical and horizontal integration of
commercial cannabis business activities involving both medicinal and
nonmedicinal cannabis retail businesses.
Impacts:
• Incentivizes cannabis businesses to expand operations within the City
and encourages new businesses to enter the Santa Ana marketplace.
• Allows for the deduction of intra-party sales and/or transfers of cannabis
and cannabis products occurring within a single integrated cannabis
business from reportable gross receipts of cannabis businesses.
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Ordinance Amendment No. 2019-01 — Commercial Cannabis Ordinance Updates
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Table 1: Proposed Financial Amendments
Item
Impact
• Reduces the net negative effect of multi -level taxation.
Security Deposits (SAMC
Amendment:
Section 21-80, 21-80.1, 21-
86, and 21-136)
Amends Ordinance NS-2962 to allow a single security deposit to cover
multiple types of vertically/ horizontally integrated commercial cannabis
business activities conducted by the same ownership regardless of form of
business structure.
Impacts:
• Reduces overall security deposit requirement to a maximum amount of
$10,000.
• Allows two or more vertically/horizontally integrated cannabis
businesses to be covered by a single deposit.
• Implements well-defined processes for handling deposits, their
application, replenishment, and release as well as requirements for
close-out audits and other guards against loss of taxes due to transfer of
ownership or termination of business.
Alternate Square Footage
Amendment:
Tax (SAMC Section 21-133)
Amends Ordinance NS-2962 to allow certain vertically and/or horizontally
integrated commercial cannabis businesses to base their alternate square
footage tax calculations on measured allocated gross square feet rather
than total gross square feet.
Impact:
• Allows distribution and manufacturing cannabis businesses that are
vertically or horizontally integrated to report actual allocated square
footage utilized upon verification by the City in place total square footage
of premises.
Testing Laboratories
Amendment:
Reduce Tax Rate from 5 to
2 Percent
Amends Ordinance NS-2962 to reduce the gross receipts tax rate on
testing laboratories and testing facilities.
Impact:
• Allows the City to maintain its competitive position with regards to
cannabis testing which is the most mobile and easily re -locatable class
of commercial cannabis business.
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Ordinance Amendment No. 2019-01 — Commercial Cannabis Ordinance Updates
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Financial Amendments (Chapter 21)
Vertical and Horizontal Cannabis Business Integration
Santa Ana voters approved Measure Y in November 2018, which established various tax rates
for legally -operating and permitted commercial cannabis businesses in the City. In tandem with
preparation of the measure, City officials met with cannabis industry representatives to discuss
vertical and horizontal integration, security deposits and substitution of allocated gross square
footage vs. total square footage for certain types of commercial cannabis businesses.
Subsequently, City staff met with cannabis industry representatives and reviewed proposed
changes to Measure Y in order to address the new tax confronting cannabis businesses and to
incentivize legal operators throughout Santa Ana. The City's current regulatory ordinances
permit co -location of multiple commercial cannabis business activities on the same site along
with medicinal cannabis retail activity; the proposed revisions to Chapter 21 will ensure that these
co -located business activities are vertically and/or horizontally integrated under the business
license code as well.
With regard to the concept of vertical/horizontal integration which relates to the City's recognition
that state law, by requiring separate licensure for certain separate aspects of commercial
cannabis business (cultivation, distribution, manufacturing, and retail sales), consciously adopts a
horizontally integrated regulatory scheme as opposed to a vertically integrated scheme adopted
in other states. Other states that utilize horizontal integration for regulatory purposes and prohibit
vertical integration at the regulatory level include Illinois and Washington. While horizontal
integration carries with it certain benefits in terms of maintaining a more open, participatory, and
business -friendly marketplace at the state level, it also results in a single integrated cannabis
business being subject to multiple state and local tax assessments. The state assessments -
sales tax, excise cannabis tax, and cultivation tax - when added to local taxes, such as Santa
Ana's, mean that a single integrated cannabis business could face a combined state and local tax
rate exceeding 50 percent of the retail sale value of their cannabis goods.
Vertical/horizontal integration of these separately licensed business activities at the local tax level
allows a single integrated business to effectively pay their gross receipts tax assessment once, at
the final point of retail sale (which is still at the highest rate of 8 percent for adult -use and 6
percent for medicinal cannabis). In this model, interparty sales and transfers of goods between
component parts of a vertically/horizontally integrated cannabis business supply chain, sharing
80 percent underlying ownership, without reference to form of business structure, are allowed to
be deducted from each individual integrated cannabis business' gross receipts tax assessment at
each point in the supply chain. This would leave only their third -party sales and/or their minimum
square footage tax, whichever is greater, to be reported and paid.
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Ordinance Amendment No. 2019-01 — Commercial Cannabis Ordinance Updates
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Security Deposits
Concerning security deposits, it was determined that nominal security deposit language setting a
minimum security deposit amount of $10,000 or the average of one month's remittable
commercial cannabis tax, whichever was greater, would be included in the final text of Measure
Y. This was done with an understanding that the City would be open via a subsequent
ordinance, as provided under the terms of Measure Y, to reducing and capping the amount of
security deposits for commercial cannabis businesses to $10,000 or one month's average
remittable commercial cannabis tax, whichever is least. Also, it would permit two or more
vertically/horizontally integrated cannabis businesses to be covered by a single deposit, provided
that: clear detailed procedural language be added surrounding security deposits, their
maintenance, application, replenishment and refunding and that similarly detailed language be
added concerning sales, assignments, transfers and terminations of cannabis businesses to
ensure the City is secure in its continued receipt of cannabis business license tax revenues.
Allocated Gross Square Footage
In the case of integrated distribution and/or manufacturing cannabis businesses, the minimum
gross square footage tax reported would reflect the allocated square footage actually utilized by
the business as verified by the City, rather than the maximum square footage of the premises.
The gross square footage tax on cultivation would continue to be based on canopy size as
reported to the state and as verified by the City. The gross square footage tax for adult -use retail
businesses would continue to be based on the maximum size of the premises.
Gross Receipts Tax Rate Reduction for Cannabis Testing Laboratories
Local jurisdiction tax rates on commercial cannabis testing laboratories vary across the state.
When the City's commercial cannabis testing laboratory ordinance was adopted in March 2018,
testing laboratory tax rates ranged from 2 to 10 percent in various jurisdictions statewide. The
City currently collects a tax of 5 percent of gross receipts or $1.50 per gross square foot,
whichever is the greater of the two calculations. Nearby, the City of Costa Mesa collects 6
percent; Long Beach collects 6 percent, with the option to increase to 8 percent; Bellflower
collects 5 percent, (with multiple 2.5 percent annual increases scheduled beginning July 1, 2020
until a 10 percent cap is reached) and Irvine collects no taxes. It is important to note that
beginning in 2015 the City of Irvine ceased collecting a business license tax for any type of
business in the City.
Cannabis testing laboratories play a crucial role in ensuring product safety for medicinal and
adult -use consumers. Testing laboratories examine products for pesticides, minerals, potency,
and toxicity. These facilities employ highly -skilled and educated individuals and require
purchasing and installation of costly equipment. Although the City's current 5 percent tax rate is
consistent with other local jurisdictions with the exception of Irvine, the City has a continuing
interest in promoting safe medicinal and nonmedicinal cannabis and cannabis products for all
users and to ensure the sustained growth of the regulated medicinal and commercial cannabis
business hub in Santa Ana. Reducing the cannabis testing laboratory gross receipts rate from 5
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Ordinance Amendment No. 2019-01 — Commercial Cannabis Ordinance Updates
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to 2 percent will maintain Santa Ana's overall competitive edge in the medicinal and commercial
cannabis industries by promoting a healthy mix of business types, employment opportunities, and
equipment investment in Santa Ana's industrial areas.
Positive Impacts of Code Amendments
There are multiple commercial cannabis business start-ups pending with the Planning and
Building Agency that would benefit from vertical and horizontal integration. For these businesses
to move forward with their permitting and licensing processes, assurance that the City will provide
local tax treatment based on principles of vertical and horizontal integration, that issues related to
security deposits and gross square footage assessment will be addressed, and that the
ordinance is being routinely examined to identify areas for streamlining and modernization will
provide a stronger foundation for success in the City. The medicinal and commercial cannabis
ordinance updates recommended by staff provide this assurance and will serve to "jump-start"
commercial cannabis business activity in the City, while at the same time accomplishing all other
objectives of the City in securing reliable and continuing receipt of resulting cannabis revenues.
Regulatory Amendments (Chapters 18 and 40)
In addition to the proposed changes listed in Table 1, the City is proposing to update and streamline
certain sections of Chapter 18 (Medicinal Marijuana) and Chapter 40 (Commercial Cannabis
Business Activities Other Than Medicinal Marijuana). Table 2 (Proposed Amendments to Chapters
18 and 40) describes the regulatory -framework ordinance amendments.
Table 2: Proposed Regulatory Amendments
Item
Amendment and Impact
Medicinal Cannabis
Amendment:
Purchasing Age (SAMC
Section 18-613)
Amends Chapter 18 to address minimum purchasing age for medicinal
cannabis products.
Impacts:
• Establishes consistency with State cannabis retail laws.
• Retains adult -use retail sales' minimum purchasing age at 21, which is
also consistent with State cannabis retail laws.
Employee Badges (SAMC
Amendment:
Sections 18-613 and 40-8)
Amends Chapters 18 and 40 addressing production of required employee
badge requirements.
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Ordinance Amendment No. 2019-01 — Commercial Cannabis Ordinance Updates
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Table 2: Proposed Regulatory Amendments
Item
Amendment and impact
Impacts:
• Removes site -specific badge requirement for each employee.
• Allows an employee that has an approved badge to work at multiple
commercial cannabis businesses without the need for multiple badges.
• Streamlines commercial cannabis business requests for new
employees, volunteers, managers, and owners.
Volatile and Non -Volatile
Amendment:
Manufacturing
Requirements (SAMC
Amends Chapter 40 to allow both non-volatile and volatile manufacturing
Section 40-8)
in the Light and Heavy Industrial zoning districts (M-1 and M-2) without a
conditional use permit (CUP), subject to Building Code and Fire Code
requirements.
Impacts:
• Addresses recent changes to State non-volatile (Type 6) and volatile
(Type 7) manufacturing categories.
• Allows a broader range of cannabis manufacturing activity types in both
of the City's industrial zoning districts.
• Streamlines the review process for Type 7 license applicants by
eliminating the CUP requirement.
• Maintains requirement that facilities be constructed subject to all life
safety Building and Fire code requirements.
Administration and
Amendment:
Implementation
Amendments (SAMC
Amends Chapter 40 to address State cannabis license type changes,
Sections 18-617.5, 40-1, 40-
allow microbusiness license for certain commercial cannabis businesses,
2, 40-5, 40-8, 40-9.1, and 40-
address audits, and minor grammatical corrections.
10)
Impacts:
• Updates certain sections to be consistent with applicable State laws.
• Creates internal consistency among Measure BB (Chapter 18), Chapter
21, and Chapter 40.
• Amends operating agreement language to be consistent with Measure
Y.
• Streamlines audits and application procedures for non -retail commercial
cannabis business applications.
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Ordinance Amendment No
July 16, 2019
Page 8
2019-01 — Commercial Cannabis Ordinance Updates
Medicinal Cannabis Purchasing Age
SAMC Section 18-613 (1) restricts access to medicinal cannabis to those aged 21 and older
unless accompanied by a primary caregiver, physician, parent, or documented legal guardian.
Amending this restriction to allow individuals age 18 and older to access medicinal cannabis will
ensure consistency with Proposition 64, which was approved by California voters in November
2016, and will assist with ensuring the long-term viability of medicinal cannabis sales. Adult -use
(recreational) cannabis sales will remain restricted to those aged 21 and older.
Badges
SAMC Sections 18-613 (k) and 40-8 (3) (o) require all agents, private security officers or other
persons acting for or employed by a commercial cannabis business to display a laminated
identification badge. Moreover, the State of California requires that all commercial cannabis
businesses produce badges, subject to inspection by the State. As written, the ordinances
indicate that the badges are issued by the business, but the City has produced the badges for all
commercial cannabis businesses. The amendment would reinforce that the badges are produced
and issued by City of Santa Ana. The amendment would also allow an individual who has
previously had a background check performed through the Live Scan process to work at an
additional commercial cannabis business without having to order a new Live Scan. The
amendment would streamline staff procedures and reduce staff time required to produce badges,
and would create flexibility within the cannabis industry to hire individuals who have already been
background checked.
Non -Volatile and Volatile Manufacturing Requirements
Immediately following the passage of Proposition 64, the State created two commercial cannabis
manufacturing categories: non-volatile (Type 6 license) and volatile (Type 7 license). Since the
two categories were established, the list of chemicals considered "volatile" has been reduced as
changes to Fire and Building safety policies have been adopted across local jurisdictions,
including the Orange County Fire Authority (OCFA). Existing Fire and Building safety policies for
other industrial activities of a similar nature that are already allowed in the industrial zoning
districts will be applied to non-volatile and volatile cannabis manufacturing activities.
Eliminating the non-volatile and volatile manufacturing distinctions in Santa Ana's local ordinance
will also help the City retain its competitive edge by aligning the ordinance with State
requirements, and will ensure that all commercial cannabis manufacturing businesses comply
with up-to-date Building Code and OCFA policies, as updated and adopted from time to time.
Administration and Implementation Amendments
Various updates to the City's commercial cannabis ordinances in Chapters 18 and 40 of the
SAMC are required to keep pace with changes to State law, create internal consistency, and
ensure that Santa Ana maintain its competitive position in the statewide commercial cannabis
industry. These amendments will:
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Ordinance Amendment No. 2019-01 — Commercial Cannabis Ordinance Updates
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• Clarify that a single Operating Agreement is required for co -located businesses, per
location;
• Allow the microbusiness license types for certain businesses, enabling business owners to
consolidate payments on State -issued license fees;
• Streamline the application process for commercial cannabis business applicants and
maintain consistency between Chapters 18 and 40 by requiring background checks (live
scans) to take place during the Phase 2 (Regulatory Safety Permit) process; and
• Address closeout audits and fix minor grammar and syntactical errors to ensure consistent
interpretation, administration, and implementation of the City's commercial cannabis
ordinances.
The proposed amendments in Tables 1 and 2 have been vetted by the City's interagency
commercial cannabis team, which includes representatives from the Planning and Building
Agency (Planning and Code Enforcement divisions), the Police Department, the Finance and
Management Services Agency, the Community Development Agency (Economic Development),
and the City Attorney's Office.
ENVIRONMENTAL IMPACT
There is no environmental impact associated with this action. In accordance with the California
Environmental Quality Act (CEQA), the subject actions are exempt from further review pursuant
to Section 15061(b)(3) of the CEQA Guidelines.
STRATEGIC PLAN ALIGNMENT & PUBLIC OUTREACH
Approval of this item supports the City's efforts to meet Goal #3 - Economic Development,
Objective #2 (create new opportunities for business/job growth and encourage private
development through new General Plan and Zoning Ordinance policies), Objective #3 (promote a
solutions -based customer focus in all efforts to facilitate development and investment in the
community), and Objective #5 (leverage private investment that results in tax base expansion
and job creation citywide). Approval of this item also supports the City's efforts to meet Goal #4 -
City Financial Stability; Objective #3 (achieve a structurally balanced budget with appropriate
reserve levels).
Public Outreach
The City notified interested parties to ensure they are aware of and have access to the latest
efforts to the proposed amendments. Interested parties include all current/operating and pending
commercial cannabis businesses, those who have expressed interest in submitting applications,
and the Santa Ana Cannabis Association (SACA).
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Ordinance Amendment No. 2019-01 — Commercial Cannabis Ordinance Updates
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FISCAL IMPACT
There is no fiscal impact associated with approval of this action as projected revenues are
incorporated within the City's 2019-20 budget. Failure to adopt the above recommended action
items, however, would have a negative impact as a significant portion of the commercial
cannabis applicants awaiting adoption of those recommended items before committing to
entering the approval, permitting, and licensing process will defer or cancel their decision to enter
the Santa Ana market and anticipated revenues will not be realized.
Minh Thai
Executive Director
Planning and Building Agency
/z4�
Kathryn Dow s
Executive Director
Finance and Management Services Agency
AP:Ia
S:RFCA\07-16-19\Commercial Cannabis Ord UpdateslRFCA OA No 2019-01 cannabis chs 18 21 and 40 amendments 07162019
Exhibits: 1. Ordinance — Amending certain sections of Chapter 21 (Finance)
2. Ordinance —Amending certain sections of Chapters 18 and 40 (Regulatory)
3. Resolution — Reducing the Commercial Cannabis Gross
Receipts Tax for testing laboratories from 5 percent to 2 percent
4. Resolution — Establishing a Canopy Measurement service fee and an
Allocated Square Footage Measurement service fee
WH:AP
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EXHIBIT 1
EXHIBIT 1
LS 6.4.19
ORDINANCE NO. NS-XXXX
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF SANTA ANA AMENDING AND ADDING CERTAIN
SECTIONS TO ARTICLES XIII, XII, AND VII OF CHAPTER
21 OF THE SANTA ANA MUNICIPAL CODE PERTAINING
TO OWNERSHIP TRANSFERS, CLOSE OUT AUDIT
PROCEDURES (SECTIONS 21-131.1 AND 21-141);
VERTICAL INTEGRATION (SECTIONS 21-131.2 AND 21-
142); REDUCTION IN THE GROSS RECEIPTS TAX RATE
FOR CANNABIS TESTING FACILITIES, DEDUCTIBILITY
OF INTERPARTY SALES AND TRANSFERS OF GOODS,
CLARIFICATION OF SQUARE FOOTAGE TAX
MEASUREMENT REQUIREMENTS (SECTION 21-133);
AND REDUCTION OF SECURITY DEPOSIT AMOUNTS
AND ESTABLISHMENT OF RELATED PROCEDURAL
REQUIREMENTS (SECTIONS 21-80, 21-80.1, 21-86 AND
21-136)
THE CITY COUNCIL OF THE CITY OF SANTA ANA HEREBY ORDAINS AS
FOLLOWS:
Section 1. The City Council of the City of Santa Ana hereby finds, determines
and declares as follows:
A. On November 4, 2014, Santa Ana voters approved Santa Ana's Medical
Marijuana Regulatory Program ordinance ("Measure BB") which was codified in
Chapters 18 and 21 of the Santa Ana Municipal Code. Such regulations govern
medicinal marijuana and the retail sale thereof.
B. In 2015, the Governor signed into law Senate Bill 643, Assembly Bill 266,
and Assembly Bill 243, collectively referred to as the Medical Marijuana Regulation
and Safety Act further amended in 2016 as the Medical Cannabis Regulation and
Safety Act which established regulations and a state licensing system for medical
cannabis cultivation, manufacturing, delivery, and dispensing.
1
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C. In November 2016, the voters of the State of California approved
Proposition 64, the California Marijuana Legalization Initiative, also known as the
Adult Use of Marijuana Act.
D. In 2017, the Governor signed into law Senate Bill 94 also known as
Medicinal and Adult -Use Cannabis Regulation and Safety Act.
E. On November 9, 2017, the City Council created Chapter 40 of the Santa
Ana Municipal Code, allowing adult -use commercial cannabis retail businesses in
the city, and amended certain sections of Chapters 18 and 21 of the Santa Ana
Municipal Code to ensure consistency with State law and Chapter 40.
F. Since November 2014, the City of Santa Ana has permitted the retail sale
of cannabis for medicinal purposes and since January 2018 for adult -use purposes.
On March 20, 2018, the City Council adopted Ordinance NS-2941 and NS-2942,
allowing and regulating commercial cannabis testing laboratories.
G. On April 17, 2018, the City Council adopted Ordinance NS-2944 allowing
and regulating commercial cannabis cultivation, distribution, and manufacturing
activities.
H. On November 6, 2018, the voters of the City of Santa Ana approved
Measure Y (Ordinance NS-2962), establishing a tax on commercial cannabis
business activities except medicinal cannabis retail sales, which continue to be
subject to taxes under Measure BB.
I. The State of California continues to update its regulations on commercial
cannabis business licensing, resulting in the need for local jurisdictions to update
and amend local commercial cannabis ordinances from time to time.
J. The City Council of the City of Santa Ana intends that nothing in this
Article shall be deemed to conflict with federal law as contained in the Controlled
Substances Act, nor to otherwise permit any activity that is prohibited under that Act
or other applicable law.
K. The City of Santa Ana has a compelling interest in ensuring that cannabis
is not cultivated, manufactured or distributed in an illicit manner, in protecting the
public health, safety and welfare of its residents and businesses, in preserving the
peace and quiet of the neighborhoods in which these uses may operate, and in
providing access of cannabis to residents.
L. The City Council held a duly noticed public hearing on July 16, 2019 in
connection with consideration and adoption of this ordinance.
2
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Section 2. This ordinance is adopted pursuant to the authority granted by the
California Constitution and State law, including but not limited to: Article IX, Section 7 of
the California Constitution, the Compassionate Use Act of 1996 (California Health and
Safety Code Section 11362.5), the Medical Marijuana Program (California Health and
Safety Code Section 11362.7 et seq.), the Medical Marijuana Regulation and Safety Act
(AB 266, AB 243, and SB 643), the Adult Use of Marijuana Act (Proposition 64), and the
Medical and Adult Use Cannabis Regulation and Safety Act (SB 94).
Section 3. Pursuant to the California Environmental Quality Act ("CEQA") and
the State CEQA Guidelines, the adoption of this ordinance is exempt from CEQA review
pursuant to California Code of Regulations section 15061(b)(3), which is applicable if it
can be seen with certainty that there is no possibility that the project may have a
significant effect on the environment. As a result, a Notice of Exemption will be filed
upon the adoption of this ordinance.
Section 4. All provisions of the Santa Ana Municipal Code which are repeated
herein are repeated solely in order to comply with the provisions of Section 418 of the
City Charter. Any such restatement of existing provisions of the Code is not intended,
nor shall it be interpreted, as constituting a new action or decision of the City Council,
but rather such provisions are repeated for tracking purposes only in conformance with
the Charter.
Section 5. Section 21-131.1, Article XII of Chapter 21 of the Santa Ana
Municipal Code is hereby added to read in full as follows:
Sec. 21-131.1. Sale, assignment, transfer, or termination of business; marijuana
collective/cooperative (medicinal cannabis retail business) owner/operator's duty
to notify; remitting and reporting requirements; closeout audit: successor's duty
to notify: successor's and transferor's joint and several liability; certificate of
nonliability.
(a) Owner/Operator's duty to notify,
who is terminating their business shall notify the collector in writing of such
termination at least ninety (90) days in advance of the date of termination of
business. If the decision to terminate business is made within less than a
ninety (90) day period prior to the date of termination, the owner/oaerator
shall then immediately notify the collector of said decision and the date of
termination of business.
3
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Sale, assignment, or transfer of business. A medicinal cannabis retail
assignee, transferee, or other successor in interest (hereinafter collectively
referred to as successor) unless the decision to sell, assign, or otherwise
transfer their business was made within less than a ninety (90) day period
prior to the sale, assignment, or transfer, in which case the transferor shall
then immediately notify the successor of the successor's responsibility for
unpaid business license taxes, including penalties, interest, charges, fees, or
costs (hereinafter collectively referred to as business license tax liabilities) for
the period prior to the sale, assignment, or transfer as set forth in subsections
(d) and (e) below, and shall further certify in writing to the collector that the
successor was notified of the requirements of this Article regarding their
responsibility for unpaid business license tax liabilities.
(b) Remitting and reporting requirements. Each medicinal cannabis retail business
owner/operator upon the sale, assignment, or other transfer, or termination of
business for any reason shall, on or before the last day of the month following the
sale, assignment, transfer, or termination of business, file a final return to the
collector on City approved forms, of the total gross receipts received, adjustments
to gross receipts, the amount of business license tax collected for the reporting
period, remittances made, if any, and the balance of the business license tax due,
if any, shall be remitted to the collector.
(c) Closeout audit. After filing the final return and remitting the balance due, the
medicinal cannabis retail business owner/operator shall make its records of
account available for a closeout audit by the collector, his or her revenue officers,
or duly authorized employees or agents of the City. The decision to perform a
closeout audit shall be made solely at the discretion of the collector. If, upon
closeout audit, or by means of other information available to them, the collector
determines that the owner/operator selling, assigning, or otherwise transferring, or
terminating their business is found to have satisfied all business license tax
liabilities, the collector shall issue to such business owner/operator a certificate of
nonliability.
If, upon closeout audit, or by means of other information available to them, the
collector determines that the owner/operator selling, assigning or otherwise
transferring, or terminating their business is deficient in either their return or
remittance, or both, the collector shall immediately notify such owner/operator of
the amount of the net deficiency, plus applicable penalties, interest, charges, fees,
or costs. Upon such owner's/operator's remittance of all business license tax
liabilities owing, the collector shall issue a certificate of nonliability.
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(d) Successor's duty to notify. If a medicinal cannabis retail business owner/operator
decides to sell, assign, or otherwise transfer their business, their successor shall
notify the collector of the date of the sale, assignment, or other transfer at least
ninety (90) days before the date of the sale, assignment, or transfer. It shall be the
duty of the successor to obtain written verification from the collector's office that
the transferor does not have or is not liable for any outstanding business license
taxes liabilities. After the successor seeks written verification from the collector's
office, if the collector notifies the successor that the transferor has or is liable for
any outstanding amount of business license tax liabilities, the successor shall
withhold an amount equal to such outstanding business license tax liabilities until
the transferor produces a certificate of nonliability stating the nonliability of the
assignment, or other transfer, the successor shall deposit the withheld amount with
the collector pending settlement of the account of the transferor.
If the decision to sell, assign, or otherwise transfer was made within less than a
ninety (90) day period prior to the date of the sale, assignment, or other transfer,
the successor shall notify the collector of the sale, assignment, or transfer
immediately and shall withhold an amount equal to the sum of the transferor's last
three (3) months' of reported and remitted business license taxes until the
present a certificate of nonliability within ninety (90) days after such sale,
assignment, or other transfer, the successor shall deposit the withheld amount with
the collector pending settlement of the account of the transferor.
(e) Joint and several liability. If the successor fails to withhold the applicable amount
required under subsection (d) they shall become jointly and severally liable along
with the transferor for the payment of the full amount of the transferor's business
license tax liabilities and shall likewise become jointly and severally liable along
with the transferor for future penalties and/or interest charges as may be applicable
as set forth in sections 21-83, 21-84, and 21-85 until all business license tax
liabilities are satisfied.
(f) Certificate of nonliability. Upon application of a medicinal cannabis retail business
operator/owner who is terminating their business, or a transferor, or a successor,
transferor's, or successor's business license tax liabilities have been satisfied. If
any business license tax liabilities remain outstanding, or if additional business
license tax liabilities have accrued subsequent to the date of application, the
collector shall give notice to the operator/owner, transferor, or successor of the
applicable amount which must be fully paid as a condition of issuing their
respective certificate of nonliability. Where a transferor's business license tax
liabilities have been partially or wholly paid by their successor to the collector
75A-15
pursuant to subsection (e) or partially or wholly satisfied by their successor's action
written consent of their successor.
Section 6. Section 21-131.2 of Article XII of Chapter 21 of the Santa Ana
Municipal Code is hereby added to read in full as follows:
Sec. 21-131.2 Vertical and horizontal integration of marijuana
collective/cooperative licensees (medicinal cannabis retail businesses) —Defined.
The terms vertical integration and horizontal integration as used in this Article shall have
the following meanings: Vertical integration shall refer to cannabis businesses operating
at different points in the same supply chain from cultivation to retail sales, as long as
they share at least 80% underlying common ownership, regardless of form of business
structure, and are engaged in interparty sales and/or transfers of goods. Horizontal
integration shall refer to cannabis businesses operating at the same point in the same
supply chain, as long as they share at least 80% underlying common ownership,
regardless of form of business structure, and are engaged in interparty sales and/or
transfers of goods. For purposes of this Article the term "cannabis businesses" shall
include marijuana collectives/cooperatives as defined in section 18-611 and commercial
cannabis businesses as defined in section 40-2, but shall not include commercial
cannabis businesses engaged in testing facilities or testing laboratory businesses.
Section 7. Section 21-133 of Article XIII of Chapter 21 of the Santa Ana
Municipal Code is hereby amended to read in full as follows:
Sec. 21-133. Commercial cannabis businesses —Annual business license tax
assessment.
Every person engaged in a "commercial cannabis business" or "commercial
cannabis activity" shall pay an annual business license tax as outlined below. This
Article shall not apply, except with respect to medical marijuana cooperatives/collectives
(also referred to as medicinal cannabis retail businesses
h„s,..ess r..e..se t;;x ,,..a A'44 R vu f this Chapter, which are vertically and/or
horizontally integrated with commercial cannabis businesses, to medical marijuana
cooperatives/collectives which are governed by Article XII of this Chapter, or to personal
cultivation as defined in section 18-611(n) of this Code.
(a) For each branch establishment or separate property location of a commercial
cannabis business transacted and carried on in the city, and for each separate
type of commercial cannabis business conducted at the same location, the higher
of the two (2) following tax rates shall be due to the City for each monthly reporting
period:
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(1) Up to ten percent (10%) of each dollar of gross receipts received or
generated for each monthly reporting period.
(2) Up to $35.00 per square foot (annual tax rate) prorated monthly to one -
twelfth (1/12th) of the annual tax rate amount.
(b) These tax rates shall not be adjusted for inflation pursuant to section 21-121 of this
Chapter.
(c) Notwithstanding the tax rates imposed herein under subsection (a), the City
Council may, in its discretion, at any time by resolution, implement any lower tax
rate it deems appropriate, and may by resolution increase such tax rate from time
to time, not to exceed the maximum rates established by subsection (a).
(d) As of the operative date of this Article, the business license gross receipts tax
rates and square footage tax rates application to specific commercial cannabis
business activities shall be established as follows:
Commercial Cannabis Business
Activity
Gross Receipts
Tax Rate
Gross Square
Footage Tax Rate
Adult -use Cannabis Retail
Business (including Delivery)
8%
$ 25.00
Cultivation
6%
$ 10.00
Distribution
6%
$ 4.00
Manufacturing
6%
$ 10.00
Testing Facility or Testing
Laboratory (effective December
21, 2018 through June 30, 20191
5%
$ 1.50
Testing Facility or Testing
Laboratory (effective beginning
2%
$ 1.50
July 1, 2019)
Commercial cannabis businesses not having a fixed place of business within the
city but conducting regular, non -incidental commercial cannabis business activities
within the city shall be subject to the gross receipts tax rate(s) as set out in the
table above based on the category/categories of commercial cannabis activity
conducted. However, such out-of-town commercial cannabis businesses shall not
be subject to any gross square footage tax rate(s).
(e) As part of the annual gross receipts/square footage tax(es) imposed by this Article,
each commercial cannabis business located within the city shall pay a minimum
75A-17
basic rate of two thousand dollars ($2,000.00) annually for each branch
establishment or separate property location of the commercial cannabis business
transacted and carried on in the city, and for each separate type of commercial
cannabis business conducted at the same location. Commercial cannabis
businesses having no fixed place of business within the city shall be exempted
from this requirement.
(f) In the event the City should in the future permit additional categories of commercial
cannabis business activity, as may from time to time be licensed by the State of
California, such categories of commercial cannabis activates shall be subject to the
same maximum tax rates as imposed herein. The City may by ordinance of the
City Council initially set the required gross receipts/gross square footage tax rates
based on category of cannabis business activity at lesser rates as may be deemed
appropriate by the City Council.
(g) For purposes of this Article, a commercial cannabis business is not considered to
be a business or person having a "specified exemption" or "specified exclusion"
from business license taxation as set forth in sections 21-48 and 21-49 of this
Chapter.
(h) For purposes of this Article any person claiming an exemption from the gross
receipts tax rate component of the combined gross receipts/square footage tax
imposed under this Article on the basis of a claim of being a qualified "nonprofit
organization" shall have the burden of substantiating their claim to the same extent
and in the same manner as a marijuana collective/cooperative in accordance with
section 21-127(a)(6) of this Chapter.
(i) Cannabis businesses shall not pass the taxes imposed by this Article through to an
adult -use cannabis retail business customer or commercial cannabis business
customer in any fashion except as part of the basic product sales and/or service
price.
Q) Definitions. For purposes of this Article, the following terms have the following
meanings:
(1) "Adult -Use cannabis retail business" as defined in section 40-2(4) of this
Code.
(2) "Commercial Cannabis Activity" as defined in section 40-2(9) of this
Code.
(3) "Commercial cannabis business' as defined in section 40-2(10) of this
Code excluding medical marijuana collectives/cooperatives also referred
to as medicinal cannabis retail sales.
(4) "Cultivation" as defined in section 40-2(11) of this Code.
(5) "Delivery" as defined in section 40-2(13) of this Code.
a
75A-18
(6) "Distribution" as defined in section 40-2(16) of this Code.
(7) "Gross receipts" — section 21-3 of this Chapter notwithstanding, "gross
receipts" for the purposes of this Article shall mean:
(A) Transfer of title or possession, exchange or barter, conditional or
otherwise, in any manner or by any means whatsoever, of tangible
personal property for a consideration including any monetary
consideration for cannabis, including, but not limited to,
membership dues, reimbursements provided by members,
regardless of form, or the total amount of cash or in -kind
contributions, including all operating costs related to the growth,
cultivation, manufacturing, distribution, testing, or provision of
cannabis or any transaction related thereto.
(B) Anything else of value obtained by an a cannabis business;
(C) The total amount of the sale price of all sales and services;
(D) The total amount charged or received for the performance of any
act, service or employment of whatever nature it may be, whether
or not such service, act or employment is done as a part of or in
connection with the sale of goods, wares, or merchandise (whether
at wholesale or retail), for which a charge is made or credit allowed,
including all refunds, cash credits and properties of any amount or
nature;
(E) Any amount for which credit is allowed by the seller to the
purchaser without any deduction therefrom, on account of the cost
of the property sold, the cost of materials used, the labor or service
cost, interest paid or payable, losses, or any other expense
whatsoever; provided that cash discounts allowed or payment on
sales shall not be included;
(F) The amount of any federal manufacturer's or importer's excise tax
included in the price of property sold, even though the manufacturer
or importer is also the retailer thereof P.Ad ,.ghether er ^et the
Amn nt of c„^h tax is stated ^ eparote ^herge•
,
(G) The amount of any California state cannabis excise tax or state
cannabis cultivation tax regardless of whether er net the amn, int M
included in the price of the
product Ar state,, to nustemeFs as a sepaFate ^harge•
(H) "Gross receipts" shall not include the following:
i. The amount of any federal tax imposed on or with respect to
retail or wholesale sales or the sale of services whether
DI
75A-19
imposed upon the cannabis business or the consumer
whenever the amount of federal tax is authorized by law to be
stated and passed through to customers as a separate charge.
ii. Any California state, county, or city sales or use tax, including
any add -on, district, or transaction and use tax, required by law
to be included in or added to the purchase price and collected
from the consumer or purchaser, or such part of the sales price
of any property previously sold and returned by the purchaser to
the seller which is refunded by the seller by way of cash or
credit allowances given or taken as part payment on any
property so accepted for resale; or
iii. The amount of the sale price of business personal property (all
property owned or leased by a cannabis business operator used
in the operation cannabis business activities, including but not
limited to: furniture, fixtures, and business equipment); real
property, including land, buildings and other improvements.
iv. The amount of equity contributions, investments, and/or loan
proceeds to cannabis business' operation, and/or proceeds from
the sale or transfer of cannabis business' retail or commercial
cannabis business.
v. The amount of interparty sales and/or transfers of goods within
a single vertically and/or horizontally integrated cannabis
business, where the sales or transfers goods are between two
or more commercial cannabis business licensees (excluding
testing facilities or testing laboratories), or one or more said
commercial cannabis business licensee(s) and one or more
medicinal cannabis retail business licensee(s), as set forth in
accordance with section 21-131.2 and/or section 21-142.
"Gross receipts" shall be calculated without any deduction on
account of any of the following:
i. The cost of tangible or intangible property sold or bartered;
ii. The cost of materials or products used, labor or service cost,
interest paid, losses, or other expense;
iii. The cost of transportation of cannabis, or other property or
product;
iv. The amount of any federal or state income or franchise taxes;
and
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75A-20
v. Any other business costs or expenses, unless otherwise
specifically exempted.
(88) "Retail ti defined iR seGt•e nn 2i40of this Cede."Gross
Square foot' or "gross square footage" for the purposes of this Article
shall mean:
(A) In the case of commercial cannabis businesses licensed by the
state to engage in an adult -use cannabis retail business, the gross
number of square feet comprising the adult -use cannabis retail
property location as confirmed by the corresponding "approved
building set' or "approved certificate of occupancy" on file with the
City of Santa Ana Planning and Building Agency, whichever is the
greater of any square footage indicated, whether such adult -use
cannabis retail business is part of an on -site vertically or
horizontally integrated cannabis business or not.
(B) In the case of commercial cannabis businesses licensed by the
state to engage in cultivation, the aggregate number of square feet
comprising all areas of the premises under "canopy', whether such
sum is greater or lesser than the gross square footage as stated in
the "approved building set' or "approved certificate of occupancy".
and whether such commercial cannabis cultivation business is part
of an on -site vertically integrated cannabis business or not.
"Canopy" shall mean the designated area(s) of a premise that will
contain mature plants at any point in time. Canopy shall be
calculated in square feet and measured using clearly identifiable
boundaries of all area(s) that will contain mature plants at any point
in time, including all of the space(s) within the boundaries. Canopy
may be noncontiguous, but each unique area included in the total
canopy calculation shall be separated by an identifiable boundary
which includes interior walls, shelves, greenhouse walls, hoop
house walls, garden benches, hedgerows, fencing, garden beds, or
garden plots; and if mature plants are being cultivated using a
shelving system, the surface area of each level shall be included in
the total canopy calculation.
Canopy shall be subject to independent measurement and
calculation by duly authorized employees or agents of the City at
the time of application for a Santa Ana Business License and
annually thereafter at the time of the renewal of such license, or
more often as may be deemed necessary in the discretion of the
collector. Whenever an independent canopy measurement and
11
75A-21
calculation is required under the terms of this Article or whenever
the collector in his or her discretion determines that the
independent measurement and calculation of a licensee's canopy is
desirable to effectuate the proper assessment or collection of the
business license taxes required to be paid under the terms of this
Chapter, or for any other purposes related to the express aims of
this Article then a canopy measurement shall be performed and a
corresponding service fee shall be applicable in the amount as
specified by resolution of the City Council.
(C) In the case of commercial cannabis businesses licensed by the
state to engage in distribution or manufacturing and that are not
vertically or horizontally integrated with another cannabis business
occupying the same premises, the gross number of square feet as
confirmed by the corresponding "approved building set" or
"approved certificate of occupancy" on file with the City of Santa
Ana Planning and Building Agency, whichever is the greater of any
square footage indicated.
(£WD) In the case of commercial cannabis businesses licensed by the
state to engage in distribution or manufacturing and occupying the
same premises with another cannabis business with which they are
vertically or horizontally integrated, the gross number of square feet
allocated by the commercial cannabis business owner/operator
respectively for either distribution use or for manufacturing use,
whether the combined sum of all vertically or horizontally integrated
uses is less than, equal to, or greater than the gross square footage
as stated in the "approved building set" or "approved certificate of
occupancy".
The number of square feet allocated ("Allocated Square Footage")
shall be subject to independent measurement and calculation by
duly authorized employees or agents of the City at the time of
application for a Santa Ana Business License and annually
thereafter at the time of the renewal of such license, or more often
as may be deemed necessary in the discretion of the collector.
Whenever an independent allocated square footage measurement
and calculation is required under the terms of this Article or
whenever the collector in his or her discretion determines that the
independent measurement and calculation of a licensee's allocated
square footage is desirable to effectuate the proper assessment or
collection of the business license taxes required to be paid under
the terms of this Chapter, or for any other purposes related to the
express aims of this Article then an Allocated Square Footage
12
75A-22
measurement shall be performed and a corresponding service fee
shall be applicable in the amount as specified by resolution of the
City Council.
(E) In the case of commercial cannabis businesses licensed by the
state to engage in testing facilities or testing laboratory businesses,
the gross number of square feet comprising such commercial
cannabis business' property location as confirmed by the
corresponding "approved building set" or "approved certificate of
occupancy" on file with the City of Santa Ana Planning and Building
Agency, whichever is the greater.
(�4M "Manufacturing" as defined in section 40-2(22) of this Code.
g9 1LOj. "Retail businesses" as defined in section 40-2(40) of this Code
(11) "Testing Facility" or "Testing Laboratory" as defined in section 40-2(44)
of this Code.
(12) "Wholesale" as defined in section 40-(46) of this Code.
(k) Modification, repeal or amendment. The City Council may repeal the ordinance
codified in this Article, or amend it in a manner which does not result in an increase
in the tax or taxes imposed herein, without further voter approval. The City Council
may likewise by ordinance adopt and add additional provisions to any other Article
of this Chapter and relate them to this Article, or amend any existing provisions of
any Article of this Chapter as they may already relate to this Article in any manner
which does not result in an increase in the tax or taxes imposed herein, without
further voter approval. If the City Council repeals said ordinance or any provision of
this Article, it may subsequently reenact it without voter approval, as long as the
reenacted ordinance or section does not result in an increase in the tax or taxes
imposed herein.
(1) Administration —Rules, regulations and guidelines. In order to aid in the city's
collection of taxes due under this Article and to ensure that all commercial
cannabis businesses are taxed consistently to the best of the city's ability, the
collector, with the concurrence of the city attorney, may promulgate rules,
regulations, and guidelines, to implement and administer this Article including, but
not limited to rules, regulations, and guidelines harmonizing other provisions of this
Chapter with the provisions of this Article in any manner not inconsistent with the
intent of this Article and which does not result in an increase in the tax or taxes
imposed herein. The collector may also, with the concurrence of the city attorney,
interpret or clarify the methodology of the tax, or any definition applicable to the
tax, so long as such interpretation or clarification (even if contrary to some prior
interpretation or clarification) is not inconsistent with the language of this Article.
13
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(m) Occasional transactions —Exemptions.
(1) The provisions of this Article shall not apply to persons having no fixed
place of business within the city who come into the city for the purpose
of transacting a specific item of commercial cannabis business at the
request of a specific client or customer, incidental to a commercial
cannabis business principally established elsewhere, provided that
such person does not come into the city for the purpose of transacting
such business on more than three (3) days during any calendar year.
(2) For any person not having a fixed place of business within the city who
comes into the city for the purpose of transacting commercial cannabis
business activities, the business license tax(es) payable by such
person may be apportioned by the collector in accordance with this
Chapter.
(n) Reporting and remittance.
(1) Beginning as set forth in subsection (r) below, and monthly thereafter,
each commercial cannabis business required to pay a tax or taxes
based on gross receipts under this Article (except qualified nonprofit
organizations exempt from taxes measured by income or gross
receipts), shall report to the city any gross receipts received during the
preceding monthly reporting period. In addition, each cannabis business
(including qualified nonprofit organizations) required to pay a tax or taxes
based on square footage shall report to the city the gross square footage
of the cannabis business' property location. Every cannabis business
shall then compute the business license taxes at both the gross receipts
rate and the gross square footage rate - prorated monthly to one -twelfth
(1/12th) of the annual tax rate amount - and shall then remit to the city
the amount of the higher of the two tax calculations due and owing
during said period in accordance with section 21-133, subsection (d). In
the case of a qualified nonprofit organization only the gross square
footage computation shall be made and the amount of such calculation
shall represent the amount due and owing during said period. All
reporting and remitting made shall be done in accordance with
instructions from the collector and shall be made using forms provided or
approved by the collector.
(2) For purposes of this section, month shall mean calendar month and shall
include any fraction of a month. Taxes shall begin to accrue on the date
that a person or entity first receives a business license or other city
permit to operate as a commercial cannabis business or upon the
operative date of this Article should a person or entity already possess a
14
75A-24
commercial cannabis business license or other city permit to operate as
a commercial cannabis business.
(3) The payment of the two thousand dollars ($2,000.00) minimum basic
rate gross receipts tax required annually for each separate branch
location or separate property location of the business in accordance with
this section, shall be made annually prior to the beginning of the fiscal
year beginning April first of the current year and expiring on the 31 st day
of March of the following year. In the case of a new commercial cannabis
business the minimum basic rate gross receipts tax shall be paid in
advance prior to any new business activity being undertaken. Every new
licensee shall pay in advance an amount equal to one -quarter (%) of the
annual minimum basic rate gross receipts tax, for each quarter and
fraction of a quarter remaining during the period for which the new
license is issued.
(o) Delinquent date —Penalty. Any individual or entity who fails to pay the taxes
required by this Article when due shall be subject to penalties and interest as set
forth in accordance with this Chapter. The collector is not required to send a
delinquency or other notice or bill to any person subject to the provisions of this
Article and failure to send such notice or bill shall not affect the validity of any tax
or penalty due under the provisions of this Article.
(p) Business license tax certificate —Required. There are imposed upon all persons
engaged in transacting and carrying on any commercial cannabis business activity
in the city taxes in the amounts prescribed in this Article. It shall be unlawful for any
person, either for him or herself or for any other person, to commence, transact or
carry on any business in the city without first having procured a business license
from the city under this Chapter and having paid the taxes set forth in this Article,
and without complying with any and all applicable provisions contained in this
Chapter. The carrying on of any commercial cannabis business activity without
complying with all the provisions of this Article shall constitute a separate violation
of this Chapter for each and every day that such commercial cannabis activity is so
carried on.
(q) Classification of business license assessment type —Term and renewal. The
business license issued to commercial cannabis businesses shall be classed as a
gross receipts assessment type, issued for the same term of license as set forth in
subsection 21-71(c) of this Chapter and shall be subject to renewal in accordance
with sections 21-72(c), 21-73(c), and 21-77.
(r) Operative date. Upon the approval by the majority of the voters of the city at the
November 6, 2018 general election, the taxes imposed by this Article shall become
operative and shall be applied by the collector upon all commercial cannabis
businesses.
15
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if S ) Operative date of decreased gross receipts tax rate. The _gross receipts tax set
initially at a rate of five (5%) percent for testing facilities or testing laboratories
pursuant to subsection (d) above shall be decreased to a rate of two (2%) percent
by resolution of the City Council rSanta Ana City Council Resolution No. XX-XXXI
as hereinabove provided for in accordance with subsection (c), which reduced rate,
under the terms of said City Council resolution, shall become retroactively effective
July 1, 2019.
Section 8. Section 21-136 of Article XIII of Chapter 21 of the Santa Ana
Municipal Code is hereby amended to read in full as follows:
Sec. 21-136. Security for collection of commercial cannabis business' business
license tax; requirement; extension of time; application; failure to post or
restore —effect; jeopardy determination; refund or release; deposit adiustment—
effect.
(a) Requirement for Security Deposit. To ensure compliance with business license tax
payment requirements established pursuant to this Article, the collector shall
require, beginning on the operative date of this Article, that each commercial
cannabis business owner/operator, (including but not limited to each purchaser,
assignee, transferee, or other successor in interest (hereinafter collectively referred
to as successor) of a commercial cannabis business subject to the business
licensing requirements of this Article} deposit within
0nd'y'd al business''^e^68) one hundred and twenty (120) days following the last
day of the month in which business was first commenced such security (per
individual business license) in a form acceptable to the collector in an amount not
larger than the commercial cannabis business owner's/operator's estimated
average monthly business license tax liability as determined by the collector or the
sum of ten thousand dollars ($10,000.00), whichever is the gFeatef least. Provided,
however, in the event that two or more commercial cannabis business licensees
sharing at least 80% underlying common ownership, regardless of form of
business structure, are engaged in an integrated cannabis business (whether
vertically or horizontally integrated) as defined in section 21-142, then a single
consolidated deposit shall be made equal to the deposit amount owing for the
integrated commercial cannabis activity having the highest individual business
license tax liability. Each new city commercial cannabis business licensee shall
upon obtaining their City business license(s) deposit a similar security as
applicable per business license within thirty (30) days after commencing business.
(b) Extension of Time. If, upon request and in the judgment of the collector, a
determination of any commercial cannabis business' estimated average monthly
tax liability for purposes of setting the amount of their required security deposit
requires an extension of time beyond one hundred and twenty (120) days following
W.
75A-26
the last day of the month in which business was first commenced, then the
collector may issue a written notification to such commercial cannabis business
granting such extension.
u Application of Security Deposit. To recover past -due business license taxes,
including penalties, interest, charges, fees or costs (hereinafter collectively
referred to as business license tax liabilities) remittable by the depositor, the
collector may apply the security deposited with the collector. At least fifteen (15)
days prior to the application of a security deposit, the collector shall serve upon the
depositing commercial cannabis business owner/operator notice of intent to apply
the security deposit. Service of notice may be made by placing the notice in the
United States mail, postage prepaid, addressed to the depositing commercial
cannabis business owner/operator at their place of business or other mailing
address of record. Any portion of the security remaining after satisfaction of
outstanding business license tax liabilities and any expenses related to third -party
administrative charges or fees relating to the liquidation and application of non -
cash deposits may be retained by the collector for security or in the case of a
closeout audit may be paid over by the collector to the depositing owner/operator.
Except in the case of a closeout audit pursuant to section 21-141, in the event the
collector applies the security deposit, or any portion of said deposit, as an offset
against remittable business license tax liabilities and any expenses related to third -
Party administrative charges or fees relating to the liquidation and application of
non -cash deposits, the commercial cannabis business owner/operator shall be
required within thirty (30) days of the collector's written demand therefor, to re
deposit the full amount of the required security. In such event the amount of the
required security shall be adiusted by the collector based on the average of the
commercial cannabis business' actual monthly gross receipts tax returns and/or
remittances as measured over the last three (3) valid monthly returns and/or
remittances received by the collector or the sum of ten thousand dollars ($10,000),
whichever is least, less any amount remaining on deposit with the collector.
Service of demand shall be in the same manner as stated hereinabove for service
of notice.
(d) Failure to Post or Restore Security Deposit —effect. Failure by a commercial
cannabis business licensee to initially post or restore a security deposit when
required by the collector pursuant to this section shall be cause for suspension
and/or revocation of such commercial cannabis business' existing Santa Ana
Business License as set out in section 21-86 of this Chapter. Similarly, in the case
of a vertically and/or horizontally integrated cannabis business, the business
license(s) of the integrated commercial cannabis business(es) shall be likewise
subject to suspension and/or revocation.
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(e) Jeopardy Determination. If the collector believes that the collection of any
business license tax imposed by this Article will be jeopardized, in whole or in part
by delay in the commercial cannabis business owner's/operator's timely remittance
of the business license tax, the collector shall serve notice upon the person
determined to be liable therefor of their determination of ieopardv and of the
business license tax required to be paid to the City, and demand immediate
Payment thereof, together with any interest and penalty determined to be due. The
collector may consider all facts and circumstances relevant to determining whether
the collection of any business license tax will be jeopardized by delay, including but
not limited to indications that the person liable for the business license tax intends
to take or is taking action to discontinue business activities in the City, dissipate or
otherwise remove assets from the City, or sell, exchange, transfer, assign, or
otherwise dispose of such person's business, personal or business income, or
business property. The collector also may consider whether the person liable for
the business license tax is or has been uncooperative or unresponsive in
connection with any investigation, examination, audit, deficiency determination,
assessment, or collection action or procedure undertaken by the collector. A
ieopardv determination of business license tax, penalty, or interest, is immediately
due and payable upon the service of the notice of ieopardv determination on the
person determined to be liable therefor. Service of notice of a ieopardv
determination shall be made by: (1) sending the notice initially by electronic mail to
the depositing commercial cannabis business owner's/operator's electronic mail
address of record as set out in the depositing commercial cannabis business
owner's/operator's application for business license or most recent business license
renewal affidavit or business license amendment statement: (2) placing the notice
for delivery with an express carrier for next business day delivery, all delivery and
tracking charges prepaid, addressed to the depositing commercial cannabis
business owner/operator at their place of business: and/or (3) conspicuously
posting said notice upon the premises of the commercial cannabis business.
Service of notice of a ieopardv determination shall be deemed completed upon
tracking confirmation of the delivery of said notice to the commercial cannabis
business owner's/operator's place of business or on the date of the actual posting
of said notice on the premises of the depositing commercial cannabis business
owner/operator. Upon the business day next following the completion of service of
notice of a ieopardv determination upon a depositing commercial cannabis
business, the collector in his or her discretion may proceed with the application of
the security deposit upon actual or estimated business license taxes due, including
penalties, interest, charges, or service fees.
(f) Refund or release of security deposit. In the case of the sale, assignment, or other
transfer or termination of business by the depositor pursuant to section 21-141, the
collector shall refund or release the security deposit amount required pursuant to
this section, or in the event of prior application of the security deposit pursuant to
R-]
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subsection (c), any unapplied amount of such security deposit, upon depositor's
presentation to the collector of a certificate of nonliability stating the nonliability of
the depositor for payment of business license taxes as hereunder provided in
section 21-141(f).
(q) Deposit adiustment—effect. In the case of a determination by the collector that the
amount of a previously posted commercial cannabis business owner's/operator's
security deposit exceeds the requirements of this section, then the collector shall
adjust the amount of the required security deposit. If the prior security deposit was
posted on a cash basis, then the collector shall refund the excess amount. If the
prior security deposit was posted on a non -cash basis, then an adjusted cash basis
security deposit or adjusted non -cash basis security deposit in a form acceptable
to the collector may be posted in exchange for the release of the prior security
deposit.
Section 9. Section 21-141 of Article XIII of Chapter 21 of the Santa Ana
Municipal Code is hereby added to read as follows:
Sec. 21-141. Sale, assignment, transfer, or termination of business commercial
cannabis business owner's/operator's duty to notify: remitting and reporting
requirements, closeout audit: successor's duty to notify: successor's and
transferor's joint and several liability: certificate of nonliability.
(a) OwnerlOperator's duty to notify,
termination at least ninety (90) days in advance of the date of termination of
shall then immediately notify the collector of said decision and the date of
termination of business.
ii. Sale, assignment, or transfer of business. A commercial cannabis business
owner/operator who is selling, assigning, or otherwise transferring their
days in advance of the date of the sale, assignment, or transfer and shall
notify the collector in writina of the name and address of the purchaser,
transfer their business was made within less than a ninety (90) day period
prior to the sale, assignment, or transfer, in which case the transferor shall
then immediately notify the successor of the successor's responsibility for
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the period prior to the sale, assignment, or transfer as set forth in subsections
(d) and (e) below, and shall further certify in writing to the collector that the
successor was notified of the requirements of this Article regarding their
responsibility for unpaid business license tax liabilities.
(b) Remitting and reporting requirements. Each commercial cannabis business
owner/operator upon the sale, assignment, or other transfer, or termination of
business for any reason shall, on or before the last day of the month following the
sale, assignment, transfer, or termination of business, file a final return to the
collector on City approved forms, of the total gross receipts received, adjustments
to gross receipts, the amount of business license tax collected for the reporting
period, remittances made, if any, and the balance of the business license tax due,
if any, shall be remitted to the collector.
(C) Closeout audit. After filing the final return and remitting the balance due, the
commercial cannabis business owner/operator shall make its records of account
available for a closeout audit by the collector, his or her revenue officers, or duly
authorized employees or agents of the City. The decision to perform a closeout
audit shall be made solely at the discretion of the collector. If, upon closeout audit,
business is found to have satisfied all business license tax liabilities, the collector
shall issue to such business owner/operator a certificate of nonliability.
If, upon closeout audit, or by means of other information available to them, the
remittance, or both, the collector shall immediately notify such owner/operator of
the amount of the net deficiency, plus applicable penalties, interest, charges, fees,
or costs. Upon such owner/operator's remittance of all business license tax
liabilities owing, the collector shall issue a certificate of nonliability.
(d) Successor's duty to notify. If a commercial cannabis business owner/operator
decides to sell assign, or otherwise transfer their business, their successor shall
notify the collector of the date of the sale, assignment, or other transfer at least
ninety (90) days before the date of the sale, assignment, or transfer. It shall be the
duty of the successor to obtain written verification from the collector's office that
the transferor does not have or is not liable for any outstanding business license
taxes liabilities. After the successor seeks written verification from the collector's
office, if the collector notifies the successor that the transferor has or is liable for
any outstanding amount of business license tax liabilities, the successor shall
transferor for oavment of business license tax liabilities. If the transferor does not
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present a certificate of nonliability within ninety (90) days after such sale,
assignment, or other transfer, the successor shall deposit the withheld amount with
the collector pending settlement of the account of the transferor.
If the decision to sell assign or otherwise transfer was made within less than a
ninety (90) day period prior to the date of the sale assignment, or other transfer,
three (3) months' of reported and remitted business license taxes until the
transferor produces a certificate of nonliability stating the nonliability of the
transferor for payment of business license tax liabilities. If the transferor does not
present a certificate of nonliability within ninety (90) days after such sale,
assignment or other transfer, the successor shall deposit the withheld amount with
the collector pending settlement of the account of the transferor.
(e) Joint and several liability. If the successor fails to withhold the applicable amount
required under subsection (d) they shall become iointly and severally liable along
with the transferor for the payment of the full amount of the transferor's business
license tax liabilities and shall likewise become iointly and severally liable along
with the transferor for future penalties and/or interest charges as may be applicable
as set forth in sections 21-83, 21-84, and 21-85 until all business license tax
liabilities are satisfied.
(f) Certificate of nonliability. Upon application of a commercial cannabis business
owner/operator who is terminating their business, or a transferor, or a successor,
for a certificate of nonliability, the collector, after conducting an audit therefore, as
he or she may deem necessary, shall issue the certificate of nonliability if the
owner/operator's transferor's or successor's business license tax liabilities have
been satisfied. If any business license tax liabilities remain outstanding, or if
successor of the applicable amount which must be fully paid as a condition of
issuing their respective certificate of nonliability. Where a transferor's business
successor's action of withholding and depositing amounts with the collector
Section 10. Section 21-142 of Article XIII of Chapter 21 of the Santa Ana
Municipal Code, is hereby added to read as follows:
Sec. 21-142. Vertical and horizontal integration of commercial cannabis business
licensees —Defined.
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The terms vertical integration and horizontal integration as used in this Article shall have
the followinq meanings: Vertical integration shall refer to cannabis businesses operating
at different points in the same supply chain from cultivation to retail sales, as long as
they share at least 80% underlying common ownership, regardless of form of business
structure, and are engaged in interparty sales and/or transfers of goods. Horizontal
integration shall refer to cannabis businesses operating at the same point in the same
supply chain, as long as they share at least 80% underlying common ownership
regardless of form of business structure, and are engaged in interparty sales and/or
transfers of goods. For purposes of this Article the term "cannabis businesses" shall
include medicinal marijuana collectives/cooperatives as defined in section 18-611 and
commercial cannabis businesses as defined in section 40-2. but shall not include
commercial cannabis businesses engaged in testing facilities or testing laboratory
businesses.
Section 11. Section 21-80 of Article VII of Chapter 21 of the Santa Ana
Municipal Code is hereby amended to read in full as follows:
Sec. 21-80. - Same —Not conclusive; audit of books.
No statement shall be conclusive as to the matters set forth therein, nor shall the filing
of the same preclude the city from collecting by appropriate action such sum as is
actually due and payable hereunder. Such statement and each of the several items
therein contained shall be subject to audit and verification by the collector, his or her
revenue officers, or duly authorized employees or agents of the City, who are hereby
authorized to examine, audit, and inspect such books and records of any licensee or
applicant for license, as may be necessary in their judgment to verify or ascertain the
amount of license fee due.
All persons subject to the provisions of this Chapter shall keep complete and detailed
records of business transactions, including, but not limited to the followinq: rent
collected, daily sales, sales taxes collected and paid to the state, any and all city, state
and federal taxes collected and remitted from cannabis sales, point of sales (POS)
system detailed daily sales data base and summary monthly sales reports, receipts,
purchases, and other expenditures, detailed general ledger, income statements, cash
flow statements, balance sheets, sales journals, cash disbursement journals and
ledgers including payroll journals, third -party staffing agency statements lease
agreements, and other reports regarding the number and types of persons employed
and/or otherwise engaged in the business, and shall retain all such records for
examination by the collector, his or her revenue officers, or duly authorized employees
or agents of the City. Such records shall be maintained for the period of the current
calendar year, and fora rior period of at least three (3) complete calendar years or
from the commencement of business within the city, whichever period is least. In the
event such records of any business are not maintained within the city and are not
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reasonably made available for examination within the city, then such business shall be
responsible for the actual travel and lodging cost in connection with the performance
of said examination.
No person required to keep records under this section shall refuse to allow the collector,
his or her revenue officers, or duly authorized employees or agents of the City to
examine said records at reasonable times and places. Any person who willfully refuses
to allow said examination on demand and at a reasonable time and place as herein
provided shall be deemed guilty of a misdemeanor. In addition, such willful refusal shall
be cause for suspension and/or revocation of such business' existing Santa Ana
Business License as set out in section 21-86 of this Chapter.
Section 12. Section 21-80.1 of Article VII of Chapter 21 of the Santa Ana
Municipal Code is hereby amended to read in full as follows:
Sec. 21-80.1. - Same —Audit deficiency; application of penalty and interest;
voluntary compliance, effect;=Abatement of penalty and interest;
application; Exception for business license taxes assessed on a monthly basis;
audit service fees.
In the event that the collector or his or her designated agents, whether through an
audit or otherwise, determine that any person has misstated their gross receipts
amount, square footage amount, or other criteria upon which their current or prior
years' business license tax has been calculated resulting in an underpayment of the
tax amount owed, the collector shall separately calculate the deficiency for each
distinct license period affected and issue a statement of tax deficiency and add
delinquency penalties as applicable to the amount of the tax deficiency in accordance
with Section 21-25, subsection (a) and Section 21-83, subsection (a), together with
interest as provided under Sections 21-84 and 21-85, as applicable, until such time as
the tax deficiency together with the accrued penalties and interest, are satisfied.
In the case of business license taxes which are assessed and payable on a monthly
basis, an identical procedure shall be applied by the collector. Provided, however, that
the provisions of Section 21-25 shall not apply.
Provided howeveF that Except business license taxes which are assessed and
payable on a monthly basis, where any person voluntarily reports a tax deficiency on
business license taxes which are assessed and payable on an annual basis such
person's penalty and interest assessment on said deficiency shall be abated until the
combined amount of tax, penalty and interest due is equalized to an amount
equivalent to the amount of current and prior years' taxes owing as computed or
determined based upon the business license tax rates and charges in effect for the
most current tax year. In computing the abatement of accrued penalties and interest to
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arrive at a combined amount of tax, penalty and interest equivalent to the amount of
the current or prior years' taxes owing as computed or determined based upon the
business license tax rates in effect for the most current tax year the collector in his or
her discretion may retain a sufficient amount of accrued penalty alone, or a sufficient
amount of accrued interest alone, or any sufficient combination of accrued penalty
amount and accrued interest amount necessary.
Whenever the result of any audit performed pursuant to this Chapter, excluding
audits performed in connection with any medicinal cannabis business or commercial
cannabis business, determines that any licensee has, exclusive of penalties and
interest, underpaid the amount of their business license tax by five (5) per cent or
more of the total amount due, but not less than two hundred fifty dollars ($250.00),
then an audit service fee in an amount as specified by resolution of the City Council
shall be applied.
In the case of audits performed pursuant to this Chapter in connection with any
medicinal cannabis business or commercial cannabis business that has, exclusive of
penalties and interest, underpaid the amount of their business license tax by five (5)
per cent or more of the total amount due, but not less than five thousand dollars
($5.000.00), then such cannabis business shall be responsible for the City's actual
cost of performing said audit.
Section 13. Section 21-86 of Article VII of Chapter 21 of the Santa Ana
Municipal Code is hereby amended to read in full as follows:
Sec. 21-86. - Same —Suspension and revocation of business license.
The collector shall suspend and/or revoke any business license issued or
granted pursuant to this Chapter only upon those grounds set forth in Sections 21-45,
21-50, 21-55, 21-58, 21-59, 21-60, 21-80, 21-136 or upon conditions set forth in any
written agreement executed pursuant to Section 21-83.
Provided further, that unless revocation is made upon conditions set forth in a
written agreement executed pursuant to Section 21-83 or upon licensee's failure to
comply with the requirements of Section 21-136, no licensee's business license shall be
suspended and/or revoked for failure to pay the— annual business license tax as set
forth in this Chapter, or any monthly business license tax as set forth in Article XII or
Article XIII of this Chapter, or any other amount due pursuant to this Chapter until the
penalties accruing for such failure to pay, exclusive of interest, equal GRe huRdFed (+nm
per Gent of the business I;c..Rse tax due feF suoh lice..se have attained the maximum
applicable amount permissible under the terms of this Chapter. Whereupon, the
collector shall give a notice of suspension, which notice shall specify the grounds for
suspension, and which notice shall be given by personal service or by depositing it in
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the United States post office in the city, postage prepaid, addressed to the licensee at
the address listed on the application of the licensee where he or she consented to
receive mail concerning his or her license, to obtain a license or to pay any license tax
due or the address listed on the most recent business license renewal affidavit or
business license amendment statement; and/or conspicuously posting said notice upon
the premises of the business. Service of notice shall be deemed completed upon the
date of personal service of said notice, or the date of mailing of said notice, or the date
of actual posting of said notice on the premises of the licensee whichever occurs first.
In the event said licensee fails, within a period of thirty (30) days-_ays, notice, to
pay the business license tax due or any other amount due pursuant to this Chapter, or
to request a hearing the procedure for which shall be as provided in Section 21-41, then
and in that event the collector shall give a notice of revocation. The licensee shall be
given at least ten (10) days —days' notice, which notice shall specify the grounds for
revocation, and which notice shall be given pursuant to the hereinabove set forth
procedure for giving notice.
In the event said licensee fails within the allotted ten (10) day period to request a
hearing to show cause why his or her business license should not be revoked, then and
in that event the collector shall revoke said person's license and give notice thereof to
said person pursuant to the hereinabove set forth procedure for giving notice.
In the event said licensee fails to file within ten (10) days thereafter, an appeal
pursuant to Chapter 3 of this Code, then the collector's action in revoking said person's
business license shall be conclusive as to all matters involved, and the transacting and
carrying on by any person of any business pursuant to said license shall thereafter be
deemed a misdemeanor.
Section 14. Severability. If any section, subsection, sentence, clause, phrase or
portion of this ordinance is for any reason held to be invalid or unconstitutional by the
decision of any court of competent jurisdiction, such decision shall not affect the validity
of the remaining portions of this ordinance. The City Council of the City of Santa Ana
hereby declares that it would have adopted this ordinance and each section,
subsection, sentence, clause, phrase or portion thereof irrespective of the fact that any
one or more sections, subsections, sentences, clauses, phrases, or portions be
declared invalid or unconstitutional.
Section 15. Effective Date. This Ordinance shall be effective thirty days after its
adoption by the City Council of the City of Santa Ana.
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ADOPTED this day of , 2019.
Miguel A. Pulido
Mayor
APPROVED AS TO FORM
Sonia R. Carvalho, City Attorney
By:
Lisa Storck
Assistant City Attorney
AYES:
Councilmembers:
NOES:
Councilmembers:
ABSTAIN:
Councilmembers:
NOT PRESENT:
Councilmembers:
CERTIFICATE OF ATTESTATION AND ORIGINALITY
I, NORMA MITRE, Acting Clerk of the Council, do hereby attest to and certify that
the attached Ordinance No. NS- to be the original ordinance adopted by
the City Council of the City of Santa Ana on , and that
said ordinance was published in accordance with the Charter of the City of Santa
Ana.
Date:
Acting Clerk of the Council
City of Santa Ana
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EXHIBIT 2
LS 7.16.19
ORDINANCE NO. NS-XXXX
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
SANTA ANA AMENDING CERTAIN SECTIONS OF ARTICLE XIII
OF CHAPTER 18 OF THE SANTA ANA MUNICIPAL CODE
PERTAINING TO MEDICINAL MARIJUANA AND CHAPTER 40
OF THE MUNICIPAL CODE PERTAING TO COMMERCIAL
CANNABIS TO UPDATE AND STREAMLINE IMPLEMENTATION
OF COMMERCIAL CANNABIS, INCLUDING MEDICINAL
CANNABIS PURCHASING AGE (SECTION 18-613), EMPLOYEE
BADGES (SECTIONS 18-613 AND 40-8), MANUFACTURING
PERMIT REQUIREMENTS (SECTION 40-8), AND
ADMINISTRATION AND IMPLEMENTATION AMENDMENTS
(SECTIONS 18-617.5, 40-1, 40-2, 40-5, 40-8, 40-9.1, AND 40-10)
THE CITY COUNCIL OF THE CITY OF SANTA ANA HEREBY ORDAINS AS
FOLLOWS:
Section 1. The City Council of the City of Santa Ana hereby finds, determines
and declares as follows:
A. On November 4, 2014, Santa Ana voters approved Santa Ana's Medical
Marijuana Regulatory Program ordinance ("Measure BB") which was codified in Chapters 18
and 21 of the Santa Ana Municipal Code. Such regulations govern medicinal marijuana and
the retail sale thereof.
B. In 2015, the Governor signed into law Senate Bill 643, Assembly Bill 266, and
Assembly Bill 243, collectively referred to as the Medical Marijuana Regulation and Safety
Act further amended in 2016 as the Medical Cannabis Regulation and Safety Act which
established regulations and a state licensing system for medical cannabis cultivation,
manufacturing, delivery, and dispensing.
C. In November 2016, the voters of the State of California approved Proposition 64,
the California Marijuana Legalization Initiative, also known as the Adult Use of Marijuana
Act.
D. In 2017, the Governor signed into law Senate Bill 94 also known as Medicinal
and Adult -Use Cannabis Regulation and Safety Act.
E. On November 9, 2017, the City Council created Chapter 40 of the Santa Ana
Municipal Code, allowing adult -use commercial cannabis retail businesses in the city, and
amended certain sections of Chapters 18 and 21 of the Santa Ana Municipal Code to ensure
consistency with State law and Chapter 40.
F. Since November 2014, the City of Santa Ana has permitted the retail sale of
cannabis for medicinal purposes and since January 2018 for adult -use purposes. On March
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20, 2018, the City Council adopted Ordinance NS-2941 and NS-2942, allowing and
regulating commercial cannabis testing laboratories.
G. On April 17, 2018, the City Council adopted Ordinance NS-2944 allowing and
regulating commercial cannabis cultivation, distribution, and manufacturing activities.
H. On November 6, 2018, the voters of the City of Santa Ana approved Measure Y
(Ordinance NS-2962), establishing a tax on commercial cannabis business activities except
medicinal cannabis retail sales, which continue to be subject to taxes under Measure BB.
I. The State of California continues to update its regulations on commercial cannabis
business licensing, resulting in the need for local jurisdictions to update and amend local
commercial cannabis ordinances from time to time.
J. The City Council of the City of Santa Ana intends that nothing in this article shall
be deemed to conflict with federal law as contained in the Controlled Substances Act, nor to
otherwise permit any activity that is prohibited under that Act or other applicable law.
K. The City of Santa Ana has a compelling interest in ensuring that cannabis is not
cultivated, manufactured or distributed in an illicit manner, in protecting the public health,
safety and welfare of its residents and businesses, in preserving the peace and quiet of the
neighborhoods in which these uses may operate, and in providing access of cannabis to
residents.
L. The City Council has held a duly noticed public hearing on July 16, 2019 in
connection with consideration and adoption of this ordinance.
Section 2. This Ordinance is adopted pursuant to the authority granted by the
California Constitution and State law, including but not limited to: Article IX, Section 7 of the
California Constitution, the Compassionate Use Act of 1996 (California Health and Safety Code
Section 11362.5), the Medical Marijuana Program (California Health and Safety Code Section
11362.7 at seq.), the Medical Marijuana Regulation and Safety Act (AB 266, AB 243, and SIB
643; hereafter "MMRSA"), the Adult Use of Marijuana Act (Proposition 64), and the Medical and
Adult Use Cannabis Regulation and Safety Act (SB 94; hereafter "MAUCRSA").
Section 3. Pursuant to the California Environmental Quality Act ("CEQA") and the
State CEQA Guidelines, the adoption of this ordinance is exempt from CEQA review pursuant to
California Code of Regulations section 15061(b)(3), which is applicable if it can be seen with
certainty that there is no possibility that the project may have a significant effect on the
environment. As a result, a Notice of Exemption will be filed upon the adoption of this
ordinance.
Section 4. All provisions of the Santa Ana Municipal Code which are repeated
herein are repeated solely in order to comply with the provisions of Section 418 of the
City Charter. Any such restatement of existing provisions of the Code is not intended,
nor shall it be interpreted, as constituting a new action or decision of the City Council,
but rather such provisions are repeated for tracking purposes only in conformance with
the Charter.
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Section 5. Section 18-613 of Article XIII of Chapter 18 of the Santa Ana
Municipal Code is hereby amended to read in full as follows:
Sec. 18-613. - Operating Standards.
(a) At all times the collective is open, a collective shall provide at least one (1) security
guard who is licensed, possesses a valid department of consumer affairs "security
guard card", and has a valid Santa Ana Business License. In the event that the
security guard is employed by an outside security guard company; such security
guard company shall maintain a valid Santa Ana Business License.
(b) The security guard and collective personnel shall monitor the site and the
immediate vicinity of the site to assure that patrons immediately leave the site and
not consume medical marijuana in the vicinity of the collective or on the property or
in the parking lot.
(c) Exterior signage shall comply with Article XI of Chapter 41. Interior signage or
advertising may not be visible from the exterior. Collectives and dispensaries must
comply with the advertising and marketing provisions of Business and Professions
Code §§ 26150-26155.
(d) No recommendations from a doctor for medical marijuana shall be issued on -site.
(e) There shall be no on -site sales of alcohol or tobacco products, and no on -site
consumption of food, alcohol, tobacco or marijuana by patrons.
(f) Hours of operation shall be limited to: 7:00 a.m. to 11:00 p.m. daily. No licensed
dispensary/collective shall be open to the public between the hours of 11:01 p.m.
and 6:59 a.m. of any day.
(g) The property shall provide an air treatment system with sufficient odor absorbing
ventilation and exhaust systems so that odor generated inside the location is not
detected outside the building, anywhere on adjacent property or public rights -of -
way, or within any other unit located within the same building as the collective if the
use only occupies a portion of a building.
(h) A collective shall only dispense medical marijuana to qualified patients and their
caregivers as defined by California Health and Safety Code § 11362.5 (Proposition
215). This shall include possession of an original valid doctor's recommendation,
not more than one (1) year old, for medical marijuana use by the patient.
(i) A collective shall notify patrons of the following both verbally and through posting
of a sign in a conspicuous location:
(1) Use of medical marijuana shall be limited to the patient identified on the
doctor's recommendation. Secondary sale, barter or distribution of medical
marijuana is a crime and can lead to arrest.
(2) That loitering on and around the collective site is prohibited by California
Penal Code § 647(e) and that patrons must immediately leave the site and not
consume medical marijuana in the vicinity of the collective or on the property or in
the parking lot.
(3) Forgery of medical documents is a felony crime.
(4) A warning that patrons may be subject to prosecution under federal
marijuana laws.
(5) That the use of medical marijuana may impair a person's ability to drive a
motor vehicle or operate machinery.
75A-39
Q) A collective shall not provide marijuana to any individual in an amount not
consistent with personal medical use.
(k) All agents, private security officers or other persons acting for or employed by a
collective shall display a laminated identification badge at least two (2) inches by
two (2) inches in size, issued by the sellestive Cam. The badge, at a minimum, shall
include the vellenPve's ".le'n IDUSIRessas" me and Heence rnbe. the
employee's first and last name, date of most recent Live Scan, expiration date of
Live Scan results after the one-year period, and a color photo of the employee that
shows the full front of the employee's face.
(1) No one under t%V�.. Rty GRe (21) eighteen (18) years of age shall be permitted to
enter establishment, unless such person is a qualified patient and is accompanied
by his or her primary caregiver, licensed attending physician, parent(s) or
documented legal guardian.
(m) A collective shall provide the name and phone number of an on -site staff person to
the police department and the code enforcement division of the planning and
building agency for notification if there are operational problems with the
establishment.
(n) Each collective owner, operator(s) and employees shall complete a criminal
background check and wear a visible photo ID at all times during operating hours.
Owners, operator(s), employees, managers or volunteers may not have been
convicted of, or pleaded guilty/no-contest to a felony or misdemeanor drug charge
within the past four (4) years; nor shall they be a person required to register as a
controlled substance offender pursuant to Health and Safety Code section 11590.
(o) Marijuana shall not be grown or cultivated at collective sites, except that cuttings of
the marijuana plant may be kept or maintained on -site for distribution to qualified
patients and primary caregivers as follows:
(1) The cuttings shall not be utilized by a collective as a source for the provision
of marijuana for consumption on -site, however, upon provision to a qualified
patient or primary caregiver, that person may use the cuttings to cultivate
marijuana plants off -site for their own use and they may also return marijuana from
the resulting mature plant for distribution by the collective.
(2) For the purposes of this paragraph, the term "cutting" shall mean a rootless
piece cut from a marijuana plant, which is no more than six (6) inches in length,
and which can be used to grow another plant in a different location.
(p) A collective shall comply with applicable provisions of the California Health and
Safety Code §§ 11362.5 through 11362.83, inclusive.
(q) If food is distributed, the collective shall comply with all relevant state laws and city
and/or county ordinances pertaining to the preparation, distribution and sale of
food.
(r) The location, interior and exterior, shall be monitored at all times by web -based
closed-circuit television for security purposes. The camera and recording system
must be of adequate quality, color rendition and resolution to allow the ready
identification of any individual committing a crime anywhere on or adjacent to the
location. The recordings shall be maintained for a period of not less than ninety
(90) days. The police department may request the recordings in connection with an
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investigation. If the recordings are not voluntarily provided, the police department
may seek a warrant or court order for the recordings.
(s) The location shall have a centrally -monitored fire and burglar alarm system which
shall include all perimeter entry points and perimeter windows and the building or
the portion of the building where the collective is located shall contain a fire -proof
safe or fire -proof filing cabinet and include a safety and security plan.
(t) Reserved.
(u) Reserved.
(v) If the collective operator is not the owner of the property where the collective is to
operate, the operator shall provide evidence that the property owner(s) consent to
the operation of a collective on the property.
(w) Collectives must obtain and maintain a valid city business license at all times as a
condition for receiving, renewing, and maintaining their regulatory safety permit.
(x) Occupancy shall not exceed that required under the Uniform Building Code and
Uniform Fire Code, and the maximum occupancy load shall be posted at the main
entrance.
Section 6. Section 18-617.5 of Article XIII of Chapter 18 of the Santa Ana
Municipal Code is hereby amended to read in full as follows:
Sec. 18-617.5. -Audits.
Annual audits. No later than lone 30 September 30th of every year, each collective shall
file with the city an audit or financial review of its operations of the previous calendar
year. The form and contents of the document shall be specified by the executive
director of finance and management services, or his/her designee(s).
Section 7. Section 40-1 of Article I of Chapter 40 of the Santa Ana Municipal
Code is hereby amended to read in full as follows:
Sec. 40-1. — Purpose and intent.
A. The purpose and intent of this article is to regulate commercial cannabis business
activities, as defined in this article, in order to ensure the health, safety and welfare of
the residents of the City of Santa Ana by establishing regulations necessary for
commercial cannabis business operating in the City of Santa Ana to obtain and maintain
a Regulatory Safety Permit ("RSP"). Any commercial cannabis businesses operating in
the City of Santa Ana shall at all times be in compliance with current State Law and this
article. All commercial cannabis facilities shall operate in accordance with the
regulations in this article and with the conditions of approval associated with the
applicable zone for the parcel of real property upon which the commercial cannabis
activities are conducted. Any commercial cannabis business shall qualify for and
receive a Regulatory Safety Permit from the City of Santa Ana as provided by this
article and operate only in a zone in compliance with Santa Ana Municipal Code before
commencing with any commercial cannabis business activity. Any commercial cannabis
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75A-41
business without a Regulatory Safety Permit is in violation of this article. The regulations
in this article, in compliance with the Compassionate Use Act, the Medicinal Marijuana
Program Act, SB 94, AB 133, Proposition 64, and the California Health and Safety Code
(collectively referred to as "State Law") do not interfere with the right to use adult -use
cannabis or medicinal cannabis as authorized under State Law, nor do they criminalize
the possession of cannabis as authorized under State Law.
B. Any person operating a medicinal marijuana collective/cooperative (as defined in
Chapter 18 of this Code) as of December 14, 2017, or who has a RSP application
pending to operate a medicinal collective/cooperative, and has met all of the
requirements of Chapter 18, shall be allowed to apply for a Regulatory Safety Permit for
the sale of Adult -Use cannabis provided that they enter into the Adult 11se Commercial
Cannabis Retailef Operating Agreement with the City.
C. The Commercial Cannabis Operating Agreement shall be a legally binding written
agreement between each commercial cannabis business operator and the City,
executed by the City Manager, or his or her designee, and in a form and substance
satisfactory to the Executive Director of Planning and Building and the City Attorney,
and containing those provisions necessary to ensure that the requirements of this article
are satisfied. A distinct Commercial Cannabis Operating Agreement shall be required
for each location aad-type of commercial cannabis business activity taking place at an
approved Commercial Cannabis Business.
Section 8. Section 40-2 of Article I of Chapter 40 of the Santa Ana Municipal
Code is hereby amended to read in full as follows:
Sec. 40-2. - Definitions.
The definitions are incorporated herein as fully set forth and are applicable to this
article. All definitions are intended to comply with those set forth by the State of
California for all commercial cannabis business activities.
1. "Applicant' means a person who is required to file an application for a permit under
this article, including an individual owner, managing partner, officer of a corporation, or
any other operator, manager, employee, or agent of a commercial cannabis business.
2. "Adult -Use" means cannabis or cannabis products that are intended to be used for
non -medicinal purposes by a person twenty-one (21) years of age or older.
3. "Adult -Use Cannabis Retailer Operating Agreement' or "Operating Agreement'
means the agreement entered into by and between the City and the commercial
cannabis business operator which will specify terms for local hiring and sourcing,
community benefit plans, and fees to compensate for authorized impacts on City
services.
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75A-42
4. "Adult -Use cannabis retail business" means an Adult -Use retail business that
obtains a Regulatory Safety Permit and engages in the delivery or sale of Adult -Use
cannabis, or an Adult -Use cannabis product, except as related Business and
Professions Code Section 19319, or Health and Safety Code Sections 11362.1 through
11362.45, as amended from time to time, excepting medicinal cannabis retail.
5. "Authorized City of Santa Ana representative" means any police officer, city
employee, contractor or agent of the city designated by the director of any city
department which has the authority and responsibility to enforce provisions as set forth
in this article.
6. 'Business owner" means any of the following:
a. A person with an aggregate ownership interest of twenty (20) percent or more in
the person applying for a license or a licensee, unless the interest is solely a security,
lien, or encumbrance.
b. The chief executive officer of a nonprofit or other entity.
c. A member of the board of directors of a nonprofit.
d. An individual who will be participating in the direction, control, or management of
the person applying for a license.
7. "Cannabis" or "cannabis product' means all parts of the Cannabis sativa Linnaeus,
Cannabis Indica, or Cannabis Ruderalis, whether growing or not; the seeds thereof; the
resin, whether crude or purified, extracted from any part of the plant; and every
compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds,
or resin. "Cannabis" also means the separated resin, whether crude or purified,
obtained from marijuana. "Cannabis" also means marijuana as defined by Section
11018 of the California Health and Safety Code as enacted by Chapter 14017 of the
Statutes of 1972. "Cannabis" does not include the mature stalks of the plant, fiber
produced from the stalks, oil or cake made from the seeds of the plant, any other
compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks
(except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of the
plant which is incapable of germination. For the purpose of this chapter, "cannabis"
does not mean industrial hemp as that term is defined by Section 81000 of the
California Food and Agricultural Code or Section 11018.5 of the California Health and
Safety Code.
8. "City" means the City of Santa Ana, a charter city and municipal corporation.
9. "Commercial cannabis activity" means the cultivation, possession, manufacture,
distribution, processing, storing, laboratory testing, packaging, labeling, transportation,
delivery or sale of cannabis and cannabis products as provided for this Chapter.
Permitted commercial cannabis activities are listed in Land Use Table 40-5 of this
Chapter.
75A-43
10. "Commercial cannabis business" means a business that obtains a Regulatory
Safety Permit and engages in the cultivation, possession, manufacture, processing,
storing, laboratory testing, labeling, distribution, delivery, or sale of adult -use cannabis,
medicinal cannabis or an adult -use cannabis or medicinal cannabis product, except as
related Business and Professions Code Section 19319, or Health and Safety Code
Sections 11362.1 through 11362.45, as amended from time to time.
11. "Cultivation" means to plant, grow, harvest, dry, cure, grade or trim cannabis, as
defined by California Business and Professional Code Section 26001, as amended from
time to time.
12. "Customer" means a natural person twenty-one (21) years of age or over.
13. "Delivery" means the commercial transfer of cannabis or cannabis products from
a retail cannabis business to a customer up to an amount determined to be authorized
by the State of California, or any of its departments or divisions. "Delivery" also includes
the use by a retail cannabis business of any technology platform owned, controlled,
and/ or licensed by the retail cannabis business, or independently licensed by the State
of California under the State law (as amended from time to time), that enables anyone
to arrange for or facilitate the commercial transfer by a licensed retail cannabis business
of cannabis or cannabis products. For the purposes of this article, "delivery" does not
include distribution or purchase of cannabis from a licensed cultivator, and cannabis
products from a licensed manufacturer, for sale to a licensed cannabis retail business.
14. "Delivery employee" means an individual employed by a licensed retail cannabis
business who delivers cannabis goods from the permitted retail premises to a customer
at a physical address.
15. "Display" means cannabis goods that are stored in the licensed retail business
during the hours of operation.
16. "Distribution" means the procurement, sale, and transport of cannabis or cannabis
products between Licensees.
17. "Edible cannabis product' means manufactured cannabis that is intended to be
used, in whole or in part, for consumption. An edible cannabis product is not considered
food as defined by Section 109935 of the California Health and Safety Code or a drug
as defined by Section 109925 of the California Health and Safety Code.
18. "Free sample" means any amount of commercial cannabis goods provided to a
purchaser of cannabis without cost or payment or exchange of any other thing of value.
19. "Labor Peace Agreement' means a legally binding agreement between an
employer and a labor organization in which the employer agrees to remain neutral in the
event its employees wish to unionize, as described more fully in Business and
Professions Code 26001(x), as amended from time to time.
75A-44
20. "License/Licensee" means a license issued by the State and includes both an A -
license (Adult -Use) and an M-license (Medicinal), and the holder of such license.
21. "Manufacturer" means a Licensee that conducts the production, preparation,
propagation, or compounding of cannabis or cannabis products either directly or
indirectly or by extraction methods, or independently by means of chemical synthesis, or
by a combination of extraction and chemical synthesis at a fixed location that packages
or repackages cannabis or cannabis products or labels or relabels its container.
22. "Manufacturing" means all aspects of the extraction and/or infusion processes,
including processing, preparing, holding, storing, packaging, or labeling of cannabis
products. Manufacturing also includes any processing, preparing, propagating, holding,
or storing of components and ingredients.
23. "Medicinal cannabis patient" is a person whose physician has recommended the
use of cannabis to treat a serious illness, including cancer, anorexia, AIDS, chronic
pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which cannabis
provides relief.
24. "Micro -Business" means a commercial cannabis business that cultivates cannabis
on an area less than ten thousand (10,000) square feet and acts as a licensed
distributor, Level 1 manufacturer, and retailer.
2225. cnlvnnt" m any selye Rt used in the extrRAtinn n c that is nn4
inlatiln nlvnnf Cnr purposes of this ehapteF a R9R .nlatile nnlvnnV innl .dn� n..rh..n
d iaxide used- fer extr..nf'n s '4 Fn y be defined and amended by the State
256. "Nursery' means a commercial cannabis Licensee that produces only clones,
immature plants, seeds, and other agricultural products used specifically for the
planting, propagation, and cultivation of cannabis.
267. "Medicinal/medical cannabis" or "Medicinal cannabis product", means cannabis
or a product containing cannabis, including, but not limited to, concentrates, and
extractions, intended to be sold for use by medicinal cannabis patients in California
pursuant to the Compassionate Use Act of 1996, found at Section 11362.5 of the
California Health and Safety Code. Medicinal cannabis retail is regulated by Chapter 18
and Chapter 21 of the Santa Ana Municipal Code.
276. "Outdoor cultivation" means the cultivation of cannabis outside a permanent
enclosed building. Outdoor cultivation is prohibited within the City of Santa Ana.
289. "Ownership interest" means an interest held by a person who is an owner as
defined by State of California commercial cannabis regulations or who has a financial
interest in the commercial cannabis business of twenty (20) percent or more.
29.30. "Package" and "Packaging" means any container or wrapper that may be used
for enclosing or containing any cannabis goods for final retail sale. "Package" and
0
75A-45
"packaging" does not include a shipping container or outer wrapping used solely for the
transport of cannabis goods in bulk quantity to a Licensee.
304. "Person" includes any individual, firm, partnership, joint venture, association,
corporation, limited liability company, estate, trust, business trust, receiver, syndicate, or
any other group or combination acting as a unit, and the plural as well as the singular.
312. "Premises" means the designated structure(s) and land specified in the
application that are in possession of and used by the applicant or Licensee to conduct
the commercial cannabis activity.
323. "Primary Caregiver" has the same meaning as that term is defined in Section
11362.7 of the Health and Safety Code, as amended from time to time.
334. "Private Residence" shall have the same definition as that contained in Health
and Safety Code section 11362.2(5) and also means a lawfully established structure,
suitable for human occupancy as required by section 17922 and 17958 of the California
Health and Safety Code. A recreational vehicle does not constitute a lawfully
established structure for the purposes of this article.
345. "Private security officer" has the same meaning as that term as defined in the
State of California Business and Professions Code section 7574.01.
356. "Purchase" means obtaining cannabis goods in exchange for consideration.
367-. "Purchaser" means a person who is engaged in a transaction with a Licensee for
purposes of obtaining cannabis goods.
373. "Qualified patient" has the same meaning as such term is defined in California
Health and Safety Code section 11362.5, as amended from time to time, and means a
person whose physician has recommended the use of cannabis to treat a serious
illness, including cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis,
migraine, or any other illness for which cannabis provides relief.
386. "Responsible person" means any of the following:
a) A person who causes a Code violation to occur.
b) A person who maintains or allows a Code violation to continue by way of his or her
action or failure to act.
c) A person whose agent, employee, or independent contractor causes a Code
violation by its failure to act.
d) A person who is the owner of, and/or a person who is a lessee or sub lessee with
the current right of possession of, real property where property -related Code violation
occurs.
e) A person who is the on -site manager of a business who normally works daily at the
site when the business is open and is responsible for the activities of such premises.
io
75A-46
3940. "Retail business" means a premises where cannabis, cannabis products, or
devices for the use of cannabis or cannabis products are offered, either individually or in
any combination for retail sale, including an establishment that delivers cannabis or
cannabis products as part of a retail sale.
404-. "Regulatory Safety Permit (RSP)" means a permit issued by the City pursuant to
this article to a commercial cannabis business.
412. "Sell," "sale," and "to sell" include any transaction whereby, for any
consideration, title to cannabis is transferred from one (1) person to another, and
includes the delivery of cannabis goods pursuant to an order placed for the purchase of
the same and soliciting or receiving an order for the same, but does not include the
return of cannabis goods by a Licensee to the Licensee from whom such cannabis
goods were purchased.
423. "State" means the State of California.
434. "Testing Facility" or "Testing Laboratory" defined in the Business and
Professions Code section 26001, as amended from time to time, means a laboratory,
facility, or entity in the State that offers or performs tests of cannabis or cannabis
products and that is both of the following:
a) Accredited by an accrediting body that is independent from all other persons
involved in commercial cannabis activity in the State; and,
b) Licensed by the Bureau of Cannabis Control.
45. "Volatile s_l.y _.V .. __.- _.v solvent that Is _. r-_d____ _Fl __m_mnhle gas nr,ann
,
that, wheR present 'R the air in SUffiGient qyaRtitie6, Will GFeate explosive or OgRitable
ixtures Examples of volatile cnlvendo 'nnl. de but -wre and limited to, butane hn.e
gnd pFepaRe, and edhaRol n as it may he defined and amended by the State
446. "Wholesale" means the sale of cannabis goods to a distributor for resale to one
(1) or more retail cannabis businesses.
Section 9. Section 40-5 of Article I of Chapter 40 of the Santa Ana Municipal
Code is hereby amended to read in full as follows:
Sec. 40-5. - Zoning compliance and regulatory safety permit requirements.
Commercial cannabis activities are expressly prohibited in all zones in the City of Santa
Ana; however, specific commercial cannabis businesses are allowed as a speGial use in
the Industrial iEeae zoning districts (M-1, M-2). The allowed current permit types are
described in Table 40-5 and the City of Santa Ana's zoning ordinance as a requisite for
obtaining a Regulatory Safety Permit. No commercial cannabis business may operate in
the City of Santa Ana without a Regulatory Safety Permit.
11
75A-47
This Land Use Table 40-5 shall be used to determine whether a commercial cannabis
business is permitted — "P", or not permitted — "X". Any commercial cannabis business
in the City of Santa Ana shall also operate in compliance with the City's zoning
ordinance. If a Zoning District is not listed in the Land Use Table in this section then the
use is expressly not permitted.
City of Santa Ana Municipal Code Table 40-5
Commercial
Cannabis
Regulatory
Business
Land Use
M-1
M-2
Safety
Activities Use
Classification
Zone
Zone
Permit
Type
Required
Cultivator/Nursery
Indoor only
P
P
Yes
Cultivator/Nursery
Outdoor or mixed-
X
X
NA
light
Indoor/Outdoor —
Type D 5 (Large
Cultivator/Nursery
Grows, as defined
X
X
NA
and amended by
the State
Manufacturing
Manufacturing
P
P
Yes
Medicinal Retail
Retail
(SAMC Chapter
P
P
Yes
18)
Retail
Adult -Use Retail
P
P
Yes
Adult -Use and/or
Testing Laboratory
Medicinal
P
P
Yes
Industrial
Distribution
Freight/Transport
P
P
Yes
12
75A-48
X P — only as
X P — only as Part
part of a
vertically-
of a vertically-
Micro -Business
Cultivation/Retail/
A M1aau#aetare/Manu
— ng
/Distri
fIstribution
integrated/co-
located business
in full
integrated/co -
located
business in full
NAYes
conformance with
conformance
with the
the requirements
of this article and
requirements of
Chapter 18.
this article and
Chapter 18.
...
cr.T.rri rrr� smta+r��Tnrsrr
...
LIQ
Section 10. Section 40-8 of Article I of Chapter 40 of the Santa Ana Municipal
Code is hereby amended to read in full as follows:
Sec. 40-8. - General provisions for commercial cannabis activities in the City of Santa
Ana.
Regulatory Safety Permit Required.
a. Each commercial cannabis business shall obtain a Regulatory Safety Permit
(RSP) specific to the business activity or activities defined by the State pertaining
to that activity. The only allowed current permit activity types pursuant to this
article are for commercial cannabis retail sales and cultivation, distribution,
manufacturing, and testing laboratories/facilities. Co -location is permitted
pursuant to Section 40-9.3.1.
b. It shall be unlawful for any person, as defined by this ordinance, to engage
in, conduct or carry on, in or upon any premises within the City of Santa Ana any
commercial cannabis business without a RSP. A commercial cannabis business
shall register and obtain a RSP from the City of Santa Ana prior to operation. The
RSP applicant shall pay an annual non-refundable application fee in an amount
established by the City Council.
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75A-49
c. A copy of the RSP shall be displayed at all times in a place visible to the
public.
d. A RSP shall be valid for a period of one (1) year from the date of issuance,
unless sooner revoked. No permit granted herein shall confer any vested right to
any person or business for more than the above -referenced period.
2. Maintenance of Records and Reporting. All records shall be maintained by the
commercial cannabis business for a period of five (5) years and shall be made available
by the commercial cannabis business to an authorized City of Santa Ana representative
upon request. If they are not produced as requested, the City may seek a search
warrant, subpoena, or court order. In addition to all other formats that the commercial
cannabis business may maintain, these records shall be stored by the business at the
location in a printed format in a fire -proof safe or filing cabinet. Any loss, damage or
destruction of the records shall be reported to the Police Department within twenty-four
(24) hours of the loss, destruction or damage.
a. The business shall obtain and maintain a valid Seller's Permit from the State
Board of Equalization.
b. Financial records include, but are not limited to: bank statements, sales
invoices, receipts, tax records, and all records required by the California State
Board of Equalization under Title 18 California Code of Regulations section 1968.
C. Personnel records, including each employee's full name, address, phone
number, social security, or individual tax payer identification number, date of
beginning employment, and date of termination of employment if applicable.
d. Training records, including, but not limited to, the content of the training
provided and the names of the employees that received the training.
e. Contracts with other businesses regarding commercial cannabis business
activity.
f. Permits, licenses, and other local authorizations to conduct the commercial
cannabis business activity.
g. Security records, as outlined in the Operational Standards for All
Commercial Cannabis Business Activities.
h. Proof of building ownership or landlord letter acknowledging business type.
i. Proof of insurance.
3. Operational Standards for All Commercial Cannabis Business Activities.
a. The location, interior and exterior, shall be monitored at all times by web -
based closed circuit television for security purposes. The camera and recording
system must be of adequate quality, color rendition and resolution to allow the
14
75A-50
ready identification of any individual committing a crime anywhere on or adjacent
to the location. The recordings shall be maintained unaltered in a secure location
for a period of not less than ninety (90) days. The Police Department may
request the recordings in connection with an investigation.
b. All controlled access areas, security rooms and all points of ingress/egress
to limited access areas and all point of sale (POS) areas shall have fixed camera
coverage capable of identifying activity occurring within a minimum of twenty (20)
feet.
c. The surveillance system storage device or cameras shall be transmission
control protocol TCP capable of being accessed through the internet by the
police department or their designee on request.
d. If applicable, the applicant shall conduct and pay for any required CEQA
reviews and analyses, and pay for all costs, including those of the City,
associated with project review under CEQA.
e. Commercial cannabis businesses shall create and maintain an active
account within the State's track and trace system prior to commencing any
commercial cannabis retail activity. In the event of system failure, the business
shall keep a hard copy record and transfer the information to the track and trace
system within twenty-four (24) hours of the system being available.
f. No physical modification of the licensed premises is allowed without written
prior permission by the City of Santa Ana and payment of any additional fees
required by the City.
g. Commercial cannabis business businesses shall provide adequate off-street
parking and comply with the City of Santa Ana Municipal Code parking
requirements in order to service customers without causing negative impact.
h. The commercial cannabis business shall provide adequate disabled access
parking per the requirements in the California Building Code.
i. The commercial cannabis business shall minimize nuisances such as trash,
litter, and graffiti.
j. Any and all signage, packaging, and facilities shall not be "attractive", as it is
defined by the State, to minors.
k. Commercial cannabis business facilities shall be required to provide an air
treatment system that ensures off -site odors shall not result from its operations.
This requirement at a minimum means that the facility shall be designed to
provide sufficient odor absorbing ventilation and exhaust systems so that any
odor generated inside the location is not detected outside the building, in any
adjacent tenant suites, on adjacent properties or public rights -of -way, or within
15
75A-51
any other unit located within the same building as the facility if the use occupies
only a portion of a building.
I. The commercial cannabis business shall comply with all State regulations
regarding:
i. Testing, labeling and storage of all cannabis products.
ii. Use of appropriate weighing devices.
iii. Electrical and plumbing regulations subject to periodic and
unannounced inspections to ensure compliance.
iv. State deadlines for applying for a State license and receiving a State
license within six (6) months after the date the State begins issuing
licenses. This may be waived if the State has longer delays in issuing
licenses of the type the commercial cannabis business seeks.
m. The commercial cannabis business shall maintain a comprehensive general
liability combined single occurrence insurance policy issued by an "A" rated
insurance carrier in an amount no less than two million dollars ($2,000,000.00),
with primary coverage, naming the City of Santa Ana as additional insured.
n. No free samples of any cannabis or cannabis product may be distributed at
any time.
o. All agents, private security officers or other persons acting for or employed
by a collective shall display a laminated identification badge at least two (2)
inches by two (2) inches in size, issued by the seNeeiive City. The badge, at a
minimum, shall include the "
aver; the employee's first and last name, date of most recent Live Scan,
expiration date of Live Scan results after the one-year period, and a color photo
of the employee that shows the full front of the employee's face.
p. All private security officers acting for or employed by a commercial cannabis
business shall be licensed by the State and issued a business license from the
City of Santa Ana.
q. The commercial cannabis business shall have a centrally -monitored fire and
burglar alarm system which shall include all perimeter entry points and perimeter
windows and the building or portion of the building where the business is located
shall contain a fire -proof safe or fire proof filing cabinet and include a safety and
security plan.
r. The commercial cannabis business shall ensure a licensed alarm company
operator or one (1) or more of its registered alarm agents installs, maintains,
monitors and responds to the alarm system. The alarm company shall obtain a
City of Santa Ana business license.
16
75A-52
S. The commercial cannabis business shall provide the name and phone
number of an on -site staff person to the police department and the Code
Enforcement Division of the Planning and Building Agency for notification if there
are operational problems with the establishment.
t. The commercial cannabis business must obtain and maintain a valid City
business license at all times as a condition for receiving, renewing, and
maintaining its regulatory safety permit.
u. Occupancy shall not exceed that required under the Uniform Building Code
and Uniform Fire Code, and the maximum occupancy load shall be posted at the
main entrance.
v. For any commercial cannabis business with two (2) or more employees, the
business owner shall attest that he/she has entered into a labor peace
agreement and provide a copy of the agreement to the City.
w. Each commercial cannabis business owner, operator(s) and employee(s)
shall complete a criminal background check and wear a visible photo ID at all
times during working hours. Owners, operators, employees, managers or
volunteers may not have been convicted of, or pled guilty/no-contest to a felony
or misdemeanor drug charge within the past four (4) years; nor shall they be a
person required to register as a controlled substance offender pursuant to Health
and Safety Code section 11590.
x. All signage for the commercial cannabis business must comply with Article
XI of Chapter 41 of the Santa Ana Municipal Code.
y. Inspections by an authorized City of Santa Ana representative may be
conducted anytime during the business's regular business hours.
4. Additional Operational Standards for Adult -Use Cannabis Retail Business.
a. At all times the Adult -Use cannabis retail business is open, it shall provide at
least one (1) private security guard who is licensed, possesses a valid
Department of Consumer Affairs "security guard card", and has a valid business
license from the City of Santa Ana.
b. The private security guard and adult -use retail cannabis business personnel
shall monitor the site and the immediate vicinity of the site to ensure that patrons
immediately leave the site and do not consume cannabis in the vicinity of the
retail business or on the property or in the parking lot.
c. Exterior signage shall comply with Article XI of Chapter 41 of the Santa Ana
Municipal Code. Interior signage or advertising may not be visible from the
exterior. Retail cannabis businesses must comply with the advertising and
marketing provisions of Business and Professions Code §§ 26150-26155.
v
75A-53
d. There shall be no on -site sales of alcohol or tobacco products, (excluding
rolling papers and lighters) and no on -site consumption of food, alcohol or
tobacco by patrons.
e. Hours of operation shall be limited to: 7:00 a.m. to 10:00 p.m. daily. No
licensed retail business shall be open to the public between the hours of 10:01
p.m. and 6:59 a.m. of any day.
f. The Adult -Use cannabis retail business shall notify patrons of the following
both verbally and through posting of a sign in a conspicuous location:
i. Secondary sale, barter or distribution of adult -use cannabis is a crime
and can lead to arrest.
ii. That loitering on and around the retail site is prohibited by California
Penal Code § 647(e) and that patrons must immediately leave the site and
not consume cannabis in the vicinity of the retail site or on the property or
in the parking lot.
iii. A warning that patrons and/or employees may be subject to
prosecution under federal cannabis laws.
iv. That the use of cannabis may impair a person's ability to drive a
motor vehicle or operate machinery.
g. No one under the age of twenty-one (21) shall be allowed to enter an Adult -
Use cannabis facility unless the licensed Adult -Use cannabis facility holds a
medicinal use cannabis RSP issued by the City and retail license issued by the
State, and the licensed premises for the adult -use cannabis license and
medicinal cannabis license are the same in accordance with Business and
Professions Code section 26140.
h. If non -cannabis food is distributed, the retail business shall comply with all
relevant State laws, County and City ordinances pertaining to the preparation,
distribution and sale of food.
I. All Adult -Use cannabis retail businesses shall establish and implement a
program to incentivize the recycling of used containers. Failure to establish and
implement a program to incentivize the recycling of used containers will result in
a violation of the terms of the required commercial cannabis Operating
Agreement requiring sustainable building or business practices.
j. Adult -Use cannabis retail businesses shall also record on the video
surveillance system point -of -sale areas and areas where cannabis goods are
displayed for sale.
18
75A-54
k. Adequate signage shall clearly state who has inspected any cannabis
product for pesticides, or other regulated contaminants, distributed at this
location.
I. Shipments of cannabis goods may only be accepted during regular business
hours.
M. Inventory shall be secured using a lockable storage system during non -
business hours.
n. No cannabis product shall be visible from the exterior of the business.
o. All required labelling shall be maintained on all product, as required by State
law, at all times.
p. Educational tours of adult -use retail cannabis businesses shall be allowed.
q. A permitted commercial cannabis retail business shall have one hundred
eighty (180) days after permit issuance by the City of Santa Ana to operate. A
permitted commercial cannabis retail business that ceases to operate for more
than ninety (90) calendar days shall be deemed "abandoned" and the permit
shall be forfeited. A permitted commercial cannabis business may temporarily
suspend operations for a period of time as may be reasonably required to affect
upgrades, modifications, repairs, or other property issue mitigations as approved
by the Director of Planning and Building or his or her designee. For the purposes
of this section, "operate" shall mean that the gross receipts fees charged for the
business exceed the fee per square foot calculations by the end of the one
hundred eighty (180) day period.
5. Additional Operational Standards for Commercial Cannabis Retail Delivery
Services.
a. Commercial cannabis retail deliveries may be made only from a commercial
cannabis retail business permitted by the City in compliance with this article, and
in compliance with all State regulations.
b. All employees who deliver cannabis shall have valid identification and a
copy of the commercial cannabis retail business' Regulatory Safety Permit and
State license at all times while making deliveries.
c. All commercial cannabis retail businesses shall maintain proof of vehicle
insurance for any and all vehicles being used to transport cannabis goods as
required by State law.
d. Deliveries may only take place during normal business hours of the
commercial cannabis retail business.
e. During delivery, the delivery employee shall maintain a physical or electronic
copy of the delivery request and shall make it available upon request by the
iF]
75A-55
licensing authority and law enforcement officers. The delivery request
documentation shall comply with State law.
f. A licensed delivery employee shall not leave the State of California while
possessing cannabis products.
g. A commercial cannabis retail business shall maintain a list of all deliveries,
including the address delivered to, the amount and type of product delivered, and
any other information required by the State.
h. A manifest with all information required in this section shall accompany any
delivery person at all times during the delivery process and delivery hours.
i. Any delivery method shall be made in compliance with State law, as
amended, including use of a vehicle that has a dedicated GPS device for
identifying the location of the vehicle (cell phones and tablets are not sufficient).
j. Each delivery request shall have a receipt prepared by the commercial
cannabis retail business with the following information:
i. Name and address of the commercial cannabis retail business.
ii. The name of the employee who delivered the order.
iii. The date and time the delivery request was made.
iv. The complete delivery addresses.
v. A detailed description of the cannabis goods requested for delivery
including the weight or volume, or any accurate measure of the amount of
cannabis goods requested.
vi. The total amount paid for the delivery including any fees or taxes.
k. At the time of the delivery, the date and time delivery was made, and the
signature of the person who received the delivery.
I. No cannabis delivery vehicle shall display signs, decals or any other form of
advertisement with the exception of a maximum four -inch by four -inch decal.
M. Inspections by an authorized City of Santa Ana representative may be
conducted anytime during regular business hours.
6. Additional Operational Standards for Commercial Cannabis Testing Facilities or
Laboratories.
a. A licensed cannabis testing facility or laboratory business, its owners and
employees may not hold an interest in any other cannabis business except
another testing laboratory business.
20
75A-56
b. Inspections by an authorized City of Santa Ana representative may be
conducted anytime during the business's regular business hours.
c. Educational tours of cannabis testing facility/laboratory businesses shall be
allowed.
7. Additional Operational Standards for Commercial Cannabis Manufacturing
Facilities.
a. r 'el nannnhmct rn Uf.. tU:,..n faG l'd'es aFe prehibited f.em Us
ing
I d'I I d the f.. 4 9� s de ne_.d '.. the California Health
vrncm�^�oi4crn�n ., �..�� .. _ _ _
�afe1���o�(d) and fWther .defined n the Ga I;f9,v..w Health and
Saf fi Code § 11362 775(b)(1)(A) ..nod a enrderd fro,.., time fn_ time, _ nlec _
P-enrd'd' alusepermit (G ID) f volatilesolvents is V„' applied ,fete and ^n ende.d s en r
ba. A licensed commercial cannabis Ren- elatile manufacturing facility may
conduct all activities permitted by the State. This includes, but is not limited to:
nen-velatile extractions, repackaging and relabeling, infusions and extractions.
eb. Any manufacturing that will be conducted by the commercial cannabis
business shall be included on the application. No additional manufacturing
activity can be conducted without notifying the Executive Director of the Planning
and Building Agency or his or her designee, after which a determination will be
made if the new activity may commence with or without modification to the RSP
or if a new RSP is required.
dc. At all times, the commercial cannabis manufacturing facility will be
compliant with all State regulations for cannabis manufacturing including Health
and Safety Code § 11362.775, as amended from time to time. Signage shall be
posted regarding the type(s) of chemicals being used at the manufacturing
facility.
ed. Cannabis manufacturing facilities shall not contain an exhibition or product
sales area or allow for retail distribution of products at that location unless the
facility is co -located with an approved commercial cannabis retail business with a
RSP.
fe. Extraction equipment and extraction process utilizing hydrocarbon solvents
shall be located in a room or area dedicated to extraction.
gf. All commercial cannabis manufacturing/processing facilities shall comply
with any and all applicable safety guidelines adopted by the Orange County Fire
Authority, the State of California, and/or the City of Santa Ana for cannabis plant
processing and extraction.
8. Additional Operational Standards for Indoor Commercial Cannabis Cultivation
Facilities.
21
75A-57
a. There shall be no exterior evidence of cannabis cultivation from a public
right-of-way.
b. The Building Official may require additional specific standards to meet the
California Building Code and Fire Code, including but not limited to installation of
fire suppression sprinklers.
c. Compliance with Section 13149 of Water Code as enforced by the State
Water Resources Control Board is required.
d. All commercial cannabis cultivation facilities shall comply with any and all
applicable safety guidelines adopted by the Orange County Fire Authority, the
State of California, and/or the City of Santa Ana for cannabis carbon dioxide
enrichment systems.
e. Cannabis cultivation facilities shall not contain an exhibition or product sales
area or allow for retail distribution of products at that location unless the facility is
co -located with an approved commercial cannabis retail business with a RSP.
9. Additional Operational Standards for Commercial Cannabis Distribution Facilities.
a. Inspections by an authorized City of Santa Ana representative may be
conducted anytime during the business's regular business hours.
b. A distributor shall ensure that all cannabis goods stored in compliance with
all applicable State regulations to ensure conformance to any and all applicable
Track and Trace systems required by the State.
C. Employee breakrooms, eating areas, changing facilities, locker rooms and
bathrooms shall be completely separated from the storage areas.
Section 10. Sections 40-9 and 40-9.1 of Article I of Chapter 40 of the Santa Ana
Municipal Code are hereby amended to read in full as follows:
Sec. 40-9. - Commercial cannabis selection process.
1. Commercial Cannabis — Registration Application and Regulatory Safety Permit
Required.
a. Existing medicinal cannabis business operators, or those with pending
applications for a medicinal RSP, who desire to operate an adult cannabis retail
business shall apply for the cannabis Regulatory Safety Permit ("RSP") on or
before December 14, 2017. The Director of Planning and Building shall review
such application and issue the RSP, without consideration of the merit based
point system, so long as they satisfy all other requirements of this article and
Chapter 18.
b. The Regulatory Safety Permit ("RSP") selection process will be conducted in
two (2) phases, Phase 1 (Registration Application) and Phase 2 (Regulatory
zz
75A-58
Safety Permit Application). Registration Applications will be reviewed by the
Director of Planning and Building or designees(s) for completeness and
compliance, and if eligible, will be placed on the "Regulatory Safety Permit
("RSP") Eligibility List" and entered into the Phase 2 Regulatory Safety Permit
Application .process. In Phase 2, the City of Santa Ana has established a merit
based point system for commercial cannabis retail businesses to objectively
award permits as described in the Regulatory Safety Permit Application.
2. Phase 1— Registration Application.
Following the adoption of this article, the Director of Planning and Building shall
prepare commercial cannabis business registration application forms and a
related administrative policy. Each commercial cannabis business interested in
operating pursuant to this article may submit an application together with a non-
refundable processing fee in an amount established by the City Council.
The Registration Application period shall be thirty (30) calendar days from the
date the applications are released. Following the application period, the Director
of Planning and Building or designee(s) shall stop accepting applications and
review all applications received in Phase 1. Each application that is complete
and in compliance with the application requirements in Phase 1 shall be placed
on the "RSP Eligibility List" and shall be notified in writing whether they are a
"RSP Eligible Applicant" or not. Each applicant on the RSP Eligibility List may
then choose to file an application for a RSP in Phase 2.
c. The requirements for Phase 1 include, but are not limited to:
All application documents required in the City's Phase 1 Registration
Application package.
ii. Application was submitted during the application period.
iii. Application forms are filled out completely.
iv_v. Phase 1 application fee is paid.
W. A signed statement that the proposed location of the commercial
cannabis business on the application meets the zoning criteria established
in this article including, but not limited to, any and all sensitive use
separation criteria required by this article.
v+vii. Proof of site control for commercial cannabis retail businesses
submitting Phase 1 applications on or after July 1, 2018.
d. The Director of Planning and Building or his or her designee(s) shall determine
whether each application demonstrates compliance with the minimum
requirements (above) and be placed on the RSP Eligibility List and entered into
the Phase 2 application and review process.
23
75A-59
e. The Director of Planning and Building or his or her designee(s) shall review
each application upon submission and ensure that the application is complete.
Incomplete applications will be promptly rejected and the applicant shall be
notified in writing of the deficiencies. The applicant shall be given an opportunity
to cure any incomplete or deficient application prior to the conclusion of the
application processing term, if such time period is applicable.
3. Phase 2 — Regulatory Safety Permit Application.
a. Each applicant identified on the RSP Eligibility List may choose to complete
and file a RSP application to the Director of Planning and Building. The
application shall be filed together with a nonrefundable fee as established by
resolution of the City Council, to defray the cost of investigation required by this
article.
b. The RSP application period shall be open for thirty (30) calendar days and may
run concurrently with the Phase 1 review period. Following the RSP application
period, the Director of Planning and Building or designee(s) shall stop accepting
applications and review all applications received in Phase 2.
c. The Director of Planning and Building or designee(s) will review all application
documents required in the City's Phase 2 application package plus the
additional requirements in subsection (d) below. The Director of Planning and
Building or his or her designee(s) will use a merit based point system to review
and rank each of applications from the most to the least points and objectively
award the top applicants a RSP. A complete description of the merit based
point system and all merit based point considerations shall be included with the
application forms.
d. Phase 2 requirements include, but are not limited to
i. All application documents required in the City's Phase 2 RSP application
package.
ii. Phase 2 application fee is paid and a comprehensive ewaeF background
check is completed on all owners, employees, volunteers, managers
security guards, and/or agents.
iii. The Building Official or designee has inspected all structures in which the
use is located to determine that all applicable standards and requirements
are met. If a building permit is required for site improvements, Permit
issuance will be deferred until a certificate of occupancy or other building
permit approval is issued. Additionally, the Building Official has determined
that there are no notices of nuisance or other code compliance issues
recorded or on the property.
iv. The Planning Manager or designee has issued zoning clearance
documenting compliance with the following:
1. The use is permitted;
2. All land use permits, if any, have been approved and all conditions of
approval have been met or are in good standing; and,
24
75A-60
3. No zoning violations exist on the property.
e. The Director of Planning and Building or his or her designee(s) shall review
each application upon submission and ensure that the application is complete.
Incomplete applications will be promptly rejected and the applicant shall be
notified that business day of the deficiencies. The applicant shall be given an
opportunity to cure any incomplete or deficient application prior to the
conclusion of the application processing term, if such time period is applicable.
3.1 Commercial Cannabis — Registration Application and Regulatory Safety Permit
for Additional Commercial Cannabis Business Activities on the Same Premises (Co -
Location).
a. An existing commercial cannabis business with an RSP may co -locate
additional non -retail commercial cannabis business activities (cultivation,
distribution, and/or manufacturing) by applying for a new RSP for the additional
use(s). The new RSP must meet the all requirements of the Santa Ana
Municipal Code except that background checks (live scans) shall only be
required for any new staff as outlined in Section 40-8. A single RSP that lists
any and all approved cannabis business activity/activities may be renewed
annually thereafter.
b. New or pPending RSP applicants wishing to co -locate additional non -retail
(cultivation, distribution, and/or manufacturing) uses may submit a new RSP for
any of the non -retail commercial cannabis business activities. The additional
RSP must meet the all requirements of the RSP except that background checks
(live scans) shall only be required for any new staff as outlined in Section 40-8.
A single RSP that lists any and all approved cannabis business activity/activities
may be renewed annually thereafter.
c. New commercial cannabis business applicants — co -location.
New commercial cannabis retail applicants wishing to co -locate additional
non -retail (cultivation, distribution, and/or manufacturing) uses shall submit
a separate RSPB for the proposed retail activity and another RSP for any of
the non -retail (cultivation, distribution, and/or manufacturing) commercial
cannabis business activities. Each RSP application will be evaluated
independently and must meet any applicable requirements of the RSP as
outlined in Sections 40-8 and 40-9, including, but not limited to, merit
evaluation and additional separation requirements for the retail RSP. A
single RSP that lists any and all approved cannabis business
activity/activities may be renewed annually thereafter.
New non -retail commercial cannabis applicants wishing to co -locate
additional non -retail (cultivation, distribution, and/or manufacturing) uses
may submit a single RSP for the proposed activity or activities. The RSP
application must meet any applicable requirements of the RSP as outlined
in Sections 40-8 and 40-9. A single RSP that lists any and all approved
cannabis business activity/activities may be renewed annually thereafter.
4. Regulatory Safety Permit Annual Renewal.
Fk7
75A-61
a. Applications for the renewal of a permit shall be filed with the Director of
Planning and Building or designee(s) at least sixty (60) calendar days before
the expiration of the current permit. Temporary permits will not be issued. Any
permittee allowing their permit to lapse or which permit expired during a
suspension shall be required to submit a new application, pay the
corresponding original application fees and be subject to all aspects of the
selection process.
b. Any person desiring to obtain a renewal of their respective permit shall file a
written application under penalty of perjury on the required form with the
Director of Planning and Building or ief or her designee(s) who will conduct a
review. The application shall be accompanied by a nonrefundable filing fee
established by the City Council to defray the cost of the review required by this
article. An applicant shall be required to update the information contained in
their original permit application and provide any new and/or additional
information as may be reasonably required by the Director of Planning and
Building or designee(s) in order to determine whether said permit should be
renewed based on compliance with all applicable provisions of the Santa Ana
Municipal Code.
5. Appeal of Denial of Regulatory Safety PermitlDenial of RSP Renewal. The City
Manager or his or her designee(s) will review all Regulatory Safety Permit
applications and renewal requests, along with all other relevant information, and
determine if a RSP should be granted and/or renewed based on compliance with all
applicable provisions of the Santa Ana Municipal Code. If the City Manager
determines that the permit shall not be granted and/or renewed, the reasons for
denial shall be provided in writing to the applicant. No such denial shall become
effective until the applicant for the regulatory safety permit and/or renewal has been
notified in writing by certified mail of the right to appeal the denial decision pursuant
to the provisions of Chapter 3 of this Code. If a timely appeal is filed, the denial shall
be effective only upon decision of a hearing officer as provided for in Chapter 3 of
the Santa Ana Municipal Code. Otherwise, the denial shall become effective after
the timely appeal period has passed. The matter may be subject to judicial review
under the provisions of California Code of Civil Procedure Sections 1094.5 and
1094.6.
Sec. 40-9.1. - Non -retail commercial cannabis business (cultivation,
manufacturing, distribution, and testing facility/laboratory) selection process.
1. Non -Retail Commercial Cannabis Businesses — Registration Application (Phase
1) and Regulatory Safety Permit (Phase 2) Required.
a. Every Non -Retail Commercial Cannabis Business shall apply for the Phase 1
(Registration Application) and Phase 2 (Regulatory Safety Permit Application) in
the manner described in Section 40-9, except that the Director of Planning and
Building or his or her designee may accept Phase 1 and Phase 2 applications
for a Non -Retail Commercial Cannabis Business concurrently, and shall review
such applications and issue the Regulatory Safety Permit Application without
26
75A-62
consideration of the merit based point system, insofar as the applications satisfy
all other requirements of this article and Chapter 18.
b. Applications for a Non -Retail Commercial Cannabis Business shall be
accepted during normal City Hall business hours and are not subject to the
thirty (30) day Phase 1 or Phase 2 application periods.
Section 11. Sections 40-10 of Article I of Chapter 40 of the Santa Ana Municipal
Code are hereby amended to read in full as follows:
Sec. 40-10. -Audits.
Annual audits. No later than dare 30th September 30th of every year, each licensed
commercial cannabis business shall file with the City an audit or financial review of its
operations of the previous calendar year. The form and contents of the document shall
be specified by the Executive Director of Finance and Management Services, or his or
her designee(s).
Section 12. Severability. If any section, subsection, sentence, clause, phrase or
portion of this ordinance is for any reason held to be invalid or unconstitutional by the
decision of any court of competent jurisdiction, such decision shall not affect the validity
of the remaining portions of this ordinance. The City Council of the City of Santa Ana
hereby declares that it would have adopted this ordinance and each section,
subsection, sentence, clause, phrase or portion thereof irrespective of the fact that any
one or more sections, subsections, sentences, clauses, phrases, or portions be
declared invalid or unconstitutional.
N/
N/
N/
27
75A-63
ADOPTED this day of 2019.
Miguel A. Pulido
Mayor
APPROVED AS TO FORM
Sonia R. Carvalho, City Attorney
By:
Lisa Storck
Assistant City Attorney
AYES: Councilmembers:
NOES: Councilmembers:
ABSTAIN: Councilmembers:
NOT PRESENT: Councilmembers:
CERTIFICATE OF ATTESTATION AND ORIGINALITY
I, NORMA MITRE, Acting Clerk of the Council, do hereby attest to and certify that
the attached Ordinance No. NS- to be the original ordinance adopted by
the City Council of the City of Santa Ana on 2019 and that
said ordinance was published in accordance with the Charter of the City of Santa
Ana.
Date:
Acting Clerk of the Council
City of Santa Ana
28
75A-64
EXHIBIT 3
LS 6.4.19
RESOLUTION NO.2019-xx
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SANTA ANA REDUCING THE COMMERCIAL CANNABIS
GROSS RECEIPTS TAX FOR TESTING LABORATORIES
FROM FIVE (5%) PERCENT TO TWO (2%) PERCENT
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANTA ANA AS
FOLLOWS:
Section 1. The City Council of the City of Santa Ana hereby finds, determines and
declares as follows:
A. In November 2016, the California Marijuana Legalization Initiative, also
known as the Adult Use of Marijuana Act (AUMA or Proposition 64) was approved by the
voters of the State of California. The AUMA legalized recreational marijuana.
B. In 2017, the Governor signed into law Senate Bill 94 also known as
Medicinal and Adult -Use Cannabis Regulation and Safety Act (MAUCRSA) establishing
state regulations and licensing for retail sales, manufacturing, distribution, delivery and
testing of adult -use (also called recreational) marijuana.
C. On November 9, 2017, the City Council created Chapter 40 of the Santa
Ana Municipal Code, allowing adult -use commercial cannabis retail businesses in the
city, and amended certain sections of Chapters 18 and 21 of the Santa Ana Municipal
Code to ensure consistency with State law and Chapter 40. Since 2014, the City has
allowed medicinal marijuana collectives/ cooperatives to operate within the City
pursuant to regulations set forth in Chapter 18 and Chapter 21 of the Santa Ana
Municipal Code.
D. On March 20, 2018, the City Council adopted Ordinance NS-2941 and
NS-2942, allowing and regulating commercial cannabis testing laboratories.
E. A general business license tax based on the gross receipts derived from
commercial cannabis businesses and gross square footage would generate essential
funds for protecting vital City services and facilities and place such businesses on more
equal footing with existing City businesses, including medical marijuana businesses
which already pay a business license tax.
75A-65
F. The City Council is authorized to impose general and special taxes in
order to fund municipal services and facilities, subject to requisite voter approval as set
forth in Government Code section 53720.
G. The voters of the City of Santa Ana approved Measure Y (Ordinance NS-
2962) on November 6, 2018, for the purpose of fixing the rate of taxation for commercial
cannabis businesses including delivery, distribution, manufacturing, cultivation, testing
and retail sales of cannabis and related products. The taxes required to be paid under
this article are declared to be required pursuant to the taxing power of the City of Santa
Ana solely for the purpose of obtaining revenue and are not regulatory permit fees.
H. The City of Santa Ana desires to remain at the forefront of commercial
cannabis by allowing and regulating commercial cannabis business activities, routinely
updating and amending its ordinances, and establishing commercial cannabis gross
receipts tax rates that are competitive and provide for the needs of the Santa Ana
community.
I. The City of Santa Ana has a compelling interest in ensuring that cannabis
is not sold in an illicit manner, in protecting the public health, safety and welfare of its
residents and businesses, in preserving the peace and quiet of the neighborhoods in
which these businesses may operate, and in providing access to safe and tested
cannabis to residents. To ensure safe and tested cannabis, the City desires to see the
establishment and successful operation of testing facilities and testing laboratories in
the City.
J. Section 21-133 (d) of Article XIII of Chapter 21 of the Santa Ana Municipal
Code establishes the initial commercial cannabis testing facility of testing laboratory
gross receipts tax rate at five (5%) percent.
K. Section 21-133 (c) of Article XIII of Chapter 21 of the Santa Ana Municipal
Code allows the City Council by resolution to implement any lower tax rate it deems
appropriate.
Section 2. The City Council hereby establishes the commercial cannabis
testing facility/testing laboratory gross receipts tax rate at two (2%) percent, lowering it
from five (5%) percent. The reduced two (2%) percent gross receipts tax rate shall
become effective July 1, 2019.
H
75A-66
ADOPTED this _ day of 2019.
Miguel A. Pulido
Mayor
APPROVED AS TO FORM:
Sonia R. Carvalho, City Attorney
By: s&'/ C_ E,
Lisa Storck
Assistant City Attorney
AYES: Councilmembers
NOES: Councilmembers
ABSTAIN: Councilmembers
NOT PRESENT: Councilmembers
CERTIFICATE -OF ATTESTATION AND ORIGINALITY
I, Norma Mitre, Acting Clerk of the Council, do hereby certify the attached Resolution No.
2019- to be the original resolution adopted by the City Council of the City of Santa
Ana on 2019.
Date:
Acting Clerk of the Council
City of Santa Ana
Resclu6on No. 201 &roc
Page 3 of 3
75A-67
75A-68
EXHIBIT 4
LS 6.4.19
RESOLUTION NO.2019-xx
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SANTA ANA ESTABLISHING A CANOPY MEASUREMENT
SERVICE FEE AND AN ALLOCATED SQUARE FOOTAGE
MEASUREMENT SERVICE FEE
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANTA ANA AS
FOLLOWS:
Section 1. The City Council of the City of Santa Ana hereby finds, determines and
declares as follows:
A. In November2016, the California Marijuana Legalization Initiative, also known
as the Adult Use of Marijuana Act (AUMA or Proposition 64) was approved by the voters of
the State of California. The AUMA legalized recreational marijuana.
B. In 2017, the Governor signed into law Senate Bill 94 also known as Medicinal
and Adult -Use Cannabis Regulation and Safety Act (MAUCRSA) establishing state
regulations and licensing for retail sales, manufacturing, distribution, delivery and testing of
adult -use (also called recreational) marijuana.
C. On November 9, 2017, the City Council created Chapter 40 of the Santa
Ana Municipal Code, allowing adult -use commercial cannabis retail businesses in the city,
and amended certain sections of Chapters 18 and 21 of the Santa Ana Municipal Code
to ensure consistency with State law and Chapter 40. Since 2014, the City has allowed
medicinal marijuana collectives/ cooperatives to operate within the City pursuant to
regulations set forth in Chapter 18 and Chapter 21 of the Santa Ana Municipal Code.
D. On March 20, 2018, the City Council adopted Ordinance NS-2941 and NS-
2942, allowing and regulating commercial cannabis testing laboratories.
E. A general business license tax based on the gross receipts derived from
commercial cannabis businesses and gross square footage would generate essential
funds for protecting vital City services and facilities and place such businesses on more
equal footing with existing City businesses, including medical marijuana businesses
which already pay a business license tax.
Resolution No. 2019-roc
Page 1 of 3
75A-69
F. The City Council is authorized to impose general and special taxes in order
to fund municipal services and facilities, subject to requisite voter approval as set forth in
Government Code section 53720.
G. The voters of the City of Santa Ana approved Measure Y (Ordinance NS-
2962) on November 6, 2018, for the purpose of fixing the rate of taxation for commercial
cannabis businesses including delivery, distribution, manufacturing, cultivation, testing
and retail sales of cannabis and related products. The taxes required to be paid under
such article are declared to be required pursuant to the taxing power of the City of Santa
Ana solely for the purpose of obtaining revenue and are not regulatory permit fees.
H. The City of Santa Ana desires to remain at the forefront of commercial
cannabis by allowing and regulating commercial cannabis business activities, routinely
updating and amending its ordinances, and establishing commercial cannabis gross
receipts tax, rates that are competitive and provide for the needs of the Santa Ana
community.
I. Section 21-133, subsection (j)(8)(B) of Article XIII of Chapter 21 of the Santa
Ana Municipal Code states that the gross square footage of cultivation canopy shall be
subject to independent measurement and calculation by duly authorized employees or
agents of the City and that a corresponding canopy measurement fee amount be
specified by resolution of the City Council.
J. Section 21-133, subsection 0)(8)(D) of Article XIII of Chapter21 of the Santa
Ana Municipal Code states that the gross square footage of allocated square footage
amounts reported by commercial cannabis business owners/operators respectively for
either distribution use or for manufacturing use, shall be subject to independent
measurement and calculation by duly authorized employees or agents of the City and
that a corresponding allocated square footage measurement fee amount be specified by
resolution of the City Council.
K. The City Council conducted a duly noticed public hearing on June 4, 2019,
to consider the proposed fee modifications.
Section 2. Pursuant to Santa Ana Municipal Code Section 21-133, subsection
(j)(8)(B) the City Council hereby establishes a canopy measurement fee in the amount of
$100.57 per hour. Said fee shall be added to the City's Miscellaneous Fee Schedule and
be subject to the Consumer Price Index changes annually. The canopy measurement fee
amount shall become operational upon the effective date of Section 21-133, subsection
(j)(8)(B)•
Section 3. Pursuant to Santa Ana Municipal Code Section 21-133, subsection
(j)(8)(D) the City Council hereby establishes an allocated square footage measurement
fee in the amount of $100.57 per hour. Said fee shall be added to the City's Miscellaneous
Fee Schedule and be subject to the Consumer Price Index changes annually. The
Resolution No. 2019-=
Page 2 of 3
75A-70
allocated square footage measurement fee amount shall become operational upon the
effective date of Section 21-133, subsection 0)(8)(D).
Section 4. The City Council finds that the fees adopted by this Resolution do
not exceed the reasonable cost of providing the services for which the fees are charged.
ADOPTED this
day of
Miguel A. Pulido
Mayor
APPROVED AS TO FORM:
Sonia R. Carvalho, City Attorney
By:
Lisa Storck
Assistant City Attorney
AYES:
NOES:
ABSTAIN:
NOT PRESENT:
Councilmembers
Councilmembers
Councilmembers
Councilmembers
4110
CERTIFICATE OF ATTESTATION AND ORIGINALITY
I, Norma Mitre, Acting Clerk of the Council, do hereby certify the attached Resolution No.
2019 - to be the original resolution adopted by the City Council of the City of Santa
Ana on
Date:
2019.
Acting Clerk of the Council
City of Santa Ana
Resolution No. 2019-xx
Page 3 of 3
75A-71
75A-72