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Habib is a lawyer in our San Francisco office, where his practice focuses on regulatory compliance, corporate, and transactional matters for cannabis companies.

California has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we cover who is banning cannabis, who is embracing cannabis (and how), and everyone in between.  For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your California cannabis business, how to keep it legal, and what you will and won’t be allowed to do.

Our last California Cannabis Countdown post was on the City of Cotati, an before that, the City of San Luis Obispo, the City of Redding, the City of San Rafael, the City of Hayward, Alameda County, OaklandSan FranciscoSonoma County, the City of Davis, the City of Santa RosaCounty and City of San BernardinoMarin CountyNevada County, the City of Lynwood, the City of CoachellaLos Angeles County, the City of Los Angeles, the City of Desert Hot SpringsSonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County and the City of Emeryville.

Today’s post is on the town of Truckee.

Welcome to the California Cannabis Countdown.

LocationTruckee is an incorporated town in Nevada County. Truckee is about 200 miles northeast of San Francisco and is just a short drive to Lake Tahoe. With its historic (and often bustling) downtown, background views of the Sierra Nevada mountains and proximity to world class ski resorts in the Lake Tahoe area, Truckee has become an attractive tourist destination. If you’re driving during the winter make sure to bring snow chains as you don’t want to veer off the road, get lost, and meat (pun intended) the fate of the Donner Party.

california cannabis marijuana Truckee
Is delivery coming to Truckee?

History with Cannabis: Truckee is known for its open beautiful landscape but no one would ever say it’s a jurisdiction that’s been open to cannabis. Dating back to 2005 the city adopted an interim ordinance prohibiting dispensaries. In 2008 the Community Development Director released a statement that dispensaries were not allowed under Truckee’s Development Code. It was only in 2015, when the California state legislature passed the Medical Cannabis Regulation and Safety Act and the Adult Use of Marijuana Act was going to be placed on the 2016 statewide ballot, that Truckee decided to revisit its prohibitionist stance towards cannabis. At this point the Town Council began to earnestly look into the feasibility of regulating cannabis businesses in jurisdiction. To gauge community feedback the Town Council held public workshops in February, March, April, and May of 2017. After those workshops the Council held three public meetings that focused on the following options: 1) continued prohibition; 2) allowing only commercial medicinal access; or 3) allowing medicinal and adult-use access. In the end the Truckee Planning Commission developed Resolution 2018-04 (“Resolution”) that would authorize delivery services.

Proposed Cannabis Laws: The proposed Resolution is by no means a gigantic step for Truckee cannabis businesses, but it’s still a step in the right direction. And a step forward is still better than the status quo of outright prohibition. Here are some of the Resolution’s highlights:

  • Allows for both medical and adult-use delivery services;
  • All other cannabis activities are prohibited (unfortunately);
  • The buffer from schools, day care centers, and youth centers would be 1,000 feet as opposed to the state’s 600 foot requirement;
  • The delivery service shall be in a fixed structure and not open to the public;
  • There are no caps on the number of licenses;
  • A license is only transferable with the approval of the Community Development Director; and
  • The term of license is for perpetuity so long as the licensee is operating in compliance with local and state law.

If you’ve been following the slow rollout of cannabis licenses from California’s state agencies, you know that the biggest impediment to securing a cannabis permit has been local regulations. Would we like to see local jurisdictions reasonably regulate all seed to sale license types? Of course we would, but that doesn’t mean that we won’t encourage smaller locales that decide to take their first step into regulating cannabis. This is especially true when a local jurisdiction is putting in place regulations to provide patients and consumers with access to tested cannabis as opposed to forcing residents to buy from the black market.

Making sure Californians have access to cannabis through delivery services has also faced initial hurdles in 2018, so having smaller locales, like Truckee, authorize cannabis delivery will benefit all legal cannabis operators along the supply chain. A hearing on the Resolution was held two weeks ago, but the Planning Commission continued the matter to the next Commission meeting, which will be held on April 26 at 6pm. We’ve seen how public support (and opposition) can sway undecided local legislators so if you want safe access to cannabis in Truckee, it’s paramount that you show up at the Planning Commission meeting!

marijuana cannabis federal policy
Let’s hope so, when it comes to prohibition.

The election of Donald Trump as president of the United States caught many pundits and prognosticators off guard. President Trump’s victory also instilled a level of uncertainty in America’s burgeoning state-legal cannabis industry. During the presidential campaign, Trump routinely professed his adherence to states’ rights when it comes to cannabis legalization (at least for medical cannabis activities). Once elected, however, President Trump appointed known cannabis prohibitionist Jeff Sessions to be his choice as U.S. Attorney General for the Department of Justice (DOJ) and cannabis operators went from feeling uncertain to outright fear.

It now appears that those fears may have been unfounded. After his confirmation, Sessions didn’t immediately seek to enforce federal laws against marijuana operators (to the pleasant surprise of many in the cannabis industry). The honeymoon lasted until January 4, 2018. Just four days into adult-use cannabis sales being legal in the state of California, Sessions formally rescinded the Cole Memo and the cannabis industry was once again thrown into turmoil. The rescission of the Cole Memo, when added with the Environmental Protection Agency’s refusal to register pesticides on cannabis crops and the Federal Drug Administration’s (FDA) threatened crackdown on medical cannabis claims, painted an ominous picture for the cannabis industry throughout the United States (although some of us were more optimistic).

It’s been over four months since Sessions rescinded the Cole Memo and although he’s rattled his saber on some occasions, the dreaded crackdown has not occurred. For that we may have Russia to thank. Sessions’ self-recusal from the DOJ’s investigation into Russian government meddling in the presidential election has made him persona non grata in the Trump administration — thereby placing his priorities at the very bottom of President’s Trump list.

Rather than a return to federal enforcement actions, we’ve begun to see quite a few positive developments as of late. Last week, President Trump told U.S. Senator Cory Gardner (R-CO) that he was committed to supporting a legislative solution to the tension between state’s that regulate cannabis activities and federal law (which we covered here). This could be a very important development, and let’s hope that this is one issue in which the President doesn’t change his mind.

Besides the commitment that the President made to Senator Gardner, there have been a number of other developments that have given cannabis businesses a reason to be optimistic:

  • The FDA just released a report that a CBD based drug has shown to have positive effect on those that suffer from seizures and epilepsy. This is a big blow to the federal government’s position that the cannabis plant has no medical value.
  • U.S. Senator Mitch McConnell (R-KY) recently introduced a bill in the Senate that would authorize hemp as an agricultural product. Any progress in the federal legalization of hemp will eventually also benefit marijuana legalization.
  • Senators Orrin Hatch (R-UT) and Kamala Harris (D-CA) sent a letter to the DOJ and the Drug Enforcement Agency, calling on them to increase the pace of medical research in cannabis. There have been approximately twenty-five applications submitted to the DEA to produce federally approved research-grade marijuana but none of them have been approved.
  • U.S. Representative  Dana Rohrabacher (R-CA) recently issued a statement that he plans on introducing a stand-alone bill that will respect a state’s right to regulate cannabis and would make the Rohrabacher-Bluemenaur Amendment permanent.

Taken as a whole, these are all encouraging developments– especially considering their bipartisan support. However, this is not the time to rest on our precarious laurels. The November mid-term elections will be on us before we know it and it will be up to all of us to elect officials that are against the government’s draconian war on cannabis. We can’t leave this up to Russia to decide for us, after all.

california alameda marin marijuana
Alameda and Marin Counties are moving ahead, slowly.

Our offices in San Francisco and Los Angeles constantly get calls from entrepreneurs looking to launch or expand their cannabis businesses. By far, one of the most challenging aspects for any attorney advising clients in the cannabis industry is staying up to date on all the developments in the Golden State’s 58 counties and 482 cities. And although it’s a daunting task, we work hard to stay on top o things.

Avid readers of our California Cannabis Countdown series are well aware of the ever-changing cannabis regulatory landscape at the local level. Every week there are a number of Board of Supervisors or City Council hearings throughout the state where cannabis-related rules and ordinances are enacted and amended. We are constantly advising our clients about any changes in the cannabis ordinances of the local jurisdictions of interest.

It’s this constant flux of change at the local legislative level that brings me to today’s topic: an update on the counties of Alameda and Marin. We last covered Alameda here and Marin here.

Let’s start with Alameda County. The County passed its most recent cannabis ordinance last September (with some minor amendments since then). That ordinance created a medical cannabis pilot program that authorized up to three dispensaries, and up to four mixed-light and two indoor cultivation permits. The County’s Cannabis Interdepartmental Work Group (“Work Group”) has taken direction from the Planning Department and has proposed to amend their cannabis ordinance to include the following:

  • Authorize adult-use cannabis activities;
  • Allow for up to five dispensaries;
  • Allow for up to ten cultivation permits (only in the East County);
  • Remove cultivation from a pilot program to a permanent use; and
  • Establish a permit fee structure (the fees are quite significant so if the County is serious about bringing operators into the legal market they will hopefully lower the proposed fees).

The Board of Supervisors will meet this Wednesday to discuss these amendments as well as determine whether the County should allow for manufacturing, distribution, and testing. The County has also expressed an interest in the recently released emergency regulations by the Department of Public Health in regard to Type S manufacturing licenses, which we covered here. If you’d like to see Alameda expand the types of cannabis activities it is willing to authorize, showing up is paramount.

As for Marin County, it is still moving at a deliberate pace– some might call it too deliberate. After the County rejected all applications for medical dispensaries, its cannabis ordinance was amended to only authorize medical delivery-only services: Adult-use cannabis activities are still some ways away in Marin County. The County hopes to begin accepting applications this month but that might be overly ambitious. Marin’s delivery-only ordinance only authorizes up to four delivery licenses and applications will be graded on a 100 point scale: Business plan (20 points), operating plan (50 points), and public benefits plan (30 points). Today at 2 p.m., the Board of Supervisors will hold a briefing to discuss the following items:

  • The medicinal cannabis license application;
  • The license application submittal guide (which provides guidance on what to include in your business, operating, and public benefits plan);
  • The owner submittal form;
  • The owner submittal form guide; and
  • The financial information form.

Although these are steps in the right direction, both Marin and Alameda can still make more progress. At the very least both counties should be open to testing laboratories and non-volatile manufacturing. Marin, with nearly 70% of its residents voting in favor of the Adult-Use of Marijuana Act (Prop 64), needs to stop dragging its feet when it comes to allowing adult-use. The slow and restrictive pace of cannabis legislation at the local level is one of the biggest impediments to cannabis operators entering the regulated market. Let’s applaud Marin and Alameda for making progress, but let’s also reach out to our local officials to let them know they can also do better. There are two great opportunities to let them know in person this week.

sonoma california cannabis
Will Sonoma stay green?

In 1996 Californians voted for the Compassionate Use Act (aka Prop 215), but more than twenty years later Californians are still fighting for their cannabis rights. One of the biggest misconceptions out there is that the entire state of California is open to cannabis businesses. Our San Francisco and Los Angeles offices field calls from new clients every week looking to start a cannabis business but on many occasions, I have to crush their business plans before they can even get started. It’s not that their business plan isn’t sound, it’s that their business is prohibited in the city or county where they wish to operate.

These bans exist because the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) explicitly authorizes local jurisdictions to regulate (or outright prohibit) as they see fit. This authority granted to local jurisdictions is just one of the reasons why commercial cannabis licensing has gotten off to a rocky start. After I tell the client that they can’t operate in Butte County, for example, the next question I usually get is “where can I operate?” If you’re a reader of our California Cannabis Countdown series, you’ll know that cannabis friendly jurisdictions do exist, but whether these locales will always remain open to cannabis is another question. There’s an unfortunate trend occurring throughout the state where local jurisdictions are passing laws authorizing commercial cannabis activities only to later change their minds. This brings me to Sonoma County.

Sonoma County would fall into the category of a cannabis friendly jurisdiction, as the County authorizes all seed to sale license types (for medical cannabis businesses anyway). However, recent events have put the County’s cannabis friendly tag in serious peril. There have been a number of high profile robberies (one of which was sadly fatal) of alleged cultivation grow houses, and cannabis opponents have been highlighting these robberies to press the County to make restrictive changes to its cannabis ordinance. The fact that the perpetrators were from out of state and came with the specific goal of targeting grow houses is also being used to further stoke fears. What the prohibitionists are not mentioning is that the houses that were targeted were not legally licensed cultivators, but instead were selected because they were suspected of being illegal grow houses. Licensed operators have security plans and security protocols, whereas illegal operators do not. This push to restrict cannabis activities in Sonoma is misguided as it will strengthen the black market and thereby increase crime. This small but vocal group of cannabis opponents have approached the Board of Supervisors and requested that the County:

  • Freeze issuing any cannabis permits until the County’s ordinance is amended;
  • Authorize only indoor cultivation, and ban all outdoor cultivation;
  • Restrict cultivation to only industrial zoned areas;
  • Place a cap on the number of cultivation permits based on the amount of cannabis necessary to supply only County residents;
  • Disband the Cannabis Advisory Group; and
  • Make these changes retroactive to apply to existing permit applicants.

If this vocal group of opponents is able to persuade the County’s Board of Supervisors to change the County’s cannabis ordinance to include these restrictive changes, the effect on operators who have spent extensive time and capital to abide by the law will be disastrous. Only those that have never been interested in complying will have benefited.

We’ve spoken at length about the importance of showing up to your local hearings and public support is needed now in Sonoma County now more than ever. We don’t want Sonoma to end up like Calaveras County. The Board of Supervisors are meeting this Tuesday at 1:30pm and the Sonoma County Growers Alliance is requesting that supporters come dressed in green. I hope to see you there wearing your St. Patrick’s Day best.

When the California Bureau of Cannabis Control (BCC) first released its proposed medical cannabis regulations under the Medical Cannabis Regulation and Safety Act (MCRSA) last April it created license types for laboratories, retailers, distributors, and transporters. Most people were surprised (and worried) when they found out that the MCRSA did not create a license type for cannabis delivery-only services. Under the MCRSA, only storefront medical retailers could deliver to a qualified patient or primary caregiver. Just like that, delivery services were about to be locked out of America’s biggest cannabis market.

As you can imagine the BCC and state legislators were inundated with calls to their offices as well as comments at public hearings about the glaring omission of delivery licensure. Whether the BCC was going to rectify this mistake became moot upon the withdrawal of their emergency regulations. The regulations were withdrawn when the state legislature passed the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) – which merged the MCRSA and the Adult-Use of Marijuana Act (AUMA) under one regulatory regime. We covered that here.

When the BCC issued their emergency regulations under MAUCRSA it was clear that the Bureau learned its lesson: This time, the BCC included a license type for delivery-only services. For delivery services that were previously a part of a collective or cooperative, this inclusion in the new regulations was a much-needed lifeline. However, since the BCC started issuing temporary licenses in January it hasn’t exactly been a smooth road for delivery services. Delivery services have been facing the same major obstacle that all other cannabis businesses are dealing with: local jurisdictions.

marijuana delivery california
Delivery is not guaranteed.

In order to be eligible to receive a commercial cannabis license from the state, you must first obtain a cannabis permit from your local city or county. As readers of our California Cannabis Countdown series are well aware, each of the state’s 482 cities and 58 counties have their own regulations. For delivery services, this dual licensing structure can cause a number of impediments to both obtaining a license and then operating a successful cannabis business. First and foremost, a local jurisdiction can enact an outright ban on all commercial cannabis activities, including delivery. In other instances, local jurisdictions are either only authorizing storefront retailers to conduct deliveries or only allowing deliveries within their borders by local permit holders. All these obstacles, when combined, limit competition and choice and thereby ultimately harm the consumer. This is especially true of qualified patients that live in prohibitionist jurisdictions or aren’t able to drive themselves to the nearest dispensary.

It is under this backdrop that State Senator Ricardo Lara (Senate District 33) introduced Senate Bill 1302 (SB 1302). The goal of SB 1302 is pretty simple: make sure every Californian that wants access to cannabis does in fact have access to cannabis (for many Californians growing their own isn’t a feasible option). The pertinent provision of SB 1302 is found in Section 26090(e):

“A local jurisdiction shall not prevent delivery of cannabis or cannabis products on public roads, or to an address that is located within the jurisdictional boundaries of the local jurisdiction, by a licensee who is acting in compliance with this division and who is acting in compliance with a license, permit, or other authorization obtained from another local jurisdiction, pursuant to the authority granted by that other local jurisdiction under Section 26200.”

SB 1302 is off to a slow start as it has yet to pickup any co-sponsors and has currently been referred to the Senate Governance and Finance Committee. Now would be a good time to let the Committee members know that you support SB 1302 and that they should too: You can find the Committee members here. SB 1302 would ensure that a licensed delivery service can provide cannabis anywhere in the state to a qualified patient, primary caregiver, or adult aged twenty-one and over. Although this would seem like a given after a majority of Californians voted for the AUMA, in practice the delivery option is far from reality. In that respect all SB 1302 is seeking to accomplish is to bring the spirit of the AUMA into practical effect. Let’s hope (and call your legislators!) it succeeds.

Last week I spoke on a panel about compliance at the Cannabis Cultivation Conference hosted by the Cannabis Business Times. If you’ve been following the latest developments in California you’d know that compliance with the myriad of regulations is the biggest obstacle for businesses looking to join the state legal cannabis market. We recently covered the current landscape facing cultivators here.

california cannabis marijuana licensing
Get your compliance checklist ready!

For commercial cannabis purposes California is a dual licensing state (although some would call it a “duel” licensing state, as it can be quite a battle to obtain a cannabis business license). Dual licensing means that in order to operate a commercial cannabis business you have to obtain a cannabis permit from your local jurisdiction before you can receive your license from the state. That means you’ve got to comply with two sets of regulations and in some occasions, many more.

For those that have been operating as collectives, cooperatives, or non-profits under the Compassionate Use Act (1996), Senate Bill 420 (2003) and the California Attorney General Guidelines (2008), compliance requirements were practically non-existent. That all changed when the state passed the Medical Cannabis Regulation and Safety Act in 2015 and California voters approved the Adult Use of Marijuana Act in 2016: Both the MCRSA and the AUMA were merged under the Medical and Adult-Use Cannabis Regulation and Safety Act to form one regulatory regime. In that sense, compliance is more manageable than it may appear at first blush.

Still, for many people who have dedicated themselves to providing medical cannabis to Californians for the last two decades, the thicket of regulations is the equivalent of a meteor-level extinction event. For the last twenty years most cannabis operators have looked at record-keeping as something you’d do if you wanted to go to jail — handshakes, your word, and cash transactions were the non-incriminating way of the land. Due to banking issues, cash transactions are still prevalent, but handshake deals should be sitting on a shelf at Blockbuster now that cannabis businesses are legitimate, licensed entities.

It is also worth noting that record-keeping and compliance does not end once you’ve obtained your local and state cannabis permits. Compliance is not only a prerequisite to obtaining but is also vital in maintaining your cannabis license. If the thought of compliance is overwhelming you and you don’t where to start, don’t worry, we’ve got you covered. This list should not act as a substitute for obtaining competent legal representation but it will give you an idea on what the road to compliance looks like. Without further ado:

  • Prepare a List Of The Regulatory Agencies That You’ll Need To Work With. At the state level, the three main regulatory agencies are the Bureau of Cannabis Control (distributors, laboratories, retailers, delivery-only retailers, microbusinesses, and temporary special events); the Department of Food and Agriculture (cultivators, processors, and nurseries); and the Department of Public Health (manufacturers). Other agencies include the Department of Fish and Wildlife, Regional Water Boards, the California Department of Taxes and Fees Administration, and the California Department of Insurance to name a couple more (there are others out there). On the local side, you’ll likely need the approval of some combination of the following: the City Council or Board of Supervisors, the City Manager, the Planning Department, the Zoning Administrator, and Police, Fire, and Building Departments. Put a list together of all the agencies (and their requirements) that will regulate your cannabis business.
  • Read Your Local Ordinance. Remember, you can’t get your state license until you obtain your local permit. Your local cannabis ordinance will list the criteria you’ll need to meet to get a license. You’ll likely need a security plan, a business plan, an odor mitigation plan, and a community relations plan. Some local ordinances have hours of operation requirements that are stricter than the state’s regulations so make sure your application abides by your local rules. It’s essential that the business, operating, and security plans you submit align with your local ordinance. I also highly recommend that you attend all of the cannabis ordinance public hearings in your local jurisdiction to familiarize yourself with the decision makers and any community concerns.
  • Make Sure Your Location Is Properly Zoned For The Activity. This coincides closely with familiarizing yourself with your local cannabis ordinance. You’ve got to make sure that your business is located in a district zoned for your cannabis activity and satisfies state and local setback requirements. If you’re leasing the property make sure the lease properly lists all of your cannabis operations as a permitted use.
  • Prepare Standard Operating Procedures And Train Your Employees To Follow Them. Prepare SOPs for every part of your operation. If you don’t know where to start, begin with your local and state applications. Every plan or action item that was listed in your applications should have a corresponding SOP.
  • Conduct Financial, Security, And Inventory Audits. Not only is important to have SOPs but you need to make sure your business is following them. Let me be brutally honest here: At some point, something is going to go wrong. If that mistake brings a regulator to your door, you’ll want to show them that mistake was an anomaly and not due to poor business practices. Conducting audits and following SOPs will go a long way in mitigating potential penalties. For more on the importance of audits, see here.
  • Compliance With Securities Regulations. Will you need to raise funds from investors? If so, you’ll need to consult with your attorney to determine whether the investment constitutes a security and if so, whether a securities exemption is applicable or not. For more on securities compliance, see here.
  • Review The Representations, Warranties, And Indemnity Provisions In Your Contracts. When’s the last time you looked over any of your contracts? Make sure the other contracting party has obtained the necessary licenses, represents that they’re in compliance with all regulations, and will indemnify you if they’re negligent or otherwise deviate from their representations and warranties.
  • Have a Compliance Team. Depending on the size of your cannabis business, compliance should not be a one-person operation. Your business will benefit from having a compliance team. Not only is this important for regulatory reasons but having a compliance team will allow you to identify inefficiencies and irregularities in your operation and correct them. Make sure your compliance team or compliance officer meets regularly with your employees as improved communication will also improve profits.

The bottom line is that compliance is necessary for cannabis businesses and should be given the appropriate attention. Compliance isn’t a four-letter word, nor should it be treated like one. A robust compliance protocol will lead to a standardized and reliable cannabis product, and if a purchaser down the supply chain (and ultimately the consumer) can rely on your product to meet the same standard every time, you will differentiate yourself in a competitive marketplace. Life might be like a box of chocolates but you shouldn’t have to guess when it comes to compliance and your product.

california immigration marijuana
The Feds and California are not getting along so well.

If you’ve been following the news lately you’ve probably noticed that that the Trump administration, along with the U.S. Department of Justice (DOJ), have not exactly been getting along with the state of California. Just last week the Department of Justice filed a lawsuit against the Golden State, claiming that three of its laws interfere with the federal government’s authority to regulate the country’s immigration system. The California laws in question are Senate Bill 54 (“SB 54), Assembly Bill 450 (“AB 450”), and Assembly Bill 103 (“AB 103”). This is not the proper venue for an in-depth breakdown of every provision in these laws, but a brief description of each will help frame this discussion:

  • SB 54: Also known as the “California Values Act” was signed by California Governor Jerry Brown on October 05, 2017. SB 54 places limitations on when California law enforcement authorities can cooperate with federal immigration officials.
  • AB 450: Signed by Gov. Brown on October 05, 2017, AB 450 prohibits employers from cooperating with immigration enforcement officers unless the employer has been served with a subpoena or judicial warrant.
  • AB 103: Approved by Gov. Brown on June 27, 2017, AB 103 is a public safety omnibus bill (meaning it is a law that covers a number of measures). The DOJ takes issue with the provisions regarding state inspection of immigration detention facilities and granting the California Attorney General the authority to review the conditions of confinement and the standards of due process at these facilities (Section 12532).

In its lawsuit, the DOJ asserts that all three laws violate the Supremacy Clause of the United States Constitution by “constituting an obstacle to the United States’ enforcement of the immigration laws and discriminating against federal immigration enforcement.” I’ll save you from having to attend a semester of Con Law 101 by giving you a succint explanation on the Supremacy Clause: the Supremacy Clause is the constitutional provision that federal law takes precedence over conflicting state laws (assuming, of course, that the law is constitutional) . California has not yet filed an answer to the DOJ’s lawsuit but any response will be sure to include a Tenth Amendment argument.

Tenth Amendment jurisprudence states that the federal government can enact laws but it can’t force (or “commandeer”) state officials to administer them. In Printz v. U.S., 521 US 898 (1997), Justice Scalia, writing the majority opinion in a close decision (the case was a 5-4 traditional conservative-liberal split) held that “Congress cannot compel the States to enact or enforce a federal regulatory program.” California can make the plausible argument (and likely winning one) that under the Printz ruling the federal government cannot force local law enforcement to assist in federal immigration enforcement. However, the Printz decision will likely only apply to SB 54. Whether AB 103 or AB 450 can survive federal judicial scrutiny is far from certain.

The concern for states that have legalized medical and adult-use cannabis activities, along with state-legal cannabis businesses, is that the DOJ’s Supremacy Clause argument can be made against a state’s lawfully regulated cannabis industry. Under the federal Controlled Substances Act marijuana is still a federally illegal Schedule I drug and that is the supreme law of the land. The conflict between federal law’s cannabis prohibition and the states in the U.S. that now regulate cannabis activities is not an issue that the U.S. Supreme Court has yet to rule on directly but it has been bubbling around the surface for some time now and that day will arrive soon enough — leave it to California to lead the way! Assuming it does, we explained in detail how a state might defend its cannabis programs here.

With respect to California state laws, we should also note that in February of 2017, California state Assemblyman Reginald Jones-Sawyer introduced AB 1578. Just like with SB 54, AB 1578 would prohibit state or local agencies from assisting the federal government in taking certain actions, except in this instance it’s cannabis activities instead of immigration enforcement. AB 1578 ended up stalled in the state legislature but ever since the rescission of the Cole Memo by U.S. Attorney General Jeff Sessions there’s been a push to reintroduce AB 1578.

Hopefully AB 1578 is revived, but if the federal DOJ is eager for a fight before that happens it doesn’t have to wait: the city of Berkeley has already fired the first shot. Last month, the Berkeley city council voted to prohibit city agencies from using resources in enforcing federal cannabis laws or providing information on cannabis activities. Because the underlying theme between SB 54 and the Berkeley resolution are the same–prohibiting local officials from assisting federal authorities in enforcing federal law–one would assume that the DOJ will let their immigration lawsuit make its way through the courts before going after Berkeley (or AB 1578, if it’s ever enacted). All of that said, the Trump administration continues to pursue a path that continuously defies logic, so why would it show restraint now?

The DOJ immigration lawsuit will likely find its way to the Supreme Court and although I highly doubt a majority of conservative justices would overturn Justice Scalia (a conservative icon to many) there’s no guarantee that the Supreme Court won’t find a way to somehow differentiate Printz from the DOJ lawsuit. This is definitely a case to follow and we’ll be sure to keep you updated on all developments.

cotati california marijuana
Hang a left for cannabis licensing by March 26th.

California has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we cover who is banning cannabis, who is embracing cannabis (and how), and everyone in between. For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your California cannabis business, how to keep it legal, and what you will and won’t be allowed to do.

Our last California Cannabis Countdown post was on the City of San Luis Obispo, and before that the City of Redding, the City of San Rafael, City of Hayward, Alameda County, OaklandSan FranciscoSonoma County, the City of Davis, the City of Santa RosaCounty and City of San BernardinoMarin CountyNevada County, the City of Lynwood, the City of CoachellaLos Angeles County, the City of Los Angeles, the City of Desert Hot SpringsSonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County and the City of Emeryville.

Today’s post is on the City of Cotati.

Welcome to the California Cannabis Countdown.

Location. Cotati is an incorporated city in Sonoma County and is about a 90 minute drive north of San Francisco. The City was founded in 1893 and is dubbed the “Hub” of Sonoma County because of its central location and hexagonal plaza.     

History with Cannabis: Although no one would call Cotati a hub of commercial cannabis activity, the City did pass an ordinance in 2007 (Ord. 787) allowing for one (1) medical cannabis dispensary. One may be a lonely number, but it sure is better than zero. After the passage of Ord. 787 things remained pretty quiet until the state passed the Medical Cannabis Regulation and Safety Act (MCRSA) near the end of 2015. Shortly thereafter, the Cotati City Council adopted a resolution to its Land Use Code to specifically prohibit the cultivation of cannabis in all of the city’s zoning districts (Resolution 2016-4). The City Council then followed up with a moratorium on all commercial cannabis activities. It was clear that the moratorium would be temporary as nearly 79% of Cotati residents voted in favor of a ballot measure establishing a commercial cannabis tax. The tax measure granted the city the authority to tax cannabis cultivators up to $25 per square foot of cultivation area, or up to 8% of gross receipts (all other cannabis businesses would also be subjected to the 8% tax).

New Cannabis Law: On February 13th of this year, the City Council lifted its moratorium and adopted a comprehensive cannabis ordinance to regulate commercial cannabis activities. It’s important to note that prior to enacting the cannabis ordinance, the City Council held public hearings in October and January and made amendments to the ordinance based on public comments. This process and result shows how important it is to show up at local hearings and voice your opinion.

Here are some of the ordinance’s highlights:

  • Authorizes both medical and adult-use cannabis activities.
  • Authorizes up to two retail licenses (one can be a microbusiness).
  • Authorizes one delivery-only retailer license.
  • Authorizes up to five indoor cultivation permits.
  • Outdoor cultivation is prohibited.
  • The City will cap the number of manufacturing, distribution, delivery and testing permits at seven. That’s cumulative across the four license types. However, a distribution license issued in conjunction with another permit will not count against the cap.
  • Volatile and non-volatile cannabis manufacturing is allowed, but volatile manufacturers will require an additional permit.
  • Edible manufacturers will need to obtain a Sonoma County Health permit.
  • On-site consumption is prohibited.
  • Permits will be issued for up to two years before renewal.
  • Allows for the sale of promotional items such as clothing and hats (the 2007 ordinance banned such sales).
  • The City decided on a tax rate of less than the 8% authorized by the tax ballot measure. Cultivators will be taxed at 2% of gross receipts or $5 per square foot of cultivation, manufacturers at 1% of gross receipts, and retailers at 3% of gross receipts.
  • Up to two cannabis plants or a maximum of twenty square feet of plant canopy may be cultivated outdoors for personal use, so long as the cultivation is attached to one residential unit (outdoor cultivation is prohibited in multi-family dwelling units).

With the ordinance in place, the City just recently released a request for proposal (RFP) for businesses to apply for a cannabis permit. The RFP will score applications based on the following forty-five point scale:

  • Project description, site plan, and community benefit (10 points).
  • Environmental Quality (10 points).
  • Safety and Security Plan (10 points).
  • Operating Plan (10 points).
  • Experience (5 points).

Since the total number of cannabis permits is capped at fourteen, the application process is sure to be competitive. Cotati is a small city (approximately 7,300 residents) so starting with a cap and moving cautiously is a reasonable first step for the city – especially considering the fact that Cotati is allowing seed to sale license types. A slow and thoughtful approach, with strong community support, will hopefully prevent political reversals and legislative bans (you know who you are, Calaveras County).

If you’re interested in applying for a commercial cannabis license in Cotati, mark your calendar: the March 26th deadline to submit applications is coming up quickly. And good luck!

When California’s state legislature passed the Medical Cannabis Regulation and Safety Act (MCRSA) back in 2015, it was the first time that California enacted a statewide licensing and regulatory regime for commercial cannabis businesses. Prior to the passage of the MCRSA, cannabis collectives and non-profits in California were operating under the Compassionate Use Act of 1996 (Prop 215), Senate Bill 420 a/k/a the Medical Marijuana Program Act (passed in 2004), and the California Attorney General guidelines that were issued in 2008 (bonus points if you knew that current Governor Jerry Brown was the AG at the time).

The pre-MCRSA landscape allowed collectives, co-ops, and non-profits to proliferate throughout the state with no real oversight. That all ended with the enactment of MCRSA and passage of the Adult-Use of Marijuana Act (AUMA) by California voters in November of 2016. Then, in June of 2017, the California State Legislature passed the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to create one regulatory system for both medicinal and adult-use cannabis businesses. Under MAUCRSA, cannabis businesses are regulated and licensed mainly by three state agencies: the Department of Food and Agriculture (regulates cultivators), the Department of Public Health (regulates manufacturers), and the Bureau of Cannabis Control (regulates distributors, laboratories, retailers, delivery-only retailers, and microbusinesses). These three governing bodies have since released hundreds of pages of regulations (which we recently covered in a webinar). Just like that, cannabis operators had to deal with a whole new playing field.

california marijuana MAUCRSA
Did California issue too many cannabis rules?

For many of the collectives, co-ops, and non-profits that existed prior to MAUCRSA, making the transition from an unregulated industry to a tightly regulated one has been difficult. In order to receive a cannabis license, a cannabis business has to meet regulations issued by its local jurisdiction as well as the state’s. For many in the cannabis industry, the cost of compliance is a barrier too high for them to meet. These businesses and individuals are not able to satisfy zoning restrictions, environmental regulations, and security requirements, or manage a draconian tax burden. If the goal of cannabis regulation in California is to take cannabis production and sales out of the illegal market and into the regulated market, the initial results are concerning.

It’s under this backdrop that the California Growers Association (CGA) recently released a report detailing the difficulties that cannabis operators are facing with coming into compliance with local and state regulations. In its report, the CGA estimates that less than one percent (yes, you read that correctly) of California’s cultivators have obtained temporary licenses from the state as of February 7. The CGA asserts that it’s not operational inefficiencies that will prohibit small cultivators from competing in the regulated market, but the cost of compliance and land-use restrictions that prevent them from entering the legal market in the first place. Many cannabis operators–some whom have been in the industry in one way or another for over twenty years–may be forced to close up shop. Others may decide to stay in the illegal market because the cost of compliance is too burdensome, contrary to the stated intent of the MCRSA and AUMA.

Let’s be honest: the illegal market will never disappear entirely, but that doesn’t mean regulations should allow the illegal market to thrive. A burgeoning black market will negatively impact the bottom line of cannabis businesses that have gone through the process of obtaining a state license. A crackdown by law enforcement and state regulators (and potentially the federal government) will become inevitable. The BCC recently released a number of cease and desist letters, and local jurisdictions, such as San Luis Obispo County, are gearing up to pursue non-compliant operators. Although enforcement is a necessary tool, state and local governments need to explore more options to bring a larger number of cannabis operators into the regulated market. In that vein, the California state legislature is looking into new avenues for cannabis businesses to thrive– one example is the introduction of Assembly Bill 2641 (which we recently covered here). AB 2641 would allow cultivators and manufacturers to sell directly to their customers at temporary cannabis events. This is definitely a step in the right direction, but California needs to do more to ensure that cannabis operators are able to participate in the new legal marketplace generally.

The AUMA allows the state legislature, by a majority vote, to make amendments that will reduce the barriers of entry into the legal cannabis market. The CGA report lists a number of actions that California can take: allowing small cultivators and manufacturers to continue to operate while they obtain licensure, encouraging local governments to enact more lenient zoning requirements, and lowering the insurance requirements for smaller cannabis businesses are just a few of the actions the report highlights.

In the end, the public, the environment, and law enforcement will all be better off if California refines its regulations so that more cannabis operators can participate in the legal market. Because of California’s size and history, how the state handles cannabis regulation will have an enormous influence on the future of the cannabis industry throughout the United States. Let’s hope that California can lead the way.

San Luis Obispo California cannabis
SLO is thinking through its options for cannabis.

California has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we cover who is banning cannabis, who is embracing cannabis (and how), and everyone in between. For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your California marijuana business, how to keep it legal, and what you will and won’t be allowed to do.

Our last California Cannabis Countdown post was on the City of Redding, and before that the City of San Rafael, City of Hayward, Alameda County, OaklandSan FranciscoSonoma County, the City of Davis, the City of Santa RosaCounty and City of San BernardinoMarin CountyNevada County, the City of Lynwood, the City of CoachellaLos Angeles County, the City of Los Angeles, the City of Desert Hot SpringsSonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County and the City of Emeryville.

Today’s post is on the City of San Luis Obispo (not the County). We’ll provide an update on what the County is up to next week.

Welcome to the California Cannabis Countdown.

LocationSan Luis Obispo (affectionately referred to as SLO) is a city in San Luis Obispo County and is home to California Polytechnic State University (well sort of, since Cal Poly’s campus sits just outside the City limits and is part of the County). SLO is located in California’s Central Coast at about the halfway point if you’re driving from San Francisco to Los Angeles. If you need to spend the night or make a pit stop, check out the quirky Madonna Inn.

History with Cannabis: San Luis Obispo currently prohibits all commercial and industrial cannabis business activities. The City, like a many number of other California jurisdictions, enacted its ban prior to January 01, 2018 (SLO enacted its cannabis prohibition ordinance in March of 2017). The City’s prohibition wasn’t meant to be permanent as nearly sixty-eight percent of SLO voters approved the Adult-Use of Marijuana Act (a/k/a Prop 64). Instead, the purpose of the City’s ban was to act as a temporary stopgap while the City sought community feedback for a long-term cannabis solution. This “prohibit while we study the issue dance” is currently playing out throughout California. Since its moratorium, the City held a number of hearings and workshops in order to engage the community so that it could begin to develop a cannabis regulatory structure. To that end the City’s Community Development Director (CDD) prepared a report for the City Council to discuss today, February 20th.

Proposed Cannabis Laws: The CDD report is the first step in enacting a cannabis ordinance. When drafting the report, the CDD used community feedback and cannabis regulations in other jurisdictions as guideposts. The goal of the report is to propose an ordinance that will regulate the cannabis marketplace and that is acceptable to the City Council and the community. Here are some of the report’s highlights:

  • It authorizes both medical and adult-use cannabis activities.
  • Authorizes up to three retail licenses.
  • Delivery is allowed.
  • Outdoor cultivation is prohibited.
  • There will be three types of indoor cultivation license types: Special Cultivator (up to 5,000 square feet), Small Cultivator (up to 10,000 square feet), and Nursery (up to 10,000 square feet).
  • Special and Small cultivators can include processing.
  • There will be a citywide cultivation cap of 70,000 square feet.
  • Only non-volatile cannabis manufacturing is allowed.
  • Distribution and testing are allowed.
  • Onsite consumption and cannabis events are prohibited.
  • Applications would be reviewed and ranked by a third party consultant (the City is still working on a criteria for ranking applications).
  • The CDD asked whether cannabis products with high concentrations of THC should be banned.
  • The CDD asked whether persons under the age of 21 (regardless of medical recommendation) should be prohibited from dispensaries.

The CDD report is by no means a finished product, as further direction from the City Council and input from the community can drastically alter (for better or worse) what the final cannabis regulation will look like for SLO. If all goes well, the City will hold another hearing in front of the Planning Commission on March 28 and potentially adopt a resolution on May 01. We’ll be sure to keep you posted.