folder Filed in Policy
State, County and Local Cannabis Regulations
Peter Cervieri

It’s rare that during the same short period of time, every city and county across a state as large as California must draft local regulations and ordinances related to a topic that has enormous consequences for a lot of people, but one that elected officials tasked with the responsibility of setting up local regulatory frameworks know nothing about.

That time is now. The topic is cannabis. The stakes are high. The gold rush is on. California is the worlds 6th largest economy. Recreational cannabis’ potential to create a wave of new businesses, profits, wealth, and taxes for cash starved municipalities has been discussed ad nauseam. It’s also a medicine. The same local decision makers are also tasked with deciding how sick people within their communities get access to high quality, safe, medicine.

Local cities and counties are, in effect, competing with each other. If a city imposes an 8-12% local tax on cultivation (Long Beach?!), cultivators can set up their facilities in an adjacent jurisdiction with more favorable tax rates. If Santa Monica drags its feet on dispensary licenses, all the better for Venice and West Hollywood.

We recently held a discussion at The Abbey in West Hollywood on State, County and Local Cannabis Regulations and Ordinances. The goal was to update attendees on state issues, as well as the local discussions being held in city halls around southern California.

Lynne Lyman from the Drug Policy Alliance kicked things off with an update on federal and state policy issues that affect local operators and communities. Jonatan Cvetko of Angeles Emeralds, spoke about Los Angeles County. Courtney Freeman of White Buffalo Cannabis, provided an update on Santa Monica.

It’s important for people to attend these local council meetings. Marin County is the cautionary tale of what happens when the cannabis supporters don’t show up in numbers with reasoned arguments and responses to the typical objections (the kids, gateway drug, riff-raff loitering around stores, the smell, etc). The majority of Marin County residents voted for Prop 64. But the local ordinances meetings were dominated by people who didn’t want (medical) dispensaries in their neighborhoods. The end result is that Marin will have no medical dispensaries in the foreseeable future. All 10 medical dispensary applicants were rejected. Recreational conversations have been punted well into the future. Live in Marin? Sick? Good luck.

At the state level, Governor Jerry Brown is trying to reconcile the medical cannabis and recreational cannabis regulatory structures.

Cannabis Trailer Bill Intent Language

The Medical Marijuana Regulation and Safety Act enacted in 2015 created a regulatory framework for the licensing and enforcement of the cultivation, manufacture, transportation, storage, and distribution of medical cannabis in California. Proposition 64, the Adult Use of Marijuana Act, made the recreational use of cannabis legal to people over the age of 21. The effective date for both measures is January 1, 2018.

It is the intent of the Governor’s Budget that this language once drafted will move the State forward with the regulation of both medical cannabis and adult use cannabis. The State will need one regulatory structure of cannabis activities across California. Implementing the current medical and adult use cannabis statutes separately will result in duplicative costs. Additionally, a separate regulatory framework for each would lead to confusion among licensees and regulatory agencies, undermining consumer protection and public safety.

This reconciliation process will affect the various constituents within the industry.

I spoke to Kenny Morrison, Founder of VCC Brands, an edibles company, and also President of the California Cannabis Manufacturers Association.

I asked Kenny to comment on the Governor’s proposal that manufacturing for recreational and medical can’t happen in the same physical space / location.

Kenny: This was the CA administration’s way of protecting cannabis businesses from the rhetoric of the federal administration–Trump and sessions have conveyed an understanding for the need for medical marijuana while being less accepting of non-medical. Given this information Governor Brown felt it was best to separate the licenses and not allow the two to co locate. This means every license type, whether you’re a cultivator, manufacture, or retailer would have to invest in and build redundant facilities to participate in the entire cannabis market. (medical and recreational). 

Aside from the fact that cannabis businesses are already extremely risky tolerant and would have to double the size of their startup investment, there’s another unintended consequence: this creates double the cannabis related businesses in the state, something that many naysayers would complain about. The city might only want two or three storefronts, but now they’re looking at 4 to 6. There could be a host of new zoning issues, etc. 

Another concern is that if we’re scared of the feds entering the state to shut places down, why bifurcate the businesses and make it so clean and tidy for them? Perhaps it’s better to make them think twice about shutting down a facility that not only serves recreational consumers, but serves the needs of serious medical patients as well. 

Peter: This separation of each company’s medical / recreational operations idea came about around the time it became clear that Trump would be President and Sessions AG? i.e., it wasn’t proposed prior to this but as a reaction to it?

Kenny: Correct. This was not proposed in MCR essay or prop 64. This notion came about when the governor created his reconciliation of the two separate laws

Peter: It sounds like the intentions are good? But you have concerns whether this is the right approach given the problem of prospective federal intervention. From a manufacturers perspective, what would you like to see regulation-wise regarding your ability to operate in both markets if you want to do so (given the shadow cast by the federal government over recreational)?

Kenny: I was in the governors office yesterday thanking his staff for their thoughtful approach while simultaneously letting them know we the industry were willing to take the risk of serving both markets from one facility

Peter: Do manufactures feel like they have the ear of the governors office (and / or state assembly members) and their voices are being heard? While you may or may not ultimately agree with however this plays out, do you feel satisfied with the process?

Kenny: Definitely. Just yesterday I visited six offices of various senators and assembly members and had sit downs. We have been advised by everyone (our lobbyists and others) that if we get 60% of what we want we should consider it a giant success. This is a complicated issue. There’s not much of a roadmap for what we’re trying to pull off here. This is the biggest market for cannabis on the planet. Opinions and perspectives are bound to vary. Almost every single stakeholder is genuinely trying their best to do what’s right based on their lens and perspective. There’s no big perpetrator of conspiracies out there, other than the obvious one or two. 

Considering everything I’ve aspired to do with cannabis/for cannabis in my career, this process of helping shape policy is sort of the culmination of all of it. Up to this point anyways. I’ve envisioned this moment for well over a decade now. 

At the local level, Courtney Freeman, CEO of White Buffalohas been attending Santa Monica city council meetings. She provided an update:

Currently, any commercial activity related to cannabis within Santa Monica city limits is considered illegal. With seventy-one percent of Santa Monica citizens voting for recreational cannabis, it is clear that the Santa Monica populace welcomes both medical and recreational cannabis.  The Council is now under mounting pressure to take the necessary steps to both prepare for and implement existing as well as new ordinances.

On March 7, 2017, the Santa Monica City Council meeting was dedicated to a study session regarding cannabis regulations. Two years prior, back in 2015, the Council established an ordinance authorizing two medical cannabis dispensaries in Santa Monica. To date, no steps have been taken to open these storefronts.  With the advent of Prop 64, the Council is faced with additional state regulations to consider regarding recreational cannabis sales in the city.  

Two questions are pervasive, “When will the two dispensaries open and where will they be positioned?”  For hopeful cannabis entrepreneurs, another question arises, “How do we apply for one of these two permits?”  The purpose of the study session was to hear the recommended course of action from city staff in order to move forward in introducing cannabis access to Santa Monica.

Approximately forty individuals attended the Council meeting with around 20 of those in attendance addressing the Council with topics for consideration.  This meeting was a great example of how citizen participation can illuminate topics previously not considered.  While the dispensary permits were at the forefront of Council minds, several attendees presented other types of businesses that would also conduct commercial activities in the cannabis industry such as manufacturing of cannabis products and business operations.  

In accordance with the staff recommendation, the council will commence in drafting the terms of the regulatory permits and define a selection process to determine who will qualify to open the two medical dispensaries.  An evaluation committee will be established to process the dispensary permit applications.  The Council expects to have this evaluation committee in place by September of 2017.

While we wait these next few months for new developments, critically ill cannabis patients in Santa Monica are dependent on cannabis delivery service, caregiver provisions, or travel to nearby permitted locations such as Venice or West Los Angeles to obtain their medicine. Santa Monica’s approach to permitting recreational cannabis is also yet to be announced. It is worth noting that the majority of Council members did express support for cannabis commerce in Santa Monica.