SUPERVISORS MOVE FORWARD ON CANNABIS TAX INITIATIVE AND SAFETY MEASURES FOR UNINCORPORATED AREAS

By Henri Migala and Miriam Raftery

June 20, 2022 (San Diego) – San Diego County Supervisors on June 15 approved a draft resolution for a ballot initiative to tax cannabis businesses in unincorporated areas.  The measure will still need final board approval on June 28 before going before the voters on the November ballot.

Supervisors also voted to have staff report back on a proposal by Supervisor Joel Anderson aimed at reducing disproportionate impacts on unincorporated communities through 16 measures that would enhance public safety, limit locations of cannabis businesses, require education on cannabis negative impacts and drug interactions, and require funds from a cannabis tax be used to benefit communities.

The vote on the ballot initiative was 3-1, with Supervisor Jim Desmond opposed.  Supervisor Nora Vargas was away at a National Association of Counties conference.

The vote on Anderson’s 16-point proposal on disproportionate impacts was 4-0.

The issue of taxing cannabis businesses in the unincorporated areas, if put on the November ballot, would be voted on by all voters countywide.

Supervisor Jim Desmond raised concern over the inequity of having all county voters decide whether to impose a tax on cannabis businesses only in the unincorporated areas.  Even Supervisors representing voters outside the unincorporated regions voiced concerns, but county staff explained that state law mandates this process.

Chairman Nathan Fletcher called the actions to advance the Socially Equitable Cannabis Program a step toward “a safe, legal cannabis regulation.”

Supervisor Anderson, in introducing his 16 measures, noted that unincorporated communities “already lack equity with regards to public safety, infrastructure, transit options, health, education and economic opportunity compared to incorporated residents.” Noting that unincorporated areas will also have greater impacts from legal cannabis operations, adding, “the needs of the communities impacted by the facilities deserve equal consideration, as all other stakeholders.”

Anderson’s measures include steps to:

• Add regional parks, trails, and recreational facilities, as well as places of worship, childcare centers, public libraries, and residential care facilities to the list of “sensitive uses” in the General Plan and/or Zoning Ordinance;
• Require 1,000 feet of setbacks of a cannabis facility from any sensitive use, or from any other cannabis facility;
• Ban billboard advertising for cannabis within 1,000 feet of any sensitive use site;
• Have a design checklist to discourage minors from trying to visit cannabis sites;
• Provide each community planning area with options to have some limits on cannabis facilities and have a maximum limit on indoor consumption lounges;
• Define “cannabis event” and allow restrictions based on noise, road safety, etc.
• Consider requirements for employment and licensing similar to the ABC requirements for alcohol establishments;
• Establish a Community Equity Contribution Program that might allow fee waivers in some cases and use funds from cannabis taxes for education, community beautification, and other community related benefits;
• Enhance enforcement operations, such as shoulder tap/minor decoy stings similar to those used to prevent alcohol sales to minors;
• Set limits on cannabis deliveries to assure they are from licensed facilities and limit hours;
• Consider certain limits on cannabis events, onsite consumption lounges, and cannabis cultivation practices;
• Explore how to incentivize local ownership;
• Determine if workers could face health risks at indoor consumption lounges and if so, establish protective measures;
• Consider whether code enforcement penalties specific to cannabis facilities are allowed and if so, have enforcement penalties that could include fines, temporary closure, or revoking permits;
• Develop an evidence-based marijuana prevention curriculum to be made available to local schools;
• Prohibit cannabis retail staff from providing medical advice;
• Create an education program on risks for pregnant women from marijuana use;
• Require warning signs in dispensaries about potential negative health impacts of combining cannabis with prescription drugs;
• Set funding requirements for enforcement against illegal dispensaries.

Cannabis Dispensaries: Old and New

As of October 2021, the Board adopted ordinance amendments to allow the five existing

cannabis dispensaries that were in operation prior to the County’s 2017 prohibition on new medical facilities to continue operations and sell commercial medicinal and adult-use cannabis. Currently, no new dispensaries or other cannabis operations are permitted under the existing ordinances.

It is anticipated that the County would make commercial cannabis permits available to operators in the unincorporated area in spring-summer 2024. At that time, new permits could be issued to the following types of cannabis businesses: cultivators (including nurseries), distributors, manufacturers, retailers, and testing laboratories.

Cannabis businesses also support a wide variety of other businesses that are not a part of the cannabis supply chain. Cultivators support garden supply stores, greenhouse manufacturers, irrigation suppliers, soil manufacturers, and a wide variety of contractors, including building and construction, lighting and electrical, permitting, and engineering.

Manufacturers support many of these same businesses, plus specialized tooling and equipment manufacturers, and product suppliers for hardware, packaging, and labeling.

All these businesses support, and are supported by, a host of ancillary businesses, such as bookkeepers, accountants, tax preparers, parcel services, marketing and advertising agencies, personnel services, attorneys, mechanics, facilities maintenance, security services, and others.

The cannabis business entrepreneur profits and the salaries paid to employees will move into the local economy, support stores, restaurants, car dealerships, contractors, home sales, and other businesses.

Background of Commercial Cannabis Activities

On January 27, 2021, the Board of Supervisors voted to approve the development

of a Cannabis Permitting Program that includes numerous elements to prioritize social equity, access, and business opportunities. As a result, the Board directed the Chief Administrative Officer (CAO) to explore the implementation of a commercial cannabis ordinance, regulations, and programs with a social equity component for the unincorporated area, including the development and implementation of a commercial cannabis taxation program.

At the May 10, 2022 meeting, the Board directed the CAO to take six actions:

1.       Return to the Board on June 14, 2022 with all actions necessary to place the Ordinance on the ballot for the November 8, 2022, General Election;

2.       Ensure the ordinance allows the Board to have the option to tax cultivation on a gross receipts or square footage basis;

3.       Include a component in the ordinance to address relief for crop failure in the cultivation market;

4.       Identify the tax as a General Tax;

5.       Indicate the Board will return at a later date to set the tax rates; and

6.       Specify that the General Tax will only apply to the unincorporated area.