TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Alexandria Latragna, Policy and Management Analyst
SUBJECT:Title
Consideration of Presenting to the Voters Ballot Measures Concerning Commercial Cannabis (City Manager Moe).
(Estimated Time: 1 Hr.)
ADOPT RESOLUTION NOS. 22-0098 AND 22-0109
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council:
1. Adopt Resolution No. 22-0098 submitting to the voters at the November 8, 2022, election a measure prohibiting the sale of commercial cannabis in Manhattan Beach.
2. Adopt Resolution No. 22-0109 submitting to the voters at the November 8, 2022, election a measure establishing a tax on commercial cannabis activity should it ever become permissible in the City.
3. Direct City Attorney to revise the Council-selected resolution(s) and measure(s) in accordance with Council direction and for internal consistency, if necessary.
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FISCAL IMPLICATIONS:
If Council opts to proceed with two measures, according to Los Angeles County’s Election Estimating Calculator on its website, the approximate costs of adding two additional ballot measures to the November 8, 2022, ballot is $38,281.26. If the prohibition measure prevails, there will be no tax revenue. Anticipated annual tax revenue if the proposed Tax Measure is placed on the ballot and receives the requisite number of votes at the election is estimated to be between $0 and $960,000. There may be additional tax revenue depending on whether other cannabis uses are taxed. Anticipated annual tax revenue if the proposed Regulatory/Tax Measure is placed on the ballot and receives the requisite number of votes at the election is estimated to be between $240,000 and $320,000. There may be additional tax revenue depending on whether other cannabis uses are subsequently allowed.
BACKGROUND:
A cannabis measure (“The Cannabis Industry Measure”) has qualified for the November 8, 2022, General Municipal Election. If adopted, the Cannabis Industry Measure would, among other things:
a. Repeal the City’s existing prohibition of all commercial cannabis activity;
b. Require the City to issue permits to three cannabis retailers at locations (i) in certain commercial districts, subject to exceptions, (ii) more than 1,000 feet from identified schools and youth centers, and (iii) more than 850 feet from identified day care centers (See attached map that indicates the areas where retailers could locate if the voters pass the Cannabis Industry Measure);
c. Establish a point system for evaluating and ranking applicants; and
d. Make the City Manager the approval authority for the three retailers, based upon a specified point and ranking evaluation system dictated in the measure.
The Cannabis Industry Measure does not impose a City tax on cannabis businesses.
Pursuant to state law, the City Council may place additional measures on the ballot for consideration by the voters. At previous City Council meetings, the City Council directed staff to draft additional measures.
DISCUSSION:
The following four measures have been drafted by the City Attorney, per City Council direction at the July 5, 2022, meeting. The Council may decide to place one or more of the following measures on the ballot for the November 8, 2022, General Municipal Election:
1. Measure Prohibiting Commercial Cannabis. RECOMMENDED. A measure banning all commercial cannabis activity (unless otherwise permitted by state law) reaffirming the ordinances previously adopted by the City Council prohibiting commercial cannabis activity in the City. The Measure Prohibiting Commercial Cannabis is attached to Resolution No. 22-0098.
If adopted by the voters, the prohibition cannot be repealed or amended, except by the voters at a subsequent election at least one year after November 8, 2022.
2. Measure Taxing Commercial Cannabis. RECOMMENDED. A measure establishing a tax on commercial cannabis should the City’s current prohibition on commercial cannabis activity be repealed. This Tax Measure does not permit any commercial cannabis activity. The Measure Taxing Commercial Cannabis would establish a minimum tax of 15% and maximum tax pf 20% of gross receipts on sales of cannabis at retail stores, and other taxes on other cannabis activities. Those retailers located outside of the City, but delivering to locations within the City, would be required to track gross sales of such deliveries and pay an annual business license tax.
If adopted by the voters, the measure cannot be repealed except by the voters at a subsequent election at least one year after November 8, 2022. The aforementioned minimum tax of 15% of gross receipts cannot be lowered, nor can the aforementioned maximum of 20% be increased, except by voters at a subsequent election at least one year after November 8, 2022.
If the Council were to place both measures on the November ballot, both measures would prevail if each received the requisite number of votes. The net effect would be that the status quo would be preserved - commercial cannabis activity would continue to be banned in Manhattan Beach - but, if either state law or a subsequent election permitted commercial cannabis activity, or any aspect of it, such activity would be taxed.
3. Measures Regulating and Taxing Commercial Cannabis. With a stated effort to simplify the voters’ choices, the Council requested two alternative versions of the measure regulating and taxing commercial cannabis for its consideration:
A. Standard Measure Regulating and Taxing Commercial Cannabis. A measure establishing regulations and taxing one or two (to be determined by the Council) retailers at certain, limited locations. The draft measure limits retailers to one. As drafted, the Measure Regulating and Taxing Cannabis would, if adopted by the voters, permit one cannabis retailer to operate on property that is located in the commercial general district (CG); at a location more than 1,000 feet from the beach, parks, religious institutions, schools, libraries, and any other cannabis retailer; and 850 feet from day care centers. With such buffers, the potential location of the site (or sites), would be limited to two portions of Sepulveda Boulevard in the CG Commercial General zoning district. The sensitive uses have been identified on the attachment titled Staff’s Suggested Buffer Map with 1,000 Foot Buffers. If the Council chooses to move forward with presenting this measure to the voters, they should select the number of permissible retail stores: (a) one; (b) two; or (c) up to two. Also, at least one Councilmember suggested that the buffer should be 1,500 feet from certain sensitive uses.
This Measure would: allow the City Manager to promulgate selection criteria, regulatory requirements and security measures, etc.; issue a permit to one retailer; and impose the identical taxes imposed by the Measure Taxing Commercial Cannabis, including the minimum tax of 15% and maximum tax of 20% of gross receipts, plus other potential taxes on other cannabis activities if such activities are subsequently authorized by law.
B. Streamlined Measure Regulating and Taxing Commercial Cannabis. A streamlined measure establishing the same key regulations and identical tax provisions (including a minimum tax of 15% and maximum tax of 20% of gross receipts, and other taxes) as Measure 3A, but streamlined to make the measure easier to digest. If the Council opts for this choice instead of the longer version, it would adopt the same resolution, but with the streamlined ordinance attached.
If either Measure Regulating and Taxing Commercial Cannabis is placed on the ballot and then receives the requisite number of votes, such measure cannot be repealed except by the voters at a subsequent election at least one year after November 8, 2022. Three provisions cannot be amended without an election: (1) the aforementioned minimum tax of 15% cannot be lowered; (2) the aforementioned maximum tax of 20% cannot be increased; and (3) the maximum number of retail stores permitted cannot be increased.
Conflicting Ballot Measures
California Election Code Section 9221 specifies that, “If the provisions of two or more ordinances adopted at the same election conflict, the ordinance receiving the highest number of affirmative votes shall control.” Practically speaking, that means if the City were to place an additional measure on the ballot for the November 8 General Municipal Election that conflicts with the Cannabis Industry Measure or other measures, the measure passing (with at least 50% + 1 “yes” votes) with the highest number of votes prevails and would cancel out any other conflicting initiatives. The Measure Taxing Commercial Cannabis does not conflict with any of the measures discussed in this staff report. The attached chart provides a simple comparison of the four measures on key elements.
At the July 5, 2022, meeting, Council requested data about the history and outcomes of competing measures. According to a journal article entitled, “Less Can Be More: Conflicting Ballot Proposals and the Highest Vote Rule,” published in the University of Chicago Law School’s “The Journal of Legal Studies,” the conflicting ballot proposal (“measure”) closest to the status quo typically receives the highest number of affirmative votes and prevails under the highest vote rule (the California model). The study identified every conflicting measure that appeared on the ballot between 1980 and 2006 in eight states that frequently use direct democracy: Arizona, California, Colorado, Massachusetts, Montana, Nevada, Oregon, and South Dakota. There were 56 instances of competing proposals. In 24 of the 56 sets of competing measures, the measure closest to the status quo received the most votes. In 13 sets of competing measures, the measure closest to the status quo did not get the most votes. In the other 19 instances, they could not determine which measure was closest to the status quo. Thus, according to the study, the conflicting ballot measure closest to the status quo (staff’s first proposed measure, attached to Resolution No. 22-0098, readopting the existing prohibition, maintains the status quo) typically receives the highest number of affirmative votes and prevails under the highest vote rule, which California has per Elections Code Section 9221 quoted above. Staff may have more recent information regarding conflicting measures at the Council meeting.
Please note that each resolution includes: standard provisions required by the County to call the election; the ballot question; and the respective draft measure attached as an exhibit.
CONCLUSION:
Staff recommends that the City Council:
1. Adopt Resolution No. 22-0098 submitting to the voters at the November 8, 2022, election a measure re-adopting the City’s existing ordinances prohibiting the sale of commercial cannabis anywhere in Manhattan Beach.
2. Adopt Resolution No. 22-0109 submitting to the voters at the November 8, 2022, election a measure establishing a tax on commercial cannabis activity should it ever become permissible in the City.
3. Direct City Attorney to revise the Council-selected resolution(s) and measure(s) in accordance with Council direction and for internal consistency, if necessary.
Staff also recommends that the City Council not proceed with placing the other draft measures on the ballot.
A summary of the proposed measures has been provided as an attachment for Council consideration to assist in the decision making process.
PUBLIC OUTREACH:
After analysis, staff determined that public outreach was not required for this issue.
ENVIRONMENTAL REVIEW:
The attached measures address compliance with the California Environmental Quality Act, Public Resources Code Sections 231000 et seq. (“CEQA”) and 14 Cal. Code Re. Sections 15000 et seq. (“CEQA Guidelines”).
ATTACHMENTS:
1. Resolution No. 22-0098 (Measure Prohibiting Commercial Cannabis)
2. Resolution No. 22-0109 (Measure Taxing Commercial Cannabis)
3. Resolution No. 22-0110 (Measure Regulating and Taxing Commercial Cannabis, or Streamlined Measure)
4. Staff’s Suggested Buffer Map with 1,000 Foot Buffers
5. Map with 1,500 Foot Buffers (Comparison Purposes Only)
6. Cannabis Measures Comparison Chart