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HomeMy WebLinkAbout4.1 Recreational Cannabis Act: Discussion of Options for Consideration in the Village of Mount Prospect 9/27/2019 BoardDocs®Pro v „u lr, s77 Agenda Item Details Meeting Sep 24, 2019 - JOINT VILLAGE BOARD AND PLANNING AND ZONING COMMISSION WORKSHOP-COMMITTEE OF THE WHOLE AGENDA - Please note change in meeting time - Meeting will begin at 6:00 pm Category 4. DISCUSSION ITEMS Subject 4.1 RECREATIONAL CANNABIS ACT: DISCUSSION OF OPTIONS FOR CONSIDERATION IN THE VILLAGE OF MOUNT PROSPECT Access Public Type Discussion Public Content BACKGROUND Public Act 101-0027, which creates the Cannabis Regulation and Tax Act (the "Act"), was signed into state law on June 25, 2019 by the Illinois General Assembly. By legalizing the sale of adult use recreational cannabis in Illinois effective January 1, 2020, the Act will have immediate and significant impacts on local governments. The Act regulates possession, sale, and consumption of cannabis. It also defines the various types of cannabis business establishments and regulates each, with specific operational restrictions, discusses licensing and more. The Act is over 600 pages long, and there are a number of specific requirements and details in the Act that are not included here but can be accessed at the following link: httpLZjilg�a.gov/legislation/publicacts/101/101-0027.htm. For Illinois residents, possession will be limited to any combination of thirty (30) grams (about one ounce) of raw cannabis, 5 grams of cannabis concentrate; or cannabis-infused products (such as edibles or tinctures) containing up to 500 milligrams of THC. Possession limits under the Act differ for Illinois residents and out-of-state visitors, with visitors being allowed to possess half the amount of a state resident. In addition, medical cannabis patients have additional possession authority, including up to five (5) cannabis plants. Possession of cannabis is prohibited in public places, on the grounds of any preschool or primary or secondary school unless approved as a medical cannabis patient, in a vehicle not open to the public unless the cannabis is in a reasonably secured, sealed, tamper-evident container and reasonably inaccessible while the vehicle is moving, among other restrictions. Consumption and sales are also regulated. The following activities are prohibited under the Act: • Consumption of cannabis in any "public place." A "public place" is defined as "any place where a person could reasonably be expected to be observed by others", and includes all parts of buildings owned in whole or in part, or leased, by the State or a unit of local government. Public Place, by definition in the Act, excludes private residences. • Consumption of cannabis on school grounds; • Consumption "in close physical proximity" to persons under 21; • Smoking cannabis in any location where smoking is prohibited by the Smoke Free Illinois Act, including hospitals, restaurants, retail stores, offices, commercial establishments, etc. • Sale of cannabis to minors under the age of 21. Policy Discussion Overview As a next step, the Village Board should build consensus on policy decisions related to the Act's implementation. A key component in the policy discussion is the joint meeting with the Village Board and Planning and Zoning Commission scheduled at the September 24 Committee of the Whole meeting. The purpose of the meeting is two- fold: to hear open public testimony from stakeholders, as well as providing staff with direction to draft ordinances as appropriate. From the reports and analysis provided by staff and the Village Attorney and testimony from stakeholders, the Board will build consensus to opt out and prohibit recreational cannabis establishments or establish https://go.boarddocs.com/il/vomp/Board.nsf/Private?open&login# 1/4 9/27/2019 BoardDocs®Pro ordinances and code amendments to regulate and tax recreational cannabis facilities. Staff hopes stakeholders will share their comments at the meeting or by email (cannabisdiscussion@mountprospect.org) to participate in this policy discussion. Opt Out Option The impacts of opting out should be considered. Most obvious to note is that opting out simply prohibits the sale and associated growing and manufacturing businesses from occurring within the Village boundaries. It will not prohibit residents from purchasing cannabis elsewhere and consuming in legal locations (such as a private residence) within the Village. Certain societal impacts of legalization, such as impaired driving and medical emergency calls, will still apply to the Village even if an opt-out ordinance is approved. There are a variety of impacts the legalization of cannabis has on law enforcement. From DUI's, underage purchasing, and potential safety/traffic concerns, the Village must be prepared regardless if the Village Board ultimately choses to opt-in or opt-out of the Act. Due to the way cannabis is metabolized in the human body, a breathalyzer-type field sobriety test is not yet available. This leaves officers to assess impairment differently than they would assess for alcohol impairment. The Mount Prospect Police Department has two (2) Drug Recognition Officers (DRE), the highest type of certification available. Over 130 hours of training in classrooms and in the lab, with passing of a written test, is required to be a DRE Certified Officer. In addition, there is a second level of training, Advanced Roadside Impairment Driving Enforcement (ABIDE), which requires less time to complete (16 hours). It is recommended that several more officers in the department complete the DRE training and all officers received the ARIDE training to help identify cannabis impaired drivers. Obtaining crash statistics from States who have previously legalized cannabis is somewhat difficult, as data capturing methods are in their infancy, and could be skewed depending on the source. The motor vehicle insurance industry analyzed Colorado, Nevada, Oregon and Washington's crash statistics compared to their neighbors who had not legalized recreational cannabis. The results show a six percent (6%) increase in automobile crashes after legalization. Regarding fatal crashes Colorado, Oregon, and Washington State saw one additional fatality per 1 million residents the first year of legalization; however, these statistics returned to normal the second year after legalization. One concerning study from Colorado showed that 69% of cannabis users in that state admitted to driving high within the last year, with 27% admitting driving high almost daily. This study reinforces the importance of Mount Prospect Police officer training and DUI enforcement as noted above. Additional information on DUI statistics in states where legalization has occurred is included in the attached memo from John Koziol, Chief of Police. Opting out will not prohibit the existing medical cannabis dispensary from operating; however, it will prohibit this location from selling recreationally under the Act. The Act grants a first wave of licenses to existing medical cannabis dispensaries. The Village opting-out of recreational sale will have a direct impact on the future operations of this business and on the potential local sales tax revenue that would be generated through sales. Under the Act, the Village may impose an additional tax of up to 3.0% ("Cannabis Retailers Occupation Tax"). This is in addition to the 1.0% regular and 1.0% home-rule sales taxes already in place in the Village. The estimated local sales tax generated through a single recreational cannabis retailer is just over $400,000 per year. Additional details on this projection to follow. See a detailed financial projection in the attached memo from Amit Thakkar, Director of Finance. Opting out does not impact the amount of funds the Village will receive through the Cannabis Regulation Fund. Per the Act, 8.0% of state revenue deposited in the Cannabis Regulation Fund (consisting of state excise and sales taxes, and licensing fees) will be transferred to the Local Government Distributive Fund, to fund crime prevention programs, training, and interdiction efforts relating to the illegal cannabis market and cannabis-based DUIs. The groundwork for spending these funds is not yet in place; a sort of audit-based system is expected to ensure the funds are spent in accordance with the Act. Staff does not have an estimate of what these revenues will be for the Village. Regulate Recreational Cannabis Option The approval of the Cannabis Regulation and Tax Act has led to the creation of many different supporting businesses, including dispensaries, craft growers, cultivation centers, processors, transporters, infusers, etc. (See attached definitions). To focus the discussion, let's start with dispensaries. Cannabis Dispensing Organizations are facilities licensed by the Illinois Department of Financial and Professional Regulation to acquire cannabis from licensed cannabis business establishments for the purpose of selling or dispensing cannabis, cannabis-infused products, cannabis seeds, paraphernalia or related supplies to purchasers or to qualified registered medical cannabis patients and caregivers under the Act. Operational Restrictions https://go.boarddocs.com/il/vomp/Board.nsf/Private?open&login# 2/4 9/27/2019 BoardDocs®Pro • A dispensing organization shall submit a list to the State of the names of all service professionals that will work at the dispensary; • A dispensing organization's license allows for a dispensary to be operated only at a single location, between 6 a.m. and 10 p.m.; • A dispensing organization shall not: ® Produce or manufacture cannabis o Have fewer than 2 people working at the dispensary at any time while the dispensary is open; ® Sell cannabis or cannabis-infused products to a purchaser unless the dispensary organization is licensed under the Compassionate Use of Medical Cannabis Pilot Program, and the individual is registered under the Compassionate Use of Medical Cannabis Pilot Program or the purchaser has been verified to be over the age of 21; ® Enter into an exclusive agreement with any adult use cultivation center, craft grower, or infuser; ® Refuse to conduct business with an adult use cultivation center, craft grower, transporting organization, or infuser that has the ability to properly deliver the product and is permitted by the Department of Agriculture, on the same terms as other adult use cultivation centers, craft growers, infusers, or transporters with whom it is dealing; o Allow for the dispensing of cannabis or cannabis-infused products in vending machines; ® Transport cannabis to residences or other locations where purchasers may be for delivery; ® Enter into agreements to allow persons who are not dispensing organization agents to deliver cannabis or to transport cannabis to purchasers. ® Operate a dispensary if its video surveillance equipment is inoperative; o Operate a dispensary if the point-of-sale equipment is inoperative; o Operate a dispensary if the State's cannabis electronic verification system is inoperative; ® Violate any other requirements or prohibitions set by State rules. Product Restrictions • A dispensing organization must include the legal name of the dispensary on the packaging of any cannabis product it sells; • Dispensing organizations are prohibited from selling any product containing alcohol except tinctures, which must be limited to containers that are no larger than 100 milliliters; • A dispensing organization shall not: o Obtain cannabis or cannabis-infused products from outside the State of Illinois; o Sell clones or any other live plant material; ® Accept a cannabis product from an adult use cultivation center, craft grower, infuser, dispensing organization, or transporting organization unless it is pre-packaged and labeled in accordance with the Act and any rules that may be adopted pursuant to the Act. Building-related Restrictions • A dispensing organization may only accept cannabis deliveries into a restricted access area. Deliveries may not be accepted through the public or limited access areas unless otherwise approved under the Act; • A dispensing organization must keep all lighting outside and inside the dispensary in good working order and wattage sufficient for security cameras; • A dispensing organization shall not operate drive-through windows. If the Board determines not to opt out, staff recommends a draft ordinance and certain text amendments to the use table, which result in the following restrictions: • Recreational cannabis dispensaries, "Cannabis Dispensary Organizations", as a conditional use in the B-3 Community Shopping District and as a permitted use in the I-1 Limited Industrial District. • All other cannabis business establishments, a cultivation center, craft grower, processing organization, infuser organization, or transporting organization, as permitted uses in the I-1 Limited Industrial District. Applicable Chapter 11 regulations including specific building enhancements (security cameras, lighting), conduct of employees, and prohibition of on-site consumption are also included in the amendments, as well as the operational restrictions noted above. Zoning distance requirements would prohibit all cannabis business establishments, including the recreational cannabis dispensaries, within 100 feet from any school, church or hospital. This distance requirement is consistent with the Village's location restrictions on Liquor Licenses, which is the same as the State requirements (Illinois State Statutes Chapter 235). A map is attached which identifies which parcels in the Village are within 100 feet of a school or church. https://go.boarddocs.com/il/vomp/Board.nsf/Private?open&login# 3/4 9/27/2019 BoardDocs®Pro In addition, no cannabis business establishment may be located within 1,500 feet of another cannabis business establishment as denoted in the Act. Alternatives: 1. Motion to draft an ordinance prohibiting cannabis business establishments in the Village. 2. Motion to draft an ordinance regulating and taxing cannabis business establishments. 3. Discretion of the Village Board. Policy Decision Flowchart: 1. Should the Village allow the retail sale of recreational cannabis? a. If yes: As a permitted use in the I-1 with a Village license? b. If yes: As a conditional Use in the B-3 with a Village license? c. If yes to a and/or b: Require 100 feet distance from schools, churches, or hospitals following the Village liquor license requirements? d. If yes to a and/or b: Should retail be allowed only in conjunction with a medical dispensary? 2. Should the Village allow on-site consumption of cannabis either at licensed (dispensaries) or unlicensed facilities, (aka "cannabis cafes")? 3. Should the Village allow other cannabis business establishments, including craft growers, cultivators, processors, transporters or infusers? Budget Impact: Estimated $440,000 in retail sales taxes annually for each retail dispensary, if approved. In either case (opt-in or out), the Village will receive its portion of the state's Cannabis Regulation Fund. Rough estimates based upon the state's projected revenue for cannabis sales have this dollar amount at $3 per capita, or $168,000 annually. ADM 19-283 cannabisdispensary (002) (002) (002).pdf (62 KB) Finance Memo - Finance Impact of Having a Cannabis Dispensary in the Village of Mount Prospect.pdf (1,167 KB) Cannabis Decision Flowcharts.pdf (101 KB) Properties within 100 feet of a Church or School.jpg (642 KB) Can nabis_FAQ_Doc_FinaI 9.09.2019(KTJ).pdf (1,455 KB) IML Cannabis_Fact_Sheet_2019_07_15.pdf (1,275 KB) ICMA Local Impacts of Commercial Cannabis Final Report_O.pdf (2,012 KB) Administrative Content Executive Content https://go.boarddocs.com/il/vomp/Board.nsf/Private?open&login# 4/4 MOUNT PROSPECT POLICE DEPARTMENT FORMAL MEMORANDUM ADM 19-283 l' a CONTROL NUMBER TO: MIKE CASSADY VILLAGE MANAGER FROM: JOHN KOZIOL CHIEF OF POLICE SUBJECT: POTENTIAL IMPACT OF RECREATIONAL CANNABIS DISPENSARIES DATE: AUGUST 26, 2019 Safety/Crime Issues - Legalization of Cannabis Created in Other States Traffic Safety Obtaining crash statistics from States who have previously legalized cannabis is somewhat difficult. Data capturing methods are still in their infancy and much of the data available is biased based on the pro or against stance by those providing the data. One crash study I located that seemed to contain no bias was from the vehicle insurance industry. They analyzed Colorado, Nevada, Oregon and Washington's crash statistics compared to their neighbors who had not legalized recreational cannabis. The results were a six percent increase in automobile crashes after legalization. Regarding fatal crashes: Colorado, Oregon, and Washington State saw one additional fatality per 1 million residents in the first year of legalization; however, after that they returned to their previous rates in the second year. In 2016, Colorado had 51 fatalities that involved a driver with a THC blood level exceeding 5 nanograms, the legal limit. The fatalities dropped to 35 the year after that. One possible explanation for this is that legalizing cannabis initially leads to an increase in newer inexperienced users when it first becomes available. One concerning study from Colorado showed that 69% of cannabis users in that state admitted to driving high within the last year, with 27% admitting to driving high almost daily. The survey found that 34% of the medical users and 40% of the recreational users said they do not think being under the influence of cannabis affects their ability to drive safely. In addition, 10% of all users thought it made them a better driver. The study also reported that of all the people who had consumed cannabis within the last year, 56% said they drove themselves to get around when they are under the influence of cannabis. Also only 69% of users knew that if you drive high you could receive a DUI from law enforcement. Several studies relate that there is a common misbelief among users that heavy cannabis use does not impair their performance behind the wheel. This of course is not accurate, particularly with the potency of today's commercial grown Page 1 of 5 With COURAGE we protect, with COMPASSION we serve. MOUNT PROSPECT POLICE DEPARTMENT ADM 19-283 FORMAL MEMORANDUM CONTROLNUMBER cannabis. The results of this study highlights the need for robust public education campaigns regarding the harms of driving under the influence of cannabis. In October of 2018, the Colorado Department of Public Safety published a study on the impacts of cannabis legalization (Colorado legalized recreational cannabis in 2014). The portion of that study regarding impaired driving arrests by Colorado State Patrol (CSP) showed DUI's overall were down 15% from 2014-2017, while the percentage of CSP citations for cannabis-only impairment stayed steady at 7%. The percentage of CSP citations with a nexus to cannabis rose from 12% in 2012 to 17% in 2016 then dropped to 15% in 2017. Colorado State Patrol citation numbers for DUI involving cannabis only were 354 in 2014, 333 in 2015, 388 in 2016 and 355 in 2017. Black Market In reviewing the effects of the black market for states who have legalized cannabis, there has been no indication that illicit sales have gone down. There is a combination of reasons for this. The main one being that the legal cannabis is taxed at such a high rate the illicit growers/dealers are an economical option for users. Additionally, there is often a pull back by law enforcement as attitudes among the public/judiciary quickly transform that all cannabis is legal and not worth their enforcement efforts. Impact of the Illinois Legalization of Cannabis Impaired Driving Enforcement Due to the way cannabis is metabolized in the body and the lack of a simple breathalyzer type test, field sobriety testing on the street will become much more difficult. Our present field tests for alcohol will be insufficient to meet the basis for probable cause for impairment. There are two types of certifications related to advanced training in the area of DUI's related to drugs. The department presently has two DRE's (Drug Recognition Officers). This is the highest level of training available and I would recommend we train several more. This training is extensive and is too cost/time prohibitive for me to recommend all Patrol Officers be required to meet this high standard. The DRE programs are limited in their availability and have very stringent requirements for an officer to be accepted into the program. The following requirements are necessary to become a DRE certified officer: • Approval based on experience in DUI enforcement. • Attend Phase I, which involves 16 hours of classroom time. • Attend Phase II, which involves 56 hours of additional classroom/lab training. • Complete the Certification Phase, which is 60 hours conducting drug influence evaluations in the field/hospitals with a 75% toxicological confirmation rate. • Pass an extensive written examination. • Upon successful completion of all phases, the officer receives a 2-year certification. In addition to a few more DRE's, I would recommend that the department train all of our Patrol Officers to meet the qualifications of an ARIDE (Advanced Roadside Impairment Page 2 of 5 MOUNT PROSPECT POLICE DEPARTMENT ADM 19-283 FORMAL MEMORANDUM CONTROLNUMBER Driving Enforcement) Officer. This will require 16 hours of training for each officer. Presently there is no validated chemical test available for roadside use. Until one becomes available, we will be relying on more sophisticated field sobriety tests that the DRE or ARIDE training provide. These more refined field tests are quite involved and will require much more time and expertise on behalf of officers in an effort to be conducted with any rate of accuracy. I have serious concerns whether a roadside chemical test is even on the horizon. With the number of states who have already legalized cannabis years ago, one would think a legitimate testing instrument would have already been created. This protracted time period suggests the difficulty modern science is having in creating a solution. At present, the only real chemical test involves drawing blood. This procedure adds much more time to the processing of a DUI case in that they must be transported to the hospital to have a medical professional draw the blood. Also despite statutes providing them civil liability protections, many times area hospital personnel have refused to draw blood on simple DUI cases citing liability or claiming they cannot do anything that is not medically necessary for the patient/arrestee. To overcome this hurdle we have created a relationship with a private phlebotomist firm. They will send out a licensed phlebotomist in a timely fashion 24 hours a day to draw blood from an arrestee in our lockup. The cost, however, is $400 per arrestee, which has been cost prohibitive for us to this point. We also expect much more hurdles in court as blood draws become more common for cannabis. Due to the invasive nature of the procedure, compared to the breathalyzer test for alcohol, we expect many more upheld 4t" Amendment challenges. Laboratory Testing Issues As with much of this new law, the statute is ahead of our present technology. For instance, in regards to the new statute requiring the identification of the specific quantities of cannabis. The laboratory has gone from a simple test where THC was only required to be identified, to where now the test will require quantifying the amount of THC. In regards to cannabis edibles, while our lab presently has a Mass Spectrometer it uses for identifying THC, they do not possess the proper instrument required for quantifying THC. The cost of such instrument is approximately $120,000. The other issue with edibles is that to conduct a test properly they need what is known as a "standard". For example, if they were requested to test a Brownie containing cannabis for a quantitative amount, they would need a Brownie made from the same batch before the cannabis was added. Such sample will never exist because not only is the manufacturer unknown they never produced any without the cannabis in the first place. The lab also has serious concerns about glass vaping vials. In addition to having problems extracting the liquid after smashing the vial. They state they will have to test at least 30% of the vials we submit from one case to make the statistical argument that all ampules from that submission contain the same quantity of THC. For instance if we Page 3 of 5 MOUNT PROSPECT POLICE DEPARTMENT ADM 19-283 FORMAL MEMORANDUM CONTROLNUMBER seize one hundred ampules, they have to test at least 30. Essentially this means this one case will take the same amount of examination time as 30 individual cases took previously. The crime lab expect backlogs to increase exponentially. In reference to the testing of blood samples for quantitative levels of THC, presently our lab will have to send these samples out of state to a private lab for such testing. They are presently preparing a grant request to obtain their own instrument for this purpose. The cost of this equipment is $300,000. Regarding these expenses, it is important to remember we are members of the Northeastern Illinois Regional Crime Lab, which is a private laboratory. Their sole funding is based on participants annual assessments making these grant requests that much more important. The Impact on the Police Department should a Recreational Dispensary be opened in Mount Prospect All of what I have discussed above is generally related to the state's decision to legalize recreational cannabis. This was legislation that the Illinois Chiefs, including myself, fought vehemently against; however, that ship has sailed and we now need to deal the best we can with its consequences. As you know, there is a medical dispensary within Mount Prospect, which has caused this Police Department no problems. I believe it is important to point out that the medical cannabis statute was very controlling and well drafted for only those with a medical need. Within that system, they possessed a card that allowed them to purchase cannabis. Even the very small minority that may have deceived the system did not want to lose their right to purchase or lose their card, creating a mostly law abiding group. With the exception of the 21-year-old age limit within the new law, there is absolutely no control on who can purchase cannabis, therefore, the purchasers will run the gambit from the law abiding to the most irresponsible. It is for these reasons I find it unreasonable to use the historical medical cannabis experience as a predictor for the upcoming recreational one. Should the Village allow the present dispensary to expand into a recreational sales location? If this was to occur, I would anticipate the need for quite a bit more parking due to the initial surge of interest. Particularly in the first six months when only the medical dispensaries are allowed to sell before expanding with 75 additional licenses throughout the state. In meeting with the owner of Revolution Enterprises (owner of our present dispensary), it was clear to me that recreational cannabis is a big business. As such, I would expect them to be responsible neighbors to protect their large investment. However, I would highly recommend there be some way to hold the ownership accountable for potential illegal activities such as consumption in their parking lot, etc. The bottom line is that they need to regulate their property so that the Police Department doesn't have to use their resources to police their property. In regards to whether the Village should allow recreational dispensaries within this community: Despite my previous objections to legalization, we live in a very mobile Page 4 of 5 MOUNT PROSPECT POLICE DEPARTMENT ADM 19-283 FORMAL MEMORANDUM CONTROLNUMBER society and I suspect we will be dealing with all the potential traffic safety and health issues that may come from this new law whether we have the dispensary within our community or not. The only way to curb these issues somewhat would be if all of the suburban areas and Chicago opted out, which is obviously an unrealistic proposition. Page 5 of 5 Village of Mount Prospect int p Mount Prospect, Illinois INTEROFFICE MEMORANDUM TO: VILLAGE PRESIDENT AND BOARD OF TRUSTEES FROM: AMITTHAKKAR, DIRECTOR OF FINANCE DATE: AUGUST 27, 2019 SUBJECT: FINANCIAL IMPACT OF HAVING A RECREATIONAL CANNABIS DISPENSARY: Regarding the subject mentioned above, I at this moment submit as below: a) Starting January 1, 2020, adults over 21 will be able to legally purchase cannabis for recreational use from licensed dispensaries across the state. b) Per the timeline given by the State of Illinois,the Department of Financial and Professional Regulations will be awarding 75 new licenses to the dispensing organizations by May 1, 2020. Agency will also be awarding 110 additional licenses for new dispensing organizations by December 21, 2021. c) Per the Cannabis Regulation and Tax Act, on and after January 1, 2020, the corporate authorities of a municipality may, by ordinance, impose a tax on all persons engaged in the business of selling cannabis at retail locations in the municipality on the gross receipts from these sales. If such a tax is imposed, the tax shall be imposed in 0.25% increments and the total municipal occupation tax may not exceed 3% of the gross receipts from these sales. Over and above the Retailer's Occupation Tax, the sales of Cannabis and Cannabis products will attract the 1.0 % regular sales tax and 1.0 % Home-rule sales tax. Cannabis Retailer's Occupation Tax - 3.00% Regular Sales Tax - 1.00% Home-rule Sales Tax - 1.00% Total Sales Tax (Municipal) 5.00% d) Additional Revenue: Per the analysis of Illinois Economic Policy Institute (the report is attached herewith): 1 Village of Mount Prospect — Finance Department FINANCIAL IMPACT OF HAVING A RECREATIONAL CANNABIS DISPENSARY—AUGUST 27, 2019 Figure.2: Purchasing Plower of Resident Housebdids, Colorado vs. Illinois, 2016 Data 41 Tl Households (20116) 2,108,992 4,822,046 Average Household Income (20,16), S88,246 S84,561 Tl Household Income After All Taxes"' 5'129..89 bilhicin 5275,20 bilhon Bfinois Purchasing Power as a Multiple of Colorado 2.12 x "Based on data from 2015 Stmt andLoca1Go,v&n;Twnt Rmincesby the U.S.Censsilus Bureau and averarge federal inclarnetax rates (l 213 115) INote that this estimate i,s not thessairne as total labor income,which would hclude benefits,,and not thesanne as grIS cstate product(GS P). Scvrcefs,1- 2076 Amencan Community Survey �r the U.S. Census &l (C't­,,)?siu.o 201-5 Statll Local Government Al bl,le the U.S-' CL-esus Bureau g_�aasuj The data mentioned above defines the purchasing power of the population in the State of Illinois, which is 2.12 times of the purchasing power of the population in the State of Colorado. Figure 3: Estimating the Market for Legalized Recreational Marijuana in Illinois, By 2020 To tall Mal,rijuana SaIes in Colorado Annually $762-81 milhon TotalMarijuana Tax Rate in Collorado", 32.9% Totall Mal,rijuafla Taxes Collected iiini Colbradio Annually $250-97 milhon Illinois Purchasing Power as a Multiple of Colorado 212 x Eotal,ls imated Annual Sales, in flfinioits (After Legalization) S1,616.20, million, Total m, aina revenfue in,Colorado Inclodes a 2r9 percen(t state salles tax on me&cal and retail rnairmivana, a '15 percent state r ta airijuaina salles tax,and a 15 percent state retafl rnai6l uana excise tax Srcarc,-��):Authors'estbral &ased on Mar#uana lav Data fi-om the lfb)l Pe�arllll of,Revenuv ( kwad,jl rn"Oyr 0i keimenut',� Zt,'UU usihg pairchasing power estfl77ates fi-om�I u're 2. The data mentioned above try to define the total sale of marijuana in the State of Colorado and multiplies the same by the purchasing power multiplier (Illinois Purchasing as a multiple of Colorado) to arrive at the total possible marijuana sales in the State of Illinois. The analysis assumes that the ratio of Marijuana consumption is same as it is in the State of Colorado (with respect to household income and purchasing power of the population). Total Estimated Sale of Marijuana Product in the State of Illinois $1,616.2 Million Total Recreational Dispensaries 185 Sales per Dispensary $8,736,216 Local Sales Tax Rate 5.00% Total Local Sales Tax Revenue $436,810 Add: Business License and Inspection Fees $5,000 Total Revenue $441,810 The table mentioned above tries to define the sale per dispensary and the total possible revenue for a municipal for having one dispensary in town. 2 Village of Mount Prospect — Finance Department FINANCIAL IMPACT OF HAVING A RECREATIONAL CANNABIS DISPENSARY-AUGUST 27, 2019 e) Additional Expenses: As depicted in the d) above, having a recreational marijuana dispensary in the Village can produce an additional income of$441,810, while at the same time the additional expenses to be incurred by the Village because of having a dispensary is questionable. The Police Department might have to enforce certain consumption and traffic-related items, and if the population in town experiences an increased consumption of cannabis product, the fire department might experience a high ambulance call volume. Police enforcement and increased EMS calls do warrant the increase in the operation cost for public safety departments. But, the underlined problem might happen even after not having a recreational dispensary as the cannabis products will be available to the eligible population throughout the State of Illinois and they can consume the cannabis product after buying it from other towns as well. At the discretion of the Village Board, the certain portion of the revenue can be earmarked for law enforcement and public safety related spending. The State of Illinois is going to spend their tax revenues from cannabis sales as below: After paying the administrative costs: a) 35% will be transferred to the General Revenue Fund, b) 25% will be transferred to the Criminal Justice Information Projects Fund to support the R3 program, c) 20% will be transferred to the Department of Human Services Community Services Fund to address substance abuse and prevention and mental health concerns, 10 d) 10% will be transferred to the Budget Stabilization Fund to pay the backlog of unpaid bills, e) 8% will be transferred to the Local Government Distributive Fund to support crime prevention programs, training, and interdiction efforts, including detection, enforcement, and prevention efforts, relating to the illegal cannabis market and driving under the influence of cannabis, and f) 2% will be transferred to the Drug Treatment Fund to fund a public education campaign and to support data collection and analysis of the public health impacts of legalizing the recreational use of cannabis. f) Conclusion: Overall, having a recreational marijuana dispensary in town can generate revenue around $441,810. These revenue will be part of the total revenue in the General Fund, and a part of the revenue can be earmarked for certain public safety and law enforcement related items. 3 Illum�� A I-Nur��oer Road fir a f;rtter 1r>rru>sru+ro „ r un w m, r �a t C ILLINOIS ECONOMIC POLICY INSTITUTE ILERIum� um. IIIIIIIIIIIIIII IIIIIIIIII I!!!I,, � !!!!!!!I Project for Middle Class Renewal �ulul Lci fJar Ldu_crtio n I'rog ra n7 School of Labor and Employment Rk laPions w w i i 11N The Financial Impact of Legalizing Mar�uana in Illinois IIIE ; ry uu. °un liii uiiriirurr ar There is significant public support for legalizing, regulating, and taxing recreational marijuana in Illinois. Fully 66 percent of registered voters in Illinois support legalizing marijuana, including a bi- partisan majority of Democrats and Republicans. Furthermore, 10 states and the District of Columbia have already legalized recreational marijuana. This report by the Illinois Economic Policy Institute (ILEPI) and the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign finds that high taxpayer costs for law enforcement and cannabis-related incarceration would be reduced by legalizing recreational marijuana. In total, Illinois taxpayers would save $18.4 million annually in reduced incarceration costs, law enforcement spending, and legal fees from marijuana legalization. This revenue could be redirected to solve other crimes— such as homicides, robberies, and assaults. The economy would also grow if Illinois were to legalize recreational marijuana. If marijuana were legalized, regulated, and taxed in Illinois, an estimated $1.6 billion would be sold in the state, in part due to regional tourism. At a 26.25 percent state excise tax on retail marijuana in addition to the 6.25 percent general sales tax, Illinois would: • generate $525 million in new tax revenues, including $505 million for the state and $20 million for local governments— a move that credit rating agencies have called "credit positive;" • create over 23,600 newjobs at more than 2,600 businesses in Illinois; • boost the Illinois economy by $1 billion annually; and • allow the state to make additional pension payments and vital public investments in infrastructure, K-12 public schools, college tuition assistance programs, and drug treatment and prevention programs. The benefits of legalization outweigh the social costs. While some legislators and constituents are concerned that legalizing recreational marijuana would increase consumption of other illicit drugs, increase motor vehicle crashes, and reduce workplace productivity, there is no evidence to support these claims.In fact, legalized cannabis has been found to reduce opioid use by as much as 33 percent, reduce traffic fatalities by as much as 11 percent,and have no effect on occupational accidents or rates of employee absenteeism.This is because marijuana consumption has not been found to increase after legalization. Legalizing, regulating, and taxing recreational marijuana would reduce costs to taxpayers, spur economic activity, create jobs, and shrink the black market. While new tax revenues would be modest and would not solve Illinois' fiscal issues, they would improve the state's budget situation and credit rating outlook, fund investments in critical infrastructure and public education, and reduce criminal justice costs. Illinois shou/illegalize, regulate, and tax recreational marijuana. i The Financiallmpact of Legalizing Mar�uana in Illinois f Itflb of CiiirtuNrits Executive Summary i Table of Contents ii About the Authors ii Introduction 1 Consumption of Marijuana and Support for Legalization in Illinois 2 Savings for Taxpayers: Reduced Law Enforcement and Incarceration Costs 2 Tax Revenue Impacts of Illinois Legalizing Recreational Marijuana 3 Economic Effects of Illinois Legalizing Recreational Marijuana 7 Addressing Concerns on Alcohol Consumption, Health, and Safety 9 Conclusion 10 Sources 11 Cover Photo Credit 13 About the Authars Frank Manzo IV, M.P.P. is the Policy Director of the Illinois Economic Policy Institute (ILEPI). His research focuses on labor market analysis, prevailing wage laws, economic development, infrastructure investment, and public finance. He earned his Master of Public Policy from the University of Chicago Harris School of Public Policy and his Bachelor of Arts in Economics and Political Science from the University of Illinois at Urbana-Champaign. He can be contacted at fmanzo@illinoisepi.org. Jill Manzo is a Midwest Researcher at the Illinois Economic Policy Institute (ILEPI). Her research focuses on income inequality, education policy, social justice, economic development, and infrastructure investment. She earned a Bachelor of Arts in Political Science and International Studies from Iowa State University. She can be contacted atjmanzo@illinoisepi.org. Robert Bruno, Ph.D. is a Professor at the University of Illinois at Urbana-Champaign School of Labor and Employment Relations and the Director of the School's Labor Education Program. He also directs the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign. His research focuses broadly on working-class and union studies issues. He earned his Doctor of Philosophy in Political Theory from New York University and his Master of Arts in Political Science from Bowling Green State University. He can be contacted at bbruno@illinois.edu. ii The Financiallmpact of Legalizing Mar�uana in Illinois IIII rvl:rod uctiiiio Ilan In 2012, Colorado and Washington became the first states to legalize marijuana for recreational purposes. The passage of Colorado Amendment 64 led to the state becoming the first to tax and legalize recreational marijuana, with commercial sales beginning in January 2014. Since marijuana is a relatively safe drug with no documented deaths from a marijuana overdose, support for legalization, regulation, and taxation of marijuana has only grown over time. Support for legalizing marijuana among American adults was just 12 percent in 1969, 48 percent by 2012, and 64 percent by 2017 (McCarthy, 2017). Although marijuana remains illegal under federal law, 10 states and the District of Columbia have legalized recreational marijuana: Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, North Dakota, Oregon, Vermont, and Washington. Each state has their own guidelines, with different rates of taxation, age restrictions, packaging regulations, and possession limits. Additionally, 13 states have decriminalized the drug and 33 states— including Illinois— have legalized medical marijuana (Chappell, 2018). Of the states which have legalized recreational use, all except Vermont allow commercial sales by private for-profit businesses (Il..opez, 2017a). The legalization, regulation, and taxation of recreational marijuana has already generated hundreds of millions of dollars in tax revenues for state and local governments. During the campaign to legalize marijuana in Colorado, proponents claimed that marijuana taxes would increase state revenues by $70 million per year. Today, tax revenues have exceeded these projections. In 2017, marijuana taxes, licenses, and fees collected in Colorado totaled $247 million, with $40 million of these revenues deposited into the Building Excellent Schools Today(BEST) program—which funds public school capital construction projects— every year. The additional $207 million is allocated to the Marijuana Tax Cash Fund, which is largely used for health care, education, drug treatment, drug prevention, and law enforcement programs (Il..olpez, 2017b). Colorado has generated more than half a billion dollars in revenues since it legalized recreational marijuana (Pedersen, 2018). In addition to generating tax revenues that fund public services and programs for social good, marijuana has been a job creator across the United States. In fact, the cannabis industry already employs 165,000 to 230,000 workers across the United States at retailers,wholesalers,testing labs, and related companies (McVey, 2017).In June 2018, Colorado officials approved $447 million for 35 school construction projects using money that is partially funded by legal marijuana sales, creating thousands of blue-collar construction jobs (Whaley, 2018).' This Illinois Economic Policy Institute (ILEPI) and Project for Middle Class Renewal report does not discuss the moral implications of legalizing marijuana, but does present the effect on criminal justice and incarceration costs. The tax revenue and economic impacts of legalizing, regulating, and taxing recreational marijuana in Illinois are also evaluated. Evidence on the social costs of legalizing marijuana are considered.This report differs from previous studies assessing the impact of legalizing recreational ' In Illinois, every $500 million in public construction project funding creates about 5,200 total jobs, including 3,000 direct construction jobs (e.g., see Craighead & Manzo,2.017). 1 The Financiallmpact of Legalizing Mar�uana in Illinois marijuana in Illinois because it evaluates the market for legal recreational marijuana in Illinois using actual economic data and evidence from Colorado's experience, updates taxpayer savings estimates from reduced incarceration costs, illustrates potential public investments that could occur using new tax revenues, and forecasts impacts on private sector sales, business openings, and job creation. 1. Ilnsu Illm III " 'iii O llln of IIII Illrl !alna an(i SupIpart°far IIII egIIII liii ,a°tlii aIn liii n IIII IIII IIII Iii Ilno liis Millions of dollars are already spent illegally in Illinois on the purchase of cannabis on the unregulated black market. According to the Marijuana Policy Project, a pro-legalization advocacy organization, an estimated 750,000 adults in Illinois reported consuming marijuana in the past month— representing nearly 6 percent of the total population in the state. Accordingly, proponents contend that the legalization of recreational marijuana would allow the State of Illinois to safely regulate the activity while collecting new tax revenues (MIfxP, 2017). Marijuana is currently decriminalized for recreational use and legally permitted for medical use in Illinois. In 2016, legislators in Illinois decriminalized the possession of up to 10 grams of marijuana for individuals 21 years old or older (Pedersen, 2018). Illinois' Medical Cannabis Pilot Program, which began accepting applications in September 2014, now has more than 46,000 qualifying patients and 55 licensed medical cannabis dispensaries— about 837 patients per dispensary (State of:I:IIllinoiis, 2018). On March 22, 2017, state lawmakers proposed bills to legalize marijuana in Illinois (McCoppin, 2017). The Illinois General Assembly did not pass legislation to legalize, regulate, and tax recreational marijuana during the 2017-2018 legislative session,despite a clear majority of Illinois voters supporting full legalization. A 2017 survey of 1,000 registered voters conducted by the Paul Simon Public Policy Institute at Southern Illinois University Carbondale found that two-thirds (66 percent) support legalizing, taxing, and regulating marijuana like alcohol in Illinois, including 76 percent of Democrats and 52 percent of Republicans (Paull Simon Public Policy 'Institute, 2017). In addition, in March 2018, Cook County residents were asked their opinion on legalizing the cultivation, manufacture, distribution, testing, and sale of recreational marijuana by adults 21 years old or older at the state- level. Fully 68 percent voted "Yes" in support of legalization (Pedersen, 2018; Ballllotpediia, 2018). Sliilu �, far° IIIa lr , I r(i Costs Historically,the costs of police, law enforcement,and corrections associated with marijuana possession have been very high in Illinois. A 2013 report by the American Civil Liberties Union found 12,406 marijuana possession arrests were made in the state in 2010, with African Americans 7.6 times more likely to be arrested than white residents. As a result, Illinois taxpayers spent $127 million to police marijuana consumption, $72 million in judicial and legal fees, and $20 million to house individuals in local jails and county correctional facilities for possession of marijuana in 2010 (ACII..U, 2013). 2 The Financiallmpact of Legalizing Mar�uana in Illinois After decriminalization, police made fewer arrests and wrote fewer tickets.In 2012,the City of Chicago decriminalized the possession of 15 grams or less of marijuana for anyone 21 years old or older.In the year prior to decriminalization, Chicago police officers made 21,000 arrests. By 2016, there were just 129 arrests and the Chicago Police Department issued fewer than 300 tickets for possession of small amounts of cannabis. In 2016, the State of Illinois decriminalized possession of 10 grams or less of marijuana for anyone 21 years old or older— making possession of small amounts of weed a civil offense rather than a crime, with fines as the penalty instead of jail time (Dain, 2018). Full legalization and taxation of recreational marijuana will further reduce taxpayer costs.In June 2016, Illinois still had 445 people incarcerated in prison due to a cannabis-related possession, manufacturing, or trafficking offense (11.)OC, 2016). According to the Illinois State Commission on Criminal Justice and Sentencing Reform in a January 2017 report, it costs Illinois more than $22,000 per year to incarcerate a prisoner (101A, 2017). Using this cost estimate and adjusting it for inflation to constant 2018 dollars, Illinois could conservatively save $10.2 million annually in reduced incarceration costs alone due to the legalization of recreational marijuana (Figure 1). Figure 1: Estimated Taxpayer Savings from Legalizing Recreational Marijuana in Illinois Reduced Incarceration Costs $10.24 million Reduced Judicial and Legal Fees* $2.95 million Reduced Policing Costs* $5.21 million Total Savings $18.40 million * Estimates have been adjusted for inflation using the Consumer Price Index(CPI,2018). Source(s): 2013 American Civil Liberties Union (ACLU 2073),• Illinois State Commission on Criminal Justice and Sentencing Reform(ICJIA,2010. Figure 1 presents annual taxpayer savings from full legalization of recreational marijuana in Illinois. Estimates are based on findings from the American Civil Liberties Union and the Illinois State Commission on Criminal Justice and Sentencing Reform adjusted for 2017 data on cannabis-related incarceration in Illinois. The estimates are also adjusted for inflation to today's dollars. The analysis reveals that legalizing, taxing, and regulating recreational marijuana would reduce incarceration costs by $10.2 million per year, decrease judicial and legal fees by about $3.0 million per year, and lower policing costs by about $5.2 million per year. In total, legalizing recreational marijuana would save Illinois taxpayers $18.4 million annually (Figure 1). This is in addition to the hundreds of millions of dollars that were saved from marijuana decriminalization in 2016. I T"ax ID''°'. InIIII Innacts IHIIII Ilii iinO Viii IIII I e III Viiiiii Irma I iiir„J' iina Illinois is about twice as large as Colorado (Figure 2). There are 4.8 million households in Illinois compared to 2.1 million households in Colorado. Additionally, according to data from the Bureau of Economic Analysis at the U.S.Chamber of Commerce,the Illinois economy produced 2.4 times as much output as Colorado (BEA, 2016). However, Illinois collects more in state and local taxes than Colorado. 3 The Financiallmpact of Legalizing Mar�uana in Illinois Figure 2 multiplies the total number of households by their average household income in both Colorado and Illinois and then adjusts total income for purchasing power after all state, federal, and local taxes. The result is that Illinois has 2.1 times as much purchasing power as Colorado. This means that recreational marijuana sales in Illinois could feasibly be about 2.1 times as much as in Colorado. Figure 2: Purchasing Power of Resident Households, Colorado vs. Illinois, 2016 Data Total Households (2016) 2,108,992 4,822,046 Average Household Income (2016) $88,246 $84,561 Total Household Income After All Taxes* $129.89 billion $275.20 billion Illinois Purchasing Power as a Multiple of Colorado 2.12 x *Based on data from 2015 State and Local Government Finances by the U.S.Census Bureau and average federal income tax rates(Census,2015). Note that this estimate is not the same as total labor income,which would include benefits,and not the same as gross state product(GSP). Source(s): 2016 American Community Survey by the U.S. Census Bureau (Census, 2016), 2015 State and Local Government Finances by the U.S. Census Bureau(Census,2015). The Colorado Department of Revenue is required by law to report marijuana tax data to the public (Colorado Department of (Revenue, 2018x). Colorado currently taxes recreational marijuana at a 32.9 percent effective tax rate. This includes a 2.9 percent state sales tax on both medical and retail marijuana, a 15 percent state retail marijuana excise tax, and a 15 percent state retail marijuana sales tax that was increased from 10 percent on July 1, 2017. Over the fiscal year from July 2017 through June 2018, the state collected $251.0 million in total marijuana taxes— not including license and application fees paid by retailers and individuals to sell recreational marijuana. Based on the effective tax rate, this means that Colorado residents and visitors spent $762.8 million legally on recreational marijuana in Colorado over 12 months (Figure 3). Figure 3: Estimating the Market for Legalized Recreational Marijuana in Illinois, By 2020 111 01,111 Total Marijuana Sales in Colorado Annually $762.81 million Total Marijuana Tax Rate in Colorado* 32.9% Total Marijuana Taxes Collected in Colorado Annually $250.97 million Illinois Purchasing Power as a Multiple of Colorado 2.12 x Total Estimated Annual Sales in Illinois (After Legalization) $1,616.20 million *Total marijuana revenue in Colorado includes a 2.9 percent state sales tax on medical and retail marijuana, a 15 percent state retail marijuana sales tax,and a 15 percent state retail marijuana excise tax. Source(s):Authors'estimates based on Mar�uana Tax Data from the Colorado Department of Revenue (Colorado Department of Revenue,2013), using purchasing power estimates from Figure 2. It is estimated that about $1.62 billion of recreational marijuana would be sold in Illinois if the state were to legalize, regulate, and tax the substance at similar levels as Colorado (Figure 3).z This is based z The $1.62 billion recreational marijuana market may be a conservative estimate. For example, there were 46,018 qualifying patients in Illinois' Medical Cannabis Pilot Program who spent $10.8 million per month at licensed medical cannabis dispensaries from January 2018 through September 2018—or$235.40 per patient per month (State of Illinois, 4 The Financiallmpact of Legalizing Mar�uana in Illinois on the total sales in Colorado adjusted for the purchasing power of Illinois households. Additionally, Illinois would benefit from being one of the only states in the region to legalize recreational marijuana. Like Colorado,tourism would be expected to increase modestly as consumers from neighboring states travel to Illinois for legalized cannabis, boosting business sales in Illinois. Illinois taxes tobacco and alcohol at higher rates than clothes, food, and services. In addition to the 6.25 percent general sales tax, Illinois levies excise taxes of $0.23 per gallon for beer, $1.39 per gallon for wine, $8.55 per gallon for liquor, and $1.98 per pack of 20 cigarettes (SallesTaxHarid book, 2018). The legalization, regulation, and taxation of marijuana would be no different. Figure 4 presents estimated tax revenues from the State of Illinois levying a proposed 26.25 percent state excise tax on retail marijuana. Combined with the 6.25 percent general sales tax,this would make the total effective tax rate on recreational marijuana 32.5 percent in Illinois— slightly lower than in Colorado (32.9 percent). In general, consumers tend to buy more of a product if it is taxed at a lower rate, but Figure 4 conservatively uses the total marijuana sales estimate of $1.62 billion for Illinois, based on Colorado's total effective tax rate. If the state were to impose a 26.25 percent excise tax on recreational marijuana in addition to the 6.25 percent general sales tax, Illinois would generate an estimated $525.3 million in new tax revenues (Figure 4). Fully $505.1 million would go to the state government while local governments would receive $20.2 million.3 This revenue estimate falls in the middle of the $350 million to $700 million range projected by some proponents of legalizing recreational marijuana in Illinois (Diriscollll, 20118). It also exceeds the $354 million in revenue projected by researchers at the conservative-learning Tax Foundation (IE3isholpollerichman & Scarboro, 2016). Note, however, that the revenue estimate from Figure 4 does not include tax revenue from licenses and application fees paid by retailers and individuals to sell recreational marijuana. Figure 4: Estimated Tax Revenues from Legalizing Recreational Marijuana in Illinois, By 2020 Total Estimated Marijuana Sales in Illinois $1,616.20 million Illinois State Marijuana Excise Tax (Proposed) 26.25% Illinois Sales Tax: State Share 5.00% Illinois Sales Tax: Local Share 1.25% Total State Taxes Collected $505.06 million Total Local Taxes Collected $20.20 million Source(s):Authors'estimates.based on Mar�uana Tax Data from the Colorado Department of Revenue (Colorado Department of Revenue,2018), using purchasing power estimates from Figure 2. 2018).If 750,000 adults in Illinois consume marijuana at the same monthly quantities as qualified patients (MPP,2.017), estimated sales would be $176.5 million per month,or a market size of$2.12 billion. s In Illinois, the general sales tax is 6.25 percent. The state keeps 80 percent of the revenue from the sales tax (or 5 percentage points of the tax) in the General Fund and transfers 20 percent (or 1.25 percentage points of the tax) to local governments. 5 The Financiallmpact of Legalizing Mar�uana in Illinois State lawmakers could stipulate how new tax revenues collected from legalized marijuana are spent. Figure 5 outlines potential public investments that could occur using the new tax revenue, assuming that half of the revenue is used to reduce pension debts by about $250 million per year. The remaining revenue could be distributed evenly at 10 percent to fund five government functions annually at about $50 million each. • Lawmakers could follow Colorado's lead and deposit 10 percent of recreational marijuana tax revenues in the School Infrastructure Fund. The additional state funding could potentially be used by local school districts to slightly reduce property tax burdens. Compared to actual revenue of $72.1 million in fiscal year 2017, $50 million would represent a 7O percent increase in school construction funding provided by the state (Illinois Comptroller, 2017). Lawmakers could allocate 10 percent of recreational marijuana tax revenues to the State Construction Account. This money is used to fund road, bridge, transportation, and similar infrastructure projects. Compared to actual revenue of $506.6 million in fiscal year 2017, $50 million would represent a 1O percent increase in funding (:Illinois Comptroller, 2017). 10 percent of recreational marijuana tax revenues could be appropriated to the Illinois State Board of Education to support elementary education at Illinois' public schools.The additional state funding could also be used by local school districts to slightly reduce property tax burdens. Compared to an enacted budget of $6.8 billion for evidence-based funding of schools, $50 million would represent about a 1 percent increase in total funding (5IE3IE::, 2018). 10 percent of recreational marijuana tax revenues could be dedicated to the Illinois Student Assistance Commission to help students pay for college education through the Monetary Award Program (MAP) grants. In the 2019 fiscal year, MAP grant funding was $401.3 million (ISAC, 2018). $50 million in new revenue would represent a 12 percent increase in higher education tuition assistance for students to attend Illinois' public universities and community colleges. • 10 percent could be appropriated to the Department of Human Services to fund drug treatment and drug prevention programs, including to help combat the current opioid crisis. These programs were among the hardest hit by the 736-day budget impasse in Illinois. Compared to the $230.7 million enacted for the Division of Addiction Treatment, $50 million in new revenue would represent a 22 percent increase in funding for substance abuse treatment and prevention programs (I:Illlinoiis OMIB, 20118). Though not shown in Figure 5, the approximately $20 million in recreational marijuana tax revenues that are transferred to local governments could be used either to fund law enforcement and hire additional officers or to pay down local police and fire pension debt obligations. The administration and regulation of legal marijuana could be funded entirely by license fees and application fees paid by retailers and individuals to sell recreational marijuana. These fees generated $8.8 million for the State of Colorado from July 2017 through June 2018 (Colorado Department of IRevenue, 2..018b). Elected 6 The Financiallmpact of Legalizing Mar�uana in Illinois officials and voters in Illinois could expect to double that revenue to pay for administering and regulating the legalized marijuana law. Figure 5: Potential Public Investments Using New Tax Revenues from Legalized Marijuana 1L�i w.m m Total State Marijuana Taxes Collected $505.06 million Potential Public Investments for the Public Good 50 Percent to Pension Payments $252.53 million 10 Percent to School Infrastructure Fund $50.51 million 10 Percent to State Construction Account $50.51 million 10 Percent to K-12 Public Schools $50.51 million 10 Percent to Monetary Award Program (MAP) $50.51 million 10 Percent to Drug Treatment and Prevention Programs $50.51 million IIIV I; Inrl Ilii liii� IIII' f(�Ct ,, of IIII IIII IIII l Ilan liii s IIII,edII Iiia 111n1g Marijuana Convenient access to dispensaries, consumption lounges, and licensed marijuana businesses is essential to a successful and safe market for legal marijuana. If consumers cannot easily purchase cannabis from the regulated legal market because local governments prevent dispensaries or retail stores from selling the substance, they will again turn to the unregulated black market. For example, Denver allows one cannabis retail establishment per 3,091 residents, which has caused the illegal market share to fall to 30 percent. Seattle, on the other hand, limited retail licenses to 21 firms, or one dispensary per 30,373 residents. Illegal activity was still estimated at 70 percent of the total cannabis market in Seattle due to the lack of access to the regulated market. Research finds that states need at least one legal cannabis retail storefront per 7,500 residents to limit the illicit black market(Beans,2018). This section uses IMPLAN to assess the economic effects of legalizing recreational marijuana in Illinois. IMPLAN is an input-output software that is considered the "gold standard" in economic impact analyses (i/owells, 2012). IMPLAN uses U.S. Census Bureau data to account for the interrelationship between businesses and households in a regional market, following a dollar as it cycles through the economy. The software uses multipliers to estimate how much a policy change— such as legalizing recreational marijuana—would affect the economy. The results reveal that legalizing marijuana would boost the Illinois economy (Figure 6).If Illinois were to legalize cannabis at an effective tax rate of 32.5 percent,total recreational marijuana sales would be expected to be $1.62 billion at over 2,600 businesses—approximately one cannabis dispensary, retailer, or manufacturer for every 4,900 residents in the state. This would be a higher density of points of sale per person than Seattle but a lower density than Denver (Beans, 2018). Legalization would directly create nearly 19,500 jobs at marijuana dispensaries, retailers, and manufacturers. Additionally, the Illinois workers who are newly employed at marijuana-related businesses would earn incomes that they spend back in the economy. This additional consumer 7 The Financial Impact of Legalizing Mar�uana in Illinois demand would save or create another 4,100 jobs at restaurants, stores, and other local businesses. Overall, the Illinois economy would grow by an estimated $1 billion annually due to the consumption of recreational marijuana by both residents and tourists (Figure 6).' Figure 6: Estimated Annual Economic Impacts of Legalizing Marijuana in Illinois, By 2020 Total Estimated Marijuana Sales in Illinois $1,616.20 million Number of Establishments (Firms Created) 2,633 businesses Total Employment (Jobs Created) 23,618 jobs • Direct Jobs at Mar�uana Dispensaries and Manufacturers 19,486job5 • Induced Jobs from Higher Consumer Demand • 4,132 jobs Net Economic Impact (Annual Gross State Product) $1,000.17 million SOUrce(S):Authors'estimates from an economic simulation using IMPLAN(1MPI/l At,2018)based on legal recreational mar�uana market estimates from Figure 4. Finally, information from the 2016 County Business Patterns dataset by the U.S. Census Bureau is used to compare the estimated number of marijuana dispensaries and related establishments to the current number of smoke shops and alcoholic drinking places in Illinois (Figure 7). As of 2016, the state had nearly 500 tobacco stores primarily engaged in selling cigarettes, cigars, pipes, and other smokers' supplies that employed nearly 1,300 workers. Similarly, the state had nearly 2,700 drinking places serving alcoholic beverages— such as bars, distilleries, and wineries— where over 21,600 bartenders, cooks, servers, barbacks, and other individuals worked. Note that this does not include restaurants which primarily sell food but may also offer alcoholic beverages. The legalization, regulation, and taxation of recreational marijuana would create about the same number of jobs— at a similar rate of pay (about $19,600 annually for mostly part-time workers)— in Illinois as there are at bars and other alcoholic drinking places. Figure 7: Estimated Marijuana Stores Compared to Similar Establishments in Illinois, 2016 Data m � MR Estimated: Marijuana Dispensaries 2,633 19,486 $383.57 million $19,588 NAICS 453991: Tobacco Stores 479 1,265 $24.63 million $19,470 NAICS 7224: Alcoholic Drinking Places 1 2,668 21,623 $365.97 million $16,925 Source(s):Authors'estimates from Figure 6-2016 County Business Patterns from the U.S. Census Bureau(Census, 2016). 4 The net effect on the overall economy ($1.00 billion) is less than total sales ($1.62 billion) because annual gross state product is the difference between all sales and the production cost of all products.As an example,consider a toy bought by an Illinois consumer at a local store for $10. Suppose that the toy was manufactured in New Mexico for $4. The difference between the sales price ($10) and the cost that the local store paid for the toy ($4) is $6. In this case, total sales are $10 in Illinois, but the Illinois economy only grows by $6 due to the local business activity.The New Mexico economygrows bythe remaining$4 from manufacturing the product.The same logic applies for recreational marijuana. 8 The Financiallmpact of Legalizing Mar�uana in Illinois Addressii lllrig Caricenris an AkffldhdI Ilan a llirllr Ill " liii llirm y IIII°°°111edII[dhlu, alrlll ' Safety Marijuana consumption rates do not rise following legalization. In Colorado, for example, "marijuana use [among Colorado residents] has not changed since legalization either in terms of the number of people using or the frequency of use among users" and marijuana consumption has remained lower than daily alcohol or tobacco use (Colorado (Department of Public Health & Einvironmein t, 2016). While more research is needed, the evidence suggests that cannabis consumption does not change due to legalization. Nevertheless, some legislators and constituents in Illinois are concerned about the unintended consequences of legalizing and taxing recreational marijuana.One concern is the relationship between marijuana use and the consumption of other drugs, including alcohol. Studies consistently show that marijuana is less addictive and less risky than alcohol.Alcohol is the leading risk factor for death among people aged 15-49 and is linked with violent behavior. Conversely, there have been no documented deaths from cannabis use and there is some evidence that marijuana users may actually be less likely to commit violence against a partner (Brodwin, 2018). The research is mixed as to whether legalizing recreational marijuana would increase or reduce alcohol consumption (Kilmer 8t Smairt, 2018). Of 39 academic studies reviewed on the topic, 16 supported the idea that alcohol consumption would decrease (41 percent), 10 supported the claim that alcohol consumption would rise (26 percent), and 13 found no effect (33 percent) (Subbairaman, 2016). Studies have found that legalized cannabis mitigates opioid use and abuse. Over the past two decades, an increasing number of fatal drug overdoses have been related to prescription opioid medications. In 2014,40 percent of all opioid overdose deaths involved a prescription opioid, with 46 people dying every day from an opioid overdose (CDC, 2018). A recent study published by researchers at the University of Kentucky and Emory University found that opiate-related deaths decreased by about 33 percent in 13 states in the six years after medical marijuana was legalized (Wein 8t Hockenberry, 2018). Additionally, a report conducted by the Minnesota Department of Health found that 63 percent of patients taking opioid medication for pain reduced or eliminated their opioid use once treated with medical cannabis (Singer, 2018). Would legalizing recreational marijuana increase the number of car accidents due to motorists driving under the influence of cannabis? Studies have failed to find a correlation between car accidents and marijuana usage in Colorado since legalization (Ingraham, 2017). In fact, traffic fatalities have been found to drop by between 8 percent and 11 percent on average in states that legalized medical marijuana, although the reason for this finding is unknown (Cohein, 2016). One explanation may be that marijuana consumption rates do not statistically increase following legalization. Lastly, some groups say that that marijuana legalization would have negative economic impacts from higher workplace injury rates, increased absenteeism, and additional homelessness—costing the state hundreds of millions of dollars per year (SAM, 2018). However, the National Academies of Sciences, Engineering, and Medicine has concluded that there is no evidence to support the claim that cannabis use increases occupational accidents or injuries and academic studies do not corroborate the claim that employee absenteeism would worsen (Millner, 2018). Meanwhile, there is no evidence that legal 9 The Financiallmpact of Legalizing Mar�uana in Illinois cannabis contributes to an increase in homelessness (Chang, 2018). Because marijuana consumption does not rise following legalization, each of these social costs is not expected to be any higher than current levels in Illinois. IIIIIIsIiii011lrm There is significant public support for legalizing, regulating, and taxing recreational marijuana in Illinois—where lawmakers have decriminalized possession of up to 10 grams of cannabis for individuals 21 years old and older. Fully 66 percent of registered voters in Illinois support legalizing marijuana. This includes 76 percent of Democrats and 52 percent of Republicans. Historically,the costs of police, law enforcement,and corrections associated with marijuana possession have been very high in Illinois. After decriminalization, police made fewer arrests and wrote fewer tickets. However, Illinois still has people incarcerated in prison due to a cannabis-related possession, manufacturing, or trafficking offense. By fully legalizing recreational marijuana,Illinois taxpayers would save $18.4 million annually in reduced incarceration costs, law enforcement spending, and legal fees. The State of Illinois is also in dire need of revenue enhancements. Following a 736-day budget impasse from the summer of 2015 to the summer of 2017, Illinois still has a $8.1 billion backlog of unpaid bills and $130 billion in unfunded pension liabilities (111inois Comptroller, 2018; CTBA, 2017). One policy change that has been proposed to raise state tax revenues is to legalize and tax recreational marijuana. Moody's Investors Service, a credit rating agency, calls legalizing recreational marijuana a "credit positive" potential change in tax policy (Moody's, 2018). As of November 2018, eleven states and the District of Columbia have legalized recreational marijuana. If Illinois were to legalize marijuana, an estimated $1.6 billion of recreational marijuana would be sold in the state, in part due to regional tourism. At a 26.25 percent state excise tax on retail marijuana in addition to the 6.25 percent general sales tax,Illinois would generate $525 million in new tax revenues, create over 23,600 new jobs at more than 2,600 businesses, boost the Illinois economy by $1 billion annually, and reduce law enforcement and incarceration costs. With new tax revenues, Illinois could fund additional pension payments while making vital public investments in new school construction projects, road and transportation construction projects, K-12 public school education, the Monetary Award Program (MAP) grants for tuition assistance for college students, and drug treatment and prevention programs. Legalizing, regulating, and taxing recreational marijuana would reduce costs to taxpayers, spur economic activity, create jobs, and shrink the black market. While new tax revenues would be modest and would not solve Illinois' fiscal issues, they would improve the state's budget situation and credit rating outlook. Illinois should legalize, regulate, and tax recreational marijuana. 10 The Financiallmpact of Legalizing Mar�uana in Illinois Sources American Civil Liberties Union (ACLU). (2013). Billions of Dollars Wasted on Racially BiasedArrestss The War on Mar�uana in Black and White. Primary authors: Ezekiel Edwards; Will Bunting; and Lynda Garcia. Ballotpedia. (2018). "Cook County, Illinois, Marijuana Legalization Advisory Question (March 2018)." Beals, Chris. (2018). "The Best Way to Fight Illegal Pot is With Legal Cannabis." The Hill. Bishop-Henchman, Joseph and Morgan Scarboro. (2016). Mar�uana Legalization and Taxes Lessons for Other States from Colorado and Washington. Tax Foundation. Brodwin, Erin. (2018). "We Took a Scientific Look at Whether Weed or Alcohol is Worse for You —and There Appears to be a Winner." Business Insider. Bureau of Economic Analysis (BEA). (2016). "Regional Data: GDP & Personal Income." Census. (2016). 2016 American Community Survey and 2016 County Business Patterns. U.S. Census Bureau. Census. (2015). 2015 State and Local Government Finances. U.S. Census Bureau. Centers for Disease Control and Prevention (CDC). (2018). "Prescription Opioid Data." Center for Tax and Budget Accountability (CTBA). (2017). New Details Emerge on Illinois' "Tier 3" Pension Plan. Chappell, Bill. (2018). "3 More States OK Easing Their Marijuana Laws: Michigan, Utah, Missouri." NPR. Cohen, Ronnie. (2016). "After States Legalized Medical Marijuana, Traffic Deaths Fell." Reuters Colorado Department of Public Heath & Environment. (2018). "Marijuana Use Trends and Health Effects." State of Colorado. Colorado Department of Revenue. (2018a). "Marijuana Tax Data." State of Colorado. Colorado Department of Revenue. (2018b). "Marijuana Taxes, Licenses, and Fees Transfers and Distribution Tax Revenue from June 2018." State of Colorado. Craighead, Mary and Frank Manzo N. (2017). IDOT Shutdown: Understanding the Economic and Transportation Consequences. Illinois Economic Policy Institute. Driscoll, Jaclyn. (2018). "Money And The Legal Weed Debate In Illinois." NPRIIIinois Illinois ComptroIler. (2017). Illinois Comprehensive Annual Financial Report.-For Fiscal Year Ended June 301 2017 State of Illinois. Illinois Comptroller. (2018). "Estimated General Funds Payable Backlog." State of Illinois. 11 The Financiallmpact of Legalizing Mar�uana in Illinois Illinois Commission on Criminal Justice and Sentencing Reform (ICJIA). (20116). Illinois State Commission on Criminal Justice and Sentencing Reform - Final Report(Parts I&II). State of Illinois. Illinois Department of Corrections (IDOC). (2016). Fiscal Year 2016 Annual Report. State of Illinois Illinois Office of Management and Budget (OMB). (2018). Fiscal Year 2019 Proposed Budget. State of Illinois. Illinois State Board of Education (ISBE). (2016). "Fiscal Year 2019 Investment to Support Educational Excellence:FY19 Operations Enacted Budget. State of Illinois. Illinois Student Assistance Commission (ISAC). (2016). "Monetary Award Program (MAP)." State of Illinois. IMPLAN Group LLC. (20118). IMPLAN System (data and software). Ingraham, Christopher. (2017). "What Marijuana Legalization Did to Car Accident Rates." The Washington Post. Kilmer, Beau and Rosanna Smart. (2016). "How Will Cannabis Legalization Affect Alcohol Consumption?" The RAND Blog. RAND Corporation. Lopez, German. (2018a). "The Spread of Marijuana Legalization, Explained." Vox. Lopez,German.(2018b)."Marijuana Taxes are Giving Colorado a Pot of Money to Rebuild its Crumbling Schools." Vox. Main, Frank. (2016). "Marijuana Arrests in Chicago Plummet, but Blacks Are 'Vast Majority' of Cases." Chicago Sun-Times Marijuana Policy Project(MPP). (2017). Potential Tax Revenue fora Regulated Cannabis Market.-Illinois. McCarthy, Justin. (2017). "Record-High Support for Legalizing Marijuana Use in U.S." Gallup. McCoppin, Robert. (2017). "Illinois Lawmakers Propose Legalizing Recreational Marijuana." Chicago Tribune. McVey, Eli. (2017). "Chart:Cannabis Industry Employs 165,000-Plus Workers." Mar�uana Business Daily. Miller, Rich. (2016). "Don't Believe Everything You Read." Capitol Fax. Moody's. (20118). "Moody's" Legal Marijuana Provides Potential Revenue Opportunities, Challenges for North American Governments and Corporates." Moody's Investors Service. Paul Simon Public Policy Institute. (7017).Illinoisans Keen on Mar�uana Decriminalization, Legalization. Southern Illinois University Carbondale. Pedersen, Brendan. (2018). "Cook County Votes Yes on Legalizing Marijuana - What's Next?" NBC Chicago. 12 The Financiallmpact of Legalizing Mar�uana in Illinois Sal esTaxHandbook. (2018). "Illinois: Alcohol Excise Taxes." Smart Approaches to Marijuana (SAM). (2018). Working Paper on Projected Costs of Mar�ivana Legalization in Il/inois Singer, Jeffrey A. (2018). "Yet Another Study Points to The Potential of Cannabis for Reducing Opioid Use." Cato Institute. State of Illinois. (2018). "Medical Cannabis Pilot Program." Update— October 3, 2018. Subbaraman, Meenakshi Sabina. (2016). Substitution and Complementarity of Alcohol and Cannabis: A Reviewof the Literature. Department of Health & Human Services. Vowels, Scott Anthony. (2012). The Economic Impact of NCMSDC Certified Minority Business on Northern California. Northern California Minority Supplier Development Council. Wen, Hefei and Jason Hockenberry. (2018)."Association of Medical and Adult-Use Marijuana Laws with Opioid Prescribing for Medicaid Enrollees," Health Care Policy and Law. 178(5): 673-679. Whaley, Monte. (2018). "Colorado Schools Get Largest Ever Contribution for Construction." The Denver Post. Zhang, Mona. (2018). "Legal Marijuana Is A Boon to The Economy, Finds Study." Forbes Cover VIII° IIID ' iir ° liii[t NORML. (2017). "Illinois Poll Finds Two-Thirds of Voters Support Legalizing Marijuana." The Daily Chronic. 13 ADULT USE CANNABIS SUMMARY The following summarizes the major elements HB 1438— The Cannabis Regulation and Tax Act. PERSONAL USE OF CANNABIS Starting January 1, 2020, adults over 21 will be able to legally purchase cannabis for recreational use from licensed dispensaries across the state. • Possession limit for Illinois residents: 0 30 grams of cannabis flower; 0 5 grams of cannabis concentrate; and o No more than 500 milligrams of THC contained in a cannabis-infused product; and o Registered patients in the medical cannabis pilot program may possess more than 30 grams of cannabis if it is grown and secured in their residence under certain conditions. • Possession limit for non-Illinois residents: 0 15 grams of cannabis flower; 0 2.5 grams of cannabis; and o No more than 250 milligrams of THC contained in a cannabis-infused product. • The possession limits are to be considered cumulative. COMPASSIONATE USE OF MEDICAL CANNABIS PILOT PROGRAM • The legalization of adult use cannabis does not alter the state's medical cannabis pilot program. • Cultivators and dispensaries will be required to reserve sufficient supply to ensure patient access to product is not interrupted. PROMOTING EQUITY • Creation of a $30 million low-interest loan program o DCEO will administer a low-interest loan program to qualified "social equity applicants" to help defray the start-up costs associated with entering the licensed cannabis industry. • Establishment of a "social equity applicant" status for licensing o A social equity applicant is an Illinois resident that meets one of the following criteria: ■ Applicant with at least 51 percent ownership and control by one or more individuals who have resided for at least 5 of the preceding 10 years in a disproportionately impacted area. 1 ■ Applicant with at least 51 percent ownership and control by one or more individuals who have been arrested for, convicted of, or adjudged to be a ward of the juvenile court for any offense that is eligible for expungement under this Act or member of an impacted family; ■ For applicants with a minimum of 10 full-time employees, an applicant with at least 51% of current employees who: • Currently reside in a disproportionately impacted area; or • Have been arrested for, convicted of, or adjudged to be a ward of the juvenile court for any offense that is eligible for expungement under this Act or member of an impacted family. • Application for new entrants to the market o The Act contains the scoring criteria that the Illinois Department of Financial and Professional Regulation will utilize to score applications for new dispensing organizations. ■ 50 out of 250 points, or 20 percent of the total points available, are designated for applicants that qualify as "social equity applicants." ■ The remainder of the points are designated for the following: • 65 points—security and record keeping • 65 points—business plan, financials, operating and floor plan • 30 points—knowledge and experience • 15 points—suitability of employee training plan • 5 points— labor and employment practices • 5 points—environmental plan • 5 points— Illinois owner (51 percent or more of ownership) • 5 points—status as a veteran (51 percent or more of ownership) • 5 points—diversity plan ■ IDFPR may award up to 2 bonus points for a plan to engage with the community the applicant will be located in. o The Department of Agriculture will develop a similar application scoring system through the rulemaking process for cultivation centers, infusers, craft growers and transporting organizations. ■ The application for each license type will designate 20 percent of the total points for applicants that qualify as "social equity applicants." • Fee waivers o The Department of Financial and Professional Regulation and the Department of Agriculture will waive 50 percent of any non-refundable license application fees and any non-refundable fees associated with purchasing a license to operate a cannabis business establishment if social equity applicants meet certain conditions. 2 • Reducing up-front costs o Applicants who receive a conditional dispensing organization license will have 180 days from the date of the award to identify a physical location for the dispensing organization retail storefront when new entrants are allowed in the market. This will reduce the costs associated with entering the industry. • Limitations on ownership o No person or entity shall hold any legal, equitable, or beneficial interest, directly or indirectly, of more than 3 cultivation centers. o No person or entity shall hold any legal, equitable, or beneficial interest, directly or indirectly, of more than 10 dispensing organizations. o No craft grower license shall be issued to a person who is licensed by any licensing authority as a cultivation center. o No person or entity shall hold any legal, equitable, ownership, or beneficial interest, directly or indirectly, of more than three craft grower licenses under this article. • Identification of"disproportionately impacted areas" o DCEO will designate "disproportionately impacted areas" for social equity applicants ■ "Disproportionately impacted area" is defined as a geographic area that is economically disadvantaged and has been impacted by high rates of arrest, conviction, and incarceration for violations of the Cannabis Control Act. ACHIEVING EQUITY THROUGH OWNERSHIP AND LICENSURE The following process is designed to ensure the most equitable marketplace in the country. • Early approval adult use license for current medical cannabis license holders o Timeline for licensing ■ Cultivation organizations: • Medical cannabis cultivators may apply for a license within 60 days of the effective date of the Act. • Licenses will be distributed to eligible applicants within 14 days if certain conditions are met. ■ Dispensing organizations: • Medical cannabis dispensaries may apply for a license within 60 days of the effective date of the Act. • Licenses will be distributed to eligible applicants within 14 days if certain conditions are met. • These entities may apply for a second license at a new location under the same parameters. 3 o Licensing costs for early approval adult use licenses ■ Cultivation organizations: • Non-refundable application fee: $100,000 • Cannabis business development fund fee: 5% of total sales between June 1, 2018 to June 1, 2019 or$750,000, whichever is less, but not less than $250,000. ■ Dispensing organizations: • License 1 o Non-refundable application fee: $30,000 o Cannabis business development fund fee: 3% of total sales between June 1, 2018 to June 1, 2019 or$100,000, whichever is less. • License 2 o Non-refundable application fee: $30,000 o Cannabis business development fund fee: $200,000 • New entrants to the adult use cannabis market o License types ■ Cultivation centers ■ Craft growers ■ Infusers ■ Transporting organizations ■ Dispensing organizations o Timeline ■ WAVE 1 • Department of Financial and Professional Regulation o May 1, 2020: The agency awards licenses for up to 75 new dispensing organizations • Department of Agriculture o July 1, 2020: The agency awards up to 40 licenses for infusers, up to 40 licenses for craft growers, and licenses for transporting organizations. ■ WAVE 2 • Department of Financial and Professional Regulation o December 21, 2021: The agency awards up to 110 licenses for new dispensing organizations • Department of Agriculture 4 o December 21, 2021: The agency awards up to 60 additional licenses for craft growers, up to 60 licenses for infusers, and licenses for transporting organizations. o Licensing costs for new entrants to the market ■ Craft growers • Non-refundable application fee $5,000 • License fee $40,000 ■ Infusers • Non-refundable application fee $5,000 • License fee $5,000 ■ Transporting organizations • Non-refundable application fee $5,000 • License fee $10,000 ■ Dispensing organizations • Non-refundable application fee $5,000 • License fee $60,000 INVESTING IN COMMUNITIES THAT SUFFERED THROUGH THE WAR ON DRUGS • The proposal would establish a new grant program, the Restore, Reinvest, and Renew (133) program, to address the impact of economic disinvestment, violence, and the historical overuse of the criminal justice system. • R3 program overview o The Illinois Criminal Justice Information Authority (ICJIA), in coordination with the Justice, Equity, and Opportunity Initiative of the Lieutenant Governor's Office, will identify designate "R3 Areas." o The R3 Program Board will consist of over 22 members and be chaired by the Lieutenant Governor, or her designee. o The R3 Program Board will solicit applications from eligible R3 Areas, review applications and approve the distribution of resources, and monitor and evaluate R3 programs. o Grant funds will be awarded by ICJIA, in coordination with the R3 Program Board. o Grants shall be used to address economic development, violence prevention services, re-entry services, youth development, and civil legal aid. o The ROC Board will deliver an annual report to the Governor's Office about its progress. PROVIDING RELIEF FOR MINOR VIOLATIONS OF THE CANNABIS CONTROL ACT • Category 1: Local law enforcement and ISP will automatically expunge arrests not leading to a conviction for possession and manufacture or possession with intent to deliver for up to 30 grams. 5 o Eligible records = arrests for section 4 and section 5 of the Cannabis Control Act for amounts less than 30 grams. Must not be associated with a violent crime or a penalty enhancement for selling to a person under the age of 18 if the individual was over 18. o Local law enforcement will identify all eligible records and automatically expunge records that did not result in a conviction by the following deadlines: ■ Arrest records between January 1, 2013 and effective date must be expunged by January 1, 2021 ■ Arrest records between January 1, 2000, and January 1, 2013, must be expunged by January 1, 2023 ■ Arrest records prior to January 1, 2000, must be expunged prior to January 1, 2025. o Records will be expunged if one year or more has elapsed since the date of the arrest with no criminal charges filed or charges were subsequently dismissed, vacated, or the individual was acquitted. • Category 2: Governor will grant pardons authorizing expungement for convictions for possession and manufacture or possession with intent to deliver for up to 30 grams. o Eligible records = convictions for Section 4 and Section 5 of the Cannabis Control Act for amounts less than 30 grams. Must not be associated with a violent crime or a penalty enhancement for selling to a person under the age of 18 if the individual was over 18. o ISP will identify all eligible convictions based on criminal history records and provide data to Prisoner Review Board (PRB) within 180 days of effective date. o PRB will review records for eligibility to ensure that they are the proper convictions and that conviction is not associated with excluded violent crime. PRB will provide notice to State's Attorney of any felony conviction eligible for clemency and provide State's Attorney 60 days to file a written objection on the basis that record is ineligible. o Governor will issue pardons authorizing expungement. o Attorney General, on behalf of Prisoner Review Board, will file a petition with circuit court to expunge records of convictions that were granted clemency. Courts have 90 days to enter an order that directs ISP, local arresting authority, and court to expunge relevant records. • Category 3: Individuals and State's Attorneys may file motions with courts to vacate convictions for possession up to 500 grams. o Eligible records = convictions for possession and manufacture/delivery/possession with intent to deliver under Section 4 and Section 5 of the Cannabis Control Act, including possession up to 500 grams. No limitations on associated with violent crime. o Individual or State's Attorneys may file motions with the circuit court where the conviction was entered asking the court to vacate the conviction and expunge court, law enforcement and ISP records. 6 o State's Attorneys may file an objection. o Court will consider reasons to retain the records (if provided by law enforcement), the petitioner's current age and age at the time of conviction, time elapsed since conviction, and any adverse consequences to individual if denied. o Motions must be filed after completion of any sentence or condition imposed by the conviction. o State's Attorneys and civil legal aid organizations (on behalf of clients) may file motions to vacate that includes more than one individual at a time. • Exclusions: Violent Crimes o If the cannabis offense was connected to a violent crime it is ineligible for the automatic expungement processes, but the individual (or State's Attorney) can still file motion with the court to vacate conviction. This list of violent crimes comes from the Rights of Crime Victims and Witnesses Act. ■ any felony in which force or threat of force was used against the victim; ■ any offense involving sexual exploitation, sexual conduct, or sexual penetration; ■ crimes related to child pornography, posting of pornographic material of a person under 17 years of age or non-consensual dissemination of private sexual images; ■ domestic battery or stalking; ■ violation of an order of protection, a civil no contact order, or a stalking no contact order; ■ any misdemeanor which results in death or great bodily harm to the victim; or ■ involuntary manslaughter and reckless homicide. Below is a table of the current law and the category of expungement that each falls under; please note that the possession amounts were different pre-2016. Section 4 (Possession) Unlawful for any person knowingly to possess cannabis in the following amounts (a) <10g Civil law Fees; Governor's Clemency violation May be given probation andAuthority/Automatic Law charges dismissed §10(a) Enforcement Expungement (b) 10-30g Class B <6 months; Governor's Clemency Misdemeanor May be given probation andAuthority/Automatic Law charges dismissed §10(a) Enforcement Expungement 7 (c) 30-1008 Class A <1 year; Individual/State's Misdemeanor May be given probation and Attorney Motions to charges dismissed §10(a) Vacate (d) 100- Class 4 Felony 1-3 years Individual/State's 5008 Attorney Motions to acate Section 5 (Manufacture, deliver or intent to deliver) Unlawful for any person knowingly to manufacture, deliver, or possess with intent to deliver or manufacture cannabis in the following amounts (a) <2.5g Class B <6 months; Governor's Clemency Misdemeanor May be given probation andAuthority/Automatic Law charges dismissed §10(a) Enforcement Expungement (b) 2.5-10g Class A <1 year; Governor's Clemency Misdemeanor May be given probation and Authority/Automatic Law charges dismissed §10(a) Enforcement Expungement (c) 10-30g Class 4 Felony 1-3 years; Governor's Clemency May be given probation andAuthority/Automatic Law charges dismissed §10(a) Enforcement Expungement EMPLOYMENT • Nothing in the Act prohibits employers from adopting reasonable zero tolerance or drug free workplace policies, or employment policies concerning drug testing, smoking, consumption, storage, or use of cannabis in the workplace or while on call provided that the policy is applied in a nondiscriminatory manner. • Nothing in the Act limits or prevents an employer from disciplining an employee or terminating employment of an employee for violating an employer's employment policies or workplace drug policy. ILLINOIS COMMUNITY COLLEGE CANNABIS VOCATIONAL PILOT PROGRAM • The Department of Agriculture, in coordination with the Illinois Community College Board, will oversee the program. • Up to 8 community colleges will be awarded a program license by September 1, 2020. • Community colleges awarded the program license may initiate programs starting in the 2021-2022 academic year. • Students must be at least 18 years old to enroll in this course of study. • Students who complete the coursework will receive a 'career in cannabis certificate.' TAXATION • All tax revenue is deposited in the new Cannabis Regulation Fund 8 • Cultivation privilege tax o 7% of the gross receipts from the sale of cannabis by a cultivator or a craft grower to a dispensing organization • Cannabis purchaser excise tax: 0 10% of the purchase price—Cannabis with a THC level at or below 35% 0 20% of the purchase price—All cannabis infused products 0 25% of the purchase price—Cannabis with a THC level above 35% o This tax is not imposed on cannabis that is subject to tax under the Compassionate Use of Medical Cannabis Pilot Program Act o This tax shall be in addition to all other occupation, privilege, or excise taxes imposed by the State of Illinois or by any municipal corporation or political subdivision thereof. • Municipal Cannabis Retailers' Occupation Tax o On and after January 1, 2020, the corporate authorities of a municipality may, by ordinance, impose a tax on all persons engaged in the business of selling cannabis at retail locations in the municipality on the gross receipts from these sales. ■ If imposed, the tax shall be imposed in 0.25% increments ■ The tax may not exceed 3% of the gross receipts from these sales • Cannabis County Retailers' Occupation Tax o On and after January 1, 2020, the corporate authorities of a county may, by ordinance, impose a tax on all persons engaged in the business of selling cannabis at retail locations in the county on the gross receipts from these sales. ■ If imposed, the tax shall be imposed in 0.25% increments ■ The tax rate may not exceed: • 3.75% of the gross receipts of sales made in unincorporated areas of the county • 0.75% of the gross receipts of sales made in a municipality located in a non-home rule county • 3% of the gross sales receipts made in a municipality located in a home rule county. ALLOCATION OF STATE REVENUE • Tax revenue will be deposited in the new Cannabis Regulation Fund • State agencies responsible for administering the adult use cannabis program will receive resources to cover administrative costs from the taxes collected by the program. • All remaining revenue will be allocated as follows: 0 35% will be transferred to the General Revenue Fund, 0 25% will be transferred to the Criminal Justice Information Projects Fund to support the R3 program, 0 20% will be transferred to the Department of Human Services Community Services Fund to address substance abuse and prevention and mental health concerns, 9 0 10% will be transferred to the Budget Stabilization Fund to pay the backlog of unpaid bills, 0 8%will be transferred to the Local Government Distributive Fund to support crime prevention programs, training, and interdiction efforts, including detection, enforcement, and prevention efforts, relating to the illegal cannabis market and driving under the influence of cannabis, and 0 2%will be transferred to the Drug Treatment Fund to fund public education campaign and to support data collection and analysis of the public health impacts of legalizing the recreational use of cannabis. GOVERNANCE • Governor's Office o The Governor will appoint a Cannabis Regulation Oversight Officer who will be stationed in IDFPR. This person, and his or her team, will have the authority to make statutory and regulatory recommendations concerning the adult use program. This person will also coordinate efforts between state agencies involved in regulating and taxing the sale of cannabis in Illinois. • Department of Revenue o Responsible for enforcing and collecting taxes associated with the sale of cannabis. • Department of Agriculture o Responsible for licensure and oversight of cultivation centers, craft growers, infusers, and transporting organizations. o Responsible for authorizing laboratories that test cannabis o Responsible for establishing, in coordination with the Illinois Community College Board, the Community College Cannabis Vocational Training Pilot Program • Department of Financial and Professional Regulation o Responsible for licensure and oversight of dispensing organizations. • Illinois State Police o Responsible for conducting background checks on everyone involved in the licensed cannabis sector. o Responsible for reviewing security plans for all licensed entities. o Responsible for reviewing all criminal history record information and identifying all individuals with minor violations of the Cannabis Control Act that are eligible for expungement. • Department of Public Health o Responsible for developing recommendations surrounding health warnings and facilitating the Adult Use Cannabis Public Health Advisory Committee. • Department of Commerce and Economic Opportunity o Responsible for administering a low-interest loan program, a grant program, and technical assistance for social equity applicants. o Responsible for identifying 'disproportionately impacted areas' • Department of Human Services 10 o Responsible for administering programs that address substance abuse and prevention and mental health o Responsible for making recommendations to the Adult Use Cannabis Public Health Advisory Committee regarding drug treatment and prevention. o Responsible administering a public education campaign and collecting data and conducting analysis of the public health impacts of legalizing the recreational use of cannabis. • Illinois Criminal Justice Information Authority o Responsible for designating R3 areas across the state that may apply for funding from the R3 Program Board for community reinvestment. • Illinois Community College Board o Responsible for establishing, in coordination with the Department of Agriculture, the Community College Cannabis Vocational Training Pilot Program PUBLIC HEALTH AND SAFETY • Twenty percent of the revenue generated by the sale of adult use cannabis will support efforts to address substance abuse and prevention and mental health. • DUI Cannabis Task Force o The Task Force will be chaired by the director of the State Police, or his or her designee. o The Task Force will examine best practices in the area of driving under the influence of cannabis enforcement, including examining emerging technology in roadside testing. o The Task Force will present its report and recommendations on improvements to enforcement of driving under the influence of cannabis to the Governor and the General Assembly by July 1, 2020. • Advertising o No cannabis business establishment nor any other person or entity shall engage in advertising that contains any statement or illustration that: ■ Is false or misleading; ■ Promotes overconsumption or cannabis or cannabis products; ■ Depicts the actual consumption of cannabis or cannabis products; ■ Depicts a person under 21 years of age consuming cannabis; ■ Makes any health, medicinal, or therapeutic claims about cannabis or cannabis products; ■ Includes the image of a cannabis leaf or bud; or ■ Includes any image designed or likely to appeal to minors, including cartoons, toys, animals, or children, or any other likeness to images, characters, or phrases that is designed in any manner to be appealing to or encourage consumption of persons under 21 years of age. 11 o No cannabis business establishment nor any other person or entity shall place or maintain, or cause to be placed or maintained, an advertisement of cannabis or a cannabis infused product in any form through any medium: ■ Within 1,000 feet of the perimeter of a school grounds, a playground, a recreation center or facility, a child care center, a public park or public library, or a game arcade to which admission is not restricted to persons 21 years of age or older; ■ On or in a public transit vehicle or public transit shelter; ■ On or in a publicly owned or public operated property; or ■ That contains information that: • Is false or misleading; • Promotes excessive consumption; • Depicts a person under 21 years of age consuming cannabis; • Includes the image of a cannabis leaf; or • Includes any image designed or likely to appeal to minors, including cartoons, toys, animals, or children, or any other likeness to images, characters, or phrases that are popularly used to advertise to children, or any imitation of candy packaging or labeling, or that promotes the consumption of cannabis. ■ These restrictions do not apply to an educational message ■ No cannabis business establishment nor any other person or entity may encourage the sale of cannabis or cannabis products by giving away cannabis or cannabis products, by conducting games or competitions related to the consumption of cannabis or cannabis products, or by providing promotional materials or activities of a manner or type that would be appealing to children. • Packaging requirements o The following warnings shall apply to all cannabis products: "This product contains cannabis and is intended for use by adults 21 and over. Its use can impair cognition and may be habit forming. This product should not be used by pregnant or breastfeeding women. It is unlawful to sell or provide this item to any individual, and it may not be transported outside the state of Illinois. It is illegal to operate a motor vehicle while under the influence of cannabis. Possession or use of this product may carry significant legal penalties in some jurisdictions and under federal law." o All harvested cannabis intended for distribution to a cannabis enterprise must be packaged in a sealed, labeled container. o Packaging of any product containing cannabis shall be child-resistant and light- resistant consistent with current standards, including the Consumer Product Safety Commission standards referenced by the Poison Prevention Act. 12 o The label of each cannabis product shall contain, among other things, a "use by" date on the label, the quantity of cannabis contained in the product, and a content list. o All cannabis products must contain warning statements established for consumers, of a size to be legible and readily visible to a consumer inspecting a package, which may not be covered or obscured in any way. o Packaging must not contain information that: ■ Is false or misleading; ■ Promotes excessive consumption; ■ Depicts a person under 21 years of age consuming cannabis; ■ Includes the image of a cannabis leaf; ■ Includes any image designed or likely to appeal to minors, including cartoons, toys, animals, or children, or any other likeness to images, characters, or phrases that are popularly used to advertise to children, or any packaging or labeling that bears resemblance to any product available for consumption as a commercially available candy, or that promotes consumption of cannabis; ■ Contains any seal, flag, crest, coat of arms, or other insignia likely to mislead the consumer to believe that the product has been endorsed, made or used by the State of Illinois. LOCAL ORDINANCES • A unit of government, including a home rule unit or any non-home rule county within the unincorporated territory of the county, may enact ordinances to prohibit or significantly limit a cannabis business establishment's location. • Voters in any precinct within a municipality that has a population greater than 500,000 residents may petition their alderman seeking an ordinance to establish the precinct as a 'restricted cannabis zone.' The ordinance may prohibit home cultivation, cannabis business establishments, or both. • Municipalities may enact reasonable zoning restrictions pertaining to licensed cultivation centers, craft growers, processing organizations, and dispensaries. • A unit of local government, including a home rule unit, or any non-home rule county the unincorporated territory of the county may regulate the on-premises consumption of cannabis at or in a cannabis business establishment within its jurisdiction in a manner consistent with this Act. A cannabis business establishment or other entity authorized or permitted by a unit of local government to allow on-site consumption shall not be deemed a public place within the meaning of the Smoke Free Illinois Act. HOME GROW • Illinois residents who are 21 years or older and registered participants in the Compassionate Use of Medical Cannabis Pilot Program may cultivate cannabis plants. o The grower must live in a household that owns the residence or has permission from the owner. 13 o The grower is limited to growing no more than 5 plants that are five inches or taller. o The grower shall take reasonable precautions to ensure that plants are secure from unauthorized access. o If the grower violates the terms of the Act, that person is liable for penalties as provided by law as well as the loss of home cultivation privileges as established by rule. PROJECTED REVENUE • The Department of Revenue projects that this industry will generate over $57 million in tax revenue and licensing fees in FY20. o This figure represents the combined revenue projections that Governor's Office received from the Department of Revenue concerning the taxation of cannabis as well as the application and licensing fees estimated by the Department of Agriculture and the Department of Financial and Professional Regulation. ■ Breakdown • DOR tax revenue: $34 million (midpoint of the range projected by DOR: 10-58 million) • DOA estimate: $12.7 million • IDFPR estimate: $10.78 million • The Department of Revenue estimates that the state will generate $140.5 million in tax revenue in FY21. o This excludes agencies' application and licensing fees as the program continues to expand. • The Department of Revenue projects significant revenue growth as the cannabis market matures in Illinois. The state could generate $253.5 million in FY22, $323.5 million in FY23, and $375.5 million in FY24. 14 CANNABIS DECISION FLOWCHART {YrYf rl VII '.i p.:is m '114 Y L..L. !�xYxr tr r ', rryf ,,��4 rr rrrrtrY,., fq rrr 9 .: °MVI" ..................................................... III IIII � � .:. �� -�:���:: II VI uuulluululluu II IIII uu ILII luiull II uuuu lulllu�ll a lulus lulu a uuu lul II ME11 I lllllllllll����� ��� �llllll����� � YES as a Conditional Use.Add to Use table and additional Should the Village allow for on-site regulatory process to Village Code via Ordinance. consumption of cannabis at "other entities"? i.e. restaurants, cannabis cafes. NO; Cannabis cafes and other non-dispensary social sites should be prohibited.Add Restriction to Village Code via CANNABIS DECISION FLOWCHART CANNABIS BUSINESS ESTABLISHMENT RESTRICTIONS __*[YES.A�RA�riicti.,�t,,Vilka�gC.cle�via rdinance. Should the minimum distance requirement NO.The distance should be greater or more restrictive. (Make a be 100'from Schools, Churches,, a Hospitals (same as liquor code)? recommendation). NO. Distance requirements of the Act are the only one that should be applied (1,5000 feet from another cannabis use). Should the Village allow for on-site +'+p NO.Add Restriction to Village Code via Ordinance. consumption of cannabis at licensed facilities (such as dispensaries)? � YES as a Permitted Use.Add Restriction to Village Code via Ordinance. YES as a Conditional Use. Add Restriction to Village Code via Ordinance. Should the Village allow retail sale only NO. Add Restriction to Village Code via Ordinance. in conjunction with Medical Dispensaries? YES as a Conditional Use. Add Restriction to Village Code via Ordinance. YES as a Permitted Use.Add Restriction to Village Code via Ordinance. 9/27/2019 Properties within 100 feet of a Church or School.jpg(816X1056) Properties iithii feet of a Church or School off �,��Auuu��o��y�,�n Illllifl,; 1��°'II ul�lll��'�Ntl1 a II���"''�Nn(Y��`w'';° a1�,�8gd8p8p1ho���°��I��iln'V�u°��iN�lllll88g1181118�u"�"I ",11 � , 'h�5 �,������ 1,I°I�I19�d11"I"111�8111nII���uXli1 ,. V ��I���I��„I��I Ni III � �..., I .. H Ilu1,ul��llrue�xr,�71�"��Ir�I�M��°�i�utluuuu�uuu� � 111114iIj����Iu�u�IluIuIII��IIuI� �nry�ry�l�uY�Yepp���aryry�ryry�ulu���ll����� IIII IIIIh^'I� � ��il�Vfl„ I �:. 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ILLINOIS MUNICIPAL LEAGUE 20 North Wacker Drive,Suite 1660 15010 S.Ravinia Avenue,Suite 10 7 Northpoint Drive 500 East Capitol Avenue I P.O.Box 5180 Chicago,Illinois 60606 Orland Park,Illinois 60462 Streator, Illinois 61364 Springfield,Illinois 62705-5180 (312)984-6400 (708)349-3888 (815)672-3116 (217)525-1220 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 INDEX ADVERTISING.......................................................................................................................................... 1 CRAFTGROWERS................................................................................................................................... 2 CULTIVATION CENTERS...................................................................................................................... 3 DISPENSING ORGANIZATIONS..........................................................................................................4 DRIVING UNDER THE INFLUENCE (DUI)........................................................................................ 7 EMPLOYMENT CONCERNS.................................................................................................................. 9 EXPUNGEMENTS..................................................................................................................................10 FREEDOM OF INFORMATION ACT.................................................................................................11 HOMECULTIVATION..........................................................................................................................12 INFUSER ORGANIZATIONS OR INFUSERS....................................................................................13 LICENSING..............................................................................................................................................14 LOCAL GOVERNMENT........................................................................................................................17 SOCIALJUSTICE....................................................................................................................................22 TAXATION, REVENUES AND APPROPRIATIONS........................................................................23 USEAND POSSESSION........................................................................................................................26 i FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 ADVERTISING What are the restrictions on advertising for a cannabis business establishment? • "Advertise" means to engage in promotional activities including, but not limited to: newspaper, radio, Internet and electronic media, and television advertising;the distribution of fliers and circulars; and the display of window and interior signs. • No cannabis business establishment nor any entity or person shall engage in advertising that contains any statement or illustration that is: o False or misleading; o Promotes the overconsumption of cannabis; o Displays cannabis; o Shows someone under 21 consuming cannabis; o Makes health or medicinal claims about cannabis; o Includes the image of the cannabis leaf or bud; or o Includes any image that is likely to appeal to minors. • No cannabis business establishment nor any person or entity shall place or maintain or cause to be placed or maintained an advertisement in any form: o Within 1,000 feet of school grounds, playgrounds, hospitals, health care facilities, recreation centers, child care centers; public parks, public libraries; or game arcades that admit persons under the age of 21; o On or in a public transportation vehicle or on a public transportation shelter; or o On or in publicly-owned or publicly-operated property. 1 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 CRAFT GROWERS What is the definition of"craft grower?" • "Craft grower" means a facility operated by an organization or business that is licensed by the Illinois Department of Agriculture to cultivate, dry, cure and package cannabis and perform other necessary activities to make cannabis available for sale at a dispensing organization or use at a processing organization.A craft grower may contain up to 5,000 square feet of canopy space on its premises for plants in the flowering stage.The Department of Agriculture may authorize an increase or decrease of flowering stage cultivation space in increments of 3,000 square feet by rule based on market need, craft grower capacity and the licensee's history of compliance or noncompliance,with a maximum space of 14,000 square feet for cultivating plants in the flowering stage,which must be cultivated in all stages of growth in an enclosed and secure area.A craft grower may share premises with a processing organization or a dispensing organization, or both, provided each licensee stores currency and cannabis or cannabis-infused products in a separate secured vault to which the other licensee does not have access or all licensees sharing a vault share more than 50%of the same ownership. Are craft growers inspected? How,and by whom? • Craft growers are subject to random inspections by the Illinois Department of Agriculture,the Illinois Department of Public Health, local safety or health inspectors and the Illinois State Police. To whom may craft growers sell cannabis? • Craft growers may sell or distribute cannabis to a cultivation center,a craft grower,an infuser organization, a dispensing organization or as otherwise authorized by rule. What are the limitations on the location of craft growers? • A craft grower may not be located in an area zoned for residential use. • A craft grower shall not be located within 1,500 feet of another craft grower or a cultivation center. 2 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 CULTIVATION CENTERS What is the definition of"cultivation center?" • "Cultivation center" means a facility operated by an organization or business that is licensed by the Department of Agriculture to cultivate, process,transport(unless otherwise limited by the Act) and perform other necessary activities to provide cannabis and cannabis-infused products to cannabis business establishments. Are cultivation centers inspected? How,and by whom? • Cultivation centers are subject to random inspections by the Illinois Department of Agriculture,the Illinois Department of Public Health, local safety or health inspectors and the Illinois State Police. To whom may cultivation centers sell cannabis? • Cultivation centers may sell or distribute cannabis or cannabis-infused products to dispensing organizations, craft growers, infusing organizations,transporters or as otherwise authorized by rule. What is the maximum space a cultivation center may provide for plants in the flowering stage? • A cultivation center may not contain more than 210,000 square feet of canopy space for plants in the flowering stage for cultivation of adult-use cannabis as provided in this Act. 3 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 DISPENSING ORGANIZATIONS What is the definition of"dispensing organization?" • "Dispensing organization" means a facility operated by an organization or business that is licensed by the Illinois Department of Financial and Professional Regulation to acquire cannabis from a cultivation center, craft grower, processing organization or another dispensary for the purpose of selling or dispensing cannabis, cannabis-infused products, cannabis seeds, paraphernalia or related supplies under the Act to purchasers or to qualified registered medical cannabis patients and caregivers.As used in the Act, a "dispensing organization" shall include a registered medical cannabis organization as defined in the Compassionate Use of Medical Cannabis Program Act or its successor Act that has obtained an Early Approval Adult Use Dispensing Organization License. What methods of sale by dispensing organizations are prohibited? • Drive-through windows • Vending machines • Transport of cannabis to residences or other locations where purchasers may be for delivery When are dispensing organizations allowed to operate? • Operation is allowed between 6:00 a.m. and 10:00 p.m. local time. • Operation is prohibited when video surveillance equipment is inoperative. • Operation is prohibited when point-of-sale equipment is inoperative. • Operation is prohibited when the state's cannabis electronic verification system is inoperative. • Operation is prohibited when there are fewer than two people working at any time within a dispensing organization. What products are dispensing organizations prohibited from selling? • Dispensing organizations may not sell any product containing alcohol except tinctures,which are limited to containers no larger than 100 milliliters. • Selling clones or other live plant material is prohibited. 4 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 • Selling cannabis, cannabis concentrate or cannabis-infused products in combination or bundled with each other for one price is prohibited. Can dispensing organizations sell cannabis outside of Illinois or obtain cannabis from outside of Illinois? • No. Dispensing organizations may not transport cannabis or cannabis products across state lines. • No. Dispensing organizations may not obtain cannabis or cannabis-infused products from outside the State of Illinois. What type of packaging is required for cannabis sold at dispensing organizations? • All cannabis sold by a dispensing organization to purchasers must be in a container or package with a label identifying, at a minimum,the name of the dispensing organization,the contents and the weight of the raw cannabis in grams or,for cannabis products,the amount of Tetrahydrocannabinol (THC) in milligrams. Are there restrictions in the Act on the location of dispensing organizations? • Yes.A dispensing organization may not be located within 1,500 feet of the property line of a pre- existing dispensing organization. What is the process for a dispensing organization to dispense cannabis to a purchaser? • Before cannabis is dispensed: o The age of the purchaser shall be verified by checking a government-issued identification card by use of an electronic reader or electronic scanning device to scan the identification; o The validity of the government-issued identification card must be verified; o Any appropriate purchaser education or support materials shall be offered; and o Information must be entered into the state's cannabis electronic verification system, including the dispensing organization's agent's identification number,the dispensing organization's identification number,the amount,type (including strain, if applicable) of cannabis or cannabis-infused product dispensed, and the date and time the cannabis is dispensed. • A dispensing organization shall refuse to sell cannabis to anyone unless the person produces valid identification showing that the person is 21 years of age or older. However, a medical cannabis dispensing organization may sell cannabis-infused products to a person who is under 5 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 21 years of age if the sale complies with the provisions of the Medical Cannabis Program Act and rules. Public Act 101-0363, effective August 8, 2019, revised the Medical Cannabis Program Act to provide that registered qualifying patients under 21 years of age shall be prohibited from consuming forms of cannabis other than medical cannabis-infused products, and purchasing any usable cannabis or paraphernalia used for smoking or vaping medical cannabis. 6 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 DRIVING UNDER THE INFLUENCE (DUI) How will DUI's be addressed under the new law? • Driving under the influence of cannabis will continue to be illegal. • The Act allows for use of validated roadside chemical tests or standardized field sobriety tests approved by the National Highway Traffic Safety Administration when conducting investigations of a violation of Section 11-501 of the Illinois Motor Vehicle Code (625 ILCS 5/11-501)or a similar local ordinance by drivers suspected of driving under the influence of cannabis. • The results of validated roadside chemical tests and standardized field sobriety tests are, under the Act, admissible at a civil or criminal trial or proceeding for an arrest for a cannabis-related offense as defined in Section 11-501 of the Illinois Motor Vehicle Code or a similar local ordinance. • The Act creates a DUI Cannabis Task Force to examine best practices for enforcement of driving under the influence of cannabis laws and emerging technology in roadside testing for impairment. • The Act creates various statutory presumptions applicable to cannabis DUls: o Tetrahydrocannabinol (THC)concentration of 5 nanograms or more in whole blood or 10 nanograms or more in an other bodily substance creates a presumption that a person was under the influence of cannabis; and o Tetrahydrocannabinol (THC)concentration of less than 5 nanograms in whole blood or less than 10 nanograms in an other bodily substance does not give rise to a presumption that the person was or was not under the influence of cannabis, but may be considered with other competent evidence in determining whether the person was under the influence of cannabis. • The refusal to submit to a chemical test will result in the imposition of driver's license sanctions under Section 11-501.1 of the Illinois Motor Vehicle Code. • The refusal to take validated roadside chemical tests or standardized field sobriety tests is admissible in any civil or criminal action or proceeding regarding impairment by use of cannabis. • An authorized medical cannabis patient who drives is deemed to have given consent to (i) validated roadside chemical tests or(ii) standardized field sobriety tests. 7 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 • Law enforcement officers must have an independent,cannabis-related factual basis giving reasonable suspicion that a person is driving or in actual physical control of a motor vehicle while impaired by the use of cannabis to conduct validated roadside chemical tests or standardized field sobriety tests. 8 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 EMPLOYMENT CONCERNS May an employer maintain a drug-free workplace? • Yes.The Act specifies that nothing shall prohibit an employer from adopting: o reasonable zero-tolerance or drug-free workplace policies; o employment policies concerning drug testing; or o regulations concerning smoking, consumption, storage or use of cannabis at the workplace or while on call. • These policies must be applied in a nondiscriminatory manner. • Employers' policies may cover use of cannabis in the employer's workplace,while performing the employee's job duties or while "on call." An employee is deemed "on call" when he or she is scheduled with at least 24 hours' notice by employer to be on standby or otherwise responsible for performing tasks related to his or her employment. • An employer may discipline an employee for violating a workplace drug policy. If the employer elects to discipline the employee,the employer must give the employee reasonable opportunity to contest the determination. • Nothing in the Act shall be construed to interfere with any federal, state or local restrictions on employment including, but not limited to,the United States Department of Transportation regulation 49 CFR 40.151(e), or impact an employer's ability to comply with federal or state law or cause it to lose a federal or state contract or funding. • The Illinois Right to Privacy in the Workplace Act prohibits discrimination for the use of a lawful product while off duty or not on call. (820 ILCS 55/5.) How can an employer determine whether an employee is impaired by the use of cannabis? • An employer may consider an employee to be impaired by the use of cannabis if the employer has a good faith belief that the employee manifests specific, articulable symptoms while working that decrease or lessen the employee's performance of the duties or tasks. 9 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 EXPUNGEMENTS What records will be automatically expunged? • The Act mandates that arrest records relating to offenses under the Illinois Cannabis Control Act for possession of under 30 grams of any substance containing cannabis that are not associated with an arrest, conviction or other disposition of a violent crime as defined in subsection (c) of Section 3 of the Illinois Rights of Crime Victims and Witnesses Act. "Minor Cannabis Offenses" will be automatically expunged by all law enforcement agencies, including records of an arrest, charges not initiated by arrest, orders of supervision or orders of qualified probation for all offenses committed prior to the Act if: o One year or more has elapsed since the date of the arrest or law enforcement interaction documented in the records; and o No criminal charges were filed or if filed they were dismissed and/or arrestee was acquitted. What is the schedule for automatic expungement? • The Act provides that all law enforcement agencies must expunge qualifying records according to the following schedule: o Records created prior to the effective date of the Act, but on or after January 1, 2013, shall be automatically expunged prior to January 1, 2021; o Records created prior to January 1, 2013, but on or after January 1, 2000, shall be automatically expunged prior to January 1, 2023; and o Records created prior to January 1, 2000, shall be automatically expunged prior to January 1, 2025. What is the process for expungement for offenders actually convicted of Minor Cannabis Offenses or of more serious violations under the Cannabis Control Act? • Within 180 days of the effective date of the Act,the Illinois State Police must notify the Prisoner Review Board of those convictions for Minor Cannabis Offenses that are eligible for expungement under the Act. • The Act provides a process for the Prisoner Review Board to make recommendations to the Governor for pardons for certain convictions for Minor Cannabis Offenses. • Those convicted for more serious violations of the Cannabis Control Act and not qualifying for a pardon have the option of petitioning for expungement through the circuit court. 10 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 FREEDOM OF INFORMATION ACT Are all records and documents created or obtained by a public body pursuant to the provisions of the Act subject to the Illinois Freedom of Information Act(FOIA)? • The Act adds an exemption to FOIA for confidential information described in Section 55-30 of the Illinois Cannabis Regulations and Tax Act (information received by state agencies from cannabis establishment licensees or applicants). • The name and address of a dispensing organization licensed under the Act shall be subject to disclosure under FOIA.The name and cannabis business establishment address of the person or entity holding each cannabis business establishment license shall be subject to disclosure. • Complaints from consumers or members of the general public received regarding a specific, named licensee or complaints regarding conduct by unlicensed entities shall be subject to disclosure. 11 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 HOME CULTIVATION What are the limitations and requirements to grow cannabis at home? • Only registered medical cannabis patients over 21 years of age may participate in home cultivation. • Additionally, cultivation in private residences by medical cannabis patients is subject to the following limitations: o There is a limit of five plants that are five inches or more per household without a cultivation center or craft grower license; o Cannabis plants may not be cultivated in an area subject to public view; o Reasonable precautions must ensure that the plants are secure from unauthorized access or access by a person under 21 years of age; o Cannabis cultivation must occur in an enclosed locked space; o Cannabis cultivation may only occur on residential property lawfully in possession of the medical cannabis patient or with the consent of the person in lawful possession of the property; o A medical cannabis patient may allow their authorized agent to tend to the plants for brief periods of time if the patient is temporarily away; o A medical cannabis patient may only purchase cannabis seed from a dispensary; o Purchase of live plant material is prohibited; and o If the home grown plants yield more than the allowable possession limit of 30 grams of raw cannabis,then the excess cannabis must remain secured within the residence of residential property in which it was grown. May a landlord prohibit growth of cannabis on their property? • Yes.An owner or lessor of residential property may prohibit the cultivation of cannabis by a lessee. 12 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 INFUSER ORGANIZATIONS OR INFUSERS What is the definition of"infuser organization"or"infuser?" • "Infuser organization" or"infuser" means a facility operated by an organization or business that is licensed by the Illinois Department of Agriculture to directly incorporate cannabis or cannabis concentrate into a product formulation to produce a cannabis-infused product. Are infusers inspected? How, and by whom? • Infusers are subject to random inspections by the Illinois Department of Agriculture,the Illinois Department of Public Health, local safety or health inspectors and the Illinois State Police. To whom may infusers sell cannabis? • Infusers may only sell or distribute cannabis to a dispensing organization, or as otherwise authorized by rule. What are the limitations on the location of infusers? • An infuser may not be located in an area zoned for residential use. • An infuser may share premises with a craft grower or a dispensing organization, or both, provided each licensee stores currency and cannabis or cannabis-infused products in a separate secured vault to which the other licensee does not have access or all licensees sharing a vault share more than 50%of the same ownership. 13 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 LICENSING Is a license required to operate a cannabis establishment in Illinois? • Yes. The Illinois Office of Cannabis Control shall issue licenses for all dispensing organizations. Dispensing organizations are defined by the Act as a facility operated by an organization or business that is licensed by the Illinois Department of Financial and Professional Regulation to acquire cannabis from a cultivation center, craft grower, processing organization or another dispensary for the purpose of selling or dispensing cannabis, cannabis-infused products, cannabis seeds, paraphernalia or related supplies under the Act to purchasers or to qualified registered medical cannabis patients and caregivers. May municipalities require licenses to operate a cannabis establishment within their boundaries? • Since licensing is a function of the state under the Act, local governments may only enforce generally applicable business registration requirements for cannabis establishments and conduct inspections of the premises to ensure compliance with local ordinances. What are the different types of licenses? • The Act creates the following adult-use cannabis licenses, subject to various fees and subject to administration by the Illinois Department of Agriculture and the Illinois Department of Financial and Professional Regulation: • Early Approval Adult-Use Dispensing Organization - A license that permits a medical cannabis dispensing organization licensed under the Illinois Medical Cannabis Program Act as of the effective date of the Act to begin selling cannabis to purchasers as permitted by the Act as of January 1, 2020. • Early Approval Adult-Use Cultivation Center - A license that permits a medical cannabis cultivation center licensed under the Illinois Medical Cannabis Program Act as of the effective date of the Act to begin cultivating, infusing, packaging, transporting (unless otherwise provided in the Act) and selling cannabis to cannabis business establishments for resale to purchasers as permitted by the Act as of January 1, 2020. A cultivation center may begin producing cannabis and cannabis-infused products once the Early Approval Adult Use Cultivation Center License is approved. A cultivation center that obtains an Early Approval Adult Use Cultivation Center License may begin selling cannabis and cannabis-infused products to approved dispensing organizations on December 1, 2019. 14 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 • Conditional Adult-Use Dispensing Organization License - A license awarded to top-scoring applicants for an Adult-Use Dispensing Organization License that reserves to the applicant the right to an adult-use dispensing organization license if the applicant meets certain conditions described in the Act. A dispensing organization that is awarded a Conditional Adult-Use Dispensing Organization License is not entitled to purchase, possess, sell or dispense cannabis or cannabis-infused products until the applicant has received an Adult- Use Dispensing Organization License. • Conditional Adult-Use Cultivation Center License -A license awarded to top-scoring applicants for an Adult-Use Cultivation Center License that reserves to the applicant the right to an Adult-Use Cultivation Center License if the applicant meets certain conditions as determined by the Illinois Department of Agriculture by rule. A cultivation center applicant that is awarded a Conditional Adult-Use Cultivation Center License is not entitled to grow, purchase, possess or sell cannabis or cannabis-infused products until the applicant has received an Adult-Use Cultivation Center License. • Adult-Use Dispensing Organization - A license issued by the Illinois Department of Financial and Professional Regulation that permits a person to act as a dispensing organization under the Act and any administrative rule made in furtherance of the Act. • Adult-Use Cultivation Center - A license issued by the Illinois Department of Agriculture that permits a person to act as a cultivation center under the Act and any administrative rule made in furtherance of the Act. • Craft Grower -The Illinois Department of Agriculture shall issue up to 40 craft grower licenses by July 1, 2020. A "craft grower" is a facility operated by an organization or business that is licensed by the Illinois Department of Agriculture to cultivate, dry, cure and package cannabis and perform other necessary activities to make cannabis available for sale at a dispensing organization or use at a processing organization. • Infuser -The Illinois Department of Agriculture shall issue up to 40 infuser licenses through a process provided for in the Act no later than July 1, 2020. "Infuser organization" or "infuser" means a facility operated by an organization or business that is licensed by the Illinois Department of Agriculture to directly incorporate cannabis or cannabis concentrate into a product formulation to produce a cannabis-infused product. An infuser is prohibited from extracting cannabis concentrate from raw cannabis material. Only cultivation centers and craft growers will be allowed to extract cannabis concentrate. • Transporter -Transporting organization" or "transporter" means an organization or business that is licensed by the Illinois Department of Agriculture to transport cannabis on 15 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 behalf of a cannabis business establishment or a community college licensed under the Illinois Community College Cannabis Vocational Training Pilot Program. Do state licenses need to be renewed? • Yes. All licenses expire and are subject to the renewal provisions set forth in the Act. • Adult-Use Dispensing Organization Licenses shall expire on March 31 of even-numbered years. Licensees must submit a renewal application as provided by the Illinois Department of Financial and Professional Regulation and pay the required renewal fee. 16 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 LOCAL GOVERNMENT May municipalities prohibit cannabis establishments within their boundaries? • Yes.A municipality may enact ordinances to prohibit or significantly limit an adult-use cannabis business establishment's location. • While adult-use cannabis business establishments may be prohibited,the Illinois Medical Cannabis Program Act specifically provides that medical cannabis dispensing organizations may not be prohibited within municipal boundaries. For medical cannabis establishments,then, municipalities may only regulate location via reasonable zoning regulations (special use permits, etc.). May municipalities and other units of local government regulate cannabis establishments within their boundaries? • A unit of local government may enact reasonable zoning ordinances or resolutions not in conflict with the Act or with Illinois Office of Cannabis Control, Illinois Department of Public Health, Illinois Department of Financial and Professional Regulation and Illinois Department of Agriculture rules regulating cannabis establishments. • A unit of local government may enact ordinances or rules governing the time, place, manner and number of cannabis establishment operations, including a minimum distance limitation between cannabis establishments and locations it deems sensitive through the use of special use permits. May municipalities prohibit or regulate cannabis establishments outside of their boundaries? • A municipality may exert extra territorial zoning authority in the unincorporated area within one and one half miles of its corporate limits through the adoption of a comprehensive plan and zoning for that area pursuant to 65 ILCS 5/11-13-1.The municipal ordinances would control that area absent a county zoning ordinance, or another municipality with zoning already in place. May municipalities regulate the on-premises consumption of cannabis and/or allow cannabis cafes and lounges? • Yes.A municipality may regulate and/or allow the on-premises consumption of cannabis at or in a cannabis business establishment within its jurisdiction in a manner consistent with the Act. The Act allows the creation of"cannabis cafes/lounges" in the discretion of the municipality. Cannabis business establishments or other entities authorized or permitted by a municipality to 17 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 allow on-site consumption shall not be deemed a public place within the meaning of the Smoke Free Illinois Act. May municipalities and other units of local government prohibit the use of cannabis within their boundaries? • No unit of local government, including a home rule unit, may unreasonably prohibit the use of cannabis authorized by the Act. Does the Act contain any location restrictions on dispensaries? • A dispensing organization may not be located within 1,500 feet of the property line of a preexisting dispensing organization. • These distance restrictions are different than those originally imposed by the Illinois Medical Cannabis Program Act. Under the Medical Cannabis Program Act, registered cultivation centers could not locate within 2,500 feet of the property line of a pre-existing public or private preschool or elementary or secondary school or day care center, day care home,group day care home, part day child care facility or an area zoned for residential use(410 ILCS 130/105(c)) and registered dispensing organizations could not locate within 1,000 feet of the property line of a pre-existing public or private preschool or elementary or secondary school or day care center, day care home, group day care home, or part day child care facility or be located in a house, apartment, condominium,or an area zoned for residential use (410 ILCS 130/130(d)). P.A. 101-0363,which made various amendments to the Medical Cannabis Program Act and became effect on August 8, 2019, eliminated the distance restrictions for medical cannabis dispensaries registered after July 1, 2019. Does failure to be in compliance with local zoning regulations have any impact on a cannabis establishment's ability to operate in Illinois? • Yes.A state-issued cannabis establishment license will be denied if the applicant is not in compliance with local zoning rules. May municipalities and other units of local government fine or penalize cannabis establishments for violation of local zoning regulations? • A unit of local government may establish civil penalties for violation of an ordinance or rules governing the time, place and manner of operation of a cannabis establishment within the jurisdiction of the unit of local government. 18 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 May municipalities regulate personal possession and consumption of cannabis? • The Act provides municipalities with the authority to locally regulate possession and consumption of cannabis by private citizens in a manner consistent with the Act.Therefore, municipalities may adopt the prohibitions and penalties of the Act into their codes which will give the local governments the ability to enforce and prosecute personal possession and consumption violations through local adjudication or the circuit court. Does the Act apply to home rule units of government? • Yes.A unit of local government may not regulate cannabis-related activities in a manner more restrictive than their regulation by the state under the Act. Home rule preemption applies here. o "This subsection is a limitation under subsection (i) of Section 6 of Article VII of the Illinois Constitution on the concurrent exercise by home rule units of powers and functions exercised by the State." Section 55-25(4). • Home rule preemption is specifically set forth in Section 55-90 of the Act. "Except as otherwise provided in this Act, a unit of local government, including a home rule unit, may not regulate or license the activities described in this Act." [emphasis added] May voters choose to limit or prohibit cannabis establishments within a municipality? • Only within the City of Chicago.The Act allows the legal voters of any precinct within a municipality with a population of over 500,000 to petition their local alderman, using a petition form made available online by the city clerk,to introduce an ordinance establishing the precinct as a restricted cannabis zone. "Restricted cannabis zone" means a precinct within which home cultivation, one or more types of cannabis business establishments, or both has been prohibited pursuant to an ordinance initiated by a petition under the Act. Does the Act contain any operational rules for adult-use cannabis dispensing organizations? • The Act, in Section 15-70, contains a list of specific business operational rules for adult-use cannabis dispensing organizations that provide a clear baseline of regulatory guidelines for these establishments. Municipalities may include these in any statement on approvals or conditions that are part of any conditional use permit.These rules include: o A dispensing organization must include the legal name of the dispensary on the packaging of any cannabis product it sells. o Dispensing organizations are prohibited from selling any product containing alcohol except tinctures,which are limited to containers that must be no larger than 100 milliliters. 19 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 o A dispensing organization may only accept cannabis deliveries into a restricted access area. Deliveries may not be accepted through the public or limited access areas unless otherwise approved under the Act. o A dispensing organization shall maintain compliance with state and local building,fire and zoning requirements or regulations. o A dispensing organization shall submit a list to the state of the names of all service professionals that will work at the dispensary. o A dispensing organization's license allows for a dispensary to be operated only at a single location. o A dispensing organization may operate between 6:00 a.m. and 10:00 p.m. local time. o A dispensing organization must keep all lighting outside and inside the dispensary in good working order and wattage sufficient for security cameras. o A dispensing organization shall not: ■ Produce or manufacture cannabis; ■ Accept a cannabis product from an adult-use cultivation center, craft grower, infuser, dispensing organization or transporting organization unless it is pre- packaged and labeled in accordance with the Act and any rules that may be adopted pursuant to the Act; ■ Obtain cannabis or cannabis-infused products from outside the State of Illinois; ■ Sell cannabis or cannabis-infused products to a purchaser unless the dispensary organization is licensed under the Illinois Medical Cannabis Program Act, and the individual is registered under the Medical Cannabis Program Act or the purchaser has been verified to be over the age of 21; ■ Enter into an exclusive agreement with any adult-use cannabis cultivation center, craft grower or infuser; ■ Refuse to conduct business with an adult-use cannabis cultivation center, craft grower,transporting organization or infuser that has the ability to properly deliver the product and is permitted by the Illinois Department of Agriculture, on the same terms as other adult-use cannabis cultivation centers, craft growers, infusers or transporters with whom it is dealing; ■ Operate drive-through windows; ■ Allow for the dispensing of cannabis or cannabis-infused products in vending machines; ■ Transport cannabis to residences or other locations where purchasers may be for delivery; ■ Enter into agreements to allow persons who are not dispensing organization agents to deliver cannabis or to transport cannabis to purchasers; ■ Operate a dispensing organization if its video surveillance equipment is inoperative; ■ Operate a dispensing organization if the point-of-sale equipment is inoperative; 20 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 ■ Operate a dispensing organization if the state's cannabis electronic verification system is inoperative; ■ Operate a dispensing organization when there are fewer than two people working at any time; ■ Be located within 1,500 feet of the property line of a pre-existing dispensing organization; ■ Sell clones or any other live plant material; ■ Sell cannabis, cannabis concentrate or cannabis-infused products in combination or bundled with each other or any other items for one price, and each item of cannabis, concentrate or cannabis-infused product must be separately identified by quantity and price on the receipt; ■ Violate any other requirements or prohibitions set by the Act or administrative rules. 21 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 SOCIAL JUSTICE What other agency oversight does the state have for social issues related to cannabis production,sale and use? • The Restoring Our Communities (ROC) program will be created.The ROC program will be a performance incentive funding program for high-need, underserved communities throughout the state. • The purpose of the ROC program will be to directly address the impact of economic disinvestment and the historical use of criminal justice responses to community and individual needs by supporting local design and control of community-based responses to these impacts that can be accessed outside of the criminal justice system. • The ROC program will provide planning and implementation grants as well as technical assistance to collaborative groups that include human service providers and community-based organizations, individuals who have experienced the criminal justice system or other systems of state intervention, individuals who have been consumers of social programs administered by the state or local jurisdictions,and local leaders from all sectors. 22 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 TAXATION, REVENUES AND APPROPRIATIONS How is cannabis cultivation going to be taxed at the state level? • Beginning on January 1, 2020, a Cannabis Cultivation Privilege Tax is imposed by the State of Illinois upon the privilege of cultivating cannabis at the rate of 7%of the gross receipts from the sale of cannabis by a cultivator. o This tax rate already exists under current medical cannabis law. o As all funds collected under the Cannabis Regulation and Tax Act and under the Compassionate Use of Medical Cannabis Program Act will be deposited into the state's Cannabis Regulation Fund, the 7%cultivation tax that previously only applied to the cultivation of medical cannabis is repealed, effective July 1, 2020 (See 410 ILCS 130/200), and replaced by the same tax that applies to both adult-use and medical cannabis cultivation. o All funds received by the Illinois Department of Revenue under the privilege tax shall be paid into the Cannabis Regulation Fund in the state treasury. • The Cannabis Cultivation Privilege Tax will be collected in addition to all other occupation or privilege taxes imposed by the State of Illinois or by any municipal corporation or political subdivision (whether the cultivation is for medical or adult-use purposes). How is the sale of cannabis going to be taxed at the state level? • Beginning on January 1, 2020, a Cannabis Purchaser Excise Tax is imposed by the State of Illinois upon purchasers for the privilege of using cannabis at the following rates: o Cannabis flower or products with less than 35%Tetrahydrocannabinol (THC): 10%tax. o Cannabis-infused products(i.e., edibles): 20%tax. o Cannabis flower or products with a THC concentration higher than 35%: 25%tax. • The purchase price of any product that contains any amount of cannabis or any derivative is subject to the excise tax on the full purchase price of the product. • The purchase of cannabis is also subject to state and local sales taxes. Sales tax is collected in addition to all other occupation, privilege or excise taxes imposed by the State of Illinois or by any municipal corporation or political subdivision of the state. • All funds received by the Illinois Department of Revenue under the excise tax will be paid into the Cannabis Regulation Fund in the state treasury. 23 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 What is the state going to do with the funds collected in the form of state taxes, license fees and any other monies collected with regard to cannabis production and sale? • The Cannabis Regulation Fund is created in the state treasury. Unless otherwise provided, all funds collected under the Cannabis Regulation and Tax Act and under the Medical Cannabis Program Act shall be deposited into the Cannabis Regulation Fund, consisting of taxes, license fees, other fees and any other amounts required to be deposited or transferred into the Fund. • Monthly,the transfers of revenues received into the Cannabis Regulation Fund shall be certified as follows: o First, to pay for the direct and indirect costs associated with the implementation, administration and enforcement of the Compassionate Use of Medical Cannabis Program Act and the Cannabis Regulation and Tax Act,the Illinois Department of Revenue shall certify the transfer of 1/12 of the fiscal year amount appropriated to the numerous agencies involved with the program; o Second, after the above-noted transfers have been made, the remainder shall be transferred by formula to the following funds: ■ 35%transferred to the state General Revenue Fund ■ 25%transferred to the Criminal Justice Information Projects Fund to support the Restore, Reinvest and Renew Program for community reinvestment ■ 20%transferred to the Illinois Department of Human Services Community Services Fund to fund mental health and substance abuse services at local health departments ■ 10%transferred to the Budget Stabilization Fund to pay the backlog of unpaid state bills ■ 8%transferred to the Local Government Distributive Fund (LGDF)to fund crime prevention programs,training, and interdiction efforts relating to the illegal cannabis market and cannabis-based DUls ■ 2%transferred to the Drug Treatment Fund for public education and awareness How may cannabis be taxed at the local level? • On and after January 1, 2020, the corporate authorities of any county or municipality may, by ordinance, impose a County and Municipal Cannabis Retailers' Occupation Tax (MCROT). • For municipalities,the MCROT is imposed upon purchasers for the privilege of using adult-use cannabis purchased in the municipality.The rate of tax shall not exceed 3%of the purchase price. If imposed,the tax shall only be imposed in 0.25% increments. • Counties are authorized to impose a tax of up to 3%in incorporated areas and 3.75%on sales emanating from unincorporated areas. 24 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 • The Illinois Department of Revenue will collect and administer the MCROT. • The MCROT shall not be imposed on cannabis that is subject to tax under the Medical Cannabis Program Act. Sales of medical cannabis from registered medical cannabis dispensaries are taxed at the 1% rate imposed on prescription and nonprescription drugs in Illinois. • Any ordinance imposing the tax must be certified by the municipal clerk of that unit of local government and filed with the Illinois Department of Revenue before June 1 of any year,to be effective and enforced by the Department of Revenue on September 1 of that year. • The MCROT will be collected in addition to all other occupation, privilege or excise taxes imposed by the State of Illinois or by any municipal corporation or political subdivision of the state. How are existing sales taxes affected? • Retailers' Occupation Taxes (sales taxes), assessed at both a local and state level, will not be deposited into the Cannabis Regulation Fund. Nothing in the Medical Cannabis Program Act and the Cannabis Regulation and Tax Act affects the collection of these taxes or their deposit in the state's general fund and/or distribution to municipalities under local ordinance. • Under the state Retailers' Occupation Tax,the sale of cannabis is classified as a "sale of tangible personal property at retail." 25 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 USE AND POSSESSION How much cannabis may a resident of the State of Illinois legally possess under the Act? • For an Illinois resident who is 21 years of age or older,the possession limit is any combination of the following: 0 30 grams of raw cannabis; o Cannabis-infused product or products containing a total of no more than 500 mg of Tetrahydrocannabinol (THC); 0 5 grams of cannabis product in concentrated form. • For individuals who register as qualifying patients under the state's existing medical cannabis program only: o Up to 5 cannabis plants and the cannabis produced from those 5 plants, secured within the residence or dwelling unit (no matter how many people reside in a residence, only 5 plants are allowed per residence). o Any combination of the amounts indicated above. Additionally, if they have plants that yield more than the 30 grams of raw cannabis,the excess must remain secured in the residence or residential property it is grown. How much cannabis may a non-resident of the State of Illinois legally possess under the Act? • For a person who is 21 years of age or older and who is not a resident of Illinois,the possession limit is any combination of the following: 0 15 grams of raw cannabis; o Cannabis-infused products or products containing a total of no more than 250 mg of THC; 0 2.5 grams of cannabis product in concentrated form. • A non-resident may not possess cannabis plants. Where is a person prohibited from possessing cannabis? • The Act does not permit any person to engage in, and does not prevent the imposition of any civil, criminal or other penalties for engaging in, any of the following conduct: o Possessing cannabis on a school bus. o Possessing cannabis on the grounds of any preschool or primary or secondary school unless approved as a medical cannabis patient. o Possessing cannabis in any correctional facility. 26 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 o Possessing cannabis in a vehicle not open to the public unless the cannabis is in a reasonably secured, sealed,tamper-evident container and reasonably inaccessible while the vehicle is moving. o Possessing cannabis in a private residence that is used at any time to provide licensed child care or other similar social service care on the premises. Where is the use of cannabis prohibited? • The Act does not permit any person to engage in, and does not prevent the imposition of any civil, criminal or other penalties for engaging in,the following: o Consuming cannabis on a school bus. o Consuming cannabis on the grounds of any preschool or primary or secondary school unless authorized in the medical cannabis program. o Consuming cannabis in any correctional facility. o Consuming cannabis in any motor vehicle. o Consuming cannabis in a private residence that is used at any time to provide licensed child care or other similar social service care on the premises. o Consuming cannabis in any public place or knowingly in close physical proximity to anyone under 21 years of age. o Consuming cannabis in any public place where a person could reasonably be expected to be observed by others. o Consuming cannabis in any location where smoking is prohibited by the Smoke Free Illinois Act(410 ILCS 82/1 etseq.), including hospitals, restaurants, retail stores, offices, commercial establishments, etc. o Universities, colleges and other post-secondary educational institutions may restrict or prohibit cannabis use on their property. How is a "public place"defined under the Act? • A"public place" is defined as any place where a person could reasonably be expected to be observed by others. • A"public place" includes all parts of buildings owned in whole or in part, or leased, by the state or a unit of local government. • A"public place" does not include a private residence, unless the private residence is used to provide licensed child care,foster care or other similar social service care on the premises. 27 FREQUENTLY ASKED QUESTIONS Cannabis Regulation And Tax Act—Public Act 101-0027 Are there certain specific activities that an individual may not perform while using cannabis? • Operating, navigating or being in actual physical control of any motor vehicle, aircraft or motorboat while using or under the influence of cannabis. • Use of cannabis by a law enforcement officer, corrections officer, probation officer or firefighter while on duty. • Use of cannabis by a person who has a school bus driver's permit or a Commercial Driver's License (CDL) while on duty. • Driving under the influence and reckless driving based on THC impairment may continue to be charged. 28 Adult-Use Cannabis Public Act 101-0027 creates the Cannabis Regulation and Tax Act and was signed into law by Governor JB Pritzker on l June 25, 2019. Effective January 1, 2020, the Act legalizes the possession and private use of cannabis for Illinois residents over 21 years of age. 7/15/19 LOCAL REGULATION OF CONSUMPTION Municipalities may not restrict the private consumption of cannabis that is authorized by the Act. However, the Act prohibits the use of cannabis in public places, schools and child care facilities among other locations. Municipalities may adopt and enforce local ordinances to regulate possession and public consumption of cannabis so long as the regulations and penalties are consistent with the Act. HOME GROW LIMITED TO MEDICAL PROGRAM PARTICIPANTS Home grow cannabis will be authorized only for medical cannabis program participants, and is limited to five plants in their residence and subject to specified restrictions. Home grow of recreational cannabis by non-medical participants is prohibited. More information about the medical cannabis program is available via this link. ZONING The Act preserves local zoning authority and directly authorizes municipalities to prohibit (opt out) or significantly limit the location of cannabis businesses by ordinance. Municipalities will have the authority to enact reasonable zoning regulations that are not in conflict with the act. This would include the authority to opt out of either commercial production or distribution o (dispensaries) of adult-use cannabis within their jurisdiction. f 'I Municipalities also may enact zoning ordinances and regulations designating the time, place, manner and number of cannabis �o business operations, including minimum distances between locations through conditional use permits. BUSINESS REGULATION In addition to zoning authority, municipalities will have the authority to allow for on-premise use of cannabis at locations to be determined locally. The Act anticipates that local authorities will engage in inspections of cannabis-related businesses. Municipalities may establish and impose civil penalties for violations of the local ordinances and regulations. ILLINOIS MUNICIPAL LEAGUE 500 East Capitol Avenue I PO Box 5180 I Springfield,IL 62705-5180 I Ph:217.525.12201 Fx:217.525.7438 I www.iml.org LOCAL REVENUE Municipalities, by ordinance, may impose a Municipal Cannabis Retailers' Occupation Tax on adult-use cannabis products of up to 3% of the purchase price, in .25% increments. Counties may impose up to 3.75% in unincorporated areas, in .25% increments. The taxes imposed under this Act shall be in addition to all other occupation, privilege or excise taxes imposed by the State of Illinois or by any unit of local government, such as sales tax. SMOKE FREE ILLINOIS ACT The Acta lies the restrictions of the Smoke Free Illinois Act on smoking cannabis and provides II pp g � that property owners may prohibit the use of cannabis by any guest, lessee, customer or visitor. In addition, lessors may prohibit cultivation of cannabis by their lessees. EMPLOYER PROVISIONS The Act provides employer protections including that nothing in the enactment prohibits employers from adopting reasonable zero-tolerance or drug-free workplace employment policies concerning drug testing, smoking, consumption, storage or use of cannabis in the workplace or while on-call. These policies must be applied in a nondiscriminatory manner. Employers may prohibit the use of cannabis by employees in the workplace, and engage in discipline, including termination, for violations of those polices and workplace rules. STATE LICENSING The Act authorizes the production and distribution of cannabis and cannabis products through state-licensed cultivators, craft growers, infusers, transporters and dispensaries. Cannabis transporters will be separately licensed by the Act, as well. A market study due in March 2021 will inform future licensing. The state will issue licenses according to a STATE REVENUE graduated scale. By the end of the first year, there will be up to 295 dispensing organizations. The Act will allow up to 500 dispensing State revenues derived from the Cannabis organizations by January 1, 2022. Cultivators will be capped at Regulation and Tax Act will be deposited 50, and 100 craft growers will be allowed. By that same date, 100 into the Cannabis Regulation Fund. The infusers will also be authorized to be licensed. funds will be distributed to multiple state agencies for implementation of the GRANTS AND INVESTMENT Act. The legalization of adult cannabis The Act establishes the Restore, Reinvest and Renew (R3) Program also includes a new source of Local to invest in communities historically impacted by economic Government Distributive Fund (LGDF) s abi disinvestment and violence. The Illinois Criminal Justice Information Regulation Fund revenues dollars. A portion of the Cannabis Authority (ICJIA) will identify R3 areas that qualify for funding, and deposits) will go to local governments, grants will be awarded by the R3 Board. A 22-member R3 Board will through LGDF, which will be used to award grants throughout the state, subject to an application process fund crime prevention programs, training and the Government Accountability and Transparency Act (GATA); and interdiction efforts. The Cannabis the R3 Board shall be chaired by the Lt. Governor. Regulation Fund is derived from moneys SOCIAL EQUITY collected from state taxes, license fees and other amounts required to be The Act provides for a social equity program to establish a legal transferred into the Fund. cannabis industry that is accessible to those most adversely ,,,,, ,,,,, ,,,,, ,,,,, ,,,,, impacted by the enforcement of drug-related laws in this state, including cannabis-related laws. Qualifying social equity applicants may be awarded financial assistance and incentives if they are interested in establishing cannabis related businesses. DECRIMINALIZATION AND EXPUNGEMENTS A significant portion of the Act addresses the decriminalization of cannabis through mandatory and discretionary expungements of criminal convictions relating to non-violent cannabis offenses. _ten Illinois Municipal League I Adult-UseCannabis Page 2 rM m.-,o , ) I H,y,� ;��� �,�,1- �' Y ��"1;1w� R��F I�,,�Y r 9M°; . : ��"� ��ry� � , AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA rl'Mr>" r" yr U "r ° "' r y i�(N y � �Hv „Je✓�1�` � %f /I'�W1�� e / `�^ M""`. 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I arc dr I�"IV J o P I l � � .� it �✓� r �!/ i r u : 1 �r I" I Pf Vllili I til I �;d° I r 1 'Y ICMA,the International City/County Management Association,advances professional local government manage- ment worldwide through leadership, management, innovation,and ethics.Through expansive partnerships with local governments,federal agencies, nonprofits,and philanthropic funders,the organization gathers information on topics such as sustainability, health care, aging communities, economic development, cybersecurity, and perfor- mance measurement and management data on a variety of local government services—all of which support related training, education, and technical assistance. ICMA provides support, publications, data and information, peer and results-oriented assistance,and training and professional development to more than 12,000 city,town,and county experts and other individuals and organiza- tions throughout the world. Published September, 2018 Copyright© 2018 International City/County Management Association, 777 North Capitol Street, N.E., Suite 500, Washington, D.C. 20002.All rights reserved, including rights of reproduction and use in any form or by any means, including the making of copies by any photographic process or by any electronic or mechanical device, printed or written or oral, or recoding for sound or visual reproduction, or for use in any knowledge or retrieval system or device, unless permission in writing is obtained from copyright owner. Contents iv Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impactea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 PublicSafety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 PublicHealth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Summary Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Case Studies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Carpinteria, California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Durango, Colorado. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Fort Collins, Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Grover Beach, California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Southern Oregon - Jackson County and City of Ashland. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Juneau,Alaska. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 Kirkland, Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Pacifica, California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 Santa Rosa, California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 Aboute Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acknowledgements ICMA gratefully acknowledges the City of Half Moon Bay,California for its funding and support of this research project.We also appreciate the generosity of the following individuals in sharing their time, insights, and connections: Amber Blake Deputy City Manager, City of Durango, CO Dennis Bozanich Deputy County Executive Officer, County of Santa Barbara, CA Matthew Bronson City Manager, City of Grover Beach, CA Matthew Chidester Deputy City Manager, City of Half Moon Bay, CA David Durflinger City Manager, City of Carpinteria, CA Judy Erwin City Manager, City of Hines, OR David Favour Development Services Deputy Director, City of Issaquah,WA Eric Feldt City Planner,City of Battle Creek, MI Rebecca Fleury City Manager, City of Battle Creek, MI Ben Florine Deputy City Clerk, City of Durango, CO Adam Hanks Interim City Manager, City of Ashland, OR Chris Harlow Deputy City Clerk, City of Durango, CO Clare Hartman Deputy Planning Director, City of Santa Rosa,CA Lorenzo Hines Assistant City Manager, City of Pacifica, CA Danny Jordan County Manager, County of Jackson,OR Ron LeBlanc City Manager, City of Durango, CO Joe Lopez City Manager, City of Modesto, CA Sean McGlynn City Manager, City of Santa Rosa, CA Emily Moon Interim City Manager, City of Issaquah,WA Dirk Nelson City Attorney, City of Durango, CO Amy Phillips City Clerk, City of Durango, CO Ginny Sawyer Policy and Project Manager, City of Fort Collins, CO Suzanne Sitter Legal Coordinator, City of Durango, CO Dan Steidle Chief of Police, City of Pacifica, CA Kurt Triplett City Manager, City of Kirkland,WA Rorie Watt City Manager, City and Borough of Juneau,AK Tina Wehrmeister Planning Director, City of Pacifica, CA Scott Winkels Intergovernmental Relations Associate, League of Oregon Cities Finally,the authors thank our ICMA colleagues Kirie Samuels,Anne Phelan, Erika White,and Tad McGalliard for their editing,design,and other contributions to this report. Local Impacts of COMMERCIAL CANNABIS INTRODUCTION (LSD), methylenedioxymethamphetamine (ecstasy), methaqualone,and peyote.' The last two decades have brought waves of signifi- Under the Obama administration,the Depart- cant change to state laws regarding medical and recre- ment of Justice issued a series of guidelines regarding ational cannabis,which in turn have implications for federal prosecution of medical and recreational can- local governments. nabis activities,the best known being Deputy Attorney Since the passing of California's Proposition 215 in General James Cole's 2013 memo.The Cole Memo pro- 1996,another 30 states plus the District of Columbia, vided some assurance to states and localities permit- Guam,and Puerto Rico have followed with their own ting medical or recreational cannabis activities that the measures legalizing medical cannabis.Voters in nine of federal government would not challenge these states' those states—Colorado,Washington,Alaska,Oregon, laws, provided they aligned with federal high-level Massachusetts, Maine, Nevada,California,and Ver- priorities such as keeping marijuana away from children mont—plus the District of Columbia have also legalized and upholding protections against public health and adult recreational use of cannabis.' safety threats associated with use and distribution. At the federal level, cannabis remains a Schedule I In early 2018,the new Attorney General Jeff Ses- drug according to the U.S. Controlled Substances Act, sions issued a memo to all rescinding the Obama reserved for"substances ...with no currently accepted administration's guidance on federal prosecution of medical use and a high potential for abuse,"a classifica- medical and recreational cannabis activities.3 Despite tion also applied to heroin, lysergic acid diethylamide the Justice Department's about-face,additional states State Cannabis Laws as of July 2018 711 Comprehensive Medical Law Comprehensive Recreational and Medical Law Source:National Conference of State Legislatures such as Oklahoma and Michigan have since proceeded IMPACTAREAS with their plans to vote on medical and recreational cannabis, respectively.The Canadian government overEconomic Development - whelmingly passed a national measure to legalize and regulate cannabis, becoming the second nation world- RedevelopmentPotential wide to do so. In the United States, public polling on While not guaranteed, it is certainly possible to capital- the issue shows a dramatic shift over the past decade ize on peak interest in this industry as an opportunity in favor of legalization.4 for redevelopment and economic growth.Across the In the meantime, increasing numbers of local govern- state of California,the declining cut flower industry is ments are faced with decisions about whether and how causing some producers to consider a shift toward can- they want to regulate medical and/or recreational canna- nabis cultivation.6 Small-scale food growers on the rural bis in their communities.These decisions are extremely outskirts of Cape Cod, Massachusetts,find themselves complicated and have implications across many local in a similar situation.7 Grover Beach, California realized government departments and systems. Public debate its underused industrial land would be marketable to is emotionally charged and not all questions can be cannabis product manufacturers, and imposed addi- answered given the youth of a legal cannabis industry. tional requirements for public improvements on those ICMA provides this resource to assist local govern- sites to such users.The small town of Cotton Plant, ments in considering implications of legal commercial Arkansas—a far cry from progressive costal enclaves— cannabis activities in their communities. Findings and sees potential for a legal medical cannabis industry to recommendations are drawn primarily from interviews resurrect a waning local economy." with local government administrators and staff and review of available data and reports (emphasizing neu- tral sources whenever possible)from early adopters of Cash-based businesses. Regardless of lenient state and legal cannabis legislation. local policy,the illegal status of cannabis at the federal level renders it effectively an all-cash industry,as the federally insured banking system is extremely limited on how, if at all, it can service these businesses. It can SII Irlu �rIIIIIIIII s. s" 'R� " V111VVV iiu�uiiui�uuiiuu "` Ilbii i 1111 also be challenging for businesses to access auxiliary � � � I m �" illll luu Imm Illllul financial (e.g.,accounting) or legal services that other s 6 r s types of businesses take for granted. For local govern- ments,this means being prepared to accept massive IUIII II 6 cash payments for taxes and fees,which could include purchasing cash-counting machines and/or increas- ing security to protect staff and facilities.And for local economies,all-cash offers on land can place pressures on availability and have pricing consequences for other UIIIII III III industries as well. �. 111111� Is 111 ills I sus ° Who are operators?The high cost of licenses, s Du s s uo s Iu x,11111 permits, land,security, other startup requirements,as well as a lack of access to financing present significant IIT I II �° III sl s barriers impacting who can enter the industry. But (IIII s s the industry is attracting a wide range of operators, s IIu VIII. �1 4 s 111 from those with a history in agriculture to tech-savvy entrepreneurs. Google employees own one of the few IU s IIII s m1 cannabis retail stores in Kirkland,Washington,while a 19 11III 1 Iu s s� ililliVVlii large start-up in Grover Beach, California is connected to a well-known Los Angeles rapper and TV personality. In Santa Rosa, California,city staff discovered through their licensing processes that many cannabis businesses — It can be tempting to overreach with projections. were operated by female heads-of-households. Early analyses on the potential economic impacts Industry employment.The Washington State of the cannabis industry are fraught with assump- Institute for Public Policy,charged with evaluating tions that can multiply into gross exaggerations the state's implementation of its legalization measure, and unrealized expectations(true for any industry, estimated the average of its 700 active cannabis busi- but particularly so for one just emerging from nesses employed approximately nine full-time equiva- underground). lent(FTE)employees at an average hourly wage of — Avoid taxing the industry back underground.The $16.45 (median of$13.44) in the final quarter of 2016. city of Grover Beach,California actually adjusted The majority of retailers, processors, and producers its tax rates downward as the industry came online were classified as small, employing less than nine FTE. to maintain a competitive overall effective tax rate. Producers and processers tended to be even smaller, — Consider your costs,which likely spread far employing four or fewer FTE.9 across your organization.The City of Santa Rosa, Revenue r California provides a detailed breakdown of the State leaders in favor of a regulated legal cannabis estimated steps and costs associated with just industry often tout the associated economic opportuni- the review of business applications,which are ties from license fees and sales and excise taxes.States substantial.1' Fort Collins, Colorado is carefully have earmarked this revenue for specific needs such as trying to monitor and cover its costs,which also schools(including construction,early education,and include staff support from a licensing coordina- anti-bullying measures), public health (substance abuse for and dedicated police officer. In contrast,the prevention/treatment,mental health),and public safety. small city of Hines, Oregon believed it was seizing Slices of revenue are also passed through to local an economic opportunity as the only city in its governments where cannabis activities are permitted. county to allow commercial cannabis businesses, Revenue distribution formulas may account for popula- but the administrative burden on its limited staff tion, number of licensed businesses,and other fac- has left them questioning the net benefit. tors,and are regularly subject to challenge or change; Of the communities we interviewed for this report, cultivation hotspot Jackson County, Oregon is urging those enlisting the help of external consultants with its state to weigh total canopy size more heavily in its cannabis industry expertise were typically pleased with revenue-sharing calculations. Some states,such as Ore- the support provided. gon, also prescribe how locally shared revenue should Tourism be spent(on public safety, in the Oregon example). For multiple reasons,the local share tends to be signifi- Tourism is a significant economic sector in virtually all of the early states to legalize recreational cannabis, so cantly smaller and thus less impactful. In light of this, and to offset local administration, it warrants special attention.While individual opinions regulation,and enforcement costs, many communities vary as to whether cannabis is a deterrent to tourism, have elected to impose their own license fees and/or research suggests a more neutral-to-favorable impact. additional local taxes on the cannabis industry.State In 2016,the Colorado Tourism Office included a new legislation may set restrictions on the rate and process series of marijuana-related questions in its annual for doing so,and state municipal leagues are often research on visitor behavior.A contracted research useful resources in parsing those regulations.Spe- firm queried individuals as to whether legalization of cific guidelines for setting such rates are beyond the marijuana influenced their perceptions on living/work- scope of this report, but general observations from our ing,visiting, or purchasing good/services from those research include the following. states.According to their findings,a majority of visitors' opinions of states where marijuana was legalized did — Explore this option as early as possible. Durango, Colorado waited until the industry had been oper- not change.Approximately 30 percent of respondents ating locally for multiple years before introducing a viewed those states more positively,and approximately dedicated tax proposal,which they were forced to 1 in 10 had a more negative view based on legalization drop in the face of overwhelming opposition. of marijuana. Results were also stratified by whether the respondent resided in Colorado and/or had taken the cash-based nature of the industry do present condi- a leisure trip in Colorado over the past year.Among tions that could encourage such activity.These risks nonresidents visiting Colorado in the year of this study, have not been lost on state and local regulators,who 47 percent said that legalization of marijuana positively have built a range of precautions into cannabis licens- influenced their consideration of states to visit.Another ing and land use regulations,such as requirements for study commissioned by the Colorado Tourism Office security systems, lighting, and employee background estimates that 15 percent of Colorado tourists engaged checks to protect the businesses themselves as well as in a marijuana-related activity during their visit,with local communities. a third of those citing that activity as a motivation for As the sector generally most accessible to the public, their trip.11 It is worth noting that state and local tour- retail businesses(or medical cannabis provisioning ism offices generally do not promote cannabis-related centers or dispensaries)are often a primary concern activities due to explicit or ambiguous regulations to municipalities. Communities implementing these based on federal legal status and/or limiting advertising protective operating and siting requirements reported to minors.12 overall satisfaction with their local legal operators and Laws restricting smoking or consumption can present noted that providing standards for compliance shifts a complication for local cannabis-related tourism,while more of the responsibility from law to code enforce- at the same time alleviating some concerns of residents. ment.The City of Fort Collins dedicated a police officer State and local laws vary, but restrictions similar to those to the industry whose work is characterized mainly as targeting the use of tobacco or alcohol use often apply, relationship building rather than punitive; police in the as do new regulations prohibiting on-premises cannabis City and Borough of Juneau,Alaska also assist busi- consumption. Private property owners and operators nesses with implementing best practices.The police can also impose their own restrictions on cannabis con- chief in Pacifica, California, notes that previously illegal sumption.Tourists may be surprised to discover they are businesses avoided reporting burglaries and other prohibited from consuming cannabis products in public crimes against their property for fear of exposing spaces, in rental cars(even as passengers),in hotels,and themselves. Now,they meet local safety standards and at the point of sale, not to mention that they cannot enjoy added protection from the police department— bring cannabis products in or out of the state. It would which hasn't seen any significant increase in the calls be reasonable to anticipate a learning curve while tour- for service. ists and residents adjust to any changes in local and state Complementing these anecdotal reports from city laws.Cities and states have developed public education administrators,the Washington State Institute for campaigns and materials addressing frequent questions Public Policy provides statistics on several types of and assumptions.13 crime in the state since the legalization of recreational Local government leaders in communities electing to cannabis.14 Arrests for drug or narcotic violations allow commercial cannabis activities observed entre- decreased by approximately 15 percent since 2012. preneurial operators tapping into tourism interests. "Incidents"(or investigations,whether resulting in an Many of the states out front early on legalized recre- arrest or not) identified as marijuana-related decreased ational cannabis are home to craft-oriented beer and/or by 63 percent from 2012-2015. Drug-only Driving wine production,which some view as complementary Under the Influence(DUI) arrests,which do not dif- to high-quality, locally produced cannabis. Cities and ferentiate marijuana from other drugs, decreased by regions have also seen a rise in "green tourism"services about a third to approximately 1,200 for 2015.Among such as taxis/limousines and travel/tour agencies. drivers involved in a traffic fatality who are tested for drugs or alcohol,there have been no significant growth Public Safety or decline in those testing positive for marijuana alone or in combination with other drugs or alcohol. Dur- ingPersonal that time, incidents identified as amphetamine/ Local governments can anticipate concern that cannabis methamphetamine- or heroin-related increased by businesses may attract criminal activity such as burglary, 72 percent and 41 percent, respectively.A follow up theft,or more serious offenses.The persistence of a can- report released in 2017 found no evidence linking nabis black market—the only market in some states—and Washington counties' retail cannabis sales with drug- urbs of Kirkland and Issaquah also noted slightly more related convictions.15 intense circulation and parking demand than antici- fety Hazards pated for their early retail businesses. Interim Issaquah City Administrator Emily Moon noted, "In terms of trip Cannabis product manufacturing/processing often generation, retail marijuana is similar to fast food in involves chemical extractions,through which solvents some ways. It's fairly constant traffic! are used to remove resin from plants and convert it into hash oil.The high-concentrate oil can then be infused Public Health into edibles,tinctures,and other products,or consumed Most states that have legalized adult use of recre- by smoking or vaporizing. Because of the volatile sol- ational cannabis are dedicating a portion of their tax vents used,the extraction process should only take place and fee revenues to public health initiatives, often with in regulated environments using proper equipment and a particular youth focus. safety precautions—otherwise, risk of explosion is high. Debate on legalization tends to be charged with This is enough to dissuade some local governments from conflicting claims about the relationship between can- wanting to allow such activities in their communities. nabis and public health indicators.The Colorado Retail Increased opportunities for legal cultivation of Marijuana Public Health Advisory Committee,a body cannabis, including at the personal scale, may tempt of experts appointed by the Colorado Department of amateur processors to attempt these extractions in Public Health and Environment to provide unbiased unregulated settings such as residential neighborhoods. and transparent evaluation of scientific literature and Beyond the threats to individuals involved and to first data on marijuana use and health outcomes, notes the responders,the extraction process poses the additional complexity of evaluating these associations for strength risk of a fire spreading to other nearby structures.The (or lack thereof)and causality. Its reports break down City and County of Denver experienced nine hash oil the validity of common claims made about youth and explosions between January and September 15,2014, adult use of cannabis and may be helpful to local gov- and the state's primary burn center has seen a spike in ernments in talking through community concerns.19 extraction burn patients since 2012.16 Youth Impacts An Important DistinctionPublic health experts, including the Colorado com- To be sure,commercial cannabis-related crimes or mittee, do tend to agree that youth abuse of can- safety hazards make the local news, and local govern- nabis can be associated with lower graduation rates ment administrators acknowledged examples ranging and increased susceptibility for addiction and mental from mundane to violent.A common theme, however, health issues. Likewise, opponents and proponents of is their tendency to involve unauthorized cannabis legalization are often united in concerns about poten- activities,such as illegal grow operations in homes or tial increases in use/abuse among young people. But on other private land.17 A black market exists,though evidence that legalization of cannabis significantly its presence varies across communities,so even com- changes patterns of youth use/abuse is lacking. munities electing to ban cannabis to the fullest extent According to the biennial Washington State Healthy possible are vulnerable to these crimes. Youth Survey, rates of current marijuana use stayed relatively consistent for sixth, eighth,tenth, and twelfth Traffic graders from 2012 to 2016(recreational legislation A more practical matter, predicting circulation impacts passed in 2012). Rates do increase across the age of commercial cannabis activities, is an emergent focus groups,from about 1 percent of sixth graders up to for transportation engineers.The County of Santa about a quarter of twelfth graders. Ease of access also Barbara, California, provides an example of a detailed increases by grade, but perception of access remained analysis estimating the potential impacts of seven dif- relatively consistent over time. Four percent of all ferent types of activities along the supply chain.1'Jack- Washington state students were suspended or expelled son County, Oregon observed increased traffic in rural during the 2015-2016 school year. Of those, 9 percent neighborhoods since cultivation (both authorized and (less than half a percent of all students)were sus- unauthorized) began to proliferate.The Seattle sub- pended or expelled due to marijuana possession.20 Colorado's youth surveys yielded similar results.21 habitual cannabis use can lead to "marijuana use dis- Multiple analyses of the biennial Healthy Kids Colorado order"or addiction in its most severe form, but these Survey agreed that marijuana use among statewide types of problems afflict a minority of reported can- youth remained essentially unchanged from 2013 to nabis users.22 NIDA also notes some evidence suggest- 2015,though recreational adult use became legal in ing links between marijuana and other drug use for 2014.These same types of surveys are conducted a minority of cannabis users, but that there are many across the country, regardless of cannabis'current legal complicating factors and further research is needed.23 status. Results of each state's youth surveys are used to There is less dispute that the mind-altering chemicals inform and target education and prevention strategies in cannabis impair judgement,coordination,and reac- that can be funded through legal cannabis revenues. tion time. Depending on the form of consumption,the State requirements will also mandate buffering effects can be delayed and prolonged for hours;traces of of sensitive uses,such as schools, child care facili- the chemicals—though unfelt—can remain detectable in ties, parks,and other youth-serving centers.Typically, the bloodstream for weeks.24 Even in states where rec- local governments will have the right to modify some reational adult use or medical use is legal, it is important of these provisions according to local preferences to remember that all laws and regulations concerning and conditions,though legal opinions vary about the what one cannot do under the influence of cannabis— flexibility to do so.Washington State allows local e.g.,operate a vehicle,show up to work—still apply.The governments to reduce this buffer for everything police department in Kirkland,Washington,was given except elementary and secondary schools and public explicit instructions not to"de-police"these sorts of playgrounds;the City of Kirkland exercised this option behaviors that fall under its purview. Local law enforce- to accommodate businesses around 600-plus feet of ment may benefit from additional training in how to licensed child care centers,given the layout of its zon- identify and confirm potential violations,since assessing ing map. Communities may elect to impose additional the influence of cannabis will typically require a blood restrictions,as was done in Grover Beach, California, test and may not be possible in the field.25 which extended its buffers along designated school Recent studies of states post-legalization have walking routes. seen some upticks in public health statistics related to From 2015 through April 2018,the state of Wash- cannabis use. For example, annual average calls to the ington logged approximately 200 violations for mari- Poison Control Center in Washington increased by 73 juana sale/service to a minor.Approximately one-third percent in the years following legalization.26 Colorado of those were issued in unincorporated areas;the rest also saw increases in marijuana exposure calls, as well were scattered across approximately 50 municipalities as in marijuana-related hospitalizations and emergency over the 3-plus year period. Reflecting on the strict department visits.27 These may be indications of legiti- requirements of Colorado's state inventory tracking mate concerns, such as a need to regulate concentra- system, Durango city staff noted that minors'access to tion and packaging of edible cannabis products (which cannabis was easier to regulate than alcohol. was done in Colorado), and they may be influenced Adult Use by changes in patient honesty or medical billing prac- tices.And as with all statistics on the industry, it is too Perspectives on adult use of cannabis and its health soon to tell whether trends will continue,level off, or implications are much more divergent.With a majority reverse. Fortunately, researchers will have access to of states now permitting some degree of medical can- more time-series data from more states as the legal nabis use, clearly there is strong support for its thera- landscape expands. peutic properties in certain situations. But discussions about cannabis as a recreational substance—informed Environment by a blend of evidence and personal values—often con- flate it with alcohol,tobacco, or opioids. Some argue Odor that cannabis is less harmful or habit-forming than It can be a tough call as to which is more pervasive— these other substances; others believe it to be a gate- cannabis odor or the concerns about it. Odor concerns, way to more serious substance abuse.The National whether tied to the plants themselves or the smoke Institute on Drug Abuse(NIDA) acknowledges that from consumption,are legitimate. For some, odor may ®® trigger allergies or asthma,for others it may simply sustainability goals, climate,and infrastructure, it trigger a reaction based on one's personal views about provides useful overviews and metrics for the resource an historically taboo substance. It is possible for local systems involved in cultivation. regulations permitting cannabis uses to be a recourse Local governments will likely apply building and for those most opposed to its odor, though there are fire safety codes to regulate potential environmental some complicating factors. nuisances and safety concerns related to lighting and In addition to siting activities in appropriate loca- compliance. Light pollution from outdoor cultivation, tions relative to other uses, land use regulations per- volatile extraction processes in manufacturing facilities, mitting activities along the cannabis supply chain will and the extent of personal cultivation allowed in mul- almost certainly include stipulations about odor control, tifamily facilities are all issues that local governments aiming to reduce the likelihood of a nuisance issue. have dealt with using local codes. Regulations provide a means for enforcement; a neigh- bor can complain if aggrieved. Formal litigation of odor Aesthetics nuisance cases has had mixed outcomes,as it can be Finally, local governments will want to consider cannabis' difficult to determine the nuisance threshold or to pin- implications on aesthetics of the natural and built envi- point the precise source. However, local governments ronment.Jackson County, home to a significant share of recently authorizing commercial cannabis activities Oregon's cannabis production, provides an aerial view of conceded that while odor issues may be more common the use's significant impact on its landscape.31 Illegal,and at the onset,they tended to dissipate as businesses to a lesser extent legal, grow operations there pose chal- became"more professional"and are given a chance to lenges to maintaining government survey corners, ripar- improve their odor mitigation systems. ian buffers,and drainage. Municipalities may be more From a consumption perspective and as mentioned concerned about signage,fencing,and generally ensur- in the earlier discussion on tourism impacts, many local ing that the cannabis industry not overtake the charac- governments already have bans in place regarding ter of an urban or suburban environment. Fort Collins, smoking indoors and/or in public places. Land use regu- Colorado prohibited the use of cannabis-affiliated lations for commercial cannabis retail can and typically phrases and images in signs for cannabis businesses. do prohibit onsite consumption. Many municipalities prevent the creation of a cannabis district through clustering by including some method of Resource cs business-to-business setbacks in their regulations.Alter- Cannabis cultivation (and to some extent processing) natively,others intend to cluster all cannabis businesses also raises concerns about water, soil,and light/energy in one or few districts,in order to prevent siting in the use,the specifics of which will vary depending on the majority of the municipality while ceding only part. local capacity(climate, infrastructure,etc.)for commer- cial cultivation. Some regulations,whether specific to SummaryRecommendations cannabis or generally applicable to agriculture,will be Based on our research, ICMA offers the following recom- set at the state level,and state departments of agricul- mendations to local governments considering whether ture and natural resources have developed answers to and/or how to allow commercial cannabis activities. frequently asked questions about regulations govern- 1. Assess the federal,state,regional,and local ing cannabis as an agricultural activity and water use.28 contexts for your decision(s).While the letter of Local governments may wish to direct prospective local federal cannabis law has not changed for some growers to pertinent recommendations and regulations time, interpretation and enforcement priorities and clarify where additional local requirements(related continue to shift. But more urgent are condi- to permitting siting,fencing, etc.) may apply, as Jackson tions at the state level and below. Some sample County, Oregon has done.29 questions to consider: The Department of Environmental Health for the a. Does current or pending state law prescribe City and County of Denver, Colorado developed a com- any decision points? Must you opt in or out of prehensive guide to best practices on energy,water, default situations? and waste management for indoor growing facilities.30 b. How did your community vote on past can- Though specifically developed in context of Denver's nabis ballot measures?Do those results entitle you to different powers(such as the ability to tax While states and local governments adopting or the ability to impose a complete ban)?Does early legislation are beginning to generate data, your community lean one way or the other in its figures should still be considered preliminary. opinion on cannabis? Even in states where legalization passed sev- c. What's happening in surrounding communi- eral years earlier, businesses are just starting ties that may impact you?Are the county and to open,following long processes to develop its municipalities talking with each other about regulations and process applications,and local this issue?Are your priorities complementary or leaders are standing by to watch for indications in conflict? that the industry needs more(or less) regulation. d. To what extent can you lean on state regu- "Start early and walk a slow path,"suggested one lations and enforcement?Are regulations California city manager—a sentiment echoed specific enough?Do you believe resources are by many of his peers'actions. Be wary of doors adequate to perform state-level responsibilities? that are difficult to close once opened; consider 2. Assemble a diverse,coordinated leadership sunset provisions or temporary caps as ways to team.Local administrations successfully navigat- test your local market and assure residents that ing the early legal cannabis landscape credited you will continue to revisit regulations and make clear,steady direction from their elected officials— adjustments as necessary. including rationale or objectives for local regulaEndnotes - tion—as extremely helpfu1.32 In addition to elected officials and chief administrative officers,planning, 1 National Conference of State Legislatures, "Marijuana Laws." htt.p.!/wruw ncsI.:arg!k csnkstarelsl;ate::Ie .i_sl_a1ures.:ma. a..ine/ police,legal,and finance staff tended to serve in man�uana.deep �ye a..k critical leadership roles. But cast a wide net across 2 Drug Enforcement Administration, "Drug Scheduling." your organization,as the industry has potential to "``""w.dca....gcavldrugirrf�ldsshtm.. 3 Office of the Attorney General, "Memorandum for All United impact many additional systems and functions. States Attorneys, Subject: Marijuana Enforcement," January 4, 3. Plan for deliberate,transparent community 2018.n.Ltps:.//ww .ttic ,.gtrl[�pa/ r 1...9..6../. download engagement. Even communities voting strongly 4 Abigail Geiger, "About six-in-ten Americans support marijuana in favor of cannabis legalization can still struggle legalization," Pew Research Center. http//ww ..pfwrrsearch... ssrg/.fac:t.:::lan_k12�1.£!/_(}.1.la�la_m_c�rican.`.::: :!.p.Pn.rL.:::rrra_ri.lua_na.::: with implementation. Provide multiple ways Ieg�liratinrr! outside of formal meetings and public hearings 5 Daniel Shortt, "Marijuana, Marihuana and Mariguana:What's in for community members to review and com- a Name?," University of Washington Cannabis Law and Policy ment on potential regulations,such as com- Blog,January 21,2016..h..ps//ale} s.,uYL e, a/clppZ2®1.G/J1,/21.! rrrarijuana:marihuana:::and..rnari.Juana..:}nrhats:-.ir7.:a.:::rrarrrr! munity surveys or other online platforms and 6 Julie Martens Forney, "Will Marijuana Cultivation Affect Floral in neighborhood/community-wide events. 4 Industry?," Society of American Florists,July 26, 2017. https/!, Expect questions, expect fears, and be willing s.afnow21g./wilI mari.ivana.cultiv. Hon.:a.Ffect.floral.::indu.!.y(, to demonstrate how proposed regulations have 7 Katy Ward, "Truro farmers want to cultivate cannabis,"Wicked Local - Provincetown, February 24, 2018. http/lprovir7retrJwn. accounted for community concerns. Maps show- Ic_ .Ial.ca_m_!n_ ws/ p_a /tri,r2....[armrs.:want...ro.... ing eligible locations for cannabis businesses cultivaiP..ear]nabis 8 Richard Fausset, "A Dying Southern Town Needed a Miracle. as well as sensitive uses are very helpful tools, Marijuana Came Calling.,"The New York Times,March 24,2018. as are summaries of key steps taken and refer- haps//www:n_yt;mes:ram/2o .e/o3/ /ids/arkansa>.:mali liana.... �... ence documents posted on your website.While cottan....rlant.htrnl 9 Washington State Institute for Public Policy, "Employment time-consuming, local governments following and Wage Earnings in Licensed Marijuana Businesses," this model were comfortable reflecting on their June 2017. http!lwUuU..uu3ipp:wa. o /IFzoprtiF.ile/ . elwi.pr�_, processes and were later able to make decisions m.p.lo.yrr,enL ar, i �rnrn �n I r�on�ed._r�a2a!i2D.2.. Businesses Re.pnrt..radf without significant debate. ......................................_` 10 City of Santa Rosa Planning and Economic Development, 4. Regularly monitor indicators and review your "Cannabis Program FAQs" March 15, 2018. h..ps:!lsr ity.or�/. Dc�cumnn.iCen_ter/Vi uv!1. 129./Ca_n_n_a_bi.s.:._FA. s.....2(3.1_H.:C13.::: regulations.This is a new industry that will con- e" - 1.,.bidlld:: ..................................... tinue to experience growing pains,especially as 11 Colorado Tourism Office, "Colorado Tourism Sets All-Time the state and federal context continue to shift. Records for sixth Consecutive vear,"June 28,2017.https/§www. 1111111 ®® cola rado.com/news/colorado-to urisrn-sets-a I I-time-records- files/PF Youth HKCS VIJ 11 n f a&Ls]p.j�i c-f. i i a 22 National Institute of Drug Abuse, 1, Marijuana Addictive?," 12 Christian M. Wade, "Tourism Officials wrestle with marijuana June 2018. marketing,"The Daily News of mmwuuryport /anuary n' 2018. oo National Institute o,Drug Abuse,"is Marijuana aGateway om«/.^ wrestle-with June 2018. 13 co|omun Department of Public Health and Environment, 24 National Institute ofDrug Abuse,"What are Marijuana snects?.^ "Responsibility Starts with Knowing the Laws." b�o�. June 2018. 14 Washington State Office v,Financial Management,"Monitoring zs Police Foundation and the Colorado Association of Chiefs of Impacts of Recreational Marijuana Legalization," March 2017. Police, "Colorado's u,o»|izatoin of Marijuana and the Impact on Public Safety,' 2015. 15 Washington State Institute for Public Policy, 1'502 Evaluation E[foy�ennent...p.df andoenent'cost Ana|vus.^September znu7. 26 Washington State Office vfFinancial Management,"Monitoring Impacts of Recreational Marijuana Legalization:' wanx 2017. 16 Police Foundation and the Colorado Association of Chiefs of Police, "Colorado's Leoa|izatoin of Marijuana and the Impact 27 Colorado Department of Public Hcv|t» and snvimnme»t, on Public safctyf 2u1s. ^wa,�uanause�enu^a^uxea|�»enec��' Ecf2uL zu Oregon Department of Environmental Quality, "Permitting 17 There have been multiple instances vfpeople committing violent of marijuana businesses." marijuana-related crime inwest coast rural unincorporated areas P. where marijuana iogrown,incentivized bvthe high street value cp Jackson County Development Services,"Marijuana Production in of marijuana on the east coast. Jackson countv, nreu»». and Jackson County FAQ,'July z7.couo. Art jE..2F.F Sonoma County, California, have experienced this phenomenon in recent months,where multiple groups have driven from east coas�s�a�esinomo,mmumo|ma,�uanau,mwe,s� 3O City and [«u»tv of Denver Department of Environmental Health, "Cannabis Environmental Best Management Practices 1a County ofSanta Barbara,. "Cannabis Land use Ordinance and Guidc... Licensing Program Final Environmental Impact ncpo¢^December 2017. 31 Jackson County,"JC Potpourri: Marijuana inSouthern Oregon Growing Pains," May uo' 2017. 19 Colorado Department of Public Health and Environment, "Marijuana use trends and health effects!^ uo Washington State Office ofFinancial Management,"Monitoring 32 See,for example,Santa Rosa,California case study Impacts of Recreational Marijuana Legalization," March 2017. on See,for example,Kirkland,Washington case study 34 Sec. for example, 8uu|c Creek, Michigan eu Colorado Department of Public Health and Environment, or Carpinteria, California c,,� "Marijuana Use Among Youth inColorado,Healthy Kids Colorado study Survey z015!^ a rPy "�"�;,`' r"y ✓1�o td /J P aJJ�'raar .fe� �, �4���� v »�, �.�d�P`ar' ,'I ��7 m r ,� h mw 1 e,J�-�,���iurr rl wr ", y '''11 !" r.;,� �" "7w r �Y�ya,. + �>'d�'S ��•. � + ;''gym -�,�or, ^iw^�"'i pt'dle➢I� ,,�u' � w,�„� /r 1� *` 4', �vry�i r' t M,"�!�' 'x� �@e I�tu �� "� ,m; m'' w yy I Y r�F��t~.w,”", w r � �� Q yh ' M" �„ �" � f r� 1 c �, rvL �rr� ^^'.,•,�, r a;. m �, YlM�lb� I�, °yu% u"''�'' m I r� �I• �! w• ,�'T�/�"�i ��y"iJ�/,«pi�rrvmwr mrn w,gym° � w•"�w '� 'ur. � m,�w, ewer r,�) f s, d n b„ 'y�„ w,� s, 1°✓b� �i� �"�I ,'✓ '"IP�?ual�;prl�r JYr Ufa I ,, ����'v"!'s�? `i ue' m' uy = � ��m"�+� �;' n ���� err f u iof 4 a I � A d fi, ! r r ✓ P v�" r m ,, �„� � ���/ , ,rll➢' 17 p� r, ire � ��, ���'wr��y�P A '” `'k"T��q��y 'dy., � � w Mr ��' l�� V �� r' ✓k d I � lC�� Nr,�: "�ww'L �' v u m`�' � i'ti" Mi li 4u� r:� �'"� lg a I✓ a - �� f� ' � r� �( � :Zu ��`8""x+� ,a r. r � !r/�l�Otlry�,/ � r ttyy "'l«1u"i�9,� � �r a"•wuu �U fi f r w " � w I i r r pro u �a I / The following case studies �! I describe the motivations, �N » processes, regulate commercial i activities in their communities. Though selected from states with longer histories of recreational and medical cannabis laws, these local ! r J d J' governments are continuing to !� t monitorindustry adatheirI . II, A i i u v, Carpinteria is bordered by the Pacific Ocean to the southwest and rural oceanside hills to the southeast,while the areas north and northwest of the city are agricultural zones dotted with , greenhouses primarily for the cut flower indus- try.That industry was once a thriving sector in California's economy, but many years of com- petition have decimated it. Greenhouses that once grew flowers are now prime real estate for recreational cannabis cultivation. The marijuana industry has been moving into Car- pinteria Valley greenhouses for years, but the pace of turnover increased once flower growers began to look for more profitable ventures.Some greenhouse tenants and owners turned to growing vegetables or even stayed with flowers, but many others have converted to grow- ing cannabis or sold their stake to someone who does. City and County SII The City of Carpinteria has instituted a moratorium on legal marijuana businesses through May 2019 while it continues a deliberate process of determining regula- tions for the city. In contrast, Santa Barbara County • • I moved quickly to establish regulations for allowing culti- Preserving the Character of Carpinteria vation and other cannabis businesses as soon as Cali- fornia licensing became available.Santa Barbara County Cut Flower Industry is the home of the most cannabis cultivation licenses The Carpinteria Valley cut flower industry had been in California, outpacing the counties of Humboldt, struggling for years due to international competition. Mendocino,and Trinity, counties known for their mari- Low-wage workforces in South and Central America juana cultivation.'All of those licenses in the vicinity left California flower growers unable to compete on of Carpinteria, many of which were originally granted price, leaving many as the owners and lessees of empty for growing medical marijuana, lie on Santa Barbara greenhouses.A number of those greenhouse owners County unincorporated land. Carpinteria's incorporated and lessees turned to cannabis cultivation due to the area does not include the agricultural portion of the high value of the crop.The first to convert were medi- Carpinteria Valley,and the city does not regulate it. cal cannabis cultivators under the previous regime of After the passage of Proposition 64 in November California medical cannabis law. Local governments had 2016,Santa Barbara County first began the process of little to no regulatory or administrative authority over deciding how to approach locally regulating the canna- these operations, leaving unfixed problems that were bis industry.At that point, Carpinteria city officials were generally foreign to flower growers,such as noxious poised to work alongside Santa Barbara County officials odors and security issues.As Santa Barbara County and attended multiple meetings with county officials registers and regulates these operations under the new on the subject. However, it soon became clear that the commercial cannabis regulatory regime,those issues city and the county were guided by different philoso- should subside. phies. Carpinteria's interest in potentially allowing and regulating cannabis businesses stemmed from public support within the community, but city officials and residents were, and still are, in favor of a cautious and deliberate approach to developing regulations. Santa N Barbara County was under pressure to quickly establish its regulations in order to limit the impact from a large and growing number of unregulated or black-market cannabis operations,generate revenues,and create a commercially viable cannabis market as an alternative to lost jobs in the cut flower industry.' These differences in approach forced Carpinteria into a reactionary position.As Santa Barbara County proceeded with its big-picture approach through the Cannabis greenhouse summer of 2017,tension was high in Carpinteria from a frustrating process of legal proceedings.The city e ► Equilibrium was able to extract some of what it wanted from the The City of Carpinteria's interest in strengthening the county, such as a cap on greenhouse canopy size and a county's cap on cannabis cultivation is twofold. One prohibition on outdoor cultivation. concern is ensuring that agriculture in the Carpinte- Currently,the area's cannabis cultivation indus- ria Valley is not dedicated to a single use.The flower try is operating in the California Coastal Zone,which industry decline was especially painful as most green- includes the Carpinteria Valley,through county-issued houses were entirely dependent on it. interim permits until the formal permitting, regulation, Community character and aesthetics comprise the and revenue-collection process passed by Santa Bar- second motivating factor for a cap. In 2002, Santa bara County undergoes a legal review by the California Barbara County enacted an ordinance to preserve Coastal Commission. Cannabis operations in Santa open field agriculture and limit unsightly piecemeal Barbara County outside the Coastal Zone are operating greenhouse construction, but Carpinteria was con- under the county's land use code and Cannabis Busi- cerned that a lack of a regulatory cap on cannabis ness License Ordinance as of June 2018.3 cultivation could undermine that ordinance.A boom- IIIII�IIIIIII ° " ing cannabis cultivation industry could potentially take Key Observations over the Carpinteria Valley's available greenhouses The City of Carpinteria prohibited all commercial activ- and increase the demand for the construction of even ity in the previous medical cannabis regulatory regime, more greenhouses. but the city will potentially allow some commercial At this point in its lifecycle,the cannabis cultivation cannabis operations once their new regulations are industry has different effects on local economic activity developed and adopted.Those operations will likely than the cut flower industry. Observations from Car- be limited to manufacturing and testing to comple- pinteria show that cannabis cultivation generates less ment the already existing cultivation in the Carpinteria intensive industrial traffic than cut flowers. However, Valley.The Carpinteria City Council is not currently that may be offset by increased traffic from laborers. inclined to allow recreational cannabis retail stores and Greenhouse cannabis cultivation uses approximately believes they would cause neighborhood problems, an 595 square feet per worker(FTE), compared to(conser- assumption based on observing the previous iteration vatively)38,314 square feet per worker for cut flower of medical cannabis stores that existed under the ear- growing.4 This discrepancy is confirmed anecdotally lier state regulations.The council's preferred approach in Carpinteria,with far more cars parked outside the is to watch the results of recreational cannabis store- greenhouses that have moved to cannabis cultivation fronts in other cities before deciding whether to allow as opposed to those growing flowers or vegetables. them in Carpinteria. Odor Although Carpinteria's long-term priorities are clear, Medical cannabis has been growing and generating City Manager David Durflinger notes that it is chal- odor just outside Carpinteria city limits for the past few lenging for a small local government to develop the years, but the problem worsened when recreational expertise necessary to both interact in a regulatory cannabis was authorized.Agriculture is typically not process with an adjoining county and to develop its subject to odor complaints under Right to Farm pro- own regulations. tections,and Santa Barbara County regulated medical Interviewee: cannabis cultivation in this manner as well.'This led David Durflinger, City Manager to an underenforcement of nuisances like odor and the lack of a regulatory infrastructure at the onset of EndnateS recreational cannabis,with many residents voicing their 1 Brooke Staggs, "So far, California has 6,000 licensed complaints. Carpinteria High School,across the street cannabis businesses. Here's what that looks like," The Orange from several greenhouses that cultivate cannabis,was County Register. April 27, 2018. ht ps//www.r�cregist r. forced to air out classrooms and send home students c2!n/201.8/04/2r iN V oiiiiii II' p % r 1 Nel mW ,ne o u n, V 1. i The City of Durango is located along a historic railway and the Animas River at the foot of the San Juan Mountains in southwest Colorado. Home o 18,000 residents and s key destination in the Four Corners region, tourists and commut- ers nearly double its population daily. An Industry Emerges In 2000, La Plata County and the City of Durango voters strongly supported an amendment to Colo- rado's state constitution legalizing medical cannabis. ,„ However, nearly a decade would pass before any Mm legal commercial activity materialized due to uncer- tainty surrounding federal preemption.The Obama administration's initial issuance of guidelines for states with legal medical cannabis,which indicated that the Department of Justice would not prioritize w ..I prosecutions, provided a long-awaited green light to �IIIII IIII VIII �IIIIII III�IIIIIIIIIIIIIIIIIII VIII VIII would-be operators. VII VIII Duran o s staff was caught o g g guar when the first business approached the clerks office for a canna- bis license in 2009. Quick consultations with the city attorney and administration confirmed a lack of any III local restrictions at the outset, resulting in the issuance IIII ®® of four early commercial medical licenses at just$50 apiece(the general business license fee)—including to one cultivation operation. p This triggered an exhaustive process to determine the appropriate zoning, fees, and other local restric- tions on such businesses. Multiple moratoria were ;r t ; implemented while the city engaged in research and discussion. While initial discussions were limited to medical marijuana, the legalization of recreational marijuana in 2012 extended the conversation such that the city was actively working on some aspect ,J of local marijuana issues all the way through the endIV of 2017. Though Durango residents voted in support of legal- ° f g g PP g /c% „�rr� ization in both 2000 and 2012,the process to develop Cannabis dispensary regulations was contentious. Identifying appropriate setbacks from sensitive uses such as schools,daycare Industry:ulated Impressions centers,and parks proved especially challenging,as the Though the city did not place explicit caps on the default state standards did not align well with the city's number of licenses allowed and did loosen some of long and linear orientation and needed to be reduced the setback requirements, prospective businesses still (either by right or with a variance) in order to provide had trouble finding locations because property own- enough options for businesses. Other major concerns ers were reluctant to lease for such uses.As a result, included the location and number of businesses within businesses were forced to turn to purchasing their own the Central Business District, potential issues with property at premium prices. lights used by cultivators, and security and fire code For those businesses that were able to secure loca- compliance. Recognizing that land use decisions can be tions,the initial licensing and enforcement process was hard to revert once a door is opened,city staff feel this challenging as the state provided little guidance and the discussion was worthwhile. rules continued to evolve. Durango's liquor licensing The most significant progress was made in 2014, authority expanded its oversight to include marijuana when a series of ordinances were passed establishing licensing and devoted time to screening and rejecting comprehensive land use standards and a local licens- applications from businesses whose employees had ing process for commercial medical/nonmedical retail histories of criminal activity. Eventually,the city con- and testing businesses. License fees increased to as cluded that decision could be left to the operators who much as $10,000 for a new business and $8,000 for a could be expected to act in the best interest of their renewal every year.'Commercial cultivation and manu- legal businesses. facturing of infused products were prohibited based on Code enforcement was also intense at first to ensure a shared understanding with La Plata County about the businesses were operating in line with the newly estab- types of uses best suited to county and city land. lished regulations. While he can recall scattered specific Since then,the city has received annexation requests incidents of crimes tied to marijuana activities in the that would extend water and sewer services to mari- early days of statewide legalization, City Manager juana cultivators located on fringe land. Following dis- Ron LeBlanc is not persuaded of a significant negative cussions with staff,the planning commission, and the impact on public safety. From an enforcement perspec- city council,the city decided to extend water and sewer five, staff feel the industry has actually been easier to services in exchange for long-term control of land use regulate than liquor licenses. planning. Reasoning that users—including marijuana Though Durango did not pursue a dedicated local cultivators—could come and go, city officials believed tax on marijuana as a part of its 2014 regulations, it would be advantageous to apply the city's more rigor- the standard 3-percent local sales tax still applied to ous requirements for elements such as sidewalks,street the industry. Revenues from marijuana businesses trees,and signage. exceeded local expectations, suggesting the black mar- 111 ME ® ket had been much larger than the city had anticipated. Key Observations Total sales and use taxes collected by the city jumped Durango's 2017 attempt to further raise revenues from by approximately$1 million from 2014 to 2015.2 its successful marijuana businesses with a specific The cash-based nature of those taxpayers presented excise tax was met with strong industry opposition. an additional complication for Durango City Hall,which Local governments should consider these issues early, was not a fully secure facility when marijuana busi- before new taxes would burden the industry. nesses first started to pay local taxes.Though security The marijuana black market in and around Durango has since changed,finance staff were unnerved when was much larger and more active than the city realized, the first businesses showed up to pay monthly tax bills evident from the higher-than-predicted sales tax rev- with stacks of cash,and parking staff needed to accom- enue.At the same time, other local governments have pany them when making transfers to the bank. seen tax revenues fall short of expectations. Rather The Industry Matures than predicting a specific number, a wide range of pos- sible tax revenues should be analyzed. With no new business applications submitted in the last two years,the industry appears to have reached Interviewees: market saturation in Durango. Prices are coming down, Ron LeBlanc, City Manager businesses are consolidating,and protests from the Amber Blake,Assistant City Manager vocal minority opposed to the industry have faded. Dirk Nelson, CityAttorney Durango's administration believes the impact on Amy Phillips, City Clerk tourism has been a net positive, noting a steady stream Chris Harlow, Deputy City Clerk of creative business proposals for transportation and Ben Florine, Deputy City Clerk green tourism experiences over the last few years.At Suzanne Sitter, Legal Coordinator the same time,ample restrictions on consumption, including in private social clubs, help to keep use out of Endnotes public view. 1 City of Durango, "Licensing of Marijuana Businesses." hltp;!! In 2017,with marijuana sales responsible for about wwwed .ren.g .gnu:Jrglir.7x.lsx'�I.!I.i[�"`�.��, $825,000 in sales tax revenue—just over 3 percent of 2 City of Durango, "Sales & Use Tax Combined,"June 14, 2018. t1!1p�/lwww,d_u ran.&2z2y.ra.rglAre.h.ivecenter/VjewFi.lellltem/1:1,2_. the city's total sales tax collected—Durango floated the 3 Cityof Durango,"SalesTax Collections ForTwelve Months Ending possibility of a dedicated marijuana excise tax.3 Already December 201 " http.!/wryry. uran.gugay.orglArchiventPr! burdened with a significant increase in the State of View�f.i�el�!tem.l3.1:5 Colorado's tax rate (with no additional pass-through to local governments),the industry responded in force against the proposal and city leaders were forced to abandon those plans. I lllllllu uulul I III mm IIIIII Iu r"/ n�l4u-� Il ifr;�//// r/!11 ��..,, F �"r iul� Yi. � ��I,�).. �,,,o,... . ��� � /j' ,,9.✓ r „�i,,.,.., r � iii, r rr�a,c �,✓I/��il//JJI��lM�i i l�yi/,r/„����`l f ,. r� r�r i1 ,��� � ///i � r/ /,/l� % �ii / r i.,, „” � � � °+�� ��<cw i,,/./�G//�% r �r�l✓�gllLl�iir'� �/�1����%//D%%i����� ///i n m 1�r �r rJ/✓A�� ^�Jn�j a iNeeNhwMr m" 9 -� f � all i I � ,'Y: � r,�%HVi��4✓MI ua� + l u' �+� Pi�"�n�(Yti� r ��f a��'u��+ r�. till ���� � E � �!+rrlly�! �Y�I��J�,h, �;� / �� i ✓ �� �r ��I19j IIIA I� � � ar Fort Collins is a city in northern Colorado known for its picturesque landscape, craft breweries, and bicycle culture. Home of Colorado State University and campuses for the technology companies Hewlett-Packard, Intel, and Agilent, the city of 164,000 has made strides in smart city utilities innovations. In 2000,Colorado voters passed Amendment 20, legalizing small amounts of medical marijuana in the state.AJuly 2009 language change by the Colorado Board of Health in the state medical marijuana law removed patient limits on medical marijuana caregiv- ers,allowing them to become de facto dispensaries.' The types change caused a rush in requests for the t es of q licenses that would allow people to be medical marijuana caregivers,such as home occupation licenses. In December of 2010, Fort Collins enacted an emergency moratorium in order to end the rush of �w I g Y I medical marihuana dispensaries which had quickly .. outpaced the city's desire to evaluate and regulate III ^.,III m this new business type. IIII t In March of 2011,the Fort Collins City Council took IIII . a IIII IIIIIIIIIIIIIIII IIIIIIIIIIIIIIIIIIII IIIIIIIIIIIIII�IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII V VVVV VVVVV VVVVVVVVVVVV action to proceed with licensing dispensaries,cultiva- tion,and the entire medical marijuana process. By Octo- IN II ber that year, Fort Collins was home to approximately the requirement that personal use cultivation not take twenty medical marijuana dispensaries. place in outbuildings. The dispensaries were short-lived.In the odd-year Despite these regulations, Fort Collins still has to election, Fort Collins voters passed a citizen-initiated combat illegal and unlicensed cultivation. Fort Collins' ballot measure to ban all medical marijuana activities in marijuana enforcement officer investigated approxi- the city. Enforcement was completed by February 2012. mately fifty complaints in 2017 and is on track to meet The ban on medical marijuana lasted just one month that number in 2018. longer than the first iteration of allowing dispensaries. Fort Collins took additional steps to manage the In the 2012 election,another citizen-initiated ballot divided community by restricting the locations of busi- measure brought back the medical marijuana dispensa- ness through zoning, implementing setback require- ries.This city-wide ballot measure was separate from ments,and regulating the type and level of advertising and concurrent with Colorado's Amendment 64,which that dispensaries can utilize. legalized adult recreational use and retail sales through- out the state. However, since Amendment 64 included For exceeding the State's restrictions, Fort Collins a local government opt-in provision, Fort Collins staff broadly bans Signage and advertising that would was able to focus on medical marijuana before taking Clearly associate the location with marijuana, as on retail sales. Following the conclusion of the medi- cal marijuana reinstatement,the City Council adopted well as prohibiting portablea advertising such s regulations for a limited recreational marijuana business leaflets, flyers, and handheldsigns.' license process. While the regulations are stringent and specific,they Regulations are not always easy to enforce,especially when it comes The second citizen-initiated ballot measure for medi- to odor complaints. Lots of industrial warehouse space cal marijuana built in a cap for dispensaries tied to the in Fort Collins has been bought or rented for marijuana- number of cardholders:one medical marijuana dispen- related activity,creating clusters of marijuana busi- sary would be allowed for every 500 medical marijuana nesses. Due to the way in which the spaces are divided cardholders in Larimer County.This cap was proposed and located, it can be difficult to pinpoint the source of by marijuana proponents as a way to make the second odor issues. iteration of medical marijuana more palatable for the electorate.Currently,there are enough medical mariStaffing - juana cardholders to allow for nine medical dispensaries Fort Collins convenes an interdepartmental taskforce in Fort Collins. However,due to a provision that grand- with representation from the fire department, plan- fathered in any dispensary that had been shut down in ning department, clerks, police, and other depart- February 2012,eleven licenses have been granted to ments as appropriate.This task force monitors the medical marijuana dispensaries,ten of which also have marijuana environment in Fort Collins and Colorado as a retail-recreational marijuana license. a whole and makes recommendations to the council Since Fort Collins requires a medical marijuana on any changes needed to the marijuana code, stem- dispensary license before granting a retail dispensary ming from everything from upcoming state legislation license,the cap also acts as a limit on recreational mari- to nuisance indicators. juana licenses. Fort Collins hired an outside attorney through an Fort Collins also grants cultivation licenses, but only open bid to serve as the retail marijuana licensing to holders of another marijuana business license,such authority.The attorney performs duties such as receiv- as retail or manufacturing. Personal cultivation in homes ing applications, making decisions on whether to grant with shared walls,sheds,or detached garages and in licenses, and leading hearings.The cost of the attorney mixed-use buildings is also banned in Fort Collins,due is covered through licensing fees. Fort Collins hired to safety and odor concerns.Greenhouses,while not an outside attorney to perform these tasks because banned, must follow the requirement that cultivation the municipal judge,who is also the liquor licensing only be done in a "locked and enclosed"space.They are authority, declined the authority to do so based on de facto banned for non-commercial cultivation,due to her workload. IN NONNI= The city has a single police officer dedicated to mari- Development pressure on industrial land is palpable, juana enforcement who performs pre-inspections and but restrictions on licenses keep growth in check. spot inspections.Originally, inspections were conducted by police officers who were not able to go out on patrol Key Observations due to injuries,causing the task to be seen as undesir- Fort Collins goes a long way to ensure that residents able.The dedicated marijuana enforcement officer,a opposed to marijuana businesses are not burdened well-respected and long-time Fort Collins police officer, or bothered by them.These efforts are evident in the emphasizes relationship building with license holders as city's advertising restrictions, cultivation requirements, well as the state marijuana enforcement division. and method of bringing issues to the Council. Overall, The Colorado General Assembly creates new types the thinking in Fort Collins is to keep marijuana compli- of marijuana licenses annually. Fort Collins has lobbied ant with an "out of sight, out of mind" philosophy. at the state level to ensure that these new licenses have By tying the number of dispensaries allowed to the opt-in provisions at the local level.With local govern- number of medical cardholders in the county, Fort Col- ment opt-ins,the Fort Collins task force has the ability lins was able to balance allowing marijuana businesses, to review new license options and weigh community in compliance with the results of the initiative,with impacts when determining whether to allow them. managing the number of businesses.When considering Recent examples include the addition of a research additional types of licenses, Fort Collins checks with license,which was desired by a local start-up com- the existing businesses on what licenses they need pany.The task force decided that the impact from the and only approves what is needed. Instituting a needs- research license was manageable, as this license does based cap on businesses and only allowing the licenses not allow for the selling of marijuana and involves only that existing businesses need,the city is better able to a small number of plants.Alternatively, Fort Collins manage industry growth. decided against approving a license for off-premises Through appropriate preparation,task-specific staff- storage based on a task force recommendation.Addi- ing,collaboration,and bringing in outside help, Fort tional storage of large quantities of marijuana was seen Collins was able to properly manage its in-demand as undesirable by the task force,and the Fort Collins marijuana industry without being overwhelmed, as well marijuana businesses did not express the need for this as cover a significant portion of the costs of regulating type of license. the industry. A Community Divided and the Interviewee: IndustryToday Ginny Sawyer, Policy& Project Manager Fort Collins residents are often split on issues, and Endnotes marijuana has been no different. In the heavily values- based debate during the back-and-forth bans of 2011 1 "Auraria crowd stands up for access to medical marijuana,"Denver Post, May 6, 20 t?. ...._urcnrnr:..._rntrcr:C:�os:l.com/2009..0`/`./2(7./ and 2012,opponents of legal marijuana painted a a.uraria crowd stands u. for icces to medical marl uana! doom-and-gloom picture while proponents focused on 2 See the Article XIV of the Fort Collins Municipal Code, which health aspects of medical marijuana and argued that implements provisions of the Colorado Medical Marijuana Code (Nittps:./llik-rrary..............................................................iro/Forl,,,collins/codes./.. prohibition is ineffective at reducing illegal activity. municipal„code?rrodellcl cNIIB IIE ARr:7CVIIl�FI�A and Years later,with new regulations in place, marijuana Article XVII,which implements provisions of the Colorado Retail remains a lightning rod and a complex issue in Fort Col- Marijuana Code (haps/llJ.ibrary:rrrurrisr�de:comlcol.FarF,,,rollil7sl. codCS/m_�arrici.pa.l,,,.code?nodelld.."CI[III SI..,II BURE_,AIf2,��:XVIIII RFMA lins.To avoid controversy and regulation fatigue,staff QIIV3I liFIERIf PR S1. 617SIAID) and the task force package issues together for council action, even for issues as simple as ordinance clean-up. While opposition still exists in the community,the industry has been able to mature. City staff describe businesses as increasingly professional and better able to control for issues like odor and underage purchasing. IIIIIIIIVI Illlllllllllm "^^° ^^" Vuuuuuum IIIIIIIIII u ouu VIII u r rr r r rrr i f / rrrrrrrrrrrrrrrrrrr, r„ r rrr „ r �W'. w, UJ d bre L M�IIIII�VIIVV �� ��NN ll���U11491'N !yllNf� 1J j'/� n .,.. rtrtrtrt rill � �� .// /r�//I%�/�✓%/moi/i� %// �� rrW/o� ,,,, ,, Grover Beach is a small bedroom community on California's Central Coast, located along the iconic Pacific oasti y aHighway 7 9 halfway between San Francisco and Los Angeles. The seaside city, along i the neighboring cit- ies of Pismo Beach and Arroyo Grande and the fineries of San Luis Obispo County, is a popular " tourist destination. / . The City of Grover Beach's initial efforts to regulate commercial cannabis activities trace back to late 2015, after the state passed a package of bills outlining new ` � ,rrr, medical cannabis regulations. California local govern- rrrrrrrrrrrrrrrrrrrrrrr ments were under the direction from the state to pass land use regulations that regulated or prohibited commercial medical cannabis activities; if local govern- ments did not do so,the state would become the sole licensing authority in that municipality. The ultimatum m w caused many local governments, including Grover VIII rl Beach,to pass indefinite or permanent moratoriums on it III commercial medical cannabis activities by the state's March 1, 2016 deadline. While the moratorium was in effect,the Grover n Beach City Council directed City Manager Matthew III ®® liiiiiiiiiiiiiiiiiiiiillillillim Bronson and his staff to draft regulations and a pro- city felt comfortable in determining reasonable setback posed tax structure for the purpose of allowing com- requirements to address community needs. mercial medical cannabis activities in the future.Such In addition to stringent cannabis-specific safety and activities were seen by the City Council as an economic security measures that exceed the state's requirements, opportunity for the city in attracting private invest- Grover Beach mandates that commercial cannabis ment and providing additional jobs.The tax structure, businesses make public improvement to their proper- which covered both medical and recreational cannabis ties to meet code requirements,such as fixing curbs, businesses if also allowed by state and local laws,was sidewalks,and landscaping.This mandate is due to approved by 70 percent of voters in November 2016— commercial cannabis businesses needing a discretion- the same election in which the statewide proposition ary use permit to operate in contrast to"allowed" uses to legalize recreational use passed. that do not trigger the same level of code require- ments. City Manager Bronson described these required Regulation Development improvements as an opportunity to"raise the bar"on Between November 2016 and May 2017, Grover the development standards and aesthetics of the city's Beach crafted broad regulations that would allow a industrial areas. Due to the strength of the retail appli- wide range of commercial medical cannabis businesses cants and stringent regulations, Grover Beach increased in the city. Cannabis was on the agenda of multiple its original cap of two retail businesses set in May 2017 public workshops and approximately ten to fifteen to a cap of four in December later that year.As of May planning commission and council meetings,drawing the 2018,the city has issued four retail permits and four largest turnout ever for a council meeting in January manufacturing permits with several other manufactur- 2017. Public engagement has decreased substantially ing permits expected to be issued by mid-2018. overtime, even though the regulations established in May 2017 continue to be modified to reflect changes An Economic Development Opportunity made at the state level and the needs of Grover Beach. Grover Beach expects to be a production,distribution, While initial regulations were limited to commercial testing,and retail hub for boutique cannabis products medical cannabis activities only, in May 2018 they due to the city's available industrial land, proximity to were expanded to the recreational or adult-use market major highways,and array of products already being pro- through a series of amendments ultimately approved duced in the area.With the opening of its first cannabis on the council's consent agenda. retail facility in May 2018,Grover Beach has the Ione The city allows every type of commercial cannabis commercial cannabis location for well over one hundred license including cultivation, processing/manufacturing, miles.' It is anticipated to cause a significant increase in testing,distribution,and retail.All cultivation must be business from locals as well as tourists heading to the conducted in an enclosed indoor space; both outdoor adjacent Pismo State Beach, many of whom are from the and greenhouse cultivation are explicitly prohibited in commercial cannabis-free California Central Valley. Grover Beach given concerns about security and ensur- ing architectural compatibility with buildings in an indus- 'As a City Manager looking at economicdevelop- trial zone.(Other cities ban greenhouse cultivation due ment, I see the opportunity to create a cannabis to operating hours enforcement and the potential for a ecosystem in our community given our unique dispute over the definition of a greenhouse.) niche in this el Like some other built-out or compact cities,Grover — Matthew Bronson Beach chose to reduce certain sensitive-use setbacks— in this case,setbacks related to youth centers.This Grover Beach has made a market-based choice to is because the state's default setbacks would have embrace the commercial cannabis industry in a thought- resulted in a de facto ban on commercial cannabis ful and safe manner. Existing businesses in the city are businesses,given the proximity of Grover Beach youth generally supportive of the move to allow commercial centers to industrial zones where cannabis businesses cannabis development, but there have been impacts would otherwise be allowed.With local regulations still from this changing market condition.The intention to restricting cannabis businesses to industrial areas,the create a free and open market for commercial cannabis Key Observations Grover Beach moved forward with the intention of treating this industry as a major economic development opportunity.The relative equidistance between Los Angeles and San Francisco,lack of commercial canna- bis activity in in the area,and available industrial land marked Grover Beach as an ideal location for com- Jill � mercial cannabis businesses to open distribution and manufacturing operations. While motivated by economic development,the city's approach has been measured. Grover Beach has �r leveraged its industry assets to gain additional value from these businesses through required property Courtesy of Grover Beach improvements.At the same time,the city has continued Opening day for Grover Beach's first retail cannabis establishment. to adapt its tax scheme to ensure the businesses aren't has caused land value in the industrial park area to rise, driven back underground. and the rent for existing business owners has risen with It is also worth noting perhaps the biggest risk of it.Some businesses have had to relocate to other parts making this industry part of an economic development of the city,and some have left Grover Beach entirely. strategy: it exists in the shadow of the federal govern- Nevertheless,the city expects a significant overall net ment. Manager Bronson notes that any new or more increase in the number of businesses,jobs,and tax rev- aggressive enforcement has potential for a "chilling enues due to the influx of commercial cannabis. effect"on the industry both statewide and in Grover The coastal California city will be looking to multiple Beach.The inability of cannabis businesses to use the metrics for judging the initial success of commercial banking system,given federal restrictions, is also a cannabis, mainly tax revenue and the number of new continued challenge given the scale of the multi-billion- businesses. Grover Beach's tax structure is a 5 percent- dollar cannabis industry. tax on gross retail receipts and 3 percent on gross Thus far, however, Grover Beach has instituted a receipts of manufacturers,distributors,and other com- thorough process to develop and tweak regulations mercial uses. It also includes a $5 per square foot tax on that have helped the public and business community cultivation uses. to buy in.The public has since complimented the city One of Grover Beach's objectives was to not tax on how regulated the industry is, and as a result, has cannabis businesses back into the underground been supportive of its local growth. Evidence from economy.The 5 percent tax on gross retail receipts this case and others suggests that starting with strin- was originally 10 percent, as approved by the voters. gent regulations on commercial cannabis, and slowly The City Council lowered the rate in order to follow relaxing them until the desired outcome is reached, is the general rule of thumb to not exceed a 30-percent a more effective method than attempting to tighten effective tax rate on an industry.Total revenues from already relaxed regulations. commercial cannabis businesses are forecast to climb Interviewee: from approximately$700,000 in the first fiscal year toward up to$1.5 million annually once the industry Matthew Bronson, City Manager matures,which would equate to nearly 20 percent of Endnotes the city's general fund.The city conservatively esti- 1 Monica Vaughan,Brad Branan,and Nathaniel Levine,"SLO county mates the recent expansion to the adult-use market is a 'pot desert' now—but not for long.A dispensary will open may yield a 25-percent increase in revenue. soon,"The Tribune, March 26, 2018. h p/lwww.sanluisobispu. com/latest-news/article2064821.99.htrrrl ...................................................................................................................................................... IIIIIIIII ®® , kl6,ll Illllllm u� I Vuu pump �„off PW i / 1 i �7 7 i Oregon was the first state to decriminalize personal possession of marijuana in 1973, and its voters legalized medicalmarijuana cultivation in 1998 througheasur efforts to amendstate's medical and recreational marijuana policies r s — r defeated—in the subsequent two dc s, but the dynamic changed in 2014. Citizen-initiated Measure 91, which passedi r vote, authorized e commer- cial r c ' , sale, purchase, and possession of marijuana for adult recreational delegateduse. It recreational marij v ight to the Oregon Liquor Control Commission provided r local governmentsestablish reasonable restrictions on the time, place, and manner in which the industry could operatein their communities. As illustrated e following two cases, the implications f n counties have been distinct fromunici a i 'e . JACKSON COUNTY Jackson County is a southwest Oregon county of 217,000 residents, home to numerous vineyards, campgrounds, and loggers.The county is part of the Southern Oregon American Viticultural Area and is an ideal environment for growing grapes. ii Oregon has a unique land use system designed to encourage development in incorporated cities and keep unincorporated county land for farm and forest uses. Since 1973,the state has maintained a progressive farmland protection program through which counties �,.,;;,, inventory, preserve,and appropriately zone their agri- cultural resource lands.'The state's Right to Farm Law affords further protections from nuisance charges or local restrictions to agricultural activity on land zoned for such use.2 Measure 91 was amended by the state legislature in 2015 in an attempt to resolve uncertainty o c about whether cannabis cultivation is a protected agri- cultural activity and what types of regulations/restric- tions local governments could implement. However, III VIII „N t r this created more questions than answers. Every local •,• 4 „2 2 government now has its own regulations on produc- tion of marijuana;these can vary widely,which creates state-level enforcement hardships. Jackson County's rural residential zoning already prohibited commercial agriculture, but Jackson County marijuana production.6 Though legalization has driven was progressive and quick in developing its own regula- up the value of private resource land, arable land,and tions for marijuana production, processing,and whole- current farmland that is usable for marijuana,growers sale and retail sales.3 The section added to its Land are increasing in number,with over 1,000 licensed pro- Development Ordinance in 2016 includes specifica- ducers in the state, 203 of which are located in Jackson tions on where marijuana activities can be sited, includ- County. On the sales front,Jackson County has only ing buffering and fencing requirements; protections 34 of Oregon's 550 licensed retailers and 15 of 124 its against nuisances such as odor or light pollution; and licensed wholesalers.' restrictions on hours of operation. Despite allowing Since marijuana cultivation was authorized in Jack- most activities with appropriate regulations,the county son County, code and planning complaints have spiked has faced significant challenges in the face of legaliza- dramatically. In the 2016 to 2017 period,the first full tion, largely tied to marijuana production. fiscal year since authorization,the county received Home to a number of vineyards and pear orchards 1,038 planning violation complaints and 425 code in the area known as Rogue Valley,Jackson County has enforcement complaints-45 of which went all the way an ideal environment for agriculture.4 Medford,the to a hearing, close to triple the normal level for the county seat,averages 195 sunny days and 52 days of county. In the first 11 months of the 2017-2018 fiscal precipitation per year.'The climate in Oregon, espe- year,Jackson County received 649 planning violation cially Jackson and Josephine counties, has attracted complaints and 383 code enforcement complaints, a large number of marijuana growers both before and according to Jackson County Development Services. after legalization.Jackson County alone produces over Three important caveats apply to these statistics on 100 tons of medical marijuana per year as tracked by complaints: (1) enforcement is complaint-driven and the Oregon Health Authority; the OLCC does not yet all complaints are investigated; (2)complaints received have a complementary system to inventory recreational related to marijuana cultivation in Jackson County are • • but largely require state-level solutions.Though increased foresight regarding the land use challenges specific to production would have been helpful, Orego- nians ultimately advanced legalization, and Jackson County could not opt out of Measure 91 because less than 55 percent of voters opposed the measure.The county's local land use regulations address many of the Y° problematic issues associated with illegal grow sites, providing a path to compliance, but the state's capacity ilii h for enforcement of licensed/unlicensed operations has 1 been limited, constrained by the number of officers cur- rently available to serve the region. While the state's relatively young legal marijuana industry has yet to see a market correction,that may � be about to change. Oregon producers and manufac- Courtesy of Jackson County turers may only sell legally in Oregon as federal law Aerial footage of Jackson County cannabis farms. prohibits marijuana being transported or sold over largely attributed to unauthorized growing, not to cul- state lines.The state reported that 550 tons of mari- tivation that attempts to follow the established regula- juana were produced in 2017, but just 170 tons were tions;and (3) many residents are hesitant to send in consumed.'The massive oversupply has led to a dra- complaints about illegal growing for fear of retribution, matic decrease in price,with a number of small-scale so it is believed issues may be under-reported.$ businesses folding and the OLCC temporarily halting Common complaints deal with such issues as new license applications while it catches up on those the following: already in the pipeline.10 • Excessive use of water and light pollution Each of Oregon's thirty-six counties faces a unique • Theft and safety concerns in/around grow sites set of circumstances in regulating this issue, and • Aesthetics, odor,and/or noise Jackson County's experience is clearly influenced by its • Traffic and speeding high desirability for marijuana cultivation. Because the marijuana supply chain is still restricted within legalized • Unpermitted grading, structures, uses, states' boundaries, it is useful to understand the chal- and/or equipment. lenges faced by supply centers. The industry has left its mark on the landscape since legalization in other ways. Surveyors must reestab- OREGON lish government corners graded over by illegal grow- ' ing; assessors have seen an uptick in applications for Located sixteen miles north of the California r- farming-related tax reductions; and the surveyor's der and at the southern end of the Rogue Valley, and assessor's offices as well as the road department the City of Ashlandis home to Southern Oregon face new land access challenges now that unauthor- University n just over 21,000 residents.Tour- ized marijuana cultivation, previously hidden on public ists regularly visit Ashland to enjoy its cultural land, has migrated to private land.Time and resources Shake- required in following upon all of these issues and com- a natural amenities, such as the Oregon hake- plaints are significant.Though the county receives a s sate Festival a Lithia ark. share of state revenue collected from the industry,that Located within Jackson County,the City of Ashland ratio is weighted toward the number of licenses rather also moved quickly in exercising its ability to enact local than the canopy size. commercial marijuana regulations. Many of Ashland's regulations were proactively developed in anticipation Key Observations of Measure 91's passage to ensure the city was poised Whether Jackson County could have avoided these to handle potential changes that might occur at the challenges is impossible to say. Impacts are felt locally state level. a 11 y �I 2a � ti ate,,, Outdoor cannabis cultivation tions in Ashland, required annual local permits, and addressed hours of operation and odor control. Like many municipalities,determining the appropri- ate local regulations for marijuana dispensaries was III III IIII a high priority.Ashland also accounted for concerns IIIIIII "' I" regarding cultivation, particularly in residential areas. IIIIII IIIIIII Medical marijuana had been legally grown in Ashland for more than a decade, but recreational legalization was expected to increase interest and uncertainty around personal cultivation and provided an opportu- Notably,Ashland addressed the ability to have a nity to review past and potential nuisance issues.After local tax on the marijuana industry. Measure 91 was several months of meetings and gathering feedback expected to preempt local taxation of marijuana, limit- from residents,the city established a set of regulations ing this ability to the state, but Ashland and other cities in January 2015 aimed at striking a balance between believed that local taxes would be grandfathered in if what the state had by then authorized and concerns adopted prior to Measure 91's effective date.11 The raised by residents and staff. In the end, both indoor council approved a 10-percent tax on gross receipts and outdoor cultivation were allowed in residential from marijuana sales in August 2014. zones with limitations. Even earlier, in April 2014,the Ashland City Council Commercial cultivation has been more of a wild card, approved a limited,temporary moratorium on the Iota- as the city does not allow other forms of agriculture on tion and operation of medical marijuana dispensaries. commercial or industrial land. In its recommendations State law already prohibited dispensaries from being to the city council,the Ashland Planning Commission located in residential zones,and Ashland's additional indicated concern about excessive use of electricity and measure limited them from commercial/mixed use water and about the long-term supply of commercial or areas and bought the city time—approximately one industrial land versus job projections for this industry.12 year—to discuss potential longer-term regulations. In The city elected to test the waters on commercial indoor fact,the city lifted the moratorium just a few months grow operations with a cap of 5,000 square feet, but later in August and passed permanent zoning require- thus far it has not approved any local permits. ments as well as time, place, and manner restrictions Implementation for dispensaries. Building on the state's buffering provisions,these zoning requirements further restricted Voters in this progressive college town supported Mea- dispensaries to strategic commercial/industrial Iota- sure 91 at a rate of 78 percent." IIIIII ®® • • Though Ashland was not alone in adopting a local ► : tax scheme prior to Measure 91,the legality of these Danny Jordan, County Administrator,Jackson County early regulations proved unclear. However, 2015 Adam Hanks, Interim City Manager,Ashland amendments to state law clearly authorized Oregon cities and counties to refer 3 percent of local taxes on Endnotes recreational marijuana sales to their voters.Ashland's 1 Oregon Department of Land Conservation and Development, measure passed,and the council elected to dedicate "DLCD Farmland Protection Program.".h p��: w 0 ongav/ those proceeds to an affordable housing trust fund.A /pa6eslfarmprotpr:o.ga> , guiding resolution directs marijuana tax revenue of up 2 Oregon Department of Agriculture, "Land Use and Right to Farm." hltra./!(v n(w.nregcarr. ervl If;7 lF'f2C GIRAM / to$100,000 annually to the fund,though with the sig- �n.q.�iFaA..,_r�.�sauJ_rtc s/wp ��li an_use as. nificantly reduced tax rate the actual contributions thus 3 Neighboring Josephine County did not disallow agriculture in far have been modest.Ashland also receives a share of rural residential zoning, creating a problem where marijuana farms started to open in rural neighborhoods.Josephine County the state's marijuana revenue,which is earmarked for attempted to disallow agriculture in rural residential zoning, public safety expenses per state statute. and push the marijuana farms out, through an ordinance. This attempt was overturned by court, because the county failed to Ashland's regulations on residential cultivation follow a procedure as the marijuana farms were grandfathered limited the number and placement of plants grown in.Josephine County is now attempting to eliminate marijuana outdoors. Recognizing that some would seek to supple- farming within its jurisdiction through an injunction. 4 South ernOregon.com, "Climate." http/lwwwsouthernoreyo2.... ment or substitute with indoor cultivation,the land con....southe..... gnnclimate!. use ordinance requires these activities to comply with 5 Sperling's Best Places, "Medford, Oregon" h.ltps://www: building codes,to confine light and glare,and to not besrpiac,es..net/c...jmatn/citylcre crr/medford overtake residential structures as the primary use.As 6 Medical marijuana is regulated by the Oregon Health Authority, while recreational marijuana is regulated by the Oregon a further, more readily enforceable layer of protection, Liquor Control Commission. This causes the regulations and the city added a new residential tier to its municipal enforcement for both sectors to be inconsistent, regardless of the similarities of the products. electric utility rates.The$0.125 rate applies to resi- 7 Oregon Liquor Control Commission, "Recreational Marijuana." dential customer use of more than 5,000 kWh/month, littp://www.o xon..pr ./..r31_e./..rr7ariiu n /lF'..ag ./..drt u t.s effectively functioning as a penalty tier for extreme 8 Danny Jordan, Interviewed by Laura Goddeeris and Will Fricke, usage. (While not part of the original discussion,this May 9,2018 9 Marijuana Business Daily,"Oregon marijuana oversupply driving measure also proved useful as Bitcoin mining grew in out small farmers, lowering paces;' April 18, 2018. traps/! popularity throughout the region.)14 rnjbiz.daily.corn/aregon..rn ri.luana.:.oversu nl.Y..::.d.rjving...ou.t:.small.:.. Tourism is a significant driver of the local and farmer"...lownn.g...pncesl, 10 Denton Record-Chronicle, "Glut of marijuana in Oregon is regional economy,and Interim City Manager Adam cautionary tale, experts say," May 31, 2018. http..�://www. believes anecdotal indications of the marijuana dentonrc.._cernlap/r,lut:-_c�F.:.ma.rijuarr dale exra rl7 sa._ylarlic.l_� 3328b1ar r)els sser a6�F s... industry's impact have been positive.A local ban on L 2 - . . 45- e792fdb6d1.33.htm1 public smoking(tobacco-driven, but applicable to marl- ...----------------------------------- 11 City of Ashland, "Marijuana in Ashland: What's next?" [it tps// juana) in the downtown area curtails potential nuisance www.ashleand:or.us/ a, e..as.p?Navlr�....1.651.. . issues,and enforcement has been fairly routine. Hanks 12 City of Ashland,Council Communication, "Public Hearing on an observed early signs of a niche market emphasizing a Ordinance Amending Title 18 Land Use of the Ashland Municipal „ Code for Homegrown Marijuana and Marijuana-Related craft„ product,similar to the beer and wine industries, Businesses,” December 1, 2015. https//ww.washl.and..or.us/ with tour operators designing regional experiences s.11B tiles/.1:_2c�_1.1.5.,,,,H.nme rnw.n_.Mar.itua_ria naari. aan.a._ showcasing the local value-added food,wine, and mari- uS�ne�ses �.�pat- 13 Jackson County Clerk, "Official Precinct Rpts 2-29 - juana producers. Amended," November 24, 2014. h::;tp;//tacksnnceuntycar.orp/, esk:tq.pM duleslFasyl[)IVNNr=ws/DcrcumerrlDownload ashx?.per ObservationsKey rtalid 9&rnoduleid. 5094&articleid..._202391&documentid 1.41. 14 Shepherd, Katie, `Bitcoin Miners Are Flocking to Oregon for Interim Manager Hanks feels Ashland was successful in Cheap Electricity.Should We Give Them a Boost?"February 21, its proactive approach t0 authorizing a legal marijuana 2018. h.ltp.!lu;rwuy...nr..nreF k....nrr,lnnwslbusinessl2�1:�/(72/21:!.. bitcoin-miners are flocking to orrgorr for_cheap.._clectri�ity.... .................................... ....... ..... industry within te city,an credits a collaborative ,hould.:_wre.:.. we.:_them.:_a_:_boost/ effort by finance,administration, legal,and especially planning staff in navigating its approach. ra.' Juneau is a rainy and temperate city,with its populationlargely located along the banks o the Gastineau Channel or in the Mendelhall Valley. Over one million tourists arrive in Juneau annually to visit the Mendenhall Glacier and surrounding landscape. The Alaskan legal landscape and popular opinion regarding marijuana have fluctuated for over forty years. In 1975,the Alaska Supreme Court ruled that the personal use of a small amount of marijuana was constitutionally protected by the Alaskan Constitu- tion's right to privacy clause.' In 1990,a passed ballot initiative recriminalized marijuana in the state,a law that was once again overturned by the courts,this time the Alaska Court of Appeals, in 2003.Just three years later,with Governor Frank Murkowski at the helm and emboldened by a political environment emphasizing "family values" "the Alaska state legislature recriminal- ized marihuana,this time as a misdemeanor punishable III VIII III s byjail time.z This law stood until the most recent marijuana ballot measure passed in November 2014,allowing posses- sion of up to an ounce of marijuana and legalizing the commercial retail sale, manufacturing,testing,and IN MEN II " s • cultivation of marijuana products.'This ballot initiative is seen as an attempt to regulate marijuana in a similar � pumMOVINV Y�ire ,< " manner to alcohol.Juneau taxes retail marijuana at an ���---- �u�ip��iui�si�uuiuumiooi 8-percent effective rate,with identical language and effective tax rate for alcohol sales.According to an analysis from Juneau's Marijuana Committee, an 8-percent tax rate would mean anywhere from $170,000 to $455,000 in revenue from the marijuana sales tax per year.4 Juneau's motivation for allowing commercial marl- juana businesses in the city was twofold.The simplest reason is that voters wanted it. Officials also hold the ' %' belief that being overly restrictive would encourage Cannabis product manufacturing black market sales. After the 2014 ballot initiative was supported by out of the market by restricting it to only commercial 63 percent of Juneau voters,the City and Borough and industrial zones, all current cultivation businesses of Juneau immediately passed an eleven-month are located in nonresidential zones by happenstance, moratorium period on marijuana businesses; this was without complaints from residents. Many residents eventually extended to thirteen months to give time feared an influx of crime surrounding new marijuana for a marijuana committee made up of assembly and businesses,something that did not materialize. Never- planning commission members to work through the theless,Juneau may ultimately restrict cultivation in the pending issues.' In this period,Juneau passed three residential zones in the future because of the evidence ordinances: amending its indoor smoking ban to include that it would not be a burden on the industry. marijuana,amending the"driving under the influence" All cultivation in Juneau is indoors.The state of definition to include marijuana,and amending the land Alaska allows outdoor cultivation,though the climate use code to include regulations for marijuana busi- and terrain are often less than ideal for it.Wide open nesses. Following the moratorium,Juneau passed addi- spaces that are both suitable for large farms and far tional regulations regulating marijuana oil extractions, enough from residential areas are nearly nonexistent allowing marijuana commercial business licenses, and in Juneau. Outdoor or"sunlight"cultivators do exist in requiring ventilation systems that prevent odor from the Fairbanks area of the state,where the terrain and being detected outside the premises. weather are far friendlier to outdoor crops.' One of the marijuana committee's key early deci- Alaska's state guidelines do not provide guidance sions was to not cap the total number of licenses, on regulating onsite consumption of marijuana prod- effectively allowing the market to determine how many ucts.Juneau does not allow onsite consumption in marijuana businesses Juneau could support.With this an attempt to ensure its public smoking ban is not approach, it took about one year for the local market to undermined. However,the city will be watching for approach equilibrium. state-level changes on the issue. In the future,there The next decision made was zoning for retail, manu- may be an opportunity to consider allowing sites with facturing,and testing.Commercial property in Juneau cultivation or manufacturing and onsite tasting,similar is generally not in conflict with sensitive uses,leaving to many breweries and distilleries. those categories of commercial marijuana businesses generally unrestrictive within commercial zoning. How- Early ever,the governing body and community of Juneau While Juneau does allow testing labs, none exist in struggled with zoning on cultivation. Commercial culti- Juneau due to the difficulties of traveling to and from vation is permitted in large-lot rural residential zoning the city.There are no roads that connect Juneau to the to supplement Juneau's limited industrial and commer- outside world; all travel takes place through air and sea, cial property. Local leaders cited strong citizen support and all facets of marijuana in Juneau have some associ- of the state legalization measure in their decision.' ated transportation issues.The retailers in Juneau all Despite fears of unintentionally zoning cultivation grow their own products, but the most convenient test- ® ing facilities are in Anchorage, necessitating a ninety- Key Observations minute flight. While Juneau proceeded with marijuana regulation pri- That flight caused some minor problems.Alaska marily to implement the will of the people and reduce state troopers are under a directive to facilitate the black market activity, several local economic develop- intrastate transportation of marijuana and to make sure ment opportunities have emerged.Transportation chal- transporters follow the law. Early on and without direc- lenges and the accompanying limited market potential tion from the state,Juneau local police were advising have limited interest from nonresidents.As a result,the commercial pilots at the municipally-run airport about industry has provided a Juneau-centric business oppor- marijuana in their cargo as a professional courtesy, tunity for local residents. believing that it was appropriate to advise the pilots of Juneau's unique situation has also resulted in locally the breach of federal transportation laws.The practice anchored and vertically integrated supply chains. Local was ended after police determined that the notifica- retailers and concentrate producers,who also double as tion was unnecessary and contradictory to the effort to cultivators, bring marijuana trim on their testing trips to regulate marijuana similar to alcohol. Anchorage.The trim is then sold to Anchorage edibles Another early, unintended consequence of introduc- manufacturers, of which there are none in Juneau, in ing a legal marijuana market was black-market sellers return for credit that the visiting business owners put targeting tourists who passed by the marijuana retail toward manufactured products to sell in Juneau. storefronts after hours. Eventually,the problem was dealt with by the retail business owners who witnessedInterviewee: the problem on their security cameras,and the need for Rorie Watt, City Manager local police involvement was and remains minimal.With more urgent concerns related to opioids, methamphet- Endnotes amines,and heroin,enforcement of marijuana violations 1 Christopher Ingraham,"Alaska legalized weed 39 years ago.Wait, by the state and local police takes a back seat to the what?"The Washington Post,September 24,2014.hi.tpsl/www: more serious drug use problems in Alaska."Overall,the v asN.ii_ng.t®_n. nst.. ®min �nrs/warrklwizl2..�_1.�t1�.912 1:1�.laska.... legalir�d.._werd 3�1. years.._arJ wa.t._whaf/an�rcd.r€,ct....on&.utm._ local police work well with the marijuana businesses and term J22b3ae4078c ................................................................................ assist with maintaining successful best security practices, 2 Megan Edge and Laurel Andrews, "Timeline: notable moments treating commercial marijuana like any other business. in 40 years of Alaska's history with marijuana:' Anchorage Daily News, April 13, 2014 (updated September 28, 2016). tttp!=.:_l/w w adn comlcanna_bis.::_nort_b!art.i_cle/a.I_aska.:::weed.::: Effects on Other r history/201:' 0'Z9 1 i! One of Juneau's biggest economic drivers is tourism, 3 "Ballot Measure No.2-13PSUM,An Act to Tax and Regulate the Production, Sale, and Use of Marijuana." httn:!lwww:eletions,, with over one million cruise ship passengers visiting .a.....a.....s........a......R .. 1F �::boo.vl dac![_Jml .. :: _n. Juneau in 2017 to take in the glaciers and picturesque 4 Cityand Borough ofJuneau."Potential 8%Sales Taxon Marijuana islands, as well as spend money at local businesses.' On Retail Sales:'htt. s 11 rk�:t,.!.rzjakoo l tt rr m n.Lwi�wer.�3nx?�,t; tachmentlli) =531.5&Ilternll C:7-2936 any given day,tourists outnumber residents in Juneau's 5 Office of the City Clerk,"CBJ Responds to Statewide Marijuana downtown area.An early concern was that some tour- Initiative:' hltps!/vv w:aun u..or lb t_.tra!]teL clerklAS�l. .___. ists would take the marijuana they buy to the parks, in MARl1J U N ./...Ma i.�uana Cornrnittee hI2 violation of Juneau's public smoking ban.This concern 6 The City and Borough of Juneau Assembly, "Commercial Cultivation of Marijuana in Residential Zones," March 21,2016. did not end up materializing, either due to education haps!/www:junta. .. rlbe.oa .o.lcl_ rklASClnCt� uAVA! about the public smoking ban or tourists being too docum_entsl20._1.6 03 2.2 Corrr_rnercia.l._Cultiv._ahon oL.. anLuana in Residential Zones.p.df busy with excursions. 7 "Fairbanks famer prepares to grow cannabis," Anchorage Juneau has a medium-sized cadre of indoor vegeta- Daily News, June 14, 2016. https!/wwynul!abeecam! ble growers,who do not appear to be affected by the .juy,vubw....a . marijuana growers. Marijuana growers tend to be more 8 Rorie Watt,interviewed by Laura Goddeeris and Will Fricke,April 16,2018 technology reliant and have more stringent security 9 Cruise Lines International Association,"Cruise Visitor Outlook,Is requirements,causing the overlap in desired properties Regional Planning Important?" February 14,2018.http.�-//www. infrastructure to be minimal. cr�_m_ k..:: IgpCf6Vt/CalFeb%2014`%1CJ201.81Jotrrr%2fJF3inklleydl. 0&prcvic w:=Southea st+Conferen ce+Feb-�201..8.�v+2.1.3-1.8ptre ...................................................................................................................................................................................... III k16� 11111E r r .dry p/rtl °R0 r' Kirkland is a large Seattle suburb on the shores of Lake Washington. It is the home of a Google campus, numerous beachfront activities, a nearly 90,000residents. In 2010, Kirklandannexe unincorporated areas of KingCounty, increasing its population by approximately 33,000. % In Washington, recreational marihuana was put on i /aaaaaaaaaaaaaaaaiaaaaaaaai/ the ballot via initiative following an intense signatures,,, collection period. Initiative 502,which proposed to legalize adult recreational use of marijuana,was among a slate of hot-button issues and offices that drew 81 percent of the state's registered voters to the polls in 'a�iaaiaaaaaaaaaaaaaaaaaaaaaaa November 2012,with 56 percent voting"yes."'In King County,where Seattle, Kirkland,and Issaquah are situ- ` ated, 60 percent of voters supported the initiative.2 King County municipalities began to make deci- sions on whether to allow cannabis businesses within their borders during the thirteen-month statewide moratorium imposed by Initiative 502,which ended on r t to"opt out"via an extended or permanent moratorium, III III ml" December 1,2013. The state allowed for municipalities " and many took the opportunity to enact such a ban.This change forced the issue of cannabis sales and produc- ' IIIIIII�III I�III�III iilllll IIII II�III�II I II�III IIIIII�IIIII�IIII I IIII VIII Illlll�i I I�IIIIIII IIIIIIIIIII�IIIIIIIIII�II��III� tion inKirkland,and the city council quickly decided residents ofKirkland and the surrounding area, indud' againotadoptingabanoncommercia| cunnabis. ingtwo Google employees who founded acannabis retail shop asa side business. Community Concern |nKirkland,support for the legalization ofmarijuana "You cannot overestimate how much energy was even stronger than inthe surrounding area,with and coRCeR? thereVV/// be /n the community over Initiative 5O2receiving a "yes"vote from 66percent legalized marijuana....The[e i5alot more passion of voters. It also received bipartisan support from the and concern in the community than we thought, city council,stemming " ' �� Yy��p�U�� /���ft/��� /�5���iM� nate unregulated black-market cannabis sales.The city council and administration interpreted the wide — Kurt Triplett support from Kirkland voters for Initiative 5O2asasign tnbegin crafting new local regulations that would allow Like other municipalities, Kirkland residents showed commercial cannabis inthe city. However,they quickly the highest interest inattending city council hearings in learned that support for commercial cannabis intheory recent memory during the debate period for legal com' dnesnota|vvaystrans|otetosuppnrtinpractice. mencia| cannabis. However, most were prevented from City staff initially proposed totreat commercial can- speaking because ofstandard time limitations onpublic nabislike any other commercial business.This phi|oso' comment during Kirkland City Council hearings.`Asa phywas reflected |nthe first prospective zoning map complement tothe formal deliberation process,the city and regulations developed,which proposed toallow manager's office,city council,and the planning direc' cannabispnndudinn. processing. andretai| businesses tor made adedicated effort toengage with community tnlocate anywhere the existing zoning standards would members and talk through their concerns.Aseries nf otherwise allow,save for the minimum buffers required incremental changes made tothe local regulations con- by the Washington State Liquor and Cannabis Board firmed that residents'input was being taken seriously and the state-imposed limit offour retail locations in and helped todissipate fears following implementation. the city.This map was met with strong opposition to prospective retail |ocotiPublic blic Sa'--^���� Chief among residents'concerns was the exposure Perhaps the biggest issue asKirkland debated com' chi|dnenandteenagersvvou|dhavetocannabisthrough mencia| cannabis was the fear ofadditional public safety legal storefronts. Bytreating cannabis retailers like concerns created bythese businesses,including their other commercial businesses, initial draft regulations cash-based nature. Kirk|and'spolice department reached allowed for the prospect ufhaving cannabis retail- out tocolleagues from similar-sized jurisdictions inCu|o' era|ocotednearorinterspersedvvithinresidontia| rado.where commercial cannabis had been upand run' aneas.After|isteningtothesecuncernsfnomnesidents. ningfor over ayear,tnask them for advice and evidence Kirkland opted tocreate retail cannabis buffers along regarding adverse public safety effects.Their colleagues designated school walk routes aswell asnear schools, found that with common sense safety regulations,the limiting children and teenagers from passing bythe commercial cannabis businesses seemed toadd noaddi' businessesvvithnegu|arity.+ tiona| public safety issues tothe area. The bans oncommercial cannabis being imposed The general opinion ofthe Kirkland Police Depart- in surrnundin8munidpa|itiescreatedadditiona| fears ment(KPO)oncommercial cannabis could becharac' amongsomenesidents.Theyvvereafraidofbecoming terizedas "skeptica|"atthe beginning ofthe debate a "destination"for cannabis,with thousands from the period. Many rank'and'fi|eofficers were not supportive surrounding municipalities coming tnKirkland solely to ofthe move tolegalize commercial cannabis inKirk- make puohases.afearthatthusfarhasnotmateria|' land, but the prospect ofaneffective mechanism todo ized. Similarly, many communities have concerns about away with the local black market was attractive.When atransient population arriving toset upshop inthe commercial cannabis businesses became legal,the KP[) commercial cannabis industry. |nthis case,those set- was instructed bythe Kirkland administration toavoid ting uVcommercial cannabis businesses were already "de'pu|icin8"cannabis aswhole and looking the other to children and teenagers, Kirkland opted to expand the sensitive use buffers required by Washington to include walk routes leading to its schools. City Manager Kurt Triplett feels that his community d benefited from the state-imposed,year-long morato- rium.This process allowed Kirkland to have a lengthy A, research and review process for developing its new ordinances. Otherapp-eraservices, like Airbnb, have caused disruption and confusion in some communities ` t t without ample time to prepare for them.Washington .W. �I t° avoided this problem with commercial cannabis due to y the required moratorium following the November 2012 initiative. Industry proponents may argue otherwise, Cannabis products for sale but evidence from Kirkland and other communities suggests there are benefits in taking time to phase in way on all activity, rather than appropriately enforcing change, either through a self-imposed moratorium,trial control of the legal and illegal markets. periods with sunset provisions,and/or other measures ensuring regular monitoring and revisiting of how this Current Landscape emergent industry functions in a community. The Washington State Liquor and Cannabis Control Board's database includes eleven records of administra- tive violations issued in Kirkland since 2015, most of Kurt Triplett, City Manager which are related to product traceability, packaging,or advertising;two instances of sales to minors were cited.b Endnotes While public safety statistics since legalization have 1 Office of the Secretary of State,"Gregoire and Reed certify 2012 election, including marriage and marijuana laws," December 5, not caused significant concern,the traffic and parking 2012. h.Ltrls.!/yyvr w.so:.wa. ov/office/news.releases.as #/ . ._. ._ ..............................:.................................p . demands associated with retail cannabis businesses news/1.065 .......................................... have been slightly higher than the city anticipated. 2 Office of the Secretary of State, "November 06, 2012 General Election Results." November 27, 2012. httr7s//results:vote., wa.., nv/res_u.I:Ls.! ,_2.1,_1:Q_F/.Ifni_tiatjve.:::Meas_u_re.:::.Nr1..::_502:.::: Key ® Conce.rn.... uana IEiyCrrunLy hLml... Kirkland's work to legalize commercial cannabis 3 State of Washington, "Initiative Measure No. 502,"filed July 8, 2011.haps.//sns:wa.:.g v� assets/elections/ini.tia.tives/iS02.ncif locally illustrates the challenges of translating theory 4 Raechel Dawson, "Kirkland imposes new temporary marijuana into practice. zoning regulations," Kirkland Reporter, March 19, 2014. hl;trl/! www.kirklandreraortgr..com/news/kirkI nd imposes.::.new. Kirkland's residents,while supportive of legalizing ................................................................. .................................... ... .......... tem.pora_ry.::rr7ari.I�_an_a:xnniny;:::regialabons/, commercial cannabis at the ballot box,were hesitant 5 Only three speakers are permitted on each side of an issue;that to embrace actual implementation of this new policy. is, three may speak on the pro side of an issue and three may Other communities would be wise to anticipate time speak on the anti side. To show their support in another way, proponents of legal commercial cannabis distributed supportive for honest and open conversation with residents about t-shirts to their supporters,causing the hearings to be the most their expectations and what changes they are comfort- colorful in recent memory as well as the most popular. able with. Kirkland feels that the effort from the plan- 6 Washington State Liquor and Cannabis Board, "Violations Dataset," June 21, 2018. haps��data.l_ct.wa.g�vdataset! ning director, manager's office,and council to engage Violations Dataset/d><3i-Lzh2 ............................................................................................................. with and listen to community members outside regular meetings went a long way to unpacking the cognitive dissonance surrounding legal cannabis. As the process continued, Kirkland continued to modify regulations based on local feedback and condi- tions.As a strategy to keep commercial retail cannabis businesses "out of sight and out of mind"with respect l IIIIIIIIu Vuuml a IVi°��uuuu w r 0 Pacifica is a seaside San Francisco suburb of nearly 40,000 residents. Lying on the Pacific Ocean side of San Mateo County, Pacifica is a popular surfing and hikingestintio Cannabis legalization had overwhelming support from Pacifica residents as well as from the city council.The / council acted swiftly in March 2017 to begin the process of allowing cannabis businesses in the city, holding a RK / joint study session with the Pacifica Planning Commis- sion.This study session was followed by planning com- mission and council meetings,which provided direction regarding the authoring of the ordinances that would allow commercial cannabis operations in Pacifica. The ordinances,which were adopted in July 2017, would be triggered by the passing of a local excise tax on the gross receipts of cannabis sales.Seventy-nine percent of voters voted in favor of the tax, enacting the ordinances to allow legal cannabis operations.' Pacifica decided to allow retail, manufacturing,andtesti III com- mercial cultivation in hecity. Ung businesses, but decided like is neighbor to the III III t south, Half Moon Bay, Pacifica does not have green- houses or agricultural business infrastructure. Outdoor cultivation of any significant scale would have been inconsistent with the suburban character of the city. III ®® The Ordinances operation. Council retained the option to decrease or Pacifica has two ordinances regulating cannabis opera- increase the rate up to 10 percent after two years.3 tions.The first is a public safety ordinance,adminis- Upon launch of the licensing process,the city received tered by the Pacifica Police Department,which governs over thirty applications for cannabis businesses. the operation and licensing of cannabis businesses, Public Safety requires background checks of owners and employees, and includes other safety requirements such as tech- While Pacifica has had illegal medical cannabis dispen- nological and physical security systems. It also includes saries operating since 2010, calls for service regarding provisions to curb nuisances such as loitering. illegal cannabis were few.The illegal establishments Pacifica's ordinances are stringent with respect to likewise were not a burden on law enforcement. How- nuisance effects,with applicants required to prove that ever,those establishments did not report burglaries their business will not be a nuisance. and other crime on their property due to the risk of The second ordinance governs the cannabis zoning facing charges themselves.With legalization,the now- regulations in Pacifica.The city created five overlay legal businesses follow common sense safety regula- districts for retail cannabis businesses: Fairmont, Linda tions while falling under the protection umbrella of the Mar, Park Pacifica, Rockaway Beach,and Sharp Park. Pacifica Police Department. Each overlay district is limited to two retail businesses, "Changes in culture statewide have caused a para- and in total no more than six retail businesses are permitted in the city.' Pacifica set these limitations due ig shift i the way cities and la enforcement are to concerns about overconcentration, particularly in approaching decisions regarding cannabis si- economically depressed areas. Cannabis testing and esses. r community and council have expressed manufacturing businesses are not restricted to the their desire for this program to exist in Paciftca. It is overlay districts;those businesses are allowed within our job to administer the program in a way that pro- certain existing commercial zones. Pacifica also reduced motes safety and fosters a positive and collaborative one of the state's default sensitive use setbacks,from relationship with cannabis business owners." 600 feet to 200 feet for day care centers, because that — Dan Steidle setback was perceived as overly restrictive. Finally,the Key ordinance clarified local regulations for personal cul- tivation, Observations including a prohibition on the use of artificial The city reached out for assistance and examples of how light for plants grown outdoors. to regulate its cannabis industry.It looked to large cities Together,these ordinances created a four-phase in the area such as San Francisco, Berkeley,and Oakland, process for establishing cannabis businesses in Pacifica, but the beach town nature and lack of a large commer- involving a license and land use entitlement: cial sector in Pacifica made comparisons difficult.A more 1. Public safety license applications are submitted beneficial route was working with experienced consul- to the police department for review. tants on the business aspects of regulations. 2. Security plans are submitted to the police Interviewees: department for review. Lorenzo Hines,Assistant City Manager,Tina Wehrmeister, 3. Use permit applications are submitted to the Planning Director, Dan Steidle, Chief of Police planning department for review and public hear- ing with the planning commission. Endnotes 4. The police chief issues licenses after confirming 1 County of San Mateo, Assessor-County Clerk-Recorder & compliance with preceding steps. Elections, "November 7, 2017 Consolidated Municipal, School, and Special District Election." https!lwwwsrrrcare.crrlpust! Pacifica launched this process directly after the nuvrrrber-l: 0 7::0.. enactment of the ordinances following the November 2 Municipal Code, Article 17.5 "MO Marijuana Operation Overlay District." https.l/lib..ar :municodecom/ca/pacifica/ 2017 election,when the local excise tax was passed. codes/code of ordina"ric.es?nodelld==Tl 9f=t.ZO H4t.0 .............................................................._............................................................................................................................................................... ........... The local tax, initially set at 6 percent of gross receipts ::� .re M. leaCr. c�vD..11-s .:.,..175.3 vl[>..li .R.. for the first two years,was projected by city staff to 3 Municipal Code, Article 17.5, Sec. 9-4.1753, "Overlay districts generate$420,000 in the industry's first full year of created" h:ttp.!!w n n:cityufi acjfica or civicaxl.file r k[ kalobcl.lrc1. aspx F.:lohllf� 1?��}1.. dll'� Nimu, IIID IIIIII I Ililliuulll, °°°°� IVuuuuuum �illlll,lll�llll IIIIIIIIIIIIIIII� III mm� VIII I� mm� r� �illl ulilllliii illillllllllll IIII III III�I�IIIIIIIIIIII�Illllllllllyl III I IIIII1��� r.,,, ".. w�l rr1,""-, ,. /n, ^l .✓ r�7✓ ,� , r: // :fir/%i.,.. 1/ir�r,;, Irk"r / �a�r �i`I � ,r>'� rhrv6(o ,�J„i%/i ��S✓/y r� ,,1�` �r Gfi y� l/ v r,,.,,� %/�l�rr/ iii//n� r,,�,, r, �,,c �,,,�� i ,, ,,,, ,,,,,arc / ,,,, ,,, �' �� �u p�/�r�'"o✓�) /� ✓,iri ��/;r� �i/�rirG%/// r,J�. 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J/i/, r ..,,,., ✓ r.,., �..1.. ,./,/A/” r 9, r,i�../,�,/ � i /. � ,./i. � / / v.�. ,e/A /�, r �,..�� ./l/ a, r� r�, /IC I rf /� ,, / � r, 1,✓r..9 rJ�iri r ri i� ,, ,.., i. r:�r.l /./� r ,Si. ,,. ,r� Il, fll,,. /„t. f. ,,r/ ,/F.r ”, oior,0 rl. /, ;,;;d � ,a �/ „�/,,,�, l�r-�, ,.� l„ �,:✓ f,. .rrr,,� ,l�`� � / .r �/f./r. /: ,r/�', 1 7J a ..�/lj.. rr//,llrti�, ,:� ,�r,,.. d y� I j'/r///✓i� /rl�a /rid /,i k� pr I � � � �� r� m rf f��,w«���a. �„4.��?. m,���/.��,/u,,��r...uia< �r„✓d..:, ,�����„� 1»��'ll,,,�,,,r��G�,ll��:�rr � �1 �Jr r��Yf,' Santa Rosa is the largest city in Sonoma County and California's Wine Country.The city is known for its diversity, i a large Mexican-American and LGBT community. In October 2017, severe r wildfires destroyed thousands of homes in Santa Rosa. History/Background Medical cannabis dispensaries have been allowed in Santa Rosa since 2005, but other aspects of the cannabis industry were only authorized in early 2016. Prior to the passage of Proposition 64 in California,the Santa Rosa City Council authorized the licensing of medical cannabis cultivation manufacturing,testing,and distribution. Santa Rosa was ahead of the curve with respect to California municipalities, making it clear after the pas- sage of Proposition 64 that it wanted to broadly allow commercial cannabis businesses. City officials recog- nized ��IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII the cannabis industry was already operating in III IIII IIII (IIII Saatatsthrough market activity he "gray market” medical dispensariesIII IIII �.m IIS III,�� �I � ! � nlllllll�l t that operated without local input. In legitimizing the industry,the Santa Rosa City Council and administra- tion saw an opportunity to ensure compliance with IN I II ®® „ It was important to have a clear direction from the council what the approachwas going to Cmryry .” — Sean McGlynn �r permitting, planning,and public safety standards and to create a revenue stream for the city.The city also �; y reasoned that any part of the industry not officially ,�,���%„U� � I��” ' i; '� "�;� �9��i� �� '; �x I���(Iflyy�Y,l permitted would continue to operate in Santa Rosa without regard for negative externalities, hence their decision to allow all elements of the supply chain from cultivation through retail sales. Process and Regulations Cannabis oil "Bring certainty to a very uncertain landscape"was a driving philosophy in Santa Rosa's efforts to carefully up the issue at more than twenty full or subcommittee meetings and implemented a series of interim regula- and thoughtfully regulate the commercial cannabis tions before finally passing a comprehensive ordinance industry.The city council—leaning on its background in public safety—prioritized developing a path to compli- in early 2018. When it finally came up for public hear- public safety— building trust between the community and ing,the pressing issues had been thoroughly discussed between residents and administrators, leading to an the industry. undramatic and anti-climactic vote. "The motivation was t get more people to Santa Rosa favored a transparent approach and e compliant so that they could e legitimate. decided against administratively approved permits for most cannabis businesses. Instead, it opted to issue use We cool tax it, and actually make It part permits through a process requiring public notices and, Our community. in many cases, public hearings and action by the plan- - Clare Hartman ning commission. It allows cannabis businesses to be City staff and the City Council's Cannabis Policy located in the same areas as their non-cannabis coun- Subcommittee members were tasked with learning all terparts. Recognizing additional concerns associated they could about the cannabis industry and its poten- with cannabis, including those gathered from public tial effects on infrastructure, health,services, and outreach,the city was proactive in layering additional more.Setting up an interdepartmental work team,staff regulations related to security protections,standards to reached out to their counterparts in other communities prevent odor,and sensitive use setbacks.While public in Colorado, Oregon,and Washington with experience interest has been piqued by businesses proposed in in regulating cannabis. But as an early community to close proximity to residential areas,these regulations have generally provided sufficient assurances to neigh- opt-in on legal cannabis, Clare Hartman, Santa Rosa's deputy director- planning, acknowledged that"we borhoods' nuisance concerns. were building the program as it was happening to us." Growing i Over the course of two years, Santa Rosa admin- istrative and planning staff took time to attend com- Thus far,Santa Rosa has approved over forty land use munity and neighborhood meetings in order to address permits for cannabis cultivation (indoor only, including concerns over specific land use permitting for cannabis greenhouses), manufacturing,testing, distribution,and businesses.The presence of former Santa Rosa Police medical retail businesses. Commercial retail applica- Chief Tom Schwedhelm and Cannabis Policy Subcom- tions were accepted in April 2018 and will proceed mittee member Ernesto Olivares,a former Santa Rosa through the evaluation and conditional use permit police lieutenant, likely helped some residents feel process through the rest of the year.There is no explicit more comfortable that the public safety aspect of can- limit on the number of cannabis business licenses, nabis businesses was being considered. Council took though 600-foot setback requirements for cannabis retail businesses to prevent over-concentration and Key Observations buffer sensitive uses implicitly cap that sector.' Many manufacturers of cannabis products were Santa Rosa believes that its permissive early approach already operating in Santa Rosa when the city began was the correct one. Observations of other jurisdictions creating its cannabis land use regulations and licensing showed that a piecemeal approach, prohibiting certain the industry.The pre-existing businesses were often sectors of the cannabis industry while allowing others, not operating in appropriate areas, such as in resi- was ineffective in quelling the problem of black market dences or in residential zones. Many have since found businesses. Preferring to allow the industry to operate legitimate and licensed locations,and some existing and regulate it led the city to permit indoor/greenhouse businesses partnered to share the cost of moving and cultivation despite limited presence of any other agri- cultural activity within city limits. licensing. Providing a path to compliance has also enabled the city to learn more about the industry's ing a path to compliance,which provided the motiva- Staff credit the council for its clear direction regard- operators,which notably include a share of single, tion and resources necessary to coordinate across female head-of-households. Absent an explicit ca the market for diverse stakeholders, including an industry not accus- p p, ppropri- ate commercial and industrial land has proved to be a tomed to working with government.This process challenge for cannabis businesses in Santa Rosa,which opened up opportunities to build trust and navigate compete against each other as well as with comple- ambiguity around public safety and code enforcement. mentary boutique tourism industries such as brewer- Other communities in the region have followed suit. ies and wineries. Industrial land vacancy rates have Cloverdale,Cotati, and Sebastopol, incorporated cities dropped from 12.2 percent in 2014 to 4.6 percent in with populations of 8,618, 7,265, and 7,379, respec- 2017.2 But Santa Rosa is wary of letting cannabis busi- lively, decided to allow commercial cannabis activities nesses dominate its economy, as the region is in the such as cultivation and manufacturing after observing process of rebuilding from the recent wildfires,and the Santa Rosa and having conversations with Santa Rosa city wants to ensure space for contractors and specialty planning staff; like Santa Rosa,these communities have trades,among many other industries.The city con- the intention of benefiting through regulatory control venes an interdepartmental follow-through program to of commercial cannabis and associated tax revenue. monitor the cannabis industry's growth and consider Interviewees: potential interventions in response to local effects or Sean McGlynn, City Manager modifications to the state law. Clare Hartman, Deputy Director-Planning Though Santa Rosa regulations intentionally direct commercial cannabis businesses away from residen- Endnotes tial land,the abundance of cannabis cultivation in the region is causing problems for law enforcement. 1 City of Santa Rosa,"Cannabis FAQs:Distance to School:'httpa!!. Brei:t... .C;)acurncr.teucnterlVie..ry/1:�I?_1.11f3ist�nec..:ta:::schoQ.._ Between February and May 2018, multiple home inva- 2 City of Santa Rosa Planning&Economic Development,"Cannabis sions took place in Sonoma County, including two in Permitting Update," January 12, 2018. https l/srcity g: r , Santa Rosa.These crimes target private residences that ° umF�nrCnnFPrlVjewll:8"7"I"tl2Q"I.i3:::f}1,.::1,2:::�nrrn.abi:s.:::P�rmi:l::: E1rtivity.:_tl pclat�:.., legally grow cannabis for personal use,which are not 3 "Son oma sees spate of marijuana-related home invasions," required to follow the strict security regulations that The Mercury News, May 4, 2018. https!lwww.mercurynws. licensed cannabis businesses abide by. Law enforce- 2rnl2c�.�.�.lcap_�ta���canezm..... related-trome-invasions! ment believes the illegality of cannabis on the east coast and the resulting high street value is at the root of the problem.3 ME IN VIII ° " About the Authors Laura Goddeeris,AICP, oversees ICMA's applied research on local government practices, programs, partnerships, and policies as Director of Survey Research. Prior to joining ICMA,she gained over a decade of experience in research,outreach,and program administration around issues of community and economic development, local and regional food systems,and transportation science.While based in Michigan, she also worked closely with municipal staff for years as chair of her local planning commission and community development advisory committee. Laura holds a Master's in Urban Planning and Policy from the University of Illinois at Chicago. Will Fricke is member of ICMA's Research and Policy Team, carrying out research projects and survey research. His work covers a wide array of topics such as service delivery, land use,and form of government.Will is a graduate of the University of Connecticut. 1cmA INTERNATIONAL CITY/COUNTY MANAGEMENT ASSOCIATION 777 'N. Capital St. NE, Ste. 500,WasWn ton; OC 20002 242.962.5680 1202,962.3500 (f) I icma.& 9/27/2019 BoardDocs®Pro v „u*r, s'z Agenda Item Details Meeting Sep 24, 2019 - JOINT VILLAGE BOARD AND PLANNING AND ZONING COMMISSION WORKSHOP-COMMITTEE OF THE WHOLE AGENDA - Please note change in meeting time - Meeting will begin at 6:00 pm Category 5. MANAGER'S REPORT Subject 5.1 As submitted Access Public Type Public Content Information Alternatives 1. 2. Action at discretion of Village Board. Staff Recommendation Administrative Content Executive Content https://go.boarddocs.com/il/vomp/Board.nsf/Private?open&login# 1/1