Sean P. Quinn, Interim City Manager

Background
Cannabis (also known as marijuana) has been legal to use in California, for medicinal purposes, since 1996. That year, voters approved Proposition 215, the Compassionate Use Act.  For several decades, sale of medicinal marijuana was largely regulated at the local level. In 2015, the State enacted three bills that collectively established a regulatory framework for the licensing and enforcement of the cultivation, manufacturing, retail sale, transportation, storage, delivery and testing of medicinal cannabis in the state. This regulatory scheme is known as the Medical Cannabis Regulation and Safety Act (MCRSA). This act established three licensing authorities: (1) Bureau of Cannabis Control which licenses testing labs, distribution, retailers and microbusinesses; (2) Cannabis Cultivation Licensing located within the Department of Food and Agriculture and licenses cultivators; and, (3) Manufactured Cannabis Safety Branch, housed within the Department of Public Health, and licenses manufacturers of cannabis products such as edibles and topical products.

In November 2016, voters approved Proposition 64, the Adult Use of Marijuana Act (AUMA). Under this proposition, adults 21 years of age or older can legally grow, possess, and use cannabis for non-medicinal purposes, with certain restrictions. Additionally, AUMA made it legal to sell and distribute cannabis through a regulated business as of January 1, 2018, unless local regulation prohibited such activity. Under Prop 64 local governments can no longer ban indoor cultivation for personal use (up to six plants), but they can “reasonably regulate” such activity. Also, local governments are prohibited from levying sales tax of any kind on medical cannabis.  Excise taxes such as business license taxes, or manufacturing taxes on medical cannabis remain valid. Local sales taxes on adult-use can be levied.

In June 2017, the Legislature passed a budget trailer bill, Senate Bill 94, that integrated MCRSA with AUMA to create the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). Under MAUCRSA, a single regulatory system was created.   Later that year, cities and counties across the state adopted new ordinances either putting moratoria in place or establishing regulations governing the cultivation, production and sale of cannabis. In January 2019, The Office of Administrative Law approved state regulations for cannabis businesses across the supply chain from cultivation to retail, including delivery. Among other provisions, these regulations preempt local ordinances restricting delivery of cannabis.  Various cities throughout the state are currently suing to overturn this restriction. 

Fairfield Cannabis Ordinances
In 2007, the City approved an amendment to the zoning chapter of the municipal code, prohibiting medical cannabis dispensaries.  

When the state adopted the MCRSA in 2015, Fairfield amended its zoning ordinance again. This amendment created code section 25.32.17 which prohibited all activities regarding cannabis in the city, including cultivation and delivery of medical cannabis.

In early 2017, following passage of Proposition 64, the City again updated the zoning ordinance to prohibit any cannabis activity in the City, except that permitted by the state law.  Under the Act, cities cannot restrict people from growing up to six plants inside a single private residence or inside an accessory structure located on the grounds of a private residence. These new code amendments also referenced relevant sections of state law regarding the safety of growing cannabis plants and combined all reference to cannabis activity as it relates to both medicinal and adult uses.

Cannabis Workshop
Since passage current cannabis prohibitions in 2017, other cities in Solano County have developed a range of regulatory approaches to cannabis. These range from broad allowances in cities such as Vallejo, Dixon, Rio Vista, and Benicia, to broad prohibitions in Vacaville (see Attachment 1 for more details). At the same time, a number of entities have approached Fairfield regarding revision of our ordinance to allow manufacture or sale of cannabis. In response, the City Council approved item 3B.6 in its 2019 Work Plan, directing that staff conduct a workshop for the Council to discuss potential allowance of various cannabis activities.    

Staff has worked with the City’s business licensing and sales tax advisor - the firm HdL – to prepare materials to lead the workshop. HdL is a statewide leader in development of cannabis regulatory programs. During the workshop HdL staff will:

• provide an overview of the regulatory environment for cannabis in California;
• discuss the status of regulations in nearby and comparable communities;
• identify the various aspects of manufacture and sale of cannabis that can be regulated;
• identify issues of concern when considering a regulatory program for cannabis, and;
• discuss potential revenue considerations.

Following the presentation, the City Council will have the opportunity to ask questions and hear from interested members of the public. Staff will then seek direction on a set of specific questions. These include:

1) Is the City Council interested in considering revisions to the City’s cannabis regulations? 

2) If so, what areas would the Council like to consider for development of a regulatory program? Potential areas include:

• Cultivation, either outdoor or indoor
• Manufacturing, either processing of cannabis plant material, or use of processed cannabis in the manufacturing of other goods (e.g., edibles).  
• Testing
• Distribution
• Dispensing, either storefront or non-storefront. 

3) Should the City seek a consultant to assist in development of a regulatory program?  If so, staff would recommend the consultant to provide expert guidance in the following areas:

• conduct one or more public workshops and subsequent study session with Council and/or the Planning Commission to refine the scope of regulations;

• develop a regulatory ordinance that incorporates Council recommendations and complies with all applicable State and local laws;
• design an application process that includes merit-based review, ranking and final selection of cannabis business permittees;
• develop of a cannabis tax ordinance and associated ballot measure with tax rates based upon emerging norms across the industry;
• conduct a fiscal analysis to determine proper cost recovery fees to ensure all allowable City costs associated with the development and implementation of the regulatory program are borne by the applicants, including permit renewals, compliance inspections, financial audits and any other requirements deemed necessary by the City; and
• provide City staff with technical assistance and subject matter expertise as needed.