Martinez could have commercial marijuana law by November

| September 9, 2018 | 0 Comments

MARTINEZ, Calif. ­­– Martinez could have its commercial marijuana ordinance in place as soon as November, city staff members told the City Council Wednesday night.

But because the current moratorium on commercial operations ends Oct. 31, the Council may be asked to extend that ban for as much as a year because no further extensions are allowed.

That ban would give the city breathing room to enact the ordinance, in case advisory panel reviews and public hearings take more time than anticipated.

The moratorium would dissolve once the commercial marijuana regulation ordinance is passed, said Christina Ratcliffe, Community and Economic Development director.

Approvals from both the state and the city are required before a marijuana business can operate legally in Martinez. Wednesday’s Council meeting gave the panel and residents a preview of the type of ordinance city employees are crafting, based on public comments given during workshops on the topic that took place in April.

The Council concurred with staff recommendations for licensing up to two marijuana retailers, one manufacturer, one distributor and one testing laboratory.

The Council also agreed that up to two delivery licenses could be issued; however, California is considering removing local control or regulation of that portion of the industry, according to reports delivered by Ratcliffe and consultant Tim Cromartie, senior advisor at HdL, a company that has been providing Martinez guidance as it develops its code.

Some advocates of legalization of marijuana touted it as a way for governmental agencies to gain revenue windfalls. Martinez should expect $160,000 to $255,000 annually from marijuana operations, depending on whether it taxes the companies at 2 percent or 4 percent of gross receipts, the report said.

Cromartie said while his firm recommends setting retail taxes at no lower than 4 percent, the city could tax other operations at that level or opt for a lower rate.

“That’s not as much as I would have estimated,” Vice Mayor Lara DeLaney said about the prospective revenue.

Cities that were quick to welcome marijuana companies and tax them at a higher rate have seen higher revenues – more than $1 million annually in Vallejo, for instance.

But Vallejo has 11 dispensaries operating within its limits and originally had little outside competition from neighboring municipalities, Cromartie said. That isn’t sustainable as the market has changed, he said. The report predicts up to half of those dispensaries may close in the future.

After Vallejo voters in Nov. 8, 2011, to approve medicinal marijuana dispensaries, more than 40 were opened. But problems followed.

After the city lost a lawsuit, Vallejo closed all dispensaries early in 2015 until its Council could pass a new ordinance regulating and limiting the number of marijuana companies. Tax collection then resumed. Its 10 percent tax rate predates adoption of Proposition 64.

Vallejo limits licensing to medicinal marijuana businesses, and authorizes cultivation, distribution, manufacturing and retail operations.

Of Martinez’s other neighbors, Concord allows manufacturing, distribution and testing focused in business park and industrial zones, and Pittsburg allows up to nine cannabis operations.

Benicia allows commercial grows, and has two authorized retailers with delivery service and one microbusiness, which offers several cannabis activities at once. Testing, manufacturing and distribution also are allowed, as are both indoor and outdoor personal cultivation.

Richmond allows medicinal marijuana commercial activity and is considering an adult-use ordinance. Retail stores are capped at three, but the city has no limits on commercial grows, testing, manufacturing or distribution. Like Martinez, it allows indoor cultivation of personal plants in compliance with Proposition 64.

El Cerrito limits retail businesses to two, but bans cultivation, manufacturing and laboratory testing. Fairfield has a total ban except for personal indoor cultivation allowed by Proposition 64. Napa allows retail and manufacturing.

Contra Costa County is considering authorizing various types of licenses, as are some other area cities.

Governor Jerry Brown and the Legislative Analyst’s Office had predicted state receipts of $175 million for the first half of the year, the first that marijuana has been legal in California for both medicinal and adult recreation use. But the first quarter receipts were just $34 million.

Under Proposition 64, legally-sold marijuana has a 15 percent state excise tax, and recreation-use marijuana has additional state sales taxes of between 8 and 10 percent.

City taxes, which can range widely are added on top of those. While San Francisco adds no local tax, Oakland’s local assessment is nearly as high as Vallejo’s, at 9.25 percent. In some cases, 45 percent of legal marijuana costs are for taxes.

In a January interview with CBS, Steve DeAngelo, cofounder of Harborside, a dispensary in Oakland, said tax rates on his products went from 15 percent to 35 percent for those buying adult-use marijuana. He has predicted taxes, licensing and other expenses passed on to consumers may send some of them to black markets.

If the future ordinance follows staff recommendations, and until Martinez sets its tax rate, a business owner would apply for both a commercial cannabis operating permit and a development agreement.

Those documents would be reviewed during a public hearing by the Planning Commission, which would send its recommendation for a Council decision. The applicant would absorb permitting and monitoring costs, staff has recommended.

None of this applies to private cultivation of up to six personal-use plants, which is permitted by California law. But staff has recommended recording that exception in the upcoming city code.

Most members of the Council agreed with a staff recommendation of a 600-foot buffer between marijuana operations and such sensitive operations as schools and daycare centers.

Youth centers also are sensitive operations, but the term has not been defined, leading to plenty of debate and multiple Planning Commission sessions concerning the only dispensary under consideration in Martinez before the moratorium was put in place.

Firefly has asked to put a medicinal marijuana dispensary in the same building as Power Endurance Training Center, a gym whose owners have said it has a large youth clientele.

“I would love a clear definition of youth center,” Mayor Rob Schroder said.

The staff report said that in appropriate zoning districts, various types of commercial cannabis operations could be placed along parts of Arnold Drive, north of the Union Pacific Railroad tracks both in the Martinez downtown area as well as east of Interstate-680, in the light industrial areas of Howe Road and Pacheco Boulevard, on California Highway 4 and Alhambra Avenue as well as Pacheco Boulevard and Arnold Drive.

Also recommended is a strong vetting system of applicants to prevent business failures as have happened in other cities. Applications could overwhelm city staff, but a multi-part process involving examination of a company’s finances and stability as well as a lottery system could be incorporated if applications outnumber the city’s caps on business types.

Most of the Council liked keeping buffers at the same number of feet as the state, although Councilmember Mark Ross suggested 1,000 feet, the same as for tobacco.

But a grocery store sold cigarettes within 1,000 feet of the former Vicente High School site, Schroder said, adding the Council may revisit the tobacco buffer law in the future.

Some Councilmembers objected to retail marijuana stores being situated close together, but others had little problem with the approach. The Council agreed to let the Planning Commission review that point and offer its opinion to the Council.

Because governing commercial marijuana companies is something new for Martinez, Ratcliffe recommended the Council review the ordinance a year after its adoption.

The Council will see the proposed ordinance in draft form and may have the new law in place before the end of the year.

In other matters before the Council Wednesday, the panel heard Assistant City Manager Anne Cardwell’s description of a proposed work plan for the Public Works department that could result in greater efficiency even if the city can’t afford to fill long-vacant positions.

During a recent analysis of City Hall’s overall operation, 61 recommendations for improvements were made and of those, 15 targeted Public Works. That assessment noted the importance of Public Works, which not only is responsible for the city’s roadways, but also its water distribution and quality.

In addition, summer heat and days with varying temperatures combined with the tendency of the land to expand and contract and the city’s aging equipment have led to multiple recent breaks in water pipes.

The work plan is divided into two parts, one dealing with infrastructure and systems improvements and the other devoted to organizational and staffing improvements.

Among the first infrastructure tasks are to develop specific work plans for water system improvements, including preparing the Capital Improvement Program, to update two water treatment plant assessments and to undertake a water rate study.

Also recommended for starting this month are identifying the near-term needs of the water treatment plant, something that could be finished by October, and putting a computer maintenance management system into place, a task that could extend into March.

In October, the city could start developing a comprehensive operations plan and manual for the water treatment plant, a four-month undertaking. In January 2019, the city could undertake a water flushing and valve testing maintenance program, start crafting a work plan for updating the City Parks Master Plan and develop a work plan for updating Martinez’s landscape an lighting district.

Two tasks under organizational and staffing improvements also should start in September. One is the gradual transfer of building and code enforcement duties from Public Works to Community and Economic Development. The other is transition of construction management.

In October, Martinez could start developing a comprehensive staffing plan for the water treatment plant, including a review of the assistant water superintendent and operations supervisor positions, budgeting for a water quality analyst and a look at the use of temporary help at the plant.

At the same time, the city could start updating its Public Works job descriptions.

November could see the writing of a Public Works succession plan, especially since several key employees are nearing retirement age.

After the first of the year, the city might look at whether it should contract out its parking meter program. It also could start turning water meter care to its maintenance division and undertake study of Public Works employees’ compensation.

“The Public Works staff is extremely dedicated and hardworking,” City Manager Brad Kilger said. But the department is having trouble keeping up as duties increase while staffing remains the same.

“If Measure X (Martinez’s half-cent general sales tax before voters in November) doesn’t pass, it will be difficult to hang on to what we have,” he said.

Since it isn’t likely Martinez would be able to fill long-vacant positions, he said, the city should invest in helpful technology as a one-time expense and restructure the department so employees can focus on public services and maintaining the city’s infrastructure.

The department’s employees would be “fully engaged every step of the way,” he said.

Vice Mayor Lara DeLaney said she is concerned about the fiscal impacts of the approach. “We better hope we get good results in November,” she said, adding the half-cent tax “is desperately needed.”

However, she said she is glad the work plan emphasizes technology.

Ross said he liked the plan’s emphasis on analyses. “If you don’t do that, you don’t know what’s wrong,” he said. Governments periodically need to examine what they are lacking, he said, adding he hoped residents would see the need.

Councilmember Noralea Gipner also said she liked the plan, and wanted to proceed. “I don’t like to see things go back on the shelf.”

One resident, Susan Gustofson, recommended undertaking a “no-blame” causal analysis of the recent water main breaks, to see why they were happening and if any changes in the water system might be contributing to the leaks.

Unplanned failures take tax dollars and manpower from other projects, she reminded the Council, and a causal study could save money in the long run.

Greg Dixon, who has worked for the Contra Costa County Water Department, noted that Martinez is in the process of replacing several water mains, and said that as old pipes are exchanged for new, more leaks and weak spots in old equipment may be discovered. Ultimately, those discoveries are a good thing, he said.

The Council awarded a $2,436,630 contract for the 2018-19 Measure D to American Paving Systems of Modesto and transferred $1,025,000 from Measure D unallocated reserves to Account C1062 to help underwrite the projects.

Greg Jacobs Engineers was contracted for up to $155,000 for resident engineering and construction management services.

Those actions are part of the city’s overall expenditures of money accumulated from the successful Measure D half-cent sales tax approved by voters in 2016.

Martinez had to wait until enough revenue was forwarded by the state before it could launch its citywide road improvement program, which will continue through the life of the tax, which sunsets after 15 years.

The Council unanimously opposed the repeal of another source of additional road repair revenues, Senate Bill 1, which raised fuel taxes and vehicle registration fees. Proposition 6, before voters in November, would end those increases.

Fuel revenues have been declining for years as more motorists buy vehicles that get more miles to the gallon or switch to hybrid or electric vehicles, but cost of making road repairs has been increasing.

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