The City of Fullerton hosted the second of a three-part community discussion on March 4 to discuss whether Fullerton should begin licensing some, if any, cannabis businesses. Fifty-five people were in the audience, including residents and advocates for cannabis and industrial hemp growing, processing, and sales.

Community and Economic Development Director Matt Foulkes facilitated a five-person panel that answered questions from the February 13 “Cannabis Listening and Information” event and from the assembled audience.

Foulkes opened the program with some background. In 2016 California voters approved Proposition 64, which made recreational use and sales of marijuana legal in the state. Leading up to that election, the Fullerton city staff had proposed a local ballot measure to define local cannabis regulations. The City Council, however, rejected the idea of putting the decision before Fullerton voters because they “wanted to wait for the results of Proposition 64,” Foulkes said.

Despite a majority of Orange County Voters, and more importantly, a majority of Fullerton Voters approving Proposition 64, the Fullerton City Council has not revisited the proposed local ordinance. In 2018, they explicitly prohibited all cannabis business uses and activities and embarked on what Chief Robert Dunn has referred to as “Whack-amole” enforcement – expending resources to shut down unlicensed cannabis businesses that reopen at another location in the City.

In October of 2019, City Council asked staff to gather community input to formulate a city ordinance on cannabis regulation for discussion in April 2020. When asked on March 4 whether the council would be considering placing an ordinance on the ballot for voters to weigh-in on allowing cannabis businesses in Fullerton on the November 2020 ballot, Foulkes said he did not know.

Foulkes introduced a panel beginning with David McPherson from HdL, named for Hinderliter, de Llamas & Associates, founded in 1983 to provide public agency revenue management services, including cannabis regulation and taxation. McPherson said that when voters approved legalized adult recreational use of cannabis, it increased consumer demand. But without enough legal options consumers were “forced to go to the illegal market.” According to McPherson, 70-80% of cannabis produced in the state is sold on the “illicit market.” In Orange County alone, there is enough demand for 122 retailers but there are only 23 that are licensed.

Both industry and government representatives participated in the cannabis panel discussion.

The next panelist was La Habra City Senior Planner Chris Schaefer. He said prohibited marijuana dispensaries were growing in La Habra so in 2018 the City Council decided to allow for 4 distribution facilities and 4 testing facilities. They hired HdL and created a Cannabis Review Board made up of city staff members. Cannabis businesses are limited to light manufacturing and commercial zones away from day cares, schools, recreational centers, and parks.

Applicants must apply for a conditional use permit, receive approval from Planning Commission and City Council, complete a rigorous building plan check, and pay a $30,000 application fee. Schaefer said the city “didn’t get as many applications as expected.” The process culminates with a negotiated Development Agreement that is good for 10 years with the possibility of two 10-year extensions that includes contractual payments to the city.

Schaefer said the City has “netted $340,000” in revenue over the last 9 months. Despite the income from these businesses, the current La Habra City Council has declined licensing delivery operations. They have recently asked staff to look at getting rid of rules that allow for testing facilities, though they currently have none, and they want to cap licensing to the 3 current licenses only. Cannabis commerce in La Habra is “still in flux” due to the make up of the City Council changing every 2 years.

The third panelist was John Mazziota from Linx Capital Group, a subsidiary of Falcon, which began as a cannabis distribution company in California and now cultivates and distributes cannabis in other states as well. Mazziota said their businesses don’t create problems like loitering, littering, and crime and they try to hire 50% of their employees from the city where operating.

Dana Cisneros from Cannabis Corporate Law said she helps form licensed cannabis businesses. She has drafted model Development Agreements that meet California and local government codes. She said “HdL is fair” at judging whether a cannabis business should receive a license to operate based on experience and plans to provide community benefit, community compatibility, security plans, and even decommissioning plans.

Darwin Cheng, Assistant Director of OC Environmental Health explained some of the regulations enforced on cannabis production. Some cannabis production waste is toxic and some is green waste. The difference occurs when processing introduces hazardous substances. As an example, production and cultivation might use pesticides and other chemicals.

After introductions, Foulkes asked questions that were generated from a cannabis information event last month. The first question was whether some cities are allowing medicinal marijuana only. McPherson said that most medical users have transitioned into recreational users because it is more convenient.

Mazziota said the “black market” is more convenient. He said that legalized sales can be controlled and provide income to the city. Cisneros said that legalized recreational use has had the effect of doctors being more open to discuss cannabis as an option for their patients.

There was discussion about what community benefits were provided by the businesses. Schaefer said the contractual payments La Habra receives are, “helping us to be able to run our city.” Some revenue provides laptops to schools and funds daycare centers. Cisneros referred to a program known as “Pot for Potholes.”

There was a request from the audience for clarity on proposed Assembly Bill 1537 that was originally going to require that cities allow store front cannabis licenses in proportion to the number of alcohol licenses in a city. Cisneros said there was a caveat that this would only apply to cities where a majority of voters approved Proposition 64. She said, “Fullerton was the first city on my mind when I heard of it” because Fullerton has so many bars. McPherson said the legislation is still in process but has been changed to be proportionate to the number of pharmacies.

An audience member asked whether there are ongoing inspections to ensure the operators continue to operate under the conditions under which they were approved. Schaefer said that La Habra police has “surprise inspections.”

Cisneros said the agreements include at least one annual review per government code where corrections are initially requested and later escalated to violations if not corrected. Cheng said that California EPA dictates progressive environmental enforcement.

Another question from the audience asked how much distance there should be between cannabis businesses. McPherson said it depends on the city. 600 feet is appropriate in cities that are spread out, but it may not be possible to find even a 25-foot buffer in older cities. Mazziota said “that is going to be one of the biggest hurdles” in Fullerton.

A person in the audience asked about how the city can avoid legal challenges with a competitive application process. McPherson said in Pasadena there were 127 applicants for only 3 permits with 35 scoring 90% or better and “someone is not going to be happy.” Cisneros said that only “sore losers” sue when they don’t win a permit. Also, the process should be transparent with objective scoring criteria. For example, in Riverside points were awarded for a location in an approved zone that did not require a zone change.

There will be one more community meeting in March. Visit the City’s Community and Economic Development Cannabis page: www.cityoffullerton.com/gov/departments/dev_serv/medical_marijuana.asp to sign up for notifications and to submit questions.