California Cities And Counties Grapple With Marijuana Legalization

California, Proposition 64, Adult Use of Marijuana Act, San Francisco, Cannabis State Legalization Task Force, Board of Supervisors, Office of Cannabis, City Administrator, Department of Public Health,

By Thomas Tunny, Reuben, Junius & Rose, LLP

On November 9, 2016, by a 56-44 percent margin, California voters approved Proposition 64, the Adult Use of Marijuana Act (AUMA). With the passage of the AUMA, it became legal for any adult 21 years or older to do the following:

  • Possess, transport, obtain or give away to other adults 21 or older no more than one ounce of marijuana or eight grams of concentrated cannabis
  • Cultivate up to six plants per residence and possess the marijuana produced by these plants. All plants and harvest in excess of one ounce must be kept in a locked space not in public view at one’s residence. Local governments may still forbid cultivation outdoors but must allow it inside a private residence or accessory structure that is “fully enclosed and secure.”

Retail sales for recreational use will not begin until licensed stores are in operation after January 1, 2018. Furthermore, medical marijuana patients will keep their existing rights under Prop. 215 to possess and cultivate as much as they need for personal medical use so long as they have a doctor’s recommendation, regardless of the Prop. 64 limits for adult users.

The passage of Prop. 64 presents an enormous challenge to local jurisdictions, which must adapt their rules and regulations to implement the provisions of Prop. 64. We will examine how implementation is proceeding in the City and County of San Francisco, and the particular challenges San Francisco is experiencing.

Mayor’s Directive
Immediately following the passage of Prop. 64, San Francisco Mayor Ed Lee issued an executive directive tasking the directors of planning and public health with drafting ordinances that address the following issues:

  • Land use: Where will cultivation, manufacturing and sales of cannabis be allowed and disallowed, and under what conditions?
  • Local licensing: How should the City’s local licensing process be structured?
  • Safety: Should the City change any laws regarding where or how cannabis may be consumed in public places?
  • Youth access: How can the City prevent diversion and sales to under-age youth?

The Office of Cannabis and Permit Approvals
Unlike many jurisdictions in California, San Francisco had a significant head start in implementing Prop. 64, because it already had in place a Cannabis State Legalization Task Force, chaired by Terrance Alan, working on legalization issues for several months prior to November 2016.

With the help of the task force, the City took its first significant step in the implementation of Prop. 64 in early June. Supervisor Jeff Sheehy introduced legislation to the Board of Supervisors establishing an Office of Cannabis. This office will be under the direction of the City Administrator, who is in the mayor’s office, and it is expected to commence operations with a staff of three, oversee the implementation of laws and regulations governing cannabis in San Francisco, and issue all cannabis-related permits in accordance with those laws and regulations.

The fact that San Francisco already has a robust regulatory scheme in place for medical cannabis both helps and hinders the City’s implementation of Prop. 64. The existing medical cannabis framework gives policy makers and the general public a significant amount of awareness of and experience in promulgating recreational-use regulations. On the other hand, one of the City’s major challenges is how to reconcile recreational regulations with existing medical regulations. (Note: In recognition of this, on September 12, 2017 the Board of Supervisors adopted an emergency ordinance imposing a 45-day moratorium on the Planning Commission’s consideration of pending medical cannabis dispensary (MCD) applications. The ordinance exempted MCDs that already have a scheduled hearing date at the Planning Commission.)

For example, the City currently has a detailed permitting and approval process for new MCDs, generally controlled by the Department of Public Health, which includes a public hearing at the Planning Commission. The question for recreational use is whether recreational-use retail facilities should follow the same approval procedures, or if there are there ways to improve the process.

One of the big frustrations with the approval process for MCDs is that after undergoing a long and often contentious process and obtaining an operating permit, the permit is then subject to appeal by the Board of Appeals. The Board of Appeals’ standard of review is de novo, meaning that the board has the authority to review and possibly deny the permit without any deference to the prior decisions by the Department of Public Health and Planning Commission. Moreover, the Board of Appeals deals with an extremely wide range of permit types, and it is challenging for the Board to develop expertise in MCD permits. This additional step in the permitting process leads to a great deal of instability and uncertainty for MCD operators.

The City is considering changes to this appeal process in implementing Prop. 64. Under consideration is an oversight board that would have expertise in cannabis and land use. The oversight board would have authority over cannabis rules and regulations, and could hear appeals of cannabis-related permits. Also under consideration is the establishment of an administrative hearing officer who would hear cannabis-related permit appeals. Either of these possibilities would provide the City with an entity dedicated solely to cannabis-related issues, unlike the Board of Appeals. While promising, this proposal still has a long way to go before it is implemented. And January 1, 2018 has already passed.

Culinary Cannabis
On the lighter side, the wide reach of Prop. 64 has extended to San Francisco’s passion for food. The City’s Cannabis State Legalization Task Force has addressed this issue, noting that there is a desire within the culinary community to incorporate adult-use cannabis in dining options and opportunities, including the use of cannabis as a meal ingredient, and the establishment of food-and-cannabis pairing options. The Task Force has recommended that City policy makers collaborate with key stakeholders, such as culinary and hospitality organizations, to develop strategies for increasing these opportunities for restaurants and other food establishments.

These strategies could include:

  • developing, proposing, and pursuing a state legislative approach that would create an exemption for these types of culinary experiences;
  • developing a patron notification process for any food establishment offering these opportunities; and
  • developing mechanisms to determine the appropriate distribution of cannabis-friendly dining venues throughout the city.

Again, however, while these are promising ideas, the City has a significant amount of work ahead before these ideas become policy realities.

The challenges posed by implementation of Prop. 64 are daunting for local jurisdictions. This is evidenced in San Francisco, which has significant experience with medical cannabis, a designated task force that had been working on these issues for months before the passage of Prop. 64, and a wealth of policy and regulatory experts. Even with all of these resources, many challenges still lie ahead for the City in meeting Prop. 64’s retail-licensing deadline. The proof will be, as they say, in the pudding. Cannabis-infused, no doubt, beginning January 1, 2018. ν

About the Author
Thomas Tunny’s practice focuses on transactions and litigation in all aspects of land use and planning law, including the California Environmental Quality Act; the Planning and Zoning Law; local land use, planning, and zoning codes; and exactions (fees/dedications). Thomas has assisted in obtaining development approvals for numerous commercial and residential projects, including cannabis-related permits.

This article will also appear in The VIEW, the quarterly publication jointly curated by the three Bay Area chapters of Commercial Real Estate Women (CREW)—CREW San Francisco, CREW East Bay, and CREW Silicon Valley. CREW is a nationwide business networking organization dedicated to the advancement of women in commercial real estate. For chapter news, events, and membership information, visit the Bay Area member organization websites at crewsf.org, creweastbay.org, and crewsv.org.

West Coast Commercial Real Estate News