Local Cannabis Opportunities and Challenges

Presented by:

4745 Mangels Blvd, Fairfield, California 94534

Neil Hall John Bliss August 4, 2016

The State of Marijuana in California: Exploring Options Special Meeting: Avalon, CA

Introduction • SCI Consulting Group • John Bliss, Vice President • Neil Hall, Cannabis Group Leader

• Overview • Unbiased • Questions and Answers

• US hemp use common through 1937 • Prohibition of alcohol from 1920 to 1933. • Harry Anslinger

• Federal Bureau of Narcotics • Mexican immigration challenges in the 1930s

History of Cannabis in US

• Marijuana Tax Act of 1937 • Opposed by American Medical Association

• Boggs Act of 1952 • Narcotics Control Act of 1956 • Strict Sentencing in 1969

• First-time cannabis possession • 2 years • $20,000 fine

• Controlled Substances Act of 1970

• Schedule 1 classification

More History of Cannabis in US

Even More History of Cannabis in US • 2014 - The Cole Memo

• 8 criteria to maintain State right to control

• The Rohrabacher-Farr Amendment • Prevents the DOJ and DEA from arresting or prosecuting

patients, caregivers, and businesses that are acting in compliance with state medical marijuana laws

Legalization Trends • Medical cannabis is currently legal in 25 States

• Recreational Cannabis

• 2012 Colorado and Washington • 2014 Alaska, Oregon and Washington D.C.

• In November 2016?

• Arizona • California • Maine • Massachusetts • Nevada

Current State Situation

History of Cannabis in California • 1996 The Compassionate Use Act

• 55.6% voter approval

• 2003 - SB 420 – The Medical Marijuana Program (MMP) • Numerous Dispensaries and Chaos • Numerous Lawsuits:

• San Diego and San Bernardino Counties • Garden Grove • Live Oak vs. Maral • Browne vs. Tehama • Riverside County vs. Inland Empire

More History of Cannabis in California

• 2015 - The Medical Marijuana Regulation and Safety Act • Three bills co-joined AB 243, AB 266, SB 643 • Now known as “MERSA” • Provides needed structure and clarity • Allows for local control

Recent History of Cannabis in California

Some MMRSA Highlights • Prevents vertical integration to avoid monopolization of market • Requires Distributors to transport product between licensees • Removes “affirmative defense” and provides legal protection

from arrest • Allows for existing cannabis businesses to integrate over time • Allows “for profit” cannabis activity • Requires implementation of “seed to sale” tracking • Allows delivery only in public agencies that do not prohibit

delivery • Requires testing with specific requirements • Prohibits Distributors and Testing facilities from holding any

other license type.

Some More MMRSA highlights • Licenses to be issued by 2018

• Bureau of Medical Cannabis Regulation • Created within Dept. of Consumer Affairs

• Allows local taxation and regulatory and licensing fees 19316. (a) Pursuant to Section 7 of Article XI of the California Constitution, a city, county, or city and county may adopt ordinances that establish additional standards, requirements, and regulations for local licenses and permits for commercial cannabis activity. Any standards, requirements, and regulations regarding health and safety, testing, security, and worker protections established by the state shall be the minimum standards for all licensees statewide.

Common Cannabis Vocabulary

420

blunt

cronick

doobie

dope

bud

herb

Mary Jane

weed

pot

reefer

The Cannabis Plant • THC • Psycho-Active

Cannabis Ingestion Methods Today

Cannabis Ingestion Methods Today

Traditional Smoking

Vaping

Cannabis Concentrate

Packaged Concentrates

Consumables

Alice B. Toklas and Gertrude Stein

4 Elements of the Cannabis Industry • Retail

• Delivery

• Cultivation

• Manufacturing

Retail Dispensaries - 1

Retail Dispensaries - 2

Retail Dispensaries - 3

Retail Dispensaries - 4

Retail Dispensaries - 5

• Appropriate buffers from schools, etc. • Signage, parking, posted operating hours • No product visible • Security and ID regulations • Odor control • No loitering off premises allowed • No smoking of product within 1,000 feet of facility • Devices for weighing or measuring products being sold must

be compliant with State regulations and control.

Retail Guidelines

Retail Best Practices • Testing Products • Selling Clones • Packaging • Recording the Transaction • Recording the Source of Product • Security • Transporting Marijuana • BOE seller’s permit • Appropriate insurances, bonds and licenses

Cannabis Labelling

Delivery Services

Cultivation

4 Aspects of the Local Cannabis 1. Community Research and Outreach, and Planning 2. Health and Safety - Ordinance 3. Taxation and Revenue – Ballot Measure 4. Monitoring and Compliance – defined by Ordinance

1. Community Research and Outreach • Determine

• Local Health and Safety Priorities • Taxation Rate

• Engage stakeholders

• Law Enforcement, Finance, Planning, school leaders, church leaders, advocates, business leaders etc.

• Community-wide Survey • Mail Survey • Phone Survey

2. Health and Safety Regulations - 1 • Ordinance Structure

• Purpose and Intent • Definitions • Permits • Operating Requirements • Penalties • Severability

2. Health and Safety Regulations - 2

Issue Recommendation Action1 H&S School Safety Outlets zoned at least 1,500' from School City Ordinance2 H&S Labelling City Guidelines City Ordinance3 H&S Retail - Number of Stores Develop Total Number (i.e. 4 to 6) and conduct rigorous application process Staff Level Policy4 H&S Retail - Zoning Identify and confirm location possibilities City Ordinance5 H&S Retail - Lease Agreement Must provide either ownership or landlord letter acknowledging business type Staff Level Policy6 H&S Testing requirements THC/CBD level, residual chemicals, insecticides/heavy metals/molds City Ordinance7 H&S Testing facility Certified lab or reliable lab City Ordinance8 H&S Tracking Seed to sale and clone management City Ordinance9 H&S Tracking RFID short range/long range replace plastic tags at what size City Ordinance10 H&S Packaging Accurate product labels - clearly state medicinal purpose City Ordinance11 H&S Edibles allowed Potency limits - packaging to avoid attraction of minors City Ordinance

H&S No onsite sale of tobacco/alcoh On premises and within distance City Ordinance12 H&S Concentrates allowed Potency limits - hash/dab/budder/shatter/etc City Ordinance13 H&S Advertising/signage Size and location restriction and with or without electrical City Ordinance14 H&S Odor control Restrictions based on City's recommendations and method to measure City Ordinance15 H&S Security - outside Number and distance from facility, uniform, badge, etc. Staff Level Policy16 H&S Security - inside Number based on size of facility, uniform, badge, etc. Staff Level Policy17 H&S Fire Hazard Control Restrictions based on City's recommendations (extinguishers, alarms, etc.) Staff Level Policy18 H&S Employee restrictions Must have background check, arrest history, etc. City Ordinance19 H&S Owner restrictions Must have background check, arrest history, etc. Needs proof owns building, etc. City Ordinance

• Outreach and Stakeholder Input • Unique to Community • Comprehensive • Addresses Potential and Current State Legislation

3. Taxation and Revenue - 1 • Conditional Use Permit or • Business License Fee

and • Business License Tax based upon Gross Receipts

• 5%, 10%, 15%, 20%

• Cultivation Tax • Collections

3. Taxation and Revenue - 2 • Special Tax 66% • General Tax 50% • Timing and Elections

3. How Much Taxation? • City of Avalon Sales Tax 9.5%

+ • AUMA 15% Gross Receipts

+ • Local Gross receipts tax (5% to 20%)

+ • $9.25 on flower/$2.75 on non-flower plant leaf =

3. How Much Revenue? • Year Round Sales

$10 to $20 per population = $38,000 to $76,000 per year

Tourist Sales = ?

3. Taxation and Revenue

3. BOE Requires A Seller’s Permit for MMD • What is the California State Board of Equalization (BOE) policy

regarding sales of medical marijuana? • “The sale of medical marijuana has always been considered

taxable. However, prior to October 2005, the BOE did not issue seller's permits to sellers of property that could be considered illegal. A policy change was issued in October 2005 and the Board directed BOE staff to issue seller's permits regardless of the fact that the property being sold may be illegal, or because the applicant for the permit did not indicate what products it sold.”

4. Monitoring and Compliance • Inspect financial records • Process applications • Randomly test product • Inspect labeling • Inspect premises • Monitor Video • Community Communications

• Complaints • Violation reports • Answer questions

Local Public Perception - 1 “…Use amongst minors will increase…” • No absolute conclusive studies yet

• Conventional Wisdom,

• Regulating location, security and price can reduce cannabis access to minors. A 2015 Columbia University study showed usage did not increase among teenagers in states in which medical marijuana had become legal. A 24-year long study recently reported in Lancet medical journal found that states that legalized medical use had reduced rates of teenage use after enacting the laws compared with states where the drug remains illegal.

Local Public Perception - 2 “…Marijuana is a ‘gateway drug’…” • No absolute conclusive studies yet • Prescription opiates • Conventional Wisdom:,

• The scientist who coined the “gateway” term recently came out with a new paper showing that it’s actually nicotine that is, biologically, the most potent gateway of all. A recent analysis by RAND's Drug Policy Research Center (DPRC) suggests that data typically used to support a marijuana gateway effect can be explained as well by a different theory. The new research, by Andrew Morral, associate director of RAND Public Safety and Justice, Daniel McCaffrey, and Susan Paddock, has implications for U.S. marijuana policy.

Local Public Perception - 3 “…Local Crime will increase…” • No absolute conclusive studies yet

“…Drugged Driving will increase…” • No absolute conclusive studies yet

• AUMA • Adult-Use Recreational • 60% Polling • 21 years old • Indoor cultivation of 6 plants for personal use • Outdoor cultivation may be prohibited • Adults may possess 28.5 grams of cannabis plant material

and 8 grams of concentrate • State excise tax of 15% on medical and recreational • State cultivation tax of $9.25 on flower/$2.75 on non-flower

plant leaf for medical and recreational

California Proposition 64 - Nov 2016

Proposition 215 Results 1996

Green = Yes Red = No

1996 California Proposition 215 Medical Use of Cannabis

2010 California Proposition 19 Recreational use of Cannabis

2010 California Proposition 19 Recreational use of Cannabis in Avalon, CA

449 Yes 442 No

• 60 % of likely California voters say they generally favor legalizing marijuana for recreational use – • 51% support in October 2014, • 52% support in September 2013

• 53% of adults say that if recreational cannabis were legalized,

they wouldn’t be bothered if a store opened in their neighborhood

• Public Policy Institute of California (PPIC),

Trends of Cannabis in California

Typical Implementation Path 1. Create a committee within your municipality including staff

from affected departments and polling and cannabis consultants.

2. Develop an implementation plan that deals with your survey, ordinance, and tax measure.

3. Conduct a survey of your broader community – to scientifically understand health & safety preferences and taxation preferences.

4. Draft a health and safety ordinance and get it approved by your council.

5. Propose a tax measure, and get it approved by your voters. 6. Rigorous monitoring and compliance

Let’s Do this Right!

• Efficiently provide Cannabis Medicine to patients • Develop mature, safe, adult-use cannabis marketplace • Eliminate Black Market and associated criminal activity • Ensure unavailable to anyone younger than 21 • Control Potential for drugged driving

Options and Next Steps for Avalon • Status Quo– continue Ban • Propose Initiative for taxation only

• Along with an ordinance for health & safety • Propose Initiative with health & safety and taxation

Questions and Answers

• PubMed – U.S. National Library of Medicine and National Institutes of Health –

type in “marijuana”

• Leafly – Dispensary and delivery locator with additional product information – see maps for locations

• Weedmaps – Similar to Leafly – see maps for locations

• http://bmmr.dca.ca.gov/ - Website of Bureau of Medical Cannabis Regulation

• http://www.legislature.ca.gov/ - link to copy of relevant MMRSA bills: • AB 243 - Cultivation • AB 266 – Regulatory framework and administration • SB 643 – Regulations for doctors and medical professionals • SB 837 – Rider included as part of the State budget and fiscal review process

Sources for Further Research