Under Prop. 64, Locals That Ban Personal Outdoor Cultivation or Cannabis Commerce Would Lose Tax Dollars

Although Cal NORML doesn’t see the need for any local ordinance to regulate six-plant gardens as required by Prop. 64, we have posted a draft ordinance that would allow for outdoor, greenhouse, and indoor personal gardens.

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October 31, 2016 – California’s League of Cities, which was responsible for pushing the “banopolooza” on medical marijuana that happened in hundreds of cities and counties in California at the beginning of this year, has released a memo to its members about the pending measure, Prop. 64, which will legalize adult use of marijuana if passed by the voters on November 8.

The AUMA (Adult Use of Marijuana Act) will require local jurisdictions to allow cultivation of up to six marijuana plants on any parcel, if inside a private residence or accessory structure that is “fully enclosed and secure.” (Section 11362.2(b)). The measure allows locals to ban outdoor cultivation, but they will ultimately lose out on tax revenues recouped via Prop. 64 if they do. In addition, locals will be forbidden to ban outdoor cultivation if and when the Attorney General determines that non-medical marijuana has become legal under federal law. (Sec 11362.2(b)(4)

Prop. 64 also has provisions for licensing recreational marijuana businesses. Unlike MCRSA (aka MMRSA), the state law that will license medical marijuana businesses starting by 2018, the AUMA does not require an applicant to provide evidence of local permission prior to being issued a state license. (§ 26056); however it prohibits state licensing entities from approving licenses for activities that would violate local ordinances. (§ 26055(e).) Thus, the League concludes, “state licensing officials bear the onus of evaluating local regulatory compliance.”

The League concludes that, “Cities should prioritize considering or enacting ordinances regulating personal nonmedical marijuana cultivation, because it will be legal under state law on November 9, 2016 if the AUMA passes, whereas nonmedical marijuana businesses will not be able to operate lawfully until the state licensing system becomes operational (likely in late 2017). Although cultivation for personal use will be legal as of November 9, 2016 if the AUMA is approved by voters, local governments will not lose any regulatory authority if they do not have an ordinance in place addressing personal cultivation before the election. Locals will retain the ability to regulate personal cultivation and to enact related ordinances at any time after the election.” (emphasis in original).

While the League is correct that Prop. 64 clearly allows locals to ban commercial cannabis operations and outdoor personal cultivation, it does not mention that the proposition denies any share in the revenues recouped statewide through taxes on marijuana sales to locals that ban these activities.

Section 34019(f)(3)(C) of the AUMA states that funds will be disbursed through the Board of State and Community Corrections “for making grants to local governments to assist with law enforcement, fire protection, or other local programs addressing public health and safety associated with the implementation of the Control, Regulate and Tax Adult Use of Marijuana Act.”

However, the section goes on to state, “The Board shall not make any grants to local governments which have banned the cultivation, including personal cultivation under Section 11362.2(b)(3) of the Health and Safety Code [outdoors upon the grounds of a private residence], or retail sale of marijuana or marijuana products.

San Juan Capistrano passed an ordinance on October 4 banning outdoor cultivation, and requiring a “residential indoor cultivation permit” for recreational growing of marijuana. The city intends to make it a misdemeanor or infraction to grow without a permit, with penalties from $100-$1000 plus a possible 6-month jail sentence.

Cal NORML expects litigation over what constitutes a “reasonable” regulation by locals, as allowed for in Prop. 64. We have written a letter to the city council members, letting them know we do not think that San Juan Capistrano’s ordinance, in essence re-criminalizing marijuana cultivation, is reasonable or within the spirit of the law. Councilman Reeve commented before casting his vote that, “We all oppose Prop. 64 and this is the most forceful thing we can do in response.”

San Juan Capistrano employs the law firm of Best, Best and Krieger, which has been instrumental in writing local medical marijuana ordinances throughout the state (and then getting paid to defend them).

Meanwhile, the city of Palo Alto passed an ordinance on October 24 banning outdoor cultivation, should Prop. 64 pass. Rather than make it an urgency ordinance, they included a sunset clause, so that the law will take effect 10 days after the election and expire one year later.

It was acknowledged during the Palo Alto meeting that the council hadn’t taken enough time to gather community feedback, as well as the fire chief’s take on the risks of indoor growing.

The city of Fillmore in Ventura county has passed a San Juan Capistrano-style ordinance, and Martinez is considering doing the same at its November 2 meeting. Read CalNORML’s letter to Martinez city council. The City of Woodland will hear a report from the city manager on their options at a November 1 meeting and the city of Davis is also considering taking action. Read Cal NORML’s letter to Davis city council.

Montebello passed a 45-day moratorium on marijuana businesses in the city should Prop. 64 pass. That move is premature, since such businesses wouldn’t be licensed by the state until 2018. Several cities in San Diego county have also passed bans on commercial marijuana business or are considering doing so; the city of San Diego, however, will be allowing them.

Fillmore, San Diego and at least 50 other cities or counties will be voting on ballot measures to regulate and tax medical or recreational marijuana retail sales and/or cultivation on November 9.

Interestingly, the League states, “The AUMA does not pre-empt local taxation. However, the AUMA’s estimated cumulative tax rate of nearly 35% on the purchase of nonmedical marijuana has potentially troubling implications for local governments. A high state tax rate by itself may depress sales and stimulate the black market. Any local taxation of marijuana should be governed by an awareness that a high retail sales tax rate, imposed on an industry that, until recently, has not been regulated at all, might stimulate black market activity and compromise the anticipated yield of revenue.”

One newspaper in Alameda county has editorialized against enacting local taxes just yet. But taxes are very popular at the ballot box.

Many other cities and counties have already banned medical marijuana cultivation and businesses. Unless those are written broadly (without the word “medical” in them), they won’t necessarily apply to recreational marijuana.

There is certainly no rush at the moment to pass outdoor cultivation bans before the spring planting season. A simple solution would be for cities to simply allow outdoor cultivation of six-plant gardens, or cultivation in greenhouses, which wouldn’t require any building code permits or code enforcement.

UPDATE: Tim Cromartie, a lobbyist with the League of California Cities, told AP that cities have months to create their own restrictions and don’t need to hastily pass bans. “There is no need for a stampede,” Cromartie said. “Some are doing it out of an over-abundance of caution.”

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