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SR 10-10-2017 7A City Council Report City Council Meeting: October 10, 2017 Agenda Item: 7.A 1 of 28 To: Mayor and City Council From: David Martin, Director, Administration Subject: Introduction and First Reading of an Ordinance Amending Article VI of the Santa Monica Municipal Code Establishing a Selection and Permitting Process for Medicinal Cannabis Retailers and Medicinal Cannabis Light Manufacturing, while continuing to prohibit commercial non-medicinal cannabis uses; Introduction and First Reading of an Interim Zoning Ordinance making necessary interim changes to the Zoning Ordinance to authorize Medicinal Cannabis Retailers and Medicinal Cannabis Light Manufacturing within certain zoning districts; and Adoption of a Fee Resolution Establishing Related Permit Fees. Recommended Action Staff recommends that the City Council: 1) Introduce for first reading the attached ordinance (Attachment A) amending the Santa Monica Municipal Code adding: a. Chapter 6.200 Commercial Cannabis, in order to establish general regulations and definitions for commercial cannabis activities; b. Chapter 6.201 Medicinal Cannabis Retailer, in order to establish a regulatory permit for medicinal cannabis retailing; c. Chapter 6.202 Medicinal Cannabis Light Industry Manufacturer, in order to establish a regulatory permit for medicinal cannabis light manufacturing; d. Chapter 6.210 Adult Use Cannabis, prohibiting commercial adult cannabis non-medicinal use activities; and 2) Introduce for first reading the attached Interim Zoning Ordinance (Attachment B) updating the definition of “Medical Marijuana Dispensaries” to conform with state law and setting forth interim development standards for light medicinal cannabis manufacturing; and 3) Adopt the attached Resolution (Attachment C) establishing Medicinal Cannabis Retail Permit fee; and 4) Direct staff to examine options for a ballot measure to create new business license tax classifications and rates for cannabis related businesses. Executive Summary Cannabis regulations in California are continuously evolving. As a result of decisions made during the 2015 update of the Santa Monica Zoning Code, Council adopted an approach to regulating retail access to so-called “medical marijuana.” Subsequent to 2 of 28 that decision in November, 2016, California voters enacted Proposition 215 legalizing trade in so-called “recreational marijuana”. During a study session on March 7, 2017, regarding an overall approach to cannabis regulations, Council directed staff to draft an ordinance to: create a regulatory permit and selection process for medicinal cannabis retailers; postpone and prohibit commercial adult cannabis non-medicinal use activities; amend the Santa Monica Municipal Code to address changes in State law related to cannabis regulations; and consider options for allowing certain cannabis-related manufacturing. Since the time of the Council study session (on June 27, 2017), the Governor signed Senate Bill 94, essentially repealing Medical Cannabis Regulation and Safety Act (MCRSA) and consolidating certain provisions of MCRSA in the licensing provisions of Adult Use of Marijuana Act (AUMA). The proposed Ordinance would require medicinal cannabis retailers and medicinal cannabis light manufacturers to obtain a local operating permit. The retailer permit would also allow for limited cultivation in a manner that meets minimum standards for that activity and location. Existing local law (in the Zoning Ordinance) limits the City to two medicinal cannabis retailer uses; the proposed Ordinance maintains this limitation and establishes a selection process with objective criteria to award the two medicinal cannabis retailer permits. With the exception of light manufacturing, the proposed ordinance would also prohibit all commercial adult cannabis non-medicinal use activities, including cultivation, testing, distribution, retailing, heavy manufacturing, etc. The proposed Interim Zoning Ordinance changes the definition of dispensary and other cannabis related business activities to be consistent with State law and authorizes medicinal cannabis light industry manufacturing in the Industrial Conservation District by right, and in the Office Campus (OC) zone with a Conditional Use Permit (CUP). The Business License Unit would administer all licenses and permits in conjunction with Business License processing as it does currently for other regulatory permits. Cannabis 3 of 28 business activity rules and regulations, and CUP requirements would be enforced by Code Enforcement staff. Personal adult non-medicinal use is permitted by State law, however, it would be subject to existing smoking regulations when cannabis is consumed by smoking or vaping. In addition to the proposed regulations, all cannabis related business activities are subject to all State laws and regulations, which are enforceable by local jurisdictions. Background On March 7, 2017, staff held a study session with Council regarding cannabis regulations (see Attachment D). At this meeting Council directed staff to draft an ordinance creating a regulatory permit and selection process for medicinal cannabis retailers, prohibiting commercial adult cannabis non-medicinal use activities (as a temporary measure), and amending the Santa Monica Municipal Code to address changes in State law related to cannabis regulations. Council also directed staff to consider the possibility of allowing certain forms of cannabis-related light manufacturing. Medicinal and Adult-Use Cannabis Regulation and Safety Act On June 27, 2017, the State adopted Senate Bill 94 as part of a budget trailer bill creating the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). The bill essentially repeals the MCRSA and adds certain provisions of MCRSA to the licensing provisions of the AUMA adopted by the voters as Proposition 64 in 2016. MAUCRSA establishes a robust set of regulations for the medicinal and adult use cannabis markets, aligns all permit types, and authorizes certain State agencies to establish rules governing cannabis operations and to implement the law. MAUCRSA consolidated the regulatory structure, but also maintained separate licenses for both medicinal and adult use to provide safeguards, presumably so that in the event of greater federal intervention into the cannabis legalization movement by the States, the medicinal program could continue even if adult non-medicinal use is interrupted. For example, MAUCRSA establishes a Type 10 license for retailers. A medicinal 4 of 28 retailer would be issued an M-Type 10 license and an Adult Use retailer would be issued an A-Type 10 license. This licensing convention is the same for all twenty cannabis license types. MAUCRSA would allow for both medicinal and adult use sales of cannabis by the same retailer; however, they would need to be from separate “locations,” meaning each would have to have different employees and entrances, although the location could be in the same building and even storefront. See Attachment E for a list of license types. Notable MAUCRSA Changes New provisions under MAUCRSA now allow for retailers to have a brick-and-mortar location that is closed to the public with all sales being fulfilled through deliveries. It also requires the State's Department of Food and Agriculture to develop an organic designation by 2021 as well as origin regions, modeled on how the food sector designated specialty wines and cheeses. On the marketing end, advertising will only be able to broadcast in mass media if at least 71.6 percent of the audience is reasonably expected to be 21 years of age or older. The bill would also require edible cannabis products to be marked with a universal identification symbol. MAUCRSA also establishes protection of the public as the highest priority for State licensing agencies in exercising its licensing, regulatory, and disciplinary functions, and requires the protection of the public to be “paramount whenever the protection of the public is inconsistent with other interests sought to be promoted”. Additionally, MAUCRSA clears up some of the questions pertaining to how officers would enforce open cannabis consumption. The law requires that, while a person is operating a motor vehicle, any cannabis or cannabis product that is in a receptacle that has been opened, or has a broken seal must be in the trunk of the vehicle. It also prohibits a person from possessing any loose cannabis flower not in a container, while driving a motor vehicle, unless the flower is in the trunk of the vehicle. However, this prohibition does not apply to a person who is a qualified patient carrying a current identification card or a physician’s recommendation and the cannabis or cannabis product is contained in a container or receptacle that is either sealed, resealed, or 5 of 28 closed. See Attachment F for the Senate Analysis of MAUCRSA for more information on the new provisions The City’s Zoning Ordinance (ZO) authorizes two medicinal cannabis dispensaries within the following Mixed-Use and Commercial District locations: Mixed-Use Boulevard District along Wilshire Boulevard between Lincoln Boulevard and Centinela Avenue; General Commercial District along Santa Monica Boulevard between Lincoln Boulevard and 20th Street; and Mixed-Use Boulevard Low District along Santa Monica Boulevard between 23rd Street and Centinela Avenue. The ZO currently refers to a medicinal cannabis retailer as “medical marijuana dispensary” and has the following broad definition: Medical Marijuana Dispensary. Any facility, building, structure, or fixed location where one or more qualified patients and/or persons with identification cards and/or primary caregivers cultivate, distribute, sell, dispense, transmit, process, exchange, give away, or otherwise make available marijuana for medical purposes. The terms “primary caregiver,” “qualified patient,” and “person with an identification card” shall be as defined in California Health and Safety Code Section 11362.5 et seq.1 Discussion For the purpose of this report and to be consistent with terminology used in newly adopted State law and the cannabis industry, this report replaces the use of the word “dispensary” with “retailer”, uses the term “cannabis” instead of “marijuana”, uses the term “medicinal” instead of “medical” when referring to permitted business activities (e.g. medicinal retailer), and uses the term “adult non-medicinal use” in lieu of 1 California Health and Safety Code Section 11362.5 was established as the Compassionate Use Act of 1996. 6 of 28 “recreational.” The discussion section of this report is separated into the following 6 sections: 1. Overview of Relevant MAUCRSA Regulations 2. Interim Zoning Ordinance 3. Medicinal Cannabis Retailer Permitting 4. Medicinal Cannabis Retailer Regulatory Compliance 5. Medicinal Cannabis Light Manufacturing Permitting 6. Prohibition of Adult Non-medicinal Uses 7. Council Direction on Taxes Section 1 - Relevant MAUCRSA Regulations MAUCRSA establishes extensive regulatory provisions and provides considerable authority to certain State agencies to establish rules governing all aspects of the cannabis market, including cultivation, water use, pesticide use, manufacturing, distribution, testing, labeling, packaging, sales, distribution, and tracking of cannabis and cannabis products through a statewide track and trace system to assist with the safe distribution and enforcement of cannabis products. Although local jurisdictions maintain the option to establish their own more restrictive regulations and maintain land use control, various agencies released proposed regulations for the MCRSA. These licensing agencies held public hearings and accepted written comments regarding the proposed regulations. However, in light of MAUCRSA the licensing agencies have withdrawn the proposed medicinal cannabis regulations noticed for public comment on April 28 and May 5, 2017. The cannabis licensing agencies are developing proposed regulations based on the new law for the commercial medicinal and adult-use cannabis industries. During this process, the licensing agencies will consider the public comment already received regarding the proposed medicinal cannabis regulations. The licensing agencies will use the emergency rulemaking process for the new proposed regulations. The emergency regulations are expected to be published in fall 7 of 28 2017. The implementation date for the issuance of commercial cannabis licenses remains the same: January 2, 2018. Since any proposed rules will be based on the rules previously drafted and withdrawn, a copy of the draft rules that were recently withdrawn are provided as Attachment G. Dual Permitting Compliance State agencies will not approve an application for a State license if the proposed use violates local law. The City is required to provide to the State Bureau of Cannabis Control a copy of any ordinance or regulation related to commercial cannabis activity as well as the name and contact information for the person who will serve as the contact for the State licensing agencies. The proposed ordinance would assign this role to the Director of Planning and Community Development or designee. The City is also required to notify the Bureau when a change in a local ordinance or regulation is adopted or the contact person is changed. State agencies will deny an application for a license for a commercial cannabis activity whenever the City has notified the Bureau the activity is prohibited. The licensing agency will notify the contact person for the City in the following situations: When an application for commercial cannabis activity is received. When an applicant is denied due to the local jurisdictions indication that the commercial cannabis activity for which a license is sought is prohibited by a local ordinance or regulation. When a State agency notifies the City of an application they have received, the City will have an opportunity to notify the agency whether the applicant is in compliance with local law. If the City indicates that the applicant is not in compliance, the licensing agency will deny the application. If the City does not provide notification of compliance or noncompliance with local law, 8 of 28 or otherwise does not provide notification indicating that the completion of the City’s permitting process is still pending, within 60 business days of receiving the notice from a State licensing agency, the licensing agency may make a “rebuttable presumption” that the applicant is in compliance with all local ordinances and regulations and issue the license if the applicant meets State requirements. After the expiration of the 60- business-day period, the City will still have an opportunity to notify the State of any inconsistencies of the proposed operation with local law. The State could then take appropriate actions against the applicant. The State would also require verification from the City of compliance with local law prior to issuance of a renewal. The City will also retain all of its enforcement options against any cannabis business not in compliance with local law, regardless of State licensing. Track and Trace A significant provision established by MAUCRSA requires the implementation of a track and trace program be the responsibility of the Department of Food and Agriculture, in consultation with the Bureau. Staff is not proposing any additional local regulation relating to track and trace. The Track and Trace technology systems to be implemented by the State would provide regulators with tools to analyze aggregated compliance data from all licensed cannabis businesses in a jurisdiction providing real time data on the cannabis chain of custody as it moves throughout the distribution chain. The system utilizes a unique identifier and authorizes a city to also administer a unique identifier and associated identifying information but would prohibit this from supplanting the Department of Food and Agriculture’s track and trace program. The data available in a track and trace system allows visibility into areas that assist law enforcement with preventing diversion and fraud, and ensuring contaminated products don’t reach the market. The system will be capable of providing information that captures, at a minimum the following: The licensee receiving the product. The transaction date. 9 of 28 The cultivator from which the product originates, including the associated unique identifier. The State will also create an electronic database containing the electronic shipping manifests to facilitate the administration of the track and trace program, which will include, but not be limited to, the following information: The variety and quantity or weight of products shipped. The estimated times of departure and arrival. The variety and quantity or weight of products received. The actual time of departure and arrival. A categorization of the product. The license number and the unique identifier issued by the licensing authority for all licensees involved in the shipping process, including, but not limited to, cultivators, manufacturers, distributors, and dispensaries. Section 2 - Interim Zoning Ordinance Staff is exploring possible approaches to amend the Zoning Ordinance to consider adult non-medicinal uses; however, consistent with Council’s prior direction and in order to expeditiously allow certain types of additional medicinal cannabis light manufacturing activities and to update cannabis definitions to align with State law, staff is recommending that Council first adopt an Interim Zoning Ordinance (IZO). Subsequently, staff would undertake more research and community engagement including study sessions with the Planning Commission and then return to Council with a more permanent solution for adult use of marijuana. Definitions The ZO currently refers to a medicinal cannabis retailer as “medical marijuana dispensary” and has the following broad definition: Medical Marijuana Dispensary. Any facility, building, structure, or fixed location where one or more qualified patients and/or persons with 10 of 28 identification cards and/or primary caregivers cultivate, distribute, sell, dispense, transmit, process, exchange, give away, or otherwise make available marijuana for medical purposes. The terms “primary caregiver,” “qualified patient,” and “person with an identification card” shall be as defined in California Health and Safety Code Section 11362.5 et seq. The proposed IZO would replace the definition of “Medical Marijuana Dispensary” creating the new definition “Medicinal Cannabis Retailer” with the more specific definition of: A licensed premises which is a physical location from which retail medicinal cannabis or cannabis products are intended to be sold for use, pursuant to the Compassionate Use Act of 1996 (Proposition 215), found at Section 11362.5 of the Health and Safety Code, by a medicinal cannabis patient in California who possesses a physician’s recommendation. The premises may be closed to the public; sales may be made exclusively by delivery. The proposed IZO would also amend the definition of “Limited Industry” to add light medicinal cannabis manufacturing, defined as “medicinal cannabis, and medicinal cannabis products using nonvolatile solvents, or no solvents”. Operational Regulations Certain regulations found in Chapter 9.31 of the SMMC regulating the operations of Medicinal Cannabis Retailers were written prior to the adoption of the comprehensive State laws regulating cannabis. The proposed IZO removes sub-sections I, K, and L of Section 9.31.185 of the SMMC that address Staffing and Security, Required Patron Notification, and Prohibited Activities which are either addressed in State law or can be more effectively addressed through the proposed regulatory ordinance and rules. Manufacturing The methods used to produce cannabis extracts involve complicated and precise 11 of 28 techniques and can include dangerous, volatile solvents, resulting in a risk of physical harm to the manufacturers and to those around them. Butane is a common solvent used in cannabis extracts. MAUCRSA restricts the number of permits that may be issued to businesses using volatile solvents and requires very high standards to ensure safety. The effect will bring the extraction community into a safer, more highly-regulated environment as production increases. The proposed Interim Zoning Ordinance would, in addition to the two medicinal cannabis retailers, allow for light manufacturing within the current definition of “Limited Industry” established in SMMC Section 9.51.030(C)(5), which includes “light industrial activities taking place primarily within enclosed buildings and producing minimal impacts on nearby properties”, and “the preparation, manufacturing, and/or packaging of food for off-site consumption.” Typical food manufacturing uses include canners, roasters, breweries, wholesale bakeries, and frozen food manufacturers.” Under the “Limited Industry” classification, a cannabis manufacturer would be allowed to operate within the Industrial Conservation (IC) zone, or with an approved Conditional Use Permit (CUP) within the Office Campus (OC) zone. The IC and OC zones are represented by the bright red outlines in the map below. 12 of 28 Under this definition, medicinal cannabis business activities would not authorize manufactures who use volatile solvents. Instead, it would be limited to assembly or preparation of products without a retail storefront that is open to the public, such as a manufacturer of cannabis-based lotions, or edibles. Under existing State law, any such manufacturer would be required to obtain an M-Type Level 1 license, which would also limit the sale of its products to medicinal retailers who also hold a State medicinal retailer license (M-Type 10). Section 3 - Medicinal Cannabis Retailer Permitting The City has not been accepting applications for medicinal cannabis dispensaries 13 of 28 pending the establishment of a selection process and regulatory framework, which have been delayed due to rapidly changing cannabis related State law. In order to license the two dispensaries the proposed ordinance would 1) establish a regulatory framework for the selection and permitting of medicinal cannabis retailers, and 2) prohibit for the time-being commercial adult non-medicinal use activities until staff is able to implement the two dispensaries envisioned by the Zoning Ordinance. Medicinal Cannabis Retailer Selection Process The proposed ordinance would establish a selection process with objective criteria that would require vetting of the businesses proposing to operate within the allowed areas within the City. This would include a Request for Applications (RFA) process that would require the applicants to provide information regarding the businesses’ financial statements, bank records, management experience, business plan, and criminal background. The primary objective of the selection process would be to ensure that cannabis retailers licensed to operate in Santa Monica meet high standards. It also provides for an orderly process. The selection process would include a defined application period when the City would accept applications. Those applications would be reviewed based on objective criteria related to the proposed operator’s business experience and proposed operations. Land Use and related location/size considerations would be later addressed as part of the CUP application process. Applicants who respond to the RFA would be required to provide detailed information regarding their business, including but not limited to the following: Names and addresses of any person with a financial interest in the retailer, including but not limited to all principals, officers, or managers, lenders, investors, and those with title to equipment or land. Names and addresses of any person responsible for the retail activities, including 14 of 28 employees, if any. Authorization to conduct background checks on all individuals associated with the application. Description of the intended business plan, including intent to operate as non- profit or for-profit business, and any plans for including cultivation on site. If cultivation is included, details on chemical and water use. Description of sustainability practices (e.g. water and energy use). Description of any proposals that would benefit the community. If a lease is already signed, the address, owner/owner represented of the property. List of addresses of the owners (or their representatives) for any properties where bona fide leasing discussions have begun. Detailed financial information, including information on existing and proposed loans and lenders. Names and addresses of current and proposed suppliers for cannabis products proposed to be sold. Names and addresses of current and proposed testing facilities to be used to ensure quality and potency and a full description of the quality control/testing protocols to be followed and labeling to be used. (note: this provision is conditional on when the State begins issuing licenses for testing facilities and standards for such testing and quality control) Copies of articles of organization or incorporation. Listing of all other cannabis related business locations owned and/or operated by applicant, including any person with a financial interest in a cannabis operation, along with copies of any operating permits for each of the locations, and information concerning any enforcement actions taken by the relevant jurisdiction. Consistent with the requirements of MAUCRSA, applicants would likely be disqualified due to any of the following: 15 of 28 Any person associated with the application has made one or more false or misleading statements, or material omissions on the application or during the application process; Fails to provide information requested or required by the City; For any reason as established in Section 26057 of the California Business and Professions Code, such as denial if any person associated with the application “has been convicted of an offense that is substantially related to the qualifications, function, or duties of the business or profession for which the application is made.” Examples include conviction of a violent felony or serious felony (e.g. fraud, deceit, embezzlement, or sale/offering for sale of any controlled substance to a minor). For conviction of drug trafficking where the convicted person was substantially involved in the planning, direction, execution, or financing of the offence as outlined in Sections 11370.4 and 11379.8 of the California Health and Safety Code. If any person with a financial interest, principals, officers, managers, or any person responsible for the retail activities has, within the previous three years, operated a marijuana retailer, cooperative, or collective without a permit issued or approved by the governing jurisdiction, and/or has had a license sanctioned, suspended, or revoked by another jurisdiction. The Police Department would review the results of the background checks and provide the results to the Director of Planning and Community Development based on the guidelines provided (see Attachment H). The proposed ordinance would also require establishing an Evaluation Committee with City staff and non-City staff to review applications based on the established criteria. Committee members would be required to complete a conflicts of interest form and applicants would be provided with the names of the committee members in advance with a defined period to file a protest with the Director of Planning and Community Development regarding the participation of a particular member based on a conflict. The committee is envisioned to include representatives from the following: 16 of 28 Finance Department Code Enforcement Division Economic Development Division Public Works Department (Waste Water Management / Sustainability) Neighborhood Association(s) Representative Representative from a City with Existing or Recent Cannabis Retailer Selection Process The committee would be facilitated by the Planning Division; however, no members of the City Planning Division would participate as an evaluator. Instead the City Planning Division would serve as an independent facilitator of the proposed selection process. The RFA evaluation process would rank the applicants. The Director of Planning and Community Development, or designee, would review the committee evaluation and background check results from the Police Department, and he/she would be authorized to request additional information to ensure that the rankings are completed fairly. The top two ranked applicants would be issued Preliminary Selection Letters. If there is a tie between more than two applicants, the selection would be made by lottery. The final ranking and issuance of Preliminary Selection Letters by the Director of Planning and Community Development would be appealable to a City Hearing Officer. The final ratings would expire after 12 months, however, the Director or designee could extend the list based on the progress being made in the permitting process. Medicinal Cannabis Retailer Permit Following the issuance of the Preliminary Selection Letter the applicant would then be required to apply for a CUP, Santa Monica Business License, and any necessary State or County permits, as well as obtain any additional entitlements that may be required for the location (e.g. ARB) following approval of a CUP. The State requires that an applicant have a location identified and verification of right to use in order for the application to be considered complete. 17 of 28 The proposed Medicinal Cannabis Retailer permit would authorize the sale of medicinal cannabis and consistent with the ZO, allow 15% of the total floor area on site for cultivation. A separate on-site cultivation permit would not be needed from the City. The proposed Medicinal Cannabis Retailer permit fee would cover the costs of processing the permit and related compliance inspections. Medicinal Cannabis Retailers would also need to comply with all other zoning requirements such as Architectural Review Board, and Building/Construction permitting requirements, including waste water, fire, electrical, plumbing, etc. (this would include identifying a floor plan with the area that will be designated for cultivation). The proposed permit would also require that all employees of the retailer complete a Livescan background check prior to hire. Prior to issuing the business license and permit, Code Enforcement would verify that existing employees have completed their background checks as part of the first compliance inspections and would be verified during each additional compliance inspection. More information on compliance inspections is discussed later in this report. Medicinal Cannabis Retailer Local Permitting Fees and Taxes The Medicinal Cannabis Retailer would be required to pay the City the following fees and taxes (these do not include fees related to construction or tenant improvements). 18 of 28 Permit/Tax Fee Conditional Use Permit $17,204.55 (includes $1,899.19 in mailing and preliminary review fees) Annual Medicinal Cannabis Retailer Permit $1,822.102 Business License Tax (If operating as a for profit business) $75 on first $60,000, and $1.25 for each $1,000 or fraction thereof of gross receipts in excess of $60,000 State Mandated Fee CASp $1.003 Business License Planning Review Fee $398.57 Fingerprint/Live Scan Fee (per person) $107.13 Medicinal Cannabis retailers would not collect sales tax on behalf of the City as medicinal cannabis sales are exempt. Medicinal Cannabis Retailer State Permits and Taxes The two successful Medicinal Cannabis Retailer applicants would need to apply for State licenses and meet all State requirements. Applicants would likely need to obtain two State permits, an M-Type 10 Retailer and M-Type 2 Cultivation indoor-small. Medicinal Cannabis Retailers would also need to obtain a Seller’s Permit from the California Board of Equalization. Retailers would be subject to State taxes on cultivation. More information concerning coordination with the State to ensure compliance with local law when issuing permits for cannabis commercial activities is provided in the next section of this report. Section 4 - Medicinal Cannabis Retailer Regulatory Compliance MAUCRSA authorizes cities to establish more restrictive regulations than issued by the 2 The permit fee is a cost recovery fee that includes the cost of $99.58 for processing the permit, which is consistent with other regulatory permit application fees, plus 4 two hour inspections at an hourly rate of $180.94 for a total of $361.88 for each inspection, and 15 minutes of City Attorney Time at an hourly rate of $275. The hourly rates are based on the costs of a Lead Code Enforcement Officer and Deputy City Attorney III fully encumbered. (($180.94* 2) * 4) + ($275 *.25) + $99.58 = $1,822.10. The proposed fee would be prorated based on the month the application is submitted to account for the number of inspections required for the first fiscal year in operation. 3 California CASP Fee: SB1186, effective 01/01/13, sunsets 12/31/2018, added a State Mandated Fee of $1.00 on any applicant for a business license and renewal of business license. The fee is for the purpose of increasing disability access and compliance with construction related accessibility requirements and developing educational resources for businesses to facilitate compliance with federal and State disability laws. 19 of 28 State, however, because of the extensive regulations governing cannabis, and the complexity and considerable public input into the State regulations, the proposed cannabis operating permit for Santa Monica would rely almost exclusively on State rules and regulations such as labeling, cultivation, testing, record keeping, etc. Currently, the ZO imposes some operational regulations which are more restrictive than those provided under State law and the anticipated rules established by the responsible State agencies. These more restrictive regulations include the following: Maximum of 2 Medicinal Cannabis Retailers Footprint may be no larger than 2,500 square feet. May not be within 600 feet of a Child Care and Early Education or Family Day Care Facility, park, school, library, Social Service Center, or other Cannabis retailer. (Although the State also imposes a 600-foot distancing requirement, it does not include as many sensitive uses. Also, the State does not use distance from other cannabis businesses, instead a formula based on “concentration” is used.) May operate between the hours of 10:00 a.m. and 8:00 p.m. Monday through Saturday and 12:00 p.m. to 7:00 p.m. on Sundays. A maximum area of 15% of the total floor area may be used for on-site cultivation of medicinal marijuana. A centrally monitored alarm system shall be installed and maintained in good working order. An on-site supervisor must be present at all times that the retailer is in operation. The retailer shall provide the Chief of Police and neighbors within 500 feet of the retailer with the name, phone number, and facsimile number of an on-site community relations staff person to whom one can provide notice if there are operating problems associated with the retailer. The retailer is required to make a good faith effort to encourage members of the public to call the community relations contact person to try to solve operating problems, if any, before calls or complaints are made to the City. Employees of the establishment shall be at least 21 years of age and patients a 20 of 28 minimum of 18 years of age; (MAUCRSA allows a Medicinal Licensee to employee 18 year olds who possess medicinal referrals). Outdoor trash receptacles shall be available near the entrances to and exits from the establishment. The premises shall be continuously maintained in a safe, clean, and orderly condition with twice daily litter pick-up within 500 feet of the retailer. Retailer staff shall notify patrons of the following verbally and through posting of a sign in a conspicuous location readily visible to persons entering the premises: Use of medicinal marijuana shall be limited to the patient identified on the doctor’s recommendation. Secondary sale, barter, or distribution of medicinal marijuana is a crime and can lead to arrest. Patrons must immediately leave the site and not consume medicinal marijuana until at home or in an equivalent private location. Retail staff shall monitor the site and vicinity to ensure compliance. Forgery of medicinal documents is a felony crime. Entry into the premises by persons under the age of eighteen is prohibited unless they are a qualified patient and accompanied by a parent or legal guardian. As discussed in Section 2 above, the proposed IZO removes two sub-sections listed above that address Staffing and Security and Required Patron Notification. In addition to the requirements outlined in the Zoning Ordinance, the proposed ordinance would authorize the Director of Planning or designee to issue rules to assist with the implementation of the Cannabis Ordinance. Medicinal Cannabis Retailer Compliance Inspections The proposed fee would fund four inspections that would be conducted by Code Enforcement staff and include a Pre-Issuance inspection prior to the issuance of the permit to verify the retailer has complied with all requirements prior to the release of the operating permit and business license. Items that would be verified would include but not be limited to verification that employees have passed a background check, security 21 of 28 system is installed and operational, State permit(s) is/are issued, CUP requirements are met, any other land use approvals needed have been obtained (e.g. Architectural Review Board), and any building permit sign offs have been obtained. Code Enforcement would also conduct additional unannounced compliance inspections throughout the fiscal year to ensure continued compliance with local law, particularly as it relates to employee background checks and security measures. Code Enforcement staff may make referrals to the police department or State enforcement authorities as warranted. Staff will submit proposed budget requests for any potentially needed resources and fines for violations of specific section of local law with the normal FY2018-19 exception based budget cycle. State Enforcement Related to Retail Operations State law also provides for enforcement provisions that would be enforced by state and local law enforcement, including but not limited to the following: 1. State agencies are required to address environmental impacts of cannabis cultivation and are required to coordinate when appropriate with cities and counties and their law enforcement agencies in enforcement efforts. This is applicable to any cultivation that would be performed in a retail operation 2. A retailer is required to notify the State licensing agency and the local law enforcement authorities within 24 hours after discovering any of the following: Significant discrepancies identified during inventory. Diversion, theft, loss, or any criminal activity pertaining to the operation of the retailer. Diversion, theft, loss, or any criminal activity by any agent or employee of the retailer pertaining to the operation of the retailer. The loss or unauthorized alteration of records related to cannabis or cannabis products, registered qualifying patients, primary caregivers, or retailer 22 of 28 employees or agents. Any other breach of security. 3. All employees of a retailer, microbusiness, or nonprofit delivering cannabis or cannabis products are required to carry a copy of the licensee’s current license and a government-issued identification with a photo of the employee, such as a driver’s license. The employee shall present that license and identification upon request to state and local law enforcement. 4. During delivery, the law requires that a licensee maintain a physical copy of the delivery request and make it available upon request by a law enforcement officer. The delivery request documentation is subject to state and federal law regarding the protection of confidential medical information. 5. A customer requesting delivery is required to maintain a physical or electronic copy of the delivery request and shall make it available upon request by law enforcement officers. 6. The California Department of Public Health is required to maintain a 24-hour, toll- free telephone number that will enable state and local law enforcement officers to have immediate access to information necessary to verify the validity of an identification card issued by the Department, until a cost-effective Internet Web- based system can be developed for this purpose. State agencies are also authorized to take disciplinary action against a licensee when a violation is committed by the licensee’s officers, director’s owners, agents, or employees while acting on behalf of the licensee or engaged in commercial cannabis activity. A State issued cannabis commercial license may be revoked for violations of cannabis rules and regulations, including but not limited to failing to comply with the requirement of a local law regulating commercial cannabis activity, intentionally and knowingly selling medicinal cannabis or medicinal cannabis products to a person without a physician’s recommendation. In addition to direct local enforcement, Santa Monica Police and Code Enforcement staff could refer matters to a State agency for investigation and disciplinary action. 23 of 28 If a retailer’s license is suspended or revoked, the licensing agency is required to inform the Bureau of Cannabis Control (“Bureau”). The Bureau is then required to inform all other licensing agencies. Section 5 - Medicinal Cannabis Light Manufacturing Permitting The proposed Medicinal Cannabis Light Manufacturing permit would authorize medicinal cannabis related “light industrial activities taking place primarily within enclosed buildings and producing minimal impacts on nearby properties”. The type of light manufacturing proposed would include commercial activities related to the assembly of products for resale, with no extraction or concentration of cannabis taking place on site. The proposed Medicinal Cannabis Light Manufacturing permit fee would cover the costs of processing the permit. Medicinal Cannabis Light Manufactures would also need to comply with all other zoning requirements such as Architectural Review Board, and Building/Construction permitting requirements, including waste water, fire, electrical, plumbing, etc. As noted in Section 1 of this report, MAUCRSA establishes extensive regulations and State agencies are also establishing rules to govern the activities of cannabis businesses. The proposed ordinance does not impose any additional regulations on cannabis light manufacturing commercial activities, other than to require a background check of the owners, disclosure of investors and lenders, and to allow for inspections by City staff. Because light manufacturing would not be open to the public for sales and would be regulated by both the State and potentially the County, neither a cap on the number of light manufactures or a selection process are proposed. However, it should be noted that the Industrial Conservation Zone is intended to preserve space for existing industrial uses and affordable space for small-scale industrial and manufacturing uses. It is also intended as a place for the adaptive reuse of industrial buildings into affordable workspace for artists and the creative industry. The IZO provides the opportunity for staff to monitor the effects of allowing cannabis-related light 24 of 28 manufacturing activities and propose adjustments as necessary to ensure that it does not in inadvertently result in existing businesses being displaced and the loss of affordable workspace. Staff proposes relying heavily on State regulations, which the Police Department and Code Enforcement would be authorized to enforce. The proposed regulatory permit would be conditioned on complying with State regulations. The Police Department and Code Enforcement would also be able to make referrals to the State enforcement agencies for violations of relevant State regulations governing cannabis commercial activities, such as regulations on packing, transporting, storing, destroying cannabis, etc. Medicinal Cannabis Light Manufacturing Local Permitting Fees and Taxes The Medicinal Cannabis Light Manufacture would be required to pay the City the following fees and taxes (these do not include fees related to construction or tenant improvements). Permit/Tax Fee Conditional Use Permit (if applicable) $17,204.55 (includes mailing and preliminary review fees) Annual Medicinal Cannabis Light Manufacturing Permit $99.58 Business License Tax (If operating as a for profit business) $75 on first $60,000, and $1.25 for each $1,000 or fraction thereof of gross receipts in excess of $60,000 State Mandated Fee CASp $1.00 Business License Planning Review Fee $398.57 Fingerprint/Live Scan Fee (per person) $107.13 A Medicinal Cannabis Light Manufacturer may also be required to obtain a County Health permit depending on the products being produced and sold. Medicinal Cannabis Light Manufacturing State Permits and Taxes MAUCRSA provides for two types of manufacturing permits, which includes the 25 of 28 concentration and extraction process. A Type 6 manufacturing license is for operators who manufacture products using non-volatile or no solvents. A Type 7 is for operators who use volatile solvents, such as butane, hexane, or ethanol. Any Medicinal Cannabis Light Manufactures would also need to obtain a State license and meet all State requirements prior to being issued a local permit. Under current law, applicants would need to obtain an M-Type 6 manufacturing permit. State law also makes explicit that an M-Type 6 licensee, which is for medicinal cannabis product manufacturing, is only allowed to manufacture cannabis products for sale by a medicinal cannabis retailer. Medicinal Cannabis Manufacturers would also likely need to obtain a Seller’s Permit from the California Board of Equalization as a wholesaler. Section 6 - Postponement of Commercial Non-medicinal Business Activity Licensing MAUCRSA allows for strong local controls for any type of medicinal or non-medicinal cannabis business authorized by State law. This includes prohibiting all cannabis sales or banning just non-medicinal cannabis businesses but allowing medicinal cannabis. Due to the difficulty in expressly prohibiting or permitting every possible unlawful or lawful use, the Santa Monica ZO is established under the principles of permissive zoning, meaning that the ZO expressly lists permitted uses. Any uses not listed are presumed to be prohibited. The MAUCRSA, does not contain any language respecting or disapproving permissive zoning. While it is very likely that, consistent with precedent, courts would uphold the City’s permissive zoning scheme’s prohibition against commercial adult cannabis non-medicinal uses, in an excess of caution and for the sake of clarity, staff recommends adopting a clear and explicit prohibition. Accordingly, the proposed ordinance explicitly prohibits all commercial adult cannabis non-medicinal use activities. However, this prohibition is envisioned to be temporary for the reasons noted above. General Law Enforcement Needs Although staff is recommending a delay in allowing adult non-medicinal use commercial 26 of 28 activities, as noted during the study session with Council, with the legalization of adult use cannabis, law enforcement staff will need to be prepared for the impacts of the legalization of adult use cannabis statewide. This is particularly true since Los Angeles shares multiple borders with Santa Monica and cannabis-related tourism in the region will likely grow. The legalization of cannabis will bring increased challenges and costs for law enforcement, as seen in Colorado and Washington where legalization is already in place. Police and Code Enforcement will require adequate and appropriate staffing for enforcement activities and training since local enforcement agencies will enforce many aspects of MAUCRSA, particularly as it relates to diversion, “open containers”, driving while under the influence (THC or THC-Combination w/Alcohol) and integration of the new State mandated track and trace systems. Section 7 - Council Direction on Taxes Staff recommends that Council provide direction to staff to examine options for a tax ballot measure to create new business license tax classifications and rates for cannabis related businesses to coincide with the review to be conducted by the Planning Division to update the Zoning Ordinance to consider commercial adult cannabis non-medicinal use activities and their potential impacts. Other local jurisdictions have adopted special taxes for cannabis related businesses. For example, in 2016, the voters of Los Angeles approved a $50 per $1000 of gross receipts tax on the sales of cannabis by medicinal cannabis businesses, and a $100 per $1000 of gross receipts tax on the sales of cannabis on non-medicinal cannabis businesses; and a $10 per $1000 of gross receipts on cannabis commercial transportation and testing or research business activities, and $20 per $1000 of gross receipts on cannabis commercial manufacturing, cultivation or other commercialization of cannabis. In 2016, Monterey County voters approved a $25 per square foot tax on cultivation with an annual adjustment by Consumer Price Index (CPI) thereafter; $5 per square foot on nurseries with annual CPI adjustment thereafter; and 10% of gross receipts on other marijuana business activities with no CPI. The earliest opportunity to submit a proposed tax ballot measure to the voters of Santa 27 of 28 Monica would be November 2018. Next Steps Initiate the request for application and selection process. Establish a review committee. Provide the State with a copy of the City’s relevant cannabis laws and regulations. Provide the State with the name of the City’s contact person. Train relevant staff on the new regulations. Initiate the Planning Commission process to update the Zoning Ordinance and other planning documents, as necessary, to conform local law with State law, and to consider commercial adult cannabis non-medicinal use activities. Evaluate necessity for additional fees or taxes to fund enforcement, compliance, and education programs related to adult use legalization (e.g. tourist and youth education programs). Financial Impacts and Budget Actions For FY2017-18, staff anticipates tax and fee revenues related to the permitting and licensing of two Retailers and one Light Manufacturer to be approximately $34,053. This does not include any fees related to construction permitting, which are dependent on the scope of work for any tenant improvements. An additional Conditional Use Permit fee of $17,204.55 would be collected if the one Light Manufacturing business that is assumed in these calculations selects a location in the Office Campus zoning district. Revenue impacts will be evaluated during the FY 2017-18 mid-year budget. 28 of 28 Two Medicinal Cannabis Retailer Permits $1,922 One Medicinal Cannabis Light Manufacting Permit $100 Two Conditional Use Permits $34,409 Three Business Licenses Minimum Tax $225* Three Business License Planning Review Fees $1,196 Total Revenue $37,852 * Any additional taxes for FY2017-18 would be calculated and paid when the Business License is renewed for FY2018-19 and recorded as FY2018- 19 revenue. Prepared By: Salvador Valles, Assistant Director of PCD Approved Forwarded to Council Attachments: A. Ordinance - Regulations B. Ordinance - Zoning C. Resolution D. Council March 7, 2017 Study Session Staff Report E. License Types F. Senate Floor Analyses G. MCRSA Proposed Rules (withdrawn) H. Background Check Standards I. Written Comments J. Powerpoint Presentation Cannabis License Types Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA) License Types Activity AUMA Cultivation Type 1 = Cultivation; Specialty outdoor; Small Type 1A = Cultivation; Specialty indoor; Small Type 1B = Cultivation; Specialty mixed‐light; Small Type 1C = Specialty Cottage; Small Type 2 = Cultivation; Outdoor; Small Type 2A = Cultivation; Indoor; Small Type 2B = Cultivation; Mixed‐light; Small Type 3 = Cultivation; Outdoor; Medium Type 3A = Cultivation; Indoor; Medium Type 3B = Cultivation; Mixed‐light; Medium Type 4 = Cultivation; Nursery Type 5 = Cultivation Outdoor; Large Type 5A =Cultivation Indoor; Large Type 5B = Cultivation; Mixed‐light; Large Manufacturing Type 6 = Manufacturer 1 Type 7 = Manufacturer 2 Testing Type 8 = Testing laboratory Retail Sales Type 10 = Retailer Distribution Type 11 = Distributor (includes transporting) Microbusiness Type 12 =Microbusiness ‐ small retailers with farms not exceeding 10,000 sq. ft. Permit holders to cultivate cannabis, and act as a licensed distributor, manufacturer (using either nonvolatile solvents or no solvents), and retailer. Note: Type 5 licenses, will not be issued until January 1, 2023. The same license types are used for both medicinal and adult use licenses; to distinguish the type approved, the license will be noted with either an “M” or “A” to denote Medicinal or Adult Use (e.g. M‐Type 10 or A‐Type 10). Attachment E SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 SB 94 UNFINISHED BUSINESS Bill No: SB 94 Author: Committee on Budget and Fiscal Review Amended: 6/9/17 Vote: 27 SENATE FLOOR: Not relevant ASSEMBLY FLOOR: 66-3, 6/15/17 (ROLL CALL NOT AVAILABLE) SUBJECT: Cannabis: medicinal and adult use SOURCE: Author DIGEST: This bill is the cannabis trailer bill for the Budget Act of 2017. This bill establishes a single system of administration for cannabis laws in California. It contains changes related to the Budget Act of 2017 that are necessary for state licensing entities to implement a regulatory framework pursuant to the Medical Cannabis Regulation and Safety Act (MCRSA), established by AB 266 (Bonta, Chapter 689, Statutes of 2015), AB 243 (Wood, Chapter 688, Statutes of 2015), SB 643 (McGuire, Chapter 719, Statutes of 2015), and SB 837 (Committee on Budget and Fiscal Review, Chapter 32, Statutes of 2016), and the Adult Use of Marijuana Act (AUMA) of 2016 (Proposition 64). This bill conforms MCRSA and AUMA into a single system that prioritizing consumer safety, public safety and tax compliance. Among other things, the bill creates agricultural cooperatives, a method for collecting and remitting taxes, a process for testing and packaging, and a process for collecting data related to driving under the influence. Assembly Amendments delete the Senate version of the bill and insert the current language. ANALYSIS: Specifically, this bill creates one regulatory system for commercial cannabis activity - the "Medicinal and Adult-Use Cannabis Regulation and Safety Act" – by doing the following: Attachment F SB 94 Page 2 1) General provisions: a) Technical Changes – Makes various changes throughout multiple code sections to replace references to “marijuana” with “cannabis” and delete code sections that are no longer required due to the integration of the medicinal and adult use systems. b) Definitions - Adds, amends, or deletes multiple definitions. c) Bureau of Cannabis Control – Recasts the section creating the Bureau of Cannabis Control (bureau) within the Department of Consumer Affairs. d) Emergency Regulation Authority - Deletes existing provision granting emergency regulation authority and adds a new one that also provides authority to re-adopt emergency regulations (one time), specifies that adopted or re-adopted emergency regulations remain in effect for no more than 180 days. 2) Incorporates various components of MCRSA, including: a) Public Protection - Specifies that protection of the public shall be the highest priority for all licensing authorities. b) Property Owner Protection - Provides protection for property owners who lease or rent a property to a licensee from asset forfeiture. c) Patient Exemption - Specifies that a qualified patient that is not engaged in commercial activity is exempt from the licensure requirements of MCRSA. Applies the same standards to a primary caregiver. d) Licensing - Clarifies that all commercial cannabis activity can only be conducted between licensees. e) Distribution License Transportation Requirements – Requires that distribution drivers be directly employed by the licensee. Clarifies that all state laws and regulations governing commercial transport apply to those transporting cannabis or cannabis products. f) Retail Security Measures - Outlines security measures for retailers and requires notification to licensing authorities and local law enforcement when inventory discrepancies or criminal activities are found. g) Testing Laboratories – Includes requirements for laboratories that were in MCRSA and are not in conflict with AUMA. These include: 1) use of a standard operating procedure to confirm or refute bad results, 2) requiring the destruction of the remains of samples, 3) notification to the bureau within one day of any change in accreditation, and 4) establishing a standard operating procedure for chain of custody controls for samples. SB 94 Page 3 h) Cannabis Study on Motor Skills - Requires the bureau to contract with the California Marijuana Research Program, known as the Center for Medicinal Cannabis Research, to develop a study that identifies the impact of cannabis on motor skills. i) Local Control - Clarifies that this division does not limit the authority or remedies of a city, county, or city and county under any provision of law, including, Section 7 of Article XI of the California Constitution. j) Pesticide Intent Language – Adds the following intent language: The use of pesticides is not adequately regulated due to the omissions in federal law, and cannabis cultivated in California for California patients can and often does contain pesticide residues. Lawful California medical cannabis growers and caregivers urge the Department of Pesticide Regulation to provide guidance, in absence of federal guidance, on whether the pesticides currently used at most cannabis cultivation sites are safe for use on cannabis intended for human consumption. 3) Contains additional public and consumer protection provisions, including: a) Exit Packaging – Requires that all cannabis and cannabis products purchased by a consumer cannot leave a retail premises unless they are placed in an opaque packaging. b) Advertisement - Requires that a technology platform and outdoor advertising company ensure that a licensee include their license number on any advertisements. c) Driving Under the Influence of Drugs (DUID) Task Force - Creates a DUID Task Force with a balanced membership to make recommendations regarding prevention of impaired driving, means of identifying impaired driving, and responses to impaired driving that reduce reoccurrence. d) Open Container Standard - Creates a new infraction if a person has opened cannabis or cannabis products in the car. Creates an exemption for a qualified patient who is carrying either a state medical identification (ID) card or a physician’s recommendation. e) California Highway Patrol Funding - Appropriates $3 million to the California Highway Patrol (CHP) to be used to for training drug recognition experts. Program costs may include training, overtime, and backfill of state and local law enforcement officers to attend training. f) Monopoly, Excessive Concentration – Maintains excessive concentration provisions of AUMA, applies the Cartwright Act, the Unfair Practices Act, and the Unfair Competition Law to all licensees. In addition, makes it unlawful for any person to monopolize, or attempt to monopolize, or to SB 94 Page 4 combine or conspire with any person or persons, to monopolize any part of the trade or commerce related to cannabis. Gives the Attorney General the authority to enforce these provisions. g) Fire and Life Safety Standards – Adds a clarification that local fire officials retain the authority to carry out fire and life safety requirements. h) Quality Assurance and Compliance Monitoring - Creates a quality assurance compliance monitor, employed by the bureau to conduct random quality control inspections and verify compliance with the packaging and labeling standards. The compliance monitor will also be responsible for independent tax verification. i) Cannabis Destruction - Clarifies that only a peace officer can seizes and destroys cannabis. j) Volatile Substance Definition - Codifies the definition of volatile substance included in recently released draft regulations. k) Local Verification Process - Require local jurisdictions to provide the bureau a copy of any ordinance or regulation related to commercial cannabis activity and a contact to serve as a liaison between the state licensing entities and the local jurisdiction. Outlines a process by which locals and the state licensing authorities will communicate regarding an applicant for licensure. 4) Enhances Tax and Cash Payment Provisions, including: a) Cultivation and Excise Taxes: i) Creates a methodology to implement the two taxes imposed by Proposition 64, the cultivation tax (9.35 per dry weight ounce for flowers and $2.75 for leaves) and excise tax (15 percent of the sales price). ii) Clarifies that the cultivation tax shall be imposed when the cannabis or cannabis products enter the commercial marketplace. iii) Requires the distributor to collect and remit the cultivation tax at the time of distribution and create a tax liability for the excise tax at the same time. The excise tax is due and payable 90-days after the transfer of the products. iv) Allows the Board of Equalization (BOE) or its successor agency to determine refund policies to ensure that there is no overpayment of tax. v) The bill does not change the incidence of tax and requires that BOE or its successor agency determine the actual tax. b) Cash Collection – Establishes that by January 1, 2018, the Secretary of Business, Consumer Services, and Housing or his or her designee work with SB 94 Page 5 the Legislature, the Department of Consumer Affairs, the Department of Food and Agriculture (CDFA), the State Department of Public Health, and any other related departments to ensure that there is a safe and viable way to collect cash payments for taxes and fees related to the regulation of cannabis activity throughout the state. c) North Coast Office - Requires that by July 1, 2018, the bureau, in coordination with the Department of General Services, shall establish an office to collect fees and taxes in the County of Humboldt, County of Trinity, or County of Mendocino in order to ensure the safe payment and collection of cash for licenses and taxes in those counties. 5) Environmental clarifications include: a) License Conditions - Clarifies that cultivation licenses issued by CDFA shall include conditions requested by the Department of Fish and Wildlife (DFW) and the State Water Resources Control Board (SWRCB). b) Adverse Impacts - Specifies that if DFW or the SWRCB finds that cultivation is causing significant adverse impacts in a watershed, CDFA shall not issue new cultivation licenses or increase the total number of plant identifiers in that watershed. c) Denial of License – Specifies that licensing entities can deny an application for a licensure or renewal for failure or inability to meet environmental requirements. 6) Makes various other changes, including: a) Advisory Committee - Specifies that the advisory committee members must include persons who work directly with racially, ethnically, and economically diverse populations. b) Appeals Panel Membership - Adds two members to the Cannabis Control Appeals Panel; one appointee each from the Senate Committee on Rules and the Speaker of the Assembly. They are in addition to three Governor’s appointees that are subject to Senate confirmation. c) Cannabis Cooperatives – Specifies that certain license types may pool their resources for cannabis farming of no more than four acres total and all members of the association must be disclosed to the licensing agencies. Specifically, the cooperatives must include three or more members (that have not been licensed to operate a cannabis business in another state or country) and form an association for the purpose of: SB 94 Page 6 i) The cultivation, marketing, or selling of the cannabis products of its members. ii) The growing, harvesting, curing, drying, trimming, packing, grading, storing, or handling of any product of its members. iii) The manufacturing, selling, or supplying to its members of machinery, equipment, or supplies. d) Organics and Appellations Standards – Requires by 2021, CDFA to develop a California organic designation for cannabis and include standards, practices and varietals as part of their appellations program. e) Non-Storefront Delivery - Specifies that a retailer shall have a licensed premises which is a physical location, but, that it may be closed to the public and that they can conduct sales exclusively by delivery. f) Diversifies Mutual Fund and Blind Trust - Allows “blind” investors to have financial interest without requiring background checks. g) Co-Location and the Definition of Premises - Allows for the co-location of medicinal and adult use cannabis businesses, although, requires that a licensee obtain separate licenses for each type of business. Codifies the definition of premises used in recently released draft medicinal cannabis regulations. h) Product Testing - Authorizes a licensed cannabis operator with an in-house (non-licensed) testing laboratory to provide testing of cannabis and cannabis products obtained from third party cannabis cultivators and manufacturers prior to those products being sent to a licensed testing laboratory pursuant to this division for final, presale quality assurance. Requires testing to of samples to be performed on the final form in which cannabis or cannabis product will be consumed or used. i) Temporary Event License - Authorizes the bureau to issue a state temporary event license at a county fair or district agricultural association, where people 21 years of age or older could sample cannabis and cannabis products. Temporary event licenses shall only be issued in local jurisdictions that authorize such events. j) State Medical ID Card - Preserves the State Medical Cannabis ID card. k) Destruction of Product - Specifies individuals engaging in activity without a license are responsible for the cost of destroying product. l) Temporary Licenses - Adds section allowing licensing entities to issue temporary licenses if specific requirements are met (including local approval, fee), valid for 120 days with a possible 90 extension. SB 94 Page 7 FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: Yes According to the Senate Budget and Fiscal Review Committee, this bill appropriates $3 million to the CHP. In addition there are likely additional regulatory costs to implement various provisions of this bill and offsetting savings from not having to implement two separate regulatory systems. The net impact of additional regulatory costs versus savings is unknown. SUPPORT: (Verified 6/14/17) None received OPPOSITION: (Verified 6/14/17) None received Prepared by: Joe Stephenshaw / B. & F.R. / 6/15/17 15:35:44 **** END **** BUREAU OF MARIJUANA CONTROL PROPOSED TEXT OF REGULATIONS CALIFORNIA CODE OF REGULATIONS TITLE 16 DIVISION 42. BUREAU OF MARIJUANA CONTROL CHAPTER 1. GENERAL PROVISIONS APPLICABLE TO ALL BUREAU OF MARIJUANA CONTROL APPLICANTS AND LICENSEES Article 1. General Provisions § 5000. Definitions For the purposes of this division, the definitions in this section shall govern the construction of this division unless otherwise indicated. (a)“Act” means the Medical Cannabis Regulation and Safety Act. (b)“Address of record” means the permanent address of an individual or organization. (c)“Bureau” means the Bureau of Marijuana Control, previously named Bureau of Medical Cannabis Regulation and Bureau of Medical Marijuana Regulation. (d)“Cannabis waste” means waste that is not hazardous waste, as defined in Public Resources Code section 40191, that contains cannabis and that has been made unusable and unrecognizable in the manner prescribed in section 5080 of this division. (e)“Commercial vehicle” means a vehicle as defined in Vehicle Code section 260. (f)“Delivery employee” means an individual employed by a licensed dispensary who delivers medical cannabis goods from the licensed dispensary premises to a medical cannabis patient or primary caregiver at a physical address. (g)“Display” means medical cannabis goods that are stored in the licensed dispensary’s retailarea during the hours of operation. (h)“Display case” means container in the licensed dispensary retail area where medical cannabis goods are stored and visible to customers. (i)“Free sample” means any amount of medical cannabis goods provided to a medical cannabis patient or primary caregiver without cost or payment or exchange of any other thing of value. (j)“Limited-access area” means an area in which medical cannabis goods are stored or held and is only accessible to a licensee and his or her employees and contractors. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 1 of 58 Attachment G (k)“Lot number” or “batch number” means a distinctive group of numbers, letters, or symbols or any combination of these that is unique to the lot of medical cannabis goods. (l)“Medical cannabis goods” means medical cannabis, including dried flower, and manufactured medical cannabis products. (m)“Medical cannabis patient” is a person whose physician has recommended the use of cannabis to treat a serious illness, including cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which cannabis provides relief. (n)“Nonvolatile solvent” means any solvent used in the extraction process that is not a volatile solvent. For purposes of this division, a nonvolatile solvent includes carbon dioxide used for extraction. (o)“Operating hours” means the hours within a day during which a licensed dispensary may allow medical cannabis patients and primary caregivers to enter the dispensary premises and purchase medical cannabis goods. (p)“Ownership interest” means an interest held by a person who is an owner as defined in section 5004 of this division. (q)“Package” and “Packaging” means any container or wrapper that may be used for enclosing or containing any medical cannabis goods for final retail sale. “Package” and “packaging” does not include a shipping container or outer wrapping used solely for the transport of medical cannabis goods in bulk quantity to a licensee. (r)“Pest” means undesired insect, rodent, nematode, fungus, bird, vertebrate, invertebrate, weed, virus, bacteria, or other microorganism that is injurious to human health. (s) “Pre-roll” means dried cannabis flower rolled in paper prior to retail sale. (t)“Proprietary private security officer” has the same meaning as that term as defined in Business and Professions Code section 7574.01. (u)“Publicly owned land” means any building or real property that is owned by a city, county, state, federal, or other government entity. (v)“Purchase” means obtaining medical cannabis goods in exchange for consideration. (w)“Purchaser” means a person who is engaged in a transaction with a licensee for purposes of obtaining medical cannabis goods. (x)“Quarantine” means the storage or identification of medical cannabis goods, to prevent distribution or transfer of the medical cannabis goods, in a physically separate area clearly identified for such use. (y)“Residential area” is an area that is within 600 feet of any single-family or multifamily residence, other than commercial hotels, motels, and similar establishments for temporary lodging. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 2 of 58 (z)“Retail area” means a building, room, or other area upon the licensed dispensary premises in which medical cannabis goods are sold or displayed. (aa) “Security monitoring” means the continuous and uninterrupted attention to potential alarm signals that can be transmitted from a security alarm system for the purpose of summoning law enforcement. (bb) “Sell,” “sale,” and “to sell” include any transaction whereby, for any consideration, title to medical cannabis is transferred from one person to another, and includes the delivery of medical cannabis goods pursuant to an order placed for the purchase of the same and soliciting or receiving an order for the same, but does not include the return of medical cannabis goods by a licensee to the licensee from whom such medical cannabis goods were purchased. (cc) “Sublet” means to lease or rent all or part of a leased or rented property. (dd) “Vehicle alarm system” is a device or series of devices installed to discourage theft of the commercial vehicle or its contents and is intended to summon general attention or to summon law enforcement as a result of an indication of an attempted breach of the commercial vehicle. (ee) “Wholesale” means the sale of medical cannabis goods to a distributor for resale to one or more dispensaries. Authority: Section 19302, 19302.1, 19304, and 19300.5(b), Business and Professions Code. Reference: Section 19300.5(b), 19302, and 19304, Business and Professions Code. § 5001. [RESERVED] § 5002. [RESERVED] Article 2. Applications § 5003. [RESERVED] § 5004. Owner (a) For publicly traded companies, “owner” means the chief executive officer or any person or entity with an aggregate ownership interest of 5 percent or more. (b) For all businesses other than publicly traded companies, an owner is: (1) An individual that has an aggregate ownership interest, other than a security interest, lien, or encumbrance, of 20 percent or more in the commercial cannabis business; (2) The chief executive officer and all members of the board of directors of an entity when that entity has an aggregate ownership interest, other than a security interest, lien, or encumbrance, of 20 percent or more in the commercial cannabis business; or (3) An individual that will be participating in the direction, control, or management of the licensed commercial cannabis business. For purposes of this section, participating in the Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 3 of 58 direction, control, or management of the licensed commercial cannabis business means that the individual has been delegated discretionary powers to organize, direct, carry on or control the operations of the licensed commercial cannabis business. Authority to control one or more of the following functions may be considered evidence that such an individual is participating in the direction, control, or management of the licensed commercial cannabis business: (A)To hire or separate employees. (B) To contract for the purchase or sale of medical cannabis goods. (C)To make or participate in making policy decisions relative to operations of the licensed commercial cannabis business. (c) Individuals that have a community property interest under Family Code section 760 in the commercial cannabis business but who will not be participating in the direction, control, or management of the commercial cannabis business as defined under subsection (b)(3) of this section are not required to submit the information required of owners in the application for licensure under section 5006, subsection (b)(22) of this division. However, information regarding an individual with a community property interest shall be disclosed by the owner in the application for licensure pursuant to 5006, subsection (b)(22)(P). If a license in which an individual has a community property interest is revoked, the individual shall be barred from holding an interest in the same license type as the license that was revoked for the same period of time as the owner is barred from obtaining a new license. If a license in which an individual has a community property interest in is denied, the individual shall be barred from holding an interest in the same license type as the license that was denied for the same period of time as an owner is barred from obtaining a new license under Business and Professions Code section 486. (d) A bank or financial institution whose interest constitutes only a loan is not considered to be an owner. (e) The following individuals are considered to have a noncontrolling interest in the commercial cannabis business and are not required to submit the information required of owners in the application for licensure under section 5006, subsection (b)(22) of this division: (1) Individuals that own an interest in a commercial cannabis business that is less than 5 percent for publicly traded companies or less than 20 percent for all other businesses; (2) Individuals that own an interest of an entity owner under subsection (b)(2) that are not the chief executive officer nor a member of the board of directors; and (3) Individuals that own an interest in an entity that owns an interest in a commercial cannabis business that is less than 20 percent. Authority: Section 19302, 19302.1, and 19304, Business and Professions Code. Reference: Section 19300.5(b), Business and Professions Code. § 5005. [RESERVED] Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 4 of 58 § 5006. Application Requirements (a) Applications may be completed online at www.bmcr.ca.gov or by delivering a printed copy to the bureau. (b) An application for medical cannabis licensure includes the following: (1)The name of the applicant. For applicants who are individuals, the applicant shall provide both the first and last name of the individual. For applicants who are business entities, the applicant shall provide the legal business name of the applicant. (2) If applicable, the business trade name (“DBA”) of the applicant. (3)The license type the applicant is applying for. (4)For applicants who are individuals, whether the owner is serving or has previously served in the military. Disclosure of military service is voluntary. An applicant that has served as an active duty member of the Armed Forces of the United States and was honorably discharged and who can provide evidence of such honorable discharge shall have his or her application expedited pursuant to Business and Professions Code section 115.4. (5)A list of the license types and the license numbers issued from the bureau and all other medical cannabis licensing authorities that the applicant holds, including the date the license was issued and the licensing authority that issued the license. (6)Whether the applicant has been denied a license by the bureau or any other medical cannabis licensing authority. The applicant shall provide the type of license applied for, the name of the licensing authority that denied the application, and the date of denial. (7)The physical address of the premises. (8)The address of record for the applicant. (9)The telephone number for the premises. (10)The website address of the applicant’s business if applicable. (11)The email address for the applicant’s business if applicable. (12)Contact information for the applicant’s designated primary contact person including the name, title, address, phone number, and email address of the individual. (13)Contact information for the designated agent for service of process including the name, title, address, phone number, and email address of this individual. (14)The business organizational structure of the applicant, for example partnership or corporation. (15)The business-formation documents, which may include but are not limited to articles of incorporation, operating agreements, partnership agreements, and fictitious business name statements. The applicant shall also provide all documents filed with the California Secretary of Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 5 of 58 State, which may include but are not limited to articles of incorporation, certificates of stock, articles of organization, certificates of limited partnership, and statements of partnership authority. (16)A list of every fictitious business name the applicant is operating under including the address where the business is located. (17)An applicant that is a foreign corporation shall include in its application the certificate of qualification issued by the California Secretary of State under Corporations Code section 2105. (18)The applicant shall supply the following financial information: (A)A list of funds belonging to the commercial cannabis business held in savings, checking, or other accounts maintained by a financial institution. The applicant shall provide for each account, the financial institution’s name, the financial institution’s address, account type, account number, and the amount of money in the account. (B) A list of loans made to the commercial cannabis business. For each loan, the applicant shall provide the amount of the loan, the date of the loan, term(s) of the loan, security provided for the loan, and the name, address, and phone number of the lender. (C)A list of investments made into the commercial cannabis business. For each investment, the applicant shall provide the amount of the investment, the date of the investment, term(s) of the investment, and the name, address, and phone number of the investor. (D)A list of all gifts of any kind given to the applicant for its use in conducting commercial cannabis activity. For each gift the applicant shall provide the value of the gift or description of the gift, and the name, address, and phone number of the provider of the gift. (19)The date the applicant began operations pursuant to section 5022 of this division. (20)The contact information for the local jurisdiction in which the applicant proposes to operate, including the name of the local licensing authority, the address, and phone number. (21) A complete list of every individual that has a noncontrolling interest in the commercial cannabis business as defined in section 5004, subsection (e) of this division. (22)A complete list of every owner of the applicant as defined in section 5004 of this division. Each individual named on this list shall submit the following information: (A)The full name of the owner. (B)The owner’s title within the applicant entity. (C) The owner’s date of birth and place of birth. (D)The owner’s social security number or individual taxpayer identification number. (E)The owner’s home address. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 6 of 58 (F)The owner’s telephone number. This may include a number for the owner’s home, business, or mobile telephone. (G)The owner’s email address. (H)The date the owner acquired an ownership interest in the applicant entity. (I)The percentage of the ownership interest held in the applicant entity by the owner. (J) If applicable, the number of shares in the applicant entity that the owner holds. (K)Whether the owner has a financial interest in any other licensee under the Act. For purposes of this section “financial interest” means an investment into a commercial cannabis business, a loan provided to a commercial cannabis business, or any other equity interest in a commercial cannabis business. (L)A copy of the owner’s government-issued identification. Acceptable forms of identification are a document issued by a federal, state, county, or municipal government that includes the name, date of birth, physical description, and picture of the person, such as a driver license. (M)A detailed description of the owner’s convictions. A conviction within the meaning of this section means a plea or verdict of guilty or a conviction following a plea of nolo contendere. Convictions dismissed under Penal Code section 1203.4 or equivalent non-California law must be disclosed. Juvenile adjudications and traffic infractions under $300 that did not involve alcohol, dangerous drugs, or controlled substances do not need to be included. For each conviction, the owner shall provide the following: (i)The date of conviction. (ii)Dates of incarceration if applicable. (iii)Dates of probation if applicable. (iv)Dates of parole if applicable. (v)A detailed description of the offense for which the owner was convicted. (vi)A statement of rehabilitation for each conviction. The statement of rehabilitation is to be written by the owner and shall contain all evidence that the owner would like the bureau to consider that demonstrates the owner’s fitness for licensure. Supporting evidence may be attached to the statement of rehabilitation and may include, but is not limited to, a certificate of rehabilitation under Penal Code section 4852.01, and dated letters of reference from employers, instructors, or professional counselors that contain valid contact information for the individual providing the reference. (N)A copy of the owner’s completed application for electronic fingerprint images submitted to the Department of Justice. (O)Attestation to the following statement: Under penalty of perjury, I hereby declare that the information contained within and submitted with the application is complete, true, and accurate. I Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 7 of 58 understand that a misrepresentation of fact is cause for rejection of this application, denial of the license, or revocation of a license issued. (P)The following information regarding an individual with a community property interest in the commercial cannabis business under Family Code section 760 shall be provided by the owner: (i)The full name of the individual. (ii)The individual’s date of birth and place of birth. (iii)The individual’s social security number or individual taxpayer identification number. (iv)The individual’s mailing address. (v)The individual’s telephone number. This may include a number for the owner’s home, business, or mobile telephone. (vi)Whether the individual has a financial interest in any other licensee under the Act. For purposes of this section “financial interest” means an investment into a commercial cannabis business, a loan provided to a commercial cannabis business, or any other equity interest in a commercial cannabis business. (23)Documentation issued by the local jurisdiction in which the applicant proposes to operate certifying that the applicant is in compliance with all local ordinances and regulations, or will be in compliance with all local ordinances and regulations by the time the bureau issues a license. (24)Evidence that the applicant has the legal right to occupy and use the proposed location that complies with section 5014 of this division. (25)For an applicant applying for a dispensary license, the applicant shall provide evidence that the proposed location is at least a 600-foot radius from a school, as required by section 11362.768 of the Health and Safety Code. (26)For an applicant with 20 or more employees, the applicant shall attest that the applicant has entered into a labor peace agreement and provide a copy of the agreement. (27)The applicant shall provide a valid seller’s permit number issued by the California State Board of Equalization. If the applicant has not yet received a seller’s permit, the applicant shall attest that the applicant is currently applying for a seller’s permit. (28)A diagram of the premises as required by section 5012 of this division. (29)Proof of a bond as required by section 5016 of this division. (30)For applicants applying for a license to distribute medical cannabis goods, the application shall include a detailed description of the applicant’s operating procedures including the following: (A) Inventory Practices Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 8 of 58 (i)A description of the applicant’s practice for receiving shipments of inventory. (ii)Where the applicant’s inventory will be kept and how records of the inventory will be maintained. (iii)The applicant’s practice for performing inventory reconciliation and for ensuring that inventory records are accurate. (B) Quality-Assurance Practices (i)The applicant’s practices for preventing the deterioration of any medical cannabis goods held by the applicant. (ii)The applicant’s practices for ensuring that all medical cannabis goods are properly packaged and labeled prior to retail sale. (iii)The applicant’s practices for ensuring a licensed testing laboratory samples and analyzes medical cannabis goods held by the applicant. (C)Security Practices (i)The applicant’s practices for allowing individuals access to the premises. (ii)A description of the applicant’s video surveillance system including camera placement and practices for the maintenance of video surveillance equipment. (iii)How the applicant will ensure that all access points to the premises will be secured, including the use of security personnel. (iv)A description of the applicant’s security alarm system. (31)For applicants applying for a license to transport medical cannabis goods, the application shall include a detailed description of the applicant’s operating procedures including the following: (A)The applicant’s practices for taking possession of medical cannabis goods. (B)The applicant’s practices for holding medical cannabis goods while not in transport. (C)The applicant’s practices for preventing the deterioration of any medical cannabis goods held by the applicant. (D)The applicant’s practices for transport of medical cannabis goods. (E)Security Practices (i)The applicant’s practices for allowing individuals access to the premises. (ii)A description of the applicant’s video surveillance system, including camera placement and procedures for the maintenance of video surveillance equipment. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 9 of 58 (iii)How the applicant will ensure that all access points to the premises will be secured, including the use of security personnel. (iv) A description of the applicant’s alarm system. (32)For applicants applying for a license to dispense medical cannabis goods, the application shall include a detailed description of the applicant’s operating procedures including the following: (A)Inventory Practices (i)A description of the applicant’s practices for receiving shipments of inventory. (ii)Where the applicant’s inventory will be kept and how records of the inventory will be maintained. (iii)The applicant’s practices for performing inventory reconciliation and for ensuring that inventory records are accurate. (B) Quality-Assurance Practices (i)The applicant’s practices for preventing the deterioration of any medical cannabis goods held by the applicant. (ii)The applicant’s practices for ensuring that all medical cannabis goods are properly packaged and labeled prior to sale. (C) Security Practices (i)The applicant’s practices for allowing individuals access to the licensed premises. (ii)A description of the applicant’s video surveillance system including camera placement and practices for the maintenance of video surveillance equipment. (iii)How the applicant will ensure that all access points to the premises will be secured, including the use of security personnel. (iv)A description of the applicant’s security alarm system. (33)The waiver of sovereign immunity required by Section 5017 of this division, if applicable. Authority: Sections 19302, 19302.1, 19304, and 19322(a)(8), Business and Professions Code. Reference: Section 2105, Corporations Code and Section 19322, Business and Professions Code. § 5007. [RESERVED] § 5008. Law Enforcement Personnel Not to Hold Licenses (a) No license authorized by the Act and issued by the bureau shall be held by, or issued to, any person holding office in, or employed by, any agency of the State of California or any of its political subdivisions when the duties of such person have to do with the enforcement of the Act or any other penal provisions of law of this State prohibiting or regulating the sale, use, Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 10 of 58 possession, transportation, distribution, testing, manufacturing, or cultivation of medical cannabis goods. (b) This section applies to, but is not limited to, any persons employed in the State of California Department of Justice, in any district attorney's office, in any city attorney’s office, in any sheriff's office, in any local police department, or in the State Department of Consumer Affairs. (c) This section shall not prohibit the ownership of any licensed commercial cannabis business by any local law enforcement officer or local reserve law enforcement officer when the licensed premises are located in a county other than that in which he or she is employed as a law enforcement officer. (d) This section applies to any person mentioned herein who has any ownership interest, directly or indirectly, in any business to be operated or conducted under a medical cannabis license. (e) This section does not apply to any person who holds a license in the capacity of executor, administrator, or guardian. Authority cited: 19302, 19302.1, and 19304, Business and Professions Code, and 19990, Government Code. Reference: Section 19302, 19302.1, and 19304, Business and Professions Code. § 5009. [RESERVED] § 5010. Premises (a)Premises means the designated structures and land specified in the application that are in the possession of and used by the applicant or licensee to conduct the commercial cannabis activity. (b) The premises must be a contiguous area and may only be occupied by one licensee. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19320, and 19323, Business and Professions Code. § 5011. [RESERVED] § 5012. Premises Diagram An applicant shall submit to the bureau with his or her application a complete and detailed diagram of the proposed premises. (a)The diagram must show the boundaries of the property and the proposed premises to be licensed, showing all boundaries, dimensions, entrances and exits, interior partitions, walls, rooms, windows, doorways, and common or shared entryways. The diagram must show the areas in which all commercial cannabis activities will take place, including but not limited to, limited- access areas. (b)The diagram must be to scale. (c)The diagram shall not contain any highlighting. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 11 of 58 (d) If the proposed premises consists of only a portion of a property, the diagram must be labeled indicating which part of the property is the proposed premises and what the remaining property is used for. Authority: Sections 19302, 19302.1, 19304, 19320(c), 19322(a)(8), and Business and Professions Code. Reference: Sections 19320(c), Business and Professions Code. § 5013. [RESERVED] § 5014. Property-Owner Approval (a) If the applicant is not the landowner of the property upon which the premises is located, the applicant shall provide to the bureau a document from the landowner that states that the applicant has the right to occupy the property and acknowledging the applicant may use the property for the commercial cannabis activity for which the applicant is applying for licensure. An applicant shall also provide a copy of the rental agreement, as applicable. (b) If the applicant is the landowner of the property on which the premises is located, the applicant shall provide to the bureau a copy of the title or deed to the property. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Section 19300.5(b), and 19321(b), Business and Professions Code. § 5015. [RESERVED] § 5016. Bond An applicant shall provide proof of having obtained a surety bond in the amount of $5,000 payable to the State of California to ensure payment of the cost incurred for the destruction of medical cannabis goods necessitated by a violation of the Act or the regulations adopted thereunder. All bonds required under this regulation must be issued by a corporate surety licensed to transact surety business in the state of California. Authority: Sections 19302, 19302.1, 19304, 19322, and 19334, Business and Professions Code. Reference: Sections 19322 and 19334, Business and Professions Code. § 5017. Waiver of Sovereign Immunity (a) Any applicant or licensee that may fall within the scope of sovereign immunity that may be asserted by a federally recognized tribe or other sovereign entity must waive any sovereign immunity defense that the applicant or licensee may have, may be asserted on its behalf, or may otherwise be asserted in any state administrative or judicial enforcement actions against the applicant or licensee, regardless of the form of relief sought, whether monetary or otherwise, under the state laws and regulations governing commercial cannabis activity. The applicant or licensee must submit a written waiver of sovereign immunity to the bureau with any license application or renewal, which is valid for the period of the license. The written waiver shall include that the applicant or licensee has the lawful authority to enter into the waiver required by this section, the applicant or licensee hereby waives sovereign immunity, and the applicant or licensee agrees to do all of the following: Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 12 of 58 (1)Provide documentation to the bureau that establishes that the applicant or licensee has the lawful authority to enter into the waiver required by this section; (2)Conduct all commercial cannabis activity in full compliance with the state laws and regulations governing commercial cannabis activity, including submission to all enforcement provisions thereof; (3)Allow access as required by state statute or regulation by persons or entities charged with duties under the state laws and regulations governing commercial cannabis activity to any premises or property at which the applicant conducts any commercial cannabis activity, including premises or property where records of commercial cannabis activity are maintained by or for the applicant or licensee; (4)Provide any and all records, reports, and other documents as may be required under the state laws and regulations governing commercial cannabis activity; (5)Conduct commercial cannabis activity with other state commercial cannabis licensees only, unless otherwise specified by state law; (6)Meet all of the requirements for licensure under the state laws and regulations governing the conduct of commercial cannabis activity, and provide truthful and accurate documentation and other information of the applicant’s qualifications and suitability for licensure as may be requested; and (7)Submit to the personal and subject matter jurisdiction of the California courts to address any matter related to the waiver or the commercial cannabis application, license, or activity, and that all such matters and proceedings shall be governed, construed and enforced in accordance with California substantive and procedural law, including but not limited to the Medical Cannabis Regulation and Safety Act and the Administrative Procedure Act. (b)Any applicant or licensee must immediately notify the bureau of any changes that may materially affect the applicant or licensee’s compliance with subdivision (a). (c) Any failure by an applicant or licensee to comply with the requirements of subdivisions (a) or (b)shall be a basis for denial of an application or renewal or discipline of a licensee. Authority: Sections 19302, 19302.1, 19304, Business and Professions Code. Reference: Sections 19303, 19304, 19311, 19312, 19322, 19323, and 19324, Business and Professions Code. § 5018. Requirements for Continued Operation While Application Pending All applicants that were in operation prior to January 2, 2018, may continue to operate while their application is pending if a completed application is received by the bureau no later than 5:00 p.m. Pacific Time on July 2, 2018, and the continuing operations are the same commercial cannabis activity as the license type for which the applicant is applying. If the application for Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 13 of 58 licensure is denied, the applicant shall cease all commercial cannabis business operations until a license is obtained. Authority: Sections 19304 and 19321, 19322, Business and Professions Code. Reference: Sections 19321 and 19322, Business and Professions Code. § 5019. [RESERVED] § 5020. Priority Review Priority review of the application shall be given to applicants that were in operation and in good standing with the local jurisdiction by January 1, 2016, and whose business ownership or premises are currently the same as they were on January 1, 2016. Priority applications shall be processed for review in the order in which they are received. Authority: Section 19302, 19302.1, 19304, and 19321(b), Business and Professions Code. Reference: Section 19321(b), Business and Professions Code. § 5021. [RESERVED] § 5022. Date Operation Began (a) For the purposes of sections 5018 and 5020 of this division, the date on which an applicant was in operation is the date an applicant began actively conducting the same commercial cannabis activity as the license type for which the applicant is applying. (b)For purposes of this section, “actively conducting” means engaging in the transportation, distribution, testing, or sale of medical cannabis goods as authorized by the local jurisdiction. (c)The date an applicant began actively conducting the commercial cannabis activity shall be provided by the applicant. The applicant shall attest to the date under the penalty of perjury and shall provide evidence of the date operations began by submitting a dated copy of any of the following: (1)Articles of incorporation; (2)Certificate of stock; (3) Articles of organization; (4)Certificate of limited partnership; (5)Statement of partnership authority; (6) Tax form; (7) Local license, permit, or other written authorization; (8)Receipts; or (9)Any other business record. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 14 of 58 Authority: Section 19304 and 19321(b), Business and Professions Code. Reference: Sections 19320(b) and 19321(b), Business and Professions Code. § 5023. [RESERVED] § 5024. Good Standing For purposes of sections 5018 and 5020 of this division, good standing shall be evidenced by a document issued or signed by the local jurisdiction that contains the following: (a)Name of the applicant; (b)Address of the premises to be licensed; (c) License type that the applicant is applying to the bureau for; (d)Name of the local jurisdiction; (e) Name of the local jurisdiction office that issued the license, permit, or other authorization for the applicant to conduct commercial cannabis activity in the jurisdiction as required by Business and Professions Code section 19320; (f)Name and contact information for the person authorized by the local jurisdiction to sign on its behalf; (g)Signature of the person authorized to sign on behalf of the local jurisdiction; and (h) A statement to the effect of: “The above named party has been issued a license, permit, or other authorization from this jurisdiction to conduct commercial cannabis activity. The above named party began operation and was in good standing in this jurisdiction on or before January 1, 2016.” Authority: Section 19304, 19320 and 19321(b), Business and Professions Code. Reference: Section 19321(b), Business and Professions Code. § 5025. [RESERVED] § 5026. Additional Information The bureau may request additional information and documents from the applicant. The bureau will provide the applicant a deadline for submittal of additional information. The bureau will consider the complexity of the information requested and the ease with which the information can be obtained and transmitted to the bureau by the applicant in determining the deadline. Authority: Sections 19302, 19302.1, 19304, and 19322(a)(4), Business and Professions Code. Reference: Sections 19302 and 19322, Business and Professions Code. § 5027. [RESERVED] Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 15 of 58 § 5028. Incomplete Applications (a) If the bureau determines that the application is incomplete, the bureau shall provide notice to the applicant in accordance with Business and Professions Code section 124. (b)An applicant has one year from the date of the notice in subsection (a) to correct all deficiencies. If the applicant fails to correct the deficiencies within the one-year period, the application shall be considered abandoned under Business and Professions Code section 142. (c)An applicant may reapply at any time following an abandoned application. (d)The bureau will not refund application fees for an incomplete application. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 124, 142, and 19322 Business and Professions Code. § 5029. [RESERVED] § 5030. Withdrawal of Application (a)An applicant may withdraw an application at any time prior to the bureau’s issuance of a license or denial of a license. (b)Requests to withdraw an application must be submitted to the bureau in writing, dated, and signed by the applicant. (c) In accordance with Business and Professions Code section 118, withdrawal of an application shall not, unless the bureau has consented in writing to such withdrawal, deprive the bureau of its authority to institute or continue a proceeding against the applicant for the denial of the license upon any ground provided by law or to enter an order denying the license upon any such ground. (d)The bureau will not refund application fees for a withdrawn application. (e)An applicant may reapply at any time following the withdrawal of an application. Authority: Sections 19302, 19302.1, 19304, and 19322, Business and Professions Code. Reference: Sections 118 and 19322, Business and Professions Code. Article 3. General Licensing § 5031. [RESERVED] § 5032. Substantially Related Offenses (a) For the purpose of denial of a license, convictions that are substantially related to the qualifications, functions, or duties of the business for which the application is made include: (1) A violent felony conviction, as specified in subdivision (c) of Section 667.5 of the Penal Code. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 16 of 58 (2) A serious felony conviction, as specified in subdivision (c) of Section 1192.7 of the Penal Code. (3)A felony conviction involving fraud, deceit, or embezzlement. (4) A felony conviction for hiring, employing, or using a minor in transporting, carrying, selling, giving away, preparing for sale, or peddling, any controlled substance to a minor; or selling, offering to sell, furnishing, offering to furnish, administering, or giving any controlled substance to a minor. (5)A felony conviction for drug trafficking with enhancements pursuant to Health and Safety Code sections 11370.4 or 11379.8. (b)Except as provided in subparagraphs (4) and (5) of paragraph (a) and notwithstanding Chapter 2 (commencing with Section 480) or Division 1.5, a prior conviction, where the sentence, including any term of probation, incarceration, or supervised release, is completed, for possession of, possession for sale, sale, manufacture, transportation, or cultivation of a controlled substance is not considered substantially related, and shall not be the sole ground for denial of a license. Conviction for any controlled substance felony subsequent to licensure shall be grounds for revocation of a license or denial of the renewal of a license. Authority: Sections 19302, 19302.1, 19304, and 19323(b)(4), Business and Professions Code. Reference: Sections 19302.1 and 19323(b)(4), Business and Professions Code. § 5033. Criteria for Rehabilitation (a) When evaluating whether an applicant who has been convicted of a criminal offense that is substantially related to the qualifications, functions, or duties of the business for which the application is made should be issued a license, the bureau shall consider the following criteria of rehabilitation: (1)The nature and severity of the act or offense; (2)Whether the person has a felony conviction based on possession or use of cannabis or cannabis products that would not be a felony if the person was convicted of the offense on the date of the person’s application; (3)The applicant’s criminal record as a whole; (4)Evidence of any act committed subsequent to the act or offense under consideration that could be considered grounds for denial, suspension, or revocation of a commercial cannabis activity license; (5)The time that has elapsed since commission of the act or offense; (6)The extent to which the applicant has complied with any terms of parole, probation, restitution, or any other sanctions lawfully imposed against the applicant; (7) If applicable, evidence of dismissal under Penal Code section 1203.4 or another state’s similar law; Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 17 of 58 (8) If applicable, a certificate of rehabilitation obtained under Penal Code section 4852.01 or another state’s similar law; and (9)Other evidence of rehabilitation submitted by the applicant. (b) If an applicant has been denied a license based on a conviction, the applicant may request a hearing pursuant to Business and Professions Code section 19324 to determine if the applicant should be issued a license. Authority: Sections 19302, 19302.1, 19304, and 19323(b)(4), Business and Professions Code. Reference: Sections 19302.1 and 19323(b)(4), Business and Professions Code. § 5034. [RESERVED] § 5035. [RESERVED] § 5036. Additional Grounds for Denial of a License In addition to the reasons for denial in Business and Professions Code section 19323, a license may be denied for the following reasons: (a)The applicant’s premises does not fully comply with standards set in regulation. (b)The applicant’s premises is substantially different from the diagram of the premises submitted by the applicant, in that the size, layout, location of a common entryways, doorways, or passage ways, means of public entry or exit, or limited-access areas within the licensed premises are not the same. (c) The applicant denied the bureau access to the premises. (d)The applicant made a material misrepresentation on the application. (e)The applicant failed to correct the deficiencies within the application in accordance with section 5028 of this division. (f) The applicant has been denied a license, permit, or other authorization to engage in commercial cannabis activity by a state or local licensing authority. Authority: Sections 19302, 19302.1, 19304, and 19323, Business and Professions Code. Reference: Sections 19302.1, 19322, and 19323, Business and Professions Code. § 5037. [RESERVED] § 5038. [RESERVED] § 5039. Notification of Change (a) Every licensee shall notify the bureau in writing within 10 calendar days of any change to any item listed in the application. The notification shall be signed by an owner as defined in section 5004 of this division. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 18 of 58 (b) If at the time of licensure a licensee employed less than 20 employees and later employs 20 or more employees, the licensee shall provide to the bureau a document attesting that the licensee has entered into a labor peace agreement and a copy of the agreement within 180 days of employing 20 or more employees. (c) Licenses are not transferable. A change to the business organizational structure or ownership requires a new application under section 5006 of this division and the initial license fees. Authority: Section 19302, 19302.1, and 19304 Business and Professions Code. Reference: Section 136, 19300.5(b) and 19322, Business and Professions Code. § 5040. [RESERVED] § 5041. [RESERVED] § 5042. Renewal of License (a) To renew a license, a completed license renewal form and renewal license fee shall be received by the bureau from the licensee no earlier than 60 calendar days before the expiration of the license, and no later than 5:00 p.m. Pacific Time on the last business day before the expiration of the license. Failure to receive a notice for license renewal does not relieve a licensee of the obligation to renew all licenses as required. (b) In the event the license is not renewed prior to the expiration date, the licensee must cease all commercial medical cannabis operations. (c)The license renewal form shall contain the following: (1)The name of the licensee. For licensees who are individuals, the applicant shall provide both the first and last name of the individual. For licensees who are business entities, the licensee shall provide the legal business name of the applicant. (2)The license number and expiration date. (3)The licensee’s address of record and premises address. (4)An attestation that all information provided to the bureau in the original application under section 5006 of this division or subsequent notification under section 5039 of this division, is accurate and current. Authority: Section 19302, 19302.1, 19304, 19321, and 19322, Business and Professions Code. Reference: Sections 19321 and 19322, Business and Professions Code. § 5043. [RESERVED] § 5044. [RESERVED] § 5045. Surrender of License (a)Every licensee who surrenders, abandons, or quits the licensed premises, or who closes the licensed premises for a period exceeding 30 consecutive calendar days, shall, within 30 calendar Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 19 of 58 days after closing, surrendering, quitting, or abandoning the licensed premises, surrender the license certificate or license certificates to the bureau. The bureau may seize the license certificate or certificates of a licensee who fails to comply with the surrender provisions of this section and may proceed to revoke the license or licenses. (b)The bureau may cancel the license or licenses of a licensee upon request by the licensee. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302 and 19322, Business and Professions Code. § 5046. [RESERVED] § 5047. [RESERVED] § 5048. Physical Modification of Premises (a)A licensee shall not make a physical change, alteration, or modification of the licensed premises that materially or substantially alters the licensed premises or the use of the licensed premises from the premises diagram originally filed with the license application without the prior written approval of the bureau. A licensee whose premises is to be materially or substantially changed, modified, or altered is responsible for filing a request for premises modification with the bureau. (b)Material or substantial changes, alterations, or modifications requiring approval include, but are not limited to, the removal, creation, or relocation of a common entryway, doorway, passage, or a means of public entry or exit, when such common entryway, doorway, or passage alters or changes limited-access areas within the licensed premises. (c)A licensee shall request approval of a physical change, alteration, or modification in writing, and the request shall include: (1)A new premises diagram that conforms to requirements in section 5012 of this division; and (2)A nonrefundable fee. (d)A licensee shall provide additional documentation requested by the bureau to evaluate the licensee’s request. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302.1 and 19320, Business and Professions Code. § 5049. [RESERVED] § 5050. Track and Trace Requirements (a)A licensee shall create and maintain an active account within the track and trace system prior to buying, selling, or transporting, any medical cannabis goods under a license issued by the bureau. (b)A licensee shall designate one individual within the organization as the licensee’s designated track and trace administrator. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 20 of 58 (1) The designated track and trace administrator may authorize additional licensee representatives to obtain track and trace system administrator accounts. (2) Each licensee representative who obtains access to the track and trace system on behalf of the licensee, shall obtain his or her own unique track and trace system administrator log-on and password. (3) Licensee representatives shall only log into the track and trace system and submit information to the track and trace system using a log-on that has been assigned to that licensee representative. (4) A licensee shall maintain a complete and accurate list of all track and trace system administrators for each licensed premises. This list shall be provided to the bureau upon request. (c)A licensee shall ensure that only authorized individuals are able to access the track and trace system on behalf of the licensee. (d)A licensee shall accurately record all transactions involving the physical movement or destruction of medical cannabis goods in the track and trace system. (1)A licensed transporter shall record transactions into the track and trace system pursuant to Chapter 3 of this division. (2)A licensed distributor shall record transactions into the track and trace system pursuant to Chapter 2 of this division. (3) A licensed dispensary shall record transactions into the track and trace system pursuant to Chapter 4 of this division. (4) A licensed testing laboratory shall record transactions into the track and trace system pursuant to Chapter 5 of this division. (e)All transactions must be entered into the track and trace system no later than the end of the day that the transaction occurred. (f) If, for any reason, a licensee is not able to access the track and trace system, the licensee shall create and maintain records detailing all transactions that would have been entered into the track and trace system. Upon the restoration of access to the track and trace system, all transactions that occurred while access to the track and trace system was not available shall be accurately entered into the track and trace system. (g) Licensees shall only enter accurate information into the track and trace system and shall correct any known errors in the information entered into the track and trace system by the licensee immediately upon discovery. Authority: Sections 19302, 19302.1, 19304, and 19335, Business and Professions Code. Reference: Section 19335, Business and Professions Code. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 21 of 58 Article 4. Enforcement § 5051. Licensee’s Responsibility for Acts of Employees and Agents In construing and enforcing the provisions of the Act and the regulations in this division, the act, omission, or failure of an agent, officer, or other person acting for or employed by a licensee, within the scope of his or her employment or office, shall in every case be deemed the act, omission, or failure of the licensee. Authority: Sections 19302, 19302.1, 19304, 19311, and 19312, Business and Professions Code. Reference: Sections 19300, 19300.5, 19302.1, 19311, and 19312, Business and Professions Code. § 5052. [RESERVED] § 5053. [RESERVED] § 5054. Additional Grounds for Disciplinary Action In addition to the provisions of Business and Professions Code section 19311, grounds for disciplinary action include the following: (a)The licensee’s premises is substantially different from the premises diagram submitted to the bureau, or from any change, alteration, or modification approved by the bureau. (b)The licensee denied the bureau access to the premises for inspection. (c)The licensee impeded an investigation by the bureau, law enforcement, or any other licensing authority. Authority: Sections 19302, 19302.1, 19304, and 19311, Business and Professions Code. Reference: Section 19307, 19311, 19302.1, 19322, 19327, and 19360, Business and Professions Code. § 5055. [RESERVED] Article 5. Records and Reporting § 5056. Record Retention (a)Each licensee shall keep and maintain the following records for at least seven years: (1)Financial records including, but not limited to, bank statements, sales invoices, receipts, tax records, and all records required by the California State Board of Equalization under Title 18 California Code of Regulations section 1968. (2)Personnel records, including each employee’s full name, social security, or individual tax payer identification number, date of beginning employment, and date of termination of employment if applicable. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 22 of 58 (3)Training records, including but not limited to the content of the training provided and the names of the employees that received the training. (4) Contracts with other licensees regarding commercial cannabis activity. (5) Permits, licenses, and other local authorizations to conduct the licensee’s commercial cannabis activity. (6) Security records. (b)The bureau may make any examination of the books and records of any licensee as it deems necessary to perform its duties under the Act. (c)Records shall be kept in a manner that allows the records to be produced for the bureau at the licensed premises in either hard copy or electronic form, whichever the bureau requests. (d)A licensee may contract with a third party to provide custodial or management services of the records. Such a contract shall not relieve the licensee of his or her responsibilities under this section. Authority: Sections 19302, 19302.1, 19304, and 19327, Business and Professions Code. Reference: Section 19327, Business and Professions Code and Section 1968, California Code of Regulations, Title 18. § 5057. [RESERVED] § 5058. Significant Discrepancy in Inventory A significant discrepancy in inventory of medical cannabis goods means a difference of at least $1,000 of medical cannabis goods within a 7-day period or at least $2,000 of medical cannabis goods in a 30-day period. Authority: Sections 19302, 19302.1, 19304, and 19334, Business and Professions Code. Reference: Section 19334, Business and Professions Code. § 5059. [RESERVED] § 5060. Notification of Criminal Acts, Civil Judgments, and Revocation of a Local License, Permit, or Other Authorization After Licensure (a)A licensee shall ensure that the bureau is notified in writing of a criminal conviction, either by mail or electronic mail, within 48 hours of the conviction. (b)A licensee shall ensure that the bureau is notified in writing of a civil penalty or judgment rendered against the licensee, either by mail or electronic mail, within 48 hours of delivery of the verdict or entry of judgment, whichever is sooner. (c)A licensee shall ensure that the bureau is notified in writing of the revocation of a local license, permit, or other authorization, either by mail or electronic mail within 48 hours of receiving notice of the revocation. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 23 of 58 Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19320, 19323, and 19360, Business and Professions Code. § 5061. [RESERVED] § 5062. Notification of Diversion, Theft, Loss, or Criminal Activity Pertaining to Medical cannabis goods Licensees shall notify the bureau and law enforcement authorities, within 24 hours, of theft or loss of medical cannabis goods. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19334, Business and Professions Code. Article 6. Security § 5063. [RESERVED] § 5064. Access to Limited-Access Areas Licensees shall ensure that any person on the licensed premises, except for employees and contractors of the licensee, are escorted at all times by the licensee or at least one employee of the licensee when in the limited-access areas of the premises. Authority: Section 19302, 19302.1, and 19304, Business and Professions Code. Reference: Section 19322, 19334, Business and Professions Code. § 5065. [RESERVED] § 5066. Licensee Employee Badge Requirement All agents, officers, or other persons acting for or employed by a licensee shall display a laminated identification badge issued by the licensee. The identification badge shall, at a minimum, include the licensee’s “doing business as” name and license number, the employee’s first and last name, and a color photograph of the employee that shows the full front of the employee’s face and that is at least 2 inches by 2 inches in size. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Section 19304, 19322, 19334 Business and Professions Code. § 5067. [RESERVED] § 5068. Video Surveillance System (a)At a minimum, a licensed premises shall have a complete digital video surveillance system with a minimum camera resolution of 1280 × 1024 pixels. (b)The surveillance-system storage device or the cameras shall be transmission control protocol/ TCP/capable of being accessed through the internet. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 24 of 58 (c)All areas recorded by the video surveillance system shall at all times have adequate lighting to allow the surveillance cameras to effectively record images. (d)Cameras must be immobile and in a permanent location. Cameras shall be placed in a location that allows the camera to clearly record activity occurring within 20 feet of all points of entry and exit on the licensed premises, and allows for the clear and certain identification of any person and activities in all areas required to be filmed under subsection (e). (e)Areas that shall be recorded on the video surveillance system include, but are not limited to, the following: (1)Areas where medical cannabis goods are weighed, packed, stored, quarantined, loaded and unloaded for transportation, prepared, or moved within the premises; (2)Areas where cannabis is destroyed; (3)Limited-access areas; (4) Security rooms; (5)Areas storing a surveillance-system storage device with at least one camera recording the access points to the secured surveillance recording area; and (6) Entrances and exits to the premises, which shall be recorded from both indoor and outdoor vantage points. (f)Dispensaries shall also record on the video surveillance system point-of-sale areas and areas where medical cannabis goods are displayed for sale. At each point of sale location, camera placement must allow for the recording of the facial features of any person purchasing or selling medical cannabis goods, or any person in the retail area, with sufficient clarity to determine identity. (g)Cameras shall record continuously 24 hours per day and at a minimum of 20 frames per second. (h)The physical media or storage device on which surveillance recordings are stored must be secured in a manner to protect the recording from tampering or theft. (i) Surveillance recordings shall be kept for a minimum of 30 days. (j)Videos are subject to inspection by a bureau employee and shall be copied and sent to or otherwise provided to the bureau, upon request. (k)Recorded images shall clearly and accurately display the time and date. Time is to be measured in accordance with the United States National Institute Standards and Technology standards. Authority: Section 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19332 and 19334, Business and Professions Code. § 5069. [RESERVED] Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 25 of 58 § 5070. Security Personnel A licensee shall hire or contract for security personnel to provide security services for the licensed premises. All security personnel hired or contracted for by the licensee shall comply with Chapters 11.4 and 11.5 of Division 3 of the Business and Professions Code. Authority: Sections 19302, 19302.1, 19304, 19322(b)(6), and 19334, Business and Professions Code. Reference: Sections 19322(b)(6) and 19334, Business and Professions Code. § 5071. [RESERVED] § 5072. Locks A licensee shall ensure that the limited-access areas described in section 5151 of this division can be securely locked using commercial-grade, nonresidential door locks. A licensee shall also use commercial-grade, nonresidential locks on all points of entry and exit to the premises. Authority: Sections 19302, 19302.1, 19304, 19322, and 19334, Business and Professions Code. Reference: Section 19302, 19322, and 19334, Business and Professions Code. § 5073. [RESERVED] § 5074. Alarm System (a) A licensee shall maintain an alarm system as defined in Business and Professions Code section 7590.1(n). (b) A licensee shall ensure a licensed alarm company operator or one or more of its registered alarm agents installs, maintains, monitors, and responds to the alarm system. (c)Upon request, a licensee shall make available to the bureau all information related to the alarm system, monitoring, and alarm activity. Authority: Sections 19302, 19302.1, 19304, and 19322(b)(6), Business and Professions Code. Reference: Sections 19322(b)(6), and 19334, Business and Professions Code. § 5075. [RESERVED] Article 7. Returns and Destruction of Product § 5076. Returns Between Licensees (a) If a licensee discovers that a manufactured medical cannabis good that was purchased from another licensee is defective, the purchasing licensee may return the medical cannabis good to the selling licensee only in exchange for a non-defective version of the same medical cannabis good. (b) Except as provided in subsection (a) of this section, a licensee may not return medical cannabis goods purchased from another licensee. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 26 of 58 Authority: Sections 19304 and 19334, Business and Professions Code. Reference: Section 19334, Business and Professions Code. § 5077. [RESERVED] § 5078. [RESERVED] § 5079. [RESERVED] § 5080. Cannabis-Waste Management (a)A licensee may not sell cannabis waste. (b)A licensee shall manage all waste that is hazardous waste, as defined in Public Resources code section 40141, in compliance with all applicable hazardous-waste statutes and regulations. (c)A licensee shall not dispose of medical cannabis goods or cannabis waste in an unsecured waste receptacle, whether in the control of the licensee or not. (d) Medical cannabis goods that a licensee intends to render into cannabis waste shall be held in quarantine for a minimum of 72 hours. A licensee shall affix to each batch one or more documents with batch information and weight. At no time during the quarantine period may the medical cannabis goods be handled, moved, or rendered into cannabis waste. The medical cannabis goods are subject to inspection by the bureau. (e)A licensee shall make medical cannabis goods into cannabis waste by rendering the medical cannabis goods unusable and unrecognizable. The licensee shall render the medical cannabis goods into cannabis waste before removing the cannabis waste from the licensed premises. A licensee shall render the medical cannabis goods into cannabis waste by grinding and incorporating the medical cannabis goods with other ground material so that the resulting mixture is at least 50% non-cannabis material by volume. A licensee shall render medical cannabis goods into cannabis waste and track that cannabis waste one batch at a time and shall not comingle different batches into cannabis waste. (f)The licensee shall render the medical cannabis goods into cannabis waste on camera in the manner required by section 5068 of this division. (g) Medical cannabis goods that a licensee deposits at a compostable materials handling operation or facility or at an in-vessel digestion operation or facility may be rendered cannabis waste by incorporating any nonhazardous compostable material, as defined in Title 14 of the California Code of Regulations at section 17852(a)(11), that a compostable materials handling operation or facility or in-vessel digestion operation or facility may lawfully accept. (h)After a licensee renders the medical cannabis goods into cannabis waste, a licensee shall do one of the following with the cannabis waste: Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 27 of 58 (1)Dispose of the cannabis waste at a manned and fully permitted solid waste landfill; (2)Deposit the cannabis waste at a manned compostable materials handling operation or a manned and fully permitted compostable materials handling facility; or (3)Deposit the cannabis waste at a manned in-vessel digestion operation or and a manned and fully permitted in-vessel digestion facility. (i) In addition to all other tracking requirements set forth in section 5050 (General) of this division, a licensee shall use the track and trace system and on-site documents to ensure the cannabis-waste materials are identified, weighed, and tracked while on the licensed premises and when disposed of or deposited in accordance with subsection (h). (j)A licensee shall enter the date and time that the medical cannabis goods were rendered into cannabis waste and the weight of the resulting cannabis waste into the track and trace system. (k)A licensee shall maintain accurate and comprehensive records regarding cannabis waste material that account for, reconcile, and evidence all activity related to the generation and disposal or deposition of cannabis waste. A licensee shall obtain a record from the solid waste facility or operation evidencing the acceptance of the cannabis waste material at the facility or operation. The record must contain the name and address of the operation or facility, the date, the volume or weight of the cannabis waste accepted, and the name and signature of the person manning the facility or operation who accepts the cannabis waste. These documents are records subject to inspection by the bureau and shall be kept in compliance with section 5114 of this division. (l)A licensee shall enter the date and time of the disposal or deposition of the cannabis waste at a solid waste facility into the track and trace system. Authority: Sections 19302.1, 19304, and 19345, Business and Professions Code. Reference: Sections 19345, Business and Professions Code. § 5081. [RESERVED] CHAPTER 2. DISTRIBUTORS Article 1. Activities § 5082. Distributor Taking Title Before Manufacturing A distributor may take title to and possession of medical cannabis after harvest but prior to manufacturing. A distributor may sell the medical cannabis to a manufacturer or enter into a contract with a manufacturer for manufacturing the medical cannabis into medical cannabis products. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 28 of 58 Authority: 19302, 19302.1, 19304, and 19326, Business and Professions Code. Reference: Section 19300.5(p) and (q) and 19326, Business and Professions Code. § 5083. [RESERVED] § 5084. No Consignment Once medical cannabis goods are received by a dispensary, a distributor shall not maintain title after transfer of the medical cannabis goods to the dispensary. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19300.5(p), 19300.5(q), and 19326, Business and Professions Code. § 5085. [RESERVED] § 5086. Distributor-to-Distributor Sales A distributor licensee may sell medical cannabis goods to another distributor licensee. Authority: Sections 19302, 19302.1 and 19304, Business and Professions Code. Reference: Sections 19300.5(p), 19300.5(q), and 19326, Business and Professions Code. § 5087. [RESERVED] § 5088. Distributor as Destroyer A distributor may destroy medical cannabis goods on the distributor’s licensed premises, in the manner required by section 5080 of this division, for another licensee. The distributor shall enter the destruction occurrence into the track and trace system. Authority: Sections 19302, 19302.1 and 19304, Business and Professions Code. Reference: Sections 19300.5(p), 19300.5(q), and 19326, Business and Professions Code. § 5089. [RESERVED] § 5090. Storage (a)A distributor shall ensure that all medical cannabis goods batches are stored separately and distinctly from other medical cannabis goods batches on the distributor’s premises. (b)A distributor shall ensure a label with the following information is physically attached to each container of each batch: (1)The manufacturer or cultivator’s name and license number; (2)The date of entry into the distributor’s storage area; (3)The unique identifiers and batch number associated with the batch; (4)A description of the medical cannabis goods with enough detail to easily identify the batch; and Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 29 of 58 (5) The weight of or quantity of units in the batch. (c)A distributor shall store medical cannabis goods in a building designed to permit control of temperature and humidity and shall prevent the entry of environmental contaminants such as smoke and dust. The area in which medical cannabis goods are stored shall not be exposed to direct sunlight. A distributor may not store medical cannabis goods outdoors. (d)Employee breakrooms, eating areas, changing facilities, and bathrooms shall be completely separated from the storage areas. (e)A distributor shall store harvest batches and edible cannabis products that require refrigeration at 35 to 42 degrees Fahrenheit. In addition, a distributor shall store harvest batches in a darkened area with no more than 60% humidity. Authority: Sections 19302, 19302.1, 19304, and 19334, Business and Professions Code. Reference: Sections 19300.5, and 19334, Business and Professions Code. § 5091. [RESERVED] § 5092. Storage Only A distributor may provide medical cannabis goods storage only services to a cultivator, manufacturer, transporter, or other distributor, unrelated to the quality assurance and laboratory testing processes. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19326 and 19334, Business and Professions Code. § 5093. [RESERVED] § 5094. Packaging and Labeling (a)A distributor may package and label medical cannabis in the form of dried flower on behalf of a cultivator or another distributor or while holding title. (b) A distributor may re-package and re-label medical cannabis in the form of dried flower on behalf of a cultivator or another distributor or while holding title. (c)A distributor may have another licensee or nonlicensee package and label on the distributor’s premises. The distributor is responsible for compliance with applicable medical cannabis packaging and labeling laws including but not limited to Business and Professions Code section 19347 and Division 8 of Title 3 of the California Code of Regulations. (d)A distributor shall not package, re-package, label, or re-label manufactured medical cannabis goods. Authority: Sections 19300.5(j), 19302, 19302.1, 19304, 19326, and 19334, Business and Professions Code. Reference: Sections 19326 and 19334, Business and Professions Code. § 5095. [RESERVED] Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 30 of 58 § 5096. Non-Medical-Cannabis Distribution Activities A distributor may not store or distribute non-medical-cannabis goods on or from the premises licensed for distribution of medical cannabis goods. Authority: Sections 19302, 19302.1, 19304, and 19334, Business and Professions Code. Reference: Section 19300.5(p) and 19334, Business and Professions Code. Article 2. Testing and Quality Assurance § 5097. [RESERVED] § 5098. Laboratory-Testing Logistics (a)After taking physical possession of a medical cannabis batch, the distributor shall contact a licensed testing laboratory and arrange for one of the following to occur: (1)A laboratory agent to come to the distributor’s licensed premises to select a random sample for laboratory testing; or (2)The distributor to transport the entire batch to the laboratory, and a laboratory agent to select a random sample at the laboratory. (b)The distributor shall observe the laboratory agent select the random samples as defined in Chapter 5 of this division. For harvest batches, the distributor shall ensure that samples be taken from batches that do not exceed 10 pounds. The sampling shall occur on video with the batch number stated at the beginning of the video and a visible time and date indication on the video recording footage. (c)After the sample has been selected, both the distributor and the laboratory agent shall sign and date a document, attesting to the sample selection having occurred, as required by Chapter 5 of this division. Authority: Sections 19302, 19302.1, 19304, 19326, and 19342, Business and Professions Code. Reference: Sections 19326 and 19342, Business and Professions Code. § 5099. [RESERVED] § 5100. Testing Sample A distributor shall be physically present to observe the laboratory agent obtain samples of medical cannabis goods for testing. A distributor shall not assist the laboratory agent nor touch the medical cannabis goods or the sampling equipment while the laboratory agent is obtaining the samples. Authority: Sections 19302, 19302.1, 19304, 19326, 19334, and 19342, Business and Professions Code. Reference: Sections 19326, 19334, and 19342, Business and Professions Code. § 5101. [RESERVED] Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 31 of 58 § 5102. Laboratory Testing Results (a)A sample “passes” a laboratory test when the sample meets specifications in Chapter 5 of this division. (b)When a batch from a manufactured or harvest batch passes, the medical cannabis goods may be transported to one or more dispensaries. (c)A sample “fails” a laboratory test when it does not meet specifications of Chapter 5 of this division. (d) If a failed sample was collected from a manufactured cannabis batch, the distributor storing the batch shall destroy the batch. A distributor shall destroy the batch in accordance with section 5080 of this division and shall do so on camera as required by section 5068 of this division. (e) If a failed sample was collected from a harvest batch and the harvest batch could be processed by a manufacturer without the resulting production batch causing harm to medical cannabis patients, as determined under Chapter 5 of this division, a distributor may, under his or her transporter license, transport the harvest batch or arrange for transportation of the harvest batch to a manufacturer. (f) If a failed sample was collected from a harvest batch and the harvest batch cannot be processed into a production batch that is safe for medical cannabis patients, the distributor or another licensee shall destroy the batch. A distributor shall destroy the batch in accordance with section 5080 of this division and shall do so on camera as required by section 5068 of this division. (g)A distributor shall not transport nor arrange for the transportation of a batch that failed a laboratory testing to a cultivator, manufacturer, or other licensee unless authorized to do so by this section. Authority: Sections 19302, 19302.1, 19304, 19342, 19343, 19344, and 19345, Business and Professions Code. Reference: Sections 19342, 19343, 19344, and 19345, Business and Professions Code. § 5103. [RESERVED] § 5104. Quality-Assurance Review When a distributor receives a certification of analysis stating that the sample meets specifications required by law, the distributor shall ensure the following before transport to one or more dispensaries: (a)The certificate of analysis the distributor received from the testing laboratory is the certificate of analysis that corresponds to the batch; (b)The label on the medical cannabis goods is consistent with the certificate of analysis regarding cannabinoid content and contaminants required to be listed by law; Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 32 of 58 (c)The packaging complies with applicable packaging laws including, but not limited to, Business and Professions Code section 19347; (d)The packaging is tamper evident. “Tamper evident” means a one-time-use seal is affixed to the opening of the package, allowing a person to recognize whether or not the package has been opened; (e)The weight or count of the medical cannabis batch comports with that in the track and trace system. A distributor shall use scales as required by the Act; and (f)All events up to this point have been entered into the track and trace system. Authority: Sections 19302, 19302.1, 19304, 19326, and 19334, Business and Professions Code. Reference: Sections 19326 and 19334, Business and Professions Code. Article 3. Other Requirements § 5105. [RESERVED] § 5106. Grace Period for Testing and Labeling A licensee is not required to have his or her medical cannabis goods tested or to follow the labeling requirements in these regulations until 180 days after licensure, or December 31, 2018, whichever is sooner. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Section 19334, Business and Professions Code. § 5107. [RESERVED] § 5108. Insurance Requirements (a)A distributor shall provide evidence of insurance coverage required under this section. An applicant for a distributor license shall provide the bureau with a certificate of insurance that shows the kinds of insurance and minimum amounts have been secured as required by this section. Failure to provide proof of insurance, as required, will result in denial of a license. (b)A distributor licensee shall at all times carry and maintain commercial general liability insurance and commercial umbrella insurance for bodily injury and property damage arising out of licensed activities. This insurance shall cover such claims as may be caused by any act, omission, or negligence of the licensee or its officers, agents, representatives, assigns, or servants. The insurance shall also cover bodily injury, including disease, illness, and death; property damage associated with the licensee’s premises or operations; and personal injury. The limits of liability insurance shall not be less than one million dollars. (c)A distributor licensee shall maintain the insurance required in subsection (b) from an insurance company authorized to do business in California by the Secretary of State. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 33 of 58 (d)A distributor licensee shall notify the bureau in writing within 10 calendar days of a lapse in insurance. Authority: Sections 19302, 19302.1, 19304, and 19322, Business and Professions Code. Reference: Section 19322 and 19334, Business and Professions Code. § 5109. [RESERVED] § 5110. Employee Requirements (a)A distributor shall not hire an employee or volunteer if the person works or volunteers for another licensee unless the other licensee is a distributor or transporter. (b)A distributor licensee shall ensure his or her employees do not have a financial interest as defined in section 5006 subsection (b)(22)(K) of this division in another medical cannabis license. A distributor licensee shall have a document for each employee in which the employee signs and attests to not having a financial interest in another medical cannabis license unless allowed under subsection (a). Authority: Sections 19302, 19302.1, 19304, 19322, and 19334, Business and Professions Code. Reference: Sections 19322 and 19334, Business and Professions Code. § 5111. [RESERVED] § 5112. Inventory Reconciliation (a)A distributor shall reconcile all inventories of medical cannabis goods a minimum of once per week. (b)A distributor shall keep an inventory log, containing the following information for each batch: (1)Where the batch originated and license number of the cultivator or the manufacturer; (2)The date of physical transfer to the distributor; (3)The time the batch arrived at the premises; (4)The unique identifiers for the batch; (5)The total weight or amount of the batch; (6)Where on the premises the batch is kept; (7)The storage conditions the batch is held in; (8)The best-by, sell-by, or expiration date of the batch, if any; (9)Shipping manifests and bills of lading; (10)A copy of the service or sale contract pertaining to the batch; and Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 34 of 58 (11)Warehouse receipts. (c) If a distributor finds a discrepancy between the inventory of stock and the inventory log or track and trace system that is outside of normal weight loss caused by moisture loss, the distributor shall commence a full audit of the batch in which the discrepancy was found. The distributor shall notify the bureau within 24 hours if, after the audit, there is a significant discrepancy in inventory. (d) If a distributor finds evidence of theft or diversion, the licensee shall immediately report the theft or diversion to the bureau. Authority: Sections 19302, 19302.1, 19304, and 19334, Business and Professions Code. Reference: Sections 19327, and 19334, Business and Professions Code. § 5113. [RESERVED] § 5114. Records (a) In addition to those records required by section 5056 of this division, a distributor shall maintain the following records: (1)Records relating to branding and packaging and labeling; (2)Current inventory log; (3)Transportation bills of lading and shipping manifests; (4) Quality-assurance records; (5)Records relating to destruction of medical cannabis goods; (6)Video that is required under section 5068 of this division; (7) Laboratory-testing records; (8) Inventory records; and (9) Warehouse receipts. Authority: Sections 19302, 19304, and 19327, Business and Professions Code. Reference: Section 19327, Business and Professions Code. § 5115. [RESERVED] § 5116. Track and Trace Requirements A distributor shall enter the following events into the track and trace system: (a)Receipt of medical cannabis goods from cultivator, manufacturer, or distributor. (1)Enter the following information: (A)Cultivator’s, manufacturer’s, or distributor’s name and license number; Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 35 of 58 (B) Name of licensee who transported the medical cannabis goods and license number; (C) Type of medical cannabis goods received; (D)Amount received, by weight or count; (E) Best-by, sell-by, or expiration date of the batch; (F)Party who holds title to the medical cannabis goods; (G)The date of receipt of the medical cannabis goods; (H) The unique identifiers associated with the medical cannabis goods; and (I)Other information required elsewhere by law. (b)Sample taken by testing laboratory. (1)Enter the following information: (A)The testing laboratory’s name and license number; (B) The name of the laboratory agent or agents who obtained the samples; (C)The weights of the samples obtained; (D)The date the samples were obtained; and (E) Other information required elsewhere by law. (c)Sale to dispensary. (1) If a distributor purchases medical cannabis goods, the distributor shall enter the following information: (A)Name of dispensary licensee with whom the distributor contracted for sale and the dispensary’s license number; (B)The date of the contract for sale; (C)The type of medical cannabis goods contracted for sale; (D)The amount of medical cannabis goods contracted for sale, by weight or count; (E)The date title passed to the dispensary; and (F) Other information required elsewhere by law. (d)Transportation to dispensary. (1) If the distributor uses his or her transporter license to transport the medical cannabis to a dispensary, the distributor shall enter the following information: Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 36 of 58 (A)Transporter name and license number; (B) Driver’s name and driver’s license number; (C)Amount of medical cannabis goods transported, by weight or count; (D)Vehicle license plate number used for transportation; (E)Date of transport; and (F)Other information required elsewhere by law, including for transporters. (e)Destruction. (f) Laboratory-test results. Authority: Sections 19302, 19302.1, 19304, and 19335, Business and Professions Code. Reference: Section 19335, Business and Professions Code. § 5117. [RESERVED] CHAPTER 3. TRANSPORTERS § 5118. Medical Cannabis Transporter Only a person licensed by the bureau as a transporter may transport medical cannabis goods between licensees, unless that person is exempt from holding a transporter license pursuant to Business and Professions Code section 19319. Authority: Section 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19300.5(j), 19326(a), and 19334(b), Business and Professions Code. § 5119. [RESERVED] § 5120. [RESERVED] § 5121. [RESERVED] § 5122. Transporter May Not Hold Title to Medical Cannabis Goods A transporter shall not hold title under its transporter license to medical cannabis goods it is transporting. However, a licensed transporter may hold legal title to medical cannabis goods if the transporter holds title to the medical cannabis goods under another medical cannabis license. Authority: Section 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19300.5 and 19328, Business and Professions Code. § 5123. [RESERVED] Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 37 of 58 § 5124. Transport Requirements The following requirements apply when transporting medical cannabis goods: (a)Transportation by means of aircraft, watercraft, drones, rail, human powered vehicles, and unmanned vehicles is prohibited. (b)Medical cannabis goods may only be transported inside of a commercial vehicle or trailer and may not be visible or identifiable from outside of the commercial vehicle or trailer. (c)Medical cannabis goods shall be locked in a box that is secured to the inside of the commercial vehicle or trailer. (d)While left unattended, the commercial vehicle and trailer shall be locked and secured. (e)A transporter shall not leave a commercial vehicle containing medical cannabis goods unattended or parked overnight in a residential area. (f)At a minimum, a transporter shall have a vehicle alarm system on all transport vehicles. Motion detectors, pressure switches, duress, panic, and hold-up alarms may also be used. (g)Packages or containers containing medical cannabis goods may not be tampered with during transport. (h) A transporter shall only travel between licensees shipping or receiving medical cannabis goods and its own licensed premises when engaged in the transportation of medical cannabis goods. The transporter may transport multiple shipments of medical cannabis goods at once in accordance with applicable laws. A transporter may not transport non-medical cannabis goods with medical cannabis goods. (i)Transport vehicles and all licensed premises are subject to inspection by the bureau. Commercial vehicles used to transport medical cannabis goods may be inspected by the bureau at any licensed premises or during transport. Authority: Section 19302, 19302.1, and 19304, Business and Professions Code. Reference: Section 19334, Business and Professions Code. § 5125. [RESERVED] § 5126. Additional Transport Vehicle Application Requirements (a) With the general licensing application, an applicant for a transporter license shall provide the following information to the bureau: (1)Proof of ownership or a valid lease for any and all commercial vehicles that will be used to transport medical cannabis goods; (2)The year, make, model, license plate number, and numerical Vehicle Identification Number (VIN) for any and all commercial vehicles that will be used to transport medical cannabis goods; and Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 38 of 58 (3)Proof of insurance in the amount of $1,000,000 for any and all commercial vehicles being used to transport medical cannabis goods. (b)The licensee shall provide the bureau with the information required by this section in writing for any new commercial vehicle that will be used to transport medical cannabis goods prior to using the commercial vehicle to transport medical cannabis goods. (c)The licensee shall provide the bureau with any changes to the information required by this section in writing within 30 calendar days. Authority: Sections 19302, 19302.1, 19304, and 19334(b), Business and Professions Code. Reference: Section 19334(b), Business and Professions Code. § 5127. [RESERVED] § 5128. Transport Personnel Requirements (a)No person under the age of 21 years old shall be in a commercial vehicle transporting medical cannabis goods; and (b) Only a licensed transporter or an employee of the licensee shall be in a vehicle while transporting medical cannabis goods. Authority: Section 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19334 and 19337, Business and Professions Code. § 5129. [RESERVED] § 5130. Transporter Storage of Medical Cannabis Goods A transporter may store medical cannabis goods on his or her licensed premises for no longer than 72 hours. Authority: Section 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19300.5(am) and 19300.5(an), Business and Professions Code. § 5131. [RESERVED] § 5132. Storage (a)A transporter shall ensure all medical cannabis batches are stored separately and distinctly from other medical cannabis batches on the transporter’s premises. (b)A transporter shall ensure a label with the following information is physically attached to each container of each batch: (1)The manufacturer or transporter’s name and license number; (2)The date of entry into the transporter’s storage area; (3)The unique identifiers and batch number associated with the batch; Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 39 of 58 (4)Description of product with enough detail to easily identify the batch; and (5)Weight of or quantity of units in the batch. (c)A transporter shall store medical cannabis goods in a building designed to permit control of temperature and humidity and shall prevent the entry of environmental contaminants such as smoke and dust. The area in which medical cannabis goods are stored shall not be exposed to direct sunlight. A transporter may not store medical cannabis goods outdoors. (d)Employee break rooms, changing facilities, and bathrooms shall be completely separated from the storage areas. (e)A transporter shall store harvest batches and edible cannabis products that require refrigeration at 35 to 42 degrees Fahrenheit. In addition, a transporter shall store harvest batches in a darkened area with no more than 60% humidity. Authority: Sections 19302, 19302.1, 19304, and 19334, Business and Professions Code. Reference: Sections 19300.5, and 19334, Business and Professions Code. § 5133. [RESERVED] § 5134. [RESERVED] § 5135. [RESERVED] § 5136. Notification of Shipment Before transporting any medical cannabis goods, the transporting licensee shall complete an electronic shipping manifest and transmit it to the bureau and the licensee receiving the shipment. Authority: Section 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19335, and 19337, Business and Professions Code. § 5137. [RESERVED] § 5138. Shipping Manifest The shipping manifest shall contain the following information: (a)The name of the licensee; (b)The names of authorized drivers; (c)The type and quantity or amount of medical cannabis goods being transported; (d)The unique identifiers issued by the Department of Food and Agriculture pursuant to Health and Safety Code section 11362.777; (e)The quantity and weight or amount of medical cannabis goods being transported; (f)The time and location of departure; Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 40 of 58 (g)The time and location of expected arrival; and (h)The make, model, and license plate number of the commercial vehicle. Authority: Section 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19327, and 19337, Business and Professions Code. § 5139. [RESERVED] § 5140. Records In addition to those records required by section 5056 of this division, a transporter shall maintain the following records: (a)Commercial vehicle maintenance and ownership records; and (b) All shipping manifests for completed transports and for medical cannabis goods in transit. Authority: Section 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19327, and 19337, Business and Professions Code. § 5141. [RESERVED] § 5142. Transporter Track and Trace Requirements A transporter shall enter the following information into the track and trace system: (a)Name and license number of the transporter; (b)Date the transporter receives the medical cannabis goods from licensee for transport; (c)Amount transported, by weight or count; (d)Date the transporter delivers the medical cannabis goods to the licensee; (e)The unique identifiers associated with the medical cannabis goods transferred; (f)Spoilage or fouling of the medical cannabis goods; (g)Any event resulting in exposure or compromise of the medical cannabis goods; and (h)Other information required elsewhere by law. Authority: Sections 19302, 19302.1, 19304, 19335, and 19337, Business and Professions Code. Reference: Sections 19335 and 19337, Business and Professions Code. § 5143. [RESERVED] § 5144. [RESERVED] Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 41 of 58 CHAPTER 4. DISPENSARIES Article 1. Premises § 5145. Subletting of Premises A licensed dispensary shall not sublet any portion of the licensed premises of the dispensary. Authority: Sections 19302, 19302.1, 19303, and 19304, Business and Professions Code. Reference: Section 19302, Business and Professions Code. § 5146. [RESERVED] § 5147. [RESERVED] § 5148. Access to Dispensary Premises (a)Except as stated in subsection (b), access to the licensed premises shall be limited to individuals who are at least 18 years old and have a bona fide business reason for entering the premises. (b)An individual younger than 18 years of age may enter the premises to purchase medical cannabis goods only if the individual is a medical cannabis patient. Any medical cannabis patient younger than 18 years old shall be accompanied by his or her parent, legal guardian, or primary caregiver. Authority: Sections 19302, 19302.1, 19303, 19304, and 19332, Business and Professions Code. Reference: Sections 19332, and 19334, Business and Professions Code. § 5149. [RESERVED] § 5150. [RESERVED] § 5151. Limited-Access Areas (a)A licensed dispensary shall only permit authorized individuals to enter the dispensary limited-access areas. (b)Authorized individuals include individuals employed by the licensed dispensary as well as any outside vendors, contractors, or other individuals who have a bona fide business reason for entering the dispensary limited-access area. (c)An individual who is not an authorized individual for purposes of entering the dispensary limited-access areas shall not enter the dispensary limited-access area at any time for any reason. (d)An individual in the dispensary limited-access area who is not employed by the licensed dispensary shall be escorted by individuals employed by the licensee at all times within the dispensary limited-access area. (e)An individual who enters the dispensary limited-access areas shall be at least 21 years of age. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 42 of 58 (f)The licensed dispensary shall maintain a log of all authorized individuals who are not employees of the dispensary that enter the dispensary limited-access area. These logs shall be made available to the bureau upon request. (g)A licensed dispensary shall not receive consideration or compensation for permitting an individual to enter the dispensary limited-access area. Authority: Sections 19302, 19302.1, 19303, 19304, and 19334, Business and Professions Code. Reference: Section 19334 Business and Professions Code. § 5152. [RESERVED] § 5153. [RESERVED] Article 2. Retail Sales § 5154. Retail Area (a) Individuals shall only be granted access to the area to purchase medical cannabis goods after the licensee has identified the individual as a medical cannabis patient or a primary caregiver. Prior to identifying an individual as a medical cannabis patient or a primary caregiver, a licensed dispensary shall verify that the individual has the following: (1)A valid physician recommendation for medical cannabis in compliance with Health and Safety Code sections 11362.5 et seq. (2)A valid proof of identification. Acceptable forms of identification include the following: (A)A document issued by a federal, state, county, or municipal government, or a political subdivision or agency thereof, including, but not limited to, a valid motor vehicle operator's license, that contains the name, date of birth, physical description, and picture of the person; or (B) A valid identification card issued to a member of the Armed Forces that includes a date of birth and a picture of the person; or (C)A valid passport issued by the United States or by a foreign government. (3) In the case of a primary caregiver, valid written documentation containing the signature and the printed name of the medical cannabis patient designating the individual as a primary caregiver for a medical cannabis patient. (b)The licensee or its employees shall be physically present in the retail area at all times when there are individuals who are not employees of the licensed dispensary in the retail area. Authority: Sections 19302, 19302.1, 19303, and 19304, Business and Professions Code. Reference: Sections 19302.1, 19303, and 19304, 19323, and 19324, Business and Professions Code. § 5155. [RESERVED] Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 43 of 58 § 5156. [RESERVED] § 5157. Hours of Operation (a)A licensed dispensary may only sell medical cannabis goods during the hours of 6:00 a.m. Pacific Time to 9:00 p.m. Pacific Time. (b)At any time the licensed dispensary is not open for retail sales, the licensee shall ensure the following: (1)The premises shall be securely locked with commercial-grade, non-residential door locks; (2)The premises shall be equipped with an active alarm system; (3)When closed for retail business, all medical cannabis goods shall be stored in a locked safe or vault on the licensed premises; and (4)Only authorized employees and contractors of the licensee shall be allowed to enter the premises after hours. Authority: Sections 19302, 19302.1, 19303, and 19304, Business and Professions Code. Reference: Sections 19332, 19303, and 19334, Business and Professions Code § 5158. [RESERVED] § 5159. [RESERVED] § 5160. Dispensary Customers (a)A licensed dispensary shall only sell medical cannabis goods to medical cannabis patients or the primary caregivers of medical cannabis patients. (b)A licensed dispensary shall verify the identity of a medical cannabis patient or primary caregiver as required by section 5154 of this division. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Section 19302.1, 19323, 19324, Business and Professions Code. § 5161. [RESERVED] § 5162. [RESERVED] § 5163. Medical Cannabis Goods Display (a)The display of medical cannabis goods for sale shall only occur in the retail area during the operating hours of the licensed dispensary. (b)The licensee shall not display any medical cannabis goods in areas outside of the retail area. The licensed dispensary shall not display medical cannabis goods in a place where it is visible from outside the licensed premises. (c)Medical cannabis goods on display shall not be readily accessible to the customers. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 44 of 58 (d)The amount of medical cannabis goods that are displayed shall not exceed the average amount of medical cannabis goods the licensed dispensary sells during an average one day period. The remainder of the licensee’s inventory of medical cannabis goods shall be stored in accordance with section 5214 of this division. (e)Medical cannabis goods may be removed from their packaging and placed in containers to allow for customer inspection. The containers shall not be readily accessible to customers without assistance of dispensary personnel. A container must be provided to the customer by the licensee or employee, who shall remain with the customer at all times that the container is being inspected by the customer. (f)Medical cannabis goods removed from their packaging for display shall not be sold, shall not be consumed, and shall be destroyed pursuant to section 5080 of this division when the medical cannabis goods are no longer used for display. Authority: Sections 19302, 19302.1, 19303, 19304, and 19334, Business and Professions Code. Reference: Sections 19303, and 19334, Business and Professions Code. § 5164. [RESERVED] § 5165. [RESERVED] § 5166. Medical Cannabis Goods for Sale (a)A licensed dispensary shall not make any medical cannabis goods available for sale or delivery to a medical cannabis patient or primary caregiver unless: (1)The medical cannabis goods were received from a licensed distributor and delivered to the dispensary by a licensed transporter; and (2)The licensed dispensary has verified that the medical cannabis goods have not exceeded their expiration or sell-by date if one is provided. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19326, 19347.5, 19347.6, and 19347, Business and Professions Code. § 5167. [RESERVED] § 5168. [RESERVED] § 5169. [RESERVED] § 5170. [RESERVED] § 5171. [RESERVED] § 5172. Daily Limits (a)A licensee shall not sell more than eight ounces of medical cannabis in a single day to a single medical cannabis patient. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 45 of 58 (b)A licensee shall not sell more than eight ounces of medical cannabis in a single day to a primary caregiver for each medical cannabis patient that the primary caregiver is authorized to purchase for. (c) If a medical cannabis patient or primary caregiver has a physician’s recommendation that eight ounces of medical cannabis in a single day does not meet the medical cannabis patient’s medical needs, the medical cannabis patient or primary caregiver may purchase an amount of medical cannabis consistent with the patient’s needs as recommended by a physician. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302.1, and 19303, Business and Professions Code; Section 11362.77, Health and Safety Code. § 5173. [RESERVED] § 5174. [RESERVED] § 5175. Medical Cannabis Goods Returned by Medical Cannabis Patients or Primary Caregivers (a) For the purposes of this section, a medical cannabis patient or primary caregiver return means a return of medical cannabis goods that were purchased from a dispensary back to the dispensary the medical cannabis goods were purchased from. (b) A licensed dispensary may accept patient or primary caregiver returns of medical cannabis goods that were previously sold to the medical cannabis patient or primary caregiver returning the medical cannabis goods. A primary caregiver may return medical cannabis goods sold to a patient for whom he or she provides care. (c)A licensed dispensary shall not resell medical cannabis goods that have been returned. (d)A licensed dispensary shall treat any medical cannabis goods abandoned on the dispensary premises as a patient return. (e)A licensed dispensary shall destroy all medical cannabis goods that have been returned to a dispensary by a medical cannabis patient or primary caregiver, in accordance with section 5080 of this division. Authority: Sections 19302, 19302.1, 19304, and 19347.6, Business and Professions Code. Reference: Section 19302.1, Business and Professions Code. § 5176. [RESERVED] § 5177. [RESERVED] § 5178. Customer Samples (a)A licensed dispensary shall not provide free samples of medical cannabis goods to any person. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 46 of 58 (b)A licensed dispensary shall not allow representatives of other companies or organizations to provide free samples of medical cannabis goods to individuals on the licensed dispensary premises. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Section 19303, Business and Professions Code. § 5179. [RESERVED] § 5180. [RESERVED] § 5181. Packaging and Labeling (a)A dispensary shall not accept from a distributor medical cannabis goods that are not packaged as they will be sold at final sale, in compliance with this division. (b)A dispensary shall not purchase dried flower that is not already packaged for final sale, in compliance with this division. (c) A dispensary shall not package or label medical cannabis goods. Authority: Sections 19300.5(j), 19302, 19304, and 19326, Business and Professions Code. Reference: Sections 19302 and 19326, Business and Professions Code. § 5182. [RESERVED] § 5183. [RESERVED] § 5184. Exit Packaging (a)Medical cannabis goods purchased by a customer shall not leave the licensed dispensary premises unless they are placed in an exit package. (b)An exit package shall meet all of the following requirements: (1)The package shall be designed or constructed to be significantly difficult for children under five years of age to open and not difficult for adults to use properly, as defined by 16 C.F.R. 1700.20. (2)The package shall be opaque so that the medical cannabis goods cannot be seen from outside the packaging. (3)For any medical cannabis goods that are intended for more than a single use, the package shall have the ability to be resealed. (4)The package shall be labeled properly pursuant to the Act and this division. (c)This section does not apply to medical cannabis goods that are sold in packages that are child-resistant pursuant to the Act and this division. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Section 19303, Business and Professions Code. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 47 of 58 § 5185. [RESERVED] Article 3. Delivery § 5186. [RESERVED] § 5187. Delivery (a)All deliveries of medical cannabis goods must be performed by a delivery employee of a licensed dispensary. (b)Each delivery employee of a licensed dispensary shall be at least 21 years of age. (c)A licensed dispensary shall not use the services of an independent contractor or courier service to deliver medical cannabis goods. (d)All deliveries of medical cannabis goods shall be made in person. A delivery of medical cannabis goods shall not be made through the use of an unmanned vehicle. (e) A delivery employee begins the process of delivering when the delivery employee leaves the dispensary premises with the medical cannabis goods for delivery. The process of delivering ends when the delivery employee returns to the licensed dispensary premises after delivering the medical cannabis goods to the medical cannabis patients or primary caregivers. (f)A delivery employee of a licensed dispensary shall, during deliveries, carry a copy of the dispensary’s current license, the employee’s government-issued identification, and an employer provided badge containing a picture and the name of the delivery employee. (g)A licensed dispensary shall maintain an accurate list of the dispensary’s delivery employees. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302.1, 19303, 19334, and 19340, Business and Professions Code. § 5188. [RESERVED] § 5189. [RESERVED] § 5190. Delivery to Physical Address (a)A licensed dispensary may only deliver medical cannabis goods to a physical address in California. (b)A licensed dispensary delivery employee shall not leave the state of California while possessing medical cannabis goods. (c)A licensed dispensary shall not deliver medical cannabis goods to an address located on publicly owned land or any address on land or in a building leased by a public agency. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302.1, 19303, 19334, and 19340, Business and Professions Code. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 48 of 58 § 5191. [RESERVED] § 5192. [RESERVED] § 5193. Methods of Delivery (a)A delivery employee of a licensed dispensary, carrying medical cannabis goods for delivery, shall only travel in an enclosed motor vehicle operated by the delivery employee or another delivery employee of the licensee. (b)While carrying medical cannabis goods for delivery, a delivery employee of a licensed dispensary shall ensure the medical cannabis goods are not visible to the public. (c)A delivery employee of a licensed dispensary shall not leave medical cannabis goods in an unattended motor vehicle unless the motor vehicle is equipped with an active vehicle alarm system. (d)A vehicle used for the delivery of medical cannabis goods shall be outfitted with a dedicated Global Positioning System (GPS) device for identifying the geographic location of the delivery vehicle. A dedicated GPS device does not include a phone or tablet. The device shall be either permanently or temporarily affixed to the delivery vehicle and shall remain active and inside of the delivery vehicle at all times during delivery. At all times, the licensed dispensary shall be able to identify the geographic location of all delivery vehicles that are making deliveries for the dispensary and shall provide that information to bureau upon request. (e)Upon request, a licensed dispensary shall provide the bureau with information regarding any motor vehicles used for the delivery of medical cannabis goods, including the vehicle’s make, model, color, Vehicle Identification Number, and license plate number. (f)Any motor vehicle used by a licensed dispensary to deliver medical cannabis goods is subject to inspection by the bureau. Vehicles used to deliver medical cannabis goods may be stopped and inspected by the bureau at any licensed premises or during delivery. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302.1, 19303, 19334, and 19340, Business and Professions Code. § 5194. [RESERVED] § 5195. [RESERVED] § 5196. Delivery Hours of Operation A licensed dispensary shall only deliver medical cannabis goods to medical cannabis patients and primary caregivers during the hours of 6:00 a.m. and 9:00 p.m. Pacific Time. Authority: Sections 19302, 19302.1(d), and 19304, Business and Professions Code. Reference: Sections 19302.1(d), 19303, 19334(a)(1), 19340, Business and Professions Code. § 5197. [RESERVED] § 5198. [RESERVED] Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 49 of 58 §5199. Medical Cannabis Goods Carried During Delivery While making deliveries, a delivery employee of a licensed dispensary shall not carry medical cannabis goods in excess of $3,000 at any time. This value shall be determined using the retail price of all medical cannabis goods carried by the delivery employee. Authority: Sections 19302, and 19304, Business and Professions Code. Reference: Sections 19302.1, 19303, 19334, and 19340, Business and Professions Code. § 5200. [RESERVED] § 5201. [RESERVED] § 5202. Medical Cannabis Consumption During Delivery Delivery employees of a licensed dispensary shall not consume medical cannabis goods while delivering medical cannabis goods to medical cannabis patients or primary caregivers. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302.1, 19303, 19334, and 19340, Business and Professions Code. § 5203. [RESERVED] § 5204. [RESERVED] § 5205. Delivery Request Receipt A licensed dispensary shall prepare a delivery request receipt for each delivery of medical cannabis goods. (a)The delivery request receipt shall contain the following: (1)The name and address of the licensed dispensary. (2)The name of the delivery employee of the licensed dispensary who delivered the order. (3)The name of the licensed dispensary employee who prepared the order for delivery. (4) A patient identification number for the medical cannabis patient who is requesting the delivery. Upon request from the bureau, a licensed dispensary shall provide the name of the medical cannabis patient associated with the patient identification number listed on the delivery request receipt. (5)The date and time the delivery request was made. (6)The delivery address. (7)A detailed description of all medical cannabis goods requested for delivery. The description shall include the weight, volume, or any other accurate measure of the amount of any medical cannabis goods requested. (8)The total amount paid for the delivery, including any taxes and fees. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 50 of 58 (9)Upon delivery, the date and time the delivery was made, and the signature of the medical cannabis patient or primary caregiver who received the delivery. (b)At the time of the delivery, the delivery employee of the licensed dispensary shall provide the medical cannabis patient, or primary caregiver, who placed the order a copy of the delivery request receipt. The delivery employee shall retain a signed copy of the delivery request receipt for the dispensary’s records. (c)The delivery request receipt shall comply with state and federal law regarding the protection of confidential medical information. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302.1, 19303, 19327, 19334, and 19340, Business and Professions Code. § 5206. [RESERVED] § 5207. [RESERVED] § 5208. Delivery Route While making deliveries of medical cannabis goods, a delivery employee of a licensed dispensary shall only travel from the licensed dispensary premises to the delivery address; from one delivery address to another delivery address; or from a delivery address back to the licensed dispensary premises. A delivery employee of a licensed dispensary shall not deviate from the delivery path described in this section, except for necessary rest, fuel, or vehicle repair stops, or because road conditions make continued use of the route unsafe, impossible, or impracticable. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302.1, 19303, 19334, and 19340, Business and Professions Code. § 5209. [RESERVED] Article 4. Producing Dispensary § 5210. [RESERVED] § 5211. Producing Dispensary License (a)To obtain a Type-10A producing dispensary license, a licensee shall either: (1)Hold at least one Type-10 dispensary license; or (2)Concurrently apply for at least one Type-10 dispensary license. (b)A licensee holding a Type-10A producing dispensary license shall designate a licensed Type­ 10 dispensary facility held by the licensee to concurrently hold both a Type-10 dispensary license and the Type-10A producing dispensary license. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 51 of 58 (c)A licensee shall hold a separate Type-10 dispensary license for each dispensary facility he or she operates. (d)A licensee who holds a Type-10A producing dispensary license shall not hold licenses for more than three Type-10 dispensary facilities. (e)A licensee who holds a Type-10A producing dispensary license may apply for licenses in other license categories as allowed under Business and Professions Code section 19328(a). Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19328 and 19334, Business and Professions Code. § 5212. [RESERVED] Article 5. Inventory and Records § 5213. [RESERVED] § 5214. Storage of Inventory (a) A dispensary shall store medical cannabis goods in a building designed to permit control of temperature and humidity and shall prevent the entry of environmental contaminants such as smoke and dust. The area in which medical cannabis goods are stored shall not be exposed to direct sunlight. A dispensary may not store medical cannabis goods outdoors. (b)Employee break rooms, changing facilities, and bathrooms shall be completely separated from the storage areas. (c) A dispensary shall store harvest batches and edible cannabis products that require refrigeration at 35 to 42 degrees Fahrenheit. In addition, a dispensary shall store harvest batches in a darkened area with no more than 60% humidity. Authority: Sections 19302, 19302.1, 19304, and 19334, Business and Professions Code. Reference: Sections 19300.5, and 19334, Business and Professions Code. § 5215. [RESERVED] § 5216. [RESERVED] § 5217. Receiving Shipments of Inventory (a)A licensed dispensary shall only receive a shipment of medical cannabis goods from a licensed transporter. (b)A licensed dispensary shall only accept shipments of medical cannabis goods between the hours of 6:00 a.m. Pacific Time to 9:00 p.m. Pacific Time. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 52 of 58 (c)During business hours, any shipment of medical cannabis goods accepted by the licensed dispensary shall not enter the premises through an entrance that is available for use by the public to enter or exit the premises. (d)Upon accepting a shipment of medical cannabis goods from a licensed transporter, the licensed dispensary shall immediately place the products in a secured and locked room, safe, or vault in a manner as to prevent diversion, theft, and loss. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302.1, 19303, 19326, 19327, and 19334, Business and Professions Code. § 5218. [RESERVED] § 5219. [RESERVED] § 5220. Inventory Documentation A licensed dispensary shall maintain an accurate record of its inventory. A licensed dispensary shall provide the bureau with a record of its current inventory upon request. The licensed dispensary shall keep a record of the following information for all medical cannabis goods the licensed dispensary has in its inventory: (a)A description of each item in the licensed dispensary’s inventory. This description will be such that the medical cannabis goods can easily be identified; (b)An accurate measurement of the quantity of the item; (c)The date and time the product was received by the licensed dispensary; (d)The sell-by or expiration date on any medical cannabis goods, if any; (e)The name and license number of the licensed transporter that delivered the medical cannabis goods; (f)The name and license number of the licensed distributor that provided the medical cannabis goods to the licensed dispensary; and (g)The price the licensed dispensary payed for the medical cannabis goods, including taxes, delivery costs, or any other costs. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302.1, and 19327, Business and Professions Code. § 5221. [RESERVED] § 5222. [RESERVED] § 5223. Inventory Reconciliation (a)A licensed dispensary shall perform a reconciliation of its inventory at least once every seven days. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 53 of 58 (b)A licensed dispensary shall verify that the dispensary’s physical inventory matches the licensed dispensary’s records pertaining to inventory. (c)The result of inventory reconciliation shall be retained in the dispensary’s records and shall be made available to the bureau upon request. (d) If a licensed dispensary identifies any evidence of theft, diversion, or loss, the licensed dispensary shall notify the bureau and law enforcement pursuant to section 5235 of this division. (e) If a significant discrepancy is discovered between a licensed dispensary’s physical inventory and the licensed dispensary’s inventory records, the licensed dispensary shall notify the bureau and law enforcement pursuant to section 5235 of this division. (f) For the purpose of this section, a significant discrepancy in inventory means a difference of at least $1,000 of product within a seven day period or at least $2,000 of product in a 30-day period. The price paid by the dispensary to acquire the product is the value to be used in this assessment. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Sections 19302.1(d), and 19327, Business and Professions Code. § 5224. [RESERVED] § 5225. [RESERVED] § 5226. Record of Sales (a)A licensed dispensary shall maintain an accurate record of every sale made to a medical cannabis patient or primary caregiver. (b)A record of a sale shall contain the following information: (1)The name of the licensed dispensary employee who processed the sale; (2) The name of the medical cannabis patient or primary caregiver who made the purchase; (3)The date and time of the transaction; (4)A list of all of the medical cannabis goods purchased, including the quantity purchased; and (5)The total amount paid for the sale including the individual prices paid for each medical cannabis good purchased and any amounts paid for taxes. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Section 19327, Business and Professions Code. § 5227. [RESERVED] Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 54 of 58 Article 6. Other Requirements § 5228. [RESERVED] § 5229. Grace Period for Compliance Up to 180 days after the date of licensure or December 31, 2018, whichever is sooner, a dispensary may sell its inventory of untested medical cannabis goods if the dispensary places a label on each package it sells with the date of purchase and the following statement: “This product has not been tested under the Medical Cannabis Regulation and Safety Act.” During the time period allowed by this section, a dispensary may package and sell medical cannabis goods that have not been packaged by a cultivator or distributor before it is transported to the dispensary as required by this division. Authority: Sections 19302, 19302.1, and 19304, Business and Professions Code. Reference: Section 19334 Business and Professions Code. § 5230. [RESERVED] § 5231. [RESERVED] § 5232. Dispensary Track and Trace Requirements A dispensary shall enter the following events into the track and trace system: (a)Receipt of medical cannabis goods from a distributor or transporter; (1)Enter the following information: (A)Distributor’s name and license number; (B) Name of licensee who transported the medical cannabis goods and license number; (C)Type of medical cannabis goods received; (D)Amount received, by weight or count; (E) Best-by, sell-by, or expiration date, if any, of each product received; (F)The date of receipt of medical cannabis goods; (G)The unique identifiers associated with the medical cannabis goods received; and (H) Other information required elsewhere by law. (b)Sale of medical cannabis goods to a medical cannabis patient or primary caregiver; (1)Enter the following information: (A)The name of the licensed dispensary employee who processed the sale; (B) The name or a patient identification number of the medical cannabis patient or primary caregiver who made the purchase; Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 55 of 58 (C)The date and time of the transaction; (D)A list of all of the medical cannabis goods purchased, including a description of the quantity purchased; (E)The unique identifiers associated with the medical cannabis goods sold; and (F) Other information required elsewhere by law. (c)Return of medical cannabis goods from a medical cannabis patient or primary caregiver; (1)If a dispensary accepts a return of medical cannabis goods from a medical cannabis patient or a primary caregiver, the dispensary shall enter the following information: (A)The name of the licensed dispensary employee who processed the return; (B)The name or a patient identification number of the medical cannabis patient or primary caregiver who made the purchase; (C)The date and time of the transaction; (D)A list of all of the medical cannabis goods returned, including a description of the quantity purchased; (E) The unique identifiers associated with the medical cannabis goods; and (F) Other information required elsewhere by law. (d)Return of medical cannabis goods to a distributor; (1)Enter the following information: (A)Distributor’s name and license number; (B) Name of licensee who transported the medical cannabis goods and license number; (C)Type of medical cannabis goods returned; (D)Amount received, by weight or count; (E) Best-by, sell-by, or expiration date, if any, of each medical cannabis good returned; (F)The date of the return of medical cannabis goods; (G)The unique identifiers associated with the medical cannabis goods returned; and (H) Other information required elsewhere by law. (e)Destruction of medical cannabis goods; (1)Enter the following information: (A)The name of the licensed dispensary employee who performed the destruction; Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 56 of 58 (B)The date and time of the destruction; (C)A list of all of medical cannabis goods destroyed, including a description of the quantity destroyed; (D)The unique identifiers associated with the medical cannabis goods destroyed; and (E) Other information required elsewhere by law. (f)Transfer of medical cannabis goods to a distributor for destruction; (1)Enter the following information: (A)Distributor’s name and license number; (B) Name of licensee who transported the medical cannabis goods and license number; (C)Type of medical cannabis goods transferred; (D)Amount transferred, by weight or count; (E)The date of the transfer of medical cannabis goods; (F) The unique identifiers associated with the medical cannabis goods transferred; and (G) Other information required elsewhere by law. Authority: Sections 19302, 19302.1, 19304, 19335, 19337, Business and Professions Code. Reference: Sections 19335 and 19337, Business and Professions Code. § 5233. [RESERVED] § 5234. [RESERVED] § 5235. Law Enforcement Notification (a)A licensed dispensary shall notify law enforcement and the bureau within 24 hours of discovery of any of the following situations: (1)The licensed dispensary discovers a significant discrepancy as defined in section 5223 of this division in its inventory. (2)The licensed dispensary becomes aware of or has reason to suspect diversion, theft, loss, or any other criminal activity pertaining to the operation of the dispensary. (3)The licensed dispensary becomes aware of or has reason to suspect diversion, theft, loss, or any other criminal activity by an agent or employee of the dispensary pertaining to the operation of the dispensary. (4)The licensed dispensary becomes aware of or has reason to suspect the loss or unauthorized alteration of records related to medical cannabis goods, registered medical cannabis patients or primary caregivers, or dispensary employees or agents. Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 57 of 58 (5) The licensed dispensary becomes aware of or has reason to suspect any other breach of security. Authority: Sections 19302, 19302.1, 19303, 19304, and 19334, Business and Professions Code. Reference: Sections 19302.1, 19303, and 19334(b), Business and Professions Code. § 5236. [RESERVED] Bureau of Marijuana Control, Medical Cannabis Regulation Proposed Text Page 58 of 58 Proposed Background Check Standards The following standards are proposed to be adopted as part of the Medicinal  Cannabis Retailer Permit rules.    For the purpose of the background review, a conviction means a plea or verdict of  guilty or a conviction following a plea of nolo contendere (“No Contest”).   An applicant shall be fingerprinted and undergo a background check by the Santa  Monica Police Department who will provide the results of the findings to the  Director of Planning and Community Development or designee.    The city may deny, suspend, or revoke a permit for any of the following:   1. Any person associated with the application has made one or more false or  misleading statements, or omissions on the application or during the  application process.   2. Fails to provide information required by the City.  3. The applicant, owner, or licensee has been convicted of an offense that is  substantially related to the qualifications, functions, or duties of the business  or profession for which the application is made.    4. In determining which offenses are substantially related to the qualifications,  functions, or duties of the business or profession for which the application is  made, the licensing authority shall include, but not be limited to, the following:  a. A violent felony conviction, as specified in subdivision (c) of Section  667.5 of the Penal Code.  b. A serious felony conviction, as specified in subdivision (c) of Section  1192.7 of the Penal Code.  c. A felony conviction involving fraud, deceit, or embezzlement.  d. A felony conviction for hiring, employing, or using a minor in  transporting, carrying, selling, giving away, preparing for sale, or  peddling, any controlled substance to a minor; or selling, offering to sell,  furnishing, offering to furnish, administering, or giving any controlled  substance to a minor.  Attachment H  e. A felony conviction for drug trafficking with enhancements pursuant to  Section 11370.4 or 11379.8 of the Health and Safety Code.  5. The applicant, or any of its officers, directors, or owners, has been subject to  fines, penalties, or otherwise been sanctioned for cultivation or production of  a controlled substance on public or private lands pursuant to Section 12025 or  12025.1 of the Fish and Game Code.  6. The applicant, or any of its officers, directors, or owners, has been sanctioned  by a licensing authority or a city, county, or city and county for unauthorized  commercial cannabis activities, has had a license suspended or revoked under  this division in the three years immediately preceding the date the application  is filed with the licensing authority.  7. Failing to obtain and maintain a valid seller’s permit required pursuant to Part  1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation  Code.  In consultation with the Police Department and City Attorney, if the Director of  Planning and Community Development or designee, determines that the  applicant, owner, or licensee is otherwise suitable to be issued a license, and  granting the license would not compromise public safety, the Director of Planning  and Community Development or designee may conduct a thorough review of the  nature of any crime, conviction, circumstances, and evidence of rehabilitation of  the applicant or owner, and may evaluate the suitability of the applicant, owner,  or licensee to be issued a permit based on the evidence found through the  review.          [end]                                                                                                                                                                                                                                                Presents       Cannabis   101  Hosted     by     the     Ocean     Park     Associa   Item 7-A 10/10/17 2 of 2 Item 7-A 10/10/17 Cannabis Regulations October 10, 2017 Item 7-A •March 7, 2017 Study Session –Create a Regulatory Permit and Selection Process –Prohibit Non-Medicinal Cannabis Business Activities •Council Defined this as Temporary to Allow for Public Process –Consider Options for Light Manufacturing –Amend SMMC to Address Changes in State Law •June 27, 2017 SB 94 “MAUCRSA” Adopted –Consolidated Medicinal & Non-Medicinal Regulations –Clarified Some Regulations (e.g. Open Container) –Authorized Retail Sales via Deliver Only (no store front) •State Draft Regulations –November 2018 (est.) •State Licenses -January 1, 2018 Introduction •Align with Comprehensive State Regulations –Repeal sub-sections I, K, and L of Section 9.31.185 of the SMMC •I. Staffing and Securing (State Law and Local Operational Regulations) •K. Patron Notification / On Site Posting (State Law) •L. Prohibited Activities / No alcohol or tobacco sales (State Law) –Re-Alignment, not Reduction •Definitions –Replace “Medical Marijuana Dispensary” with “Medicinal Cannabis Retailer” –Update Industry, Limited Classification •Allows for Medicinal Cannabis Light Manufacturing •Prohibits Non-Medicinal Commercial Activities –Provides Time to Initiate Public Process Interim Zoning Ordinance Statewide Regulations –Overview Medicinal and Non-Medicinal •Personal Cultivation and Use •Commercial Activities –Retail Sales –Distribution –Te sting –Cultivation –Manufacturing •Commercial On-Site Consumption •Special Event Permits for On-Site Sale & Use at Temporary Events Complete Local Control Local Regulation Authorized To night’s Discussion Medicinal and Non-Medicinal •Personal Cultivation and Use •Distribution •Te sting •On-Site Consumption •Special Event Permits for On-Site Sale & Use •Retail Sales –Only 2 – 2,500 sq ft –Within a Limited Zone –Distancing •Commercial Cultivation – 375 sq ft (15%) –Only by City Authorized Retailer within the Retail Location •Manufacturing –Light Manufacturing, No Volatile Solvents –Assembly Only, No Extractions –Office Campus Zone (with CUP) –Industrial Conservation Zone Medicinal Cannabis Retail Sales and Cultivation Medicinal Cannabis Retail Zones Prohibited within 600 Feet of a: •Child Care Center •Early Education Center •Day Care Center •Park •School •Library •Social Services Center •Other Medicinal Cannabis Retailer Challenges •Limited Space Options •“Surge” Lease Costs Medicinal Cannabis Retail Sales Operational Approval Phases 1.Operational Review –Selection Process –Land Use Process 2.Compliance Review 3.Permit Issuance Medicinal Cannabis Retail Sales Phase 1: Operational Review •Selection Process –Request for Applications –Defined Application Period –Objective Standards with Ratings –Evaluation Committee Rankings –Selection Decision Made by Director of Planning or Designee –Preliminary Selection Letter Issued –Appeal Period –List Expiration •Land Use Process –Identify Location –Conditional Use Permit Process –Other Entitlement Processes (e.g ARB, Landmarks) Medicinal Cannabis Retail Sales Phase 2: Compliance Review (Overlap with Entitlement Period) •State Licensing –Bureau of Cannabis Control (BCC) •Retailers (M-Type 10) –Department of Food and Agriculture (DFA) •Specialty Indoor, Small, <500 sq. ft. (M-Type 1A) •Te nant Improvement/Build Out –Standard Development Review Process •B&S •Fire •Water Resources •Santa Monica Business License Application Submittal –Fees –State Permit Verification •Other State or County Permits (e.g. Health Dept., Board of Equalization) Medicinal Cannabis Retail Sales Phase 3: Permit Issuance •Pre-Permit Issuance Compliance Inspection •Permit and Business License Issuance Medicinal Cannabis Light Manufacturing Medicinal Cannabis Light Manufacturing Proposed IZO •Light Manufacturing •No Volatile Solvents / Extractions –Vo latile Solvents (e.g. Butane) –Concentrates (e.g. Oils, Shatter, Budder/Wax) •Assembly Only Medicinal Cannabis Light Manufacturing Updated Definition to Existing Classification Industry, Limited •Light industrial activities producing minimal impacts on adjacent properties. Includes light manufacturing, such as packaging of foods for off-site consumption (e.g. wholesale bakery, frozen foods) •Added: “medicinal cannabis, and medicinal cannabis products for off-site use or consumption using nonvolatile solvents, or no solvents” Medicinal Cannabis Light Manufacturing Utilizing Existing Zones •Office Campus –Provides for office and advanced technology uses, scientific research, and administration, and limited manufacturing of related products which require large expanses of floor area. –CUP Required –Uses must be conducted within an enclosed building or an open enclosure screened from public view. In order to approve a CUP, a finding that proposed uses are compatible with abutting residential neighborhoods is required. •Industrial Conservation –Intended to preserve space for small-scale industrial and manufacturing businesses 16Medicinal Light Manufacturing Proposed: •Office Campus (OC) •Industrial Cons. (IC) Medicinal Light Manufacturing Permit Issuance •Regulatory Permit and Business License –Zoning Conformance Review •State Licensing –Department of Public Health •Manufacture 1 -Non Volatile or No Solvents (M-Type 6) •Te nant Improvement/Build Out –Standard Development Review Process •B&S •Fire •Water Resources Operating Permit Fees Cost recovery Fee $99.58 Administrative Processing $361.88 Two Hour Compliance Inspection Proposed Annual Permit Fees Annual Medicinal Cannabis Retailer Permit $1,822.10 Annual Medicinal Cannabis Light Manufacturing Permit $ 99.58 New Medicinal Cannabis Retailer Permits-Prorated July –September (4 Inspections)$1,822.10 October –December (3 Inspections)$1,391.47 January –March (2 Inspections) $ 960.84 April –June (1 Inspection)$ 530.21 Business License Taxes •Current –Retailers and Manufactures •Tax Group I •$75 on the first $60,000 •$1.25 per $1,000 (.125%) •Evaluate –Community Impacts –Increased Demands on Law Enforcement –Public Health Education –Yo uth, Tourism –Needed Funding, Resources, Programs •Consider –Ballot Initiative –New Cannabis Classification(s) and Rates Next Steps •Extend IZO Within 60 Days of IZO’s Effective Date •Draft Administrative Regulations •Initiate Request for Application and Establish a Review Committee •Provide State with Copy City’s Cannabis Ordinance Regulations and Contact Person •Train Staff •Evaluate Track and Trace Technologies with State, Identify Implementation Needs •Initiate Public Process –Consider Commercial Cannabis Adult Non-Medicinal Use Activities –Consider Other Medicinal Commercial Use Activities –Consider Commercial On-Site Consumption •Evaluate Necessity for Additional Fees or Taxes to Fund Enforcement, Compliance, and Education Programs (e.g. Tourism and Youth) •Return to Planning Commission and Council with Recommended Changes to the Zoning Ordinance Questions? Cannabis Regulations October 10, 2017 Item 7-A -Public Health -Education -To urism Forms of Butane Hash Oils (BHO) Shatter Oil Budder/Wax REFERENCE:    RESOLUTION NO. 11080  (CCS)