By Chris Frost
Oxnard--- The Oxnard City Council, took a step forward in the cannabis market during its June 4, meeting, and unanimously approved the manufacturing, testing, and distribution within the city limits.
The item brought some debate, as council members asked City Manager Alex Nguyen to step on the gas and bring back an ordinance that allows businesses to open retail marijuana dispensaries in Oxnard, which would help the city's budget crisis through additional tax revenue.
The council also approved a resolution approving the live scan procedure to adopt an Originating Agency Identification (ORI) number to permit the city to obtain both state and federal (FBI) criminal histories for the regulation of cannabis applicants.
Planning & Environmental Services Manager Kathleen Mallory made the presentation to the council and said in Jan. and Apr. 2018, the council banned cannabis use and allowed the delivery of medical cannabis in the city limits.
"In June 2018, the council approved a ballot measure that put the cannabis business tax on the ballot, and that was approved," she said. "In June 2018, the council conducted a robust study session that evaluated different cannabis uses, and the city came up with strategies on how to address them.
"Later in June, we presented a fiscal impact analysis with HdL with a medical and non-medical physical analysis of what the city can support," she said.
The Planning Commission heard the ordinance on April 4, 2019, and approved the item 5-0, with two members absent.
The council directed the ordinance to use the state's buffer of 600 feet for cannabis businesses, she said, and take a go-slow approach, which looks at how many types of cannabis businesses can be located within the city.
"The study that HdL provided to the city indicated there are vastly more businesses types that can be accommodated in the city than the go-slow approach would recommend," she said.
"We're taking the council's recommendation to go forward with the manufacturing testing and distribution tonight. We're looking at eight manufacturing facilities, three distributors and one testing lab."
Oxnard is centrally located to take advantage of the Los Angeles and northern markets, she said, and could easily handle more than listed under the go-slow approach.
In the northeast area, Mallory said the spot could accommodate retail, manufacturing, testing, distribution.
In the Rose/Santa Clara corridor, the city can handle retail locations as well as manufacturing testing, distribution and indoor cultivation.
"As we proceed with our cannabis approach down the road, we could accommodate retail in some of the areas we are talking about tonight," she said.
"The reason why we chose to advance the manufacturing, testing, and distribution is because those are uses that are fairly easy to regulate at this point and are governed by state law," she added. "They are clear about how to address the best practices."
Those uses are best suited in limited, light and heavy manufacturing zoning district districts, she said, what the city calls industrial zones.
"Those are areas separated from a residential neighborhood and have buffers between commercial and industrial areas," she said.
Tim Cromartie from HdL Companies reviewed the technical aspects of the ordinance and said testing cannabis measures the composition of the product and HdL Labs provides a critical health and safety function and are the mechanism that enforces the health and safety standards the state imposed in the medical act of 2015.
"To avoid conflicts of interest, our owners/operators are prohibited by law from holding any other type of ownership interest in any other type of licensed commercial cannabis activity, so it's firewalled off so there wouldn't be any appearance of a conflict of interest. "They must be licensed by the state and must maintain an ISO ESC accreditation for testing labs that speaks to the proper calibration of the equipment they use regularly. The labs are required to destroy testing batches that yield non-compliant samples."
The distribution will be in large quantities, he said, and will go from business-to-business in semi-trucks and not in passenger cars and minivans possibly on a statewide scale.
"They are the mechanism to move between licensees, specifically from cultivation facilities, to testing and ultimately to retail," he said. "The cannabis must be tested in the form, it will reach the consumer, so if it's edible, it's got to be in the form that is ready for sale."
They will also collect taxes for the state, he said, which is a 10 percent cultivation tax.
"They are critical from the stream of commerce because they move the product between licensees and get the product to the consumers," Cromartie said. "The state transportation and manifest cargo rules apply, so if you are moving significant amounts of product, there are heightened security standards, there are paper and electronic cargo manifest standards that are triggered when these vehicles are moving product."
He pointed out they do not make deliveries, and distribution is a separate function.
"Deliveries are movement of small amounts of product to end consumers, usually in much small unmarked passenger vehicles," he said.
Cannabis permits are reviewed annually through the city manager's office and are subject to renewal. There will be a deadline before the expiration of the annual permit, and the renewal application must be submitted to the city."
"There is a bit of due process if that renewal application is denied, there is a process from that business to seek some redress," he said. "A denied applicant can't resubmit within one year if they lose that appeal."
The business can't transfer licenses to someone else, he said, which addresses a problem HdL sees with alcohol licensees when the license holder will get into a problem with the state regulatory authority and transfer the license to someone else, which allows them to continue the same operation.
Mallory said the draft ordinance has been available for a couple of months and it was introduced to the inter-neighborhood council (INCO) in Jan.
"The manufacturing, testing and distribution ordinance was out for public review for three weeks in Feb., and we received three comments," she said. "Some were questions that didn't require any modification to the ordinance. One comment letter resulted in a change to a reference to 24-hour security that is commonly needed for a dispensary. Some of the operations for manufacturing are not 24-hour."
During public comments, Alexander Kozushin, Chief Executive Officer from Lotus Topia, said his company would apply for a manufacturing license.
Lotus Topia is an animal wellness company that uses cannabis to heal animals and their humans.
"In creating and voting on this ordinance, Oxnard has followed the will of the people in this community," he said. "This is an important vote. The cannabis industry will bring in jobs, tax dollars, and an overall positive contribution to this community. Most of the entrepreneurs sticking out their necks in this cannabis industry are passionate about what we are doing. It's not just about capitalism; we want a better society."
The company wants to heal and contribute, he said, in addition to giving back to the communities that support their work.
"We're asking for an opportunity to contribute to the betterment of Oxnard and its citizens," he said. "Thank you to Director Mallory for bringing this ordinance to a vote."
Assistant City Attorney Ken Roselle told the council that if a new business comes into the same area as the cannabis facility, like a daycare center, that business can't make the cannabis business close down.
"The cannabis facility will still have the ability to renew their permit on an annual basis if they met all the requirements, regardless if a school or some other sensitive use locates nearby," he said. "It does not give them the right to maintain that location in perpetuity if they don't meet the other requirements for commercial cannabis uses in our city."
Councilman Bert Perello said the ordinance only addresses certain parts of the cannabis issue and the other parts need to be addressed.
"Every aspect of the cannabis issue needs to be addressed," he said.
Perello asked Cromartie what the estimated value of a semi would be that carries cannabis and Cromartie said there is no limit regarding a product that can be taken in a distribution truck.
"There are state limits that can be imposed on delivery," Cromartie said. "Those are smaller passenger vehicles, they only have one driver, there are security requirements for those, and there is a lot more concern, at least on the state level for the small delivery vehicles as opposed to the semi-trucks."
He pointed out that if you pack a child's backpack full of cannabis that can be worth up to $11,000, depending on the strength of the product.
"The state imposed a $5,000 limit on the amount of product that can be carried in a delivery vehicle," he said. "It will be in an unmarked passenger vehicle. You don't want a vehicle driving down a street with a cannabis leaf on it. That is an invitation to armed robbery."
Perello fired the first salvo to move forward with retail sales and cultivation.
"With what the city is facing, losing city employees, the presentations from the fire department, the presentation from the PACC, there comes a time to take a double look," he said. "The go-slow approach, the safe and sane approach is a good idea, but there also comes a time where you have to sit down and buckle up your seat belt and do the work. Now is the time."
Council Member Vianey Lopez asked about the social equity component of the ordinance, and she wants to set the guidelines as they move closer to retail sales.
She asked if sensitive areas include neighborhoods and not just sites like schools and daycare centers.
"It doesn't include any residential or commercial mom-and-pop center, small or large," Mallory said. "It also does include any school, K through 12 and Charter Schools."
Cromartie added that under state law, neighborhoods don't fall under the definition of state use.
"The local jurisdictions are free to expand that definition at will, and that's where your planning and law enforcement folks come in on individual neighborhoods and can carve out things like churches and public parks where you know children are going to come in and congregate."
Applicants for permits would be screened by HdL; first, Mallory said, followed by an internal Cannabis Committee put together by city employees and HdL.
Councilman Bryan MacDonald likes that permits do not run with the land, and that has been a problem with ABC permits.
"You have no control of the permittee of the land passing off the land use right to another person," he said.
MacDonald isn't thrilled about the ordinance but has become accepting of it.
"It's what the people of the State of California decided, so how do we do this, protect the community and still abide by the wishes of the Majority of the people in the State of California," he said.
Mayor Pro Tem Carmen Ramirez said she's heard about legislation that punishes cities that don't allow retail cannabis sales.
"That bill has bogged down in the assembly because of strong opposition from the League of California Cities," Roselle said. "That would not affect Oxnard if, as anticipated, we bring the retail component forward right after your August break."
She supported testing in Oxnard and noted the city has the perfect testing facility.
"I want to learn from other mistakes like the cultivation going on in Carpentaria," she said. "Cultivation has caused problems for people in that city with the smell and being too close to sensitive areas."
Councilwoman Gabriela Basua said she is not a big fan of cannabis but is also not a fan of the go-slow approach.
"Especially during this budget crisis," she said. "I encourage my fellow council members to have that conversation about including retail. I work for the neighboring city (Port Hueneme), and I have to admit, I was first hesitant about it, but it works great."
Councilman Oscar Madrigal said retail cannabis sales are enormous, and the city must look at that aspect of the market.
"The go-slow approach is not good for the future of this city financially," he said. "The day that retail comes, it should be on the 101 corridor, and the people who have the Collection or the Rose or the Palm will jump at the opportunity."
Mayor Tim Flynn said that eventually, all marijuana uses would be allowed.
"I think it's incumbent upon us with the unique challenges the City of Oxnard has," he said. "We talk about social equity and all these other things, but the blunt reality is if we ask ourselves the question, will allowing retail stores make it more available to younger people? I think it's probably no different from alcohol. We have an abnormally high at-risk youth population. We have as much as half or more of all the homicides in Ventura County, and I don't know how marijuana is going to make this a safer community. I don't think I should be pursuing revenue at any cost."
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