City one step closer to allowing cannabis businesses

In a unanimous vote during a special budget meeting this past Monday, the City Council moved a step closer to allowing certain types of cannabis-related businesses to operate within the city. The item passed on a 4-0 vote, with council member McCord having been excused from the meeting.

Deputy city attorney Doug White made the presentation, pointing out that the city has held workshops and gotten feedback from the community over the past several months. Seeking a qualified business owner to participate in a pilot program is the next step in the process.

A Request for Qualifications (RFQ), which will allow the city to choose a qualified candidate for a pilot cannabis-related business, is the next step.

Conflicting legislation

State and federal laws regarding cannabis remain in conflict. However, the passage of state Proposition 64 last November, which opens the door for local agencies to gain significant tax revenue, has spurred many local government entities to move toward allowing such businesses. While cannabis businesses in California are now legal from the state’s perspective, they are also heavily regulated and taxed, and cities can add additional taxes and fees.

Request for Qualifications (RFQ)

The resolution passed Monday night authorized city staff to release a Request for Qualifications (RFQ), which is essentially a call for those who would like to conduct a cannabis-related business within city limits to submit a business proposal for the city’s approval.

No obligation to allow cannabis businesses

White pointed out that cannabis-related businesses remain illegal within city limits, and passage of this authorization to seek RFQs from interested business owners does not obligate the city to allow such businesses.

It does give potential applicants the right to submit an application for the city’s consideration, which would provide city staff with an idea of the potential cannabis-related businesses in the area.

“Rather than speculate on what people would like to do and where they would like to do it,” White said, “we felt it would be best to… put a face to a proposal and… evaluate the proposal in totality, in terms of licenses they would like to operate with at state level and local level.”

Eliminate unqualified businesses

White pointed out that this approach would also eliminate potential business whose owners lack the ability and “sophistication to operate in a highly-regulated environment.”

According to the City Council Agenda Report, “applicants must demonstrate knowledge and experience in developing successful businesses. Applicants must include a proposal… addressing the potential adverse impacts of commercial cannabis within… city limits and the applicant’s proposal to mitigate any negative effects.”

$5,000 application fee

The application fee, which must be paid when the application is submitted, is $5,000.

According to the report, this fee is necessary “to cover city staff time and attorneys’ fees associated with reviewing, evaluating and processing the application.”

Thirty-day application window

The RFQ will be released this Friday, June 30. Completed applications are due by the close of business on Monday, July 31.

White and his team recently assisted the city of Oakdale in a similar process, which he said had 14 applicants. Due to Patterson’s geographic location and industrially-zoned property, White said Patterson is likely to have more than that.

‘Pre-conferences’ for applicants to be held

Two pre-conferences were held in Oakdale, White noted, with attendance of about 70 people each. White encouraged city staff to also hold two; one in week two of the application period, and the second during the fourth week.

Potential revenue, crime increases

While the potential for significant revenue exists for agencies who allow marijuana businesses in their jurisdictions, there is also serious concern on the part of law enforcement due to the substantial amount of cash such businesses generate. (As marijuana is still classified as an illegal Schedule I narcotic, business owners are prohibited from holding bank accounts to manage their business transactions.)

November ballot

The sense of urgency expressed during the recent workshops remains, as the city could potentially impose a tax on cannabis-related businesses or products, which would need to appear on the ballot this November. If deadlines to facilitate this are not met, the city could either hold a costly special election, or would miss out potential revenue until the next regularly-scheduled election, which would not occur until November, 2018.

Curiously, the new state law requires that cannabis-related businesses be licensed by their local jurisdictions, and up and operating, by December 31, 2017, in order to apply for a state license after January 1, 2018 (which is required in order for a cannabis-related business to operate in the state).

Proposed budget adopted

The budget presented at a special City Council meeting on Thursday, June 15 was essentially adopted as drafted, with the exception of approximately a million dollars that had been reallocated. Those funds were originally budgeted for street repairs.

However, the anticipated revenue from Measure L and SB1 allowed the funds to be moved to cover other one-time expenses, such as repairs to the museum building, a reduction in pool fees and contributions toward the city’s future pension liabilities.

Museum repairs

City manager Ken Irwin advised the council that after reevaluation of the repairs needed at the museum building, an additional $50,000 has been allocated to those repairs. Council member Farinha requested an itemized list of the planned repairs, which Irwin said would be provided to council members.

Irwin explained that the additional allocation was also needed in order for the city to apply for a grant to make the repairs. Such grants frequently require government agencies to set aside ‘matching funds’ monies to be used in addition to the grant proceeds for a given project.

Firefighter training

In response to Council member McCord’s request at the last budget meeting, Irwin said an additional $12,000 had been moved from street maintenance to cover the cost of an Advanced Life Support (ALS) certification sponsorship program to assist volunteer firefighters in becoming eligible to be hired by the Fire Department.

Irwin said a program will be created and presented to the council for approval in August. Any funds not used during this fiscal year will be carried over to the 2018-19 fiscal year.

New positions

Several new positions and reclassifications were authorized by the council: A Community Development Director, two additional Sheriff deputies, a part-time administrative clerk in the Police Department, a Maintenance Worker I, an Account Clerk was reclassified from part- time to full-time, a new paramedic in the Fire Department, a new electrician I/II and Electrical Instrumentation Manager reclassified in Public Works and a new Maintenance Worker I in Public Works.

City Manager Ken Irwin emphasized that bringing on the two deputies will take time, but funds have been allocated in the fourth quarter, just in case an additional deputy could be arranged for and hired by that time. In the event that a new deputy cannot be brought in by the fourth quarter, those funds would carry over to the next fiscal year.

Mayor suggests new signage

Although it was not included in the budget, Mayor Novelli mentioned the need for electronic “leader board”-style signs to be placed at City Hall, to keep citizens informed of upcoming events, and at I-5 to attract visitors to “our beautiful city”. Council member Parham expressed support for the idea.

Expense clarification

During the public comment period, a citizen attending the meeting noted that the same line items, such as office supplies, are listed as expenses for each department, and questioned whether they might be “redundancies” in the budget.

Irwin responded that breaking out the expenses by department ensures that revenue is allocated to the correct expenses. Using the example of the Administrative Department, he explained that that department “can’t take revenue from garbage service fees, or sewer rates... those are funds that have to go to a certain (type of expense).”

Finance Director Saadiah Ryan further explained that the level of detail in the budget is necessary so that individual expenses can be tracked by department, and evaluated as to whether they are coming in over or under the amount budgeted for each particular expense. The individual department data can also be aggregated and used for reports and presentations, Ryan said.

Ryan used Internet and Technology (IT) expenses as an example. “We have spreadsheets that we (use to) accumulate the total, then we allocate it by number of users… (a given) department has. We take the total cost for the service and allocate it to the various departments depending on how many users each has, which makes the allocations more accurate… and defensible”, she explained.

Appropriations limits

Appropriations limits are imposed on government spending, according to the Gann Initiative, which was passed in 1979. The limits are calculated using a number of factors, and are tied to external factors such as changes in the Consumer Price Index (CPI), per capita income, and population, and must be approved by the City Council every year.

n Contact Jenifer West at 892-6187, or jenifer@pattersonirrigator.com

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