Proposed South Lake Tahoe cannabis ordinance adds more licenses

SOUTH LAKE TAHOE, Calif. - What started off as baby steps to legal cannabis businesses and regulations in South Lake Tahoe has morphed into a run to a proposed cannabis ordinance that could potentially bring 15 new licenses to town.

The City Council had three choices during their October 16 meeting after a successful referendum put a halt to the City's approved cannabis ordinance just days before it went into effect. They could repeal Ordinance 1118 and enact it in one year, send it to the voters without alteration at an election not less than 88 days after the Council order, or create an ordinance with substantial changes to withstand another referendum that could stop it again.

"It is kind of shocking to see many more licenses," said Mayor Wendy David of the subcommittee's newly proposed ordinance. "I have concerns about our small town with that many."

The subcommittee of some stakeholders under the guidance of Councilmembers Austin Sass and Brooke Laine came up with the following proposed ordinance at their October 8, 2018 meeting:

• Maintain the current prohibition on on-site consumption at retailers but include re-opener provision to reconsider the issue in one year.

• Instead of the 10 points for the direct economic benefits provided to the city under section 6(a) of the evaluation criteria in the Development Agreement Application Guidelines for Operation of Cannabis Businesses in the City of South Lake Tahoe, establish a community impact fee to be based on actual costs to city and a community public benefit between 0-8 percent of gross receipts received, with points to be awarded based on the percent offered. Note that this would also require a change to the Development Agreement Application Guidelines adopted by City Council Resolution No. 2018-84.

• Tighten up the owner and operator requirements in the current ordinance to ensure that straw men won't be used to circumvent local owner/operator benefits.

• Change the permissible use category for cultivators from "nursery" to "industrial services" under Table 6.55.740.

• If one or both of the microbusinesses that end up getting permitted do not have a distribution component, add up to two additional stand-alone distribution licenses for a maximum of four distribution permits.

• If one or both of the microbusinesses that end up getting permitted do not have a retail component, add up to two additional stand-alone retail licenses for a maximum of four retail permits.

• Remove requirement that no more than one permit will be issued per lot or parcel, with requirement that permittees must operate in separate suites or units.

• Add four permits for manufacturing (non-volatile extraction and packaging) and establish a maximum square footage of building space for this permit type.

• Allow existing permitted medical marijuana dispensaries to temporarily expand land use to include adult use retail within existing space, for a period of three years, under same conditions as current section 6.55.840. At the end of the three-year period, existing permitted medical marijuana dispensaries would need to obtain a public safety license and use permits to continue operating.

During the original ordinance there would have been six licenses issues, two for retail sales, two for microbusiness and two for cultivation. The microbusinesses could have three of four license types: Retail, Cultivation, Manufacturing and Distribution. Now they have proposed adding four more permits for manufacturing (non-volatile extraction and packaging) on top of the scenarios for microbusinesses not uses all of their permitted business types.

"We were one day away from starting the ordinance when the rug was pulled out from under us," said Laine. "I suggest a 'go slow' approach and am not afraid to take it to the voters. If it goes to voters, (Cody Bass of Tahoe Wellness Cooperative) can’t sue the voters and file a referendum. Give voters the facts and let them decide."

Bass is grandfathered in under the new ordinance and now able to conduct adult-use businesses in the same manner he does medical-use now, no matter if his property is in the correct zoning, for up to three years.

“Many different opinions here, we’re not going to make everybody happy," said Councilman Jason Collin. "At first it was about access to medicine, now it's about making money.”

Collin cast the only vote against the proposed ordinance.

Both Laine and David expressed concern the City is being held hostage by Bass who is a candidate for City Council.

"The community spent months discussing the pros and cons (of cannabis) and we came up with a good medium ground, which the council massaged and came to agreement on what that was going to be," said Laine. "The problem is that TWC didn’t get everything they wanted is why we are here today."

"What bothers me, why we’re trying to figure out what is right for the community, is we have the same people saying if you do this then I’m going to do that," she continued with concerns of future referendums if people aren't happy with the new ordinance.

Several pro-cannabis business people spoke during the meeting with one lone non-cannabis business speaker voicing concern of the new ordinance.

"The South Tahoe Drug Free Coalition (DFC) mission is to reduce youth access to drugs," said Hannah Marzocco of the DFC. "There is already a reduction in the perception of harm. Seventeen South Tahoe High students have already been caught with substances for first time already in this school year – dramatic numbers increasing (not counting those caught multiple times). There is a definite fear and reality in increasing the number of licenses. We need to make sure the youth understand the impacts in their lives until age 25."

DFC has an intervention program for first time offenders at the middle and high schools who are caught with drugs or found to be under the influence. With much smaller number caught in an average month, 17 in six weeks is a concern to the group.

After she spoke, Robert Fehskens who has been involved in most of the cannabis conversations as a potenital license holder said, "Walk before we run, sounds like we’ve about doubled the number of licenses before getting out the door."

"The DFC has a valid concern, too many is a recipe for something going wrong. Get started with fewer and add more in six or 12 months," said Fehskens.

One of the speakers Tuesday, Alex Gosselin, said he is forecasting each retail business in South Lake Tahoe selling 3.5 pounds of cannabis a day. Other speakers said there needs to be more cultivation in South Lake Tahoe to fill that need and not to import weed from other locations. It takes a 25-square foot grow area 90 days to produce two pounds of cannabis.

The number of 15 for potential licenses (not counting grandfathered in Tahoe Wellness Cooperative) are figured out due to the choice of microbusinesses to not have cultivation, retail and/or manufacturing. Those license types are proposed to be available to others plus the addition of four other manufacturing licenses.

"It's been 10 years at this podium," Bass said as he spoke before the Council. "The whole community will benefit from the process." He did not agree with his business just getting three years to operate as adult-use as he works out zoning issues with his Lake Tahoe Boulevard property. He asked for seven but the ordinance proposal was kept at three years.

"We will move back into weeds of zoning to change cultivation to industrial zoning," he added.

The process of collecting signatures for the referendum was brought into question after some citizens complained about what was being presented, a possible election code violation. The Assistant District Attorney's office said they didn't think it was a criminal case but did tell the City the Secretary of State could look into civil charges.

Next steps - the ordinance will go before the Planning Commission, most likely at their next meeting November 8. It will then come back before the Council November 13 or at their following meeting, December 11 when the next Council is sworn in for a first reading. A second reading would be at their next meeting, with an ordinance in place 30 days later.