A familiar cast of characters showed up at the special city council meeting Jan. 25 for the one agenda item to be discussed: a review of the city’s medical marijuana ordinance. By the end of the meeting, the council voted to form an ad hoc committee to collect information toward writing a marijuana ordinance specifically addressing cultivation.

At the outset of the meeting, City Manager Bill Avera reminded the council that during the Dec. 21, 2015 meeting they kicked off discussions on medical marijuana and he provided them with the urgency ordinance adopted several years ago as well as the ordinance adopted by the city that prohibits dispensaries within city limits. He said it was the council’s desire to have a special meeting to allow ample time to gather information as the council was reviewing what other communities are doing. He said legislation was being drafted at the state level to extend the March 1 deadline by which local jurisdictions had to have their own medical marijuana regulations on the books or the state would be given that power. The state senate approved that bill Monday. Avera said after discussion with experts he still feels there is a need for more information.

“I think the things we want to talk about tonight is, what some communities are doing is coming up with a full-on ban against everything,” Avera said, “but there are other communities that are considering how they’re operating their cultivation, manufacturing, distribution, and dispensaries in a much broader ordinance. So, I’m here to get direction from the council tonight about how you want to draft our ordinance for your consideration in the very near future.”

Mayor Ignacio Velazquez asked Attorney Aaron Johnson, who represents the Coastal Growers Association — and said he also represents the city of Hollister and not outside entities trying to set up marijuana-specific businesses — why so many communities are changing their ordinances for medicinal marijuana.

Johnson said that after the governor signed various bills dealing with medical marijuana into law in Oct. 2015, a “drafting error” was discovered that mandated all jurisdictions in the state must adopt ordinances on cultivation by March 1, 2016.

“If they didn’t take initiative, then the state could take over the permitting process for local jurisdictions,” Johnson said. “This started a race for control.”

Velazquez asked if the takeover would be permanent or temporary. Johnson said the mandate was “ambiguous,” and that’s why many cities are erring on the side of caution to make sure they have something on the books before the state takes control away. The mayor wondered if any city ordinance would be grandfathered, to which Johnson said grandfathering needs to be considered when writing ordinances on cultivation and unless there is something explicit in the ordinance, it’s not allowed.

“Not many jurisdictions have explicitly allowed for cannabis cultivation,” Johnson said. “The problem is it’s a grey area that could lead to litigation. We have a system that has been approved by the state that requires a dual licensing scenario to be properly permitted. You get your local license or permit and take that to the state and get a state permit. You can’t apply to the state without the local permit.”

Councilman Raymond Friend asked if the city has an ordinance in place prior to March 1 will the state come back and say it isn’t valid. Johnson said as long as the ordinance has verbiage relative to “cultivation,” the state could invalidate it. He said the ordinance might only pertain to dispensaries. Friend said the city’s ordinance only covers dispensaries.

“So, if the state decided it was going to allow limited cultivation that could happen within the city even if we said there wouldn’t be any dispensaries?” Friend asked.

Johnson said he was correct and said the city has several options. He said the California League of Cities has taken the position that cities that don’t know which way they will go to go ahead and ban cultivation and work on the ordinance at a later time. Some cities, though, have begun to address the issue directly, he said.

“That’s what we’d like to see in our city,” Johnson said. “Do we want cultivation? Do we want manufacturing? Do we want dispensaries?”

Johnson pointed out the potential economic impact. He said the California market could be as high as $10 billion. In Santa Cruz, he said, the city takes in well over $1 million in tax revenue. If Hollister had one dispensary he said the revenue could be as much as $750,000 annually. He said tax revenue is not necessarily a reason to allow dispensaries, but said sales are already going on around Hollister, so why not bring the benefits to the city.

Velazquez asked Johnson what sort of revenues could be collected as a sales tax. Johnson said he’s seen tax rates range between 2.5 percent to 15 percent at the dispensary level. Taxes on cultivation, Johnson said, are based on square footage.

He said what he sees as the next step for the council is to discuss the three areas of cultivation permits: indoor under lights, outdoor, and mixed lights or greenhouses. He said the same technology is used to grow cannabis as any other agricultural crop, comparing the appearance of a marijuana plant to a tomato plant.

Councilwoman Mickie Solario Luna asked about licensing transportation. Johnson said there are licenses for transportation, as well as testing and distribution. He said no one knows how those licenses will “shape up” until the Bureau of Medical Marijuana Regulation is established. At the moment, he said, the licenses are “placeholders” in the law and the city need not be concerned at this time and no action needs to be taken until the state figures out what it wants to do.

Councilman Karson Klauer asked Johnson if the city were to continue to prohibit dispensaries and if Gilroy has dispensaries, would they be able to deliver to Hollister. Johnson said if Hollister does nothing in the ordinance addressing deliveries, by law, Gilroy dispensaries would be able to deliver to Hollister residents. He said they’re also allowed to drive through San Benito County to other areas that allow it. He said local police cannot pull people over simply for transporting medical marijuana.

“If we were to allow dispensaries to do deliveries, we’d be able to set up some kind of license for somebody from Gilroy to deliver to Hollister?” Klauer asked.

Johnson said if the city were to regulate deliveries it would have to have a license to designate a point from which deliveries would be dispensed. Do nothing and they can deliver to Hollister, he said, adding, “regulate and you’re telling the cannabis business you need to set up your shop here, get permitted, pay the proper taxes and you can deliver from that point.”

Klauer asked how far a dispensary had to be from a school. Johnson said the state law mirrored federal law of a minimum of 600 feet from the school property line to the property line of the cannabis business.

Friend said he wanted to be sure that if someone who lives in the city goes to a dispensary elsewhere to buy medical marijuana and was transporting it back to the city they wouldn’t be “hassled.”

The mayor wanted it clarified that the sense of urgency is over the March 1 deadline dealing with cultivation and not dispensaries or manufacturing. Johnson agreed. Velazquez said the council should, therefore, focus on cultivation and the fact that if it is in the city, it would be indoors. He wanted to know if medical marijuana is grown within the city limits would sales be limited to the city, or could it be transported to other areas. He also wanted to know more about the potential tax structure and zoning considerations.

Johnson said because of the short timeframe and requirements for public postings, zoning issues that would have to go before the planning commission, first and second readings and a 30-day waiting period, the city might opt for an emergency ordinance to address those issues. But he said the rush may be moot since the bill approved by the senate this week basically states the March 1 deadline is a mistake. He said he expects the governor to sign the bill and the March 1 deadline will not be an issue. Just in case, though, he recommended that the city look at emergency ordinance language, which gives the city broad discretion.

“I’m a little concerned that there’s a good chance it’s going to be extended, but to move forward with an urgency (ordinance) is a mistake where we’re not allowing more of the public to be involved in the conversation and make sure we’re not going to trip over ourselves,” Velazquez said.

Johnson said communities that have taken the urgency route have limited what they allow with the intent of going back after public input and amend the ordinance to reflect what the city truly wants. The mayor asked that if next week the deadline goes away, could the city take its time? Johnson said yes. Friend said in the interest of time he favored the emergency ordinance and they could take six months, if needed, to amend the ordinance. He emphasized the need to do something or the state would force the city’s hand. Velazquez said chances where high that the deadline would be extended and he wanted—if the council chooses—to have the ordinance done right the first time.

“It’s more helpful to understand what it is we want to do rather than piecemeal this together,” the mayor said. “If we’re going to do this we need to put the effort into it and do it right. I think it would be better to put a committee together to do this in detail and spend the time to take a look at what other cities are doing around the state that have done it right.”

Johnson agreed that an ad hoc approach is a good route to go in order to keep abreast of Assembly Bill 21 and other issues. He said the ad hoc committee could also be working with the staff on the ordinance to determine its potential benefits and constraints.

Mike Smith, who has spoken in support of medical marijuana at previous meetings, said he was a cancer patient who underwent surgery and radiation treatments in 2012, and was able to purchase it in the county. In 2014, when he had to have follow-up surgery, he found there was no longer a dispensary in the county.

“This is discrimination against sick and dying people who need access to medicine and have to travel outside the city and county to get it,” he said. “And another thing, as a former ‘water guy,’ it appears that this multi-billion dollar industry is going to come out of the shadows and into the light, it gives you an opportunity to benefit. The city has a reclaimed water program and this might be an opportunity to use some of that reclaimed water and get this industry to take a look at investing in your recycled-water program.”

Sean Donahoe, a lobbyist with Oakland-based Operative Campaigns, said the city and county could benefit from different transport and distributor licenses. He said there is talk of a specific delivery-only license, as well as a research license through six to seven pieces of legislation working their way through the process.

“I think it’s a good idea to have more dialogue and if the council wants to insert more taxation benefits to optimize revenues to place something on this November ballot,” he suggested.

Niani White spoke before the council, stating that he is not an advocate of marijuana use, but is in favor of the city having a dispensary.

“I’m a homeowner next to Maze Middle School and around a block from my house there was a huge illegal dispensary in a home where a man converted the entire home to an illegal marijuana dispensary,” he said. “It was within 600 feet of the school. There was a large amount of drugs in the house, which means there were probably firearms involved. So, I would rather it be in a place where everybody knows where it’s at and it’s safe.”

Avera recommended that the council either appoint two of its members to the ad hoc committee to begin working on the ordinance or to be prepared for the meeting in February with an emergency ordinance.

“It would probably be easier to ban cultivation in the event that something happens, just so we’re prepared,” he said. “If you select two members, we can start working on this immediately.”

Friend added that it might be beneficial to also include two people from the planning commission as part of the committee so "whatever the council dictates won’t be news to the planning commission and speed the process." Paul Rovella, city counsel, reminded the council that according to the Brown Act, only members of the governing body could be on the ad hoc committee, adding that the committee would be free to invite others. He advised, for purposes of forming the committee, to stay with council members.

Velazquez said what he would like to see from the committee is information on cultivation, manufacturing, dispensaries, if crime rates in cities that have gone through the process have diminished to fully understand what the council needs to do.

He asked Avera, “What’s the absolute drop-dead date as far as the emergency ordinance?”

“If there’s no urgency by March 1, we’re fine,” Avera said. “With emergency ordinances you have to make special findings, but once you adopt them, say by the second meeting in February, it’ll go into effect immediately. I suggest we’re ready to do that (write emergency ordinance) now.”

The mayor recommended council members Klauer and Friend to be on the ad hoc committee.

“I think councilmember Klauer and councilmember Friend are going to be busy for the rest of the year,” Velazquez quipped. “There’s a lot of work to do and I think a lot of traveling because I think it will be really important to visit a lot of different cities throughout the state to have a good understanding of what we’re looking at. It’s one thing to read something, it’s another to actually visit communities and see the results of their decisions.”