In an effort to respect the wishes of voters while maintaining a cautious approach to commercial cannabis, Redwood City will soon welcome marijuana delivery operations without walk-in retail and nurseries that grow and sell starter plants in its industrial zones.

The City Council voted 5-2 for the ordinance at Monday’s meeting, with Vice Mayor Diane Howard and Councilman Jeff Gee opposed.

Delivery centers entail call centers as well as storage and direct delivery of cannabis products, and will be allowed in IR, LII, IP and GI zoning districts, according to a staff report.

Indoor nurseries are only allowed to produce clones and immature plants — not adult ones — that must be shipped outside the city for commercial cultivation, and they’re allowed in the same zoning districts as delivery centers, according to the report.

The adopted ordinance includes a long list of regulations for the newly approved businesses, some of which were modified during Monday’s meeting, and others will be clarified before the ordinance sees its second reading.

Businesses must undergo an extensive application process to obtain a cannabis business permit, including background checks of owners and employees and interviews with a cannabis task force. A conditional use permit will also be required of nurseries, in which proposals and potential impacts are evaluated individually, and all cannabis businesses will be required to re-register with the city annually and pay a variety of fees.

Economic Development Manager Catherine Ralston said the application process would take about 90 days.

Cannabis businesses must also be located at least 600 feet from “sensitive receptor” sites, including schools, child care centers, public parks or community centers.

Other regulations require businesses to keep a record of transactions for inspection and potential audit; a security guard must be present during operating hours at delivery centers; all customers must be over the age of 21 and be verified by electronic ID scan; and no cannabis, alcohol or controlled substances may be consumed on business premises, according to the report.

The ordinance is still subject to change and interpretation, and the council deferred some discretion to the city manager.

Councilman John Seybert said in his motion, which ultimately passed, that “other issues,” including the basic transactional information, be handled “by the city manager’s regulatory authority.” To be clear, the council stressed that the city should not have access to any customer information that could be in conflict with the Health Insurance Portability and Accountability Act.

Seybert’s motion also deviated from the draft ordinance with respect to security and setback requirements: The council voted to lower the buffer zone for cannabis businesses from 1,000 to 600 feet, and nurseries will not be required to employ a security guard.

Those particular issues, among others, led Gee and Howard to oppose the measure. Both wanted to preserve the original 1,000-foot setback requirement from “sensitive receptor” sites, and Gee said he wants the ordinance to more explicitly restrict nurseries from growing adult plants.

“I say start slow, we can always add on as we go, but it’s really hard to ratchet it back,” Howard said, adding that San Jose approved commercial cannabis too soon with too few regulations and it was a “nightmare.”

Gee and Howard also expressed interest in setback requirements for trailer parks and other residential areas in the vicinity of the industrial zones where cannabis businesses will soon be permitted.

Councilwoman Alicia Aguirre, who ultimately voted for the ordinance, said she’s worried rents will soar in the zoning districts where cannabis businesses are allowed, which could lead to the displacement of existing businesses.

Cannabis business owners who spoke at the meeting said finding feasible property in Redwood City is their primary obstacle. Some said a combination of scarce vacant property in the permitted industrial zones with even fewer landlords willing to rent to cannabis businesses has made it difficult to set up shop in Redwood City.

Prospective businesses are also, of course, limited by the required setback from youth centers, which are still being identified by the city.

Mike McGillis, who owns a cannabis delivery business that operates in Redwood City, said conditional use permits, or some process by which businesses are approved on a case-by-case basis is the best approach.

“There will need to be special use permits and flexibility to make it all work,” he said, adding that such a system would allow neighborhoods to weigh in and be part of the process.

The ordinance, which was approved by the Planning Commission in late March, represents the third of a four-phase approach to commercial cannabis that the council adopted in response to statewide legalization, which took effect in January. The first phase in November included a ban on all commercial cannabis activities, except deliveries of medicinal and adult use cannabis by retailers located outside the city. The fourth phase entails potential regulations allowing storefront retail cannabis businesses in 2019.

Cities have been taking various approaches to commercial cannabis post-legalization. Burlingame, East Palo Alto, Half Moon Bay and Woodside have interim bans on commercial activity, with the intention of further research. Several cities, including Belmont, Colma and San Mateo have prohibited commercial cannabis businesses while Foster City has banned all commercial activity. San Carlos has allowed some aspect of commercial cannabis such as commercial cultivation, manufacturing and testing subject to regulation and zoning but is not allowing retail storefronts. Pacifica voters approved a local tax on marijuana operations in November.

“We’re in uncharted territory and in a lot of ways we’re pioneering a new way of doing things,” Mayor Ian Bain said. “Even though other cities have done some things ahead of us and made some mistakes — and we’re attempting to learn from those — we’re also leading the way in some respects.”

In other business, the council discussed recently commissioned polls that suggest Redwood City voters are open to a sales and transient occupancy tax hike. A potential tax measure is one of several efforts to preserve city services in light of an impending budget deficit. After “robust” community dialogue, staff will bring draft measures to the city council in June or July to be placed on the November ballot.

(650) 344-5200 ex. 102

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