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HomeMy WebLinkAboutReso 34-2018 (18-184)City of South San Francisco P.O. Box 711 (City Hall, 400 Grand Avenue) Igo South San Francisco, CA City Council Resolution: RES 34 -2018 File Number: 18 -184 Enactment Number: RES 34 -2018 RESOLUTION APPROVING A CANNABIS OPERATOR PERMIT APPLICATION FEE, A CANNABIS OPERATOR PERMIT FEE, AND A CANNABIS BUSINESS INSPECTION FEE; AND AMENDING THE FISCAL YEAR 2017 -18 MASTER FEE SCHEDULE. WHEREAS, on January 25, 2017, the Council adopted a temporary moratorium on all cannabis- related uses, which has been extended; and WHEREAS, throughout 2017, the City Council held a series of study sessions to consider whether to allow, and how to regulate, various types of commercial cannabis uses; and WHEREAS, the City Council passed a citywide ban on storefront retail and outdoor cultivation cannabis uses effective January 12, 2018; and WHEREAS, on February 14, 2018, the City Council adopted an ordinance amending South San Francisco Municipal Code Section 20.410 to permit manufacturing, testing, and delivery of cannabis and prohibit cannabis microbusinesses; and WHEREAS, Hinderliter, de Llamas & Associates (HdL) prepared the City's cannabis cost recovery fee study, attached herein as Exhibit A; and WHEREAS, the cannabis fee study analyzes the costs associated with regulating cannabis commercial uses in the City, identifies the amount of the fee that is necessary to off -set those costs, and recommends that the City adopt three cannabis cost recovery fees: a cannabis operator permit application fee, a cannabis business inspection fee, and a cannabis operator permit fee; and WHEREAS, the proposed cannabis cost recovery fees serve to mitigate the impact of the cost of the City of South San Francisco's cannabis regulatory and enforcement efforts; and WHEREAS, in approving the cannabis fee study and adopting the fees, the City finds that: (1) The purpose of the fees is to off -set the costs of regulating, monitoring and engaging in City of South San Francisco Page 1 File Number: 18 -184 enforcement activities for commercial cannabis businesses; and Enactment Number: RES 34 -2018 (2) The fees will be used to cover the costs to the City of regulating, monitoring and engaging in enforcement activities for commercial cannabis businesses; and (3) There is a reasonable relationship between the fees' use and the type of development projects on which the fees are imposed because the fees will be used to off -set the costs to the City of regulating the types of businesses upon which the fees are imposed; and (4) There is a reasonable relationship between the need for the City to regulate commercial cannabis businesses and the existence of commercial cannabis businesses in the city and thus, it is reasonable to impose the fees on these businesses. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of South San Francisco does hereby: Approve a one -time, non - refundable cannabis operator permit application fee at a rate of $7,528 per application. Approve a cannabis business inspection fee at a rate of $360 per inspection. Approve a cannabis operator permit fee at a rate of $15,274 per year. Amend the Fiscal Year 2017 -18 Master Fee Schedule. At a meeting of the City Council on 3/14/2018, a motion was made by Pradeep Gupta, seconded by Mark Addiego, that this Resolution be adopted. The motion passed. Yes: 4 Mayor Normandy, Mayor Pro Tem Matsumoto, Councilmember Gupta, and Councilmember Addiego Absent: 1 Councilmember Garbarino City of South San Francisco Page 2 1 City of South San Francisco Cannabis Business Fees Analysis Executive Summary Cannabis Operator Application Fee: HdL has evaluated and conducted compliance inspections for over 1,000 cannabis businesses in the past three years, which has provided key data in creating a “fit gap” analysis on the application review process. In determining the City of South San Francisco’s application fee, this analysis has taken into consideration the staff that will be participating in the review, the complexity of the review, and the number of hours necessary to complete the process. To ensure the City is 100% reimbursed for the staff time, we have captured the total burden cost of each employee involved in the application process. As a result, we have concluded that each application will take 44.5 hours to review at a cost of $7,528 to be charged to each applicant. This will be a one-time fee that will be charged as part of a business’s initial application. Cannabis Business Inspection Fee: The Cannabis Business Inspection Fee is designed to cover the cost of inspecting specific uses that implicate Water Quality Control Plant requirements. These inspections will be conducted for the relevant uses on an annual basis. Thus, not all cannabis uses will be subject to this fee. It should be noted that the annual Fire, Code Enforcement and Security Inspections are applicable to all types of cannabis uses and these inspections are incorporated into the annual Operator Permit Fee amount outlined below. The Cannabis Business Inspection Fee will be established at the rate of $360 per inspection based on the cost of Water Quality Control Inspector and City Engineer/Public Works Director time. Cannabis Operator Permit Fee: The recommended permit fee is based on the cost of annually reviewing cannabis businesses for permit renewal and the cost of overseeing the City’s proposed regulatory/enforcement strategy. The regulatory/enforcement strategy is designed to review licensed cannabis businesses within the City of South San Francisco on an annual basis and monitor businesses’ compliance with the City’s rules and regulations throughout the year. The total enforcement time is broken into five performance activities intended to balance proactive and reactive work that is critical to industry compliance. It is anticipated that the City will issue nine (9) cannabis permits based on the population and geographic size of the City, market conditions, and experience in other comparable jurisdictions , we have determined the following factors. As seen in the chart below, 60% of the overall strategy is in the form of proactive enforcement, while 40% of the time is spent engaged in reactive enforcement. The percentage numbers are expected to change to a greater percentage of proactive enforcement as the industry and the enforcement strategies mature. EXHIBIT A 2 Additionally, the strategy is designed to oversee the licensed businesses by utilizing both non-sworn and sworn personnel. The sworn officer is intended to be used as logistical support to the non-sworn staff and to assist in matters related to conducting backgrounds, regulatory inspections (includes vehicles) and investigations pertaining to complaints or non-qualified sales, which could lead to criminal prosecution. The proposed 819 hours of enforcement time calculates to the equivalency of 39% of one full time person for the overall enforcement hours for the year. This averages to 91 hours per cannabis business being permitted as noted in the below chart. It is recommended that the Cannabis Operator Permit Fee be established at the rate of $15,274 to cover all the cost associated with the management and oversight of the program. This fee will be charged to businesses prior to issuance of an Operator Permit and annually thereafter. ENFORCEMENT ACTIVITY PER PERMIT STAFF INVOLVED TOTAL HOURS PERCENTAGE Risk-Based Inspections (RBIS) Sworn /Non-sworn 28 hrs. 40% • Training & Stakeholder Meetings Sworn /Non-sworn 9 hrs. Complaints Sworn /Non-sworn 18 hrs. 20% Administrative Actions / Operator Permit Renewal and Annual Inspections Sworn /Non-sworn 18 hrs. 20% Non-Qualified Sales Programs Sworn / Non-sworn 9 hrs. 10% Backgrounds (Business / Employees) Sworn /Non-sworn 9 hrs. 10% Description of Enforcement Activities • Risk-Based Inspections – The City intends to establish “Risk-Based” criteria for prioritizing enforcement-related inspections of cannabis businesses. Risk-Based criteria are needed to make the best use of the City’s limited resources. This is accomplished by targeting for enforcement those businesses that are non-compliant with the laws and regulations governing the cannabis industry. The Risk-Based Inspection methodology is designed to identify and predict non-compliant activity, which could be indicators of greater public safety threats. 40% 20% 20% 10% 10% Enforcement Activities Risk-Based Inspections Complaints Admin. Actions Non-Qualified Sales Programs Backgrounds 3 o Level 1 Inspections are limited to a quick review of the business, which may be conducted either on-site or off-site. o Level 2 Inspections involve a thorough inspection of the business and provides a structured and efficient tool to gauge how well a licensed business is meeting compliance standards. o Level 3 Inspections require the inspector or investigator to prepare a comprehensive plan to define investigation objectives along with tasks and resources required to fulfill the objectives. • Complaints – As part of a robust and effective Risk-Based inspection system, it is imperative for the City to receive, track, and investigate complaints received from external sources in a consistent manner. The evaluation and investigation of complaints should be one of the City’s highest priorities. Based on the number and type of complaints, enforcement staff might need to re-classify the risk level and evaluate whether the need for increased enforcement activity might be warranted. • Non-Qualified Sales Programs – The primary objective of Non-Qualified Sales Programs is to test and evaluate the level of compliance with regards to the businesses sales activity. Non-Qualified Sales are defined as any sales transactions that are conducted in violation of State and/or local ordinance. As direct customer sales are very limited in the City (non-storefront delivery only), preventing unauthorized sales and shutting down illegal sale operations is a high enforcement priority. • Administrative Action / Follow-up Inspections – In the event a business is the subject of administrative sanctions, that business should be scheduled for increased inspections and reporting requirements. Backgrounds (Business / Employees) – Criminal and financial background checks will be conducted on all individuals reporting to have direct financial interest in the business. In addition, all employees of cannabis businesses will be subject to criminal background checks. The size of the proposed business, ownership structure, and funding sources may vary greatly, which can affect the complexity of the background check process. The City intends to develop a standardized administrative background check process to increase the time and efficiency of reviewing proposed businesses and their employees. Recommended Personal Protection Equipment- The City intends to purchase the necessary safety equipment to ensure the safety of the staff conducting inspections at the facilities. Estimated cost may vary based on the type of inspections being conducted; however, we anticipate this cost to be less than $300 and therefore, a cost recovery fee was not included in the cost analysis. The City intends to identify these needs in the future and incorporate the cost of safety equipment in year two of the program. 2935109.1 City of South San Francisco Summary of Cost Recovery Fees Cost Recovery Fee Application 7,528$ Permit 15,274$ Inspections 360$ Based on 9 Permits Department Employee Type Hourly Rate Hrs Req'd Program Cost City Managers Office City Manager 181.00$ 27.00 4,887$ City Managers Office Manager of Communications 181.00 2.25 407.25 Economic and Community Development Senior Planner 163.00 90.00 14,670.00 Economic and Community Development Building Inspector 106.00 12.00 1,272.00 Economic and Community Development Associate Planner 163.00 12.00 1,956.00 Finance Department Finance Director 114.00 9.00 1,026.00 Finance Department Business Registration Inspector 114.00 9.00 1,026.00 Finance Department Business Registration Accounting Technician 114.00 2.25 256.50 Police Department Sergeant 171.00 90.00 15,390.00 Police Department Community Services Officer II 171.00 4.50 769.50 Police Department Police Records Technician 171.00 2.50 427.50 Fire Department Fire Marshal 166.00 90.00 14,940.00 Fire Department Safety Inspector 166.00 18.00 2,988.00 City Attorney's Office City Attorney 260.00 27.00 7,020.00 Public Works City Engineer/PW Director 144.00 2.50 360.00 Public Works Water Quality Technician 144.00 2.50 360.00 Total Program Costs 400.50 67,756$ Annual Fee (based on 9 permitees)44.50 7,528$ Based on 9 Permits Department Employee Type Hourly Rate Hrs Req'd Program Cost City Managers Office City Manager 181.00$ 24.00 4,344$ City Managers Office Manager of Communications 181.00 5.00 905.00 Economic and Community Senior Planner 163.00 18.00 2,934.00 Economic and Community Building Inspector 106.00 49.50 5,247.00 Economic and Community Associate Planner 163.00 18.00 2,934.00 Finance Department Finance Director 114.00 27.00 3,078.00 Finance Department Business Registration Inspector 114.00 24.50 2,793.00 Finance Department Business Registration Accounting Technician 114.00 24.50 2,793.00 Police Department Sergeant 171.00 180.00 30,780.00 Police Department Police Records Technician 171.00 39.00 6,669.00 Police Department Community Services Officer II 171.00 49.50 8,464.50 Fire Department Fire Marshal 166.00 144.00 23,904.00 Fire Department Safety Inspector 166.00 144.00 23,904.00 City Attorney's Office City Attorney 260.00 72.00 18,720.00 Public Works City Engineer/PW Director 144.00 0.00 - Public Works Water Quality Technician 144.00 0.00 - Total Program Costs 819.00 137,470$ Annual Fee (based on 9 permitees)91.00 15,274$ Based on 9 Permits Department Employee Type Hourly Rate Hrs Req'd Program Cost City Managers Office City Manager 181.00$ 0.00 -$ City Managers Office Manager of Communications 181.00 0.00 - Economic and Community Senior Planner 163.00 0.00 - Economic and Community Building Inspector 106.00 0.00 - Economic and Community Associate Planner 163.00 0.00 - Finance Department Finance Director 114.00 0.00 - Finance Department Business Registration Inspector 114.00 0.00 - Finance Department Business Registration Accounting Technician 114.00 0.00 - Police Department Sergeant 171.00 0.00 - Police Department Police Records Technician 171.00 0.00 - Police Department Community Services Officer II 171.00 0.00 - Fire Department Fire Marshal 166.00 0.00 - Fire Department Safety Inspector 166.00 0.00 - City Attorney's Office City Attorney 260.00 0.00 - Public Works City Engineer/PW Director 144.00 11.25 1,620.00 Public Works Water Quality Technician 144.00 11.25 1,620.00 Total Program Costs 22.50 3,240$ Annual Fee (based on 9 permitees)2.50 360$