CITY OF BOULDER CITY COUNCIL AGENDA ITEM MEETING DATE: February 7, 2012

AGENDA TITLE: Second reading, and consideration of Emergency Ordinance No. 7834, establishing a moratorium on applications for new medical marijuana business licenses, on applications for expansion or amendment of existing medical marijuana business licenses, on applications for the transfer of medical marijuana business licenses, and on applications for new medical marijuana business owners or financiers through August 9, 2012, setting a fee for applications to change or add business managers, and setting forth related details.

PRESENTER/S Tom Carr, City Attorney Kathy Haddock, Senior Assistant City Attorney EXECUTIVE SUMMARY On January 3, 2012, council adopted an emergency moratorium on medical marijuana applications to be effective until February 8, 2012. The date was chosen so there could be a first reading of the ordinance on January 17, 2012, and a public hearing on February 7, 2012, prior to the moratorium being extended for a longer period of time. Staff recommended that council pass an emergency moratorium for several reasons, including the effect on the city of recent court decisions, and to allow time for council to evaluate the effect on the city of the use of city resources for medical marijuana businesses, saturation and location issues, and changes to the citys laws to allow for proper regulation of medical marijuana. Staff recommends that the council extend the moratorium for an additional six months and impose a fee on applications for change of business managers to at least cover the costs incurred by the Licensing Division in processing the applications. Council asked that staff address some issues for second reading.

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Suggested Motion Language: Staff requests council consideration of this matter and action in the form of the following motion: Motion to adopt on second reading Emergency Ordinance No. 7834, to extend a moratorium on applications for new medical marijuana business licenses, on applications for expansion or amendment of existing medical marijuana business licenses, on applications for the transfer of medical marijuana business licenses, and on applications for new medical marijuana business owners or financiers through August 9, 2012, and setting a fee for applications to change or add business managers and setting forth related details

COMMUNITY SUSTAINABILITY ASSESSMENTS AND IMPACTS Economic: There are no direct economic impacts of imposing the moratorium and the moratorium should not affect the sales taxes collected by current medical marijuana businesses. Continuing the moratorium will make some additional staff time available in order to perform a financial analysis to determine whether medical marijuana business licensing is being covered by the existing fees or is instead being subsidized from the General Fund. This analysis will inform future decision-making on changes to fees and location of additional medical marijuana businesses. Social: A primary purpose of the moratorium is to provide staff time to evaluate the impacts of the number of medical marijuana businesses on the community, and the impact of having cultivation facilities in the city if there is no dispensary in the city generating sales tax revenue. It will also allow staff time to amend the medical marijuana ordinance, enhancing its enforceability, and to determine whether additional changes to the laws of the city governing medical marijuana should be recommended to council. The recommendations stemming from such analysis will inform future decisions on how medical marijuana is impacting the delivery of city services and quality of life in Boulder. OTHER IMPACTS Staff Time: If council elects to lift the moratorium, the staff time devoted to medical marijuana licensing and the fees for the licenses would remain the same. Performing the suggested analysis will require significant staff time and is not on the work plan of any department. However, imposing the moratorium makes some additional staff time available to accomplish some of the analysis that would otherwise be spent processing medical marijuana applications. Public Feedback Medical marijuana businesses have asked for an exemption to the moratorium because of problems with landlords or concerns that they may be subject to federal enforcement

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actions, due to proximity to a school. The businesses requested that the moratorium include an exception to relocate in Boulder. BACKGROUND The moratorium will allow the city staff and council to assess where we are, and where we are going, with respect to medical marijuana. Staff has finished processing the 117 original applications, and the 7 applications submitted to correct grounds for denial since November 1, 2010. Today, there are 75 licensed medical marijuana businesses operating in Boulder, including 32 dispensaries, 37 grows, and 6 marijuana infused products (MIP) businesses. There are 12 pending license applications (5 dispensaries, 5 grows, and 2 MIPs), which were among the original 117, plus 2 additional applications submitted in late December. There has not been a full analysis of the fees charged for medical marijuana business license processing. However, from limited analysis, staff believes that the fees do not cover the processing costs. As a result, the direction from council that medical marijuana regulation should pay for itself without a subsidy from the General Fund is not being met. No fee is charged for processing applications to change or add business managers. The staff has not suggested the moratorium cover those applications because employee turnover is not under the control of the business owner. However, a fee does need to be imposed to cover the citys costs of processing these applications. The cost for the Licensing Divisions review is $143 for an average application. That does not include the costs for the non-average application, or the costs incurred by other departments, including the Police Department and City Attorneys Office, that may also be involved in the application process. A moratorium would allow the council time to consider additional limitations on medical marijuana businesses, including (1) whether to limit the total number of licenses in Boulder; (2) whether to prohibit grows serving dispensaries outside of Boulder; (3) the impact of grows on the availability of industrial land in Boulder; (4) city resources necessary to properly regulate these businesses; (5) the effect on Boulder of neighboring municipalities deciding not to allow medical marijuana businesses or only allowing dispensaries; (6) the effect of the state medical marijuana enforcement being 2-5 years behind where they anticipated being at this point; (7) determining the appropriate amount of fees for applications, because the current fees have not covered the citys costs of reviewing applications; (8) necessary changes to the code to adequately regulate medical marijuana businesses in a manner that will be enforced by Boulder courts; (9) how to protect the city in view of recent and pending court decisions finding that the federal government has pre-empted the citys regulation of marijuana in several areas; and (10) to see how courts will enforce the citys laws in pending cases. The city does not have the staff to litigate every license denial, which is where a recent Boulder District Court decision could lead. A moratorium will allow staff the time to assess the weaknesses in the city ordinances and make recommendations to council without the pressure of processing yet more licenses.

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ANALYSIS In order to have the time for staff to provide council information to make decisions about changes to medical marijuana laws, the staff needs to be relieved temporarily from the duties of processing applications. Allowing new businesses to locate in the city, or existing businesses to apply for new locations prior to council analyzing the effects on other businesses, saturation issues, and costs of the businesses would worsen the existing status rather than create the opportunity for all new businesses to comply with new laws. Staff recommends a moratorium because of the impact of medical marijuana businesses on the community, not how the laws affect individual medical marijuana businesses. There are sufficient medical marijuana businesses licensed in Boulder to provide medical marijuana to the community. The city does not allow transfers of any licenses or permits to alternate locations, except under specific procedures. The most broad transfer provisions apply to liquor licenses, but that law is dictated by the state. Creating exceptions to the moratorium would negate the purpose of adopting the moratorium. Moreover, any exceptions would have to be drafted to provide equal protection to all similarly situated medical marijuana businesses. Thus far, exemptions to the moratorium have been primarily requested for two reasons; difficulties with a landlord and concerns about federal enforcement. Difficulties with a landlord may affect any type of business, not just medical marijuana businesses. Concern about federal government enforcement is a risk to all medical marijuana businesses that each business needs to measure for itself. Attempting to draft an exception to this moratorium that addresses each of these issues, but treats all medical marijuana businesses equally, would negate the purpose of the moratorium. Part of the analysis that staff can present to council during the moratorium period is whether there emerges a specific class of medical marijuana businesses that should be allowed to transfer licenses more freely than other medical marijuana businesses. Staff is requesting that council impose the moratorium for only six months to comply with Colorado court decisions limiting the length of moratoria. Staff will report to council before the end of the moratorium regarding the progress made and the need for any extension if necessary. First Reading Requests for Information In the first part of January, the U.S. Attorneys Office for Colorado announced that it had sent cease and desist letters to 23 medical marijuana dispensaries. The letter required the dispensaries to close by February 27, 2012 for violating 21 U.S.C. 860(a). That section of the federal law provides for enhanced penalties for drug trafficking within 1,000 feet of a vulnerable use. Uses specified by the law include public and private schools, universities, vocational schools, and properties owned by housing authorities, among others. The U.S. Attorneys Office considers this issue to be a law enforcement matter and will not release the names and locations of the businesses. While we do not know what businesses received letters, the word on the street is that the letters were sent only to dispensaries in Denver; that at least one business received a

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letter because of its proximity to a private university; and that the U.S. Attorneys Office will be sending more cease and desist letters in the future. The map of medical marijuana businesses in Boulder shows 13 dispensaries within 1,000 feet of a school or day care. That list does not include other medical marijuana businesses (cultivation facilities or MIPs), nor show businesses within 1,000 feet of any of the CU or Naropa campuses, vocational schools, or Boulder Housing Partners properties. Council asked how the proposed moratorium would affect a dispensary in Boulder if it received the letter and wanted to relocate within the city. The proposed moratorium would prevent such a business from submitting an application for a new medical marijuana business license if the events occurred while this moratorium was in place. Staff does not recommend making an exception to the moratorium for several reasons. First, one of the reasons for the moratorium is to give the city an opportunity to evaluate the financial, land use, and other effects on the city of medical marijuana businesses. If staff time is required to process new applications, that purpose is negated. Second, previous amendments to Chapter 6-14 B.R.C., 1981, addressing a particular circumstance have resulted in several unintended consequences. Staff is requesting the opportunity to thoroughly evaluate the current situation, and the effect of changes in the Code, prior to making any exceptions. Third, Section 6-14-12(b) B.R.C., 1981 provides that a medical marijuana business license is considered revoked if a court of competent jurisdiction determines that federal law pre-empts the states laws. Finally, our best information is that no Boulder business is in need of an exception now, and we have no reason to believe that any will be in the next few months, and maybe not until after the moratorium expires. Matrix of Options Council may: 1. Take no action on the suggested ordinance. This would result in the moratorium being lifted as of 8:00 a.m. February 8, 2012; existing fees and laws would apply to all applications for new or expanded businesses or changes of ownership. 2. Adopt the suggested ordinance. Council could determine whether to lift or extend the moratorium based on the input provided at the public hearing. 3. Adopt a moratorium with exceptions to address circumstances for some, but not all, medical marijuana businesses that provides equal protection to all medical marijuana businesses. Staff recommends Option 2. ATTACHMENTS A. Suggested Ordinance

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Attachment A

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 E. C. D.

ORDINANCE NO. 7834 AN EMERGENCY ORDINANCE IMPOSING A MORATORIUM ON APPLICATIONS FOR NEW MEDICAL MARIJUANA BUSINESS LICENSES, ON APPLICATIONS FOR EXPANSION OR AMENDMENT OF EXISTING MEDICAL MARIJUANA BUSINESS LICENSES, ON APPLICATIONS FOR THE TRANSFER OF MEDICAL MARIJUANA BUSINESS LICENSES, AND ON APPLICATIONS FOR NEW MEDICAL MARIJUANA BUSINESS OWNERS OR FINANCIERS, THROUGH AUGUST 9, 2012, SETTING A FEE FOR APPLICATIONS TO CHANGE OR ADD BUSINESS MANAGERS, AND SETTING FORTH RELATED DETAILS.

THE CITY COUNCIL OF THE CITY OF BOULDER, COLORADO MAKES THE FOLLOWING FINDINGS OF FACT: A. B. All of the findings contained in Ordinance No. 7830, adopted on January 3, 2012; Additional time is required for city staff to be able to provide council information regarding recent court decisions and the city resources used to license and regulate medical marijuana businesses and their effect upon the city; Amendments to the citys law regarding medical marijuana requires amendments to be more effectively enforced to implement the intent of the council; The city has not previously set a fee on processing of an application for a business manager, but finds that processing such applications takes a significant amount of staff time and resources, including an average cost of $143 per application for the licensing division alone, and several such applications are filed by each medical marijuana business each year; and An extension of the temporary moratorium adopted on January 3, 2012 is necessary for the immediate preservation of public peace, health and safety. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BOULDER, COLORADO: Section 1. The City Council adopts the findings in this ordinance and those contained

in Ordinance No. 7830, adopted on January 3, 2012, incorporated herein by this reference.

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Attachment A

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Section 2.

Continuing from February 7, 2012 and continuing until 8 a.m. on August

9, 2012, no application for a medical marijuana business license, nor an application to expand a medical marijuana business, nor a transfer of the license, nor an application for change of owner or financier, shall be accepted by the city manager.

5 6 7 8 9 10 subsection (f), which fee shall be paid to the city by the applicant prior to the acceptance of an 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Section 5. The City Council finds that public health, peace and safety justify the (b) Criminal background check fee, per person checked: (c) License fee, per year: (d) Renewal application fee, per year: (e) Renewal license fee, per year: (f) Application for a new business manager Actual Costs $2,075.00 $1,040.00 $1,040.00 $ 150.00 application for a new business manager. 4-20-64. Medical Marijuana Businesses. Application and license fees for medical marijuana businesses shall be up to the following amounts: (a) Application fee: $3,115.00 Section 3. The City Council directs the city manager to study, develop, evaluate, and

review appropriate regulations, ordinances, and fees pertaining to medical marijuana businesses for presentation to and consideration by the City Council. Section 4. Section 4-20-64, B.R.C., 1981, shall be amended by the addition of

adoption of this moratorium as an emergency measure. The nature of the emergency is described, in part, by the findings of fact set forth in this ordinance. The City Council finds that

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Attachment A

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additional time is required to consider an appropriate response to recent interpretations of the citys law and medical marijuana laws at the municipal, state and federal level, and the appropriate fees so that taxpayers are not subsidizing the costs of licensing and regulating medical marijuana businesses. The City Council also needs sufficient time to evaluate

5 6 7 8 9 10 managers required resources of the licensing division of the city in excess of an average of $143 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 City Clerk on behalf of the Director of Finance and Record Attest: ____________________________________ Mayor INTRODUCED, READ ON FIRST READING, AND ORDERED PUBLISHED BY TITLE ONLY this 17th day of January 2012. per application, plus costs of other departments of the city. Section 7. The City Council deems it appropriate that this ordinance be published by approaches to avoiding negative impacts associated with licensing new or expanded medical marijuana businesses. Therefore, the City Council orders that this ordinance shall be effective immediately upon its passage. Section 6. The city council finds that the cost of processing applications for business

title only and orders that copies of this ordinance be made available in the office of the city clerk for public inspection and acquisition.

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Attachment A

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Attest:

READ ON SECOND READING, PASSED BY A TWO-THIRDS VOTE OF COUNCIL MEMBERS PRESENT, ADOPTED AS AN EMERGENCY MEASURE, AND ORDERED PUBLISHED BY TITLE ONLY this 7th day of February, 2012.

____________________________________ Mayor

City Clerk on behalf of the Director of Finance and Record

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