The Avalon City Council discussed the feasibility of allowing recreational cannabis during the Sept. 17 meeting. The conversation took about two hours.
The council took no action.
Councilmember Mary Schickling argued that recreational cannabis would be a source of revenue for the city.
However, the federal government forbids transporting recreational cannabis through federal waters.
Background
Management Analyst Devin Hart gave the staff presentation.
According to Hart, in November 1996, Prop. 215 legalized medical cannabis in California. In November 2016, Prop. 64 legalized adult-use or recreational cannabis. On June 27, 2017, then-Gov. Jerry Brown signed a law that preserves local authority to adopt laws that limit or prohibit use of medical and non-medical cannabis businesses.
Hart said the California Code of Regulations prohibits transporting cannabis by water, but includes a special carve-out for Catalina Island.
“That’s how we were able to get our current medical business licensed and operable under the state legislation,” Hart said.
In contrast, she said federal legislation identifies cannabis as a Schedule 1 illegal drug. The Federal Controlled Substances Act does not contain an exemption for medical cannabis, according to Hart.
However, Hart said the Rohrabacher-Farr Amendment, adopted in December 2014, prohibits the Justice Department from spending funds to interfere with state cannabis laws.
According to Hart, this is important to Avalon because the Pacific Ocean is under the jurisdiction of the U.S. Coast Guard.
“There are no federal protections, exemptions, or guidelines, to allow for the use of adult use or recreational commercial cannabis,” Hart said.
“In Avalon,” said Mayor Anni Marshall.
“Anywhere,” Hart said.
According to Hart, the federal penalties for possession up to one year in jail and up to $1,000 in fines for a first offense; 15 days to two years’ incarceration and $2,500 in fines for a second offense, and 90 days to three years of incarceration and fines up to $2,500.
Hart went over the penalties for possession of cannabis with intent to sell: Less than 50 kilograms: Up to five years in prison and a $250,000 fine; 50 to 99 kilograms: Up to 20 years in prison and fines up to $1 million, 100 to 99 kilograms: Five to 40 years in prison and fines up to $2 million. 1,000 or more kilograms: 10 years to life in prison and $4 million in fines.
Hart said the Justice Department has proposed moving cannabis to Schedule III.
“It’s still a controlled substance,” Hart said.
According to Hart, transportation of cannabis on federal waterways will still be illegal but the penalties would be slightly reduced.
(“Schedule III drugs, substances, or chemicals are defined as drugs with a moderate to low potential for physical and psychological dependence,” according to the Drug Enforcement Agency.)
“City staff really interprets this as there’s no viable way to transport adult use cannabis to Catalina Island without violating federal law and or risking those federal penalties that we discussed earlier,” Hart said.
She said the harbor master had been in contact with the Coast Guard and the Coast Guard agreed that it is illegal.
She said the Coast Guard doesn’t need a reason or reasonable suspicion to board and search a vessel.
She said the previous cannabis operator’s vessel was boarded a number of times. According to Hart, they were allowed to deliver only because it was a medical use delivery.
Hart then turned to the local cannabis ordinance, which was adopted on Nov. 7, 2017.
Hart said it was great to go back and see the council struggle thoughtfully with the balancing the nature of the community and the potential impact a cannabis business would have on their small town with the desire to serve the medical need for people in Avalon.
According to Hart, the city required brick and motor businesses to be in commercial or special zones, exterior signage is prohibited, required odor control, required 24 hour video surveillance and uniformed security personnel are required on site, limited medical cannabis delivery service permits to one, and prohibited public smoking of cannabis.
According to Hart, the city could adopt a cannabis tax, but the council decided not to.
In March 2020, Avlaon voters considered an advisory measure on whether the city should allow recreational cannabis in the city.
According to Hart, 612 voters cast “No” ballots; 435 cast “Yes” ballots.
Voters also considered an advisory measure to allow a storefront cannabis business within Avalon city limits.
According to Hart, 682 voters cast “No” ballots; 365 voters cast “Yes” ballots.
Hart then turned to the potential community and economic impact of expanding the current cannabis ordinance.
“Currently, 75% of the Island’s visitors are day trippers or from a cruise ship,” Hart said.
“So if we were to expand our current cannabis ordinance to incorporate adult use, it’ll be arguably a smaller fraction of just our local population and visitors that may be able to participate without examining potential locations for consumption because as I mentioned earlier, right now your prohibited from smoking cannabis in public places,” Hart said.
She said there would be additional costs for enhanced enforcement and administrative support to manage commercial cannabis regulations as well as for the illicit cannabis market.
“I think that’s something that every community really struggles with,” Hart said.
“Anecdotally, I’ve talked to a number of different cities and it’s something that their communities really struggle with; a robust and thriving illicit cannabis market,” Hart said.
According to Hart, the legal corridor has regulations and fees. “The illicit market really does have an unfair advantage,” Hart said.
She said something Avalon would need to tackle would be how to govern the illicit market. Would the city have dogs at the Catalina Express monitoring the lines of people on the board? Hart said if the city expanded the market, the city would need more administrative staff and more code enforcement support.
Finally, she turned to taxation. Hart said a tax must be approved by local voters.
According to Hart, Santa Barbara opened up cannabis business with a 20% tax. Nearby Golita imposed a 5% tax. According to Hart, in the first year Santa Barbara didn’t get any revenue.
In one example Hart provided, a cannabis product starting at $100 would rise to about $140 dollars after other taxes were added.
Hart looked at cities comparable to Avalon and said they all prohibit cannabis.
One of the cities she said staff looked at was Santa Barbara. Population: 87,533. Annual visitors: 6.5 million.
According to one of Hart’s slides: Total local cannabis taxes were almost $1.3 million. (The Islander rounded the figure up.)
Another city that staff looked at was West Hollywood. Population: 34,514. Visitors: 22 million. Local cannabis tax revenue, almost $2 million. (Again, the figures come from a slide. The Islander rounded the figure up.)
“They have over 70 cannabis businesses,” Hart said.
South Lake Tahoe. Population: 21,175. Visitors: 15 million.
Cannabis tax revenue: $1 million.
Hart said South Lake Tahoe is on the Nevada boarder.
According to another slide, Avalon has a population of 4,000. Annual visitors: 1 million.
“Everyone eats and drinks when they go on vacation, so we thought that would be a really great benchmark to use,” Hart said, apparently referring to staff projections of potential cannabis revenue.
She said staff realized a 3.7% to 4.8% correlation between food and beverage sales related to other cities’ cannabis sales.
Avalon staff rounded the figure up to 5%.
Based on that number, Avalon staff saw potential revenue of $120,000 at a 5% tax rate; 240,000 at 10% and $360,000 at 15%.
The numbers did not account for administrative and code enforcement costs.
Discussion
“I just had one question about the impact of thee business and you mentioned cruise ships,” said Councilmember Mary Schickling.
Earlier, During Hart’s presentation, Hart raised concern about whether Disney Cruise Line would stop using Avalon as a port of call if the city allowed a storefront cannabis shop.
Schickling questioned Hart on that point.
Hart apologized for using cruise ships and said that was probably a poor example.
Hart said she meant the people who are on a cruise ship, not necessarily the Disney Cruise ships.
Hart said they talk about Catalina as an Island of romance and would those areas of the market be negatively impacted by a robust cannabis business. She said it was a question for consideration.
Schickling said Hart cited Santa Barbara. They have cruise ships and they also have dispensaries.
“I thought it was interesting that you included that in the staff report,” Schickling said.
Mayor Marshall said she appreciated all of the research.
“But it actually says there’s no way it can get to Catalina, why do we continue the conversation?” Marshall asked.
“Because I brought this up,” Schickling said.
“I wanted to be able to talk to my fellow council people and mayor and the community to find out what the interest is in getting it,” Schickling said.
She said she felt that if they could lay the groundwork to bring cannabis across the water, other people could step forward and drive the program.
She said the vote they had before was four years old. She said things can change a lot in four years.
Schickling said her main goal was to have another tax revenue stream in Avalon.
“It will not add cars. It will not have a major flood of people adding to it,” Schickling said.
“It will not have an effect on local housing,” Schickling said.
“I just was hoping to see our way clear to amend the ordinance, lay the groundwork for anyone that would possibly be interested in tackling that hurdle and getting it going,” Schickling said.
“I would recommend not Front Street,” Marshall said.
“I wanted to jump off and just find out what people feel,” Schickling said.
City Manager David Maistros said he would disagree that recreational cannabis would have no negative impact on the city. “I have heard from a number of stakeholders, business members, community members, that saw this on the agenda and asked if this was really going to happen,” Maistros said.
“I think it does have an impact having cannabis stores on Front Street. It does have an impact on family-friendly visitors,” Maistros said.
According to Maistros, cannabis might impact visitors that might not choose to come to the Island.
Maistros then addressed the illegality of transporting recreational cannabis to Catalina. “It puts the city in a very difficult position to say we’re going to legislate and provide an opportunity for a cannabis business to come here when we know that if they have the product on their shelf they couldn’t have gotten it here legally,” Maistros said.
“They would have to come to us for a license and we could deny it because they can’t have a legal way to get it here,” Schickling said.
“Why would we have it,” Maistros asked.
“Why would we even bother?” Marshall asked.
“Just to lay the groundwork, to be ready,” Schickling said.
According to Marshall, being ready would be when the federal government reclassified cannabis.
“They would have to legalize adult use,” Hart said.
“It seems like there’s so much ‘ifs’ and no time frame … ” Marhsall trailed off.
Hart said the market was so strong and robust in Long Beach she wasn’t sure if a 15% (Avalon) sales tax was viable.
She said even if a retailer sold $8 million worth of cannabis in Avalon, it would be tied with the city’s highest grossing current business.
Hart said staff would be happy to do further analysis if that’s council direction.
“I hate to tell you, weed is already here,” Schickling.
“It’s here, people are buying it and smoking it,” Schickling.
She said in an age when fentanyl is out there and you don’t know when you buy something what’s in it, she would feel much better about the community and guests having the opportunity to go to a state-licensed dispensary.
“If you care about your children, think about getting a dispensary,” Schickling said.
Councilmember Michael Ponce said the community already has addiction on the Island. “We already have drinking issues. We don’t need to bring another one here,” Ponce said.
Councilmember Yesenia De La Rosa said she saw what Schickling was saying. But if the Coast Guard says it’s illegal, that was where De La Rosa was having an issue.
Marshall said she believed the medicinal cannabis delivery service was doing well.
Janey Hall said she was really tired of giving all her money to the city of Long Beach. She said it was archaic to think cannabis isn’t going to become legal now in a federal sense.
“As far as the children go, they have a lot to deal with just—how many bars do we have per capita?” Hall asked.
She said on a cruise ship day she notices the smell of cannabis. “It’s just about everywhere because they’re not able to smoke on the boat, but they’re looking for a place,” Hall said.
Marshall argued that it would be cheaper to have medical cannabis delivery in Avalon than on the mainland.
“I practically don’t know anyone that doesn’t use it for sleep,” Hall said.
City Attorney Scott Campbell provided a legal perspective. According to Campbell, Best Best & Krieger works for several of the cities that Avalon staff looked at including Santa Barbara and Santa Ana.
“We found is that the revenues are there for recreational cannabis. The projections as to what cities actually take are not actually what you get,” Campbell.
“We do have problems in some of our cities where you have one establishment or two establishments that are legal,” he said.
He said you have other establishments popping up all the time.
“So we have a lot of city staff chasing around,” Campbell said.
“You wouldn’t have that issue with Avalon if you had only one [dispensary] but you’d still have people maybe not wanting to pay the prices and taxes that you have with recreational cannabis, which we see in our other cities,” Campbell said.
“This is a total issue of local control,” Campbell said.
He said there was some leakage with illegal cannabis and some law enforcement costs in all the cities that Best Best & Krieger represents.
Marshall asked if there was anything to prohibit someone with a commercial space where you could just go in and have proper ventilation and get stoned but not purchase cannabis.
“That’s what they have in West Hollywood,” Campbell said.
“That is an option,” Campbell said.
“I would also point out that the cannabis customer is a different type of customer than what we see now,” Schickling said.
“There aren’t usually brawls, knockdown drag-outs, domestic violence,” Schickling said.
“We see a lot, a lot of violence in this town from drunk people,” Schickling.
“We allow that daily. We encourage it. We just had a brew fest. We have the Wine Festival,” Schickling said.
Schickling said she would continue to see if the federal law can be changed. “But I didn’t want to beat a dead horse if my council was not behind me, if my community was not behind me, so I really was hoping to hear from more people,” Schickling said.
Yolanda Montano said she was a little confused.
“We are OK for medical? So medical marijuana can come across?” she asked.
Marshall confirmed that medical marijuana can come across.
Montano said what was on the fence now was brick and mortar for recreational marijuana.
She said most people who go into a brick and mortar for cannabis is for medical needs. She said her grandson is battling cancer. She said it took five days for him to get addicted to his pain medication.
Montano said her daughter spent a month-and-a-half on the paperwork to get him vetted for medical marijuana and he is now pain free, he can eat, and there is no addiction.
She used medical marijuana when she had chemotherapy.
She said people are selling marijuana on the streets.
Montano said the Municipal Code doesn’t allow tattoo shops.
“Well, they’re doing it underground,” she said.
Maistros said it’s not the city’s decision to say you can transport cannabis.
“I understand that, but I’m just saying that like Mary said she’s just asking questions and seeing if it’s a possibility,” Montano said.
Councilmember Lisa Lavelle said she had an almost equal number of people in favor and against.
She said the challenge she had was that the sales tax rate is interesting in the amount of sales that would have to take place for recreational cannabis to make sense and then add the enforcement side and the regulation side. “It doesn’t feel like it’s quite balancing out where it should be,” Lavelle said.
Lavelle said she wouldn’t be averse to changing the ordinance if the federal law could be changed but until that happened, she didn’t know if it made sense right now.
Marshall said medical cannabis can only be delivered to hotels for now.
Schickling asked why the ordinance says medical delivery only.
“You can’t have just a medical storefront?” Schickling asked.
Hart said when the council was developing the initial ordinance, they did not want cannabis to have a physical presence in the special commercial zone.
Ponce brought up a past medical marijuana vote.
In 2016, Avalon voters defeated Measure X would have allowed medical marijuana sales and cultivation with a 12% transaction tax, according to lavote.gov. The measure would have allowed up to two medical marijuana dispensaries and would have required a $10,000 license fee, according to lavote.gov.
Marshall said she did not believe having a storefront would increase illicit activities.
Schickling thanked Hart for a tremendous amount of research.
She said she was going to pursue getting cannabis legally transported through federal waters.
