MEMORANDUM TO PLANNING COMMISSION

April 20, 2011

From: Ed Robey and Ron Green

To: Lake County Planning Commission

Re: Medical Marijuana Dispensaries on August 28, 2011 Agenda

1. Introduction

We have reviewed the proposed ordinance and wish to offer suggestions for improvement.
Before going into detail, we would like to discuss the proposed ordinance in general.

This proposed ordinance uses the Use Permit process to regulate dispensaries. Use Permits go
with the land. We think that it would be preferable to have a licensing process for the
operator of the dispensary which would be similar to a liquor store license issued by the state.
The license would be issued for a particular individual, who has to pass a background check,
pay a yearly fee to operate at a specified location, meet all required standards, etc. If the
operator changed, then the new operator would need to go through the licensing process.
There is no provision in the proposed ordinance for dealing with changes in operators.

The proposed ordinance uses zoning to regulate the location of dispensaries. This is awkward
because the system of land use zoning districts was designed before the issue of medical
marijuana dispensaries existed. The licensing process would eliminate this problem. The
license would be issued to an individual to operate at a particular location. If the location did
not meet some specified guidelines, it would not be granted. Again, the liquor license is the
model.

The cost of administrating the licensing process would be covered by the license fee.

Finally, the proposed ordinance reeks with an unspoken attitude that these dispensaries are
quasi-criminal enterprises, when in fact the voters of California chose to legalize marijuana
for medical use. This is the law in California, and we need to deal with it in a rational and
practical manner. These dispensaries are actually more like a cross between a drug store and a
liquor store.

After a brief discussion of the relevant law, we discuss in detail our major concerns with the
proposed ordinance. This is not an exhaustive list of all of the problems with the proposed
ordinance. We believe that a dispensary ordinance can be written much more concisely, and
prefer a licensing process rather than use permits. We have written and enclose a Model
Ordinance.

1
2. The Legal Context

Proposition 215, The Compassionate Use Act of 1996, was passed by the voters of California
and legalized the medical use of marijuana by anyone with a written or oral recommendation
to use marijuana from a licensed physician.

This Act stated that one of its purposes was to encourage the state government to implement a
plan to provide for the safe and affordable distribution of medical marijuana to those
patients who need it. [California Health and Safety Code, section 11362.5, subd. (b)(1)(C)]

In 2003, the State Legislature’s response to that directive was to pass SB 420, the Medical
Marijuana Program Act (MMPA), which attempts to clarify and implement Proposition 215.
Among other things, the MMPA added section 11362.775 to the Health and Safety Code,
which provides that medical marijuana patients may “associate within the state in order
to collectively or cooperatively” cultivate marijuana for medical purposes. One of the
stated purposes of the act was to “enhance the access of patients and caregivers to medical
marijuana” via collective or cooperative cultivation projects. [Stats. 2003, ch.875, section
1(b).]

In People v. Urziceanu, 132 Cal.App.4th 747 (Ct. App. 2005), the Court held that the MMPA,
in specifically itemizing the marijuana sales law, contemplates the formation and operation of
medicinal marijuana dispensary collectives “that would receive reimbursement for marijuana
and the services provided in conjunction with the provision of that marijuana.”

In People v. Hochanadel, 176 Cal.App.4th 997 (Ct. App. 2009), the Court settled any
remaining doubts and specifically held that "storefront dispensaries [that are collectives or
cooperatives] may operate legally . . . ."

3. The Proposed Ordinance Forces the Dispensaries to Move [72.3, 72.5]

The proposed ordinance forces the dispensaries to move from their safe, convenient, well-
established locations in C-2 and CH shopping areas, to C-3, M-1 and M-2, heavy commercial
and industrial areas, next to such businesses as appliance stores, tire stores, auto repair shops
and manufacturing businesses. (C-3 is heavy retail and service commercial, M-1 is heavy
commercial and light industrial or manufacturing, and M-2 is heavy industrial or
manufacturing).

The more appropriate zoning is where most of the dispensaries now are, in C-2, and also in
CH. C-2 is for a full range of commercial retail and service establishments, and specifically
includes retail sales of drugs and liquor. CH allows for retail sale of beer and wine. Letting
the dispensaries stay in C-2 and CH is more consistent with the zoning definitions.

We suggest that you “grandfather” all of the dispensaries currently operating under the
moratorium that are located in any type of commercial zoning, allowing them to stay in their
existing locations without the necessity of obtaining a use permit. We believe it is in the best
interests of the County to set up a regulatory licensing procedure for dispensaries, and our
Model Ordinance does that.

2
4. “Dispensary” is Defined Inaccurately [72.4(a)]

The definition of a medical marijuana dispensary at 72.4(a) is overly broad, and inaccurate.
We suggest the following definition of a dispensary, as set forth in our proposed Model
Ordinance:

“Medical marijuana dispensary” or “dispensary” means any storefront facility which

distributes, transmits, gives, or otherwise provides medical marijuana to qualified patients or
primary caregivers in accordance with California Health and Safety Code section 11362.5
through section 11362.83, inclusive, commonly referred to as the Compassionate Use Act of
1996 and the Medical Marijuana Program. A medical marijuana patient growing
“collective" or “cooperative” that does not operate as a storefront dispensary is exempt from
the provisions of this ordinance.

The definition proposed by staff is the same one considered but not used by the Board of
Supervisors in the moratorium ordinance which they passed. The Board adopted a definition
similar to the one we are suggesting, except we have added the word “storefront” and we have
added the last sentence to clarify that this ordinance is only about storefront dispensaries, and
not about growing collectives that might, for instance, use a barn or other outbuilding to
divide up medical marijuana grown collectively by 2 or 3 or 10 people.

5. Residency Requirement [72.6(i)]

The proposed ordinance would require all dispensary members to be residents of the county,
thereby infringing on the constitutional right of people to travel intrastate. Let’s be careful
here, because we want an ordinance that is legal and will hold up in court. Prop 215 was
passed by the voters of California, and applies statewide, as does SB 420. There is no
requirement like this on any other legal enterprise in our county. Imagine going to a pharmacy
with a prescription for heart or blood pressure medicine, while visiting Lake County, and
being told that you must be a resident, or you can’t get your medicine. Similarly, the multiple
sclerosis or glaucoma patient visiting or vacationing in Lake County should be able to get her
medical marijuana medicine.

In addition, what does “reside” mean? Does a summer resident with a second home in Lake
County “reside” here for purposes of this ordinance? Someone coming to Lake County to
vacation for a week, 2 weeks, a month, or the entire summer should certainly be able to use
our dispensaries, just like they can use our pharmacies and other businesses. This provision
creates serious enforcement problems, as well as legal issues.

There is an established right to travel both interstate and intrastate, and this provision violates
the due process and the equal protection clauses of both the 14th Amendment to the U.S.
Constitution and also Article 1, Section 7 of the California Constitution. These provisions
require equal protection under the laws and that all residents of California be free to travel
throughout the state uninhibited by laws that unreasonably burden this movement. Equal
protection means that laws are supposed to protect people equally.

3
Also, there are some out of county residents that travel here to purchase medical marijuana
from our dispensaries, and these visitors spend their dollars all over the county, not just at the
dispensaries, but also at our wineries, restaurants, motels, stores, gas stations, casinos, and
cultural events.

We strongly recommend that dispensary members not be required to reside in Lake County.
There is simply no justification for this provision, and it violates the equal protection clauses
of the United States and California Constitutions.

6. Compliance and Records [72.6(a), (f)]

The proposed ordinance requires that dispensaries open their financial records and disclose to
the Sheriff who their growers are and the locations where the cannabis is grown. They would
have to label the marijuana with the identification of the grower, and the cost of the marijuana
to the dispensary.

Compliance would be through the Sheriff’s Office, rather than through the Health Department
and the Planning Department. This attempts to treat the dispensaries as criminal enterprises
rather than as legal businesses offering a legitimate and legal form of alternative medical
treatment. There are admittedly zoning implications, as well as health implications, and the
dispensaries should be regulated by the Health Department except for zoning issues, not by
the Sheriff’s Office. State identification cards (optional) are already issued by the County
Health Department. If you get the optional State of California ID card through the County,
the County Health Department must keep this confidential. The State Medical Marijuana ID
card has an ID number and a picture, but no name due to privacy/confidentiality laws. Law
enforcement officials can verify online that it is a valid card.

The growers are required by state law and the proposed ordinance [72.6(c)] to be patients and
members of the dispensing collectives. Requiring disclosure of their names and growing
locations is a violation of patient privacy and the Health Insurance Portability and
Accountability Act (HIPAA) of 1996 (P.L.104 -191). Under HIPAA, all patient information is
private and confidential.

Handing the Sheriff a list of who is growing medical marijuana for a dispensary and
identifying the location not only violates patient privacy laws but also violates the collective
members’ privilege against (federal) self-incrimination and has a very chilling effect on those
supplying the medical marijuana dispensaries. And, with federal laws still in conflict with
California’s laws, there is nothing to prevent the Sheriff from sharing this information with
the DEA. There is no valid reason for this requirement.

Concerning the cost of the marijuana to the dispensary, no other types of businesses must
disclose their wholesale cost to the public, why require that of dispensaries?

Concerning financial records, we suggest the following language:

4
Each dispensary shall allow the Planning Director to have access to the dispensary’s state
tax returns previously filed with the state for the purpose of verifying that the dispensary is
operating on a not-for-profit basis in accordance with the Attorney General’s Guidelines. Tax
returns shall be produced within 14 days after receipt of the Planning Director’s written
request.

7. Edibles Should Be Explicitly Permitted [72.6(d)]

It is unclear in the proposed ordinance whether edibles are permitted. This is an established
part of dispensaries, many people are unable to smoke or even vaporize cannabis due to their
medical conditions, and need to ingest it in some way, but may not have the time or
knowledge to prepare edibles themselves. We propose the addition of the following provision:

Medical marijuana may be provided by a dispensary in an edible form. In addition, any

edible produced, provided, or sold at the facility which contains marijuana shall be so
identified, as part of the packaging, with a prominent and clearly legible warning advising
that the product contains marijuana, the type of marijuana if known, whether the marijuana
used is bud, trimmings or leaf, the quantity of marijuana used to produce each individual
edible, and that it is to be consumed only with a physician's recommendation. Edibles shall
not count toward the processed marijuana weight limit.

8. Sales in Child-Proof Containers [72.6 (e)]

The proposed ordinance requires sale in child-proof containers. This is unnecessary and is not
the way medical marijuana is traditionally sold. It is usually sold in various sizes of plastic
bags. It will not be easy to find a child-proof container for an ounce of cannabis. This should
be left up to the responsible parents to be sure their children don’t have access.

9. Warning Message [72.6(e)]

The proposed ordinance requires a message that it “may cause cancer when smoked.” This is
inappropriate and inaccurate. In fact, studies have shown that marijuana may fight cancer and
does not cause lung cancer. Should we have warnings without facts to back them up?

10. Cultivation and Sale of Live Plants on the Premises [72.6(o)]

The proposed ordinance would not allow cultivation of cannabis on the dispensary premises,
which some dispensaries now do. We see no reason for this provision.

Also, it would not allow for the sale of clones (cuttings) or small baby plants, that all
dispensaries engage in, especially in the Spring. However, it would allow for the sale of
flowering marijuana plants, which means it would allow the sale of larger, more advanced
plants, but not little cuttings or babies, which makes absolutely no sense. And, how do you
sell plants without cultivating them while they are in the store? Cultivating means growing,
tending, feeding and watering a plant, which you have to do to keep it alive, even in a store.

5
11. The Ordinance Should Follow State Law on Distance From Schools, etc. [72.5(f)]

The proposed ordinance requires that dispensaries be located 1000 feet from any school, 1000
feet from another dispensary, and 500 feet from a park, drug/alcohol rehab facility, day care
center or youth-oriented facility.

We suggest that dispensaries be located at least 600 feet from a public or private school
(kindergarten through 12th grade) in accordance with Section 11362.768(b) of the Health and
Safely Code. We suggest that all the other distance restrictions be eliminated.

12. Home Delivery Services [72.6(c), 72.9]

The proposed ordinance would prohibit home delivery services except from approved
dispensaries. Some patients form legal growing collectives at the property of one of the
collective members, and the primary grower may then distribute the medical marijuana by
home deliveries to other collective members. This should not be prohibited.

If you adopt the definition of a “dispensary” as set forth above in heading 4 above on page 3,
then this problem is resolved. We recommend that you use our definition of a dispensary and
particularly the last sentence, which says: A medical marijuana patient growing “collective"
or “cooperative” that does not operate as a storefront dispensary is exempt from the
provisions of this ordinance.

13. Number of Dispensaries [72.5(d)]

According to the staff report, there are now 11 dispensaries operating under the provisions of
the moratorium. The proposed ordinance limits the number to 9. We propose that 15 be
permitted, to allow for population growth and growth in the medical marijuana industry. At
the very least, 12 storefront dispensaries should be permitted. There is recommended
language on page 2 of our Model Ordinance.

14. Setback from Residential Zoning [72.5(g)]

The proposed ordinance requires a setback of 100 feet from residential zoning districts. The
problem with this is that many commercial properties, particularly those in C-2, C-3 and CH
border directly on residential zoning, thereby eliminating many possible locations. We see no
reason for such a requirement.

6
15. Felony and Misdemeanor Convictions [72.5(j)]

The proposed ordinance disqualifies an operator who has a felony conviction, a misdemeanor
conviction involving moral turpitude, or who has engaged in “misconduct related to the
qualifications, functions or duties of a permittee.” This is overbroad and vague.

We instead recommend the following language:

No person who has been convicted of a felony within the past ten (10) years may be actively
engaged in the operation of any dispensary.

Going back more than 10 years runs contrary to rehabilitation considerations, and a
dispensary owner may have merely been convicted of felony possession of marijuana or
cultivation of a handful of marijuana plants for personal use prior to Proposition 215.

Concerning misdemeanor convictions, there are various acts of moral turpitude, the proposed
language is overly broad, and would mean that a minor, very old mistake, such as shoplifting
a candy bar or a pack of cigarettes from a store when young, would disqualify the person
(petty larceny). A provision relating to felony convictions within the last 10 years should
be sufficient.

The provision relating to other “misconduct” is very vague and we have no idea what it means
or who would decide what it means, and we therefore recommend it be eliminated.

16. Physical Size of Dispensary [72.5(i)]

The proposed ordinance would limit occupancy of a dispensary to buildings no more than
2500 square feet. Although most are probably much smaller than that, what legitimate
purpose does this serve? We recommend removing this provision.

17. Applicants Should Not Be Required to Disclose Locations Where Their Marijuana
Will Be Grown. [72.5(k)7.]

The proposed ordinance requires that a dispensary applicant divulge “source locations of
medical marijuana to be distributed . . . .”

This is highly inappropriate. The growers are required by state law and also by the proposed
ordinance [72.6(c)] to be patients and members of the dispensing collectives. Requiring
disclosure of their names and growing locations is a violation of privacy. Handing the
Sheriff a list of who is growing medical marijuana for a dispensary and identifying the
location not only violates patient privacy laws but also violates the collective members’
privilege against (federal) self-incrimination and has a very chilling effect on those supplying
the medical marijuana dispensaries. And, with federal laws still in conflict with California’s
laws, there is nothing to prevent the Sheriff from sharing this information with the DEA.
There is no valid reason for this requirement.

7
There are three legal sources of medical marijuana at the dispensaries. The dispensary
operator can grow it herself for the dispensing collective. The second way is if a member of a
dispensing collective or cooperative contracts with the dispensary specifically to supply
medicine in return for reimbursement for his labor and expenses. The third source is members
that grow their own, but have extra, and then contract with the dispensary to sell their excess
in return for reimbursement for labor and expenses. The specific sources are always changing,
and even if this were required in violation of privacy laws, all the applicant could do is give
information current at the time of the application, since she would not be able to predict future
sources.

18. The Requirement for Liability Insurance is Excessive [72.13]

The proposed ordinance requires that the dispensaries carry insurance with liability limits of
one million/two million dollars. Purchasing that amount of insurance is very expensive and it
is unreasonable to require that. We suggest that the amount be lowered to the more reasonable
amount of $500,000.

19. Conclusion

These are our major concerns. We believe that a licensing process, such as we set forth in our
Model Ordinance, is a far simpler and better way to go. Thank you for your time and
consideration.