SJCBC LLC (San Jose Cannabis Buyers Collective)

The purpose of this informational memorandum is to provide the outreach and implementation plan to be undertaken by the City to assure that marijuana businesses in the City are aware of, and understand, the Marijuana Business Tax (“MBT”) to be imposed on these businesses. Effective March 1,2011, any person engaged in marijuana business in the City shall pay a MBT of 7% of gross receipts to the City. The first tax remittance is due April 30, 2011 for gross receipts for the prior calendar month. Details of the MBT are included in the attached brochure, as well as in San Jos6 Municipal Code Chapter 4.66. Additionally, this memo provides a brief summary of the City’s current position on Medical Marijuana regulations and enforcement, in light of past City Council action.

Outreach

HempCon 2011 Medical Marijuana Convention

The Finance Department (“Finance”) participated in the HempCon 2011 Medical Marijuana Convention held in the Convention Center’s South Hall on January 28 through January 30, 2011. Finance had a booth (provided complimentary by HempCon) where staff handed out brochures explaining the MBT and answered any related questions. Staffproactively visited all marijuana businesses in attendance to assure they received the MBT brochures.

HempCon is a medical marijuana show catering to those who may benefit from the medical use of marijuana and industry participants. The event included a number of exhibits including medical marijuana dispensaries, collectives, caregivers, products, evaluation services, legal services, educational institutes, equipment, and accessories. More information on HempCon can be found at w~wv.hempcon.com.

Newspapers/Journals

Prior to the effective date of the MBT, Finance will place publi.c notices and articles in various publications to further the efforts to ensure that all marijuana businesses in the City are informed of MBT. Publications will likely include the San Jose Metro, San Jose Mercury News, E1 Observador, and local business organization newsletters.

Training Seminar

Finance will hold a training seminar on Monday, February 28, 2011 from 9:00 – 11:00 am in the Council Chambers to review the MBT ordinance, and the preparation of the MBT return and registration form. Letters will be sent to all known marijuana businesses operating in the City inviting them to the 2-hour seminar.

Implementation

In order to properly staff for the implementation of the MBT, Finance will add over-strength positions. Staff will be responsible for monitoring remittances, identifying non-remitters, assessing penalties and interest, and generating management reports (statistics). In addition, staff will conduct site audits of each marijuana business in two-person teams to ensure compliance with the MBT ordinance and validate the gross receipts reported to the City and the related remittances. It is anticipated that site visits will commence in May 2011, to coincide with the first MBT tax remittance due on April 30, 2011.

Status of Regulating Medical Marijuana Establishments

At the December 13, 2010 City Council Special Meeting on medical marijuana, the City Council directed staff to cease issuing business licenses to new medical marijuana establishments and to continue those enforcement priorities approved by the City Council on June 22. As of December 13, 2010, the Finance Department has ceased accepting Business Tax Registration Forms for new medical marijuana establishments.

In addition, staff was directed to return to the Rules Committee with a work plan and meeting schedule to complete the review of medical marijuana regulations that result in the adoption of ordinances providing:

• (a) Land Use Restrictions;
• (b) Business Operating Regulations
• (c) Budget action that results in a 100% Cost Recovery Program for the regulatory program;
• (d) Authorization of the addition of staff to support the regulatory program; and,
• (e) Establishment of fines for various violations related to the regulations.

The City of San Jose has not adopted ordinances that would allow or regulate medical marijuana collectives. A draft ordinance was discussed in June and December 2010, and Council deferred further consideration until spring 2011. Because San Jose does not have an ordinance regulating or allowing these collectives, all medical marijuana businesses currently are considered a nuisance and are not allowed under the Municipal Code. The proposed work plan is scheduled to go to the Rules Committee on February 23,2011 for consideration.

Status of Enforcement Activities

Per Council’s action at the June 22, 2010 City Council Meeting, the City Administration was directed to focus enforcement on the closure of any medical marijuana collective that is:

• Within 500 feet from specific sensitive uses such as residential homes, school, child day care center, churches that includes schools or day care, community or recreation centers, parks, trails, libraries, substance abuse rehabilitation centers or another medical marijuana collective.
• Outside of the Commercial General (CG) Zoning District.

All of the 100 or so marijuana businesses are subject to enforcement based on this direction; however, staff resources in Code Enforcement and the City’s Attorney’s Office are focused on first addressing those collectives creating a public nuisance. For example, the City was successful in the closure of the Purple Elephant establishment which was creating a nuisance to the community.

COORDINATION

The preparation of this memorandum was coordinated with the City Attorney’s Office, City Manager’s Office, and Police Department.