November 2, 2018

Recent Changes to California State & Local Legislature


Recent legislative and regulatory developments in California on both the state and local levels have the potential to further increase costs to licensed cannabis businesses.

On the state level, Governor Jerry Brown recently signed into law Assembly Bill 2799. Among other measures, the new law requires that licensed California cannabis businesses must employ at least one supervisor and one employee who have successfully completed a Cal-OSHA 30-hour general industry outreach course. Licensees have a year from the issuance or renewal of the license to fulfill the requirement.

While the training of supervisors and employees will likely not be a particularly burdensome expense in itself, meeting OSHA requirements can in some cases be quite costly and time consuming. This is especially true when renovations to a facility are required to comply with OSHA mandates. Additional OSHA requirements for general industry – such as the development and implementation of emergency action plans or ensuring that hazard communication standards are being followed – can necessitate significant planning, record keeping, and training of other employees, depending on the type of operation.

In local matters, cannabis businesses in Santa Barbara County, which has become a hub of cultivation activity since the beginning of the licensed market, are being urged by officials to get in compliance with the municipal ordinance approved earlier this year. According to the Santa Barbara Independent, only one county land-use permit has been issued to a cannabis operation thus far. This despite there being over 1,000 active temporary state licenses issued to businesses in Santa Barbara County as of the end of August.

Although recently-passed legislation establishing a category of “provisional licenses” should allow temporary license holders to stay compliant with the state through 2019, the Independent report quotes county officials as stating that enforcement efforts against non-compliant cannabis operations would be picking up in the future. Additionally, local tax payments are due by October 31st. Cultivators in Santa Barbara County will face a levy of 4% on their gross receipts.

Finally, with elections approaching in the coming week, numerous municipalities in California will likely see cannabis-related questions on their ballots. KRCR reported that residents of the city of Redding, in Shasta County, will decide on Measure C. The ballot initiative, if approved, would impose a tax of $3 per square foot on all cultivation operations, while adult-use retailers would see a 5% local tax on top of the state’s 15% levy. The measure would also allow local officials to raise rates as high as $25 per square foot or 10% of gross receipts.