OF CANNABIS CONTROL...2018/07/19 · Ben Wu Beverly Yu Members Absent (3) Kristin Heidelbach-Teramoto Alice Huffman James Sweeney Department of Consumer Affairs Dean R. Grafilo –Director,

OF

CANNABIS CONTROL CALIFORNIA

Cannabis Advisory Committee

Meeting Minutes – May 17, 2018

Hilton Oakland Airport, International Ballroom

1 Hegenberger Road, Oakland

Members Present (19):

Avis Bulbulyan (Arrived late)

Timmen Cermak

Matt Clifford

Bill Dombrowski

Jeff Ferro

Eric Hirata

Catherine Jacobson

Arnold Leff

Kristin Lynch

Kristin Nevedal

Joe Nicchitta

LaVonne Peck

Matt Rahn

Keith Stephenson

Tamar Todd

Helena Williams

David Woolsey

Ben Wu

Beverly Yu

Members Absent (3)

Kristin Heidelbach-Teramoto

Alice Huffman

James Sweeney

Department of Consumer Affairs

Dean R. Grafilo – Director, Department of Consumer Affairs

Bureau of Cannabis Control (Bureau) Executive Staff Present

Melanie V. Ramil – Deputy Bureau Chief

Tamara Colson – Assistant Chief Counsel

Andre Jones – Assistant Chief of External and Intergovernmental Affairs

Alex Traverso — Assistant Chief of Communications

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Minutes Taken By

Ashlynn Blackshire, Legal Secretary, Bureau of Cannabis Control

1. Welcome, Call to Order, and Establishment of a Quorum (Matt Rahn, Chair,

Cannabis Advisory Committee)

Matt Rahn, Cannabis Advisory Committee (Committee) Chair, called the meeting to order.

Meeting official start time noted as 10:10 AM.

Roll was taken, 18 Committee members were present. Quorum was established.

Committee Comment: 0 Comments

Public Comment: 0 Comments

2. Welcome Remarks (Dean R. Grafilo, Director, Department of Consumer Affairs)

Director Grafilo thanked the Committee members for their service. Director Grafilo also

encouraged Committee members and the public to continue to provide their valuable feedback.



3. Review and Approval of March 15, 2018 Cannabis Advisory Committee Meeting

Minutes

The Committee reviewed the March 15, 2018 draft minutes.

Committee Comment: 1 Comment

Committee Member Cermak motioned to the Committee to approve and adopt the March 15,

2018 draft minutes as presented. Committee Member Ferro seconded the motion.

Roll call vote was taken, the motion to approve and adopt the March 15, 2018 minutes passed on

a 16-0 vote, 2 committee members abstained.

Public Comment: 1 Comment

David Fluhart: Mr. Fluhart thanked the Committee for listening to the public’s voices and

taking what the public has to say into consideration. He appreciated that the minutes reflect the

point of view of everybody that was in attendance at the last meeting.

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NAME YEA NAY ABSTAIN ABSENT RECUSAL

Avis Bulbulyan ✓ Timmen Cermak ✓ Matt Clifford ✓ Bill Dombrowski ✓ Jeff Ferro ✓ Kristin Heidelbach- ✓ Teramoto

Eric Hirata ✓ Alice Huffman ✓ Catherine Jacobson ✓ Arnold Leff ✓ Kristin Lynch ✓ Kristin Nevedal ✓ Joe Nicchitta ✓ LaVonne Peck ✓ Matt Rahn ✓ Keith Stephenson ✓ James Sweeney ✓ Tamar Todd ✓ Helena Williams ✓ David Woolsey ✓ Ben Wu ✓ Beverly Yu ✓

4. Discussion and Possible Action to Approve, Modify, or Reject the Subcommittee on

Licensing Application’s Recommendations (Beverly Yu, Chair, Subcommittee on

Licensing Applications)

Committee Member Yu presented the Licensing Application Subcommittee’s proposed

recommendations to the Committee.


Committee Member Cermak requested clarification on recommendations 2 and 3. Specifically,

what the two recommendations require over and above the temporary regulations as they stand.

Committee Member Yu stated that the recommendations would increase transparency in the

annual applications. Recommendation number 2 would require a corporation or entity to disclose

the names of the owners of the corporation or entity, not just name the corporation or entity itself

as the owner. Recommendation number 3 would require a corporation or entity that has a

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financial interest to disclose the name, birth date, and provide a government-issued ID for all

individuals who are owners.

Committee Member Wu inquired whether the Bureau had estimates in terms of how much

additional time and cost it will take for the Bureau to validate labor standards.

Assistant Chief Counsel Colson responded that the Bureau does not have a specific number in

response to this recommendation.


Susan Tibbon: Ms. Tibbon expressed concern regarding the potential corporatization of the State.

She stated that right now, there is no place for the small farmer. Microbusinesses are in no way

“micro” and the current legal framework would allow people like Steve DeAngelo to have 20

microbusinesses all over the state. She feels that there can be more done to make a space for legacy

farmers.

Dan Ghirjatis: Mr. Ghirjatis is an attorney for a retail dispensary operating in San Jose and

recommended that the Committee do nothing with the Subcommittee’s recommendations on licensing applications, as they will harm the market and are overkill. He stated there are already

California law and Department of Labor Industrial Standards in place; recommendations 1 and 2

will seriously hurt investment opportunities. If applicants must disclose people with minor shares

in the company, its going to make investment money go away, and the market is already suffering.

Dr. William Munjar: Dr. Munjar wanted clarification on how many employees a business must

have to be required to enter into a labor peace agreement. He stated that he finds it completely

acceptable under the law that anyone with a 20 percent or greater aggregate be required to disclose

information, but individuals at or under 19 percent are not required to.

Joshua Jenkins: Mr. Jenkins expressed concern regarding further regulation in the industry. He

talked about small farmers and “mom-and-pop” shops already trying to comply with existing regulations and stated that adding more regulations is going to push people back into the black

market. Mr. Jenkins stated that companies are being as transparent as possible, and that adding

more regulations is “placing the assumption and presumption of guilt on these companies.” He asked that the Committee take this into consideration and not pass Recommendations 1, 2, 3, and

5.

Sabrina Fendrick: Ms. Fendrick expressed her support for Recommendations 2 and 3 and stated

that if corporations are not required to disclose the names of the owners, this could potentially be

used as a loophole for companies to apply for a license through a shell company and no one would

know who is fiscally responsible. She stated that everyone needs to compete on an equal and

transparent playing field.

John Brower: Mr. Brower expressed support for all the recommendations on the floor and stated

the “transparency of ownership is vital.” He stated that small businesses and farmers need every advantage that is available, including the use of third-party consultants or preparers for their

applications. Mr. Brower also suggested that the July 1, 2018 deadline be kept regarding the

Bureau’s transition period and that Track-and-Trace and laboratory requirements be fully

implemented.

Unknown: The speaker stated that while transparency in ownership is needed, regarding social

equity, a disclosure of ownership would hurt equity people. The speaker also stated that

undocumented workers could be at risk if their status or any other information was disclosed. The

speaker reiterated the need for transparency, but expressed concern that more regulations will

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make it harder for small businesses, people of color, and undocumented workers to enter the

market.

Tony Williams: Mr. Williams stated that he is currently in the process of waiting for a permit in

Pacifica, however the local jurisdiction is now trying to force him to close instead of allowing his

collective to operate under the “sunset clause,” which he says he is in full compliance with. He asked for clarification regarding the specifics of the sunset clause and if local jurisdictions can

force collectives to close.

Nick Hunto: Mr. Hunto expressed concern over obtaining authorization from local jurisdictions

to operate as cannabis businesses. He stated that on the local level, there are a lot of problems, and

it is very difficult. He said that if there was some way to take some control away from the local

jurisdictions so that more businesses could get a license, that would be preferable.

Ross Gordon: Mr. Gordon spoke on behalf of the California Growers Association (Association)

and stated that the Association largely represented, though not exclusively, cultivators. He

expressed support for Recommendations 2 and 3 and stated that they would ensure corporations

would not be able to hide behind shell companies. He stated that the Association’s feelings toward the recommendations were “overwhelmingly positive” and would not create additional disclosure requirements on smaller businesses.

Unknown: The speaker expressed strong support for Recommendation 1. The speaker stated that

they were a chemist who had worked in the industry and there are no labor standard regulations in

the California Occupational Safety and Health Administration (Cal/OSHA) or other workplace

standards to reference for cannabis businesses. The speaker suggested that a specific

recommendation be made that fume hoods be required to be installed in any business that partakes

in the formulation of vape pen cartridges.

Unknown: The speaker stated that for many individuals operating in the gray or black market,

employment opportunities with licensed businesses are going to be big opportunities. The speaker

also stated that it is important to note that there is some sort of benefit to licensed businesses hiring

people out of the gray and black market; doing so will be important to decreasing the size of these

gray and black markets over time.

Melanie Luthern: Ms. Luthern spoke on behalf of United Food and Commercial Workers

(UFCW) Western States Council (Council) and expressed both her personal and the Council’s strong support of Recommendation 1, particularly regarding compliance with labor standards and

reporting prior labor law violations. Ms. Luthern stated that Recommendation 1 is similar to the

other requirements already contained in the existing regulations, and is no more onerous than any

of the other requirements listed. She thanked the Committee for its effort of ensuring effective

regulations are in place.

Ray Pers: Mr. Pers expressed concern that there was nothing in the recommendations regarding

contract labor. He stated that labor is an expensive cost and suggested that something could be

added in the regulations for businesses that wanted to contract their employees or if someone could

find out if contracted employees will be allowed. Mr. Pers also suggested that something be placed

in the recommendation regarding preparers to ensure that the preparers do not assume

responsibility or liability for the application.

Vera Levett-Casey: Ms. Levett-Casey thanked the licensing Subcommittee for all its hard work

in addressing these recommendations. She requested that, for Recommendation 3 regarding

government-issued identification disclosures for all corporate owners, the requirement for the

personal and home addresses of the owners be used specifically by Bureau staff only and not posted

on any website. Ms. Levett-Casey stated that there have been quite a few people who have gotten

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personal information off the Bureau’s website and she would like to make sure that does not

happen anymore.

Tim Morland: Mr. Morland recommended that the Committee not pass Recommendation 3 until

there was more clarification regarding disclosure requirements for companies that are publicly

traded or have many shareholders or stakeholders who have a financial interest in the company.

Nolan Marley: Mr. Marley expressed support for transparency in a company. He indicated that

the company he works for is publicly traded and the owners and shareholders should be disclosed.

He would like to see a clause added that states corporate officers, directors, board members who

control more than 20 percent of stock issued by the corporation must be disclosed as well. As for

publicly traded companies, he would like the Committee to be aware that financial interest could

shift very easily in an openly traded market and consider that for their recommendations as well.

Sam Nobel: Mr. Nobel expressed concern that Recommendations 2 and 3 may allow corporations

or limited liability corporations to be created outside of California in states that do not have

requirements for stating of information or a list of officers and then give licensing authorities in

California random identification. He also suggested that the Committee look at foreign

qualifications of corporations and corporations that are outside of California.

David Fluhart: Mr. Fluhart stated that recommendations the Committee will be voting on are

difficult decisions to make, either way. He expressed concern that the Committee will not be

successful in accomplishing what they want to do.

Additional Committee Comments: 27 Comments

Vice-Chair Todd requested clarification regarding the definition of ownership under the

regulations and if a corporation or entity owns 20 percent or more of a company, would they have

to disclose owner information.

Committee Member Yu commented that definition of “owner” under the regulations applies to any individual, corporation, or entity that owns 20 percent or more of a company.

Committee Member Lynch questioned, regarding labor standards, if the recommendations cover

contract labor as opposed to employees under California statute.

Committee Member Yu commented that the Subcommittee did not cover that in their hearing

and was not sure of the rules in terms of going back to Subcommittee to clarify.

Committee Member Wu inquired whether there is anything in the labor standards that explicitly

says that cannabis businesses are not subject to Cal/OSHA. He stated that Recommendation 1 may

create more bureaucracy and adds on to a list of things preventing people from getting started in

the industry. He asked whether Recommendations 1, 2, 3, and 6 could be voted on separately, or

whether they had to be voted on all at once.

Chair Rahn stated that the motion was to vote on all the recommendations at once.

Committee Member Peck asked if the motion could be amended to vote on the recommendations

individually.

Chair Rahn stated that the motion can be amended if the Committee wishes.

Committee Member Leff suggested the motion be amended so that Recommendations 1, 2, 3,

and 6 be voted on separately.

Committee Member Yu accepted Committee Member Leff’s amendment to her motion and

motioned to take up Recommendation 1 for a vote.

Committee Member Nicchitta seconded the motion.

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Committee Member Ferro commented that a big part of legitimizing and stabilizing the industry

is to make sure the workers are protected and that businesses are complying with all labor standards

regardless of employee size.

Committee Member Cermak also commented that businesses need to make sure they are treating

their employees properly in terms of safeguarding their health.

Committee Member Jacobson inquired as to why the Committee was discussing specific labor

standards for businesses, if Cal/OSHA standards are already in place for any business that operates

in California.

Committee Member Yu responded that because the cannabis industry has functioned primarily

without any regulations, this recommendation would help set a standard and gives workers a peace

of mind knowing that businesses must follow labor standards.

Committee Member Jacobson questioned if it is common practice in any other industry for a

new business to disclose past labor law violations.

Chair Rahn responded that it depends on the local government and their licensing authority.

Committee Member Ferro commented that having some sort of requirement or

acknowledgement of labor standards from businesses during the application process would be

helpful in the inception of this industry.

Committee Member Jacobson responded that Cal/OSHA has held a meeting to specifically

address labor standard issues in the cannabis business and inquired if there had been any discussion

about working with Cal/OSHA so that businesses could reach out to Cal/OSHA regarding labor

law standards.

Committee Member Yu stated that there has not been any discussion about working with

Cal/OSHA since the last Subcommittee hearing. She agreed that workers should be in contact with

Cal/OSHA.

Committee Member Ferro also commented that the Committee is not just focused on labor

standards that are related to Cal/OSHA law but other labor standards, such as sexual harassment

in the workplace or wage and hour violations. He stated that there are already labor standards in

place that cover those issues as well.

Committee Member Dombrowski commented that the Committee may be unnecessarily

worrying about problems that have not been proven and that there are already a lot of regulations

in place with regards to labor standards.

Committee Member Woolsey also commented that he was concerned about the additional

resources that would be needed by the Bureau to enforce this recommendation, possibly extending

the application processing time.

Committee Member Lynch expressed support of Recommendation 1 and stated that this

additional requirement would be a good preventative measure for small businesses and entities to

ensure that they are in compliance and not in danger of losing their license.

Committee Member Cermak stated that the licensing forms already have a section dedicated to

acknowledging compliance with labor standards and expressed that if preparers and businesses

understood a plan was necessary, the time and effort put into complying would be small.

Chair Rahn commented that while it has been newly legalized, the industry is not brand new and

the standards of practice have already been around. Adding another responsibility for the Bureau

and another requirement for licensees is over burdensome and unnecessary.

Committee Member Bulbulyan commented that labor standards apply to two sides—health and

safety of the employees and wage and hour standards. Cal/OSHA has pretty much covered the

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health and safety side, however, there needs to be more regulations and standards regarding wage

and hour labor standards.

Roll call vote was taken, the motion to adopt Licensing Application Subcommittee

Recommendation No. 1 failed on an 8-11 vote.




Committee Member Yu motioned the Committee to adopt Recommendation No. 2. Committee

Member Woolsey seconded the motion.


Committee Member Bulbulyan inquired whether disclosure of ownership will apply to public

corporations.

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Committee Member Yu responded that it would, and if an applicant lists a corporation as an

owner, they would have to the disclose the owner or owners of that corporation.

Committee Member Bulbulyan responded and inquired if the definition of owner in the

recommendation is the same as the Bureau’s definition of owner described in their regulations.

Committee Member Yu stated that the definitions were the same.


Recommendation No. 2 passed on an 18-1 vote.





Member Leff seconded the motion.

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Committee Comments: 37 Comments

Committee Member Jacobson inquired whether the public comment regarding disclosure of

addresses and personal information was addressed in the recommendation.

Committee Member Yu responded that the application goes directly to the Bureau and none of

the information on it would be made public.

Asst. Chief Counsel Colson clarified that depending on the information that comes to the Bureau,

some of it is disclosable, while other information is not.

Committee Member Bulbulyan questioned if information on applications can be made exempt

from Freedom of Information Act (FOIA) requests.

Asst. Chief Counsel Colson responded that the Bureau is subject to both FOIA and the California

Public Records Act (CPRA) requests and the only way to make information exempt is to change

that specifically in both statutes.

Committee Member Jacobson inquired whether requiring applicants to disclose their state-issued

government ID will put individuals whose immigration status is unknown, at risk.

Committee Member Yu responded that theoretically that might be possible, but the

recommendation was mostly directed at corporations being identified as owners.

Committee Member Bulbulyan commented that disclosing owner(s) of a corporation may make

it harder for new investment money and capital to enter the market and may limit the funding for

social equity. It would be difficult to get public companies to list all owners and their information.

This requirement may deter corporations from entering the market, or find ways to circumvent the

regulations.

Committee Member Woolsey referred to a prior public comment and inquired whether

Recommendation No. 3 conflicts with Section 5004 of the Bureau’s emergency regulations, which

states that individuals who hold a share of stock that is less than 5 percent of the total shares of a

publicly traded company are excluded from being disclosed.

Asst. Chief Counsel Colson clarified that persons with up to 5 percent ownership in a publicly

traded company do not have to disclose under the current financial interest disclosures.

Committee Member Woolsey asked Asst. Chief Counsel Colson whether those persons with 5

percent or less ownership still be excluded from disclosures if the recommendation was to pass.

Asst. Chief Counsel Colson responded that those persons would still be excluded.

Committee Member Bulbulyan added that the definition of ownership in a publicly traded

company with aggregate shares of 5 percent or more would not apply to a private equity structure,

which is more of a limited partner/general partner structure.

Asst. Chief Counsel Colson clarified that as of right now, the regulations state that persons with

ownership up to 5 percent are exempt and that Recommendation No. 3 does not limit a percentage

of financial interest that would be excluded from disclosure.

Committee Member Nicchitta cited 26051.5 of the Business and Professions Code, which

requires a person that has a financial interest in a company to be disclosed in an application for

licensure, with some exemptions allowed. He asked whether a person is still required to disclose

under 26051.5 if that person has financial interest in a company that has financial interest in

another company.

Asst. Chief Counsel Colson responded that the statute requires anybody with a financial interest

to disclose.

Committee Member Nicchitta requested clarification regarding whether an applicant would need

to list the company as a “person” with financial interest if the recommendation passed as drafted.

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Asst. Chief Counsel Colson responded that the company would indeed need to be listed as a

person.

Committee Member Yu clarified that Recommendation No. 3, if passed, would amend the

regulations about financial disclosures.

Committee Member Lynch clarified that the issues presented in public comment about

corporations using shell companies and coming into the market were addressed in Committee

Member Nicchitta’s comments.

Committee Member Yu stated that was the Subcommittee’s intent. Committee Member Bulbulyan questioned how Recommendation No. 3 will work in instances

of legacy trusts and family stock where there are multiple layers of disclosure.

Committee Member Yu responded that this is the first step in addressing the issue of transparency

and that there are more concerns that need to be addressed and discussed.

Committee Member Lynch asked if it would be possible to make and adopt a motion to table

Recommendation Nos. 2 and 3 for a future Committee or Subcommittee hearing.

Asst. Chief Counsel Colson responded that Recommendation No. 2 had already been voted on

and passed, but a motion could be made to revisit the recommendation at a future meeting. The

motion would be to review Recommendation No. 2 and table Recommendation No. 3 for a future

Committee meeting, because Chair Rahn has not extended the Subcommittees beyond the initial

sessions. However, a motion could be made to have more Subcommittee meetings if desired.

Committee Member Jacobson questioned what would be discussed if Recommendation No. 3

was tabled for a future Committee or Subcommittee meeting.

Committee Member Yu responded that the issues presented by Committee Member Bulbulyan

regarding financial disclosure of owners of family stock and legacy trusts.

Committee Member Jacobson responded and requested clarification regarding whether the issue

was that the Bureau needs to be aware of every entity in a business, including a family trust.

Committee Member Yu responded that the way Recommendation No. 3 is drafted states, “any corporation or other entity” and stated that this description would hopefully capture all business

structures.

Committee Member Jacobson questioned what the Subcommittee’s concerns are with the current regulations as they stand now and what issues they are trying to address with this recommendation.

Committee Member Yu responded that the concerns are that businesses with many financial

investors, who might just be corporations or other entities feeding money into a company, may

enter the market and the State may not be aware of who has ownership. This recommendation

would ensure that there is some transparency when businesses apply for licensure.

Committee Member Cermak questioned whether there would be any additional complications

to applying this recommendation to foreign corporations.

Asst. Chief Counsel Colson responded that under the Bureau’s current regulations, the obligations

to disclose a financial interest apply to everybody, and that Bureau staff could clarify language in

the regulations to make that clearer. Foreign corporations are not prohibited by the regulations, but

will still need to follow all owner and financial disclosure requirements.

Committee Member Jacobson questioned how the owner and financial disclosure requirements

would affect crowdsourcing or crowdfunding.

Asst. Chief Counsel Colson responded that the statute currently requires the disclosure of any

person with any financial interest that meets that threshold, with the few exceptions such as blind

trust or persons with up to 5 percent ownership in a publicly traded company. It was clarified that

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there is no percentage requirement for financial disclosure. The 20 percent requirement applies to

the identification of owners in a business.

Chief Rahn commented that he agreed with Committee Member Bulbulyan that

Recommendation No. 3 could cause overregulation and stated that the Bureau’s regulations

already in place address the Subcommittee’s concerns. If, down the road, these issues are arising

or are still around, they can be dealt with then.


Recommendation No. 3 failed on an 6-12 vote.





Member Leff seconded the motion.

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Asst. Chief Counsel Colson requested clarification that Committee Member Yu motioned the

Committee to adopt Recommendation No. 6 and that Committee Member Leff understood that

was the motion he seconded.

Committee Member Yu responded that motion was to adopt Recommendation No. 6.

Committee Member Leff responded that he understood he seconded that motion.


Public Comments: 0 Comments






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Committee Member Yu motioned the Committee to adopt Recommendation No. 4 with the

amendment to include locally licensed equity applicants. Committee Member Ferro seconded

the motion.

Committee Comment: 1 Comment

Committee Member Nicchitta commented that if the Bureau and the other licensing agencies

review their annual license fees, they should look at allowing reduced or incentivized fees for

certain groups such as disabled-veteran-owned businesses, social-enterprise businesses, or

business that employ the formerly incarcerated or homeless.


Susan Tibbon: Ms. Tibbon suggested that legacy farmers receive incentives and fees tied to gross

receipts. She expressed concern that rural farmers in Mendocino County are at 1 percent adoption

and that the licensing fees are too steep for the small farmers to pay, which is affecting the

communities.

Joshua Jenkins: Mr. Jenkins suggested that the issue of helping veterans obtain licensing be made

its own recommendation for the Committee to consider. He stated that there is already an equity

requirement for veterans in the state of California under Business and Professions Code 16102 that

is not being enforced.

Paul Hansberry: Mr. Hansberry agreed with Chair Rahn that the industry is not brand new, just

newly legalized, and has been around for a long time. He expressed concern that there should be

incentives for adoption. Currently, there are only barriers and the focus should be on small farmers

and businesses, not corporations.

Dr. William Munjar: Dr. Munjar stated that he is a retired military veteran and his application

was expedited. As a result, he received his temporary license. He disagreed with prior comments

stating that the licensing authorities are not helping veterans and thanked the Bureau for helping

him obtain a license. He expressed concern about the fees associated with hosting a cannabis event

and questioned whether any other event organizer in any other industry had to pay such high fees.

He also commented that corporations are not evil, and may help the industry in some cases.

Douglas Rio: Mr. Douglas spoke on behalf of the California Compassion Coalition (Coalition).

The Coalition suggested that the non-remuneration compassion cannabis activities or programs

donating 100 percent of the organization’s cannabis at no cost to qualified, at-risk communities,

should be fully exempt from all state taxes and licensing fees.

Ray Pers: Mr. Pers suggested that African Americans and people of color who have been

disproportionately disenfranchised by the war on drugs receive some priority in licensing or placed

into a separate equity program, because they have been affected the most. He also expressed

concern that licensing authorities are not reaching out to the African American communities.

Ryan Miller: Mr. Miller expressed support in reducing qualification requirements for disabled

veterans.

Ramon Garcia: Mr. Garcia stated that communities of color and equity applicants need

scholarships, fee waivers, payment plans, and reduced fees because it is already hard enough for

these communities to raise the capital needed to get started in the industry. He stated that small

farmers and small businesses paved the way for legalization and should not be shut out by big

corporations.

Unknown: The Speaker commented on the large amount of fees that are incurred at the local level,

even before applying for a state license.

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Tim Morland: Mr. Morland stated that because licensees had to have a separate A and M license,

that meant separate fees, which becomes expensive very quickly. He suggested a tier system for

licensees who had multiple locations throughout the state. The primary location would have the

full annual fee and other “field” locations would have lower fees. Allen Steiner: Mr. Steiner suggested there be more discussion of helping individuals who have

cannabis-related arrests on their record and businesses that can prove they were operating under

Prop 215 enter the industry.

Ralph Trueblood: Mr. Trueblood stated that he and others who work with compassionate use

have saved taxpayers hundreds of millions of dollars over the last 20 years, and that no more

impediments are needed in the process to get licensed.

Sean Kiernan: Mr. Kiernan expressed support for more help to veterans trying to enter the

industry, and stated that this would be the best economic opportunity that veterans would have.

Christopher King: Mr. King stated that, as a retired veteran, he could get every single benefit he

was qualified for except the business license tax and fee exemption. He stated that there may be a

disconnect with the Disabled Veterans and Business Enterprise Program, which is a different

entity.

Unknown: The speaker expressed concern that the Committee has not touched on the mass

incarceration of people of color and the war on drugs when discussing levelling the playing field

of the cannabis industry. He recommended using the revenue generated from the industry to give

back to the disenfranchised communities.

Nolan Maury: Mr. Maury supported the recommendation to decrease fees for equity applicants

and eliminate the separate A and M licenses in favor of one license for both types. He

recommended waiting until there is more sales data for the first year, before assessing any fees.

Dale Sky Jones: Mr. Jones suggested that there should be a distinction between cannabis events

and educational events; the fees for these events should be adjusted accordingly.

Ron Leggett: Mr. Leggett also supported reducing fees for people of color and other equity

applicants to make it possible for these groups to enter the industry.

Charley Pappas: Mr. Pappas thanked the Committee for their work and stated that inclusion of

co-ops and collectives and businesses in the black market is needed to make the industry work.

Robert Wiener: Mr. Wiener stated that the annual fees are detrimental to small farmers and that

a lot of them are quitting the industry altogether because they cannot afford cultivation taxes and

license fees.

Adam Villareal: Mr. Villareal also supported reducing fees and added that Tier 3 applicants

should be included in the discussion because they are the ones trying to support partnerships and

sponsor social equity applicants. Accordingly, they should not have to pay such high fees.

Travis Wheatley: Mr. Wheatley cited section 16102 of the Business and Professions Code.

Bill Cooke: Mr. Cooke expressed support for reducing fees and costs for the smallest license types

and suggested larger license types could subsidize the smaller businesses.

Unknown: Speaker stated that the Committee will really need to push the social equity and

amnesty programs on the legislature so that small businesses, legacy farmers, and equity applicants

have a chance to enter the industry.

Unknown: The speaker suggested that instead of calling the program “social equity” rename it to “equity equity” to remove the stigma associated with it. He also expressed concern that groups who were incarcerated on drug charges are being left out of the conversation.

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Committee Member Lynch questioned whether Recommendation No. 4 also included reducing

fees for entities whose primary purpose is to serve disabled and military veterans.

Committee Member Yu responded that the Recommendation No. 4 states the following: “The licensing authorities should evaluate the amount of annual fees, especially fees paid by people with

disabilities, military veterans, and locally licensed equity applicants.” Committee Member Cermak suggested that the recommendation be amended to add nonprofit

compassion programs to the list.

Committee Member Yu accepted Committee Member Cermak’s amendment to her

recommendation. Committee Member Ferro seconded the amendment.

Committee Member Lynch repeated her earlier question, regarding whether the amended

recommendation includes entities whose primary purpose is compassionate use or to serve people

with disabilities or veterans.

Committee Member Yu responded that entities would be encompassed by the word “applicants” but asked if there should be more clarification.

Committee Member Lynch responded that the recommendation says, “paid by people” which

does not necessarily mean an entity and inquired about situations where the individual applicant

did not qualify, but the entity who is helping them does. Specifically, whether these entities would

be eligible for reduced fees under this recommendation.

Committee Member Yu suggested that the recommendation be amended for clarification and

should say: “The licensing authorities should evaluate the amount of annual fees, especially fees paid by applicants with disabilities, applicants who served in the military, and locally licensed

equity applicants” and include Committee Member Cermak’s amendment regarding nonprofit

compassion programs.

Asst. Chief Counsel Colson clarified that under the Medicinal and Adult Use Cannabis Safety

and Regulatory Act (MAUCRSA), a “person” also includes a corporation or LLC, so using

“people” in the recommendation already encompasses entities.

Roll call vote was taken, the motion to adopt Licensing Application Subcommittee amended




Eric Hirata ✓ Alice Huffman ✓ Catherine Jacobson ✓ Arnold Leff ✓

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Kristin Lynch ✓ Kristin Nevedal ✓ Joe Nicchitta ✓ LaVonne Peck ✓ Matt Rahn ✓ Keith Stephenson ✓ James Sweeney ✓ Tamar Todd ✓ Helena Williams ✓ David Woolsey ✓ Ben Wu ✓ Beverly Yu ✓


Member Dombrowski seconded the motion.


Committee Member Lynch questioned whether the Subcommittee discussed delaying testing

requirements for smaller entities, but requiring larger entities who have the capital to comply with

the July 1 deadline.

Committee Member Yu responded that the Subcommittee did not discuss any testing issues and

was more focused on the requirement that A and M licensees only conduct businesses with their

respective license types.

Asst. Chief Counsel Colson clarified that the transition period described in section 5029 of the

Bureau’s emergency regulations does not exactly state any phase-in testing requirements. The

phase-in testing requirements are in the testing laboratory section of the regulations.

Committee Member Bulbulyan inquired about the fees associated with A and M designations,

as all cannabis goods must be tested, regardless of the licensee’s designation. He also supported

delaying the transition period because the testing labs are not ready; the local governments are not

issuing licenses, which means the State cannot issue licenses.

Committee Member Stephenson commented that individuals do not have to get a county or state

issued medical marijuana card to purchase medicinal marijuana—they may bring a doctor’s recommendation.

Committee Member Cermak commented that the public health recommendation to not require

the state or county issued card was passed.

Committee Member Woolsey agreed that the transition period should be delayed, but questioned

how the Subcommittee came up with 18 months as the time of delay.

Committee Member Yu responded that the Subcommittee wanted to give the State more time to

evaluate everything. The Subcommittee also wanted to account for the lag in local government

action.

Committee Member Bulbulyan requested clarification as to whether the recommendation was to

extend the transition period until January 1, 2020, as opposed to January 1, 2019.

17

Committee Member Yu stated that the recommendation was to extend the transition period until

January 1, 2020.

Committee Member Bulbulyan suggested that the recommendation be amended to change the

extension to January 1, 2019, and commented that a six-month extension is a fair amount of time.

He indicated that he thought the recommended 18 months seemed a little excessive.

Committee Member Nevedal commented that merging the two license designations and fees

would be very beneficial and should be considered, in addition to extending the transition period.

Asst. Chief Counsel Colson requested clarification that the recommendation to extend the

transition period until January 1, 2020 did not apply to the recommendation to merge the license

designations and fees.

Committee Member Yu clarified that the January 1, 2020 date only applied to extending section

5029(b)(1) of the Bureau’s emergency regulations. The merging of A and M licenses and fees

would be implemented separately.

Committee Member Cermak commented that nurseries do not want to designate a crop as

recreational or medicinal until they see what is in demand. He questioned whether the Track-and-

Trace system will still be able to track product if it is no longer designated as A or M.

Asst. Chief Counsel Colson clarified that the Track-and-Trace system will be able to track all

product, regardless of designations present.


Dorina Burn: Ms. Burn expressed concern that an additional six months would still not be enough

time to train everyone on all the requirements and regulations and supported extending the

transition period until January 1, 2020.

Ron Edwards: Mr. Edwards also supported extending the transition period until January 1, 2020.

Dr. William Munjar: Dr. Munjar questioned the assessing of annual fees and how these amounts

were generated.

Susan Tibbon: Ms. Tibbon expressed concern about being forced to destroy products that have

already been paid for. She suggested that the transition period be modified to read “until all

products are sold or destroyed by the dispensary at their discretion.” Paul Hansberry: Mr. Hansberry agreed with Ms. Tibbon’s comment. Retailers should be able to

recoup the monies that they paid for the products in their inventories.

Unknown: The speaker appeared on behalf of Hannah Nelson, a Mendocino-based attorney, who

was unable to come. Ms. Nelson’s statement was read to the Committee. Ms. Nelson’s statement indicated that extending the transition period would be helpful to farmers, however Track-and-

Trace does not have to be delayed.

Unknown: The speaker stated that since the A and M designation only comes into play for tax

purposes, product should not be designated as such until the point of sale at the retailer. The

speaker also supported extending the transition period until January 1, 2020.

Ross Gordon: Mr. Gordon expressed his support for Recommendation No. 5, and stated that the

prohibition of moving products between designations and having separate premises for each

designation make it hard to keep up with demand needs.

Allen Steiner: Mr. Steiner agreed with Mr. Gordon’s comments and added that it is important that there is a strong medicinal marijuana program.

Unknown: The speaker supported the recommendations to extend the transition period and merge

the license designations.

18

Sabrina Fendrick: Ms. Fendrick supported extending the transition period and merging the

license designations.

Valerie Corral: Ms. Corral supported extending the transition period and stated that the July 1

deadline is daunting because of all the large amounts of cannabis product that would have to be

destroyed if not sold by the deadline.

Unknown: The speaker also supported the recommendations to extend the transition period and

merge the license designations. The speaker then expressed concern that current medicinal product

that does not pass testing is destroyed instead of being used by compassionate use programs.

Joseph Evans: Mr. Evans supported extending the transition period and merging the license

designations. He stated that this would be helpful to testing labs because manufacturers of

laboratory equipment only want to sell their equipment if the product being tested is medicinal.

Max Mikalonis: Mr. Mikalonis expressed support for extending the transition period and

combining the license designations.

Alec Shedony: Mr. Shedony suggested that product not be marked A or M until it leaves the

distributor and goes to the actual point of sale and the customer.

Vera Levett-Casey: Ms. Levett-Casey also supported not designating product as A or M until the

point of sale and stated that 18 months gives enough time for voting cycles and statutory changes

to occur.

John Brower: Mr. Brower expressed support for extending the transition period and combining

the licensing designations and fees.

Unknown: Speaker supported combing the licensing designations and fees.

David Blaine: Mr. Blaine supported combining the A and M designations and license fees.

Andrew Jarvis: Mr. Jarvis supported extending the transition period an additional 18 months and

combing the license designations and fees.

David Fluhart: Mr. Fluhart stated that he supported extending the transition period only for an

additional 6 months as opposed to the recommended 18 months.


Committee Member Cermak expressed support for extending the transition period, but

commented that combining the license designations might cause problems when dealing with the

Federal government. He suggested adjusting the cost of licenses but keeping the license

designations separate.

Committee Member Peck commented that the public brought up good points for extending the

transition period and combining the license designations and hopes the Committee takes the public

comments into consideration.

Committee Member Bulbulyan commented that the A and M designations have been a topic of

discussion in every single Subcommittee and stated that this affects the supply chain more than

anything else, which is why it is imperative that the designations be combined into one.

Committee Member Ferro requested clarification regarding whether the removal or merging of

the designations was a statutory change and if the combining of fees was allowed.

Asst. Chief Counsel Colson responded that the annual license fees could certainly be combined

and that statute does not get into specifics about whether A licensees can do business with M

licensees and M licensees can do business with A licensees.

19


Recommendation No. 5 passed on an 18-0 vote. Committee Member Stephenson stepped out of

the room and was not present to vote.




Chair Rahn called for a lunch break at 12:40 p.m. The Committee meeting was called back into

session at 1:30 p.m.


Manufacturers’ Recommendations (Jeff Ferro, Chair, Subcommittee on

Manufacturers)

Committee Member Ferro presented the Manufacturers Subcommittee’s proposed

recommendations to the Committee.

20


Committee Member Ferro motioned the Committee to adopt Recommendation Nos. 1, 2, 3 and

4 as drafted. Committee Member Leff seconded the motion.

Committee Member Cermak questioned if the typical dosage purchased for adult use was

known.

Committee Member Ferro responded that he was not sure and posed the question to other

Subcommittee members.

Committee Member Bulbulyan replied to Committee Member Cermak and stated that the

recommendations to increase dosage came from the thought process that the inactive ingredients

in topical products were more dangerous than the actual active ingredients of cannabis oil, so by

limiting dosage, public and consumer safety were not actually increased.

Committee Member Jacobson responded to Committee Member Bulbulyan’s comment and

questioned whether non-edible also meant inhalable or smokeable product.

Committee Member Bulbulyan answered that the definition is not statutory and that this

recommendation would cover topical lotions and vape cartridges, which would increase the

medicinal dosage to 4,000 and adult-use dosage to 2, 000 milligrams.

Christina Dempsey, California Department of Public Health (CDPH) clarified that non-

edible cannabis products include concentrates like vape cartridges and topical products and noted

there are several cannabis products that are non-edible.

Committee Member Jacobson responded to Christina Dempsey and asked if inhalable

products are already covered by statute.

Committee Member Ferro responded and said that was correct and that is why the

Subcommittee stated they were not covered by statute.

Christina Dempsey, CDPH requested clarification regarding which statute the Subcommittee

was referring to and explained that vape cartridges are considered a concentrate product which

falls into the non-edible category. If the Subcommittee is recommending raising the THC limits

in non-edibles, it would also apply to vape cartridges.

Vice-Chair Todd questioned whether there are limits in the statute as to the dosage and number

of doses for non-edible products.

Christina Dempsey, CDPH responded that the limit in the statute is for a serving size of edible

products.

Committee Member Jacobson requested clarification of the dosage in a vape cartridge.

Committee Member Bulbulyan clarified that the recommendation was to increase the dosage

for non-edible products only, which will not affect the dosage restrictions on edible products.

The recommendation would restrict the quantities of products but allow a higher dosage, which

can still be controlled.

Committee Member Hirata asked Christina Dempsey, CDPH if studies were done on other

states with legalized marijuana and their dosage limits.

Christina Dempsey, CDPH responded and said that CDPH did look at other states when setting

the limits and CDPH’s limits are consistent to limits that other states have imposed.

Committee Member Bulbulyan commented that most other states do not have dosage limits for

medicinal cannabis products, only adult-use products.

Vice-Chair Todd questioned whether the recommendation to raise dosage limits would apply to

both medicinal and adult-use cannabis products.

21

Committee Member Bulbulyan responded that the recommendation would raise the limit

dosage for medicinal non-edible products from 2,000 mg to 4,000 mg and adult-use non-edible

products from 1,000 mg to 2,000 mg.

Committee Member Nicchitta requested clarification as to whether the recommendation was

about raising the dosage limitations or raising the amount allowed in an individual package.

Committee Member Bulbulyan clarified that the recommendation would allow for non-edible

products such as lotions, vape cartridges, and tinctures to be increased in the amount of

concentration, so consumers do not have to buy multiple units of the same product to get the

same quantity.

Committee Member Nicchitta questioned if there is any existing dosage limit for non-edible

products in the regulations.

Committee Member Bulbulyan responded that the current regulations have a dosage limit of

1,000 mg and 2,000 mg.

Christina Dempsey, CDPH clarified that CDPH’s regulations do not set serving sizes or

“dosage” limits for non-edible products. Serving size restrictions are only set for edible products.

Non-edible products have a total package limit for THC contained.

Committee Member Nicchitta responded and questioned if the 1,000 mg and 2,000 mg limits

set for non-edibles was the total package limit. Christina Dempsey, CDPH responded that was

correct.

Committee Member Cermak questioned whether there is a limit to how much adult-use

product an individual can purchase and walk out of a retail store with.

Asst. Chief Counsel Colson responded that the Bureau has set limits to how much retailers can

sell to an individual each day, based on the Health and Safety Code’s requirements regarding possession of both medicinal and adult-use cannabis products. Committee Member Cermak

questioned what those amounts were. Committee Member Woolsey responded that it is 28 ½

grams of flower and 8 grams of concentrate for adult-use products.

Asst. Chief Counsel Colson added that for medicinal sales, if an individual had a physician’s

recommendation that stated a higher amount than what is allowed per the Health and Safety

Code, the Bureau has allowed retailers to sell the physician’s recommended amount to that

medical patient.


Dr. Kevin Crowley: Dr. Crowley supported the recommendation to increase dosages for non-

edible products. He stated that non-edible cannabis products should be identified using

established pharmaceutical dosage forms as defined by the United States Pharmacopeia (USP).

Dr. William Munjar: Dr. Munjar expressed concern that the licensing authorities do not have

technology or resources to determine dosage.

Susan Tibbon: Ms. Tibbon suggested that there needs to be a mechanism to pre-approve and vet

labeling with clear, timely, corrected information.

Douglas Rio: Mr. Rio expressed support for raising the dosage limits in non-edible products and

suggested that donations provided through compassion programs be exempt from the dosage

limit requirements.

Dr. Lynn Silver: Dr. Silver commented that raising the limits on non-edible cannabis products is

unwise and imprudent and that regulators should seek to promote smaller levels of consumption,

less frequently, instead of increasing the amounts consumers can buy.

22

Unknown: The speaker commented that seeds and plants should not be required to be in child-

resistant packaging since there are no cannabinoids in them.

Michael: Michael commented that there needs to be more distinction between non-edible

products and more distinction between different molecules such as THC, THCA, Delta ATHC,

etcetera.

Unknown: The speaker stated that veterans usually have a regimen of 1,000 mgs, twice a day,

and the current dosage limits are adversely affecting them.

Ross Gordon: Mr. Gordon stated that there needs to be more clarification from CDPH regarding

packaging and labeling requirements.

Paul Hansberry: Mr. Hansberry expressed support for the recommendation, and stated that it

would help manufacturers cut down on packaging.

Unknown: The public speaker agreed with a prior comment that dosage limits be consistent with

United States Pharmacopeia requirements.

Alec Shedony: Mr. Shedony suggested that there be different regulations regarding cannabis

pills and tablets and stated that most non-cannabis prescribed pills are supplied monthly. Patients

should not have to go to the store every three days to pick up their prescription.

Lindsey Colmey: Ms. Colmey stated that as a consumer, the smaller dose packaging was

making it difficult for her to have access to her medication.

Rick Miller: Mr. Miller expressed concern that patients are having trouble accessing the amount

of medication they need due to the packaging limits and supported the recommendation for

raising the dosage.

Adam Villareal: Mr. Villareal stated that the dosage limits are promoting a “race to the bottom”

for products containing very low dosages and is making products less medically effective.

Valerie Corral: Ms. Corral commented that restrictions should be lifted for high THC dosages

in oral applications, topicals, and rectal applications, especially for patients who are considered

seriously ill.

Unknown: Speaker expressed support for all the Subcommittee’s recommendations and

suggested that licensing authorities and regulators look at Colorado’s packaging laws for flower

products, which only require tamper-evident packaging versus child-resistant pakaging.


Committee Member Cermak commented that he had issues with Recommendation No. 4,

because it does not distinguish between the amount of THC or the amount of CBD when

discussing raising the dosage limits but instead only discusses the weight of the product,

regardless of its contents. He suggested that Recommendation No. 4 be separately be voted on

from the other three recommendations.

Christina Dempsey, CDPH clarified that the limits set in CDPH’s regulations are not product

weight requirements or limits, but are the limits on the amount of THC that can be in the

products.

Committee Member Jacobson questioned whether the limits in the regulations only pertain to

THC or any cannabinoid. Christina Dempsey, CDPH responded that the limits applied to THC

among its various types, THC Delta-9 is the psychoactive form of THC.

Committee Member Bulbulyan commented that he agreed with Committee Member

Cermak’s comment and stated that there needs to be more discussion and information regarding

the other types of THC, but if the regulations were to wait until more studies are done to review

dosage limits, it would be a long time. For now, raising the dosage limits will lower taxes, lower

23

packing costs, and lower production costs, and is also more feasible than removing the dosage

limits altogether.

Vice-Chair Todd commented that Recommendation No. 4 is vague in its actual wording and

does not say anything about THC but uses the term “dosage”. She requested clarification if the

recommendation is meant to apply to only THC.

Committee Member Bulbulyan responded that regarding dosage, the limits in the regulations

apply to THC and CBD, which is what the recommendation is referring to.

Committee Member Jacobson clarified that Recommendation No. 4 regards the total amount of

THC per package, not the limits on dosage in products.

Roll call vote was taken, the motion to adopt Manufacturers Subcommittee’s Recommendation

Nos. 1-4 passed on an 14-5 vote.




24


Microbusiness’ Recommendations (James Sweeney, Chair, Subcommittee on

Microbusiness)

Committee Member Nevedal presented the Subcommittee’s proposed recommendations to the

Committee.


Committee Member Nevedal motioned for the Committee to adopt Recommendation Nos. 1

and 2 as drafted. Committee Member Clifford seconded the motion.

Committee Member Clifford commented that while he supported Recommendation No. 2, he

did have an issue with the term “microbusiness” and the fact that nowhere in the statute or

regulations, except for cultivation, has a size requirement for microbusinesses. He suggested that

the recommendation be amended to state that microbusinesses are required to have cultivation as

one of their operations.

Committee Member Nevedal asked if an amendment to the recommendation could be made

now to include Committee Member Clifford’s request.

Asst. Chief Counsel Colson responded that the recommendation voted on by the Subcommittee

cannot be changed, however a motion can be made to the Committee to adopt the

recommendation with certain amendments.

Chair Rahn also commented that the language in Recommendation No. 2 says a “ceiling that

delineates” and suggested that wording may be used to establish a size limit for microbusinesses. Committee Member Wu commented that there may be microbusinesses that do not want to

participate in cultivation activities and therefore are not subject to the size limit.

Committee Member Clifford responded that while that may be true, it is also the opposite of

the true intention of the original statute regarding microbusinesses size.

Vice-Chair Todd also commented that making cultivation a requirement for a microbusiness

brings the license type back to its original intent, because the limitation of size for cultivation in

a microbusiness is what made it for small business owners.

Committee Member Wu agreed with both Committee Member Clifford and Vice-Chair

Todd and stated he wanted to make sure all loopholes are closed, one of which could be

microbusinesses without a cultivation operation and therefore no size restrictions.

Committee Member Bulbulyan commented that there needs to be more clarification regarding

what separates a microbusiness from a larger business—separation by the size of the business or

the amount of revenue the business generates.

Committee Member Cermak commented that requiring cultivation to be a part of any

microbusiness is advantageous to small farmers due to the limited cultivation size.

Committee Member Jacobson questioned if the original intent of creating a microbusiness

license and cultivation limit was to give an advantage to small farmers.

Vice-Chair Todd responded that the creation of a microbusiness concept was tied to cultivation

and was supposed to be an advantage to small farmers by allowing them to vertically integrate

their operations.

Committee Member Nevedal added that under the current regulations, if a microbusiness

decided not to cultivate, there is nothing that would keep that entity as a “micro” or small business in relation to the other three operations (retail, manufacturing, distribution). Thus, the

essence of the ability to provide a pathway for small cultivators to enter the market is lost.

25

Committee Member Ferro commented that the creation of microbusinesses was not meant to

be an advantage to small businesses but to allow small farmers, who were already invested in

manufacturing and selling their own products, to remain competitive in the market.

Committee Member Jacobson requested clarification that the amendment to Recommendation

No. 2 be that a cap for the size of the entire microbusiness, not just the cultivation aspect, be

added.

Committee Member Nevedal responded that is correct and suggested the amendment state:

“Redefine to include a ceiling that requires that the cultivation be one of the components to

qualify for a microbusiness and delineates when the business is no longer considered a

microbusiness.” Committee Member Clifford commented that the amendment should clearly state that the

microbusinesses must have a cultivation operation on an area 10,000 square feet or less.

Committee Member Nevedal responded that the recommendation could be worded to have that

requirement and stated that the regulations could also be clarified to determine if a microbusiness

can buy from other cultivators, thereby circumventing the limit size of the microbusiness by

using other product and becoming a “large” microbusiness, which is why a “ceiling” needs to be established.

Asst. Chief Counsel Colson commented that the amendments must stay within the concepts of

the original recommendation based on how it appears in the agenda which was to have a

“ceiling”, not change all the activity requirements.


Dr. William Munjar: Dr. Munjar expressed concern that the Committee has only discussed the

implementation of these recommendations, but not how they will be enforced. He also stated that

the cannabis event organizer license should not be lumped together with the microbusiness

license.

Unknown: The public speaker suggested that the local jurisdictions determine security measures

for the businesses in their limits. The speaker also supported the idea that microbusinesses be

allowed to bring in other products than their own.

Paul Hansberry: Mr. Hansberry agreed with prior comments suggesting that local jurisdictions

create their own security requirements for the businesses in their limits; each city or county is

different.

Susan Tibbon: Ms. Tibbon cited an article stating that a “microbusiness is a firm with five or

fewer employees started for $50,000 or less initial capital and may not have access to traditional

commercial loans.” She stated that thousands of individuals felt that corporations and large

businesses have taken over what was supposed to be for small farmers and small operations.

Unknown: The speaker suggested that if one part of a microbusiness’ operation needs more room to expand, that they not have to change the layout of the building or the premises, but just

pay the additional fees for the higher-tiered license.

Bill Cooke: Mr. Cooke expressed concern that if an applicant has an agriculturally zoned

property, they cannot manufacture or have retail sales, except at seasonal farm stands. He

commented that there needs to be a way for the small farmer to enter the industry.

Zack Michaelson: Mr. Michaelson commented that requiring a microbusiness to have a

cultivation operation would hurt him and others who want a microbusiness but do not want to

cultivate. He suggested to keep Recommendation No. 2 as it is; tying gross sales to the annual

license fees.

26

Jude Tillman: Ms. Tillman stated that requiring microbusiness to have a cultivation operation

would be in conflict with the system already in place in Mendocino County. She stated that retail

dispensaries in Mendocino County do not need security personnel.

Doug Rio: Mr. Rio commented that compassionate care use programs should be exempt from

local and state taxes, as well as annual licensing fees.

Allen Steiner: Mr. Steiner stated that a lot of cities and counties do not have microbusinesses in

their ordinances because they are unaware of what they are and how they operate. He suggested

that the Bureau create materials to educate local jurisdictions about microbusinesses.

John Brower: Mr. Brower agreed with requiring microbusinesses to have a cultivation operation

on areas 10,000 square feet or less. He also agreed that local jurisdictions should oversee security

requirements for businesses in their area.

Ross Gordon: Mr. Gordon agreed with the recommendation to allow local jurisdictions to create

their own security requirements and agreed with the recommendation to create licensing tiers

tied to gross sales.

Michelle Dezitzer: Ms. Dezitzer stated that some local jurisdictions do not allow cultivation, so

making it a requirement will make it harder to get a microbusiness in some areas. She also stated

that one of the problems for a small farmer is that microbusiness’ operations must be in the same

area.

Valerie Corral: Ms. Corral stated that donated goods should not be taxed.

Dr. Silva: Dr. Silva referred to Committee Member Cermak’s suggestion that

Recommendation No. 4 be voted on separately from the other three recommendations, and

inquired as to whether that was motioned and voted on. Chair Rahn clarified it was only a

friendly recommendation to the Committee member who made the motion, but was not a motion

in and of itself.

Max Mikalonis: Mr. Mikalonis stated that the current regulations require that all operations

under a microbusiness license must be performed on the same premise which is advantageous to

having three separate licenses.

Ann Polson: Ms. Polson suggested that compassionate use programs be exempt from the

proposed cultivation requirement.

Joseph Airone: Mr. Airone agreed with the prior commenter’s recommendation to exempt

compassionate use programs from the proposed cultivation requirement for microbusinesses.

Robert May: Mr. May suggested that the local jurisdictions create security measures for

businesses in their areas. He also suggested that the Committee define what a microbusiness is

and the level of commercial activity allowed.

Rob Weiner: Mr. Weiner expressed support for the recommendations and agreed with the

recommendation to allow local jurisdictions to determine security requirements for businesses.

David Fluhart: Mr. Fluhart agreed with prior comments suggesting that local jurisdictions

handle security requirements for businesses.


Committee Member Woolsey commented that it would not be a good idea to require

microbusinesses to have a cultivation operation, as it would allow an individual to cultivate one

plant to meet the requirement and continue with their other operations. He suggested that the

recommendations be voted on separately.

Committee Member Nevedal accepted Committee Member Woolsey’s suggestion and

motioned that Recommendation Nos. 1 and 2 be voted on separately.

27

Committee Member Clifford seconded the motion.

Committee Member Nicchitta inquired about security measures. Specifically, he asked if that is

something that can be changed in regulations or if it must be done through change in the statute.

Asst. Chief Counsel Colson clarified that the statute does call for security measures and stated

that local jurisdictions can add additional security measures on top of what the State requires.

Committee Member Nicchitta responded and questioned whether there will be a complete

elimination of security measures in the regulations if the recommendation passes, or will they

still be there due to it being statute.

Asst. Chief Counsel Colson responded that there are some requirements in the regulations that

do address security measures, but cannot speak to what changes, if any, would be made if the

recommendation was to pass.

Committee Member Nevedal cited sections 5042 to 5047 of the Bureau’s regulations which

details security personnel requirements for retailers and stated that the requirements for security

cameras, alarms, and personnel were the most challenging for stakeholders to comply with.

Asst. Chief Counsel Colson clarified that the security requirements in sections 5042 to 5047 of

the Bureau’s regulations applied to all licensees under the Bureau, not just retailers. Committee Member Nevedal questioned whether it would be better for the Committee to

specify which security measures should be reviewed and discussed.

Committee Member Woolsey questioned whether sections 5042 to 5047 of the Bureau’s

regulations would be eliminated, moving that authority to local jurisdictions if the

recommendation passes.

Committee Member Nevedal clarified that the recommendation’s intent was not to remove all security requirements, but that requirements for security cameras, alarm systems, and personnel

be reviewed, especially for businesses in rural settings.

Vice-Chair Todd commented that the recommendation seems to fit more for rural

microbusinesses, but not necessarily for urban microbusinesses, which goes back to the issue of

defining what a microbusiness is.

Committee Member Nevedal responded that under the current regulations, it is not possible to

be a rural microbusiness and the goal of the Subcommittee was to address the issues from rural

stakeholders, including issues with some of the security requirements.

Committee Member Bulbulyan commented that requiring microbusinesses have a cultivation

operation will adversely affect microbusinesses already in place, especially in urban areas where

a 10,000-square foot space would be expensive.

Committee Member Clifford clarified that 10,000 square feet is the maximum size a cultivation

site can be under a microbusiness as per statute “up to 10,000 square feet”. Committee Member Nicchitta commented that deferring security measures to local

jurisdictions would be problematic, as it may incentivize businesses to “border-hop” to get the

best economic result with no regard for market or retail needs.

Committee Member Woolsey also agreed that lowering or deferring security measures to local

jurisdictions may also cause situations where stolen goods from one jurisdiction that had more

lax security measures gets moved into another jurisdiction.

Committee Member Jacobson commented that it is difficult to vote on Recommendation No. 1

without having established a definition for microbusinesses.

Committee Member Cermak questioned the best course of action to gain more clarity into

what a microbusiness is.

28

Chair Rahn suggested that the Committee make a recommendation to Staff to provide more

clarification and insight.

Committee Member Wu commented that Recommendation No. 1 can be interpreted two

ways—complete removal of the security requirements in the Bureau’s regulations and deferment

to local jurisdictions to create security measures, or keep the State’s requirements and local

jurisdictions can opt-out of the measures that do not make sense for their area.

Asst. Chief Counsel Colson commented and noted that if a business has a state license, they are

subject to all the rules and requirements attached to that license. In that sense, the State’s security requirements are the base and local jurisdictions can add additional requirements not addressed

by the state. A local jurisdiction can put in lower standards; however, a licensee will need to stay

compliant with the State’s security requirements to maintain their state license.

Committee Member Wu questioned whether there could be some sort of opt-out clause added

to the regulations for local jurisdictions to opt-out of some security requirements.

Asst. Chief Counsel Colson responded that could be added to the regulations as an opt-out by

the local jurisdiction, not the individual licensee.

Committee Member Nevedal inquired whether the recommendation should be amended to

allow microbusinesses to seek exemption from security requirements under sections 5044, 5045,

and 5047 of the Bureau’s regulations, if the local jurisdiction allows the exemption.

Committee Member Leff agreed with Committee Member Nevedal that local jurisdictions

should determine security measures and the State can put out guidelines on what they think is the

best protocol.

Committee Member Ferro and Committee Member Williams left the meeting and quorum

was maintained. Roll call vote was taken, the motion to adopt Microbusiness Subcommittee’s Recommendation No. 1 failed on an 8-6 vote. 3 Committee Members abstained.



Eric Hirata ✓ Alice Huffman ✓ Catherine Jacobson ✓ Arnold Leff ✓ Kristin Lynch ✓ Kristin Nevedal ✓ Joe Nicchitta ✓

29

LaVonne Peck ✓ Matt Rahn ✓ Keith Stephenson ✓ James Sweeney ✓ Tamar Todd ✓ Helena Williams ✓ David Woolsey ✓ Ben Wu ✓ Beverly Yu ✓

Committee Member Nevedal motioned for the Committee to adopt Recommendation No. 2.

Committee Member Leff seconded the motion.


Committee Member Clifford suggested the recommendation be amended to require

microbusinesses have cultivation operation on areas up to 10,000 square feet in size.

Committee Member Nevedal inquired whether the recommendation motion should be amended

to state “a fee schedule should require cultivation to not exceed 10,000 square feet and include a

ceiling that delineate when a business is no longer considered a microbusiness?” Committee Member Clifford inquired whether the recommendation can be appropriately

addressed through changes in the fee schedule.

Asst. Chief Counsel Colson commented that the agenda item is related to the license tiers and

compassionate use and fee caps and the Committee must stay within those requirements when

making amendments.

Committee Member Jacobson responded to Asst. Chief Counsel Colson’s comment and

questioned whether the Committee should be discussing whether it should add cultivation

requirements, since that is not in the scope of the original agenda item.

Asst. Chief Counsel Colson clarified that the recommendation does not necessarily include

what all the requirements for a microbusiness would be and that the Committee must make sure

they are talking about the specific recommendation; not what microbusiness requirements should

be in general.

Committee Member Jacobson suggested tabling discussion regarding defining microbusinesses

and tying to cultivation operations as a future agenda item. Committee Member Cermak

agreed that this should be tabled until the next meeting and requested the Bureau to provide

clarification of what a microbusiness is.

Chair Rahn also agreed with tabling the discussion regarding defining microbusinesses until

next meeting and stated that Bureau staff can provide more insight and clarity to the Committee

for the next meeting.

Committee Member Clifford agreed and withdrew his friendly recommendation to amend

Recommendation No. 2.

Committee Member Leff moved to table the motion to the next Committee meeting.

Committee Member Jacobson commented that the Committee should vote on

Recommendation No. 2 because it is not defining a microbusiness, but suggesting that fees be

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tied to gross receipts and that a ceiling is placed that delineates when a business is no longer

considered a microbusiness.

Committee Member Bulbulyan inquired about what happens when a microbusiness hits the

ceiling and is no longer considered a microbusiness anymore.

Committee Member Nevedal responded that the benefit of a microbusiness is to incentivize

small businesses to remain in existence and stated that if a microbusiness wants to expand past

the ceiling, it is up to the licensee. However, they would be giving up the single microbusiness

license and would need to obtain separate licenses.

Committee Member Bulbulyan responded that it would be a financial hardship for a business

to have to re-do their entire business setup because they reached a ceiling and suddenly had to

give up their license.

Committee Member Nevedal commented that the decision to remain a microbusiness or expand

beyond the ceiling is up to the licensee to determine if that is the most cost-effective and sensible

course to take.

Committee Member Bulbulyan responded that in a way it is penalizing business for being

successful in growth.

Committee Member Nevedal commented that the situation is akin to individuals in the craft

beer industry who must determine if they want—or can—move into higher tax tier and stated

that the recommendation is meant to incentivize small businesses to stay small.

Committee Member Bulbulyan responded that everything the Subcommittee and Committee

discussed is how to help small businesses enter the market and continue to grow and this

recommendation has the potential to stifle growth.

Chair Rahn commented that the Committee should be cautious on setting a threshold on a dollar

amount, because it could create a situation where a business that is modeled on selling premium

product may reach that threshold, but still have low volume and would not be considered a

microbusiness.

Committee Member Jacobson responded that the recommendation is intended for the small

businesses in operation currently to continue operations, not for startup companies looking to

enter the market and expand.

Committee Member Cermak commented that the recommendation is meant to reserve vertical

integration for small businesses and to incentivize the businesses to stay small to make sure there

are not large corporations operating as microbusinesses, shutting out smaller entities.

Committee Member Bulbulyan responded that entities do not have to be microbusinesses to be

vertically integrated; they can just obtain separate licenses for each activity. The issue is not

becoming a microbusiness, it is what happens after the threshold is reached.

Committee Member Nevedal requested clarification as to whether the primary concern with the

recommendation is if a microbusiness reaches the threshold and needs to obtain separate

licenses, that they must also obtain separate premises.

Committee Member Bulbulyan responded that the primary concern is that once a

microbusiness reaches the threshold, they are penalized and given a financial hardship because

they must give up their microbusiness license if they want to continue to grow and apply and pay

for three or more separate licenses.

Committee Member Nevedal motioned that the Committee adopt Recommendation No. 2 as

drafted, with the knowledge that more discussion regarding microbusinesses will need to happen.

Committee Member Jacobson seconded the motion.

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Roll call vote was taken, the motion to adopt Microbusiness Subcommittee’s Recommendation

No. 2 passed on an 17-0 vote.




Committee Member Nevedal presented the Microbusiness Subcommittees Recommendation

Nos. 3-6. Chair Rahn suggested that these recommendations be combined with agenda item 7 as

they deal with legislative and statutory changes. Committee Member Nevedal agreed with

Chair Rahn’s recommendation.


Dr. William Munjar: Dr. Munjar suggested there be a graduated licensing procedure for

microbusinesses that reach the ceiling and must obtain separate licenses to continue operation.

32

Susan Tibbon: Ms. Tibbon suggested that microbusiness’ retail location be a farm stand, instead

of a brick and mortar building, and that shared facilities be allowed with non-volatile manufactures

and not just oil and butter producers.

Paul Hansberry: Mr. Hansberry suggested that microbusinesses be allowed to have activities at

separate locations and have one location as a primary business which the licensing fees are paid

on.

Unknown: The speaker stated that there needs to be more clarification on what “contiguous” means in respect to microbusinesses, and supported the allowance of farm stands as a retail location

in a microbusiness.

Jude Tillman: Ms. Tillman also supported the recommendation to allow multiple non-contiguous

premises for microbusinesses.

Bob Wiener: Mr. Wiener expressed support in making microbusinesses more attainable for small

farmers and businesses.

Taylor Blake: Mr. Blake requested that one of the activities allowed under a microbusiness be the

ability to participate in cannabis events.

Bill Cooke: Mr. Cooke supported the recommendation to allow farm stand sales in rural counties.

Allen Steiner: Mr. Steiner stated that the single-premise opportunity in the microbusiness

structure offers a chance for local producers and businesses to work together.

Dr. Silver: Dr. Silver did not support the recommendation to allow farm stand sales and stated

that it would be difficult to assure enforcement of youth protection as well as other protections if

this recommendation was to pass.

John Brower: Mr. Brower expressed concern that the current microbusiness structure is shutting

out small farmers and stated that the license type was not created for giant retailers to vertically

integrate, but for the small businesses to be able to enter and compete in the market.

Ross Gordon: Mr. Gordon expressed strong support for all the recommendations presented and

stated that allowing non-contiguous premises and farm stand sales will allow farmers and

manufactures better access to consumers to develop relationships.

Robert May: Mr. May supported all the recommendations and stated that the way to get small

farmers and businesses into the market is to allow non-contiguous premises for microbusinesses.

David Fluhart: Mr. Fluhart expressed support for allowing farm stands to be used as retail

locations.

Alec Shedony: Mr. Shedony commented that before a “ceiling” is placed on microbusinesses,

there needs to be some sort of path created for microbusinesses currently in operation to transition

to separate licenses.

7. Discussion and Possible Action on How to Proceed with Recommendations

Requiring Statutory or Non-Regulatory Changes

Chair Rahn presented recommendations on how to address the legislature on proposed statutory

or non-regulatory changes.


Committee Member Nicchitta motioned to delegate Chair Rahn the authority to pen a letter to

the legislature identifying the major topics of concern that are legislative, not regulatory.

Committee Member Woolsey seconded the motion.

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Public Comment:8 Comments

Unknown: The speaker expressed concern regarding what topics will be included in the letter to

the legislature.

Unknown: The speaker suggested that a second letter also be penned to the licensing authorities,

requesting clarification on the regulations brought up in discussion.

Jude Tillman: Ms. Tillman respectfully requested how the public can help the Committee

pressure the legislature and licensing authorities to make the proposed changes happen.

Dr. William Munjar: Dr. Munjar suggested that a letter be penned to the President of the United

States requesting the rescheduling of marijuana from a Schedule 1 drug.

Bill Cooke: Mr. Cooke expressed support for penning a letter to legislature and suggested allowing

microbusinesses be smaller businesses, but not necessarily vertically integrated.

Robert May: Mr. May suggested the Committee write a letter to the licensing authorities

requesting a relaxing of regulations to allow businesses to thrive.

Unknown: The speaker supported the recommendation for non-contiguous premises for

microbusinesses and requested that microbusinesses be allowed to take in product from other small

cultivators.

Unknown: The speaker commented that the according to the Small Business Administration,

small businesses are defined as being “dependent on an industry” and can have revenue ranging

from $750,000 to $38.5 million. They stated that $750,000 is a small number and businesses should

not be penalized for reaching that number.

Additional Committee Comment: 2 Comments

Committee Member Cermak asked whether Chair Rahn would take input from the chairs of

each Subcommittee as to what topics will be included in the letter to legislature. Chair Rahn

stated that he will be reviewing past Committee meeting webcasts and Subcommittee hearings to

make sure each Subcommittee’s topics of concern are appropriately addressed.

Committee Member Jacobson clarified to the Committee and to the public that the letter being

written to legislature is being done because the Subcommittees discussed issues of concern raised

that are non-regulatory and are out of the control of the licensing authorities.

Committee Member Todd exited the meeting and the Committee maintained quorum. Roll call

vote was taken, the motion to pen a letter to legislature regarding statutory and non-regulatory

changes passed on an 15-0 vote. 1 Committee Member abstained.



Eric Hirata ✓ Alice Huffman ✓

34

Catherine Jacobson ✓ Arnold Leff ✓ Kristin Lynch ✓ Kristin Nevedal ✓ Joe Nicchitta ✓ LaVonne Peck ✓ Matt Rahn ✓ Keith Stephenson ✓ James Sweeney ✓ Tamar Todd ✓ Helena Williams ✓ David Woolsey ✓ Ben Wu ✓ Beverly Yu ✓

8. Public Comment on Items Not on the Agenda


Susan Tibbon: Ms. Tibbon stated that the Bureau’s position regarding what the cultivation area under a microbusiness is arbitrary and completely unworkable. The current 10,000 square foot

area including the garden, the drying area, and the processing area is another impediment for

many cultivators especially in the northern counties.

Paul Hansberry: Mr. Hansberry stated that there are plenty of resources available that define

microbusinesses that the Committee can reference.

Dr. Silver: Dr. Silver respectfully requested that the Committee recommend that the CDPH

carry out an in-depth assessment of potential public health impacts and recommend regulatory

actions for the issues of increasing potency of THC in products, the proliferation of flavored non-

edible products, and retail locations promoting use during pregnancy.

Ray Pers: Mr. Pers expressed concern that there was no discussion of the equity

Subcommittee’s recommendations during the hearing and stated that there needs to be an equity program for African Americans and people of color separate from the general social equity

group.

Gillian Levy: Ms. Levy stated that while CDPH has permitted the manufacturing of alcohol

tinctures, the product cannot pass the residual solvent test set in the Bureau’s testing laboratory regulations. She requested clarification on how to be compliant with testing.

Ryan Miller: Mr. Miller suggested that the topic of disposal of “contaminated cannabis

hardware” such as vape pens, cartridges, and batteries, be discussed at the next Committee

hearing.

Nick Peraino: Mr. Peraino is with Service Employees International Union (SEIU) Local 1021,

and commented that the administration introduced a budget trailer bill that, if passed, will change

the funding allocations under Prop 64 and re-prioritize where some of the funding goes. This

35

would require new regulations to be drafted. Mr. Peraino requested that the Committee discuss

this topic at the next meeting.

Jim Lewi: Mr. Lewi thanked the Committee for all their work and requested that cannabis

events be placed on the agenda for the next meeting.

Charley Pappas: Mr. Pappas thanked the Committee for their work and looked forward to

continuing working together.

Unknown: The speaker stated that 501(c)(3) non-profit organizations are illegal in the cannabis

industry and supported earlier public comments that donated cannabis goods should not be taxed.

Unknown: Speaker thanked the Committee for all their work and suggested that the Committee

discuss the July 1, 2018 transition deadline in a future agenda. The speaker indicated the July 1,

2018 deadline should stay because it will be the only thing that will create a “white-market”

demand. In addition, the speaker suggested additional agenda topics such as licensees ability to

offer samples, and retailers and microbusinesses being allowed to participate in county fairs and

local events other than cannabis events.

Anne Kelson: Ms. Kelson thanked the Committee for their work and for listening to the public

and working together to address the issues of stakeholders in the industry.

Unknown: The speaker expressed concern regarding the dosage limits in edible products and

suggested that pills and tablets be considered separately from edibles and non-edible topicals.

Allen Steiner: Mr. Steiner suggested there be more discussion regarding the employees of

cannabis businesses to make sure they are trained and up to date with current industry practices.

Bob Wiener: Mr. Wiener suggested discussing the cultivation tax as a future agenda item.

Unknown: The speaker requested that the Bureau consider adding a packaging-only permit so

that businesses can package at a separate facility other than manufacturing and that the Bureau

be more responsive and helpful when licensees call to request clarification on regulations.

Rich Miller: Mr. Miller repeated his earlier statement that regarding labeling, packaging, and

testing, cannabinoid profiles that are above .50 need to be considered as well as CBDs.

Jackie McGowan: Ms. McGowan requested that the topic of local control be added to the next

agenda.

David Fluhart: Mr. Fluhart suggested that past Committee and Subcommittee discussions be

made available online. He also suggested that the topic of a state public trust be put on the

agenda for the next hearing.

Unknown: Speaker suggested the Bureau create a new license type for businesses that want to

create web-based platforms for businesses.

9. Future Agenda Items


Committee Member Nicchitta suggested that the Committee discuss temporary cannabis events,

public health issues, and research using medical cannabis at the next Committee hearing in San

Diego.

Committee Member Peck suggested that the issue of tribes and indigenous peoples entering the

market be discussed as a future agenda item.

Committee Member Jacobson questioned if presentations by experts about public health was

still going to occur. Chair Rahn responded that it is currently being worked on and public health

will be discussed in the next few meetings.

Committee Member Jacobson commented that waste disposal, taxation of donated goods, and

seed and plant packaging issues should be added as future agenda items.

36

Committee Member Nevedal commented that taxation in general, not just of donated goods,

should be discussed.

Committee Member Stephenson commented that the issue of exit packaging needs to be

discussed.

Committee Member Cermak requested that time in the agenda be saved for the Subcommittees

that did not have all their recommendations put forward and have not have the opportunity to

discuss their topics.

10. Adjournment: 4:44 PM

37

Documents

OF CANNABIS CONTROL...2018/07/19 · Ben Wu Beverly Yu Members Absent (3) Kristin Heidelbach-Teramoto Alice Huffman James Sweeney Department of Consumer Affairs Dean R. Grafilo –Director,