After the Gold Rush: Proposition 64 – Next Steps for Public Agencies
By Neil Hall
December 27, 2016
Just a year after the California legislature approved new regulations for medical marijuana, 56% of the State’s voters approved legalizing non-medical adult consumption of marijuana. California joins Alaska, Colorado, Maine, Massachusetts, Nevada, Oregon, Washington, and Washington D.C. in making non-medical marijuana available to adults 21 years and older.
While a ban makes sense in some cities and counties and implementation in others, all need to understand and plan their next steps. We recommend a five-step cannabis approach for implementation in most public agencies: assess, implement, regulate, tax and compliance monitoring.
Assess Community Preferences
Conveniently, Proposition 64 contributed valuable assessment information. Local communities can spend time to research and analyze the voting results for Proposition 64 and evaluate support levels compared with the Statewide average. Once the easy work is done, undertake a valid survey of the community to gauge attitudes for regulation as well as taxes. Do residents prefer medical and non-medical be available and taxed, do they want them sold in separate locations, etc. While it may not happen in your city or county, misreading or ignoring the community’s attitudes can be risky. We’ve seen some examples of what can happen when a community assessment is not done. Competing local initiatives to allow retail sales appear on the ballot. Often, a voter initiated ordinance provides less tax revenue and fewer regulations than a measure written by the City or County
The second step is to develop an implementation plan that incorporates community preferences, a regulatory ordinance, a tax ordinance and appropriate monitoring and follow-up. Part of the assessment of preferences is determining an appropriate tax level, what regulations are necessary and what fees need to be levied to pay for this new industry. Just reviewing State mandated regulations in each of the license categories illustrates the need for careful oversight and expert advice on what activities are required to ensure smooth implementation. City or county staff must be part of a stakeholder group to ensure that areas like planning, finance and public safety are included in the implementation plan. Because of the publicity and potential revenue, we recommend using a consultant to help review applications and make selections. As a recent League of California Cities presentation concluded, using a consultant to accept and review applications and make recommendations in a scoring system method of selection can be preferable to using City or County staff.
Both the MCRSA and Proposition 64 allow local public agencies to charge fees for compliance and regulation to industry participants. Undertaking a local fee study for commercial cannabis activities can be daunting, especially if you are not a marijuana expert. Minor things like the storage of CO2 containers in cultivation or nursery sites can be a substantial hazard if they are not correctly anchored. We recently engineered a fee structure for manufacturing, cultivation, dispensaries, distribution, testing and transportation for a city in the Central Valley. Under Proposition 26, the fees must be justified by the activities they require. Ensuring those fees are correct protects the tax revenue established by the city or county that was intended to provide additional revenue for specific or general fund services. The goal of the fees is to provide safety, transparency and a sustainable path for a cannabis business. The engineering and fees are charged back to the entities who received licenses.
SCI analyzed the best practices and missteps of taxes enacted in Colorado, Oregon and Washington as well as in cities and counties in California that tax medical marijuana. We can assist public agencies who need to decide what activities will be taxed, how they will be taxed and what tax mechanism is most suitable. Our revenue model can predict the potential revenue to a city or county based on several variables as well as the commercial activity being taxed. Whether the tax is based on receipts, square footage, is flexible or fixed and applies to medical, non-medical or both are extremely important decisions.
The fifth and final step is the most overlooked yet the most critical component of a public agency’s adoption of cannabis regulations – ensuring compliance. The size and complexity of implementing commercial cannabis activities requires routine, specialized monitoring. For instance, cash is still exchanged for cannabis products. Verifying that the money is accounted for prevents diversion of product and ensures the projected tax revenue. Utilizing track and trace software, visual inspections of property and video monitoring are some of the techniques SCI employs to make sure commercial activities comply with local and State regulations. Requiring compliance benefits cannabis businesses as well by keeping the “playing field” level for all participants. Our staff are trained and experienced in what to look for and we can start and stop compliance activities on very short notice. We can transfer the knowledge and train City or County staff to take over the compliance once all activities are in place and become routine. And keep in mind that all the costs of monitoring and compliance should be part of the regulatory fees paid for by industry participants – not the City or County.
Whether you welcomed or dreaded the passage of Proposition 64, every public agency will need to gauge the results in their community and begin planning their next steps. For more help, contact: Neil Hall at 707-430-4300 x 124 or firstname.lastname@example.org
2016 California Voter Approved Propositions
November 30, 2016
This year’s presidential election was without a doubt one for the history books, and while the entire nation was bracing themselves for whatever outcome may come, California was considering major changes as well.
This year’s propositions stirred conversations on a variety of subjects amongst them: healthcare, education, the death penalty, taxes, firearms, oh, and you might have heard a little something about Marijuana legalization as well... So aside from now having to pay for your grocery bags throughout the state, what exactly has changed?
Proposition 51As construction costs and school renovations continue to grow, this will now allow for a $9 million bond to be used for modernizations of K-12, charter, vocational schools, and community colleges. Despite opposition from The Howard Jarvis Tax Payers Association, as well as from Gov. Brown, this measure passed with a 54% support rate.
Proposition 53A "yes" vote supported requiring voter approval before the state could issue more than $2 billion in public infrastructure bonds that would require an increase in taxes or fees for repayment. The measure fell shy of required voter approval, with a 41% support rate. The proposed tunnels to move water through the Sacramento to San Joaquin River Delta and California High-Speed Rail were two projects that would have required voter approval if Proposition 53 was approved.
Proposition 54We often talk to our clients about the importance of transparency, and how when moving forward with a measure, community trust can be built up so long as they are educated and aware of how proposed funds will be spent. Proposition 54 is a direct reflection of that, and with a strong 65% support, California will now require the legislature to publish a bill online for 72 hours prior to it passing.
Proposition 59A "yes" vote supported advising the state's elected officials to use their authority to overturn the Citizens United v. Federal Election Commission decision, potentially through an amendment to the U.S. Constitution. This measure passed with a 52% support rate.
Proposition 64In California, the possession or use of marijuana for recreational purposes was illegal going into the election. The passage of Proposition 215 in 1996 legalized medical marijuana. With 56% support rate, Proposition 64 made it legal for individuals to use and grow marijuana for personal use on November 9, 2016. However, the sale and subsequent taxation of recreational marijuana will not go into effect until January 1, 2018
For more information, and the complete list of CA approved measures please visit:
Parcel Tax Reporting Requirements
Aug 25, 2016
With the close of the 2015-16 fiscal year, the State Controller’s Office new parcel tax requirements go into effect for the first time for most parcel taxes submitted annually on county secured property tax rolls. Assembly Bill 2109 (Daly), approved by Governor Brown in September 2014, adds section 12463.2 to the Government Code. Beginning with the 2015-16 fiscal year, local government agencies are now required to annually report parcel tax information to the State Controller’s Office seven months after the close of each fiscal year. For specifics on the reporting requirements for locally assessed parcel taxes, please see below.
Parcel Tax Definition:
collected on the annual property tax bill. A parcel tax includes, but is not limited to, all types of Mello-Roos taxes and special taxes for governmental purposes such as libraries, hospitals, schools, protection services, fire protection, ambulance services, parks, or museums.
- The type and rate of parcel tax imposed.
- The number of parcels subject to the parcel tax.
- The number of parcels exempt from the parcel tax.
- The sunset date of the parcel tax, if any.
- The amount of revenue received from the parcel tax.
- The manner in which the revenue received from the parcel tax is being used.
SB 272 California Public Records Act: July 1, 2016 Compliance Deadline
June 23, 2016
In October 2015, Governor Brown approved Senate Bill 272 which, adds to the California Public Records Act (Gov. Code §6250-6276.48) by requiring cities, counties, and special districts to create an online catalog of all “enterprise systems” that are used to collect and store data. SB 272 goes into effect on July 1, 2016 and requires all local agencies, with the exception of local educational agencies, to post the catalog on the agency’s website and update it on an annual basis.
The California Public Records Act was established to allow the public access to state and local agency’s governmental records. SB 272 is a step forward to help increase the accessibility of public information and to improve overall government transparency.
What is an Enterprise System?
The bill defines an enterprise system as a software application or computer system that collects, stores, exchanges, and analyzes information that the agency uses that is both of the following:
- A multi-departmental system or a system that contains information collected about the public.
- A system of record.
What is Required?
The enterprise system catalog must be posted in a prominent location on the local agency’s website. If agency does not have a website, the information must be readily available for the public to access upon request. The catalog must contain the following information:
- Current system vendor;
- Current system product;
- A brief statement of the system’s purpose;
- A general description of categories or types of data;
- The department that serves as the system’s primary custodian;
- How frequently system data is collected; and
- How frequently system data is updated.
Exemptions under SB 272
As previously mentioned, this bill does not apply to school districts. Enterprise systems exclude information that could compromise the security of the local agency. An enterprise system does not include the following:
- Information technology security systems, including firewalls and other cybersecurity systems.
- Physical access control systems, employee identification management systems, video monitoring, and other physical control systems.
- Infrastructure and mechanical control systems, including those that control or manage street lights, electrical, natural gas, or water or sewer functions.
- Systems related to 911 dispatch and operation or emergency services.
- Systems that would be restricted from disclosure pursuant to Section 6254.19.
- The specific records that the information technology system collects, stores, exchanges, or analyzes.
For more information regarding SB 272 please go to the following link:
Paving a Path to Medical Marijuana Regulation: California Lawmakers Lead the Fray
By Neil Hall
March 17, 2016
In 1996, California voters approved cannabis for medical use by passing Proposition 215. The ensuing 20 years produced a patchwork of various court rulings, and cities and counties enacted bans, taxes and regulations while seeking to balance the needs of their communities with state and federal regulations. Late in 2015, the California legislature drafted and passed three co-joined bills, AB 243, AB 266 and SB 643 to form the Medical Marijuana Regulations and Safety Act (MMRSA). The MMRSA effectively creates a comprehensive plan to regulate and license medical cannabis.
Proposition 215 garnered approval of over 55% of California voters in 1996. According to some sources, it was deliberately vague to avoid conflict with Federal law and to encourage regulations to evolve as the market matured. Voter initiatives often lack the detail required to pass as a bill in the legislature, and likely the drafter’s of Proposition 215 intended to address specific medical cannabis benefits that were unavailable to patients at the time. Regardless, the legislature introduced and approved SB 420 in 2003 to provide further regulations and an “affirmative defense” for patients who might otherwise be subject to arrest. Among the provisions of SB 420 were issuing county medical cannabis identification cards to patients with a valid doctor’s recommendation; establishing cannabis “cooperatives”; and requiring “no smoking” zones within 1,000 feet of school facilities, youth centers or while operating a boat or motor vehicle.
Even with the passage of SB 420, public agencies sought judicial clarification, especially regarding potential conflicts with Federal law. San Diego County filed a lawsuit (2006) which alleged that forcing them to issue medical cannabis health cards violated the Federal Controlled Substance Act (CSA). The County lost the lawsuit and ultimately filed an appeal with the U.S. Supreme Court which denied their petition and rendered the original decision in the case final. In a separate ruling, the City of Garden Grove vs. Superior Court of Orange County (2007), Garden Grove was ordered by the Fourth Appellate District to restore cannabis confiscated from a medical cannabis user by local authorities and reminded local police that their job is not to enforce federal laws. In Riverside vs. Inland Empire (2013), Browne vs. Tehama (2013), and Maral v. City of Live Oak (2014) court rulings affirmed the right of public agencies to control or ban cultivation and distribution within their jurisdictions. Two major Federal tax court rulings CHAMP vs. The Commissioner of the IRS and Olive vs. The Commissioner of the IRS, helped form the basis for policies in levying State and Federal income taxes.
The California legislature then got involved. With recent polls indicating more than 70% of California voters approve existing use of medical cannabis, lawmakers decided it was “high time” to implement health and safety standards. Each of the three MMRSA bills was originally designed to address a particular area of the medical cannabis industry. AB 243 primarily addressed cultivation, AB 266 charted an administration path and SB 643 outlined medical guidelines and testing and labelling. The MMRSA establishes a dual licensing process for the cannabis industry (with a few “grandfathered” exceptions). Cultivator licenses are defined by grow size and method of lighting, and along with transporters, distributors, dispensaries and nurseries they must apply for and receive first a local license, then a state license before beginning operations. Testing is required for any retail cannabis product, and seed to sale tracking and labelling are also mandatory. Several existing government entities have responsibility to help with the regulations and licensing, and a new government department, the Bureau of Medical Marijuana Regulation is created to oversee implementation of the regulations and licensing and is expected to be fully operational by 2018. And the requirement that cooperatives or collectives exist as “not for profit” businesses is phased out and “for profit” medical cannabis business is allowed. The latest legislative action on medical cannabis is the proposal of a 15% State excise tax on medical cannabis (SB 987) by State Senator Mark McGuire, who was also the author of SB 643.
Now the question is – when will local public agencies begin to implement their own regulations and taxes on medical cannabis?
Note: At the time of this writing, 14 initiatives to legalize recreational cannabis are filed with the California State Attorney General. Several already received title and summary and are cleared to begin gathering signatures. We think the most likely initiative to appear on the ballot is 15-0103 commonly referred to as the Adult Use of Marijuana Act (AUMA). The AUMA has financial support to reach the ballot from Sean Parker, and is endorsed by Lt. Governor Newsom, the NAACP and the California Medical Association. Four states - Colorado, Washington, Oregon and Alaska - and the District of Columbia have legalized the adult use of recreational cannabis.
Tiered Rates for Dry Dates: California Ballot Measure Seeks to Encourage Water Conservation
By Kyle Tankard
January 22, 2016
Just as recent El Niño storms have brought heavy rains to drought-stricken California, a new funding mechanism seeks to provide similar relief to cities, counties and water agencies across the state that have felt the heat over the course of the four-year drought. On December 14, the League of California Cities along with the California State Association of Counties (CSAC) and the Association of California Water Agencies (ACWA) filed a proposed constitutional amendment with the Attorney General’s office. The California Water Conservation, Flood Control and Stormwater Management Act seeks to provide local agencies with a new, alternative funding mechanism for stormwater management, flood control, and sewer and water supply services and projects, and also gives them the flexibility to establish usage rates that encourage conservation and reduce rates for low-income users.
The proposed ballot measure comes in the wake of an appellate court decision last spring, which ruled the tiered rates set out by the City of San Juan Capistrano violated Proposition 218, which exists as Article 13D of the California Constitution. The Court’s decision maintained that tiered rates, while legal under the state constitution, must be established based upon the actual cost of providing the service. The tiered system implemented by San Juan Capistrano charged a higher per-unit rate for heavier water use, which arguably exceeded the actual cost of providing water at that level of usage. Ultimately, the decision has diminished the ability of San Juan Capistrano and other water agencies to utilize the tiered pricing system as a tool to encourage conservation.
Although the proposed constitutional amendment provides local agencies the power and flexibility to establish a tiered system without the requirement that top rates be tied to cost of service, the amendment has been constructed in such a way that also protects taxpayers. Agencies must follow strict accountability requirements to provide transparency and ratepayer protections. Similar to procedures required by Proposition 218, a public hearing must be held and all rate payers must be notified beforehand. If a majority of written protests against the fee exists, then the fee or charge shall not be imposed. The proposed amendment requires that the fee or charge must “bear a fair or reasonable relationship to the fee payer’s burden or benefits received from the water service or sewer service”. Furthermore, an independent annual audit is required to show how the funds were spent and ensure that funds were used for the purpose they were imposed.
Despite recent El Niño storms, recovery from California’s historic drought requires much more co-operation from Mother Nature. Across the state, reservoir levels remain low, groundwater reserves remain depleted, and a full recovery may take several more years. This, coupled with the likelihood that climate change will continue to bring severe floods and droughts into the future, it is important that local agencies have the tools necessary to overcome these challenges. The proposed ballot measure is a step in the right direction in water policy and provides agencies an instrument to secure a more sustainable future in California. Stay tuned to see if this measure can make it on the ballot for November’s statewide election.
Five Things to Consider Before You Conduct a Public Opinion Survey
By Susan Barnes
A well-crafted public opinion survey can provide you with a lot of information regarding the desires of your community, how they feel about your agency, and whether they are willing to support a proposed funding measure. This article will provide you with five things you will want to consider before you conduct a survey.
1. Determine What You Want to Find Out
First, try to narrow down the information you’re seeking to the top two or three pieces of information you want to get by conducting the survey. It’s best to keep it reasonably simple. If the survey is too long or complicated, you run the risk of people being unwilling to take the time to complete the entire survey. A short, focused survey has the best chance of providing your agency with accurate information from a representative sample of your community.
2. Know Your Audience
Clearly, you want to survey people in your agency’s jurisdiction. Beyond that, you need to consider who, specifically, you want to target with your survey. If you’re considering a funding measure, the type of measure will determine whether you need to survey only registered voters, or just property owners, or both. Also, consider whether you are interested in information from people with specific interests, such as park users or people who are retired. Reaching the right people with your survey will make all the difference in obtaining the information you need.
3. Decide What Survey Instrument You Want to Use
Surveys conducted through the mail, those done online, and those done over the phone each have their pros and cons.
Mailed surveys are great for reaching property owners, including those who may not live in your community. It’s also a great way to reach likely voters if you’re going to conduct a mailed ballot proceeding, and it won’t interrupt anyone in the middle of dinner.
Online surveys are convenient for many people, but not everyone has access to the internet. This method may work better for young, tech-savvy community members, but less well for elderly people. Also, if an online survey isn’t done the right way, you may not get a representative sample of respondents.
One benefit of online or phone surveys is they can provide you with more flexibility than a mailed survey. For instance, you can change which question you ask next based on the answer to the question before it. On the other hand, phone surveys need to catch people when they’re at home, so they tend to have a lower response rate than other methods, and they may not be the best way to reach the elderly or others with hearing difficulties.
4. Craft a Compelling Message
The first thing a community member will wonder when approached with a survey, regardless of the survey method, is “What is this about?” Be sure you have a clear, compelling message to let your community know a bit about your agency, why you are conducting the survey, and why their opinion is important to you. Otherwise, they may just hang up the phone or throw away the survey.
5. Be Prepared for the Next Steps
Many factors can cause people to change their opinions over time. Trends in the economy, foreign relations, and even the time of year can influence how people feel about things in your community. Therefore, the longer you wait to act on your survey results, the less valuable those results become. Before you conduct your survey, be prepared to take action on the results as soon as possible.
Preserve or Prevent?
By Steven Wolf
Preserve something positive or prevent something negative? These are two basic approaches that messaging to increase revenues can take. When an agency needs an increase in funding to maintain their operations, facilities, and services, they have to be very careful about how they ask their constituents.
At face value, a preserve message seems favorable. The focus is kept on the high quality services being performed. A school district might say, “We have excellent schools and we need more finances to keep them that way.” On the other hand, a prevent message might be perceived as threatening by focusing on the negative consequences of diminished services. If the same school district says, “Without additional funding, school buildings will crumble, class sizes will increase, and dropout rates will double,” how will people respond differently? Perhaps they will think the district is being irresponsible with their spending and using exaggerated claims to scare people.
Yet a prevent message has tempting upsides to it. People can be emotionally impacted by the consequence-focused message and make a greater commitment to take action. Researchers studying a Virginia Governor’s race found that “negative ads appear to stimulate voter turnout” (Freeman and Goldstein, 1999). The concept that risk and consequence-based messages can stimulate voters rings valid and requires consideration.
Should a fire district show photos of past fires (prevent) or their best apparatus (preserve)?
For services that happen behind the scenes, like mosquito control, preserve messages grab much less attention. People do not tend to notice the absence of mosquitos, and they might not attribute the hard work of a vector control agency to their bug bite-free summer. But show them a magnified image of an Asian Tiger Mosquito with a prevent infestation message and they will pay more attention.
Which is a better message strategy to build support for a district’s services – preserve or prevent? Unfortunately for those who like black and white answers, it depends. Each community will have its own preference for and understanding of the public services it receives. The same community might respond best to a prevent message for fire services, but a preserve message for water pollution prevention. And of course, most message strategies will have a complex blend of both preserve and prevent elements. When so much is at stake, independent research should be conducted that accurately measures how the community would respond to different message strategies.
Steven Wolf is a Marketing and Process Analyst at SCI Consulting Group and has a Master of Arts in Communication from West Texas A&M University.
Freedman, P. & Goldstein, K. (1999) Measuring Media Exposure and the Effects of Negative Campaign Ads, American Journal of Political Science, v43.4
In Support of our Local Government Agencies
By John Bliss, P.E.
Those of us who work in the area of public finance too often sit on the sidelines when it comes to supporting the use of the funds we help generate. Following is a reprinting of an opinion piece written by SCI Vice President John Bliss, P.E. and published in the Oakland Tribune on June 11, 2013.
Enough of the self-satisfied, ill-informed commentary from non-experts regarding recent issues with the stunningly beautiful, structurally rigorous new east span of the Bay Bridge. While responsible criticism is important, the current irresponsible discourse erodes and undermines the credibility of our institutions, and may permanently damage the belief in this magnificent new structure. This bridge promises to be a world famous visual icon, tantamount with our other local signature structures: the Golden Gate Bridge and Transamerica Tower. Wait until the old bridge is removed from our direct view, and this elegant yet tough beauty truly debuts in all her grandeur.
All major projects, infrastructure and otherwise, and especially a bridge as complex as this one, require correction and modifications during the construction process. The Golden Gate Bridge did. The Hoover Dam did. Caution is advised when commenting on the specifics in this case, because there has been some contradictory public discussion. What is known, is that some of the world’s best and brightest engineers and construction professionals, from both the private and public sectors, are working to address any and all concerns. Remember that the Bay Area is a mecca for Civil Engineering and the University of California at Berkeley is indisputably the world’s top Civil Engineering university. We are good at this.
Moreover, mature and well-proven regulatory processes are in place to design, construct, inspect and assure quality for all our infrastructure. These processes worked in this case. Additionally, all large bridges have built-in redundancies and safety factors. This amazing bridge will open soon and it will meet or exceed all structural requirements.
The new east span of the Bay Bridge is the world’s longest-span self-anchored suspension bridge. Many factors (span length, local geography and topography, type and strength of foundation soils, aesthetics, etc.) are considered when designing a bridge. Engineers made the right decision when selecting this bridge type for this challenging site. Similar bridges exist in Japan (Konohana) and Korean (Yeongjong) and have performed flawlessly for 20 years. Moreover, there are three long self-anchored suspension bridges in downtown Pittsburgh built in the 1920s, that still serve that city today.
We in the Bay Area are renowned for our creativity, our leadership in technology, and our eagerness to move forward. This bridge exemplifies all of these strengths. And let’s not forget that that CALTRANS originally proposed a conservative, although arguably bland, simple viaduct structure to replace the existing bridge. We rejected that and are much better off for it. Although there are no guarantees in seismic engineering, because temblors are inherently random, computer modeling and analysis has become so sophisticated that we have a truly remarkable understanding of the predicted performance of large structures in seismic events.
Let’s celebrate the amazing infrastructure renaissance in the Bay Area unseen since the 1930s: the new Bay Bridge, the new Carquinez Straits Bridge and new Benicia Bridge, the 4th bore of the Caldecott, significant seismic strengthening of the Golden Gate Bridge, BART to the Oakland International Airport, and BART to San Jose . Stop the feeding frenzy of negativism. Remember, our large infrastructure does not only serve its pedestrian purposes. It must inspire us. It is who we are. It is our mark on the world and it is certainly how we will be remembered.