San Diego City Council Rules Committee Meeting – June 20, 2016

On Monday, June 20, 2016, beginning at 18:15 UTC, the San Diego City Council Rules Committee met to consider City Charter amendments and a proposed cannabis business tax ordinance. The committee unanimously advanced two charter items to full council and voted 4-1 to advance the cannabis tax measure, while continuing several longer-term charter reorganization items.

Public Comments & Testimony

• On the proposed Charter Section 40 changes, one public speaker opposed the amendments, saying they were "bad for transparency," and asked the committee to "carefully consider these changes before acting."
• The Article 16 elected-officials item drew no public speakers.
• On the cannabis business tax ordinance, speakers expressed a range of views. Carol Green said she was in favor of taxing marijuana if the state initiative passes, but hoped it would not pass, and warned against assuming it will pass. Judith Strang supported Councilmember Kercy's concern about the strain of marijuana on the community and youth, and shared a family member's psychotic break after using marijuana concentrates.
• Phil Rath, executive director of the United Medical Marijuana Coalition, said his members serve over 90,000 patients. He voiced concerns that an 8 percent tax could burden patients and drive the market to illegal dispensaries, and requested a lower floor near 1 percent, a working group, and inclusion of dispensary data in any fiscal analysis.
• Scott Chipman urged defeating the Adult Use of Marijuana Act, questioned claims that tax revenue would solve budget problems, and said any taxation must cover all enforcement and social costs.
• Medical marijuana patients and advocates, including Mara Felsen, Robert Berkstrom, Terry Best, and Ken Sobel, opposed or raised concerns about taxing medicine. Best cited 1.4 million Californians using medical cannabis, with 92 percent reporting it helped them, and said "marijuana is a medicine, and we should not tax it." Sobel said "the power to tax is the power to destroy" and asked the committee to consider Internal Revenue Code Section 280E.
• Christopher Siegel and Antonio Lee, representing the Association of Cannabis Professionals, opposed the tax, citing high compliance costs, existing regulation fees, no added police reports at operating cooperatives, and the risk of making legal dispensaries unfeasible.
• Nurse Heather Manis asked the committee not to tax medical marijuana, saying if adult-use were legalized, tax that but "do not tax our patients for their medicine."

Discussion Items

• Charter Section 40 (City Attorney). The committee reviewed proposed amendments to Charter Section 40. Council President Pro Tem Emerald said the charter should require the city attorney to be an attorney in good standing with meaningful experience, and that many provisions would require meet and confer. She moved to forward the full staff report to the full council on July 11, 2016, with an amendment adding meet and confer and a single-subject evaluation of adding independent legal counsel for SD SERS. City Attorney's Office staff said language such as "as determined by ordinance of council" was vague and could conflict with other charter provisions, and asked for time for legal analysis. The motion passed unanimously.

• New Article 16: Elected Officials. Jennifer Barry of the City Attorney's Office presented a draft article consolidating and updating sections on elected officers. It provides uniform vacancy and succession rules, forfeiture for conviction, a removal-for-cause process requiring a three-quarters council vote to refer to voters, a no-confidence removal process, and a suspension provision pending criminal charges. Council President offered numerous drafting changes, including deleting a chief-of-staff management sentence, removing city manager references, changing special-election timing from six months to one year, requiring appointments within 30 days, and deleting references to specific charter sections. City Attorney's Office staff noted several items need further legal review, including timing under state law and the definition of "suspension." Council President Pro Tem Emerald expressed concern that the suspension provision could "invite witch hunts." The committee voted unanimously to move the draft to full council, subject to legal review and working-group input.

• Cannabis Business Tax Ordinance. Councilmember Kercy introduced an ordinance adding an 8 percent gross receipts tax on marijuana businesses, with possible council increase to 15 percent, as a contingency if the Adult Use of Marijuana Act passes in November 2016. The tax would apply to all San Diego marijuana businesses, including deliveries; implementation would begin upon voter adoption, and changes to the rate would require council action. Councilmember Kercy said he personally opposes AUMA, but believes local governments should prepare for legalization and related costs. During discussion, he clarified the tax would not apply to medicinal dispensaries under state law, and he said he was open to lowering the 8 percent floor or phasing it in. He moved the ordinance forward to full council and added an amendment making implementation contingent on the state measure passing. Councilmember Cole supported the measure and expressed interest in dedicating revenue to public safety and youth services. Council President Pro Tem Emerald supported preparing ahead, saying medical marijuana should not be taxed and adult-use businesses should pay the same sales tax as other businesses. The committee voted 4-1, with Council District Six voting no.

• Future Charter Reorganization Items. The committee reviewed three additional charter articles for future consideration: independent non-mayoral administrative services, legislative activity, and executive/mayoral activity. No action was taken; these will be included in the committee's final report and considered for a future ballot, potentially 2018. Mr. Monroy asked that future planning commission language be harmonized with state code Section 65100.

Key Outcomes

• Charter Section 40: unanimous motion to forward to full Council on July 11, 2016, with meet and confer and SD SERS independent-counsel single-subject evaluation.
• New Article 16: unanimous motion to forward the draft to full Council with the reviewed edits and requested legal and working-group input.
• Cannabis business tax: motion carried 4-1, with Council District Six voting no, to advance the ordinance to full Council contingent on state AUMA approval, with staff directed to prepare final language and implementation review.
• Items 4-6: continued to the committee's final report and a future ballot; next Rules Committee meeting set for Wednesday, July 13, 2016, at 9 a.m.