Cannabis Legalization Task Force Year I Report - San Francisco PDF

SAN FRANCISCO STATE CANNABIS LEGALIZATION TASK FORCE YEAR I REPORT AND RECOMMENDATIONS Prepared by the San Francisco Department of Public Health December 2016 Table of Contents Message from the Task Force Chair and Co-Chairs..................................................................................... 3 Executive Summary...................................................................................................................................... 4 Project Design............................................................................................................................................... 7 1. INTRODUCTION AND BALLOT INITIATIVE REVIEW................................................................... 9 CANNABIS ACTIVITY: AN OVERVIEW........................................................................................ 9 BALLOT INITIATIVE REVIEW...................................................................................................... 13 OTHER STATES’ EXPERIENCES................................................................................................... 14 2. LEGAL AND REGULATORY LANDSCAPE..................................................................................... 18 FEDERAL CANNABIS POLICY...................................................................................................... 18 THE ILLICIT MARKET.................................................................................................................... 22 ADULT USE LEGALIZATION AND THE EXISTING MEDICAL CANNABIS PROGRAM..... 24 3. PUBLIC SAFETY AND SOCIAL ENVIRONMENT........................................................................... 26 PUBLIC SAFETY CONSIDERATIONS........................................................................................... 26 SOCIAL ENVIRONMENT CONSIDERATIONS............................................................................ 29 A. PUBLIC CONSUMPTION........................................................................................................ 29 B. YOUTH ACCESS AND EXPOSURE....................................................................................... 31 C. TOURISM AND HOSPITALITY............................................................................................. 38 4. LAND USE AND SOCIAL JUSTICE................................................................................................... 43 CANNABIS LEGALIZATION AND SOCIAL JUSTICE................................................................ 44 LAND USE......................................................................................................................................... 49 5. REGULATION AND CITY AGENCY FRAMEWORK...................................................................... 58 ADULT USE LICENSING................................................................................................................ 58 AGENCY REGULATION AND OVERSIGHT................................................................................ 64 TAXATION AND REVENUE........................................................................................................... 68 DATA COLLECTION AND MONITORING................................................................................... 72 Recommendations....................................................................................................................................... 74 Conclusion.................................................................................................................................................. 99 Appendices................................................................................................................................................ 100 Appendix A: Current San Francisco State Legalization Task Force Seats and Members.................... 100 Appendix B: Proposition 64 General Summary................................................................................... 102 Appendix B: State Nonmedical Cannabis Comparison........................................................................ 109 Appendix C: Proposition 64 Provisions Table: Public Safety and Social Environment....................... 114 1 Appendix D: Proposition 64 Provisions Table: Land Use and Social Justice...................................... 125 Appendix E: Proposition 64 Provisions Table: Regulation and City Agency Framework................... 130 Appendix F: Recommendations Framework Documents..................................................................... 147 References................................................................................................................................................. 153 2 Message from the Task Force Chair and Co-Chairs San Francisco re-emerges as a leader in cannabis policy after being home to the historic passage of Proposition 215. The historic passage of Proposition 215 in 1996 created the first pathway of legal protections for cannabis-use by AIDS patients who sought to successfully treat a wide variety of conditions. And now Proposition 64 is a new historic opportunity to positively impact the lives of our citizens and our visitors. As chair and co-chairs of the Task Force charged with proposing cannabis policy to City Hall, we are proud to present our first year’s report containing over 80 recommendations in 8 policy areas. We created them all through a consensus process, where all voting members studied, discussed, and agreed on each recommendation. We thank the City Departments which sent representatives, all of whom participated fully in the information gathering, questioning, and resolution phases of the year’s work. We also thank the members of the public who not only participated in public comment, but who were willing to share their thoughts with the team through policy papers and other forms of communication. This report provides a clear perspective on the overarching strategy and priority issues from which all policy should be written. To that end, this document does two things: 1) it lays out our recommendations for Year I; and more importantly 2) it clarifies where the Task Force should direct its time and resources in Year II. In Year II, the Task Force will develop legislative proposals for Board members to turn our consensus-based policy recommendations into real legislation for San Francisco to manage the newly created legalized medical and adult-use cannabis marketplace, from plant to consumer. For this new industry to successfully, safely, and uniformly meet the demands of Proposition 64, we need leadership from the Mayor’s Office and the Board of Supervisors to direct our work with stakeholders -- from residents to non-cannabis businesses, from patients and adult-users to the existing cannabis community. We are extremely grateful for the dedication and extraordinary work of the Task Force coordination team at the Department of Public Health, including Colleen Chawla, Mavis Asiedu- Frimpong, Gretchen Paule, and Nicole Sandberg. We look forward to the year ahead, and believe our report will serve as a model for San Francisco, as well as other urban environments working to implement well-thought-out policy to legalize cannabis for medical patients and adult users. Respectfully Submitted, Terrance Alan, Chair Daisy Ozim and Sara Payan, Co-Chairs 3 Executive Summary In November, 2016, California voters legalized the use, possession and retail sale of nonmedical, or adult use, cannabis across the State via Proposition 64–the “Adult Use of Marijuana Act.” Proposition 64 makes it legal for individuals age 21 and older to: possess, transport, purchase, consume and share up to one ounce of adult use cannabis and eight grams of adult use cannabis concentrates; and personally cultivate up to six plants in their private residence. The Proposition also establishes a State-level regulatory system for the commercial cannabis industry as well as a Bureau of Marijuana Control to oversee this process. Under this regulatory system, individuals wishing to participate in the commercial cultivation, manufacture, distribution and/or retail sale of adult use cannabis will require a State license and maintain compliance with any regulations promulgated by other State regulatory agencies. Along with a State-based regulatory structure, Proposition 64 also allows localities to tailor implementation of the law to their needs and preferences. In anticipation of this, then-San Francisco Supervisor Scott Wiener sponsored legislation creating the City’s Cannabis State Legalization Task Force in July of 2015. 1 According to the Ordinance, “the purpose of the Task Force shall be to advise the Board of Supervisors, the Mayor, and other City departments on matters relating to the potential legalization of cannabis so that the City's policymakers are fully prepared to address the policy questions through legislation, administrative actions, and otherwise, following the adoption of a State law.” 1 California has had a medical cannabis program in place since 1996, and its regulatory landscape was recently altered through a set of laws collectively known as the Medical Cannabis Regulation and Safety Act (MCRSA). Proposition 64 and the adult use market it establishes preserves the medical cannabis system under MCRSA and builds upon it by aligning the two regulatory structures. For example, it tasks the same State agencies with regulatory responsibilities under both systems, and requires the Bureau of Medical Cannabis to oversee both markets. Though the Task Force is exclusively focused on adult use cannabis legalization, the medical cannabis landscape will have effects on that of adult use and vice versa. This report therefore reflects this notion. The Task Force will be active for a two-year period, which began in January, 2016. Over the course of its first year, the Task Force’s designed a set of approximately eighty recommendations across various topic areas to fulfill its mandate. In drafting recommendations, the Task Force developed consensus principles that guided its process: 1. Evidenced-based approach: Task Force will use an evidence-based approach in its process. 2. Protect youth: Task Force will design policy recommendations that protect youth. 1 Unless part of a quote or formal name of a statute, organization or regulatory body, the term “cannabis” will be used throughout this document. Under those conditions, this document will also use the terms “medical” and “nonmedical” to distinguish between the two markets. 4 3. Second-hand smoke: Task Force recognizes the importance of reducing second-hand smoke exposure. 4. Land Use: Task Force will develop guidelines to inform local land use decision-making processes for cannabis businesses. 5. Data collection: The Task Force will use science and data to support and inform recommendations and policy. 6. Illicit Market: Task Force will develop recommendations that seek to reduce the illicit market. Within this context, the recommendations included in this report fall into three main categories and are the culmination of research and analysis, expert testimony, and discussions among Task Force Members. RECOMMENDATION CATEGORY 1: Public Safety and Social Environment. Discussions in this topic area focused on possible driving under the influence policies and neighborhood safety issues, and social environment considerations were divided into three main sub-categories: public consumption, youth access and exposure, and tourism/hospitality. Recommendations stemming from these discussions addressed the following areas: Driving Under the Influence Neighborhood Safety Cannabis Training and Enforcement Priorities for the San Francisco Police Department Public Consumption Youth Access and Exposure Cannabis Tourism and Hospitality RECOMMENDATION CATEGORY 2: Land Use and Social Justice. Discussions in this topic area focused on retail and non-retail adult use business zoning approval processes, as well as diversity within the cannabis industry’s workforce and business ownership opportunities. Recommendations stemming from these discussions addressed the following areas: Zoning Approaches for Non-Retail Cannabis Uses Zoning Approaches for Retail Cannabis Uses Medical Cannabis Dispensary and Adult Use Retail Zoning Approval Processes Workforce Development and Entrepreneurship Opportunities Tax Revenue Allocation to Support Social Justice Goals RECOMMENDATION CATEGORY 3: Regulation and City Agency Framework. Discussions in this topic area revolved around local licensing possibilities, local cannabis regulatory agency responsibilities, and local taxation considerations. Recommendations stemming from these discussions addressed the following areas: Local Cannabis Licensing Structures Cannabis Delivery Policies Business Participation in the Adult Use and Medical Markets Local Agency Oversight of the Cannabis Industry 5 Local Taxation and Revenue Allocation Data Collection Tools to Monitor Impact of Adult Use Legalization This report highlights key research findings in the above main recommendation categories. It also includes the full set of recommendations that the Task Force encourages the City and County of San Francisco to consider in order to successfully implement Proposition 64. With its continued adoption across the State, the adult use cannabis landscape will likely be a fast-moving and ever-evolving one. In Year II of its active period, the Task Force will therefore closely monitor Proposition 64 implementation and continue in its advisory role for the City. 6 Project Design Year I of the San Francisco’s State Cannabis Legalization Task Force began in January, 2016, and concluded in December of that same year. The Task Force currently consists of 22 seats, the first seven of which are held by non-voting government bodies, and the remaining seats by voting members from various sectors, including advocacy, business, and tourism. Current Task Force Member seats as of December 2016 are included in this report as Appendix A. The Task Force conducted monthly public meetings over its Year I period, with time allotted during each meeting for public comment. The overarching Year I goal was to draft a set of recommendations in three main areas: Public Safety and Social Environment Land Use and Social Justice Regulation and City Agency Framework Research for this report relied on three main sources of information. First, while several legalization initiatives were proposed for the November 2016 California ballot over the course of the Task Force’s active period, Proposition 64 - the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA) - appeared to have the most momentum. It therefore served as the policy foundation for the Task Force’s discussions. California Lieutenant Governor Gavin Newsom and other policy experts formed the Blue Ribbon Commission on Marijuana Policy in 2013. This document also relies on the Blue Ribbon Commission’s 2015 report, “Policy Options for Regulating Marijuana in California,” to outline important policy considerations against the backdrop of Proposition 64’s provisions. Finally, the experiences of other states across the Nation that have legalized cannabis for adult use lent helpful insight to Task Force Members in Year I, and, where that information is available in the aforementioned topic areas, it is included in this report. In preparation for the recommendation drafting process in each topic area, Task Force coordinators prepared issue briefs for the Task Force and the public. These issue briefs formed part of the information-sharing process and focused on main areas of Task Force discussion, including the existing legal landscape, social environment, public safety, youth access and exposure, land use, social justice, tourism, and regulation and city agency framework. The collection of issue briefs is included here as the main research sections of the report. The Task Force also identified experts to provide additional information and context for meeting discussions. Meeting activities included small and large group discussions to identify and reflect upon priority areas, spotlight panel presentations from Task Force Members on the key issues represented by their seat, and Task Force Coordinator presentations on key research findings in each of the recommendation drafting areas. Task Force coordinators also provided recommendation drafting packets for each topic area that included brainstorming questions based on previous Task Force discussions and a set of the main Proposition 64 provisions corresponding to that issue area. Task Force Members worked in small groups to draft each set of recommendations, and the full Task Force then reviewed, edited and approved each recommendation via a consensus-building process. Task Force Members had multiple opportunities throughout the year to review the draft 7 recommendations until they were finalized at the Task Force’s November 9, 2016, meeting. The report and recommendations will be presented to the San Francisco Board of Supervisors in January 2017. 8 1. INTRODUCTION AND BALLOT INITIATIVE REVIEW The information in Section 1 addresses the following questions: 1. What is the status of medical and adult use legalization across the Nation? 2. What is the cannabis use landscape in California and in San Francisco? 3. How would Proposition 64 affect the current landscape in California and in San Francisco? 4. What are the general experiences of other states that have legalized adult cannabis use? CANNABIS ACTIVITY: AN OVERVIEW United States As of November 2016, twenty-nine states and the District of Columbia have medical cannabis access laws, and eight states and the District of Colombia have expanded access for nonmedical purposes. Cannabis refers to the dried leaves and flowers of the cannabis sativa plant. The cannabis plant contains many different chemicals, with perhaps the most commonly known being its psychoactive element, delta-9-tetrahydrocannabinol, or “THC.” 2 In the United States, cannabis has two main uses – medical, in which it is used to treat various illnesses, and nonmedical. Cannabis can be consumed in multiple ways – e.g. by inhalation, oral ingestion, absorption into the bloodstream sublingually, or via topical application. 3 The medical benefits of cannabis are not well-researched due to its current federal status as a Schedule I drug, meaning that, from the federal government’s point of view, it has “no currently accepted medical use in treatment in the United States, a lack of accepted safety for use under medical supervision, and a high potential for abuse.” 4 The California Medical Association and other advocacy groups assert that cannabis does have medicinal value and can be used to treat pain, nausea, anorexia and a host of other illnesses. 5 The residents of many states now hold this view, and as of November 2016, twenty-nine states and the District of Columbia, Puerto Rico 9 and Guam have laws permitting cannabis use for medicinal purposes. ii, 6 As of November 2016, eight states and the District of Columbia have also expanded access for nonmedical purposes, iii as well, although in Maine, where the measure to legalize adult use cannabis narrowly passed, the voting tallies are expected to undergo a recount. 7 Cannabis Legalization in the United States, 2016 Source: Governing. (2016). State Marijuana Laws in 2016 Map. Retrieved from http://www.governing.com/gov- data/state-marijuana-laws-map- medical-recreational.html. ii The twenty-nine states which have legalized medical cannabis in some capacity are: Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont and Washington. iii Colorado, Washington, Oregon, Alaska, California, Massachusetts, Maine and Nevada have legalized cannabis for adult use. 10 California California has had medical cannabis laws in place since 1996, with city and county-based programs across the State. New medical cannabis laws alter this environment significantly by enacting State-level licensing and safety standards. The California Blue Ribbon Commission on Marijuana Policy worked to identify possible cannabis policy options in anticipation of nonmedical use legalization. In 1996, California became the first state in the U.S. to legalize medical cannabis. This came by way of via Proposition 215, i.e. the Compassionate Use Act, which was incorporated into California’s Health and Safety Code (Sec. 11362.5) after passage. Its purpose is: (A) To ensure that seriously ill Californians have the right to obtain and use marijuana for medical purposes where the medical use is deemed appropriate and has been recommended by a physician who has determined that the person's health would benefit from the use of marijuana in the treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief; and (B) To ensure that patients and their primary caregivers who obtain and use marijuana for medical purposes upon the recommendation of a physician are not subject to criminal prosecution or sanction. 8 Senate Bill 420 followed almost a decade later to prescribe personal cultivation and possession limits and establish the right of qualified patients and caregivers to form collectives/cooperatives for the lawful cultivation and distribution of cannabis among members. 9 These laws allowed for medical cannabis access and created city and county-based systems across the State. Medical Cannabis Regulation and Safety Act (MCRSA) This landscape was altered significantly on October 9, 2015, when California Governor Jerry Brown signed a package of three bills collectively known as the Medical Cannabis Regulation and Safety Act (MCRSA), into law. 10 Taken together, MCRSA gives the State more regulatory control over the medical cannabis industry, from cultivation to sale. Perhaps one of the most significant ways in which this will be achieved is via a dual State-local licensing system identifying seventeen different licensing categories across the supply chain. After such licenses become available at the State level, no entity may operate a medical cannabis business without express permission to do so from the State and the appropriate local authority. A newly established State Bureau of Medical Cannabis Regulation (sitting under the Office of Consumer Affairs) will manage this process and all other aspects of MCRSA implementation. iv It is estimated that licenses under this system will be issued beginning January 1, 2018. 11 iv As noted in the report, Proposition 64 establishes a central regulatory agency for both medical and nonmedical cannabis – the Bureau of Marijuana Control (BMC). The BMC will assume the duties of the previously established State Bureau of Medical Cannabis Regulation. 11 Proposition 19 Cannabis legalization advocates attempted to legalize nonmedical use on previous occasions, most recently in 2010 via the failed Proposition 19, which garnered 46.5 percent of the popular vote that year. 12 Though it failed to pass, that same year, then Governor Arnold Schwarzenegger signed SB 1449 into law, which made possession of less than one ounce a civil infraction rather than a criminal misdemeanor. 13 After 2010, legalization advocates continued to call for California to follow in the footsteps of Colorado and other states that have legalized nonmedical cannabis use. Blue Ribbon Commission on Marijuana Policy In anticipation of the repeated attempt to legalize nonmedical use, California Lieutenant Governor Gavin Newsom and other policy experts formed the Blue Ribbon Commission on Marijuana Policy in 2013. The Commission has engaged in an effort to examine various cannabis policy options and its most recent 2015 report, “Policy Options for Regulating Marijuana in California,” provides a blueprint for the State and local jurisdictions to consider in preparation for legalization. 14 San Francisco Various agencies share responsibility for administering San Francisco’s medical cannabis program, with the Department of Public Health managing the medical dispensary permitting process. The program currently consists of approximately 34 licensed dispensaries. The State’s medical cannabis laws are codified within San Francisco’s Health and Safety Code, Article 33 – the Medical Cannabis Act. The Act outlines the permitting guidelines for medical dispensaries, which all operate as collectives/cooperatives. In order to legally obtain medical cannabis from such a dispensary, a patient or qualified caregiver must obtain a physician’s recommendation for medical cannabis and join a collective/cooperative. This essentially establishes a closed system of cannabis activity, where a group of qualified patients/caregivers are responsible for all aspects of cannabis cultivation and sale. 15 As of September 30, 2016, there were 34 licensed medical cannabis dispensaries in the City/County of San Francisco, including two delivery-only dispensaries. 16 Though the Department of Public Health is responsible for the dispensary permitting process, overall management of the medical cannabis program is the shared responsibility of various City agencies. For instance, the Planning Department determines whether a dispensary meets the zoning requirements for each particular location, since only certain areas in San Francisco, mostly in the SOMA and Tenderloin neighborhoods, are zoned to allow for a dispensary. 17 The Department of Building Inspection, the Fire Department, and the Mayor’s Office on Disability all need to approve an application for a dispensary permit before a dispensary can legally begin operations. 12 BALLOT INITIATIVE REVIEW California Proposition 64 - The Adult Use of Marijuana Act In November 2016, California voters passed Proposition 64 legalizing adult use cannabis across the State. Proposition 64 mirrors the new MCRSA laws and is aligned with the Blue Ribbon Commission’s recommendations. In November 2016, California legalized adult use cannabis via Proposition 64, also known as the Adult Use of Marijuana Act (AUMA). The measure passed with 56.5 percent of the vote. 18 Proposition 64 allows individuals 21 years of age or older to legally grow, possess and consume cannabis for nonmedical purposes, with certain restrictions. Proposition 64 also provides for the regulation of nonmedical cannabis businesses and establishes a cannabis taxation and revenue allocation structure. The review below focuses on Proposition 64 specifically as the policy framework for the Task Force’s discussions. According to the text of Proposition 64, its purpose is to: establish a comprehensive system to legalize, control and regulate the cultivation, processing, manufacture, distribution, testing, and sale of nonmedical marijuana, including marijuana products, for use by adults 21 years and old, and to tax [its] commercial growth and retail sale. 19 Under Proposition 64, adults will be able to legally possess one ounce of cannabis and cultivate six personal plants. Proposition 64 also establishes a Statewide regulatory system for commercial production and sale. To achieve the above goal, the initiative outlines several policy objectives, including: a) the transfer of cannabis activity from the illicit market to an effective regulatory scheme that protects public health and bars youth exposure; b) tracking and tracing cannabis products throughout the supply chain; c) giving local governments control over nonmedical cannabis business requirements and zoning laws; and d) the generation of State tax revenue for public interest purposes, such as youth treatment/prevention and environmental protections. Proposition 64 is aligned with many of the recommendations in the aforementioned Blue Ribbon Commission report. Proposition 64’s nonmedical cannabis system is also designed to run parallel to the State’s new medical cannabis structure under MCRSA. Proposition 64 references this new legislation and models much of its regulatory structure on its foundation. For example, its licensing categories are very similar to MCRSA’s and it tasks the same State agencies with regulatory enforcement duties. Further detail on Proposition 64’s main elements is provided throughout this report and in Appendix B. 13 OTHER STATES’ EXPERIENCES 20 As of November 2016, eight states and the District of Columbia have legalized nonmedical cannabis use in some capacity. This report draws primarily from the experiences of four states with legalized adult use cannabis laws prior to the November 2016 elections–Colorado, Washington, Oregon and Alaska–since more data and information are available for these states. In Year II of its active period, the Task Force will continue to monitor the progress of the states that have most recently legalized adult use cannabis. Appendix B provides a state-by-state comparison of the nonmedical cannabis laws in the aforementioned states: Colorado, Washington, Oregon and Alaska. All four have the same provisions with respect to legal age to use/possess cannabis (21) and personal possession amounts (one ounce), but the states differ significantly in other policy areas. Policy implementation timelines, the strength of existing medical cannabis markets in each state, and other factors all contribute to the different experiences each is facing. As the policy landscape rapidly evolves in each state, such experiences could provide insight into important policy considerations. Colorado Legalization of nonmedical cannabis began with Colorado in 2012, and advocacy groups and State government officials have reportedly noted both benefits and challenges since implementation began. The nonmedical use legalization wave began in 2012 with Colorado. The Marijuana Policy Project calls the State’s post-legalization results “overwhelmingly positive,” noting an increase in tax revenue and job opportunities, and a decrease in crime rates. 21 A status report published by the Drug Policy Alliance noted similar results – lower cannabis possession arrest rates, a decrease in traffic fatalities, and allocation of tax revenue towards public interest goals, such as mental health and prevention services for youth. 22 In terms of tax revenue, media reports that while State government officials see it as a boost to its budget, they also caution against that being the driving force behind cannabis legalization policy, further noting that, according to an official within Colorado Governor John W. Hickenlooper’s Office of Marijuana Coordination, the main goals of legalization should rather be to ensure a safer, more regulated market or as an alternative to the war on drugs. 23 The Colorado Department of Revenue is tasked with implementation and regulatory enforcement of Colorado’s cannabis legalization laws. 24 A Brookings Institution report published during the first policy implementation year viewed the process as successful and attributes that to a number of factors, including collaborative approaches to policy implementation, strong State leadership, and adaptation of regulatory institutions to respond effectively to the new law. Further, the report viewed Colorado’s establishment and reliance upon a task force to advise policymakers on implementation as one of the “most important [and successful] administrative actions.” 25 14 While Colorado has reportedly seen some gains, there have also been challenges associated with legalization. In a media interview transcription from January 2015, Mr. Ron Kammerzell, a senior Department of Revenue official, identified edible cannabis as one of the biggest legalization challenges. In that transcript, he stated that Colorado’s regulations for edible cannabis in the nonmedical market were designed to mirror existing ones for the medical market, but regulators found there to be better knowledge about THC potency among medical cannabis consumers, resulting in higher risks of overconsumption for nonmedical users. 26 As discussed in the subsequent Youth Access and Exposure section of this report, Colorado has legislated changes to address these concerns, but it remains an ongoing challenge. Another challenge appears to be the use of highly volatile butane solvents to create hash oil high in THC concentrates. According to media reports, 27 this caused an increase in butane-related explosions in Colorado since nonmedical use sales began. To address these concerns, Colorado recently passed House Bill 15-1305, placing limitations on the home production of cannabis using hazardous substances. 28 Colorado has also faced legal challenges from its neighboring states after legalizing adult use cannabis. In December 2014, Nebraska and Oklahoma filed a lawsuit with the U.S. Supreme Court, arguing that federal law preempts Colorado’s legalization efforts. 29 The Supreme Court ultimately declined to hear the case in March 2016. 30 Media reports indicate that this case may be consolidated with a similar case brought by sheriffs in Nebraska and Kansas and initially dismissed by a federal judge in 2016. If consolidated, the joint claims would be heard at the 10th Circuit Court of Appeals in Denver, Colorado. 31 The outcomes in these and any other legal challenges may have effects on the cannabis policy landscape in Colorado and nationwide. Washington Since nonmedical use sales began in 2014, Washington has made significant changes to its cannabis legalization system, consolidating the medical and nonmedical markets into one nonmedical system and opting for a simpler, one-time retail tax rather than levying taxes at multiple steps of the supply chain. Initiative 502 legalizing nonmedical cannabis use passed in 2012, and the system has gone through significant changes since that time. Cannabis activity during the State’s 2015 legislative session was focused on lawmaking to fill perceived policy gaps. Initially, the State opted to keep its medical and nonmedical cannabis systems separate; but in 2015 it consolidated them into one nonmedical system. Media reports and public testimony during hearings on the subject noted that consolidation was a way to level the playing field and create a more effective regulatory structure for the medical market. 32 The merged market went into effect on July 1, 2016, and the State’s health department developed emergency regulations aimed at ensuring continued access for patients. 33 Under the new structure, certain adult use retail locations have an endorsement to serve medical cannabis patients. 34 As of July 1, 2016, Washington has altered its cannabis taxation structure, moving from a model that levied taxes at various stages of the supply chain (production, distribution and sale) to a 15 simpler, one-time 37 percent retail tax. This allows cannabis businesses to deduct normal business expenses from federal tax returns, which was not possible under the previous scenario, due to federal cannabis prohibition. 35 Ensuring a smooth market consolidation and managing this tax change will likely continue to be major priorities for the State. Oregon Following the passage of Measure 91 to legalize adult use cannabis in 2014, Oregon began issuing nonmedical cannabis licenses in early 2016. The first nonmedical cannabis retail stores opened on October 1, 2016. Measure 91 legalized nonmedical cannabis in Oregon in November 2014. Since that time, individuals have been allowed (from 10/1/2015 until 12/31/2016) to purchase limited amounts of cannabis for nonmedical use from medical cannabis dispensaries – one-quarter ounce of dried leaves and flowers per day. 36 Medical cannabis businesses received waivers to temporarily sell nonmedical cannabis before the State began the process of issuing nonmedical types of licenses. 37 Under this temporary system, Oregon applies a 25 percent tax to nonmedical cannabis retail sales made in medical cannabis dispensaries. This provision is in effect until December 31, 2016, after which time medical cannabis dispensaries will no longer be able to sell nonmedical cannabis and the tax rate will be lowered to 17 percent. Cities and counties can add up to an additional three percent tax on nonmedical cannabis sales. 38 Oregon’s Liquor Control Commission oversees cannabis regulation in the state. It began accepting nonmedical cannabis license applications on January 4, 2016, 39 and the first nonmedical cannabis retail stores opened on October 1, 2016. 40 Alaska Alaska began issuing cannabis licenses in February 2016 and will be the first state to allow on-site consumption at retail locations. Since legalizing the nonmedical use of cannabis in 2014 via Ballot Measure 2, the state has been focused on designing the necessary policies and regulations to formalize and standardize the nonmedical market. Though the personal use of medical cannabis by qualified patients and caregivers was legal before Measure 2, the State did not have provisions or regulations for medical cannabis sales. 41 Measure 2 affirmed that the legalization of nonmedical cannabis would not adversely affect medical cannabis use and the initiative made no provisions for a separate medical cannabis market. 42 The newly formed Marijuana Control Board (MCB), part of the Alcohol and Marijuana Control Office, is overseeing the State’s cannabis industry. 43 The final cannabis regulations set forth by 16 the Marijuana Control Board went into effect February 21, 2016, 44 at which time Alaska began accepting applications for its four license types: cultivation facilities, manufacturing facilities, testing facilities and retail stores. 45 In October 2016, the first nonmedical cannabis retail stores opened. 46 As of November 2016, Alaska allows on-site consumption at licensed retail locations at the discretion of its Marijuana Control Board. 47 As discussed in the report, Denver, Colorado, recently passed an initiative allowing for on-site cannabis consumption in designated areas of a business. Proposition 64 has a similar provision, which would make California the third location to allow the practice. 48 Monitoring the implementation of this provision may therefore be an important consideration for California and its localities. 17 2. LEGAL AND REGULATORY LANDSCAPE The information in section 2 addresses the following questions: 1. How would federal cannabis regulations and policies impact State adult use legalization laws? 2. What is the illicit market’s connection to broader legalization goals? 3. How might adult use legalization impact and interact with the existing medical cannabis market? 4. How have other adult use legalization states addressed these issues? 5. How does Proposition 64 address these issues? FEDERAL CANNABIS POLICY Legal Status of Cannabis in the United States Cannabis possession and distribution is illegal at the federal level, but federal authorities and Congress have recently provided enforcement guidance for States with cannabis legalization laws. In the United States, it is illegal to “manufacture, distribute, or dispense, or possess … a controlled substance.” 49 Federal law further defines a controlled substance as one classified under schedules one through five of the Controlled Substances Act (CSA). 50 Cannabis is classified as a Schedule I drug under the CSA, meaning that it has “no currently accepted medical use in treatment in the United States, a lack of accepted safety for use under medical supervision, and a high potential for abuse.” 51 As medical and nonmedical cannabis are legal in several states, this represents a conflict between federal and state law, and the federal government has the authority to enforce the Controlled Substances Act across the United States. 52 Department of Justice Enforcement Priorities In recognition of this legal conflict, the federal government has provided guidance in the past for states with cannabis legalization laws.53 Most recently, in 2013, then Deputy Attorney General James Cole released a memorandum outlining eight enforcement priorities for the Department of Justice (DOJ) with respect to cannabis. By that time, Colorado and Washington had become the first two states to legalize cannabis for both adult use and medical purposes. According to the memorandum, the DOJ is “committed to using its limited investigative and prosecutorial resources to address the most significant threats in the most effective, consistent, and rational 18 way.” 54 The enforcement priorities serve as focus areas for the DOJ to ensure that this goal is met. 2013 Department of Justice Memorandum: Federal Enforcement Priorities Preventing the distribution of marijuana to minors; Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels; Preventing the diversion of marijuana from states where it is legal under state law in some form to other states; Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity; Preventing violence and the use of firearms in the cultivation and distribution of marijuana; Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and Preventing marijuana possession or use on federal property. The Cole memorandum also notes that, for states with existing cannabis legalization laws, the DOJ expects “strong and effective regulatory and enforcement systems that will address the threat those state laws could pose to public safety, public health, and other law enforcement interests.” Finally, the memorandum notes the DOJ may challenge state legalization systems that do not align with this standard and the enforcement priorities. 55 It is important to note that this guidance and the enforcement priorities could change under a future U.S. president’s views and direction. In December 2015, the Government Accountability Office (GAO) released a report analyzing the connection between these DOJ enforcement priorities and the effects of cannabis legalization in the United States. According to the report, the DOJ does prosecute cases where there is a violation of the enforcement priorities, discuss issues that implicate these priorities with state officials, and collaborate with other federal partner agencies to review data they may collect that would relate to enforcement. The GAO report also found that the DOJ does not adequately document its process for monitoring compliance with the enforcement priorities, and the DOJ has concurred with the GAO recommendation that it begin doing so. 56 In the future, therefore, there are likely to be changes in the way the DOJ documents compliance in states that have legalized cannabis for medical and/or adult use. Federal Cannabis Policy Updates at the Congressional Level Members of the U.S. Congress have introduced legislation in the past that would alter cannabis’ federal legal status—none has been enacted thus far. 57 Most recently, the Ending Federal 19 Marijuana Prohibition Act of 2015, introduced by U.S. Senator Bernie Sanders, would permit states to decide whether to legalize and regulate cannabis within their borders and remove cannabis from the Controlled Substances Act, except in cases when it is transported to jurisdictions where it is illegal. 58 Though federal cannabis prohibition remains in place, Congress has made its own enforcement priorities known to the DOJ. In 2014, Congress passed its spending bill, known as the Congressional Appropriations Act of 2015, stating that: none of the funds made available in this Act to the Department of Justice may be used, with respect to [states with medical cannabis legalization laws, including California], to prevent such States from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana. 59 This direction to the DOJ was renewed in the spending bill of 2016 60 and must be renewed each year for it to remain effective. The language is currently intact in Senate Bill 2837, 61 the Commerce, Justice, Science, and Related Agencies Appropriations Act for 2017, which has been approved by the Senate Appropriations Committee and is awaiting further action per the federal budgeting process. v,62 Two recent cases have illustrated the impact of this provision. In August 2016, the U.S. Court of Appeals for the 9th Circuit upheld the budget provision when the Department of Justice attempted to prosecute cases against medical cannabis patients and providers in California and Washington. 63 The Court ruled that State regulations took precedence over federal regulations, and that as long as the defendants did not violate their respective state’s laws, the Department could not proceed with its federal criminal prosecutions. The budget provision was also crucial to a 2015 California District Court case, where the Court held that this provision barred the Drug Enforcement Administration from pursuing actions against those acting in compliance with California cannabis legalization laws.64 As long as the budget provision is in place, both cases provide legal interpretations of the federal government’s enforcement boundaries related to medical cannabis. Though an increasing number of states have legalized cannabis at the state-level, the federal government has maintained its prohibition policies. Most recently, the Drug Enforcement Administration announced that cannabis will remain a Schedule 1 substance under the Controlled Substances Act. 65 v Congress passed a continuing resolution for the federal budget for fiscal year 2017, which provides funding at 2016 levels through April 28, 2017. Although Congress has not yet passed a budget for 2017, the appropriations process has begun. 20 Federal Banking Rules Federal cannabis policy affects the industry’s access to banking services, which may present public safety concerns in areas where cannabis is legalized. Under the Controlled Substances Act, it is also illegal to aid or abet the commission of a federal crime, such as the production or distribution of cannabis. 66 Further, the Department of Justice released a memorandum in 2014 that focused on financial transactions within the cannabis industry, stating that Financial transactions involving proceeds generated by marijuana-related conduct can form the basis for prosecution under the money laundering statutes (18 U.S.C. §§ 1956 and 1957), the unlicensed money transmitter statute (18 U.S.C. § 1960), and the Bank Secrecy Act. 67 Offering banking services to the cannabis industry could therefore expose banks to criminal liability. According to media reports, this means that cannabis business owners cannot easily access the banking systems, and instead operate largely as cash-only entities. They further report this to be a public safety concern, as the businesses may be targets for robberies and theft because of large amounts of cash that may be stored on-site. 68 Former U.S. Attorney General Eric Holder voiced similar concerns in a 2014 media interview. 69 In California, Board of Equalization members have also commented on these public safety concerns and the inability to accurately collect taxes within a cash-only system. 70 Colorado Credit Union Lawsuit The aforementioned concerns would also implicate the adult use market. Other states’ experiences may provide further insight into this issue. Colorado was the first state to legalize cannabis for adult use, and in 2015, the Fourth Corner Credit Union of Denver filed suit against the Federal Reserve, asking that it be permitted to provide banking services to legally compliant cannabis businesses in the area. Before the lawsuit, the Colorado Division of Financial Services approved the Credit Union’s credentials and it then submitted an application to the Federal Reserve for a master account necessary for the electronic transfer of funds. The Federal Reserve denied this request and the Credit Union sought legal relief via the lawsuit. In its ruling, the District Court found for the Reserve, stating that it “cannot use equitable powers to issue an order that would facilitate criminal activity.” 71 Current federal policy remains an important consideration, even against the backdrop of the Department of Justice’s enforcement priorities and guidance. 21 THE ILLICIT MARKET The Illicit Market’s Connection to Adult Use Legalization Policy Areas Any adult use legalization structure will be in competition with the illicit market for consumers, and this implicates other policy areas, such as youth access, public safety and taxation. The illicit market operates outside of legally established rules of operation, and it is an important consideration for any cannabis legalization framework. This is because a tension exists between the legal and illicit markets, where one would compete with the other for consumers. If one legalization goal is to create a pathway for the legal sale of cannabis, reducing the illicit market would be of chief concern. California’s Blue Ribbon Commission on Marijuana Policy names the reduction of the illicit market as one of its core strategy recommendations for cannabis legalization, since, according to the Commission, that goal is essential to a well-functioning cannabis market. 72 As part of its work, the Commission established three main working groups: (1) Youth Education and Prevention, (2) Public Safety and (3) Taxation and Regulation, and illicit market concerns were apparent in all three policy areas. With respect to youth education and prevention, the working group found that effective regulation and taxation focused on youth protection could also reduce cannabis availability within the illicit market. Among the Public Safety working group’s concerns was the need for clear separation between the legal and illicit markets. According to that working group’s findings, these lines can be blurred in cases where cannabis is diverted from the legal market into the illicit market or vice versa. Finally, taxation is one of the many factors that would impact the illicit market’s existence, since an ill-devised taxation structure could encourage users to patronize, and hence bolster, the illicit market. 73 Other States’ Experiences with the Illicit Market In Washington, a reduction in the cannabis excise tax amount is seen as a way to constrain the illicit market, and Colorado currently faces a legal challenge from neighboring states alleging cannabis trafficking across state lines. Washington - Reduced Excise Tax and Delivery Services Pilot Program Adult use sales began in Washington State in mid-2014, and in December 2015, roughly a year and a half later, best estimates from the State Liquor and Cannabis Board’s state that adult use outlets claim 35 percent of the market, the medical cannabis markets claim 37 percent, and the illicit market’s share is 28 percent. 74 Although the Washington Legislature introduced a bill in 2016 to reduce the cannabis excise tax from 37 percent to 25 percent in an attempt to discourage the purchase of cannabis in the illicit market, 75 the bill did not pass and the cannabis excise tax remains at 37 percent. 76 22 Another way that some State policymakers are seeking to address concerns about the illicit market is through a new program for cannabis home deliveries. Washington state law currently prohibits cannabis home delivery services, but these services continue in violation of this law and outside of the regulated market, which, according to Seattle Mayor Ed Murray, is undermining legal retail sales. To address this problem, he supported a state bill that would have authorized a pilot program to legalize delivery services and, from his City’s point of view, “reduce the illicit market for marijuana.” 77 The bill did not move forward in 2016. Colorado – Lawsuit from Neighboring States In Colorado, alleged diversion to the illicit market across State lines has led to a lawsuit from its neighboring states. In March 2015, sheriffs in Nebraska and Kansas filed a lawsuit in Colorado District Court, claiming that cannabis illegally entering neighboring states had unfairly burdened law enforcement officers in those states. In the Complaint, the Plaintiff sheriffs contended that: the result of the increased Colorado-sourced marijuana being trafficked in [their] count[ies] due to [Colorado’s legalization initiative] has been the diversion of a significant amount of [staff time and resources] to counteract the increased trafficking and transportation of marijuana which is illegal in his jurisdiction. 78 For these reasons, the Plaintiff sheriffs asked the Court to invalidate Colorado’s legalization initiative. A federal trial court judge dismissed this case in February 2016. 79 According to media reports, the case was appealed to the 10th Circuit Court of Appeals in April 2016 and may be consolidated with another case brought by Nebraska and Oklahoma, as both Plaintiffs assert that Colorado’s legalization efforts are preempted by federal law and should be halted on those grounds. 80 Proposition 64 Approach to the Illicit Market Proposition 64 contains provisions aimed at reducing the illicit market and preventing illegal cannabis diversion. Among other purposes noted within Proposition 64, the initiative seeks to “tax the growth and sale of marijuana in a way that drives out the illicit market for marijuana and discourages use by minors, and abuse by adults.” 81 To achieve these goals, Proposition 64 requires the Bureau of Marijuana Control, i.e. the agency with primary responsibility for regulating the adult use system at the State level, to establish an advisory group that ensures that the regulatory environment does not lead to an enhanced illicit market. 82 It also requires the California Legislative Analyst’s Office to submit a report to the Legislature with recommendations for cannabis tax rate adjustments that undermine the illicit market. 83 Another stated goal of Proposition 64 is to “prevent the illegal diversion of marijuana from California to other states or countries or to the illegal market.” 84 One of the strategies for achieving this goal is a “seed to sale” tracking system for every step in the cannabis supply chain. The Medical Cannabis Regulation and Safety Act of 2015 (MCRSA) created this track 23 and trace system for medical cannabis, and Proposition 64 would authorize the California Department of Food and Agriculture, the Bureau of Marijuana Control and the Board of Equalization to expand the program to include cannabis in the adult use market. 85 ADULT USE LEGALIZATION AND THE EXISTING MEDICAL CANNABIS PROGRAM Separate Medical and Nonmedical Legalization Systems Since the medical cannabis market may have an impact on that of adult use, it will be important to monitor developments within the medical cannabis industry here in San Francisco. With the passage of Proposition 64, nonmedical cannabis will be joining an existing medical cannabis framework in the State. Though the nonmedical and medical systems would be separate, it may be useful to consider the existing medical cannabis framework and understand the effects that each market may have on the other. For example, an adult use taxation structure that is perceived by users to make cannabis and cannabis products too expensive may push some to the medical cannabis market inappropriately, and it would be important to monitor such effects. As is noted in subsequent sections of this report, the intersection of the medical and nonmedical systems will likely have impacts on other areas of consideration. Recent Development – 2016 Medical Cannabis Bills Since the MCRSA significantly altered the medical cannabis landscape in California, legislators have enacted subsequent legislation to fill perceived legislative gaps. To that end, in 2016, several medical cannabis bills were proposed and passed, including the following: AB 21: Deleted a provision in MCRSA that required local governments to pass land use medical cannabis cultivation regulations by March 1, 2016, and clarified that local governments continue to have jurisdiction over the cultivation of medical cannabis by those individuals exempt from licensure requirements under MCRSA. 86 AB 2679: Added additional required information for medical cannabis licensing reporting to the Legislature. It also allows the University of California’s Marijuana Research Program to include, as part of its reporting duties, studies on the effects of cannabis on motor skills.87 The California Governor’s Trailer Bill for the 2016-2017 Budget, passed in May 2016, included additional funding for MCRSA implementation, as well as several statutory changes to the law. For example, the bill clarified that licensing departments have authority to create license types, set fees, and conduct license enforcement, as well as establish deadlines and provide conditional licenses. The bill also added requirements for labeling and child-proof packaging, and provided for the adoption of guidelines to protect water resources affected by cannabis cultivation. The bill also changes references from “marijuana” to “cannabis” in several provisions, including the 24 name of the leading regulatory agency, which is now referred to as the Bureau of Medical Cannabis Regulation. 88 Future regulatory changes to the medical cannabis sector may affect the adult use market and should be monitored. Proposition 64 Medical Cannabis Provisions Proposition 64 preserves the existing medical cannabis system and builds upon it. California has had medical cannabis laws in place since 1996 through Proposition 215, i.e. the Compassionate Use Act. Proposition 64’s nonmedical cannabis legalization structure is designed to run parallel to that of medical cannabis. The ballot initiative therefore preserves existing provisions under the Compassionate Use Act and MCRSA and builds upon them. It establishes a Bureau of Marijuana Control that would oversee both medical and adult use regulatory systems, thereby dissolving the Bureau of Medical Marijuana Regulation under MCRSA. Among other provisions, it requires all medical cannabis patients to obtain updated physician recommendations that meet the new MCRSA standards and tasks county health departments or the county’s designee with developing protocols that ensure compliance. 89 25 3. PUBLIC SAFETY AND SOCIAL ENVIRONMENT The information in section 3 addresses the following questions: 1. What are the public safety considerations related to driving under the influence and cannabis business security? 2. What are the considerations for developing policies on public consumption of cannabis? 3. What are the considerations for addressing youth access and exposure concerns? 4. How could adult use legalization affect tourism and the hospitality industry? 5. How have other adult use legalization states addressed these issues? 6. How does Proposition 64 address these issues? PUBLIC SAFETY CONSIDERATIONS Road Safety & Driving Under the Influence (DUI) There is no scientifically-established cannabis intoxication threshold level for driving under the influence—states that have legalized adult use have taken different approaches to enacting DUI standards. In California, Proposition 64 maintains existing California laws criminalizing the operation of a vehicle under the influence of cannabis and provides funding for further research and the development of cannabis DUI protocols. Cannabis Use and Driving Impairment California’s Blue Ribbon Commission on Marijuana Policy consulted various stakeholders in its process of developing policy options for cannabis regulation in California, and each agreed that “a person impaired and under the influence of marijuana, whether for medical or adult use, should not get behind the wheel of a car.” 90 The State of Colorado legalized adult use of cannabis in 2012, and in a report published two years later, the Colorado Department of Public Health and Environment found “substantial evidence that (i) the risk of motor vehicle crash doubles among drivers with recent marijuana use; (ii) combined use of marijuana and alcohol increases motor vehicle crash risk more than use of either substance alone, and (iii) [there exists] a positive relationship between [delta-9-tetrahydrocannabinol] THC vi blood level and motor vehicle crash risk, meaning the higher the level of THC in blood, the higher the crash risk.” 91 vi Delta-9-tetrahydrocannabinol is cannabis’ main psychoactive element. 26 Although such evidence indicates that cannabis use may cause driving impairment, there is currently no scientifically established THC threshold level for intoxication in the blood. One challenge of determining this standard is that THC can remain in the bloodstream after the effects of intoxication have worn off, so the presence of THC may not be a reliable measure of intoxication. 92 Another challenge is the lack of cannabis roadside impairment tests. While a roadside test such as the Breathalyzer can confirm blood alcohol content, a similar test for cannabis is not currently available. 93 DUI Standards in Other States Among states that have legalized adult use, there are differences in the Driving Under the Influence (DUI) standards used, which may be a reflection of the aforementioned challenges in establishing cannabis intoxication levels. Oregon and Alaska maintained their existing prohibitions against driving under the influence of cannabis without specifying a threshold intoxication level, while Colorado and Washington both established a more specific 5ng/mL THC threshold DUI standard. In Colorado, if an individual shows blood test results of 5ng/mL of THC or higher, a jury may infer that the person was under the influence of cannabis, but the person may present evidence that the permissible inference should not apply in their specific case. 94 Washington establishes a 5ng/mL DUI per se standard, meaning that results above the limit are automatic evidence of impairment—motorists above the limit are guilty of driving under the influence. 95 Proposition 64 Road Safety Provisions Proposition 64 maintains existing laws under the California Vehicle Code (Section 23152(e)) criminalizing the operation of a vehicle under the influence of cannabis. The ballot initiative does not set a threshold cannabis intoxication level, but does provide funding for the California Highway Patrol to establish cannabis DUI protocols and allows for possible grants to research organizations to develop driving impairment tools. Provisions in the ballot initiative also allocate funding for public education campaigns regarding the dangers of operating a vehicle while impaired and provides resources to local government for enforcement of DUI laws and programs to enforce traffic laws. 96 Cannabis as a Cash-Only Industry Due to federal banking restrictions, many cannabis businesses operate on a cash-only basis, which may present public safety concerns in areas where cannabis is legalized. Proposition 64 contains security measures for cannabis businesses that may help to address such concerns. Federal cannabis policy bars cannabis businesses from accessing banking services. As a result, media reports that cannabis businesses instead operate as cash-only entities and that large 27 quantities of cash may therefore be stored on-site, making cannabis businesses susceptible to theft and burglary and posing safety risks to both workers and patrons. 97 Proposition 64 Cannabis Business Security Provisions Proposition 64 includes provisions that require cannabis retailers and microbusinesses to implement security measures, including but not limited to, restricting access to areas containing cannabis products and storing products in secure and locked areas to prevent theft. With regard to delivery services, the proposed Bureau of Marijuana Control will establish security and transportation safety requirements, such as minimum qualifications for delivery personnel and vehicle type. 98 THC Extraction Methods The manufacture of cannabis products can involve the use of highly flammable solvents, such as butane. To decrease this public safety risk, Proposition 64 requires that manufacturers obtain a license in order to engage in such practices in the commercial sector. To produce more concentrated cannabis extracts such as hash oil, volatile solvents, e.g. butane, are often used. Due to their highly flammable nature, butane solvents can lead to dangerous explosions if not handled safely. Since adult use legalization began in Colorado in 2012, media reports that the State has seen an increase in butane-related explosions, particularly from THC extraction operations in residential settings, which can cause injury and damage property within the vicinity of the explosions. 99 To address this, the City and County of Denver has since passed an ordinance limiting hash oil extraction operations to those with licenses. 100 Proposition 64 employs a similar method of addressing this public safety concern, requiring a license for the manufacture of cannabis products with volatile solvents in the commercial sector. 101 28 SOCIAL ENVIRONMENT CONSIDERATIONS A. PUBLIC CONSUMPTION Public Consumption Policy Considerations Factors such as product type and location may be considered in regards to how and where cannabis is consumed, and given the multiple ways in which consumption may occur, the Task Force may consider policy options based on those differences. Proposition 64 allows local jurisdictions discretion to permit on-site consumption at licensed cannabis retail locations, and it may be useful to consider existing public consumption laws in that decision-making process. The questions of where and how cannabis may be consumed are central to social environment policy considerations. Cannabis can be consumed in multiple ways (e.g., smoking, ingesting, and vaping) and a variety of factors related to each method may be considered in developing consumption policies. Within that context, policy tools may be used to address issues related to (1) access, availability, and use by youth; (2) driving under the influence; (3) the risk of problematic use or overconsumption; (4) consumption of contaminated cannabis products and/or products of unknown potency; and (5) concurrent use of alcohol and cannabis, particularly in public settings and as it relates to driving impairment. 102 According to the Blue Ribbon Commission, examples of such tools include advertising and public consumption limits to prevent youth exposure, and education campaigns to discourage problematic use and educate consumers about health risks associated with such use. 103 With the aforementioned considerations in mind, the Commission also notes the argument that a lack of public smoking spaces could lead consumers to use edible cannabis products instead, which may have unanticipated intoxication effects on those consumers. This argument would therefore support public consumption spaces as a way to provide more places for responsible consumption for tourists and residents alike. Another argument is that, in public consumption spaces, users are outside the safety and comfort of their home while using cannabis and may over-consume if retailers are motivated to sell more product than is safe to distribute at any one time. 104 In addition, on-site smoking of cannabis may pose secondhand smoke risks for workers at such establishments, and the Commission therefore states that this impact should be considered when evaluating the need for on-site cannabis smoking locations. 105 San Francisco’s Current Smoking Laws San Francisco Health Code, Article 19F defines smoking as “inhaling, exhaling, burning or carrying any lighted smoking equipment for tobacco or any other weed or plant,” which would include cannabis. 106 The San Francisco Health Code, Article 19N states that wherever smoking is prohibited, so is the use of electronic cigarette devices. 107 Therefore, devices used to vape liquids or products, including cannabis products, may not be used in any area where smoking a cigarette is prohibited. Several City ordinances clarify that smoking is prohibited in most public spaces (e.g. parks, playgrounds, athletic fields) and buildings (e.g. restaurants, workplaces, 29 common areas of multi-unit housing), as well as certain unenclosed areas (e.g. bus stops, sports venues, farmers’ markets). 108 Some exceptions where smoking is allowed include one’s own home and certain businesses meeting stringent criteria. The purpose of these smoking laws is to reduce exposure to secondhand smoke 109 and the extent to which youth view smoking as a social norm. 110 Other States’ Experiences Washington and Oregon prohibit public consumption of cannabis and cannabis products, while Alaska allows for on-site consumption at cannabis retail locations at the localities’ discretion. Some local jurisdictions in Colorado and Washington have proposed legislation to allow for on-site consumption in order to provide more legal consumption spaces for residents and tourists. Washington and Oregon all prohibit public consumption of cannabis and cannabis products. 111 Alaska allows for on-site consumption at cannabis retail locations at the discretion of its state regulatory body112 and monitoring the implementation of this provision may be an important consideration for California and its localities. Also, it is important to note that due to federal prohibitions, it is still illegal to smoke or consume cannabis on federal property, such as national parks, even in states that have legalized cannabis use. 113 Denver, Colorado Some Colorado establishments have organized as private clubs with a limited number of employees or allowed on-site vaporizing only, which enables them to offer on-site consumption options for patrons. 114 In November 2016, Denver voters passed Proposition 300, also known as the “City of Denver Cannabis Consumption Pilot Program Initiative.” 115 The proposition calls for the creation of a four-year pilot project to allow on-site cannabis consumption in designated areas of a business. The permitted businesses would need approval from the surrounding neighborhood or business improvement district and could only serve as consumption spaces and not be licensed for any other commercial cannabis activity. 116 According to local media reports, this model would allow businesses like bars, cafes and restaurants to have cannabis consumption areas, which could provide more consumption locations for both residents and tourists. 117 But, most recently, the Colorado Department of Revenue announced a regulation that would prohibit any location that serves alcohol from also allowing on-site cannabis consumption, which limits the types of models previously contemplated under Proposition 300. 118 Seattle, Washington Washington law does not currently allow for on-site consumption locations. 119 In 2015, Seattle’s City Attorney released a memorandum proposing local legislation to license and regulate “marijuana use lounges” which would permit cannabis vaporization and ingestion locations, but not allow for on-site cannabis sales in those locations, in order to provide spaces for legal cannabis consumption. 120 In the memorandum, the City Attorney states that enforcement of 30 public cannabis consumption laws would be more effective if there were additional locations for legal consumption. 121 The legislation has not yet been introduced. Proposition 64 Public Consumption Provisions Under Proposition 64, consumption of cannabis and cannabis products in public remains illegal. Proposition 64 allows local jurisdictions to determine whether or not to allow on-site consumption, subject to certain conditions. Under Proposition 64, consumption of cannabis and other cannabis products in public remains illegal and smoking cannabis is prohibited in locations where smoking tobacco is also prohibited. 122 But Proposition 64 also allows local jurisdictions to determine whether or not to allow on-site consumption. Localities may permit on-site consumption at licensed retailers under the following minimum conditions: (1) access is restricted to persons 21 years of age and older; (2) consumption is not visible from a public place or non-age restricted area; and (3) sale or consumption of alcohol or tobacco is not allowed at the retailer. 123 Proposition 64 also establishes a standard dosage (not to exceed ten milligrams of THC per serving) for edible cannabis products, and the product must be scored into serving sizes if the product contains more than one serving. 124 B. YOUTH ACCESS AND EXPOSURE Risks of Early Onset Use Cannabis use among youth can affect physical development and present consequences that potentially reduce job and educational prospects. Edible cannabis-infused products present particular challenges with respect to youth exposure, and the Blue Ribbon Commission recommends that regulations be put in place to address them. One of the guiding principles of California’s Blue Ribbon Commission on Marijuana Policy is to protect youth and limit youth exposure to cannabis. According to the Commission’s Youth Education and Prevention Working Group, regular or excessive cannabis use among youth can be associated with reduced educational attainment and puts teens at “greater risk for problems with alcohol and other substance abuse.” 125 Similarly, the California Department of Public Health cites studies indicating that early onset and regular cannabis use among adolescents is 31 associated with adverse changes to parts of the brain used for memory and learning, a decline in IQ scores, impaired school performance, and a greater likelihood of dropping out of high school. 126 According to the Commission, it is important to also note that many studies on this subject have limitations and are unable to make causal conclusions due to study design. The Commission further notes that youth behavior and academic achievement are determined by a complex system of factors, making it difficult to isolate the specific effects of cannabis use. 127,128 In addition to health risks, there may be consequences related to the criminal justice and school systems, as well. The Commission notes that teens who are regular or heavy cannabis users have a greater risk for disciplinary actions at school and are more likely to have contact with the criminal justice system. 129 Arrests and disciplinary actions can also render youth ineligible for federal loans and/or job opportunities, which may have lasting effects, particularly for racial minorities. 130 The Commission concludes that it is important to design policy tools and educational programs that prevent youth initiation and uptake of cannabis use and delay such use until adulthood.131 According to the Commission, lessons learned on that point from tobacco regulation show that advertising/marketing restrictions 132 and evidence-based educational programs, such as school- based and broad-based campaigns aimed at the general public, are effective youth exposure prevention strategies. 133 Youth Access Points and Connections to Illicit Market After adult use legalization, cannabis may continue to be readily available and accessible to youth through the illicit market. The Commission notes that adult use cannabis regulation and taxation could reduce access to cannabis from illicit sources and recommends that such regulations include 134: Strict enforcement of age limits Regulating the number, type, and location of retail outlets Limiting sale of products that attract youth (e.g. edibles in the form of candy) Restricting advertising and marketing Establishing standards for labeling, potency, purity and dosing Developing non-criminal sanctions for youth under 21 (e.g. Student Assistance Programs) The Commission notes that the price of cannabis will likely impact youth use. It predicts that adult use legalization will lower cannabis prices in the new adult use market as compared to the illicit market. Youth often have less disposable income and are sensitive to changes in prices, meaning higher cannabis prices would put cannabis further out of youth’s reach. So, although youth would not be able to legally purchase adult use cannabis, a decrease in price may still render cannabis more accessible to them. The Commission therefore recommends price-setting regulations, such as a minimum price or an excise tax, rather than a sales tax, to avoid the aforementioned circumstances. 135 32 Edibles and Potential Danger Edible cannabis-infused products, or “edibles,” present a challenge for youth exposure, as they may resemble candy or foods which appeal to youth, or may be accidentally consumed by youth when mistaken for other foods. 136 Youth may also consume them intentionally. A 2016 study of youth aged 15-17 in San Francisco found that edible cannabis was nearly as common as that used for inhalation. In that study, youth reported that using edibles could reduce their chances of being caught with the substance, and that edibles are used to avoid smelling like smoke, if they do not enjoy smoking or wish to appear to peers as non-users. 137 Whether accidentally or intentionally consumed, cannabis exposure in youth may cause health effects such as drowsiness, dizziness, elevated heart rate, vomiting, trouble breathing and seizures. 138 These effects are often more severe in children who consume edible cannabis products, as edibles contain higher concentrations of THC and the effects last longer when ingested than inhaled. 139 In response to these concerns, the Blue Ribbon Commission calls for regulations on edible cannabis products, both to deter use among youth and to prevent accidental ingestion. The Commission recommends that edibles be sold in tamper-proof or childproof packaging, and be designed in a way that does not appeal to children. 140 Other States’ Experiences Colorado and Washington have not seen significant increases in youth cannabis use, but the proportion of youth who view cannabis use as risky have decreased in each state post-legalization. Both Colorado and Washington have passed laws to regulate cannabis packaging and edible cannabis-infused products in order to limit youth access and use. Colorado - Youth Access and Use Colorado’s medical cannabis program has been in existence since 2000, and the state legalized cannabis for adult use in 2012. The biannual Healthy Kids Colorado Survey includes cannabis use among middle and high school students as a data point. According to the Survey, cannabis use rates among middle and high school students from 2009 to 2015 remained relatively stable, 141 but from 2013 to 2015, the percentage of middle and high school students who saw regular cannabis use as risky behavior decreased from 54 percent to 48 percent, respectively. A 2016 report by the Colorado Department of Public Safety found that overall drug suspension and expulsion rates vii in schools decreased from 2004/2005 to 2008/2009 but then increased in 2009/2010 which, according to the report, possibly corresponds to medical cannabis commercialization across the state during that time. Since that increase, rates have remained vii The Colorado Department of Public Safety report notes that suspension and expulsion data on cannabis is not collected separately, but rather that cannabis is included in the larger category of “drugs”. The report states that cannabis is the most commonly used drug in elementary and secondary schools, and because of this, it notes that trends in drug suspensions and expulsion are likely to be related to changes in use and possession of cannabis. 33 relatively stable for suspensions and have decreased for expulsions post-adult use legalization. viii A law passed 2015 requires the Colorado Department of Education to collect discipline data about cannabis separately from other drugs, with the first set of data on that point to be released in late 2016. 142 The aforementioned Department of Public Safety report also found that the total rate (+2 percent) and number (+5 percent) of juvenile cannabis arrests increased from 2012 to 2014. 143 Health Impacts of Youth Exposure Colorado has relied on two main data sources to understand the health impacts of cannabis exposure on youth: poison center data and hospitalization/emergency department visit data. A Colorado Department of Public Health and Environment report using statewide poison center data found that cannabis-related exposure calls increased from 44 in 2009 (pre-adult use legalization) to 229 in 2015 (post-adult use legalization). Since 2010, 46.8 percent of cannabis exposure calls have been for individuals ages 17 and younger, indicating a large proportion of youth affected. Report data collected since July 1, 2014, show that in children ages 0-8, edible cannabis products constitute a majority (52.1 percent) of reported cannabis exposures. 144,ix A Colorado Department of Public Health and Environment report focusing on hospitalization and emergency department visit data found that rates of hospitalizations due to possible cannabis exposures x in children under age 9 increased from the 2001-2009 pre-adult use legalization time period to the 2014-June 2015 post-adult use legalization time period from 1 per 100,000 to 13 per 100,000. 145 The same report found that rates of emergency department visits in children under age 9 also increased from the 2011-2013 pre-adult use legalization time period to the 2014-June 2015 post-adult use legalization time period. 146,xi Though these trends indicate increased cannabis exposures in children, the aforementioned studies and media sources note several limitations of the research findings. First, hospitalization and emergency department findings only represent “possible” cannabis exposures, xii since cannabis use is often grouped with other drugs for reporting purposes, and/or cannabis use may viii The Colorado Department of Public Safety report notes that prior to the 2012 school year, legislation (S.B. 12- 046/H.B. 12-1345) modified some zero-tolerance policies that had resulted in what some considered “unnecessary expulsions, suspensions, and law enforcement referrals.” The report states that this change in law should be taken into account when examining disciplinary trends, as this legislation may have impacted the number of suspensions and expulsions from 2012 onwards. ix In a separate study focused on one region in Colorado, researchers found similar results regarding poison call center trends and exposures to edibles among children ages 0-10. See Wang, G.S., M.C. Le Lait, S.J. Deakyne, A.C. Bronstein, L. Bajaj and G. Roosevelt. (2016). Unintentional Pediatric Exposures to Marijuana in Colorado, 2009- 2015. JAMA Pediatrics 170(9):e160971. x The Colorado Department of Public Health and Environment report on hospitalizations and emergency department visits notes that the data represent “possible” cannabis use, given that records only indicate whether the exposure is from “psychodysleptic drugs,” a broader category which includes cannabis and other drugs. According to the report, other psychodysleptic drugs have a low prevalence of use, so this data measure can be considered a reasonable proxy for cannabis use. In addition, the report states that the age cut-off of 9 years was chosen to represent children who were unlikely to be intentionally using cannabis, but these data do not actually distinguish between intentional or unintentional cannabis use. xi In a separate study focused on one region in Colorado, researchers found similar results regarding hospitalizations among children ages 0-10. See Wang, G.S., M.C. Le Lait, S.J. Deakyne, A.C. Bronstein, L. Bajaj and G. Roosevelt. (2016). Unintentional Pediatric Exposures to Marijuana in Colorado, 2009-2015. JAMA Pediatrics 170(9):e160971. Doi: 10.1001/jamapediatrics.20160971 xii See footnote ix above. 34 be noted in the medical record but may not be the main reason for the hospital/emergency department visit. 147,148 Second, they note that hospital and emergency department visits could be a result of cannabis use exacerbating an existing health condition, rather than it causing the particular condition that led to the visit. 149 Third, poison center data is self-reported and may underestimate the true number of exposures. 150 Finally, the studies assert that cannabis-related exposure among children remains relatively rare in comparison to exposures to household products and pharmaceuticals, 151 and that health problems caused by cannabis exposure are usually minor. 152,153 Limiting Youth Exposure In light of the existing data, Colorado has taken legislative measures to limit youth exposure, with an emphasis on edibles. For example, cannabis sold at a retail store must use child-resistant packaging and meet labeling requirements, such as listing license and batch numbers, date of sale, a universal THC symbol, potency information, testing status, and health warning statements. 154 Edible products must be scored in serving sizes of 10 or fewer milligrams of THC and have opaque exit packaging. 155 The word “candy” is prohibited on labels 156 and edible products (not just the packaging) must be marked or imprinted with a universal symbol for THC to alert users about its content and help protect children, and adults, from unintended consumption. 157 Effective October 1, 2017, it will be illegal to sell cannabis-infused candies in the shapes of people, animals or fruits, as regulators determined these shapes may be attractive to children. 158 Colorado is also using cannabis tax revenues to address youth access and exposure concerns. Revenue from sales and excises taxes is allocated to various departments, including the departments of Education, Public Health and Environment, and Public Safety in support of youth-focused initiatives including school construction, school-based prevention and intervention services, a public awareness education campaign, juvenile diversion program, and substance use disorder treatments. 159 Washington - Youth Access and Use Data from Washington illustrates trends that are similar to Colorado’s experience. Findings from the 2014 Washington State Healthy Youth Survey indicate a small but gradual increase in youth cannabis use over the past decade, but no significant trends in youth cannabis use since legalization. 160 According to the survey data, the percentage of 12th grade students who consider it risky to regularly use cannabis decreased between 2012 and 2014, from 34 percent to 26 percent. 161 A separate study found that the percentage of teenagers who said it was “easy” to obtain cannabis increased slightly from 54 percent to 55 percent between 2010 and 2014. 162 Retail adult use sales began in July 2014, so there may not yet be sufficient data to assess the impact of legalization on youth access and use. Additionally, while it appears most middle and high school students in the state do not use cannabis xiii, the Washington State Liquor and xiii According to the 2014 Washington State Health Youth Survey, 73 percent of 12th grade students, 82 percent of 10th grade students and 93 percent of 8th grade students had not used cannabis in the past month before the survey was conducted. See Washington State Department of Social and Human Service. (No date). 2014 Washington State Healthy Youth Survey – Facts about Teens and Marijuana. Retrieved from http://www.askhys.net/Docs/HYS%202014%20Facts%20Marijuana%20mp.pdf. 35 Cannabis Board (WSLCB) cautions that a trend of decreasing perception of cannabis use as risky is concerning and could lead to increased youth use in the future. 163 In terms of school-based consequences of cannabis use among youth, approximately 4 percent of all students were suspended or expelled in the 2013-2014 school year and of these, 11 percent of students were suspended or expelled due to cannabis possession. 164 Health Impacts of Youth Exposure The Washington Poison and Drug Information Center saw an 86 percent increase in the number of cannabis exposure calls between 2011 and 2015, from 146 to 272. In 2015, 46 percent of such cases were for youth under age 19, and 32 percent involved edibles. 165,166 Limiting Youth Exposure One of the Washington State Liquor and Cannabis Board’s top priorities in regulation of adult use cannabis is preventing youth access. 167 Regulations on that issue have focused on edible products. Before sales of adult use cannabis began, Washington established regulations requiring WSLCB approval of all edible cannabis products and packaging to closely monitor items that might appeal to children. 168 Under the regulations, products, labels, and packages may not be “designed to be especially appealing to children.” 169 Edibles must also be in child-resistant packaging that is also separately scored into serving sizes. Depending on the type of product, labels must contain information including, but not limited to, business name and license number, inventory ID in track and trace system, concentration of THC and CBD xiv, date manufactured, and health warnings. xv,170 The WSLCB is currently collaborating with the Washington Poison Center to develop a warning symbol to identify adult-only products, such as cannabis, that are not intended for children. 171 The WSLCB also tasked the University of Washington’s Cannabis Law and Policy Project with investigating food and food marketing that appeal to children to inform additional regulation of edibles. The Project’s 2016 research report shows that children prefer foods of certain colors, shapes and odors, and that promotional characters and television advertising influence children’s preferences by attracting their attention to certain products, improving their memory of them, and encouraging them to ask their parents for those products. 172 The Washington ballot initiative legalizing adult use, Initiative 502, sets aside funds for the Washington Department of Health to mitigate public health impacts of cannabis use via a Marijuana Prevention and Education Program. The goal of this program is “to reduce initiation and use of cannabis by youth (ages 12-20), especially among populations most adversely affected by marijuana use.” 173 Through this program, in April 2016, the Washington Department of Health began a new campaign to educate 12- to 17-year-olds about the risks and consequences of cannabis use. 174 Tax revenues have also funded a cannabis-specific educational website for the public with information and data on general cannabis laws and health effects as well as resources for youth prevention. 175 The website content is a collaborative effort between the Washington State Liquor and Cannabis Board, the Seattle Children’s Hospital and the University of Washington’s Alcohol and Drug Abuse Institute. 176 xiv CBD, or cannabidiol, is a chemical unique to the cannabis sativa plant, which is not known to have psychoactive effects. See University of Washington Alcohol and Drug Abuse Institute. (2016). Learn About Marijuana. Retrieved from http://learnaboutmarijuanawa.org/factsheets/cannabinoids.htm xv Some health warnings may also be given separately to the consumer in accompanying materials. 36 Proposition 64 Provisions to Minimize Youth Access and Exposure Proposition 64 contains multiple advertising and packaging requirement provisions designed to prevent sales to minors and reduce youth exposure and access. The initiative also dedicates a portion of tax revenues to youth-focused education, prevention and treatment services. Two of the primary goals of Proposition 64 are to protect children from potential dangers and to move cannabis from the illicit to the regulated market where stricter safeguards can be put in place to prevent youth from accessing it. To this end, Proposition 64 contains various provisions to prevent youth sales, access and exposure, such as advertising and package labeling requirements. It also sets aside funding for youth education, prevention and treatment services. Preventing Youth Sales, Access and Exposure Proposition 64 would legalize cannabis for adult use. As such, it contains multiple provisions to prevent sales to minors. Licensees are prohibited from 177: selling cannabis or cannabis products to anyone under 21 years of age allowing anyone under 21 access to access the premises employing any persons under 21 years of age selling or transferring cannabis unless first verifying via government-issued identification that the consumer is over 21 years of age. An adult use licensee that also qualifies as a medical cannabis dispensary may allow access and sale to a person 18 years of age and older with valid government-issued identification and a medical cannabis identification card. 178 Proposition 64 also establishes that persons under 21 may be used by peace officers in the enforcement of the aforementioned provisions and are immune from prosecution. 179 Proposition 64 has provisions specifying where cannabis business may be located and where cannabis may be consumed to prevent youth access. Cannabis businesses may not be located within 600 feet of schools, day care centers or youth centers that are in existence at the time the license is issued and allows State licensing authorities or a local jurisdiction to set a different radius. 180 Individuals may not possess, smoke or ingest cannabis on the grounds of a school, day care center or youth center while children are present or smoke cannabis within 1,000 feet of these locations while children are present, except on the grounds of a private residence. 181 Advertising, Lab

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