Agenda Item Wording:
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Cannabis Ordinance Discussion - Receive and review draft Cannabis Ordinance, draft cannabis business application and selection process, and provide staff with direction on changes to these documents, and authorize an amendment to the existing HdL contract to assist staff in a fee nexus study to set all applicable fee amounts for the cannabis business program by appropriating $12,000 from the General Fund for this contract amendment. This item is scheduled for the Work Session; if not completed, it may be continued during the Regular Session portion of this meeting.
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Agenda Date: 03/16/2026
Prepared by:
Devon Jones, Economic Development Manager, devon.jones@visalia.gov, (559) 713-4190; Paul Bernal, Planning and Community Preservation Director, paul.bernal@visalia.gov, (559) 713-4025; Jim Koontz, City Attorney
Department Recommendation:
Receive the staff report and presentation on the draft Cannabis Ordinance, City’s Cannabis Business Application, and selection process and provide staff with any input or necessary changes to these documents prior to considering the ordinance and related material for adoption at a future City Council meeting.
In addition, staff recommends the City Council amend the existing sole source contract with HdL to assist staff in preparing a cannabis fee nexus study to determine all applicable processing fee amounts for the cannabis business program, by appropriating $12,000 from the General Fund for this contract amendment. Please note during the preparation of the cannabis ordinance, cannabis application and selection process, staff noted that no fee had been identified/adopted via a nexus study to charge applicants if/when an ordinance were to become adopted.
Summary:
The consultant, HdL, along with staff and the City Attorney’s office, have prepared the draft Cannabis Ordinance (Chapter 4.04) based on input and feedback provided by City Council and Planning Commission in past work session meetings. The draft Cannabis Ordinance is currently worded to establish the number of businesses permitted to operate in the City of Visalia at zero; however, the draft ordinance effectively establishes the regulatory framework for such businesses to operate when Council elects to proceed with permitting such businesses to operate within the City of Visalia at a future date. This is based on prior direction from Council during work session discussions.
Furthermore, the storefront and non-storefront retail cannabis business application and selection processes for potential adoption by separate resolution have also been drafted per prior input received from Council. These processes are unique from the other cannabis business application processes (distributor, manufacturer, microbusiness, processor, delivery only medical marijuana retail, and testing laboratory) because these are the only two business license types that are proposed to have restricted amounts. In both cases, Council input thus far has suggested three licenses per type.
Both the draft ordinance and draft application and selection processes are presented this evening for review before coming back to Council for formal adoption later this year. Additionally, the draft Zoning chapter (Chapter 17) edits indicating zones where such cannabis businesses are to be allowed to operate and definitions of such uses is provided for review as well. Important to note is that retail storefront buffer requirements are established in the Cannabis Ordinance itself.
Lastly, staff request the Council amend the existing sole source contract with HdL to assist staff in preparing a cannabis fee nexus study to determine all applicable fee amounts for administering the cannabis business program. During the preparation of the ordinance and related application and processing material, it became apparent that a fee nexus study had not been contemplated as there are several associated fees with the licensing process and City staff will need the assistance of HdL to accurately assess all costs associated with eventual implementation of a Cannabis Business License program.
The contract amendment request requires City Council authorization to appropriate $12,000 from the General Fund. Once a draft fee schedule is determined, staff will present to Council for review and adoption by separate resolution.
New Draft Cannabis Business Ordinance - Chapter 4.04:
The draft Cannabis Business Ordinance establishes the regulatory framework for commercial cannabis activities within the City of Visalia. The ordinance is crafted based on input from Council and recommendations from staff and the consultant. Highlights of language included in the Cannabis Business Ordinance are as follows:
Chapter 4.04.410 (see Attachment 1: Draft Ordinance)
- Hour restrictions of 9:00 A.M. to 9:00 P.M. for retail storefront and non-storefront and delivery services but no stated restrictions on other types of uses beyond retail. Hour restrictions for delivery only medical marijuana retail would follow state law only, which currently restricts from 6:00 A.M. to 10:00 P.M.
Chapter 4.04.170 (see Attachment 1: Draft Ordinance)
- Annual terms to expire June 30th to align with the City’s regular business tax term.
Chapter 4.04.100 (see Attachment 1: Draft Ordinance)
- Limit number of cannabis business licenses at this time to zero. Council may change this at any time after ordinance adoption by resolution.
Chapter 4.04.340 (see Attachment 1: Draft Ordinance)
- Sensitive uses and buffer sizes for retail storefront buffer:
o 600 foot buffer from existing:
§ Churches
§ Parks - not to include open space land use, trails or conservation easements
§ Schools - K-12, public and private
§ State licensed day care facilities
§ “Youth centers”
o 100 foot buffer from all residential zoning
Chapter 4.04.130 (see Attachment 1: Draft Ordinance)
- Application and selection process to be codified by separate resolution.
Chapter 4.04.180 (see Attachment 1: Draft Ordinance)
- The City Manager is authorized to make all decisions concerning the issuance of renewal licenses.
Chapter 4.04.250 (see Attachment 1: Draft Ordinance)
- Similarly, appeals will be heard by an appointee designated by the City Manager.
Rescind Chapter 5.66:
Based on the adoption of the Cannabis Ordinance, staff is noting that Chapter 5.66 (which pertains to state mandate to permit delivery only medical marijuana retail businesses as a result of SB 1186) would effectively be outdated, and no longer valid. To reduce confusion and be more efficient and simplified for both staff and potential businesses, provisions in Chapter 5.66 are now incorporated into Chapter 4.04. This will also require some minor edits to Ch. 8.64 to be consistent as well.
Updates to Chapter 17 (Zoning):
In addition to the ordinance changes as noted above, updates to Chapter 17 (Zoning) are required and will be reviewed by Planning Commission before coming to Council for formal adoption. As identified in Attachment 4, the proposed edits that will be reviewed by Planning Commission include:
Chapter 17.25 Zone Use Matrix (see Attachment 4: Draft Zoning ordinance update)
- Permitted commercial cannabis businesses includes:
o Retail storefront and non-storefront.
o Cultivation: Only the ‘Processor’ sub license type which consists of businesses “that only trim, sift, cure, dry, grade, package or label cannabis.” Given Visalia could offer a competitive location to conduct such activities without the potential concerns of the other cultivation use types (water consumption), this type will be considered.
o Manufacturing.
o Distribution.
o Testing laboratory.
o Microbusiness: Only to include ‘Processor’ Cultivation sub license type and only non-storefront Retail use type. Only zoning to consider for Microbusiness use type will be Light Industrial or Industrial.
o Delivery only medical marijuana retail per state mandate.
- Specific zones where cannabis businesses will be conditionally permitted to operate (all based on prior direction from Council):
o Retail storefront:
§ Conditionally Permitted in Regional Commercial (C-R), Commercial Mixed Use (CMU), and Service Commercial (C-S)
§ However, retail storefronts will not be allowed in the Microbrewery/Microwinery Overlay District (i.e., East Downtown area)
o Non-storefront retail will be conditionally permitted in Light Industrial (I-L) and Industrial (I) zones and specifically in the Visalia Industrial Park Overlay area only. This overlay area will encompass the appropriately zoned property mainly found west of Shirk Street but including the properties along Shirk between Doe Avenue and Grove Avenue.
o All other use types that may be allowed in I-L or I zones shall also be restricted to this Visalia Industrial Park Overlay.
§ Distributors, Manufacturers, Microbusiness, and Processors
o Testing Laboratories will be conditionally permitted in Commercial Mixed Use (C-MU), Professional/Administrative Office (O-PA), Business Research Park (BRP), and I-L and I zones.
o Delivery Only Medical Marijuana Retail will remain permitted by right in the I-L and I zones in order to be in compliance with SB 1186.
Business Application and Selection Process Resolution:
The following structure and required information materials for retail storefront and retail non-storefront cannabis business applications are as follows (see Attachments 2 and 3):
- Commercial Cannabis Business Application
- Financial Responsibility, Indemnity and Consent to Inspection Terms Agreement
- Agreement on Limitations of City’s Liability, and Certifications, Assurances, Warranties, and Indemnification to City
- Property Owner Consent/Landlord Affidavit
- Proof Property Ownership or Lease Agreement/Letter of Intent to Lease
- Proof of insurability from an Insurance Company
- Zoning Verification Application
- Application Zoning Verification Letter
- Application fee
- Require background checks
Application Evaluation and Review
- Business Plan
o Includes various elements of typical business plans, including in this case, items such as owner qualifications, past performance, budgets and pro forma, proof of capitalization, description of operations.
o Requires demonstration of proof of capitalization in the form of documentation of cash or other liquid assets on hand, letters of credit, or other equivalent assets along with full budget for construction and operation.
- Location and Neighborhood Compatibility Plan
o Should include elements typical for the City’s site plan review submittals but also how the potential business will proactively address and respond to any neighborhood complaints or concerns (odor control plan, managing traffic, waste management plan, etc.) in order to address neighborhood compatibility.
- Safety and Security Plan
o Should consider all possible fire, medical and hazardous situations, as well as all access control, inventory control, cash handling procedures. Complete policy/procedures manuals are not required at this point in the application process however, a great deal of review of the eventual requirements will need to be evident and detail will need to be provided at this stage.
- Community Benefits Plan
o Based on prior input from Council and similar forms of development agreement requirements in the area, staff is recommending a minimum cash value of $50,000 or 1% of annual gross receipts, whichever is greater, annually. Here are some examples of what other jurisdictions have required in the area:
§ City of Tulare and Valley Pure: One-time payment of $100,000 and annual payments of $50,000 for various projects, plus the annual tax rate.
§ City of Tulare and Token Farms: 2% of its sales annually to a local nonprofit plus annual tax rate.
§ City of Porterville and City Culture Cannabis Club: yearly sum of $30,000.00 or 1% of Owner’s annual gross receipts, whichever amount is greater.
§ City of Porterville and Haven: yearly sum of $30,000.00 or 1% of Owner’s annual gross receipts, whichever amount is greater.
§ City of Lemoore and NHC Lemoore: Initial licensing fee of $200,000 (unless skate park and splash pad required relocation, in which it was $350,000), annual license fee of $12,860, $24,000 annually in charitable donations in the city, plus annual tax rate.
§ City of Lemoore and Valley Pure: any business license fees as part of cannabis program, 5% annual tax rate (“Revenue Raising Fee”) to be renegotiated every 3 years, and their fair share of skate park and splash pad relocation project (50%).
- Staff is recommending disqualifying applicants if they have had a local cannabis business license suspended or revoked.
Lottery Selection (Merit based selection versus Lottery based selection):
Staff and the consultant, HdL, recommend the selection processes for any such Cannabis related business/use that may require limiting the number of licenses issued (e.g., retail storefront) should ultimately be done via a lottery draw method. This process is recommended in an effort to reduce exposure and risk to potential litigation and to best streamline the lengthy appeals process common with unselected applicants. Although Council expressed support for the “lottery” selection method, but noted their interest in measures to ensure quality applicants for the lottery process resulted in quality cannabis business operators, staff is confident the application and selection process and cannabis business ordinance guidelines presented will best result in quality operators being eligible for selection while also mitigating risk of lengthy appeal processing and litigation.
As drafted, the process includes thorough application requirements and thorough quality assurance review for submitted applications. Doing so establishes a rigorous up-front process to identify qualified firms for the lottery draw method while also keeping the process open to all qualified applicants. In addition, there are requirements applicable during the post selection process, or business establishment stage, to help ensure qualified firms are selected. Some of those requirements for retail storefront licensees include:
- All licensees will need to go through Site Plan Review.
- Public hearing will occur with the Conditional Use Permit hearing with planning commission.
- Selected applicants will have 12 months to acquire Conditional Use Permit, any other entitlements (if applicable), and any necessary building permits and begin construction.
o Cannabis business renewal licenses will not be provided to licensees who do not meet this timeframe.
- Selected applicants will also have 24 months to acquire their Certificate of Occupancy for their cannabis business or risk license revocation.
- Additionally, a Cannabis Business License cannot be transferred or otherwise sold within the first 5 years of the date of issuance of the License.
o Further, the owner of a Cannabis Business License shall not transfer ownership or control of the license to another person or entity unless and until the transferee obtains an amendment to the license from the City Manager stating that the transferee is now the licensee. Such an amendment may be obtained only if the transferee files an application with the City Manager in accordance with the provisions of the ordinance as though the transferee were applying for an original Cannabis Business License. The proposed transferee’s application shall be accompanied by a transfer fee to be determined and the transferee’s application will be treated as a new application.
Establishing Cannabis Program Fee Schedule:
As mentioned above, in order to complete the process of establishing all the rules and regulations to be ready to begin accepting cannabis business interest in the City of Visalia, staff requires Council authorization to amend the existing sole source contract with HdL to assist in a fee nexus study to determine all applicable fee amounts for administering the cannabis business program. There are several associated fees with the licensing process and staff will need the assistance of HdL to accurately assess all costs associated with eventual implementation of a Cannabis Business License program.
This requires City Council authorization to appropriate $12,000 from the General Fund for this contract amendment. Once a draft fee schedule is determined, staff will present to Council for review and adoption by separate resolution.
Cannabis Application Process Request
Should Council desire at this time to start allowing such businesses to operate within the City, instead of passing the ordinance with number of cannabis licenses set at zero, staff would also request an amendment to the existing sole source contract with HdL to provide application submittal and review, and license review services to assist the City with quality assurance in the application processing and licensee selection process. HdL would host an online portal for cannabis businesses to submit license applications and collect application fee payments. In addition to hosting the online portal, HdL would provide ongoing technical support to cannabis applicants seeking to access and/or submit materials through the portal and review all cannabis business license application materials for completeness. Once the opportunity for submitting applications closes, the City would be provided online access to the submitted materials for the purpose of reviewing the applications for completeness. This amendment would require an estimated appropriation of an additional $120,000 from the General Fund for these additional services. Given the attached cost estimate from HdL, bases total cost on number of applications submitted this estimate assumes 30 retail storefront and retail non-storefront applications in total.
Next Steps:
- 1st reading of the Cannabis Business Ordinance at a future Council meeting.
o As mentioned above, this will include rescinding 5.66 and also adopting a zoning text amendment following Planning Commission review
- Adopt a resolution establishing the application and selection process for both storefront and non-storefront retail cannabis business license applications given these are the only licenses to be limited.
- Adopt a resolution to set all applicable cannabis program fees following work with HdL.
- When Council wishes to allow cannabis business licenses to be eligible for issuance, staff will return with a separate resolution at that time. Additionally, staff will require the authority to contract with a consultant to assist with the application review and submittal, license review and overall quality assurance.
Fiscal Impact: $12,000 from General Fund to amend existing sole source contract with HdL to assist in preparing a fee nexus study to determine all applicable fees for cannabis business program.
Prior Council Action:
• On July 21, 2025, Council provided additional input re: the establishment of a cannabis business ordinance and corresponding business application and selection review process.
• On May 5, 2025, Council provided initial input on draft cannabis business ordinance and corresponding business application and selection review process.
• On March 3, 2025, Council authorized staff to proceed with drafting a cannabis business ordinance for adoption but during the adoption process, set the number of businesses permitted to operate in the City to zero effectively establishing the regulatory framework for such businesses but not yet permitting such businesses to operate and amend the existing contract with HdL to include the additional scope of work totaling $24,600 and appropriate an additional $5,000 from the General Fund.
• On July 15, 2024, Council adopted an amended Resolution 2024-24 to place a cannabis tax measure on the November 2024 general election ballot.
• On June 17, 2024, Council conducted the second reading and adoption of Ordinance No. 2024-06, adding Chapter 3.14 (Cannabis Business Tax) to Title 3 of the Visalia Municipal Code to establish a tax on cannabis business activities within the city.
• On June 3, 2024, Council conducted the first reading of Ordinance No. 2024-06, adding Chapter 3.14 (Cannabis Business Tax) to Title 3 of the Visalia Municipal Code to establish a tax on cannabis business activities within the city and adopted Resolution 2024-24 to place a cannabis tax measure on the November 2024 general election ballot.
• On May 20, 2024, Council authorized staff to present an ordinance to include a local cannabis tax measure for voter consideration on the Tulare County November 2024 General Election ballot.
• On May 6, 2024, Council authorized staff to continue working with HdL to develop a local cannabis tax measure and ballot language to be included on the November 2024 ballot and appropriated $20,000 from the general fund for the development of tax measure informational materials.
• On November 20, 2023, Council conducted the second reading and adoption of Ordinance No. 2023-13 for Zoning Text Amendment No. 2023-02, a request by the City of Visalia to amend Visalia Municipal Code Chapter 17.25, add Section 17.32.167, amend Chapter 8.64, and add Chapter 5.66 in order to address upcoming state mandated changes as a result of the passage of SB 1186, and to establish objective standards for permitting delivery only medical marijuana retail establishments within the City of Visalia.
• On November 11, 2023, Council authorized the City Manager to award a contract to HdL Companies for an amount not to exceed $35,000, with a total budget of $40,000.
• On November 6, 2023, the City Council authorized the City Manager to award a contract to FM3 Research for an amount not to exceed $39,500, with a total budget of $45,000.
• On July 17, 2023, Council directed staff to initiate a zoning ordinance update to implement reasonable zoning regulations in response to SB 1186 and hire a consultant, via a sole source contract, to assist staff with the preparation of a potential tax measure specifically for cannabis sales for the 2024 general election and to identify potential revisions to cannabis regulations in Visalia.
Alternatives: In addition to the recommended motion, authorize staff to amend the existing sole source contract with HdL to provide application review services for both storefront and non-storefront retail cannabis business applications, appropriate an additional $120,000 from the General Fund for this additional service, and authorize staff to amend the Draft Cannabis Business Ordinance to enable cannabis businesses to apply for necessary licenses to operate within the City.
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to authorize staff to amend the existing sole source contract with HdL to provide assistance with the preparation of a fee nexus study to determine all applicable fee amounts in the City’s cannabis business program and appropriate $12,000 from the General Fund for this contract amendment.
Environmental Assessment Status: N/A
CEQA Review: N/A
Deadline for Action: 3/16/2026
Attachments:
- Attachment 1: Draft Ordinance
- Attachment 2: Draft Application Procedures - Retail storefront
- Attachment 3: Draft Application Procedures - Retail non-storefront
- Attachment 4: Draft Zoning ordinance update
- Attachment 5: Staff presentation
- Map 1: Final buffer map
- Map 2: Visalia Industrial Park Overlay
- HdL additional services cost estimate
Strategic Goal: Indicates which City Strategic Goal(s) this item supports. Check all that apply.
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