CITY Of RANCHO SANTA MAR GAR IT A CITY COUNCIL STAFF REPORT

Page 1 CITY Of RANCHO SANTA MAR GAR IT A CITY COUNCIL STAFF REPORT DATE: May 10, 2017 TO: City Council of the City of Rancho Santa Margarita FROM: Jennifer M. Cervantez, City Manager ~ BY: Cheryl Kuta, Development Services~or SUBJECT: Zoning Code Text Amendment CA 17-002, an Ordinance amending Subsections (a) (Purpose), (b) (Definitions), and (c) (Marijuana businesses prohibited) of Section 9.05.140 (Marijuana-related businesses) and amending Section 9.01.190 ("M" Definitions) of the Rancho Santa Margarita Municipal Code to permit the limited personal cultivation of marijuana inside a person's private residence and inside an accessory structure to a person's private residence in conformance with Proposition 64, and to prohibit personal cultivation of marijuana outdoors upon the grounds of a person's private residence Recommendation 1) Receive staff presentation and report. 2) Council questions of staff. 3) Open public hearing. 4) Receive public testimony. 5) Close public hearing. 6) City Council discussion and deliberation. 7) Introduce for first reading, read by title only, and waive further reading of an ordinance entitled: AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF RANCHO SANTA MARGARITA, CALIFORNIA ADOPTING ZONING CODE TEXT AMENDMENT CA 17-002 AMENDING SUBSECTIONS (A) (PURPOSE), (B) (DEFINITIONS), AND (C) (MARIJUANA BUSINESSES PROHIBITED) OF SECTION 9.05.140 (MARIJUANA-RELATED BUSINESSES) AND AMENDING SECTION 9.01.190 ("M" DEFINITIONS) OF THE RANCHO SANTA MARGARITA MUNICIPAL CODE TO PERMIT THE LIMITED PERSONAL CULTIVATION OF MARIJUANA INSIDE A PERSON'S PRIVATE RESIDENCE AND INSIDE AN ACCESSORY STRUCTURE TO A PERSON'S PRIVATE RESIDENCE IN CONFORMANCE WITH PROPOSITION 64, AND TO PROHIBIT PERSONAL CULTIVATION OF MARIJUANA OUTDOORS UPON THE GROUNDS OF A PERSON'S PRIVATE RESIDENCE 1241325.2 05/10/17 Item No. 5.2

Zoning Code Text Amendment CA 17-002 May 10, 2017 Page 2 Page 2 Background and Discussion In 2013, the Rancho Santa Margarita Municipal Code (RSMMC) was amended in order to expressly prohibit the establishment and operation of medical marijuana dispensaries in all zoning districts in the City. In September 2016, Title 9 of the RSMMC was again amended in response to the Medical Marijuana Regulation and Safety Act (MMRSA) to expand the City-wide ban on medical marijuana dispensaries to include all marijuanarelated businesses. The term "marijuana business" was broadly defined to include marijuana cultivation. On November 8, 2016, California voters approved Proposition 64 - the Control, Regulate, and Tax Adult Use of Marijuana Act (AUMA), which legalized the recreational (nonmedical) use of marijuana in California for persons twenty-one (21) years of age or older and authorized the limited personal cultivation of marijuana by such persons inside a person's private residence, inside an accessory structure to a person's private residence, and outdoors upon the grounds of a person's private residence (e.g., in an outdoor garden area) subject to the following limitations: (a) not more than (6) six living plants may be planted, cultivated, harvested, dried, or processed within a person's single private residence, inside an accessory structure to a person's private residence that is fully enclosed and secure, or outdoors upon the grounds of a person's private residence at one time; and (b) the living plants and any marijuana produced by the plants in excess of 28.5 grams shall be kept in a locked space, and shall not be visible by" normal unaided vision from a public place. Proposition 64 authorizes municipalities to completely prohibit the limited per$onal cultivation of marijuana outdoors upon the grounds of a person's private residence (e.g., in an outdoor garden area), up to and until a determination by the California Attorney General that nonmedical use of marijuana is lawful in the State of California under federal law. However, a municipality must specifically enact a ban on outdoor cultivation. Absent such an enactment, outdoor cultivation would remain legal. The proposed Zoning Code Text Amendment would update Section 9.05.140, entitled Marijuana-related businesses, and the related definition in Section 9.01.190 for consistency with Proposition 64. Review Process A Zoning Code Text Amendment (ZCTA) must be adopted by Ordinance. Such an amendment may be initiated by the City in accordance with Section 9.08.080 of the Zoning Code. To approve a ZCTA, the Planning Commission must conduct a public hearing and forward a recommendation to the City Council. The Planning Commission conducted a public hearing on April 5, 2017 and voted unanimously to adopt a resolution recommending that the City Council approve the proposed ZCTA. Following the Planning Commission public hearing, the proposed Ordinance must be introduced by the City Council for first reading at a public hearing. The City Council then conducts a second reading of the proposed Ordinance at a subsequent meeting for 1241325.2

Zoning Code Text Amendment CA 17-002 May 10, 2017 Page 3 Page 3 adoption of the Ordinance. If approved, the Ordinance would go into effect 30 days following the City Council's adoption of the Ordinance. In order to adopt the proposed Ordinance approving the ZCTA, the City Council must make the following findings: (1) That the proposed ZCTA is consistent with the goals, policies, programs, and land uses of applicable elements of the General Plan; (2) That the proposed ZCTA will not adversely affect surrounding properties or the surrounding environment; and (3) That the proposed ZCTA promotes public health, safety, and general welfare and serves the goals and purposes of Title 9 of the RSMMC. Staff has prepared the required findings in Section 2 of the proposed Ordinance (Attachment A). The proposed Ordinance is not subject to the California Environmental Quality Act (CEQA) pursuant to the California Code of Regulations, Title 14, Chapter 3, Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) because it has no potential for resulting in physical change to the environment, directly or indirectly. A public notice was published in the April 28, 2017 edition of the Coto De Caza News. A public notice was also posted at City Hall, on the City's Web site, at the Trabuco Canyon Water District Headquarters and at Orange County Fire Authority Fire Station No. 45 on April28, 2017. Zoning Code Text Amendment The proposed ZCTA would exempt the limited personal cultivation of marijuana from the current City-wide ban on marijuana-related land uses in all zoning districts within the City, as required by Proposition 64, and would expressly prohibit the cultivation of marijuana outdoors upon the grounds of a person's private residence, also as,authorized by Proposition 64 (Health & Safety Code section 11362.2 (b)(3)). Staff has researched implementation of the Prop 64 allowance for the limited personal cultivation of marijuana by other South Orange County cities and found that all of the other cities researched, with the exception of Laguna Woods, have banned or propose to ban outdoor cultivation. These cities include Aliso Viejo, Laguna Hills, Laguna Niguel, Lake Forest, Mission Viejo, San Clemente, and San Juan Capistrano. The proposed Ordinance in Attachment A is provided in bold/strikethrough format to clearly identify the proposed changes to Sections 9.05.140 and 9.01.190 of the Zoning Code. The proposed Ordinance clearly defines "Personal cultivation of marijuana" and, limits the definition to indoor cultivation only within a private residence or within an accessory structure to a private residence that is fully enclosed and secure. Further, the proposed Ordinance also defines "Private residence" to match the definition of that term provided in Proposition 64 and modifies the existing definition of "Marijuana 1241325.2

Zoning Code Text Amendment CA 17-002 May 10, 2017 Page 4 Page 4 Business" and "Marijuana cultivation site" to further clarify the allowance for personal cultivatio_n of marijuana. Staff recommends adoption of the proposed Ordinance in order to reconcile the City's Zoning Code with the mandates of Proposition 64, while expressly prohibiting the cultivation of marijuana outdoors upon the grounds of a person's private residence. If the proposed Ordinance is not adopted, the City's Municipal Code will remain inconsistent with and preempted by the requirements of Proposition 64. The ambiguity between the City's Zoning Code and the requirements of Proposition 64 could potentially undermine the City's ability to enforce the current marijuana business ban. Further, absent the enactment of an express prohibition, outdoor cultivation of marijuana in residential areas would be legal. If the proposed Ordinance is approved, the Development Services Department would enforce the proposed ban on outdoor cultivati.on through the normal Code Enforcement procedures. Should complaints be received about potential outdoor cultivation of marijuana, staff would respond in accordance with current procedures for processing Code Enforcement complaints. This includes a visual investigation of the complaint, or inspection warrant, if necessary, contact with the property owner regarding the complaint, and issuance of a notice of violation. As with other Municipal Code violations, administrative citations may be issued if correction is not achieved in a reasonable time period. Alternatives 1. As described in the report, Prop 64 allows limited personal cultivation of marijuana within a person's. private residence, inside an accessory structure to a person's private residence that is fully enclosed and secure, or outdoors upon the grounds of a person's private residence (e.g., in an outdoor garden area). While it is staff's recommendation that the City completely prohibit the limited personal cultivation of marijuana outdoors upon the grounds of a person's private residence (e.g., in an outdoor garden area) as allowed by Prop 64, the City Council could allow for the limited personal cultivation of marijuana outdoors upon the grounds of a person's private residence (e.g., in an outdoor garden area). This is not recommended. 2. The City Council could direct staff to research and propose reasonable regulations for the personal cultivation of marijuana inside a person's private residence and inside an accessory structure to a person's private residence; however, state law does not provide any guidance to cities on how to draft such a regulatory program. Consequently, depending on the degree of local regulations, such regulatory programs may be ineffective and/or preempted by state law, and may be subject to legal challenge as violating Proposition 64. 3. The City Council may choose not to approve the proposed Ordinance. Staff advises against this option, however, because the Rancho Santa Margarita Municipal Code is currently inconsistent with the requirements of Proposition 64. 1241325.2

Zoning Code Text Amendment CA 17-002 May 10, 2017 Page 5 Page 5 Fiscal Impact There is limited fiscal impact related to the recommended action. Code Enforcement staff will respond to complaints received regarding outdoor cultivation of marijuana in accordance with the current procedures for processing Code Enforcement complaints. A small increase in Code Enforcement calls may result, but can be absorbed by current staffing and resources. Attachments A. City Council Ordinance Adopting Zoning Code Text Amendment CA 17-002 B. City Council Ordinance Adopting Zoning Code Text Amendment CA 17-002 in redline format C. Planning Commission Resolution No. PC 17-04-05-04 1241325.2

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Page 7 ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF RANCHO SANTA MARGARITA, CALIFORNIA, ADOPTING ZONING CODE TEXT AMENDMENT CA 17-002 AMENDING SUBSECTIONS (a) (PURPOSE), (b) (DEFINITIONS), AND (c) (MARIJUANA BUSINESSES PROHIBITED) OF SECTION 9.05.140 (MARIJUANA RELATED BUSINESSES) AND AMENDING SECTION 9.01.190 ("M" DEFINITIONS) OF THE RANCHO SANTA MARGARITA MUNICIPAL CODE TO PERMIT THE LIMITED PERSONAL CULTIVATION OF MARIJUANA INSIDE A PERSON'S PRIVATE RESIDENCE AND INSIDE AN ACCESSORY STRUCTURE TO A PERSON'S PRIVATE RESIDENCE IN CONFORMANCE WITH PROPOSITION 64, AND TO PROHIBIT PERSONAL CULTIVATION OF MARIJUANA OUTDOORS UPON THE GROUNDS OF A PERSON'S PRIVATE RESIDENCE THE CITY COUNCIL OF THE CITY OF RANCHO SANTA MARGARITA, CALIFORNIA, DOES HEREBY ORDAIN AS FOLLOWS: Section 1. The City Council of the City of Rancho Santa Margarita hereby finds, determines, and declares as follows: A. On December 10, 2002, the City of Rancho Santa Margarita adopted the Rancho Santa Margarita General Plan. B. On April 11, 2007, the City Council of the City of Rancho Santa Margarita adopted Title 9 of the Rancho Santa Margarita Municipal Code (the "Rancho Santa Margarita Zoning Code"), establishing allowable uses within all zoning districts. C. On August 14, 2013, the City Council of the City of Rancho Santa Margarita adopted Ordinance No. 13-01 adopting Zoning Code Text Amendment CA 13-001 to prohibit Medical Marijuana Dispensaries in all zoning districts. D. Effective January 1, 2016, the Medical Marijuana Regulation and Safety Act (MMRSA) established a comprehensive regulatory and licensing framework for the operation of marijuana businesses within the State of California. The MMRSA confirmed the authority of cities to control uses of land within their respective jurisdictions and specifically, to regulate or prohibit marijuana businesses. 1241774.2 ATTACHMENT A

Page 2 Page 8 E. On October 12, 2016, the City Council of the City of Rancho Santa Margarita adopted Ordinance No. 16-05 adopting Zoning Code Text Amendment CA 16-001 to update, clarify and provide more specificity to the City's ban on marijuana businesses in all zoning districts within the City in accordance with MMRSA. F. On November 8, 2016, California voters approved Proposition 64 - the Control, Regulate, and Tax Adult Use of Marijuana Act (AUMA), which legalized the recreational (non-medical) use of marijuana in California for persons twenty one (21) years of age or older and authorized the limited personal cultivation by such persons of not more than six (6) living marijuana plants inside a person's private residence, inside an accessory structure to a person's private residence, and outdoors upon the grounds of a person's private residence (e.g., in an outdoor garden area). G. Proposition 64 authorizes the City to completely prohibit the cultivation of marijuana outdoors upon the grounds of a person's private residence, up to and until a determination by the California Attorney General that nonmedical use of marijuana is lawful in the State of California under federal law. H. The City of Rancho Santa Margarita has initiated Zoning Code Text Amendment CA 17-002 in accordance with Section 9.08.080 of the Rancho Santa Margarita Zoning Code, to exempt the limited personal cultivation of marijuana from the City's existing ban on marijuana-related uses and activities in all zoning districts within the City as required by Proposition 64, and to expressly prohibit the cultivation of marijuana outdoors upon the grounds of a person's private residence as authorized by Proposition 64. (Health & Safety Code section 11362.2 (b)(3)). I. On April 5, 2017, the Planning Commission of the City of Rancho Santa Margarita held a duly noticed public hearing and considered public comments and the written and oral information and testimony presented by City staff, community residents and other interested parties, and recommended that the City Council approve and adopt Zoning Code Text Amendment CA 17-002. J. On May 10,2017, the City Council of the City of Rancho Santa Margarita held a duly noticed public hearing and considered public comments and the written and oral information and testimony presented by City staff, community residents and other interested parties concerning proposed Zoning Code Text Amendment CA 17-002. Section 2. In accordance with Section 9.08.080(d) of the Rancho Santa Margarita Zoning Code, the following findings for approving Zoning Code Text Amendment CA 17-002 are hereby made: 1241774.2

Page 3 Page 9 (A) GENERAL PLAN Finding: That the proposed Zoning Code Text Amendment is consistent with the goals. policies. programs. and land uses of applicable elements of the General Plan. The proposed Zoning Code Text Amendment (ZCTA) is consistent with the goals, policies, programs and land uses of applicable elements of the General Plan because the proposed ZCTA permits the limited personal cultivation of not more than six (6) living marijuana plants by persons twenty-one (21) years of age or older inside a person's private residence and inside an accessory structure to a person's private residence, as required by state law, and expressly prohibits the cultivation of marijuana outdoors upon the grounds of a person's private residence while maintaining the City's current policies and land use provisions pr0hibiting marijuana businesses and marijuana-related uses in all zoning districts within the City. (B) COMPATIBILITY Finding: That the proposed Zoning Code Text Amendment will not adversely affect surrounding properties or the surrounding environment. The proposed Zoning Code Text Amendment (ZCTA) clarifies that marijuana businesses are prohibited in all zoning districts within the City. The limited personal cultivation of marijuana permitted by this Ordinance is subject to the following restrictions: a) not more than six (6) living plants may be planted, cultivated, harvested, dried, or processed within a person's single private residence or inside an accessory structure to a person's private residence that is fully enclosed and secure; and (b) the living plants and any marijuana produced by the plants in excess of 28.5 grams shall be kept in a locked space, and shall not be visible by normal unaided vision from a public place. Additionally, the proposed ZCTA prohibits the planting, cultivation, harvesting, drying, or processing of marijuana plants outdoors upon the grounds of a person's private residence. Consequently, the proposed ZCTA will not adversely affect surrounding properties or the surrounding environment. (C) GENERAL WELFARE Finding: That the proposed Zoning Code Text Amendment promotes public health. safety, and general welfare and serves the goals and purposes of Title 9. The proposed Zoning Code Text Amendment will serve the goals and purposes of Title 9 by clarifying and confirming that, notwithstanding the limited personal cultivation of not more than six (6) _living marijuana plants by persons twenty-one (21) years of age or older inside a person's private residence or inside an accessory structure to a person's private residence permitted in accordance with state law, outdoor cultivation of marijuana (including outdoors upon the grounds of a person's private residence), marijuana dispensaries, marijuana businesses, and other marijuana-related uses shall 1241774.2

Page 4 Page 10 remain prohibited in all zoning districts within the City. This prohibition will ensure that none of the negative secondary effects of outdoor cultivation of marijuana, marijuana dispensaries, marijuana-related uses or marijuana businesses will adversely impact the public health, safety, or general welfare. Section 3. Title 9 of the City of Rancho Santa Margarita Municipal Code (Planning and Zoning), Chapter 9.05 (Special Regulations), Section 9.05.140 (Marijuana-related businesses), Subsections (a) (Purpose), and (b) (Definitions) is hereby amended and restated in its entirety to read as follows: Sec. 9~05.140.- Marijuana-related businesses. (a) Purpose. In order to protect the public health, safety, and welfare of the residents and businesses within the City, the declared purpose of this Chapter is to prohibit marijuana-related businesses and/or activities as stated in this Chapter. (b) Definitions. In addition to any other definitions contained in the Municipal Code, the following words and phrases shall, for the purpose of this Chapter, be defined as follows, unless it is clearly apparent from the context that another meaning is intended. Should any of the definitions be in conflict with any current provisions of the Municipal Code, these definitions shall prevail. ( 1) Identification card. A document issued by the State Department of Health Services which identifies a person authorized to engage in the medical use of marijuana and the person's designated primary caregiver, if any. (2) Marijuana. For purposes of this Chapter, "Marijuana" shall have the same meaning as is defined by Health & Safety Code section 11018 and the term ''cannabis" as that term is defined by California Business & Professions Code section 19300.5(f). If the definition under State law is amended, the City's definition shall be as amended. "Marijuana" shall also mean any "cannabinoid" as defined by Business & Professions Code section 19300.5(e), "cannabis concentrate" as defined by Business & Professions Code section 19300.5(g), "edible cannabis product" as defined by Business & Professions Code section 19300.5(s), "manufactured cannabis" as defined by Business & Professions Code section 19300.5(ac), "medical cannabis" as defined by Business & Professions Code section 19300.5(af), and "topical cannabis" as defined by Business & Professions Code section 19300.5(al), as those sections exist as of January 1, 2016 or as amended thereafter. (3) Marijuana business. Any activity, whether or not carried out for commercial gain, which involves cultivation, possession, manufacture, processing, storage, laboratory testing, labeling, transportation, distribution, or sale of marijuana or any marijuana-infused products. This 1241774.2

Page 5 Page 11 definition shall include any of the foregoing activities conducted by or on behalf of a qualified patient or the primary caregiver of a qualified patient. All references in this chapter to "marijuana business," shall be synonymous with "marijuana dispensary," "mobile marijuana dispensary," and "marijuana cultivation site," which are defined in this section. The term "marijuana business" shall not include "personal cultivation of marijuana," as defined in this section. (4) Marijuana cultivation site. Any location, whether indoor or outdoor, where marijuana is planted, grown, harvested, dried, cured, graded, or trimmed, or upon which all or any combination of those activities occurs. The term "marijuana cultivation site" shall not include "personal cultivation of marijuana," as defined in this section. (5) Marijuana dispensary. Any dispensary, facility, cooperative, club, individual, business, group, collective, establishment or other association with a storefront or mobile retail outlet where marijuana, in any form, whether for medical, recreational, or any other purpose, is transferred to any person, firm, corporation, association, club, society, or other organization, regardless of whether that activity is undertaken on a forprofit or non-profit basis, or any combination thereof, and regardless of whether the activity is for compensation or is gratuitous. (6) Mobile marijuana dispensary. Any marijuana dispensary, facility, cooperative, club, individual, business, group, collective, establishment or other association with or without a storefront or mobile retail outlet, which engages in the transportation or delivery of marijuana or any marijuana-infused products. For purposes of this Chapter, "delivery" shall mean the transfer of marijuana or other marijuana-infused products from a marijuana dispensary or a marijuana testing laboratory to any person, firm, corporation, association, club, society, or other organization, including, but not limited to, any owner, manager, proprietor, employee, volunteer, or salesperson, and shall also include the use by a marijuana dispensary of any technology platform owned and controlled by the dispensary that enables any person or entity to arrange for, or facilitate the transfer of marijuana or any marijuana-infused products. (7) Personal cultivation of marijuana. The possession, planting, cultivation, harvesting, drying, or processing of not more than six (6) living marijuana plants and possession of the marijuana produced by the plants by persons twenty one (21) years of age or older inside a person's private residence or inside an accessory structure to a person's private residence located upon the grounds of a person's private residence that is fully enclosed and secure as authorized by Health and Safety Code Sections 11362.1 and 11362.2, as may be amended, and subject to the following limitations: (a) 1241774.2

Page 6 Page 12 not more than six (6) living plants may be planted, cultivated, harvested, dried, or processed within a person's single private residence or inside an accessory structure to a person's private residence that is fully enclosed and secure, at one time; and (b) the living plants and any marijuana produced by the plants in excess of 28.5 grams shall be kept in a locked space, and shall not be visible by normal unaided vision from a public place. The term "personal cultivation of marijuana" shall not include the planting, cultivation, harvesting, drying, or processing of marijuana plants outdoors upon the grounds of a person's private residence. (8) Physician. An individual who possesses a recognition in good standing to practice medicine or osteopathy issued by the Medical Board of California or the Osteopathic Medical Board of California and who has taken responsibility for an aspect of the medical care, treatment, diagnosis, counseling, or referral of a patient and who has conducted a medical examination of that patient before recording in the patient's medical record the physician's assessment of whether the patient has a serious medical condition and whether the medical use of marijuana is appropriate. (9) Primary caregiver. The individual, designated by a qualified patient or by a person with an identification card, who has consistently assumed responsibility for the housing, health, or safety of that patient or person. ( 1 0) Private residence. For purposes of this Chapter, "private residence" shall have the same meaning as is defined by Health & Safety Code section 11362.2(b)(5) (i.e., a house, an apartment unit, a mobile home, or similar dwelling), as may be amended. ( 11) Qualified patient. A person who is entitled to the protections of California Health and Safety Code Section 11362.5, but who does not have an identification card issued by the State Department of Health Services. Section 4. Title 9 of the City of Rancho Santa Margarita Municipal Code (Planning and Zoning), Chapter 9.05 (Special Regulations), Section 9.05.140 (Marijuana-related businesses), Subsection (c) (Marijuana businesses prohibited) is hereby amended by adding new Subpart (6) to read as follows: (6) The planting, cultivation, harvesting, drying, or processing of marijuana plants outdoors upon the grounds of a person's private residence is prohibited in every zoning district in the City. Section 5. Title 9 (Planning and Zoning) of the City.of Rancho Santa Margarita Municipal Code, Chapter 9.01 (General Provisions), Section 9.01.190 ("M" Definitions") is amended by revising the definition for "Marijuana business" to read as follows: 1241774.2

Page 7 Page 13 Marijuana business means any activity, whether or not carried out for commercial gain, which involves cultivation, possession, manufacture, processing, storage, laboratory testing, labeling, transportation, distribution, or sale of marijuana or any marijuana-infused products. This definition shall include any of the foregoing activities conducted by or on behalf of a qualified patient or the primary caregiver of a qualified patient. All references in this Section to "marijuana business," shall be synonymous with "marijuana di~pensary," "mobile marijuana dispensary," and "marijuana cultivation site," which are defined in Section 9.05.140. The term "marijuana business" shall not include "personal cultivation of marijuana," as defined in Section 9.05.140. Section 6. The City Council of the City of Rancho Santa Margarita determines that Zoning Code Text Amendment CA 17-002 is not subject to the California Environmental Quality Act (CEQA) pursuant to the California Code of Regulations, Title 14, Chapter 3, Sections 15060 (c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Se~tion 15378) because it has no potential for resulting in physical change to the environment, directly or indirectly. Section 7. The City Council of the City of Rancho Santa Margarita determines that, pursuant to Section 711.4 of the California Fish and Game Code, this Ordinance is exempt from the required fees as it has been determined that no impacts to wildlife resources will result from the project. Section 8. The City Council of the City of Rancho Santa Margarita determines that this Ordinance will not have any adverse impacts to any subregional Natural Communities Conservation Planning (NCCP) Program. Section 9. If any section, subsection, subdivision, sentence, clause, phrase, or portion of this Ordinance is, for any reason, held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have adopted this Ordinance and each section, subsection, subdivision, sentence, clause, phrase, or portion thereof, irrespective of the fact that any one or more section, subsection, subdivision, sentence, clause, phrase, or portion thereof be declared invalid or unconstitutional. Section 10. The City Clerk shall certify to the adoption of this Ordinance and cause the same to be posted as required by law. 1241774.2

Page 8 Page 14 PASSED, APPROVED AND ADOPTED THIS DAY OF, 2017. CAROL A. GAMBLE, MAYOR ATTEST: AMY DIAZ, CITY CLERK STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss CITY OF RANCHO SANTA MARGARITA ) I, Amy Diaz, City Clerk of the City of Rancho Santa Margarita, California, DO HEREBY CERTIFY that the foregoing Ordinance No. was duly introduced and placed upon its first read_ing at a Regular Meeting of the City Council on the day of, 2017, and that thereafter, said Ordinance was duly adopted and passed at a Regular Meeting of the City Council on the day of, 2017, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: AMY DIAZ, CITY CLERK 1241774.2 '~. {~.

Page 9 Page 15 AFFIDAVIT OF POSTING AND PUBLICATION STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss CITY OF RANCHO SANTA MARGARITA ) AMY DIAZ, being first duly sworn, deposes and says: That she is the duly appointed and qualified City Clerk of the City of Rancho Santa Margarita; That in compliance with State Laws of the State of California, ORDINANCE NO.,being: AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF RANCHO SANTA MARGARITA, CALIFORNIA, ADOPTING ZONING CODE TEXT AMENDMENT CA 17-002 AMENDING SUBSECTIONS (a) (PURPOSE), (b) (DEFINITIONS), AND (c) (MARIJUANA BUSINESSES PROHIBITED) OF SECTION 9.05.140 (MARIJUANA RELATED BUSINESSES) AND AMENDING SECTION 9.01.190 ("M" DEFINITIONS) OF THE RANCHO SANTA MARGARITA MUNICIPAL CODE TO PERMIT THE LIMITED PERSONAL CULTIVATION OF MARIJUANA INSIDE A PERSON'S PRIVATE RESIDENCE AND INSIDE AN ACCESSORY STRUCTURE TO A PERSON'S PRIVATE RESIDENCE IN CONFORMANCE WITH PROPOSITION 64, AND TO PROHIBIT PERSONAL CULTIVATION OF MARIJUANA OUTDOORS UPON THE GROUNDS OF A PERSON'S PRIVATE RESIDENCE on the day of, 2017, was published in the Orange County Register; and was in compliance with City Resolution No. 00-01-06-07, on the day of, 2017, caused to be posted in three places in the City of Rancho Santa Margarita, to wit: Rancho Santa Margarita City Hall Fire Station 45 Trabuco Canyon Water District AMY DIAZ, CITY CLERK Rancho Santa Margarita, California 1241774.2

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Page 17 ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF RANCHO SANTA MARGARITA, CALIFORNIA ADOPTING ZONING CODE TEXT AMENDMENT CA 17-002 AMENDING SUBSECTIONS (a) (PURPOSE), (b) (DEFINITIONS), AND (c) (MARIJUANA BUSINESSES PROHIBITED) OF SECTION 9.05.140 (MARIJUANA RELATED BUSINESSES) AND AMENDING SECTION 9.01.190 ("M" DEFINITIONS) OF THE RANCHO SANTA MARGARITA MUNICIPAL CODE TO PERMIT THE LIMITED PERSONAL CULTIVATION OF MARIJUANA INSIDE A PERSON'S PRIVATE RESIDENCE AND INSIDE AN ACCESSORY STRUCTURE TO A PERSON'S PRIVATE RESIDENCE IN CONFORMANCE WITH PROPOSITION 64, AND TO PROHIBIT PERSONAL CULTIVATION OF MARIJUANA OUTDOORS UPON THE GROUNDS OF A PERSON'S PRIVATE RESIDENCE THE CITY COUNCIL OF THE CITY OF RANCHO SANTA MARGARITA, CALIFORNIA, DOES HEREBY ORDAIN AS FOLLOWS: Section 1. The City Council of the City of Rancho Santa Margarita hereby finds, determines, and declares as follows: A. On December 1 0, 2002, the City of Rancho Santa Margarita adopted the Rancho Santa Margarita General Plan. B. On April 11, 2007, the City Council of the City of Rancho Santa Margarita adopted Title 9 of the Rancho Santa Margarita Municipal Code (the "Rancho Santa Margarita Zoning Code"), establishing allowable uses within all zoning districts. C. On August 14, 2013, the City Council of the City of Rancho Santa Margarita adopted Ordinance No. 13-01 adopting Zoning Code Text Amendment CA 13-001 to prohibit Medical Marijuana Dispensaries in all zoning districts. D. Effective January 1, 2016, the Medical Marijuana Regulation and Safety Act (MMRSA) established a comprehensive regulatory and licensing framework for the operation of marijuana businesses within the State of California. The MMRSA confirmed the authority of cities to control uses of land within their respective jurisdictions and specifically, to regulate or prohibit marijuana businesses. 1241332.3 ATTACHMENT B

Zoning Code Text Amendment CA 17-002 Page 2 Page 18 E. On October 12, 2016, the City Council of the City of Rancho Santa Margarita adopted Ordinance No. 16-05 adopting Zoning Code Text Amendment CA 16-001 to update, clarify and provide more specificity to the City's ban on marijuana businesses in all zoning districts within the City in accordance with MMRSA. F. On November 8, 2016, California voters approved Proposition 64 - the Control, Regulate, and Tax Adult Use of Marijuana Act (AUMA), which legalized the recreational (non-medical) use of marijuana in California for persons twenty one (21) years of age or older and authorized the limited personal cultivation by such persons of not more than six (6) living marijuana plants inside a person's private residence, inside an accessory structure to a person's private residence, and outdoors upon the grounds of a person's private residence (e.g., in an outdoor garden area). G. Proposition 64 authorizes the City to completely prohibit the cultivation of marijuana outdoors upon the grounds of a person's private residence, up to and until a determination by the California Attorney General that nonmedical use of marijuana is lawful in the State of California under federal law. H. The City of Rancho Santa Margarita has initiated Zoning Code Text Amendment CA 17-002 in accordance with Section 9.08.080 of the Rancho Santa Margarita Zoning Code, to exempt the limited personal cultivation of marijuana from the City's existing ban on marijuana-related uses and activities in all zoning districts within the City as required by Proposition 64, and to expressly prohibit the cultivation of marijuana outdoors upon the grounds of a person's private residence as authorized by Proposition 64. (Health & Safety Code section 11362.2 (b)(3)). I. On April 5, 2017, the Planning Commission of the City of Rancho Santa Margarita held a duly noticed public hearing and considered public comments and the written and oral information and testimony presented by City staff, community residents and other interested parties, and recommended that the City Council approve and adopt Zoning Code Text Amendment CA 17-002. J. On M~Y19, 2Q1~, the City Council of the City of Rancho Santa Margarita held a duly noticed public hearing and considered public comments and the written and oral information and testimony presented by City staff, community residents and other interested parties concerning proposed Zoning Code Text Amendment CA 17-002. Section 2. In accordance with Section 9.08.080(d) of the Rancho Santa Margarita Zoning Code, the following findings for approving Zoning Code Text Amendment CA 17-002 are hereby made: 1241332.3

Zoning Code Text Amendment CA 17-002 Page 3 Page 19 (A) GENERAL PLAN Finding: That the proposed Zoning Code Text Amendment is consistent with the goals. policies, programs, and land uses of applicable elements of the General Plan. The proposed Zoning Code Text Amendment (ZCTA) is consistent with the goals, policies, programs and land uses of applicable elements of the General Plan because the proposed ZCTA permits the limited personal cultivation of not more than six (6) living marijuana plants by persons twenty-one (21) years of age or older inside a person's private residence and inside an accessory structure to a person's private residence, as required by state law, and expressly prohibits the cultivation of marijuana outdoors upon the grounds of a person's private residence while maintaining the City's current policies and land use provisions prohibiting marijuana businesses and marijuana-related uses in all zoning districts within the City. (B) COMPATIBILITY Finding: That the proposed Zoning Code Text Amendment will not adversely affect surrounding properties or the surrounding environment. The proposed Zoning Code Text Amendment (ZCTA) clarifies that marijuana businesses are prohibited in all zoning districts within the City. The limited personal cultivation of marijuana permitted by this Ordinance is subject to the following restrictions: a) not more than six (6) living plants may be planted, cultivated, harvested, dried, or processed within a person's single private residence or inside an accessory structure to a person's private residenc'e that is fully enclosed and secure; and (b) the living plants and any marijuana produced by the plants in excess of 28.5 grams shall be kept in a locked space, and shall not be visible by normal unaided vision from a public place. Additionally, the proposed ZCTA prohibits the planting, cultivation, harvesting, drying, or processing of marijuana plants outdoors upon the grounds of a person's private residence. Consequently, the proposed ZCTA will not adversely affect surrounding properties or the surrounding environment. (C) GENERAL WELFARE Finding: That the proposed Zoning Code Text Amendment promotes public health, safety, and general welfare and serves the goals and purposes of Title 9. The proposed Zoning Code Text Amendment will serve the goals and purposes of Title 9 by clarifying and confirming that, notwithstanding the limited personal cultivation of not more than six (6) living marijuana plants by persons twenty-one (21) years of age or older inside a person's private residence or inside an accessory structure to a person's private residence permitted in accordance with state law, outdoor cultivation of marijuana (including outdoors upon the grounds of a person's private residence), marijuana dispensaries, marijuana businesses, and other marijuana-related uses shall 1241332.3

Zoning Code Text Amendment CA 17-002 Page4 Page 20 remain prohibited in all zoning districts within the City. This prohibition will ensure that none of the negative secondary effects of outdoor cultivation of marijuana, marijuana dispensaries, marijuana-related uses or marijuana businesses will adversely impact the public health, safety, or general welfare. Section 3. Title 9 of the City of Rancho Santa Margarita Municipal Code (Planning and Zoning), Chapter 9.05 (Special Regulations), Section 9.05.140 (Marijuana-related businesses), Subsections (a) (Purpose), and (b) (Definitions) is hereby amended and restated in its entirety to read as follows (additions shown in bold, deletions shown in strikethrough): Sec. 9.05.140.- Marijuana-related businesses. (a) Purpose. In order to sene protect the public health, safety, and welfare of the residents and businesses within the City, the declared purpose of this Chapter is to prohibit marijuana-related businesses and/or activities as stated in this Chapter. (b) Definitions. In addition to any other definitions contained in the Municipal Code, the following words and phrases shall, for the purpose of this Chapter, be defined as follows, unless it is clearly apparent from the context that another meaning is intended. Should any of the definitions be in conflict with any current provisions of the Municipal Code, these definitions shall prevail. ( 1) Identification card. A document issued by the State Department of Health Services which identifies a person authorized to engage in the medical use of marijuana and the person's designated primary caregiver, if any. (2) Marijuana. For purposes of this Chapter, "Marijuana" shall have the same meaning as is defined by Health & Safety Code section 11018 and the term "cannabis" as that term is defined by California Business & Professions Code section 19300.5(f) [effective January 1, 2016]. If the definition under State law is amended, the City's definition shall be as amended. "Marijuana" shall also mean any "cannabinoid" as defined by Business & Professions Code section 19300.5(e), "cannabis concentrate" as defined by Business & Professions Code section 19300.5(g), "edible cannabis product" as defined by Business & Professions Code section 19300.5(s), "manufactured cannabis" as defined by Business & Professions Code section 19300.5(ac), "medical cannabis" as defined by Business & Professions Code section 19300.5(af), and "topical cannabis" as defined by Business & Professions Code section 19300.5(al), as those sections exist as of January 1, 2016 or as amended thereafter. (3) Marijuana business. Any activity, whether or not carried out for commercial gain, which involves cultivation, possession, manufacture, 1241332.3

Zoning Code Text Amendment CA 17-002 Page 5 Page 21 processing, storage, laboratory testing, labeling, transportation, distribution, or sale of marijuana or any marijuana-infused products. This definition shall include any of the foregoing activities conducted by or on behalf of a qualified patient or the primary caregiver of a qualified patient. All references in this chapter to "marijuana business," "marijuana related business," or "marijuana dispensary" shall be synonymous with "medical marijuana dispensary," "mobile marijuana dispensary," and "marijuana cultivation site," which are defined in this section. The term "marijuana business" shall not include "personal cultivation of marijuana," as defined in this section. (4) Marijuana cultivation site. Any location, whether indoor or outdoor, where marijuana is planted, grown, harvested, dried, cured, graded, or trimmed, or upon which all or any combination of those activities occurs. The term "marijuana cultivation site" shall not include "personal cultivation of marijuana," as defined in this section. (5) Marijuana dispensary. Any dispensary, facility, cooperative, club, individual, business, group, collective, establishment or other association with a storefront or mobile retail outlet where marijuana, in any form, whether for medical, recreational, or any other purpose, is transferred to any person, firm, corporation, association, club, society, or other organization, regardless of whether that. activity is undertaken on a forprofit or non-profit basis, or any combination thereof, and regardless of whether the activity is for compensation or is gratuitous. (6) Mobile marijuana dispensary. Any marijuana dispensary, facility, cooperative, club, individual, business, group, collective, establishment or other association with or" without a storefront or mobile retail outlet, which engages in the transportation or delivery of marijuana or any marijuana-infused products. For purposes of this Chapter, "delivery" shall mean the transfer of marijuana or other marijuana-infused products from a marijuana dispensary or a marijuana testing laboratory to any person, firm, corporation, association, club, society, or other organization, including, but not limited to, any owner, manager, proprietor, employee, volunteer, or salesperson, and shall also include the. use by a marijuana dispensary of any technology platform owned and controlled by the dispensary that enables any person or entity to arrange for, or facilitate the transfer of marijuana or any marijuana~infused products. (7) Personal cultivation of marijuana. The possession, planting, cultivation, harvesting, drying, or processing of not more than six (6) living marijuana plants and possession of the marijuana produced by the plants by persons twenty one (21) years of age or older inside a person's private residence or inside an accessory structure to a 1241332.3

Zoning Code Text Amendment CA 17-002 Page 6 Page 22 person's private residence located upon the grounds of a person's private residence that is fully enclosed and secure as authorized by Health and Safety Code Sections 11362.1 and 11362.2, as may be amended, and subject to the following limitations: (a) not more than six (6) living plants may be planted, cultivated, harvested, dried, or processed within a person's single private residence or inside an accessory structure to a person's private residence that is fully enclosed and secure, at one time; and (b) the living plants and any marijuana produced by the plants in excess of 28.5 grams shall be kept in a locked space, and shall not be visible by normal unaided vision from a public place. The term "personal cultivation of marijuana" shall not include the planting, cultivation, harvesting, drying, or processing of marijuana plants outdoors upon the grounds of a person's private residence. (8) Physician. An individual who possesses a recognition in good standing to practice medicine or osteopathy issued by the Medical Board of California or the Osteopathic Medical Board of California and who has taken responsibility for an aspect of the medical care, treatment, diagnosis, counseling, or referral of a patient and who has conducted a medical examination of that patient before recording in the patient's medical record the physician's assessment of whether the patient has a serious medical condition and whether the medical use of marijuana is appropriate. (9) Primary caregiver. The individual, designated by a qualified patient or by a person with an identification card, who has consistently assumed responsibility for the housing, health, or safety of that patient or person. (1 0) Private residence. For purposes of this Chapter, "private residence" shall have the same meaning as is defined by Health & Safety Code section 11362.2(b)(5) (i.e., a house, an apartment unit, a mobile home, or similar dwelling), as may be amended. (11) Qualified patient. A person who is entitled to the protections of California Health and Safety Code Section 11362.5, but who does not have an identification card issued by the State Department of Health Services. Section 4. Title 9 of the City of Rancho Santa Margarita Municipal Code (Planning and Zoning), Chapter 9.05 (Special Regulations), Section 9.05.140 (Marijuana-related businesses), Subsection (c) (Marijuana businesses prohibited) is hereby amended by adding new Subpart (6) to read as follows: 1241332.3

Zoning Code Text Amendment CA 17-002 Page 7 Page 23 (6) The planting, cultivation, harvesting, drying, or processing of marijuana plants outdoors upon the grounds of a person's private residence is prohibited in every zoning district in the City. Section 5. Title 9 (Planning and Zoning) of the City of Rancho Santa Margarita Municipal Code, Chapter 9.01 (General Provisions), Section 9.01.190 ("M" Definitions") is amended by revising the definition for "Marijuana business" to read as follows (additions shown in bold, deletions shown in strikethrough): Marijuana business means any activity, whether or not carried out for commercial gain, which involves cultivation, possession, manufacture, processing, storage, laboratory testing, labeling, transportation, distribution, or sale of marijuana or any marijuana-infused products. This definition shall include any of the foregoing activities conducted by or on behalf of a qualified patient or the primary caregiver of a qualified patient. All references in this Section to "marijuana business," "marijuana related business," or "marijuana dispensary" shall be synonymous with "medical marijuana dispensary," "mobile marijuana dispensary," and "marijuana cultivation site," which are defined in Chapter Section 9.05.140. The term "marijuana business" shall not include "personal cultivation of marijuana," as defined in Section 9.05.140. Section 6. The City Council of the City of Rancho Santa Margarita determines that Zoning Code Text Amendment CA 17-002 is not subject to the California Environmental Quality Act (CEQA) pursuant to the California Code of Regulations, Title 14, Chapter 3, Sections 15060 ( c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) because it has no potential for resulting in physical change to the environment, directly or indirectly. Section 7. The City Council of the City of Rancho Santa Margarita determines that, pursuant to Section 711.4 of the California Fish and Game Code, this Ordinance is exempt from the required fees as it has been determined that no impacts to wildlife resources will result from the project. Section 8. The City Council of the City of Rancho Santa Margarita determines that this Ordinance will not have any adverse impacts to any subregional Natural Communities Conservation Planning (NCCP) Program. Section 9. If any section, subsection, subdivision, sentence, clause, phrase, or portion of this Ordinance is, for any reason, held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have adopted this Ordinance and each section, subsection, subdivision, sentence, clause, phrase, or portion thereof, irrespective of the fact that any one or 1241332.3