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Report
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Report To:-RLHHDORHPHDG3ODLDGHHORSPHRPPLHH
Date of Meeting: January 7, 2019
Report Number: PSD -005-19 Resolution: JC -026-19
File Number: PLN12.12 By-law Number:
Report Subject: Option to 2pt-o ut of 3rivate annabis 5etail 6tores
Recommendations:
1. That Report PSD -005-19 be received;
2. That Council adopt one of the options below:
a) i) That the Municipality of Clarington advise the AGCO that it opts -in to allow retail
sales of recreational cannabis within the Municipality of Clarington; and
ii) That Staff be directed to draft a Municipal Cannabis Retail Policy Statement for
Council's consideration for consideration at the March 11, 2019 Planning and
Development Committee Meeting; or
b) That the Municipality of Clarington advise the AGCO that it opts -out of allowing retail
sales of recreational cannabis within the Municipality of Clarington; and
3. That the Region of Durham be advised of the Municipality of Clarington's decision with
respect to the retail sales of recreational cannabis.
Municipality of Clarington
Report PSD -005-19
Report Overview
This Report provides general information on the provincial government's policies and
regulations relating to the legalization of the sale of non -medicinal cannabis and the
municipal option to opt -out of permitting privately owned cannabis retail stores.
1. Background
Page 2
1.1 Federal legislation (Bill C-45 The Cannabis Act) provided for the legalization of non-
medicinal cannabis, addressing its regulation, sale, and cultivation. The main purpose
of Bill C-45 is to protect the health of youth by restricting their access to cannabis and to
reduce illicit activities in relation to cannabis by providing access to legal cannabis.
1.2 The Ontario government has passed legislation to regulate and permit privately owned
cannabis retail stores. Under this system, the Alcohol and Gaming Commission of
Ontario (AGCO) will license and regulate all cannabis retail stores.
1.3 Municipalities have the option of opting out of having privately -run cannabis retail stores
in their municipality. To opt -out, municipal councils must pass a resolution and send it
to the Registrar of the AGCO by January 22, 2019.
1.4 Report CLD -006-18 "Impacts of Cannabis Legislation" provided a broad overview of the
impacts of the legalization of cannabis and the potential impacts on services in
Clarington. It addressed the issues of enforcement, store locations, and business
licensing.
1.5 Report PSD -077-18 "Proposed Private Cannabis Retail Stores" provided the information
that was available at the time regarding future privatized sales and government -run
online sales.
2. Ontario Cannabis Retail Model
2.1 Although the Ontario government currently offers online retail sales of cannabis through
the Ontario Cannabis Store (OCS), on April 1, 2019, Ontario will permit privately owned
and operated cannabis retail stores. There will be no government run physical stores.
Government run online sales will remain alongside private cannabis retail sales. The
OCS is a subsidiary of the Ontario Cannabis Retail Corporation (OCRC), and the OCRC
will be the sole wholesaler of cannabis to private stores.
2.2 The provincial government has established a regulatory framework (O. Reg. 468/18)
under the recently passed Cannabis Licence Act, 2018. These regulations provide
information on how private cannabis retail stores will be licensed and regulated through
the AGCO. On December 13, 2018 the province passed O. Reg 497/18 that limits the
number of cannabis retail stores in the GTA Region, which is defined as including
Durham, York, Peel and Halton, to a total of six. No timeframe is provided for the 25
store restriction (i.e. when the restriction may be lifted). However, during the restriction
Municipality of Clarington
Resort PSD -005-19
Page 3
none of the retail store authorizations will be issued to a Licensed Producer or an
affiliate of a Licensed Producer.
3. Issues to Consider
3.1 The Act and the regulations set out how the AGCO will be the sole authority in licensing
and approving the location of stores. The AGCO will handle all licensing, regulation,
and enforcement of legal retail stores. Illegal retail stores ("dispensaries") will continue
to be under the purview of the police.
3.2 Municipalities are provided the opportunity to choose to opt -out of permitting physical
cannabis retail stores within their boundaries.
3.3 The decision to opt -out must be made by January 22, 2019. Unless a municipal
government opts out as per Ontario Regulation 468/18 s. 22, it opts -in to private
cannabis retail sales by default.
4. Issues to Consider
Municipalities Cannot Zone Cannabis Retail Stores
4.1 Subsection 42(2) of The Cannabis Licence Act, 2018 states:
"The authority to pass a by-law under section 34, 38 or 41 of the Planning Act does
not include the authority to pass a by-law that has the effect of distinguishing
between a use of land, a building or a structure that includes the sale of cannabis
and the use of land, a building or a structure that does not include the sale of
cannabis."
This means municipalities cannot:
1) pass a zoning by-law under s. 34 of the Planning Act;
2) pass an interim control by-law under s. 38 of the Planning Act; or
3) use site plan control under s. 41 of the Planning Act to regulate cannabis retail
stores.
4.2 The Association of Municipalities of Ontario (AMO) and other commentaries on the
legislation have interpreted this section, in part, to mean that municipalities cannot zone
cannabis retail stores any differently than other retail. However, Section 42(2) of The
Cannabis Licence Act, 2018 can also be interpreted to mean that a cannabis retail store
may be permitted anywhere in a municipality. It was expected the regulations (O. Reg.
468/18) would address this issue, but they do not.
Municipality of Clarington Page 4
Report PSD -005-19
4.3 Nonetheless, it is clear that municipalities are prohibited from zoning cannabis retail
stores. Municipalities cannot designate areas where stores would be permitted or
prohibited. Municipalities cannot impose any regulations to control setbacks or minimum
distances from certain uses or between cannabis retail stores. The AGCO will be the
sole authority to determine where stores will be located.
ACGO's Regulations for Cannabis Retail Stores
4.4 Municipalities are also prohibited from providing a system of licences respecting the
sale of cannabis. The AGCO will handle all licensing of stores. With the limitation to 25
retail cannabis stores, the AGCO will implement a lottery system to determine who will
be able to apply for one of the 25 initial stores. The AGCO will accept Expressions of
Interest, online, from January 7-9, 2019. The AGCO will be issuing three kinds of
licences:
A "Retail Operator License" which is granted to a person to operate a store;
x A "Cannabis Retail Manager License" which permits other specified functions within
the retail store; and
x A "Retail Store Authorization" which is issued to a licensed Retail Operator for the
operation of each/specified store.
4.5 Based on O. Reg. 468/18 the AGCO will not issue a retail store authorization if the
proposed store is within 150 meters of a school. This distance is measured from the
property line of the school to the property line of the cannabis store. The AGCO is
working with the Ministry of Education to ensure the AGCO has the location data of
schools. For comparison purposes, the distance from the Bowmanville LCBO store to
the nearest property line of Clarington Central Secondary School is approximately 135
metres.
4.6 Once the restriction of 25 stores is lifted (again, there is no indication when this may
take effect), the Regulations provide no limit on the number of retail store authorizations
that will be granted in Ontario or in any municipality. However, a corporation,
partnership or sole proprietor may hold a maximum of 75 store authorizations.
4.7 Retail stores must be "stand-alone" stores, meaning they cannot be part of another
store. Stores are permitted to be open between 9am and 11 pm and must refuse entry to
anyone under 19 years -old. Licensed producers of cannabis are permitted a single
retail store but it must be on or within the production site.
15 -day Notification Period
4.8 If the AGCO determines an application for a cannabis retail store has met the minimum
requirements (including that the municipality has not opted out), the Commissioner of
the AGCO will provide a 15 -day notification period for residents, municipalities, and
regions to make written submissions as to whether the issuance of a retail store
authorization is in the public interest.
Municipality of Clarington Page 5
Report PSD -005-19
4.9 The regulations define the "public interest" as protecting public health and safety,
protecting youth and restricting their access to cannabis, and preventing illicit activities
in relation to cannabis. The issuance of a retail store authorization will have "regard to
the needs and wishes of the residents of the municipality." Written submissions that do
not address these three areas will not be considered.
4.10 Municipalities will not be directly notified of proposed cannabis retail stores. Instead,
proposed locations will be posted on the AGCO website and the applicant is to post a
placard at the proposed retail location.
4.11 The AGCO's decision to issue or refuse a retail store authorization is final. A Judicial
Review is the only means for appeal.
Drafting a Clarington Cannabis Retail Policy Statement
4.12 The 15 day comment period would not provide sufficient time for Council to make
comments on each application. As a result, AMO suggests that municipalities that do
not opt -out of private cannabis retail stores draft a "Municipal Cannabis Retail Policy
Statement." This would be adopted by Council and assist Municipal staff when
preparing written submissions during the 15 -day notification periods. The policy
statement should focus only on the three areas of "public interest" noted above and
could, for example, identify specific land uses the Municipality wishes to keep at a
minimum distance (e.g. drop-in centres for at -risk youth or addiction treatment centres).
Each land use identified to be kept a minimum distance from cannabis stores should be
clearly stated, along with a clear justification for the need for a minimum distance, and
address how it relates to the prescribed three areas of "public interest."
Durham Region's Health Department Locational Criteria
4.13 On October 24, 2018, Dr. Robert Kyle provided a memo regarding cannabis use.
Dr. Kyle suggests Durham's municipalities that permit private retail cannabis stores take
advantage of the 15 -day notification period to influence the location of stores. A list is
provided of land uses he feels should not be nearby cannabis stores, which includes
post -secondary schools, beer and LCBO stores, tobacco retailers, high-priority
neighbourhoods, and long-term care homes. However, no explanation or justification
for the increased separation from cannabis stores is provided.
Funding Considerations
4.14 A letter dated November 20, 2018 from the Minister of Finance to Heads of Council
outlines how the province will follow the previous Ontario government's arrangement to
provide $40 million in funding to municipalities over 2 years through the Ontario
Cannabis Legalization Implementation Fund (OCLIF).
Municipality of Clarington Page 6
Report PSD -005-19
4.15 In early January 2019, all municipalities, regardless if they opt -out or opt -in, should have
received the first of two payments. The $15 million fund payments are calculated on a
per household basis and adjusted so each municipality received a minimum of $5,000.
Clarington's share of this fund is expected to be a first payment of $43,391.
4.16 A second fund of $15 million will be distributed after the January 22, 2019 opt -out
deadline. If Clarington does not -opt out, it will receive another payment of $43,391; if
Clarington opts out, it will receive $5,000.
4.17 The remaining $10 million of the OCLIF will beset aside to address costs from
unforeseen circumstances related to the legalization of cannabis, and priority will be
given to municipalities that have not opted out.
4.18 Beyond the $40 million OCLIF fund, if Ontario receives $100 million from the federal
excise duty on non -medicinal cannabis in the first two years, the province may then
begin to share 50% of the federal excise duty with municipalities that have not opted
out. It is impossible to calculate how much if any revenue this might provide for
Clarington.
4.19 It is important to note that this funding must be used to off -set costs directly related to
the legalization of cannabis. Permitted costs include increased costs due to
enforcement, responding to public concerns, paramedic or fire services, by-law or policy
development. It appears there will be random audits, so the Municipality will need to
keep track of how the funding is allocated.
5. Process for Opting Out
5.1 As outlined in Section 41(5) of the Cannabis Licence Act, 2018 and Section 22 of
Ontario Regulations 468/18, Council must pass a resolution by January 22, 2019 if it
wishes to opt -out of having cannabis retail stores in the Municipality.
5.2 A municipality that decides to opt -out and prohibit cannabis retail stores may later
reverse its decision and opt -in; however, under the Cannabis Licence Act, 2018, a
decision by a municipality to allow cannabis retail stores is final and may not be
subsequently reversed. Once a municipality has opted in, it cannot later opt -out.
5.3 If the AGCO has not received written notification from a municipality within the process
described above by January 22, 2019, then, by default, private cannabis retail stores
will be allowed within the jurisdiction beginning April 1, 2019.
Municipality of Clarington Page 7
Report PSD -005-19
6. Comments
6.1 Some municipalities have undertaken some level of consultation with residents prior to
making a decision to opt -in or opt -out. Should Council wish to receive public comments
and provide for consultation, time is limited and direction should be given to staff on how
Council wishes to proceed.
6.2 At the December 10, 2018 Joint General Government and Planning and Development
Committee Meeting, John Mutton on behalf of Cannapiece Corporation submitted a
written request, Attachment 1, that requested "preference be given to those recreational
cannabis dispensaries that have a Health Canada approved medicinal health clinic with
a medical practitioner on site." Council would not have the ability to give preference in
this regard as municipalities are prohibited from either licensing or passing zoning by-
laws to regulate cannabis retail stores. Should Council wish to, it may consider this
preference in drafting a Clarington cannabis retail policy statement as discussed above.
The AGCO will only consider written submissions that address the public interest.
7. Pros and Cons of Opting In or Opting Out
7.1 If Clarington opts in and permits privately owned cannabis retail stores in the
Municipality, it would benefit from receiving two payments of $43,391. If the province
receives more than $100 million from the federal excise duty on non -medicinal cannabis
in the first two years, the province may share 50% of this surplus with municipalities.
While all this funding must go toward the costs of legalization, there may be other
economic benefits to permitting cannabis retail stores. If Clarington opts out, the
Municipality would lose out on some of this funding, receiving only $48,391 to put
towards costs associated with legalization.
7.2 Opting in may help to reduce the illicit trade of cannabis and legal stores have strict
prohibitions on selling to minors. Residents would have the option to purchase
cannabis in physical stores as well as online through the OCS. If Clarington opts out,
residents would continue to have access to legal cannabis online through the OCS and
possibly neighbouring municipalities.
7.3 If Clarington opts in and experiences problems of any kind with cannabis store
locations, it has no legal authority to change the rules by which stores operate or are
located. Opting out would solve potential problems due to the uncertainly of the
impacts on the community of an unlimited number of cannabis retail stores placed
wherever the AGOC determines. Opting out would shield the Municipality from potential
problems due to the lack of municipal power to regulate retail sales through zoning or
licencing.
Municipality of Clarington
Resort PSD -005-19
Page 8
7.4 While it may appear prudent to opt -out now and leave open the possibility of opting in a
later date, Clarington would receive $48,391.00, instead of $86,782 if it were to opt -in
now to put toward the costs directly associated with the legalization of cannabis. Opting
in at a later date would also mean Clarington would not receive whatever portion of the
federal excise duty the province may share in the future.
8. Concurrence
8.1 This report has been reviewed by the Clerk and the Municipal Solicitor who concur with
the information provided.
9. Conclusion
9.1 The purpose of this report is to provide information on the option facing the Municipality
if they wish to opt -out of permitting privately -owned cannabis retail stores in Clarington.
The Municipality is prohibited from either licensing or zoning cannabis retail stores, all
licensing and location decisions will be made by the ACCO.
9.2 Council must decide whether to opt -in or opt -out of allowing retail sales of cannabis in
Clarington. It is recommend that Council adopt one of the following resolutions:
a) i) That the Municipality of Clarington advise the AGCO that it opts -in to allow
retail sales of recreational cannabis within the Municipality of Clarington; and
ii) That Staff be directed to draft a Municipal Cannabis Retail Policy Statement for
Council's consideration for consideration at the March 11, 2019 Planning and
Development Committee Meeting; or
b) That the Municipality of Clarington advise the AGCO that it opts -out of allowing retail
sales of recreational cannabis within the Municipality of Clarington
9.3 Should the Municipality opt -in, residents and the Municipality will be provided a 15 -day
notification period to provide written submissions concerning the proscribed "public
interest."
9.4 There are funding considerations to be taken into account if the Municipality wishes to
opt -out. The deadline to opt -out is January 22, 2019.
Municipality of Clarington
Resort PSD -005-19
Page 9
Submitted by: Reviewed by:
Faye Langmaid, RPP, FCSLA, Andrew C. Allison, B. Comm, LL.B
Acting Director of Planning Services CAO
Staff Contact: Mark Jull, Planner, 905-623-3379 x2426 or mjull@clarington.net
MJ/tg
There are no interested parties to be notified of Council's decision.
Attachments:
Attachment 1 — Correspondence from John Mutton
Attachment 2 — Municipal Decisions to Opt -in or Opt -out
Municipalities that have opted in or out, as posted
on AO's website_
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