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File Number: 12 -341 Because of the imminent expiration of the City's moratorium, staff recommends that the City Council introduce the proposed ordinance for first reading, and direct staff to schedule second reading and an update on the status of medical marijuana dispensary regulations for its next regular meeting on September 4, 2012. This will allow staff and the City Council time to evaluate what, if anything, the California Supreme Court and other local jurisdictions do in the next seven weeks to address the legal uncertainty created by the decisions pending California Supreme Court hearing and the County of Los Angeles decision. If the City Council took no action on the proposed ordinance and allowed the moratorium to expire, then the City would find itself in the legal position it was in before it enacted the current moratorium i.e. staff relied upon the authority granted to the Finance Director by the Municipal Code to reject a business license application if the proposed business would not or could not comply with applicable laws or regulations. San Leandro Municipal Code section 2 -2 -420. In this case, because marijuana is a schedule I controlled substance under the Federal Controlled Substances Act (FCSA), manufacture, possession, and distribution of marijuana by a dispensary, collective or cooperative would be considered an illegal business, and a business license could not be issued; this is essentially the holding that was appealed in Pack v. City of Long Beach. However, because that case has been de- published pending California Supreme Court review, Qualified Patients v. City of Anaheim ( 2010) 187 Cal.App.4th 734 is the current law, which holds that in certain circumstances, Federal law may not pre -empt State medical marijuana laws. Thus, the law is unsettled as to whether the City's legal inability to issue a business license to a medical marijuana collective, cooperative or dispensary because to do so would violate the FCSA is a proper application of Federal laws' pre - emption over State laws. Law Enforcement Analysis In 2011, the Department of Justice issued a memorandum to federal prosecutors stating that marijuana dispensaries and licensed growers in states with medical marijuana laws could face prosecution for violating federal drug and money - laundering laws. Under Federal law, a dispensary's operations involving the sales and distribution of marijuana are illegal and subject to criminal prosecution. Under the law, real and personal property involved in such operations are subject to seizure by and forfeiture to the United States. Attorney General Kamala Harris recently issued a memorandum to California Law Enforcement officials stating that the current medical marijuana laws are being "exploited by gangs, criminal enterprises, and others." After conducting research with state, federal, patient and civil rights communities it was concluded that the California medical marijuana laws need to be reformed, simplified, and improved to explain how, when, and where individuals may cultivate and obtain physician recommended marijuana. A critical element of this reform is also to educate law enforcement with guidelines for enforcement. In her memorandum Attorney General Harris urges the California legislature to amend the law to establish clear rules governing medical marijuana. Attorney General Harris states "We cannot protect the will of the voters, or the ability of seriously ill patients to access their medicine, until statutory changes are made that define the scope of the group cultivation right, whether dispensaries and edible marijuana products are permissible and how marijuana grown for medical use may lawfully be transported." City of San Leandro Page 5 Printed on 711012012