SUBJECT Permitting Cannabis Retail Storefronts in Thunder Bay

RECOMMENDATION

For information only.

EXECUTIVE SUMMARY

Under the Cannabis Licensing Act, 2018 and Ontario Regulation 468/18, the
Province has given municipalities the option of prohibiting cannabis retail
store locations within their municipal boundaries. This decision is required
to be made no later than January 22, 2019.

If Council decides to opt-out as of the January 22, 2019 deadline to prohibit

cannabis retail store locations, and it passes a resolution to this effect, the
City will still have an opportunity to opt back in at a later date to allow for
cannabis retail stores within our boundaries.

However, it is expected that there would be significant financial

consequences to the City by choosing this route (as will be discussed later in
this report).

If Council decides to do nothing by this date, the City will by default be

deemed to have optedin. In other words, no action is required to be taken,
if Council wishes to allow cannabis retail stores to operate within our
municipal boundaries. It should be noted, however, that once the City is
deemed to have opted-in, Council will not be able to prohibit cannabis retail
stores at a later date.

Various City departments, divisions, and City related committees and

boards were consulted on the specific question before Council; whether to
permit cannabis retail storefronts within the boundaries of Thunder Bay. Of
the fifteen consulted, five recommend opting-in, nine remain neutral on the
issue, and one recommends opting-out. Each of their positions and reasons
are attached to this Corporate Report No. R165/2018 (City Manager’s
Office) at Attachment “A”
(Summary of Consultations with City Departments, Divisions, and
Committees).

Representatives of the various departments, divisions and City related

committees and boards who were consulted in the preparation of this
report will be in attendance at the Council meeting on December 17, 2018,
in order to answer questions and provide further clarification regarding
their position and supporting reasons.

Corporate Report No. R 165/2018

It should be noted that Administration is seeking public input via an online

survey to provide the opportunity to Thunder Bay residents to share their
thoughts of whether cannabis retail stores should be permitted or
prohibited in the City. The online survey, which is available on the City’s
website at www.thunderbay.ca/CannabisStores was launched on December
7, 2018, and will close on January 2, 2019. The results of this survey will be
summarized and made available to Council on January 14, 2019, when this
report will be presented again to Committee of the Whole for debate and a
decision.

DISCUSSION

Relevant Cannabis Legislation

The Federal Government of Canada, through the coming into force of the
Cannabis Act, 2017, has removed the criminal prohibitions on the sale and
consumption of recreational cannabis in Canada, subject to certain
restrictions.

On September 27, 2018, the Province introduced Bill 36, which includes the
Cannabis Licencing Act, 2018, establishing the Province as the sole
wholesaler and online retailer of recreational cannabis, with bricks and
mortar retail limited to private retailers.

On November 14, 2018, the Province enacted Ontario Regulation 468/18,

which provides for the regulation of retail store authorizations, the
operation of cannabis retail stores and matters respecting municipalities.
The private retail licensing system will be administered by the Alcohol and
Gaming Commission of Ontario (AGCO) and authorizations will be granted
by the Registrar of the AGCO.

AGCO Process for Licensing Private Retailers

There are three parts to the licensing regime: operator approval, retail site
location approval, and store management licensing. Of primary concern to
municipalities is the retail site location approval process which requires that
the AGCO post notice of a proposed cannabis store site, following which
there is a 15 day window allowing the public and municipality to make
submissions regarding the proposed site.

Under the current legislation, municipal governments will not receive

advance notice of an application; however, they will be permitted to make
submissions to the AGCO regarding the application during the 15 day
window as to whether or not authorization is in the public interest.

This presents an opportunity for the municipality to speak to any local

sensitivities or concerns surrounding such authorization. A proposed site
will be ineligible for authorization by the Registrar if the permitting of an
authorization is not in the “public interest”. Under the Regulation, “public
interest” is defined as matters concerning protecting public health and
safety, protecting youth and restricting their access to cannabis, and
preventing illicit activities in relation to cannabis. The Regulation also
creates “buffer zones” prohibiting the authorization of a location which is
within a 150 metre radius of a school, but no additional buffer zones have
been

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Corporate Report No. R 165/2018 specified and the municipality is not

permitted to pass any By-laws creating additional buffer zones.

The Province has stated that it anticipates accepting retail store applications
in early December, with the first retail locations opening on April 1, 2019.

In the event that Council allows private retail, it will need to consider
establishing a protocol in order to respond to notifications for Retail Store
Authorization so that a response may be provided to the AGCO Registrar.
Administration will return to Council with a draft policy statement in order
to give municipal staff direction in making submissions to the AGCO during
the 15 day window for comment. This statement will speak to local sensitive
uses and other considerations with respect to the siting of cannabis retail
stores.

Consultations with City Departments, Divisions, Committees, Boards

The Office of the City Solicitor was tasked with preparing this report to
Council, which attempts to outline the various potential implications the
decision of whether or not to opt-out of private cannabis retail will have for
the City.

In the process of preparing this report, the Office of the City Solicitor met
with a number of City departments and divisions as well as City related
boards and committees who were anticipated to be either affected by
Council’s decision or have a position as to the benefits or drawbacks in
allowing cannabis retail stores within City boundaries. Each of them was
asked to submit a position in writing, which positions are appended to this
report at Attachment “A” (Summary of Consultations with City
Departments, Divisions, Committees).

Throughout the consultation process, a number of points were raised in

support of permitting

private cannabis retail by the various departments, divisions, committees,

and boards who were consulted including:

1. Increasing Public Health and Safety: will afford some further public health
and safety measures in terms of improving access to legal cannabis,
potentially reducing demand for the illicit cannabis market, and allowing
emergency personnel, such as EMS, to determine the true ingredients of
what an individual may have ingested when responding to calls;

2. Securing Additional Provincial Funding: does not put the City of Thunder
Bay at risk of losing further significant funding from the Province to help it
off-set costs directly related to the legalization of cannabis, which the City
will have to address regardless of whether retail stores are permitted within
its boundaries (e.g. online cannabis sales, home cultivation of up to four
plants per household, availability of cannabis in neighbouring
municipalities, etc.); and

3. Providing other Financial Opportunities: will create an additional revenue

source for the City in terms of increased occupancy of vacant retail spaces,
increased tax revenues, increased tourism, and will provide greater
employment opportunities.

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Corporate Report No. R 165/2018

A number of risks associated with permitting private cannabis retail were

also identified by those who were consulted including:

1. Store Density: a higher density of retail outlets correlates with increased

consumption and harms. Under the current legislation, there is no
limitation on the density of stores within a municipality.

2. Store Locations: the legislation establishes “buffer zones” requiring there

to be adistance of 150m between schools and retail locations, but does not
address any other areas such as facilities which serve youth, other
substance retail outlets, and other sensitive areas in the City. In the event
that the City decides to permit private cannabis retail, it will be necessary to
develop internal policies to address local sensitivities.

3. Ability to Meet Demand: there are concerns surrounding the ability of

retail outlets to meet consumer demand. It is anticipated that legal
producers will not be able to supply product at a rate which will meet
consumer demand, which may lead to retailers seeking alternate supplies of
cannabis products through the illicit market. Likewise, the inabilityfor
consumers to access legal product may result in them purchasing through
the illicit market.

4. Extended Store Hours: under the legislation, cannabis retail stores will be
permitted tobe open from 9am-11pm seven days a week. This increased
access to cannabis may lead to increased consumption and associated
harms.

5. Municipal Control: under the current legislation, municipalities are

limited in theamount of control they may exercise over where cannabis
retail outlets may be located.

The City does not have the ability to control retail cannabis locations,
specifically,through its Zoning or Licensing By-laws. Municipal input is
restricted to the 15 day window following notification of a Retail Store
Authorization during which submissions may be made to the AGCO
Registrar as to whether the granting of an authorization would be in the
public interest.

FINANCIAL IMPLICATION

The Ministry of Finance has confirmed that it will be establishing the

Ontario Cannabis Legalization Implementation Fund (OCLIF) which will be
responsible for distributing funds to help municipalities off-set the
transition costs associated with the legalization of recreational cannabis.
The initial funds will be distributed to municipalities on a per-household
basis in January, 2019. The City of Thunder Bay is expected to receive
$129,992.

Following the January 22 deadline for municipalities to opt-out under the

Cannabis License Act, municipalities will receive a second payment in March
of 2019. Those municipalities who have opted-out of cannabis retail will
receive a payment of $5,000, while those who have not optedout will
receive additional funding on a per-household basis. If the City of Thunder
Bay does not

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Corporate Report No. R 165/2018

opt-out, Administration expects to receive a minimum of another $129,992,

depending on the number of municipalities that opt-out.

The Province has also set aside $10 million in funding to address any
unforeseen circumstances arising from the legalization of cannabis, with
priority being given to municipalities who have not opted-out of private
retail as of the January 22, 2019 deadline.

The Ministry of Finance has also confirmed that in the event that Ontario’s
portion of the federal excise duties imposed on legal cannabis exceeds $100
million within the first two years of legalization of cannabis, the Province
will provide 50 percent of the surplus only to those municipalities who have
not opted-out of permitting private cannabis retail as of January 22, 2019.

The Ministry of Finance has stated that municipalities must use any of the
above-mentioned

funding to address costs that directly relate to the legalization of

recreational cannabis.

Examples of costs which this funding may be put toward include:

1. increased enforcement (e.g. police, public health, by-law enforcement,

court

administration, litigation, etc.)

2. increased response to public inquiries (e.g. correspondence, etc.)

3. increased paramedic services

4. increased fire services

5. by-law and policy development (e.g. police, public health, workplace
safety policy, etc.)

Examples of costs which this funding is not permitted to be put toward

include:

1. costs that have been, or will be, funded or reimbursed by any other
government body or

third party

2. costs not related to cannabis legalization

CONCLUSION

It is concluded that this report should be accepted for information and that
Administration will provide a further report to Council on January 14, 2019.

BACKGROUND

On September 27, 2018, the Province introduced Bill 36, which includes the
Cannabis Licencing Act, 2018, establishing the Province as the sole
wholesaler and online retailer of recreational cannabis, with bricks and
mortar retail limited to private retailers.

On November 14, 2018, the Province enacted Ontario Regulation 468/18,

which provides for the regulation of retail store authorizations, the
operation of cannabis retail stores and matters respecting municipalities.