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HomeMy WebLinkAboutItem 07a - Business License Revocation for Sphinx Mart DATE: October 15, 2024 TO: Honorable Mayor and City Council FROM: Jason Kruckeberg, Assistant City Manager/Development Services Director Lisa Flores, Deputy Development Services Director By: Alejandra Smith, Business License Officer SUBJECT: REVIEW OF THE BUSINESS PERMIT AND LICENSE REVIEW BOARD’S DENIAL OF THE BUSINESS LICENSE REVOCATION APPEAL FOR SPHINX MART LOCATED AT 142 E. HUNTINGTON DRIVE CEQA: Not a Project Recommendation: Adopt Resolution No. 7602 denying the appeal and upholding the Business Permit and License Review Board’s decision to revoke the business license for Sphinx Mart located at 142 E. Huntington Drive SUMMARY The Appellant and business owner of Sphinx Mart, Mr. Saad Saadhom, is appealing the Business Permit and License Review Board (“Board”) decision to revoke his business license, after it was determined that the business was in violation of Arcadia Municipal Code for selling cannabis products and California Health and Safety Code for selling illegal mushrooms. Sphinx Mart is a tobacco shop located at 142 East Huntington Drive. It is recommended that the City Council adopt Resolution No. 7602 (refer to Attachment No. 1), denying the appeal and upholding the Business Permit and License Review Board’s decision to revoke Sphinx Mart’s business license with the condition that this business owner may not be allowed to apply for another business license within the City for 12 months. BACKGROUND On June 17, 2013, the City issued a business license to Sphinx Mart to allow for the sale of tobacco at 411 East Huntington Drive, Unit 112. On September 19, 2019, Sphinx Mart relocated to 142 East Huntington Drive, and a new business license was issued to allow for the sale of tobacco, tobacco accessories, and snacks (refer to Attachment No. 2). The business has been operating in the City for 11 years. A condition of approval was placed on the business license that “no cannabis sales or alcohol” shall be allowed. The business owner had a previous violation for illegal gambling machines in 2019 but brought the business into compliance soon after he was cited. Business License Revocation Sphinx Mart – 142 E. Huntington Drive October 15, 2024 Page 2 of 6 The subject commercial building has two units, one of which is currently occupied by Sphinx Mart, and the other unit will be occupied in the future by an approved speakeasy- style bar. The building is located on the south side of Huntington Drive in Downtown Arcadia. The property is zoned CBD, Central Business District. The CBD Zone is intended to promote a strong pedestrian-oriented environment and to serve community and regional needs for retail and service uses, professional office, restaurants, public uses, and other similar and compatible uses. According to the Los Angeles County Assessor’s database, the commercial building is owned by PI Properties No. 79 LLC. The property owner has been informed of all correspondence from the City related to this revocation. In May of this year, Business License Services conducted an inspection of all the tobacco stores in the City. It was discovered that Sphinx Mart had illegal cannabis products for sale. Businesses that engage in the sale of cannabis products are considered a marijuana dispensary, which are prohibited uses under the Arcadia Development Code Section 9109.01.140. It was also discovered that Sphinx Mart had illegal psychotropic mushroom products for sale, which are considered a Schedule I Controlled Substance under California Health and Safety Code Section 11054. Sphinx Mart was in violation of State and local law. As a result, on June 25, 2024, the City sent a Notice of Revocation letter (refer to Attachment No. 4 of the Business License and Review Board Staff Report packet) to the Appellant, and a citation was issued for the violations. The letter informed the Appellant that in 10 days from the date of issuance, the business license would be deemed revoked and all business activity in the City must cease. However, it informed the Appellant of his ability to appeal the decision. The Appellant filed a written appeal on July 5, 2024, within the required 10 days (Refer to Attachment No. 4 of the Business License and Review Board Staff Report packet). Prior to the Business Permit and License Review Board Meeting, the City’s Police Department submitted the mushroom products that were seized from Sphinx Mart to the District Attorney. The products were also sent to the Los Angeles County Sheriff’s Department Scientific Services Bureau to determine if they contained psilocybin. On August 13, 2024, the Business Permit and License Review Board (“Board”) considered the appeal. After much discussion, the Board agreed to revoke the license but modified the recommended term of revocation, so the business owner would not be allowed to apply for a new business license within the City beginning 12 months from revocation, reduced down to six (6) months from revocation. The amended Resolution was adopted by the Board on September 10, 2024 – refer to Attachment No. 3 for an excerpt of the August 13, 2024, Board’s Minutes, and Attachment No. 4 for the Board’s Staff Reports, dated August 13, 2024, and September 10, 2024. An appeal of the Board’s decision was filed by the Appellant on September 19, 2024, during the 10-day appeal period – Refer to Attachment No. 2. As part of the revocation process, the business was required to close permanently on September 23, 2024, which they did. Business License Revocation Sphinx Mart – 142 E. Huntington Drive October 15, 2024 Page 3 of 6 DISCUSSION Pursuant to Arcadia Municipal Code (“AMC”) Section 6216.7(3) and 6216.8, the License Officer and the Board upon an appeal, “may suspend or revoke any business license upon receipt of any of the following information from any source that the holder of the license has violated any conditions of said license, or has violated or permitted to be violated any law or laws of the United States or the State, or any ordinance applicable to the premises where the business covered by said license is conducted, or in connection with said business.” The Board revoked Sphinx Mart’s business license because they clearly violated the conditions of approval on the business license that prohibit the sale of cannabis, by selling various cannabis products and for operating an illegal marijuana dispensary, which was in violation of local law. Sphinx Mart also illegally sold psychedelic mushroom products, which contained psilocybin, in violation of State late. Cannabis Violations Arcadia Development Code (“ADC”) Section 9104.02.030(C), prohibits marijuana dispensaries in all zoning districts in the City: “Marijuana cultivation, dispensaries, manufacturers, and delivery of marijuana, as defined by Division 9 (Definitions), shall be considered prohibited uses in all zoning districts of the City.” Sphinx Mart was considered a marijuana dispensary under ADC Section 9109.01.140, which defines marijuana dispensary as “a facility where marijuana, marijuana products, or devices for the use of cannabis or cannabis products are offered, either individually or in any combination, for retail sale, including an establishment that delivers cannabis and cannabis products as part of a retail sale.” As a facility where marijuana products or devices for the use of cannabis or cannabis products are offered for retail sale, Sphinx Mart was illegally operating as a marijuana dispensary. Marijuana (cannabis) is defined under ADC Section 9010.01.140 as “all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. It does not include (1) Industrial hemp, as defined in Section 11018.5 of the California Health & Safety Code; or (2) The weight of any other ingredient combined with marijuana to prepare topical or oral administrations, food, drink, or other product.” Marijuana products are defined under ADC Section 9010.01.140 as “marijuana that has undergone a process whereby the plant material has been transformed into a concentrate, including, but not limited to, concentrated cannabis, or an edible or topical product containing marijuana or concentrated cannabis and other ingredients.” Business License Revocation Sphinx Mart – 142 E. Huntington Drive October 15, 2024 Page 4 of 6 Sphinx Mart offered the following cannabis/marijuana products for sale: • STIIIZY 40’s Infused Pre-Rolls (premium cannabis flowers infused with live resin); • TREHouse Delta 9+ Syrup and D9+ THC Syrup (chemicals found in cannabis sativa plants); • STIIIZY Weed Vape Pods (products which contain varying levels of THC and CBD); and • FRYD Extracts Vape Cartridge (products which contain THC, cannabis oil, and live resin). Refer to Attachment No. 4 for photos of the illegal cannabis products. Mushroom Violations Sphinx Mart’s business license was also revoked due to their sale of illegal mushrooms. Mushrooms and mushroom products that contain psilocybin or psilocin are a Schedule I Controlled Substance under Health and Safety Code Section 11054(d)(18) and (d)(19). Under Health & Safety Code Section 11378(2), possession for sale of this controlled substance is illegal. Attachment No. 4 includes photos of these illegal mushroom products containing psilocybin. The mushroom products were sent to the Los Angeles County Sheriff’s Department Scientific Services Bureau and tested positive for psilocybin. Business and License Review Board Hearing The Board held a public hearing on August 13, 2024. During the meeting, the Appellant requested that the City not revoke his business license on the basis that he was not aware that these products were illegal since he was informed by his wholesaler that the mushrooms comply with State law and are legal to sell. He also stated that this business was his only source of income and requested that the Board reconsider the revocation and reinstate the business license, with a contingency that he will comply with all the rules and regulations that are applicable to local law. Following the public hearing, the determination of the Board was to deny the appeal and uphold the License Officer’s decision to revoke the business license, with a provision that the business license holder, the holder’s employee, agent, partner, director, officer, controlling stockholder or manager, shall not be allowed to apply for a new business license within the City for at least six (6) months. This was a modification of the original recommendation of the Staff, which had been for a 12 month waiting period to reapply. The amended Resolution was adopted by the Board on September 10, 2024. Subsequent Violations Pending adoption of the amended Resolution, but after the appeal hearing with the Board, on September 2, 2024, the City’s Police Department witnessed juveniles in possession of tobacco products loitering in front of Sphinx Mart. Police investigated and confirmed Business License Revocation Sphinx Mart – 142 E. Huntington Drive October 15, 2024 Page 5 of 6 the tobacco products were purchased at Sphinx Mart, and a citation was issued to the business for selling tobacco to minors. Since the business owner of Sphinx Mart continues to violate the law, it is recommended that City Council expand the term or revocation, prohibiting the business license holder from applying for a new business license for 12 months, as was the City’s initial recommendation, instead of six (6) months. The business license would be revoked with a provision that no new business license for any business in the City may be requested by the holder of the revoked license, for 12 months. This condition would apply to any employee, agent, partner, director, officer, controlling stockholder, or manager of the license holder, for any business or location within the City, or by any other person for the same business on the same premises where the business covered by the revoked license was conducted, or for the same business on a different premises within the City. If, after the period specified, application for a new business license is made, the applicant must comply with all requirements of the City Codes for issuance of a new business license. There shall be no automatic reinstatement of a revoked business license and the City is under no obligation to grant the new application. ENVIRONMENTAL ANALYSIS The business license revocation is exempt from the California Environmental Quality Act (“CEQA”) pursuant to Section 15358 (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting physical change to the environment, directly or indirectly. Moreover, the revocation does not constitute a project under the California Environmental Quality Act (“CEQA”) under Section 15061(b)(3) of the CEQA Guidelines, as it can be seen with certainty that it will have no impact on the environment. FISCAL IMPACT Although the current business does generate sales tax, the recommended revocation will not have a significant impact on City revenues. RECOMMENDATION It is recommended that the City Council determine that this action does not constitute a project under the California Environmental Quality Act (“CEQA”); and adopt Resolution No. 7602 denying the appeal and upholding the Business Permit and License Review Board’s decision to revoke the Business License for Sphinx Mart located at 142 E. Huntington Drive, with the condition that this business owner may not be allowed to apply for another business license within the City for 12 months. Business License Revocation Sphinx Mart – 142 E. Huntington Drive October 15, 2024 Page 6 of 6 Attachment No. 1: Resolution No. 7602 Attachment No. 2: Appeal Letter, dated September 19, 2024 Attachment No. 3: August 13, 2024, Minutes of the Business Permit and Review Board Attachment No. 4: August 13, 2024, and September 10, 2024, Business Permit and Review Board Resolution No. 2150 and Staff Reports with all the original attachments Attachment No. 1 Resolution No. 7602 1 RESOLUTION NO. 7602 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, DENYING THE APPEAL AND UPHOLDING THE BUSINESS PERMIT AND LICENSE REVIEW BOARD’S DECISION TO REVOKE THE BUSINESS LICENSE FOR SPHINX MART LOCATED AT 142 E. HUNTINGTON DRIVE WHEREAS, on September 19, 2019, the City issued a business license to Mr. Saad Saadhom, the business owner and Appellant of Sphinx Mart that is located at 142 East Huntington Drive, for the sale of tobacco, tobacco products, and food snacks. A condition of approval was placed on Sphinx Mart’s business license that prohibits the sale of cannabis or alcohol; and WHEREAS, in May of 2024, Business License Services conducted an inspection of all the tobacco stores in the City. It was discovered that Sphinx Mart had illegal cannabis products for sale. The business was in violation of its business license condition of approval prohibiting cannabis sales. WHEREAS, businesses which engage in the sale of cannabis products are considered a marijuana dispensary and are prohibited under the Arcadia Development Code Section 9101.01.140. The business was operating in violation of local law. WHEREAS, in May of 2024, it was discovered that Sphinx Mart also had illegal psychotropic mushroom products containing psilocybin for sale, which are considered a Schedule I Controlled Substance under the California Health and Safety Code Section 11054(d) and their sale prohibited under the California Health and Safety Code Section 11378(2). The business was in violation of State law; and WHEREAS, pursuant to the Arcadia Municipal Code Section 6216.7(3) the License Officer may suspend or revoke any business license upon receipt of any of the following 2 information from any source that the holder of the license has violated any conditions of said license, or has violated or permitted to be violated any law or laws of the United States or the State, or any ordinance applicable to the premises where the business covered by said license is conducted, or in connection with said business; and WHEREAS, on June 25, 2024, a Notice of Revocation was issued to the Appellant, and a citation was issued for the violations. The business was required to close their business permanently on July 6, 2024, unless an appeal was filed; and WHEREAS, on July 5, 2024, within the prescribed 10-day appeal period, an appeal was timely filed by the Appellant, Mr. Saad Saadhom; and WHEREAS, on August 13, 2024, a public hearing was held before the Business License Permit and Review Board (“Board”), at which time all interested persons were given full opportunity to be heard and to present evidence; and WHEREAS, the City recommended the Board uphold revocation of Appellant’s business license subject to the condition that Appellant and his employees, agents, partners, directors, officers, controlling stockholders or managers may not request any business license for any business or location within the city or by any other person for the same business on the same premises where the business covered by the revoked license was conducted, or for the same business on a different premises within the City, for a period of 12 months; and WHEREAS, following consideration of all testimony and evidence, including staff report and attachments, the Board voted unanimously (Board Member Hui was absent) to deny the appeal and uphold the revocation and amended the terms that the Appellant may not be allowed to apply for another business license within this City for six (6) months 3 rather than the recommended terms of 12 months, and directed Staff to return with a revised Resolution. The Board also closed public hearing at this meeting. WHEREAS, on September 10, 2024, the Board voted with a 4-0 vote (Board Member Hui abstained) to approve Resolution No. 2150 and issued a final decision as to the business license revocation; and WHEREAS, within the prescribed 10-day appeal period, the Appellant filed an appeal on September 19, 2024. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, HEREBY RESOLVES AS FOLLOWS: SECTION 1. The facts set forth above are true and correct and are incorporated herein by reference. SECTION 2. The City Council finds that based upon the entire record, pursuant to Section 6216.7(3) of the Arcadia Municipal Code (“AMC”), the business holder of the license has violated both the conditions of approval of said license, which prohibits the sale of cannabis or cannabis products, and the Arcadia Development Code (“ADC”) Section 9104.02.030(C) which prohibits marijuana dispensaries in all zoning districts in the City. As a facility where marijuana products and/or cannabis products are offered for retail sale, Sphinx Mart was considered a marijuana dispensary under ADC Section 9109.01.140, which is prohibited in the City of Arcadia. Sphinx Mart’s business license was also revoked due to the sale of illegal mushrooms. Mushrooms and mushroom products which contain psilocybin or psilocin are a Schedule I Controlled Substance. Sale of this controlled substance is illegal under Health & Safety Code Section 11378(2). 4 Given that the sale of cannabis is a violation of local law, and sale of Schedule I drugs containing psilocybin is a violation of State law, the Appellant should have been aware of these City and State regulations, the Board recommended that the business license be revoked with a provision that no new business license for any business in the City may be requested by the holder of the revoked license for six (6) months by the business holder’s employee, agent, partner, director, officer, controlling stockholder or manager, for any business or location within the city or by any other person for the same business on the same premises where the business covered by the revoked license was conducted or for the same business on a different premises within the City. If, after the period specified, application for a new business license is made, the applicant must comply with all requirements of this Code for issuance of a new business license. There shall be no automatic reinstatement of a revoked business license, and the City is under no obligation to grant the new application. SECTION 3. The business license revocation is exempt from the California Environmental Quality Act (“CEQA”) pursuant to Section 15358 (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Moreover, the revocation does not constitute a project under the California Environmental Quality Act (“CEQA”) under Section 15061(b)(3) of the CEQA Guidelines, as it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA. 5 SECTION 4. For the foregoing reasons the City Council, given the discretion authorized by AMC Section 6216.9, determined that appeal shall be denied, and the business license for Sphinx Mart shall be revoked subject to the terms that no new business license for any business in the City may be requested by the holder of the revoked license for 12 months by the business holder’s employee, agent, partner, director, officer, controlling stockholder or manager, for any business or location within the city or by any other person for the same business on the same premises where the business covered by the revoked license was conducted or for the same business on a different premises within the City. If, after the period specified, application for a new business license is made, the applicant must comply with all requirements of this Code for issuance of a new business license. There shall be no automatic reinstatement of a revoked business license, and the City is under no obligation to grant the new application. SECTION 4. The City Clerk shall certify to the adoption of this Resolution. [SIGNATURES ON THE NEXT PAGE] Passed, approved and adopted this 15th day of October, 2024. ATTEST: City Clerk APPROVED AS TO FORM: MICaeiJ. Maurer City Attorney Mayor of the City of Arcadia 6 Attachment No. 2 Appeal Letter, dated September 19, 2024 Attachment No. 3 August 13, 2024 Minutes of the Business Permit and Review Board Attachment No. 4 August 13, 2024 and September 10, 2024 Business Permit and Review Board Resolution No. 2150 and Staff Report with all the Attachments DATE: September 10, 2024 TO: Business Permit and License Review Board FROM: Lisa Flores, Deputy Development Services Director Prepared By: John Wade, Business License Assistant SUBJECT: RESOLUTION NO. 2150 - DENYING THE APPEAL AND UPHOLDING THE REVOCATION OF THE BUSINESS LICENSE FOR SPHINX MART LOCATED AT 142 E. HUNTINGTON DRIVE Recommendation: Adopt On August 13, 2024, the Business Permit and License Review Board voted unanimously to deny the appeal and uphold staff’s recommendation to revoke the business license for Sphinx Mart located at 142 E. Huntington Drive. City staff recommended a provision of revocation that the business license holder, the holder’s employee, agent, partner, director, officer, controlling stockholder or manager, shall not be allowed to apply for a new business license within the City for at least twelve (12) months. After much discussion, the Board agreed to modify Staff’s recommended term from twelve (12) months to six (6) months and directed Staff to return with an amended Resolution. Attached is the amended Resolution (Resolution No. 2150) for adoption. Pursuant to Arcadia Municipal Code Section 6216.9, the Appellant will have ten (10) days to appeal the decision. The appeal period ends on September 23, 2024, which is the last business day (City Hall is closed on September 20, 2024). If no appeal is filed, Sphinx Mart shall be required to cease their operation, and it must be entirely closed for business as of September 24, 2024. If any Board Members, or other interested party has any questions or comments regarding this matter prior to the September 10, 2024, Business License and Review Board Meeting, please contact Business License Officer, Alejandra Smith at (626) 574-5437 or by email at asmith@ArcadiaCA.gov. Business License Revocation Sphinx Mart – 142 E. Huntington Drive September 10, 2024 Page 2 of 2 Approved: Lisa L. Flores Deputy Development Services Director Attachment No. 1: Resolution No. 2150 DATE: August 13, 2024 TO: Business Permit and License Review Board FROM: Lisa Flores, Deputy Development Services Director By: Alejandra Smith, Business License Officer SUBJECT: RESOLUTION NO. 2150 - DENYING THE APPEAL AND UPHOLDING THE REVOCATION OF THE BUSINESS LICENSE FOR SPHINX MART LOCATED AT 142 E. HUNTINGTON DRIVE CEQA: Not A Project Recommendation: Adopt SUMMARY Sphinx Mart is a tobacco shop located at 142 East Huntington Drive. The Appellant and business owner of Sphinx Mart, Mr. Saad Saadhom, is appealing the City’s decision to revoke his business license. On June 25, 2024, the City revoked Sphinx Mart’s business license after it was determined that the business was in violation of Arcadia Municipal Code for selling cannabis products and California Health and Safety Code for selling illegal mushrooms. On July 5, 2024, the Appellant filed a written appeal. It is recommended that the Business Permit and License Review Board adopt Resolution No. 2150 (refer to Exhibit No. 1), denying the appeal and upholding the business license revocation for Sphinx Mart with the condition that this business owner may not be allowed to apply for another business license within this City for twelve (12) months from this revocation appeal. BACKGROUND On June 17, 2013, the City issued a business license to Sphinx Mart to allow for the sales of tobacco at 411 East Huntington Drive, Unit 112. On September 19, 2019, Sphinx Mart relocated to 142 East Huntington Drive and a business license was issued to allow for the sale of tobacco, tobacco accessories, and snacks (refer to Exhibit No. 3). The business has been operating in the City for eleven (11) years. A condition of approval was placed on the business license that “no cannabis sales or alcohol” shall be allowed. The business owner had a previous violation for having illegal gambling machines in 2019, but brought his business into compliance soon after he was cited. Business License Revocation Sphinx Mart – 142 E. Huntington Drive August 13, 2024 Page 2 of 5 The subject commercial building has two units, one of which is currently occupied by Sphinx Mart, and the other unit will be occupied in the future by a speakeasy bar. The building is located on the south side of Huntington Drive in Downtown Arcadia. The property is zoned CBD, Central Business District. The CBD zone is intended to promote a strong pedestrian-oriented environment and to serve community and regional needs for retail and service uses, professional offices, restaurants, public uses, and other similar and compatible uses. According to the Los Angeles County Assessor’s database, the commercial building is owned by PI Properties No. 79 LLC. The property owner has been informed of all correspondence from the City related to this revocation. In May of this year, Business License Services conducted an inspection of all the tobacco stores in the City. It was discovered that Sphinx Mart had illegal cannabis products for sale. Businesses which engage in the sale of cannabis products are considered a marijuana dispensary and are prohibited under the Arcadia Development Code Section 9109.01.140. It was also discovered that Sphinx Mart had illegal psychotropic mushroom products for sale, which are considered a Schedule I Controlled Substance under California Health and Safety Code Section 11054. The business was operating in violation of the State and local law. As a result, on June 25, 2024, the City sent a Notice of Revocation letter (refer to Exhibit No. 2) to the Appellant, and a citation was issued for the violations. The letter informed Appellant that unless an appeal was filed, the revocation required the business to close and cease operation on July 6, 2024. The Appellant filed a written appeal on July 5, 2024 (refer to Exhibit No. 4). DISCUSSION Pursuant to Arcadia Municipal Code (“AMC”) Section 6216.7(3), the License Officer “may suspend or revoke any business license upon receipt of any of the following information from any source that” “the holder of the license has violated any conditions of said license, or has violated or permitted to be violated any law or laws of the United States or the State, or any ordinance applicable to the premises where the business covered by said license is conducted, or in connection with said business.” In this case, Sphinx Mart’s business license was revoked for violating both their business license conditions of approval and State and local law. First, Sphinx Mart violated their business license conditions of approval which prohibit the sale of cannabis, by selling various cannabis products (refer to Exhibit Nos. 3 and 5). Second, Sphinx Mart violated local law by operating as an illegal marijuana dispensary in violation of local law. Specifically, Arcadia Development Code (“ADC”) Section 9104.02.030(C) prohibits marijuana dispensaries in all zoning districts in the City: “Marijuana cultivation, dispensaries, manufacturers, and delivery of marijuana, as defined Business License Revocation Sphinx Mart – 142 E. Huntington Drive August 13, 2024 Page 3 of 5 by Division 9 (Definitions), shall be considered prohibited uses in all zoning districts of the City.” Sphinx Mart is considered a marijuana dispensary under ADC Section 9109.01.140, which defines marijuana dispensary as “a facility where marijuana, marijuana products, or devices for the use of cannabis or cannabis products are offered, either individually or in any combination, for retail sale, including an establishment that delivers cannabis and cannabis products as part of a retail sale.” As a facility where marijuana products or devices for the use of cannabis or cannabis products are offered for retail sale, as will be explained below, Sphinx Mart was illegally operating as a marijuana dispensary. Marijuana (cannabis) is defined under ADC Section 9010.01.140 as “[a]ll parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin. It does not include (1) Industrial hemp, as defined in Section 11018.5 of the California Health & Safety Code; or (2) The weight of any other ingredient combined with marijuana to prepare topical or oral administrations, food, drink or other product.” Marijuana products are defined under ADC Section 9010.01.140 as “[m]arijuana that has undergone a process whereby the plant material has been transformed into a concentrate, including, but not limited to, concentrated cannabis, or an edible or topical product containing marijuana or concentrated cannabis and other ingredients.” Sphinx Mart was offering for sale the following cannabis/marijuana products: •STIIIZY 40’s Infused Pre-Rolls (premium cannabis flowers infused with live resin); •TREHouse Delta 9+ Syrup and D9+ THC Syrup (chemicals found in cannabis sativa plants); •STIIIZY Weed Vape Pods (products which contain varying levels of THC and CBD); and •FRYD Extracts Vape Cartridge (products which contain THC, cannabis oil, and live resin). Refer to Exhibit No. 5 for photos of the illegal cannabis products. Sphinx Mart’s business license was also revoked due to their sale of illegal mushrooms. Mushrooms and mushroom products which contain psilocybin or psilocin are a Schedule I Controlled Substance under Health and Safety Code section 11054(d)(18) and (d)(19). Under Health & Safety Code Section 11378(2), possession for sale of this Business License Revocation Sphinx Mart – 142 E. Huntington Drive August 13, 2024 Page 4 of 5 controlled substance is illegal. Exhibit No. 6 are photos of these illegal mushroom products containing psilocybin. Appellant is requesting that the City not revoke his business license on the basis that he was not aware that these products are illegal since he was informed by his wholesaler that the mushrooms comply with State law and are legal to sell. He has also stated that this business is his only source of income and is requesting that the Board reconsider this revocation and reinstate the business license with a contingency that he will comply with all the rules and regulations that are applicable to the local law (refer to Exhibit No. 4). Given that sale of cannabis products are a violation of local law, and sale of Schedule I drugs containing psilocybin are a violation of State law, Appellant should have been aware of these City and State regulations. The License Officer recommends that the business license be revoked with a provision that no new business license for any business in the City may be requested by the holder of the revoked license for twelve (12) months. Also, this condition that a new license may not be requested for twelve (12) months applies to the business license holder’s employee, agent, partner, director, officer, controlling stockholder or manager, for any business or location within the city or by any other person for the same business on the same premises where the business covered by the revoked license was conducted or for the same business on a different premises within the City. If, after the period specified, application for a new business license is made, the applicant must comply with all requirements of this Code for issuance of a new business license. There shall be no automatic reinstatement of a revoked business license and the City is under no obligation to grant the new application. ENVIRONMENTAL ANALYSIS The business license revocation is exempt from the California Environmental Quality Act (“CEQA”) pursuant to Section 15358 (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Moreover, the revocation does not constitute a project under the California Environmental Quality Act (“CEQA”) under Section 15061(b)(3) of the CEQA Guidelines, as it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA. RECOMMENDATION It is recommended that the Business Permit and License Review Board adopt Resolution No. 2150, denying the appeal and uphold the decision to revoke the City’s business license for Sphinx Mart and that Sphinx Mart employees, agents, partners, directors, officers, controlling stockholders or managers not be allowed to apply for a Business License Revocation Sphinx Mart – 142 E. Huntington Drive August 13, 2024 Page 5 of 5 new business license in the City of Arcadia for a period of twelve (12) months from the date of this revocation appeal. If the Board intends to deny this revocation, the Board should make a motion to deny the revocation stating that the finding(s) does not satisfy with reasons based on the record, and direct staff to prepare a resolution for adoption at the next meeting that incorporates the Board’s decision and specific findings. If any of the Business License and Review Board Members or other interested party has any questions or comments regarding this matter prior to the August 13, 2024, hearing, please contact Business License Officer, Alejandra Smith, at (626) 574-5437, or by email at asmith@ArcadiaCA.gov. Approved: Lisa L. Flores Deputy Development Services Director Exhibit No. 1 – Resolution No. 2150 Exhibit No. 2 – Notice of Revocation Letter Exhibit No. 3 – Sphinx Mart Business License Exhibit No. 4 – Appeal Letter Exhibit No. 5 – Photos of Cannabis Products Exhibit No. 6 – Photos of Mushroom Products Exhibit No. 1 Resolution No. 2150 Exhibit No. 1 1 RESOLUTION NO. 2150 A RESOLUTION OF THE BUSINESS LICENSE PERMIT AND REVIEW BOARD OF THE CITY OF ARCADIA, CALIFORNIA, DENYING THE APPEAL AND UPHOLDING THE REVOCATION OF THE BUSINESS LICENSE FOR SPHINX MART LOCATED AT 142 E. HUNTINGTON DRIVE WHEREAS, on September 19, 2019, the City issued a business license to Mr. Saad Saadhom, the business owner and Appellant of Sphinx Mart that is located at 142 East Huntington Drive, for the sale of tobacco, tobacco products, and food snacks The subject business address is zoned CBD, Central Business District. A condition of approval for Sphinx Mart’s business license provided that no cannabis sales or alcohol shall be permitted and WHEREAS, in May of 2024, Business License Services conducted an inspection of all the tobacco stores in the City. It was discovered that Sphinx Mart had illegal cannabis products for sale. The business was operating in violation of its business license condition of approval prohibiting cannabis sales. Businesses which engage in the sale of cannabis products are considered a marijuana dispensary and are prohibited under the Arcadia Development Code Section 9101.01.140. The business was operating in violation of local law. It was discovered that Sphinx Mart had illegal psychotropic mushroom products containing psilocybin for sale, which are considered a Schedule I Controlled Substance under the California Health and Safety Code Section 11054(d) and their sale prohibited under the California Health and Safety Code Section 11378(2). The business was in violation of the State law; and WHEREAS, Section 6216.7(3), the License Officer may suspend or revoke any business license upon receipt of any of the following information from any source that the 2 holder of the license has violated any conditions of said license, or has violated or permitted to be violated any law or laws of the United States or the State, or any ordinance applicable to the premises where the business covered by said license is conducted, or in connection with said business; and WHEREAS, on June 25, 2024, a Notice of Revocation was issued to the Appellant, and a citation was issued for the violations. The business was required to close their business permanently on July 6, 2024, unless an appeal was filed; and WHEREAS, on July 5, 2024, within the prescribed 10-day appeal period, an appeal was timely filed by the Appellant, Mr. Saad Saadhom; and WHEREAS, on August 13, 2024, a public hearing was held before the Business License Permit and Review Board, at which time all interested persons were given full opportunity to be heard and to present evidence. NOW, THEREFORE, THE BUSINESS LICENSE PERMIT AND REVIEW BOARD OF THE CITY OF ARCADIA, CALIFORNIA, HEREBY RESOLVES AS FOLLOWS: SECTION 1. The facts set forth above are true and correct and are incorporated herein by reference. SECTION 2. The Board finds that based upon the entire record, pursuant to Section 6216.7(3) of the Arcadia Municipal Code, the business holder of the license has violated both the conditions of approval of said license, which prohibits the sale of cannabis or cannabis products, and the Arcadia Development Code (“ADC”) Section 9104.02.030(C) which prohibits marijuana dispensaries in all zoning districts in the City. As a facility where marijuana products and/or cannabis products are offered for retail sale, Sphinx Mart is considered a marijuana dispensary under ADC Section 3 9109.01.140, which is prohibited in the City of Arcadia. Sphinx Mart’s business license was also revoked due to the sale of illegal mushrooms. Mushrooms and mushroom products which contain psilocybin or psilocin are a Schedule I Controlled Substance. Sale of this controlled substance is illegal under Health & Safety Code Section 11378(2). Attachment No. 4 are photos of this illegal substance these illegal mushroom and products containing psilocybin. Given that the sale of cannabis is a violation of local law, and sale of Schedule I drugs containing psilocybin is a violation of State law, the Appellant should have been aware of these City and State regulations, and the License Office is recommending that the business license be revoked with a provision that no new business license for any business in the City may be requested by the holder of the revoked license for twelve (12) months by the business holder’s employee, agent, partner, director, officer, controlling stockholder or manager, for any business or location within the city or by any other person for the same business on the same premises where the business covered by the revoked license was conducted or for the same business on a different premises within the City. If, after the period specified, application for a new business license is made, the applicant must comply with all requirements of this Code for issuance of a new business license. There shall be no automatic reinstatement of a revoked business license and the City is under no obligation to grant the new application. SECTION 3. The business license revocation is exempt from the California Environmental Quality Act (“CEQA”) pursuant to Section 15358 (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has 4 no potential for resulting in physical change to the environment, directly or indirectly. Moreover, the revocation does not constitute a project under the California Environmental Quality Act (“CEQA”) under Section 15061(b)(3) of the CEQA Guidelines, as it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA. SECTION 4. For the foregoing reasons the Business License Permit and Review Board determined that the business license for Sphinx Mart shall be revoked subject to the conditions of approval that no new business license for any business in the City may be requested by the holder of the revoked license for twelve (12) months by the business holder’s employee, agent, partner, director, officer, controlling stockholder or manager, for any business or location within the city or by any other person for the same business on the same premises where the business covered by the revoked license was conducted or for the same business on a different premises within the City. If, after the period specified, application for a new business license is made, the applicant must comply with all requirements of this Code for issuance of a new business license. There shall be no automatic reinstatement of a revoked business license and the City is under no obligation to grant the new application. [Signature on the next page] 5 Passed, approved and adopted by the Business License Permit and Review Board this 13th day of August 2024. _________________________ Vincent Tsoi, Chair, Business License Permit and Review Board ATTEST: ______________________ Lisa L. Flores Secretary APPROVED AS TO FORM: ______________________ Michael J. Maurer City Attorney Exhibit No. 2 Notice of Revocation Letter Exhibit No. 2 Exhibit No. 3 Sphinx Mart Business License Exhibit No. 3 Exhibit No. 4 Appeal Letter Exhibit No. 4 Exhibit No. 5 Photos of Cannabis Products Exhibit No. 5 Figure 1 – Cannabis Products Products in yellow box – STIIIZY 40’s Infused Pre-Rolls Products in blue box – TREHouse Delta 9+ Syrup and D9+ THC Syrup Products in red box – STIIIZY Weed Vape Pods Products in green box – FRYD Extracts Vape Cartridge Figure 2 – Photo taken at Sphinx Mart STIIIZY 40’s Infused Pre-Rolls Figure 3 – Photo from STIIIZY website Figure 4 – Photo from STIIIZY website Figure 5 – Photo taken at Sphinx Mart TREHouse Delta 9+ Syrup and D9+ THC Syrup Figure 7 – Photos from Figure 8 – Photos from TREHouse website TREHouse website Figure 6 – Photos from TREHouse website Figure 9 – Photo taken at Sphinx Mart STIIIZY Weed Vape Pods Figure 10 – Photo from STIIIZY website Figure 11 – Photo from STIIIZY website Figure 12 – Photo taken at Sphinx Mart FRYD Extracts Vape Cartridge Figure 13 – Photos from Flower Avenue Cannabis Online Store Figure 14 – Photos from Flower Avenue Cannabis Online Store Figure 15 – Photo taken at Sphinx Mart Front view of STIIIZY Premium THC Pods Figure 16 – Photo taken at Sphinx Mart Back view of STIIIZY Premium THC Pods Exhibit No. 6 Photos of Mushroom Product Exhibit No. 6 Figure 1 – Mushroom Product Product in yellow boxes – Magic Mushrooms Figure 2 – Mushroom Product