That the City Council: CONSIDER, APPROVE, AND ADOPT THE FIRST READING OF ORDINANCE NO. CC 2026-__ ENTITLED: AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LA HABRA, CALIFORNIA, FINDING THAT THIS ORDINANCE IS EXEMPT FROM REVIEW UNDER THE CALIFORNIA ENVIRONMENTAL QUALITY ACT AND TERMINATING DEVELOPMENT AGREEMENT 22-04 BETWEEN THE CITY OF LA HABRA AND SHRYNE LA HABRA, LLC (DBA BLAZE) FOR A NON-STOREFRONT RETAIL CANNABIS BUSINESS THAT NEVER COMMENCED OPERATIONS AT 1721 EAST LAMBERT ROAD, SUITE A. 

On November 8, 2016, the electorate of the State of California approved Proposition 64 ("Prop 64"), enacting the Adult Use of Marijuana Act ("AUMA"), to be codified in various sections of the California Health and Safety Code and California Business and Professions Code. The AUMA allows adults ages 21 and over to use, possess, and cultivate limited amounts of marijuana, and establishes a state licensing and regulatory framework for marijuana businesses serving the recreational market. The AUMA also allows local jurisdictions to prohibit outdoor cultivation of marijuana for personal use, to regulate indoor cultivation of marijuana for personal use, and to prohibit all nonmedical and recreational marijuana businesses from locating and operating within their jurisdictions.  

In compliance with State law, between April 2, 2018, and December 21, 2020, the City Council adopted a series of ordinances repealing Section 18.08.140 (Cultivation of Marijuana Prohibited) of Chapter 18.08 (General Regulations) of Title 18 (Zoning) of the La Habra Muncipal Code (LHMC or Code), and adding and amending Zoning Code Chapter 18.22 (Commercial Cannabis Activity) to provide regulations for commercial cannabis distribution businesses (warehouse operations), cannabis testing laboratories and non-storefront retail cannabis businesses (direct to customer delivery).  Each type of cannabis business is limited to a maximum of four licenses to operate in the City, subject to successfully navigating the application/background review process and receiving City Council approval of a Development Agreement (DA). Zoning Code Chapter 18.22 (Commercial Cannabis Activity) is provided as Attachment 2.

The City Council has approved DAs for the operation of three distribution businesses and four non-storefront retail businesses. However, two of the DAs for distribution (River Distribution Company and Pinnacle Wellness Group, LLC) have been terminated, leaving only one in operation (Canna America). Of the four DAs approved for non-storefront retail operations only one, On Deck Delivery, is currently operational; Essential Roots is revising plans to complete the plan check process, JP420, LLC has a separate public hearing at this Council Meeting for the termination of its agreement, and Shryne La Habra is the subject of this staff report. More detailed information about these licenses is provided in Attachment 3. 

On August 15, 2022, the City Council adopted Ordinance No. 1846, which approved DA 22-04 between the City of La Habra and Shryne La Habra, LLC (DBA Blaze) for the operation of a non-storefront retail cannabis business at 1721 East Lambert Road, Suite A. The Development Agreement, approved for a five-year term, and the corresponding Conditional Use Permit (CUP) 22-13 granted the Developer the vested right to develop and operate the Project in accordance with City and State law (Attachment 4.) 

Following the initial approval of DA 22-04, several critical changes in the corporate structure and operational control of Shryne La Habra, LLC (the "Developer") occurred without the required notification or approval:

In response to the City's notice of default and subsequent discussions regarding the unapproved transfer, the Developer elected not to pursue a formal cure. Instead, on February 18, 2026, Shryne La Habra, LLC submitted a formal letter to the City voluntarily surrendering its project and license (Attachment 5.)

The Developer requested that the license be rendered "null and void" through legislative action rather than disciplinary revocation. Because the business never commenced operations and has now formally abandoned the project, termination of the Development Agreement is the final step to clear the entitlement on the subject property. 

In accordance with California Government Code 65868 and 65867, the termination of a development agreement, which was approved by ordinance, requires a public hearing and the adoption of a new ordinance. Therefore, staff recommends that the City Council, following a public hearing, introduce an ordinance to terminate Development Agreement 22-04. 

Section 14.1 (Payments) of Development Agreement 22-04 states that the developer shall pay the City 0.5% on all gross receipts attributable to the Site and also requires certain community benefit payments. Since the facility has not commenced operations, the City has not received any of these payments. Furthermore, there is no fee adopted for the termination of this Development Agreement, and therefore, the associated costs are absorbed by the Community and Economic Development Department's General Fund budget. 

The recommended action is consistent with the following goals of the La Habra General Plan:

The recommended action implements the following City Council Goals and Objectives: