City officials say changes may include lifting a cap on the number of dispensaries, allowing on-site consumption lounges and softening rules that don’t allow cannabis businesses near schools, churches and other “sensitive receptors.”
Another possible change is ending a requirement that deliveries come from dispensaries with retail storefronts, which would broaden access to the industry by shrinking start-up costs for low-income people.
City officials say they also will consider lowering taxes on indoor cannabis farms and factories that make edible cannabis products, a move that could spur more of those businesses to open locally.
City Council members expressed support for potentially loosening the rules and lowering taxes during a meeting last month of the council’s Land Use and Housing committee.
Opponents of cannabis legalization said loosening the rules would be catering to drug dealers, contending that San Diego residents aren’t asking for such changes and don’t want them.
Industry leaders expressed general support for looser rules. But they urged the city to crack down on illegal delivery operations before allowing new competitors into the city’s legal cannabis industry.
The leader of the city’s newly established Cannabis Business Division said it’s possible some of the rules San Diego adopted in 2014 for cannabis businesses have turned out to be too conservative and restrictive in retrospect.
“We are seeing now that there may be unintended constraints causing trouble,” P.J. Fitzgerald, head of the new division, told the council’s Land Use and Housing Committee on April 22.
Only 23 of a maximum 36 dispensaries have been approved, more than seven years after the city legalized them, and only 21 of the 23 have opened. Meanwhile, 12 of 40 approved cannabis manufacturing businesses have opened.
Fitzgerald and industry leaders say more dispensaries haven’t opened primarily because potential sites are nearly impossible to find. Dispensaries are allowed only in light-industrial zones and must be at least 1,000 feet from parks, churches, schools and other sensitive uses.
Fitzgerald said those constraints are a big obstacle to city plans for cannabis equity: helping minorities break into the industry because the war on drugs disproportionately affected them, primarily with long prison sentences for selling a drug that is now legal.
“As the city moves forward with adoption of a cannabis social equity program, we will certainly need room for growth and expansion, and so we’ll need to study changes to the city’s cannabis program,” Fitzgerald said.
Councilman Stephen Whitburn agreed.
“Our zoning framework, as it stands today, precludes and discourages many minority and low-income San Diegans from benefitting from an industry that historically disadvantaged their communities and livelihoods,” Whitburn said.
Councilman Sean Elo-Rivera said things must change.
“At this point in time, the industry is fairly exclusive,” he said. “Only those with access to significant capital, attorneys and consultants have had the ability to compete for an operating permit.”
Legalization opponents said these changes are industry-driven, not a response to community feedback.
“No one but drug dealers are clamoring for this expansion,” said Scott Chipman, leader of San Diegans for Safe Neighborhoods, an anti-legalization group.
Barbara Gordon, another member of that group, said city leaders should listen to residents.
“I bet most residents would rather have a grocery store than a pot shop in their neighborhood,” Gordon said.
Carrie Jaquess, of Hope United Methodist Church in Rancho Bernardo, urged city officials not to eliminate churches from the list of sensitive uses that cannabis businesses can’t locate near and not to soften the distance requirements, contending churches are hubs for local youth programs.
“Please do not sell out our youth and communities by sacrificing their health and safety in favor of the cannabis industry,” she said.
San Diego is one of the only governments or agencies in the state restricting how close cannabis businesses can be to churches.
The city is also more restrictive than state law and most other local governments on how far cannabis businesses can be from sensitive uses. San Diego requires a 1,000-foot buffer, while San Francisco’s buffer is only 600 feet.
San Diego also restricts hours of operation for cannabis businesses to 7 a.m. through 9 p.m., while state law and most other cities allow operation from 6 a.m. to 10 p.m.
Regarding cannabis delivery businesses, industry leaders said they are open to “reasonable expansion” but stressed that illegal deliveries account for as much as half of local cannabis sales.
“We are cautious about rapidly expanding the number of locations to the point where businesses don’t have the chance to compete with the black market, but instead only compete with each other and drive each other out of business,” said Phil Rath, who leads a coalition of local dispensary owners.
Fitzgerald noted that San Diego managed to shut down hundreds of illegal cannabis storefronts, but illegal deliveries have been harder to stop because they can change locations quickly after police shut them down.
Police Officer Radford Pajita of the narcotics squad said there are no easy answers. He suggested more money for staff and enforcement efforts could help.
San Diego could use some revenue from the 8 percent tax the city levies on all cannabis businesses to fund more enforcement. The tax is projected to generate $22.7 million during the fiscal year that ends June 30.
Some industry leaders say the tax should be lowered for cannabis manufacturing and cannabis cultivation businesses. Lower taxes would increase projected profits, spurring investors to fund construction or building renovations needed for those businesses to open.
Fitzgerald said the comprehensive analysis she is launching will include a comparison of San Diego’s city cannabis tax and taxes levied by other agencies across the state.
Another possible rule change could be allowing on-site consumption lounges, where customers could smoke or consume cannabis products they buy at a dispensary — like drinking alcohol at a bar or drinking coffee at a coffee house.
That change appears to be less about social equity and more about increasing cannabis tourism and dispensary revenue.
Councilman Joe LaCava agreed with his colleagues that cannabis equity is a worthy goal but said he wants San Diego’s efforts to be more targeted.
He said the program should be more like allowing people who can prove they have low incomes to live in subsidized housing, not a broad approach where the city changes its rules and hopes low-income people end up benefitting.
San Diego recently got a $75,000 state grant to study the effect of cannabis locally so it can create an equity program.
A proposed equity program, which could include loosened regulations, will be presented to the City Council next January, Fitzgerald said. The city could then apply to the state for $5 million in equity funding in February, she said.