Monday, the city of San Diego is set to debate the last remaining question before the City Council about marijuana: Where should businesses that manufacture, cultivate, distribute and test it be allowed? Or should they be allowed at all?
Delivery services are also hoping the City Council revisits permits for those businesses. Right now, hundreds may have to shut down.
But many people have no idea what’s going on or the profound changes in law, culture and economics that are about to hit San Diego.
So let’s start with the basics.
Is marijuana legal?
Yes. Well, no.
Right now, under state law, it is legal for an adult to possess one ounce of cannabis and grow six plants of their own.
The federal government, however, still considers it an illegal narcotic. The feds have so far declined to crack down on states that legalized marijuana. A federal law currently prevents the government from spending money to enforce marijuana prohibition in states that have legalized it.
But let’s be real. If President Donald Trump, or more likely Attorney General Jeff Sessions – not a fan of marijuana – wanted to crack down on it, they could. The most likely scenario, in my opinion, would have a local U.S. attorney go rogue and start his or her own crackdown. If that were to happen, I can’t see Trump or Sessions holding them back.
The federal prohibition on cannabis still makes things awkward even without a crackdown. Attorneys helping marijuana businesses are not supposed to help people do illegal things. These businesses don’t have access to banking, so cash management and storage is a major problem.
But the state is going forward with legalization, as are many others. Every day that goes by makes it harder and harder to imagine a clawback of the new legitimate market.
Where can you buy marijuana in San Diego?
It may be legal to have marijuana and grow it, but it’s still not legal to purchase it. You still need a doctor’s recommendation to go to a dispensary or have it delivered.
Those recommendations are notoriously easy to get but it’s still a step you have to take.
Does the city still have to decide where people will be able to purchase marijuana?
No. The city passed rules on where it would give medical marijuana dispensaries permits. Seventeen groups have gotten those permits. Not all of them have opened shops – some are still under construction.
Those places will likely be the ones that apply for state authorization to sell recreational marijuana products when that becomes available next year.
The city is done talking about where storefronts can be.
So what’s happening now?
Marijuana doesn’t just appear in stores. And it’s not just the marijuana bud or flower anymore. Now there are many varieties of edibles, tinctures, capsules, oils and even teas and products that don’t make you euphoric but do serve some medical purposes.
So somewhere people will cultivate the crop, manufacture it into products, distribute it and test it. Testing it is a big part of the state’s new law to make sure people can trust labeling and dosage recommendations.
The question, then, before the City Council is: Where should that supply chain be located? Should we allow people to cultivate it within city limits? Should we make them ship it in?
That’s what the City Council is debating. And unlike other difficult decisions, it can’t punt.
The moratorium on permitting these businesses will run out in December. If the City Council doesn’t make a decision, then it will be made for them. Those businesses will only have to conform to state law and existing zoning restrictions.
What’s more, Cynara Velazquez, who represents some of these businesses, said 18 manufacturing and nine cultivation facilities already started operating before the moratorium. They got business tax certificates from the city.
They’ll want to know if they can keep operating.
What’s the debate?
Police Chief Shelley Zimmerman made an impassioned plea the last time this came up before the Council to ban these businesses altogether. The City Council listened to her but asked staff to develop regulations for them to consider anyway.
City staff recommended two options. One option would only allow testing facilities. This appears to be the new Zimmerman Option.
The other option staff offered the Council would OK all the supply-side activities, with two facilities in each City Council district allowed to seek conditional use permits, or 18 total. It is a long, involved process to get one of those permits.
If the Council accepted that option, it would mean those businesses would have to be in industrial zones, 1,000 feet from parks, churches, schools, day cares and libraries.
It would also, crucially, mean those facilities could not be right next to marijuana dispensaries. In other words, you could not have a distribution facility right next to a store.
Advocates are worried in particular about the limit of two supply chain businesses per City Council district. The problem is that some City Council districts don’t have any space that meets the requirements. Other Council districts could house many more than two.
Advocates hope the City Council will go with a maximum limit for the whole city.
The second issue is the distance those facilities would have to be from things like schools and day cares. Should it be 600 feet or 1,000 feet? And should those business not be allowed to be next to each other?
That matters, because landlords aren’t often sure what to do. If one allows these types of businesses, it’s significant if it can’t have more than one in a building.
Phil Rath, who represents most of the licensed dispensaries, said they are most worried about the supply chain being safe and reliable.
“It’s expensive, risky and dangerous to move large amounts of this product long distances, and that’s a big part of or shops’ motivations for seeing this implemented appropriately by the City Council,” Rath said.
Chris Siegel already operates a manufacturing facility in Otay Mesa called Diamond Terp. He produces tinctures, mouth drops, topicals for skin, capsules and many other products. He’s been going since April 2016, before the moratorium.
He said if the city adopts the recommendations that allows businesses like his, as written in the staff report, his place will conform. But he’s worried about limits.
The demand will be here for marijuana. If we don’t produce it here, it will be brought in.
“If there are not enough facilities to cultivate it and produce supply, that will spur the black market to fill the need and all the risks that come with the black market,” Siegel said.
What will the City Council decide?
It seems unlikely the Council will ban the supply chain businesses completely.
“Prohibiting a complete supply chain would be a missed opportunity to collect much needed revenue for the general fund and could result in an unregulated black market, which threatens public safety and consumer health,” Councilwoman Barbara Bry said in a written statement.
The city does have financial considerations. Last year, voters approved a tax on marijuana of 5 percent. And it will go up to 8 percent in 2019. The tax is on gross receipts of marijuana businesses, including the supply chain businesses, not just the storefronts.
City staff basically said they have no idea how much money that could bring in. If 18 supply chain businesses and 17 storefronts are allowed, and they each had an average $5 million in total revenue (which seems pretty modest), that would be $8.75 million a year to the city.
That’s not life-changing for the city, but it could be orders of magnitude higher. And that’s just the special marijuana tax. It doesn’t include the fees and sales taxes that already exist.
What about delivery services?
Right now, hundreds of delivery services are operating in San Diego.
But city law says only licensed dispensaries can legally offer deliveries.
Since there are only 17 permitted dispensaries, they’re they only ones the city says can deliver.
And right now only eight of them are offering delivery services.
They will have to scale up quickly, or the black market could continue servicing that demand. Delivery advocates are pleading with the city to consider offering more permits for delivery, but it’s not on the docket right now.
The city appears to be intent on cracking down on delivery services not attached to licensed operations.
The state will begin handing out licenses to businesses right at the start of 2018. But businesses have to get these local permits first.