Three months before California begins issuing business licenses for recreational pot, the City Council will debate a new ordinance to allow medical dispensaries to open for the first time in Santa Monica.  The ordinance will prohibit recreational shops while allowing two dispensaries and “light manufacturing” of medical cannabis products within city limits.  The Council will consider three main topics when it comes to Tuesday’s discussion: medical, recreational and taxes.

Medical: the City heads into the weeds

Existing law limits the city to two medical pot shops.  The new ordinance establishes a selection process to choose two operators of those licenses.

“The RFA evaluation process would rank the applicants,” reads a report from David Martin, director of administration for the City.  “The Director of Planning and Community Development, or designee, would review the committee evaluation and background check results from the Police Department, and he/she would be authorized to request additional information to ensure that the rankings are completed fairly.”

Once the business owner receives the correct local and state permits, he or she will pay a $17,000 conditional use permit among other fees and taxes.  Medical cannabis is exempt from current sales taxes.

The shops may open in one of three areas designated by the City: on Wilshire Boulevard between Lincoln and Centinela Avenue, Santa Monica Boulevard between Lincoln and 20th Street, or Santa Monica between 23rd Street and Centinela Avenue.  The stores are allowed to grow marijuana but can be no larger than 2,500 square feet.  The shops may not be within 600 feet of a school, daycare, park, library, social services center, or the other cannabis business.

Governor Jerry Brown signed a bill this summer that consolidated marijuana regulations – basically combining the framework for medical and recreational shops.  However, the state is maintaining separate licenses for the two sides of the industry, “presumably so that in the event of greater federal intervention into the cannabis legalization movement by the States, the medicinal program could continue,” according to the report.

Recreational: stonewalling (for now)

Although prohibited for now, the City is exploring possible approaches to amend the Zoning Ordinance to allow commercial sales of recreational pot.  Recreational marijuana sales are supposed to kick off Jan. 1, however, it could take until late November for the state to issue regulations that govern the new marketplace.

Personal use of marijuana will be allowed throughout the state – subject to local smoking and vaping regulations.  Santa Monica’s new ordinance would prohibit all commercial activities – including growing, testing, selling and heavy manufacturing – of cannabis products.

Nearby Los Angeles is also still working its rules and the city is facing criticism that some operators could be cut out of the market.  The state will begin by issuing temporary licenses, good for four months.  California’s top government official in charge of regulations told an industry group “we all have anxiety.  Lori Ajax also admitted “It’s not going to be perfect.”

At the last Council meeting, both Councilmember Kevin McKeown and Tony Vazquez suggested they would be open to eventually allowing recreational marijuana businesses to take advantage of the influx of marijuana tourism.  Because Santa Monica is surrounded by Los Angeles on three sides, surrounding regulations may impact what city leaders choose to do here.

At a study session in March, the City Council leaned toward a cautionary approach when opening the door for recreation pot shops.  Councilmember Sue Himmelrich stated Santa Monica is not “desperate for the revenue we could get from this.”

Some forecasters anticipate California’s legal cannabis economy could quickly balloon to $7 billion.

Taxes: shades of green

The Council will decide whether to create a ballot measure that would create a new business license tax for cannabis related businesses.  In 2016, Los Angeles voters approved a structure that taxed transportation, research, manufacturing, medical and retail sales on a sliding scale.  A ten percent gross receipts tax for recreational cannabis sales will go into the General Fund there.  The earliest Santa Monica voters could decide on a measure would be November next year.

Council will meet on Tuesday, Oct. 10 in City Hall, 1685 Main Street. Closed session begins at 4:30 p.m.

Michael R. Blood with the Associated Press contributed to this report

Kate Cagle

Senior reporter for the Santa Monica Daily Press