Santa Monica’s restrictive cannabis regulations throttle the local marketplace based on information presented to City Council this week.
Ajay Kolluri, HdL’s Director of Cannabis Services (a municipal finance consulting firm that provides advice and guidance on cannabis business regulation) gave an extremely comprehensive and succinct presentation, highlighting – among other things – in a not-too-subtle manner just how Santa Monica stands alone, behind the rest of Los Angeles County and indeed, the state of California, in terms of legalizing retail cannabis.
While medical marijuana has been legal in California since 1996, it wasn’t until 2021 that Santa Monica issued its first permit. Per the Santa Monica municipal code, only two dispensaries are allowed in the city and they are limited to medical use only, which means that customers will be required to have a doctor’s recommendation to purchase products.
"Santa Monica residents therefore can, and most certainly do, cross city limits to purchase adult-use cannabis from LA based businesses," Kolluri said.
While Council debated issues like their cap on the number of licenses in town and the proximity of dispensaries to schools or sports fields, it was Mayor Gleam Davis who raised an extremely pertinent question, "Could we allow the two current medical dispensaries to convert to recreational dispensaries?"
Davis alluded to the fact that Council had heard testimony during Tuesday’s meeting that the only existing dispensary in Santa Monica, the Local Cannabis Company was losing the interest of the majority of walk-in customers who, upon learning they need to apply for a medical card, simply leave without purchasing anything.
"Since we’ve opened, we’ve only had about a 20 percent conversion rate. I think it’s closer to 10 percent, but you can see how far off that is, it’s people just not wanting to wait," Erin Carachilo, CEO of Calyx Peak, the parent company of the Local Cannabis Company, told the Daily Press just last week.
Davis continued her reasoning, "Because why should I go get a doctor’s prescription if I can go down to Lincoln Boulevard in Venice and buy it without that? I don’t know if this is a legal question, or a land use question or some combination thereof, but is there a way to address the issue of the two [dispensary licenses] that we’ve already vetted through a very tough process and allow them to convert while we study all these other things so that they don’t go out of business?"
Kolluri responded, "There are a number of cities and counties that have done that as a first step to a larger effort to allow for more cannabis activity."
"I can’t think of any reason that you couldn’t do that," confirmed City Attorney Doug Sloan, later adding, "Under state law, we cannot legally prohibit delivery that legally originates from outside the city," when the potential issue of regulating cannabis delivery was raised.
Councilmember Jesse Zwick suggested that Council should be weary of overregulating the issue and Councilmember Phil Brock said, "I think they should be allowed to convert to retail, both the one that’s already open and the one that’s planned further up the street, as long as they follow the regulations we established.
"We should abandon our much more restrictive city requirement and use the state requirement as the method most cities are using as it seems to work. It keeps businesses away from sensitive areas, retailers away from sensitive areas, but still allows for a wide enough swath of the city to be covered and not oversaturated."
Councilmember Caroline Torosis said, "We should think about any money that we’re generating from the taxation be reinvested back into the community," adding, " I’m very pro retail uses. I’m pro all types of uses. I also think that we shouldn’t regulate cannabis. Just because we have gun control on the agenda tonight, let’s not regulate cannabis more than we’re regulating guns."
Through the course of discussion, the fate of the mysterious second dispensary was revealed — the current license holders want a way out.
According to David Martin, Community Development Director for the City of Santa Monica, construction has not even begun on Harvest of Santa Monica, which was set to be situated at 1416 Wilshire Blvd.
"They approached us about being able to sell their entitlement to someone else. And so we were working with the city attorney’s office to figure out if we can do that, it’s a little bit awkward, because there was such a lengthy process there," Martin said.
Davis said she was in favor of storefront dispensaries that could fill empty retail outlets, was hesitant to put a cap on the number and was totally opposed to any discretionary processes.
No one was opposed to allowing adult-use consumer access including delivery and additional investigation was recommended to determine the appropriate standards of consumption lounges. However, Council asked the City for further clarification on the effects of a cap on the number of license applications together with zoning clarification.
