A Change of Pace

On January 31, the San Diego City Council met to discuss the passing of Proposition 64 and to begin the process of taking the necessary steps to regulate the evolving medical and nonmedical cannabis markets. For proponents of comprehensive cannabis regulation, this meeting was a huge success. As a result of that meeting, the currently licensed medical cannabis dispensaries will likely be able to begin selling recreational cannabis in 2018. This decision makes the city of San Diego one of the first in California to permit the licensing and sale of adult use cannabis. This was a unanimous decision by all councilmembers.

Not only did the city of San Diego take a bold and progressive step to allow recreational stores, but it became quite clear that city councilmembers and their staff took the time to become educated on the realities of implementing the regulatory logistics necessary to bring the Medical Cannabis Regulation & Safety Act (MCRSA) and the Adult Use of Marijuana Act (AUMA) to fruition. During the three-plus hour meeting, there was significant discussion regarding how the product will be transported from the cultivators and manufacturers to the distributor and testing facilities and finally, to the dispensaries. This process, known as the supply chain, is an often-overlooked aspect of local cannabis regulations and creates significant headaches for cannabis business owners.

“The council discussed the vital importance of regulating a fully functioning supply chain within the city in detail, realizing that if the currently licensed dispensaries did not have access to the full supply chain within our city, they would have to look to cities like Desert Hot Springs for product, distribution and testing.”

Initially, the city council was faced with a proposal to ban all aspects of the supply chain. However, the weeks leading up to the January 31 decision were filled with collaborative meetings between councilmembers and local cannabis policy gurus, cannabis businesses and advocates. The council discussed the vital importance of regulating a fully functioning supply chain within the city in detail, realizing that if the currently licensed dispensaries did not have access to the full supply chain within our city, they would have to look to cities like Desert Hot Springs for product, distribution and testing. This would in turn cause products to constantly be trucked in and out of the city, which could have a negative impact on the environment and ultimately hamper dispensaries’ and cannabis outlets’ ability to keep enough inventory on their shelves.

This education and partnership resulted in a directive by city council to staff to return with recommendations for a regulated cannabis supply chain within nine months from the that council meeting date. All current businesses with an approved Zoning Use Certificate and Business Tax Certificates will also be permitted to continue operating until city council adopts regulations regarding those uses. However, these businesses will not simply be grandfathered in under new regulations but rather will have to comply with the updated land use and zoning requirements.

Additionally, the proposal before the city council also included several other notable clean up provisions to the existing dispensary only ordinance passed in 2014. Most notably, action was taken to create a new retail sales use, “marijuana outlets” which reflects not only the passage of AUMA but also the phasing out of the collective/cooperative model in 2018 and beyond. In addition to allowing retail sales, the new use encompasses medical cannabis consumer cooperatives. A number of other modifications to the current regulations were also approved, such as the separation of public parks and clarification on cannabis delivery.

Unfortunately, one week earlier, the county of San Diego took actions in direct contrast with city of San Diego. The county Board of Supervisors, in a 3-2 vote, enacted a complete ban on all cultivation sites and dispensaries in unincorporated areas. Businesses already in place are not required to close up shop, but will be required to relinquish their businesses in five years. Hopefully, the county of San Diego will see the expected success in the city of San Diego and will about-face on their draconian policy.

The city of San Diego certainly has its work cut out, as it hammers out a full implementation plan. That being said, it is very likely that San Diego will ultimately have a complete and healthy supply chain system in place that will benefit the city, businesses and the people of San Diego.