Santa Monica may soon see a few more cannabis shops in commercial areas.
On Tuesday evening, the city council heard the first reading of a new ordinance designed to implement a permitting process for new retailers, establish operational controls, and consider establishing an equity program for the cannabis industry.
In June 2023, the council held a study session on adult-use recreational cannabis and directed staff to prepare an ordinance allowing adult-use cannabis businesses of all kinds in the city, so long as they follow state guidelines. Along with that, they asked staff to create a “social equity component” to the program, “to help ensure that communities most impacted by federal and state cannabis enforcement are provided an opportunity to benefit from the cannabis industry,” according to a staff report.
Next, staff prepared language to amend the Zoning Ordinance and conducted an equity assessment to guide the development of a potential cannabis equity program. The Zoning Ordinance changes include location requirements within approved commercial districts. In this case, it is proposed that no two cannabis retailers be within 300 feet of each other, and there be only one retailer per city block. Location requirements would also specify that cannabis uses of any kind must be at least 600 feet from schools, youth centers (existing at the time a cannabis business permit application is submitted), and day care centers.
However, the staff report also suggests that the city council consider eliminating the 300-foot separation requirement between retailers due to uncertainties involved in the order of applications received, the length of time an application should be considered valid, and limits on the city’s software’s ability to track these varying time periods.
Permitting Process
In 2017, a previous council adopted an ordinance prohibiting adult-use recreational cannabis. But since that time, and with the passage of Proposition 64 legalizing recreational cannabis the year before, the councils that followed have passed several interim ordinances to permit retailers to sell medicinal cannabis to two approved retailers. After a lengthy selection process, two retailers were approved that have only recently begun operations. They are located at 925 Wilshire Boulevard and 1418 Wilshire Boulevard.
In addition to Zoning, the city’s Municipal Code would also need to be amended for adult-use cannabis purposes, “to provide definitions, operating requirements and conditions, permitting regulations and fees, and other regulatory standards.” Among the staff’s recommendations are:
- Eliminate the Cannabis Permit application selection process, including the limit to just the two existing permits.
- Add a Cannabis Delivery Permit for Non-City-Based Cannabis Delivery Retailers coming into Santa Monica to deliver cannabis
- Specify that permits are not transferable unless exceptions are outlined, and that certain changes must be submitted to the city for review
- Reiterate that the permits are issued in conjunction with the business license certificate, and annual renewal is required for retailers and non-city-based cannabis deliveries
- Clarify the city’s ability to conduct regular inspections, which are aimed at ensuring that retailers are adhering to the applicable regulations intended to protect the community
- Include an Indemnification Agreement to minimize the City’s financial exposure to claims, losses, and damages.
The current proposal has permit fees at about $2,150 for retailers (when incorporating business licensing fees) and about $100 for cannabis delivery companies.
Equity Assessment
In January of last year, the city was awarded a $40,000 grant from the Governor’s Office of Business and Economic Development (GO-Biz) to conduct an Equity Assessment. According to the staff report, this practice “walks through data analysis that ultimately identifies which populations and communities within the City have been most disproportionately impacted by the War on Drugs; an overview of cannabis-related businesses and activities; barriers to entry; summary of community outreach conducted and the feedback provided; best practices from other California cities; findings formed at the intersections of all of the research and analysis; and recommendations for Santa Monica’s equity program.”
City staff used an online survey, community workshops, stakeholder interviews, and community-led discussions to complete the Assessment. They say the Equity Assessment enabled them to develop an informed cannabis equity program and “give charge to implementing the findings and recommendations in the assessment.” Findings in the report confirmed what most suspected – that prohibition of cannabis use was not uniformly enforced across the city, but was disproportionately enforced in the more economically disadvantaged Pico Neighborhood.
The findings also unearthed specific best practices from peer cities. Among them are: prioritizing those most harmed by cannabis enforcement, avoiding systemic barriers like a lack of startup capital, helping applicants avoid exploitative partnerships, encouraging cannabis industry training programs, community reinvestment from cannabis tax proceeds, and data collection and program evaluation.
Justin Palmore, one of the operators of the Harvest cannabis retailer on Wilshire, addressed the council, encouraging the development of a mentorship program for new retailers. He said that just because an applicant is eligible because they are low-income or a victim of enforcement, that doesn’t equate to having “business acumen.” He said it is critical that those given majority power in an enterprise’s decision-making need to be taught how to run an operation.
“With mentorship, we can go through every application and each person and help guide them to victory,” he said.
To Mr. Palmore’s point on mentorship, Councilmember Ellis Raskin asked staff to confirm his belief that training was part of the proposed Equity Plan. Staff confirmed that technical assistance could be provided if the city could obtain grant funding from the state, but, absent those funds, they don’t presently have the resources.
With that, Raskin moved the item, with Zoning and Municipal Code changes, inclusion of the Equity Plan, and removal of the 300-foot buffer/One per block requirement.
Mayor Pro Tem Caroline Torosis seconded the item, with direction that city staff liaise with the L.A. County Office of Cannabis Management, which is offering a social equity boot camp for equity applicants, which includes training on grants and loans, and other technical assistance.
Councilmember Jesse Zwick asked staff if they have seen programs work effectively in other jurisdictions that have required applicants to maintain majority ownership despite their income status and business experience. Staff admitted that, “It’s a mixed bag,” as not every jurisdiction has the same eligibility requirements. They also said jurisdictions have had to adjust their eligibility requirements based on how well or not things are working.
Community Development Department Director Jing Yeo added, “We’re pretty late to the game when it comes to this, so we have the advantage of learning from a lot of cities that have come before us.”
The real issue became the 300-foot buffer or single retailer per city block. Mayor Lana Negrete stated her discomfort with eliminating the 300-foot buffer between shops, expressing concern that too much saturation in one place could harm retailers.
Raskin said he could see the buffering argument another way, equating an area rich with bars and restaurants as attracting more clientele as a result of their proximity, making for a popular area overall. Negrete disagreed, saying that in her own experience running a music shop, nearby competition made things more challenging.
Councilmember Barry Snell turned more toward the idea of a limit on the total number of retailers.
Raskin and Negrete then had more give and take over the wisdom of the 300-foot barrier. Raskin, attempting to compromise, proposed that the council revisit the issue once they see where the first five or six applicants propose to locate. Negrete responded, “If we’re allowing it in the whole city, why do we need to have two or three on one block?”
Zwick argued that the equity component is really about access to capital, and not city blocks. He also said, “As much as I would love to not necessarily have one block become our ‘pot row,’ I think all of these regulations that we’re talking about are sort of imagining some gold rush that, as staff has mentioned, passed us by by about 10 years.” He added, “We’re trying to regulate for a problem that doesn’t exist right now.”
Raskin’s motion passed, 6-1, with Negrete voting no, saying she believed more thought could have gone into the proximity issue.
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