Long Beach will allow the sale of recreational cannabis after the City Council voted 7-1 Tuesday night to advance an ordinance that will pave the way for the industry to enter the city.
Under the new ordinance, which still must receive a second vote, recreational retailers will be allowed to co-locate with existing medicinal retail shops, but will not be allowed to exist as standalone shops. Current law allows up to 32 medicinal dispensaries, all of which will be able to apply for adult-use permits if they’re currently licensed to sell medicinal products.
“In other words, only the existing medical dispensaries will be authorized to apply for an adult-use dispensary license,” said Ajay Kolluri, an assistant to the city manager who helped oversee the city’s crafting of its adult use ordinance.
Non-retail operations like distributors and cultivators would have the option to co-locate with existing license holders or apply for new business licenses at a separate location.
Buffers would largely mirror those already in place for medicinal operations. Adult-use retailers would be subject to the 1,000-foot buffers from public and private schools as well as public beaches. They would also be subject to 600-foot buffers from public parks, libraries and day-care centers.
The new policy would also include an equity element with goals for hiring people who are from impoverished neighborhoods and have been negatively affected by past cannabis-related arrests or convictions.
To be eligible a person would have to be at or below 80 percent of the area median income and have a net worth below $250,000. The person also must either have lived in a Long Beach Census tract for at least three years where more than half the residents are at or below 80 percent of the median income, or have had a past marijuana-related conviction that would have been a citation or misdemeanor under current law.
Vice Mayor Rex Richardson adjusted the target goal for hiring a person who meets this criteria from a minimum of 25 percent of annual hours worked to a minimum of 40 percent. He also added a provision that would require operators of adult-use businesses to submit community reinvestment and small business incubation plans that describe how the business will support neighborhoods that meet the equity criteria.
Operators could get around this requirement if a “good faith” effort was shown to satisfy the hiring goal but was unable to meet it, Kolluri said.
Other changes to the ordinance included a provision requiring adult-use shops to close at 9 p.m. instead of 10 p.m. Delivery services would still be able to operate until 10 p.m., with the issue to be revisited after a review period.
The lone dissenting vote came from Fifth District Councilwoman Stacy Mungo, who had several attempts to amend the ordinance denied by Richardson, who made the original motion for a vote. Under the parliamentary rules used by the council, Richardson had authority to accept or deny friendly amendments.
Mungo pushed for changes to the equity portion of ordinance, asking for the hiring policy to apply not to just certain ZIP codes but all parts of the city and also requested that there be a six-month hold time from when a medicinal operator opens to when it could apply for an adult-use sales permit.
“For those of you who have suffered through the 30, 40, 50 patients a day because you are only medical, I can only hope that you would want to be supportive that each different business that is your competitor and your partner would go through that same kind of six-month process where they would be evaluated by their community,” Mungo said. “There are lots of impacts of dispensaries. There are significantly less impacts of a medical dispensary.”
Representatives from the cannabis industry were on hand to voice support for the ordinance that could vastly expand their customer base. Pam Chotiswatdi from the Long Beach Collective Association said that after the state legalized adult-use cannabis, fewer people have received prescriptions for medicinal cannabis as access was made easier with voters’ approval of Proposition 64, the statewide ballot initiative to legalize adult-use sales.
The impact to the medical industry has been dramatic, she said, estimating that around 70 percent of people who are currently showing up to cannabis store fronts in Long Beach are there because they believe adult-use sales are already legal in Long Beach. When they find out they can’t buy cannabis products, they go somewhere else; cities such as Los Angeles and Santa Ana have already allowed sales of recreational marijuana.
Opening the city to adult-use sales is critical to the current operators’ survival, she said.
“Without adult-use sales the current dispensaries would not last,” said Chotiswatdi, who said the industry is currently being undercut by both the black market and legal sales in surrounding cities. “They would die.”
Adam Hijazi, a member of the board of directors of the collective association and manager of the LB Greenroom, a dispensary near Rose Park, urged the council to pass this ordinance to give the legal industry a chance to compete.
“The legal markets are hurting,” Hijazi said. “It’s not what everybody thinks it is. We’re hurting every single day and we just want to be able to compete against whatever illicit market is out there.”
A second reading and vote on the ordinance is expected in early July, and adult-use sales of cannabis could begin as early as August 2018, according to city estimates. The co-location mandate would likely streamline the process, officials said.
To date, nine of a maximum 32 dispensaries have opened shop in the city with 23 others trudging through the permitting process.
Because of the slow rollout of those dispensaries, business owners who were either grandfathered in because they had won the right to apply for a permit through the city’s previous lottery, or those who won spots in the most recent lottery, have not contributed as much tax revenue to the city’s coffers as initially expected.
The city’s adopted budget for the 2018 fiscal year estimated a cannabis tax haul of $5.2 million but current estimates show that figure projected to be closer to $2 million with the majority of those funds ($1.4 million) deriving from cultivation. Kolluri said revenue from the 2019 fiscal year is projected to be about $4.4 million but cautioned that cannabis revenue has been incredibly difficult to predict.
The cost to the city is expected to be $266,000 in one-time fees to set up the equity hiring program, with the initial and ongoing operating costs to be recovered through an annual equity fee charged to operators, currently estimated to be about $2,000 per business.
A November vote by the council had placed a moratorium on recreational businesses as the city sought time to draft an ordinance. Council members at the time said that if they failed to enact a policy, voters would likely take the issue to the ballot like they did with medicinal cannabis in 2016.
By legalizing sales at the council level rather than letting the issue be decided at the ballot box, the council maintains the ability to augment it in the future—something that Richardson reminded his council colleagues of before the vote was taken.
“There’s nothing that stops us from coming back and working together on changes once we evaluate what this process looks like,” Richardson said. “I’m sure that there will be changes to this ordinance. I want you to just know that this will be an ongoing process.”