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History of Cannabis Legislation in the Unincorporated County

Licensed cannabis has a tumultuous history in the unincorporated County of San Diego. Historically, the Board of Supervisors’ approach to cannabis regulation has yoyoed from a years-long (and ultimately unsuccessful) lawsuit challenging the legality of CA Prop 215 (legalizing medical cannabis use) to a licensed cannabis moratorium from 2008-2009, the passage of a medical-only ordinance in 2010, and, finally, on the heels of San Diego voters overwhelming support for Proposition 64, a complete about face and new ban on all commercial cannabis in 2017.

In the relatively short time that cannabis was permitted in the County, only five commercial cannabis licenses were issued with five medical dispensaries opening. Of those five operators, at least one is a microbusiness that also cultivates, manufactures and distributes cannabis. When the current ban was enacted in March of 2017, the existing licensees were allowed to remain open for an additional five years, until March of 2022, when they must cease operations.

The County’s decision to again ban cannabis means that most of the 500,000 residents, living in a region that spans over 4,500 square miles have little or no access to licensed cannabis. And in March of 2022, that limited access will disappear entirely along with five thriving enterprises who have been contributing to local employment, state and local tax revenue and the health and wellness of county residents.

On August 5, 2020, Supervisor Nathan Fletcher, the Boards lone democrat at the time, proposed repealing the County’s ban and developing a new ordinance that would allow both adult-use and medical retail sales, expand zoning regulations to allow retail sales and cultivation in additional, proscribed zones, reduce the sensitive-use setback from 1,000 to 600 feet, and to develop the region’s first cannabis social equity program to address the inequities suffered by communities of color during the War on Drugs. Supervisor Fletcher’s proposal failed to get a second and was not even debated by the Board.

Impact of 2020 Election

Fortunately the November 2020 election results have resulted in a radically different makeup on the County Board of Supervisors. For the first time in decades, the board will have a democratic majority, and a reasoned approach to licensed cannabis is finally a possibility in San Diego County.

The election of democrats Nora Vargas representing district 1 and Terra Lawson-Remer in district 3 are both seen as very positive outcomes for any cannabis vote in San Diego County. A large swath of Supervisor Vargas’ district has been heavily impacted by the War on Drugs and would benefit greatly from a cannabis social equity program. Supervisor Lawson-Remer replaces the extremely conservative Kristin Gaspar, who originally proposed the County’s ban in January of 2017. Finally, just last week, at the new Board’s first meeting, Supervisor Nathan Fletcher was named Chair of the Board and Supervisor Vargas was named Vice Chair.

Main Issues for Cannabis in San Diego County

Issue # 1 – Consumer Access

For many San Diego residents, cannabis is a necessary component of their regular healthcare. As the global pandemic continues, more residents have turned to cannabis as a treatment for the crushing effects of stress and anxiety.

Declared an essential service by both the State and San Diego County, cannabis is the only essential service that is not readily available to all County residents.

Consumer access issues for the more than 500,000 residents of the unincorporated portions of San Diego County are different than access issues for the 1.4 million residents of the City of San Diego, where zoning regulations create the most issues.

Today, proximity to a licensed dispensary is arguably the most critical issue though the costs associated with medical-only regulations, the local ban on edible cannabis products and access once the five currently operating dispensaries are forced to close in 2022 must also be addressed.

Proximity

San Diego County is quite large, covering over 4,500 square miles. Residents of the eastern and northern portions of the County can be more than 100 miles from a licensed dispensary, limiting their access to safe, tested cannabis products or necessitating a one- to two-hour drive to the nearest legal source.

While delivery is an option throughout California, the minimum delivery charge for remote areas of the county are cost prohibitive for most people. Three fifths of the current county dispensaries are located in Ramona, California, within less than three miles of one another; clearly this is not sufficient to effectively serve such a large geographic area.

So what is the appropriate number of cannabis retailers for a jurisdiction our size with over 500,000 residents? Per California State law the density of off-sale alcohol licenses is one outlet per every 2,500 residents. San Diego County’s density of cannabis outlets is one medical dispensary for every 101,000 residents, approximately. Once the five existing dispensaries are forced to close in March of 2022, access will be taken away completely.

Edible Product Ban

The unincorporated County is the only jurisdiction in San Diego County where edible products are banned, and they are the only type of cannabis product that is banned. The restriction on edible products puts an undue burden on county residents who must travel to purchase licensed edibles, while neighbors in nearby jurisdictions do not.

Many consumers began choosing non-inhalable cannabis products when the vaping illness became widespread in 2019. The Covid-19 pandemic has resulted in even more cannabis consumers turning to edible products as an alternative to inhalable forms of cannabis.

The County’s restriction on edibles was developed long before state regulations banning edible products that appeal to children and require packaging that is opaque, tamper-evident and child-resistant. With such comprehensive regulations in effect, there is simply no need for the County to prohibit the sale of edible products.

Medical-only Regulations

Adult-use cannabis has been legal in California since proposition 64 was approved by voters in November of 2016, and the first licensed adult-use sales began on January 1, 2018. In California, as in states that legalized adult-use cannabis before California did, the medicinal cannabis market contracts, significantly.

When the medical market shrinks, costs for those patients rise, as has been seen in California, Oregon, Colorado and Alaska. One component of the high cost of cannabis for residents of the county would be easy to remedy: the cost of obtaining a medical marijuana recommendation, which has to be renewed annually. During the current financial crisis, with so many San Diego County residents unemployed or under-employed, removing what is effectively an administrative fee just makes sense, especially if it keeps consumers from turning to the illicit market.

Issue # 2 – Revenue Shortfalls

It is an undisputed fact that cannabis tax revenue in California has fallen far short of the projections that were made in the lead up to the Prop 64 vote in November 2016.

We have just begun our fourth year of licensed sales and, according to the Bureau of Cannabis Control (BCC) search page, there are 780 active licensed retailers in California as of January 2021 (a density of one dispensary for every 50,600 residents, approximately).

Even when taking into account that the first licensed retail sales did not take place until January 1, 2018, tax revenue is far below projected expectations. It is widely reported that the majority of cannabis sales in California take place in the unlicensed or illicit market. Reporting on the size of the illicit market varies, but everyone agrees that it is large and thriving. Localities must take on the challenge of eliminating the unlicensed market if they hope to realize the full potential of cannabis revenue, which seems even more important now that we are facing enormous budget deficits.

Issue # 3 – Social Equity

In a county as racially diverse as San Diego, it is unacceptable that not a single jurisdiction has a cannabis social equity program in place. The War on Drugs unfairly impacted communities throughout San Diego County, and policies to repair that damage are long overdue. For generations, cannabis enforcement, arrests and incarceration have unfairly impacted communities of color whose members now face both regulatory and financial challenges entering the legal cannabis industry.

Across California, social equity (SE) programs have been adopted by the cities of Coachella, Long Beach, Los Angeles, Oakland, Rio Dell, Sacramento, San Francisco, and San Jose as well as in Humboldt and Mendocino counties.

These programs benefit individuals from communities that were negatively or disproportionately impacted by cannabis criminalization with programs such as licenses reserved for equity applicants; reduced or waived licensing fees; business, management and financial training programs; workforce development and retention; and, finally, loans and grants to ensure that equity applicants have access to the significant capital critical to cannabis business ownership.

On Tuesday, January 12, 2021, the Board of Supervisors voted 5-0 to declare racism a “public health crisis” and develop policies “designed to tackle systemic racism, and remove the barriers that prevent diversity, equity and inclusion.” In August of 2020, Supervisor Fletcher proposed reversing the cannabis ban and developing a county SE program, but his motion failed to receive a second and the social justice issue was not discussed at all.

With three newly elected members and the first democratic majority in generations, the Board of Supervisors should finally have the ability to reverse the cannabis ban and put regulations in place to give BIPOC communities the ability to take an ownership stake in the cannabis industry that can lead to the type of generational wealth that can truly make a difference in communities of color.

Issue # 4 – The Illegal Market

California has long been regarded as the largest cannabis market in the world, yet licensed industry and state tax revenue do not come close to reflecting that due to a thriving illicit market for cannabis. It is estimated that up to 80% of California’s cannabis sales take place in the illegal marketplace, and per capita sales lag behind those in Colorado, Massachusetts, Oregon and Washington.

Proposition 64 guaranteed local control of commercial cannabis, and over 70% of local jurisdictions ban cannabis completely. High taxation, over 30% in many jurisdictions, local bans and a confusing patchwork of state and local regulations cause many consumers to purchase cannabis from unlicensed dispensaries and delivery services.

Cannabis and cannabis products purchased in unlicensed dispensaries pose a serious health risk to individuals and their communities as those products are untested and can contain harmful pesticides, mold and other contaminants. Unlicensed businesses do not pay their state and local excise taxes or other taxes, giving them an unfair pricing advantage over licensed retailers.

Allowing licensed retail sales, supported by a robust local supply chain that includes cultivation and manufacturing, benefits that local community and will go a long way towards eliminating the illicit market. Reversing the ban, developing a SE program for the county’s most impacted communities and a launching a County-sponsored consumer licensed cannabis education program will help eliminate the illicit cannabis market in San Diego County.

Bringing Cannabis Back To San Diego County: Next Steps

Given the current financial crisis and the essential status of cannabis, the Board of Supervisors must vote to allow licensed cannabis in San Diego County.

On Wednesday, January 27th, the Board will be voting on Chair Fletcher and Supervisor Vargas’ proposal to develop an ordinance for both medical and adult-use cannabis in San Diego County, Agenda Item #4.

Your support is needed. Use the button below to send a letter of support for cannabis in San Diego County to your Supervisor. You can also submit a comment online or request to speak during the virtual meeting on the 27th.



 

Beyond the Unincorporated County

To have a full understanding of the current state of cannabis throughout San Diego County, we must look at the 18 incorporated cities that are part of San Diego County. Of the 18, half have passed commercial cannabis regulations of some sort; please see below for a short synopsis of the adult-use and medical status of these nine cities as well as license types available and local cannabis business tax rates, when applicable, for each.

City of San Diego

Both medical and adult-use cannabis are licensed in the City of San Diego as well as cultivation, manufacturing, distribution and testing. Cannabis Production Facilities (CPFs), where cultivation, distribution and manufacturing are allowed, are limited to 40 throughout the city. Cannabis Outlets (COs) are retail establishments where cannabis is sold directly to consumers. COs are capped at 36 licenses, with a maximum of four in each of the City’s nine council districts. To date, 25 licenses have been approved and  22 COs are open for business. The City of San Diego’s retail cannabis business tax is currently 8%.

Read our full analysis of the current state of cannabis in the City of San Diego.

Chula Vista

Measure Q passed in November of 2018, allowing adult-use licensed cannabis in Chula Vista, including cultivation, manufacturing, distribution, retail and testing. There is a limit of 12 retail licenses available with a limit of three per district. By year-end 2020, only one retail license has been issued for a non-storefront delivery service which began operating in November of last year. There are multiple lawsuits pending against the City claiming an arbitrary and biased application process. Chula Vista’s retail cannabis business tax is currently 7%.

Encinitas

Measure H, which allows for adult-use cultivation, manufacturing, distribution and retail sales, was passed by Encinitas voters on November 3, 2020. When available, there will be a limit of four retail licenses, which can be increased by the City Council at their discretion. Applications for cannabis licenses could be accepted by Encinitas as early as Q3 2021. There is no local cannabis business tax on retail sales other than standard sales tax.

Imperial Beach

In July of 2018, the Imperial Beach City Council approved an ordinance to allow one adult-use retail license. At least 12 months after the first dispensary opens, the City Council may vote to allow one additional license. Imperial Beach has no local cannabis business tax and has yet to issue its first commercial license.

La Mesa

The City of La Mesa allows both medical and adult-use licenses for retail sales, cultivation, manufacturing, distribution and testing. Multiple licenses have been issued, and there are currently five dispensaries operating in the city. The local cannabis business tax rate in La Mesa is 4%.

Lemon Grove

Licensed cannabis in Lemon Grove is currently limited to medical dispensaries only, though the City Council is expected to adopt adult-use regulations in 2021. One medical dispensary is operating in La Mesa with multiple applications in process for the three remaining licenses that are available. On November 3, 2020 Lemon Grove voters approved Measure J, to establish a commercial cannabis business tax of up to 8% for retail sales and up to 4% for all other marijuana businesses. On December 15, 2020,  Lemon Grove’s City Council decided on an initial tax rate of 5%, which went into effect on January 1, 2021.

National City

Currently, all commercial cannabis activity is prohibited in National City. However, on September 17, 2019, City Council voted to develop an ordinance allowing for three cannabis businesses in National City, then voted again on February 18, 2020, to allow a maximum of six cannabis businesses that can include on-site consumption lounges and a 5% community benefits tax rate for these businesses.

If passed in a timely manner, National City would become the first jurisdiction in San Diego County to allow for on-site cannabis consumption. The Covid-19 pandemic has stalled progress on this issue, leaving local healthcare and community activists as well as the cannabis industry waiting for the adoption of the ordinance.

Oceanside

On April 11, 2018, the City of Oceanside approved medical cannabis. Updates to the original ordinance include the addition of adult-use cultivation in June of 2020 and the passage of ballot Measure M, establishing a cannabis business tax on November 3, 2020. To date, Oceanside has issued 10 medical cultivation licenses, two nursery licenses, for manufacturing licenses and three for distribution as well as two non-storefront retail (delivery only) licenses. To date, one retail business is operating in Oceanside, and the cannabis business tax for retailers is 5%, which went into effect on January 1, 2021.

Read our full analysis of the current state of cannabis in Oceanside.

Vista

Commercial cannabis was adopted in Vista on November 6, 2018, when residents voted in favor of ballot Measure Z, which allowed up to 11 medical cannabis retailers. On December 10, 2019, City Council voted to expand commercial cannabis licensing to include manufacturing, distribution and testing laboratories with a limit of two manufacturing and two distribution licenses with no limit on cannabis testing laboratory licenses. There are multiple medical retailers open in Vista, and the current medical retail tax is 7%.