Review of cannabis policies sparks debate on retail stores, permitting, and delivery hours

SAN LUIS OBISPO COUNTY — San Luis Obispo County supervisors reviewed their cannabis policies and chances are, regulations are looking to loosen.

During the Tuesday, Sept. 26, meeting, the Board of Supervisors voted to direct staff to adjust the current cannabis ordinance to allow brick-and-mortar retail stores in unincorporated areas for the first time. This came after several local cannabis business owners urged supervisors to loosen regulations set on them as heavy fees and rules are greatly affecting them. Overall, they asked to be treated as a regular commodity.

But some other people from the community had a different view. Some asked to increase regulations or eliminate the cannabis program completely.

Supervisor Dawn Ortiz-Legg (D-3) vented frustration with legal and illegal cannabis being linked. 

“Here we are having a conversation about illegal cannabis. I am tired of having these two conversations come together,” she said. “If we have an illegal cannabis situation that’s regarding things that have to do with law enforcement, illegal cannabis, that should be one conversation.”

The proposed changes for the county’s cannabis regulations encompass three key areas. First, there is a proposal to modify the expiration criteria for cannabis cultivation permits. Currently, these permits expire five years from their approval date, with the possibility of a one-time renewal within 12 months of expiration. The proposed change aims to shift this time frame to five years from the date the cannabis project becomes operational, offering more flexibility to permit holders.

Secondly, adjustments to mobile dispensary hours of operation are on the table. Currently restricted to operating from 8 a.m. to 8 p.m., the proposed change aligns these hours with the state’s regulations, allowing mobile dispensaries to operate from 8 a.m. to 10 p.m. daily.

Lastly, the county is considering permitting storefront retail dispensaries in unincorporated areas, a practice currently prohibited. This change would necessitate the development of new land use standards addressing concerns related to health, safety, and neighborhood compatibility.

Supervisor Debbie Arnold (D-5) believed that her consituents in the unincorporated communities do not want cannabis retail locations and that extended hours would further spread law enforcement too thin.

She declared she would not support those changes, saying, “I would not be supportive of the retail dispensaries at this time in the unincorporated areas.”

Supervisor John Peschong (D-1) joined Arnold in opposition to storefront dispensaries.

In 2018, SLO County voters approved implementing Measure B-18, which taxed the gross receipts of cannabis businesses in unincorporated areas. The intention was to cover the costs associated with regulating this emerging industry, which included property inspections and permit processing. However, the tax revenue fell short of the actual costs.

During the 2022-23 fiscal year, the tax generated only $597,747, while the county’s total expenses for regulating legal and illegal cannabis operations exceeded $1.5 million. To bridge the gap, the county had to allocate an additional $400,942 from the General Fund. To address this issue, the board decided to reduce the cannabis business tax from 8 percent to 6 percent, effective until July 2024. This reduction is expected to generate $387,000 in revenue for the 2023-24 fiscal year but leaves a substantial funding gap.

Supervisor Jimmy Paulding (D-4) said, “We need to look at cost recovery and ensure that we’re not just subsidizing through our General Fund an industry that could actually generate substantial revenue.”

According to the staff report, hefty fees that cannabis business owners pay include $18,702 for annual license renewal for cultivation projects and $15,441 for non-cultivation projects plus $11,570 for inspection fees for cultivation projects.

Supervisor Bruce Gibson (D-2) stated it costs the county more to regulate the local cannabis market than it should.

He suggested the county enroll the cannabis program in Lean Sigma Six, a program designed to make county processes more efficient. With a 3-2 vote — Arnold and Peschong voting no — supervisors directed staff to draft a report to use Lean Sigma Six to streamline cannabis regulations.

The board voted 4-1 to direct staff to draft an ordinance to extend delivery hours to 10 p.m., with Arnold voting no.

On Tuesday, Oct. 17, the county board is set to make crucial decisions regarding the cannabis industry. In addition to the vote on expanding the operating hours, the supervisors will vote on revising the cannabis cultivation permitting process.

One significant proposal is to alter the expiration criteria for cultivation permits. Currently, permits expire five years from approval, but county staff suggests shifting this timeframe to five years from the project’s operational start date. The board voted 4-1 in favor of exploring this change, with one dissenting vote from Arnold.