CANNABIS SALES IN THE PIPELINE

NEW ORDINANCE WOULD ALLOW 2 DISPENSARIES, HOME DELIVERY

By Christian Kallen

The City of Healdsburg is zeroing in on a set of rules and regulations that open the “green door” to the production and sale of cannabis inside city limits.

High on the agenda of Monday night’s City Council meeting, March 20, is hearing the recommendation to amend the Healdsburg Municipal Code to allow cannabis businesses to operate in the city, including permitting a “storefront retailer” or dispensary. Up to two dispensaries could be licensed, to operate in commercial and service zones, exclusive of the Plaza Retail zone.

Other kinds of cannabis businesses would also be permitted, again only in certain areas—primarily Industrial and Mixed Use zones. These include non-volatile manufacturing, non-cultivation manufacturing, testing and distribution.

And in a recent wrinkle, delivery businesses will now be permitted because Gov. Gavin Newsom signed a state law last year prohibiting cities from prohibiting delivery of medicinal cannabis anywhere in the state.

The appearance of new cannabis rules comes more than six years after Prop 64 made recreational use of marijuana legal in California. More than half of the cities in the county have already welcomed dispensaries to their jurisdictions—the exceptions to date being Petaluma, Rohnert Park, Windsor and Healdsburg.

Healdsburg’s reluctance to enter the market has faded in the last couple years, beginning with a citywide work session the council held in November 2021, which was followed by a community survey.

That survey had over 600 respondents. And while a cannabis dispensary was broadly approved by 55%, the numbers did not indicate overwhelming support. For instance, 42% would “prefer that we keep our city’s current prohibition on commercial cannabis operations,” and 38% said the right number of cannabis dispensaries for Healdsburg is none, significant reluctance in both instances.

Modest Changes

That led city staff—from the City Manager’s office, the City Attorney’s office, Community Development and Administrative Services—to recommend modest ordinance changes to allow commercial cannabis in town limited to certain zones and disallowed within 600 feet of schools, day care centers, youth centers, parks, libraries or religious institutions.

Dispensaries, the most public of cannabis businesses, would be capped at two, and disallowed in the downtown commercial core (Plaza Retail and Downtown Commercial zoning districts). Delivery and manufacturing with non-volatile compounds would also be permitted, but commercial cultivation would not.

As the staff presentation to the Planning Commission outlined it, “No commercial cannabis uses would be allowed within the Plaza Retail district which surrounds the Healdsburg Plaza. Cannabis storefront retailers (dispensary) and cannabis microbusinesses would be allowed in the Downtown Commercial, Service Commercial, Mixed Use, and Industrial zoning districts subject to specific use regulations…”

Maps of the zones and exclusion buffers around those institutions indicate the most likely locations for cannabis businesses would be along Healdsburg Avenue north of Powell Street, to about Sunnyvale, where the Healdsburg Community Center exclusion zone would begin.

“In general, the various buffers and restrictions are intended to limit the exposure of youth to cannabis operations,” reads the staff report. “This is similar to the approach taken for alcohol-related businesses, although in many cities, the restrictions for cannabis have been greater, likely due to the newness of this particular use and comfort levels within the community.”

Cash and Carry

The city was forced to make one adjustment to their proposal by allowing a type of business that had already been rejected—a non-store front retail, or a delivery company. As it happens, Newsom signed a bill in September that, while it won’t go into effect until January 2024, impacts Healdsburg’s cannabis planning by preventing cities from prohibiting “the retail sale by delivery of medicinal cannabis and requires all local jurisdictions to allow licensed, non-storefront, deliveryonly medicinal cannabis businesses.”

Healdsburg planners had not anticipated a delivery-only business in the menu of allowed cannabis businesses, and according to the staff report, “the Act represents a significant limitation on local control over cannabis businesses.”

This draft of the proposals allows delivery retailers in the Industrial zone, though it would not “be included in the limit on the number of storefront retail dispensaries and or microbusinesses…”

One primary reason for allowing cannabis business in town is the revenue generated from sales. Measure M on the November 2022 ballot was easily passed by the voters to establish an 8% tax of gross receipts for cannabis businesses to be spent on unrestricted general revenue purposes.

Usually the selection of operators for the dispensaries and other businesses is a challenging prospect.

In January, the city signed with the widely-used HdL Companies to consult on selecting candidate businesses for the operations. The firm has been a consultant on similar selection processes throughout the state, including in the City of Sonoma.

Reducing Risk

HdL Companies is a “leader of auditing, operations and revenue solutions for public agencies,” according to their website at hdlcompanies.com. (The HdL is a legacy name from its founding in 1983 as Hinderliter, de Llamas & Associates.) They have made cannabis compliance services a key offering.

Earlier this year, the city contracted with them for up to $142,000 to cover the cost of 18 applicants and 16 interviews for the dispensary businesses, along with coordinating the other compliance issues that opening a new business entails.

The expense was filed on the Jan. 23 consent calendar. But when it was pulled for discussion by Councilmember Ron Edwards, it gave Assistant City Manager Andrew Strumfels the chance to justify the expense.

Strumfels said the city was contracting with “someone who has experience in other jurisdictions developing cannabis programs and understands all the cost drivers for staff time and other components of getting cannabis business off the ground.”

He also implied that having an experienced consultant like HdL would lower the risk to the city if the selection process was contested. That means designing an RFP to solicit dispensary applicants, methods of judging and evaluation, and the interview and selection process itself.

“What we really need the consultant here to do is provide technical expertise,” said Sturmfels, “and frankly help us reduce risk wherever possible. Because the reality with the RFP process is there will be more applicants than we have licenses available.”

Edwards pressed for involvement of city staff and review by the council and the public throughout the process. Sturmfeld assured him that there will be several “decision points” for the council, and the public, to review the RFP process and final selection of dispensary and other operators.