The city of La Mesa is creating a new precedent in how to approach legal cannabis and deal with unlicensed shops. Previously cities have approached legal retail store front cannabis by putting a cap on the number of licenses for these types of businesses allowed in a certain city district. LA has something similar and refers to this cap as undue concentration. The city has stated that they determined the cap number based on population numbers in a certain area.
However this approach proves faulty and is obviously illustrated by the number of illegal shops that continue to exist. The longevity of these illegal shops proves demand but they also pose an unnecessary risk as the products continue to be distributed to the public unregulated. As the vaping issue continues to spread there is an obvious need for regulation and oversight. Just last week officials confiscated over 2,000 illegal unregulated vaping products in Fresno county. https://www.yourcentralvalley.com/news/crime/tower-district-smoke-shop-raid-bcc-reveals-what-was-found-2/ Prior to that individuals were falling victim to unregulated laced synthetic flower that they were getting the product from unlicensed retailers. https://www.scmp.com/news/world/united-states-canada/article/2140004/one-dead-outbreak-related-synthetic-marijuana-use The past approach of increasing enforcement, taken by LA City and other counties, has proven to be ineffective in stopping the illicit market, as most shops can move quickly and revamp any losses substantiated. Even after years of attempting to shut down and criminalize illegal cannabis operators, new shops open up regularly and show no sign of stopping.
La Mesa recognizes that the best approach to serve their communities is to allow individuals to apply and receive a retail store front license and not be subject to a concentration cap. La Mesa City Council Member Bill Baber stated, “We’re basically saying they’re in our commercial areas, they have to be regulated, and the market itself will flush out how many get to exist.” Find the La Mesa adult-use cannabis ordinance, here.
The problem with caps and additional restrictions on cannabis businesses that they give room for illegal shops to flourish. Many factors work against legal cannabis operators such as zoning requirements, landlords, lack of banking options, and even the department of water and power unnecessarily burdening cultivation and manufacturing operators concerning power upgrades. So not only are all these restrictions making it hard for legal businesses to break even, they create a need for illegal shops as the demand for cannabis products continues to increase.
According to an LA times article, “(t)hree years after California legalized the sale of recreational marijuana, most voters want municipalities to permit pot shops in their communities even though the vast majority of cities have outlawed them, according to a UC Berkeley Institute of Governmental Studies poll conducted for the Los Angeles Times.” The article states that “63% of California voters favored their cities giving permits to cannabis stores.” So then why the concentration caps. Even those opposed to legalized cannabis must know that the best way to rid communities of illegal cannabis operators is to support legal and regulated businesses instead.
The California cannabis market is still behind compared to the number of illegal pot stores that are in business, with only 601 legal retail stores throughout the state. Assemblyman Phil Ting states that “providing safe access to cannabis products helps deter crime, creates good jobs and increases tax revenue.”
Tax revenues are another area being hindered by California’s strict regulation on the industry. While the state expected up to $1 billion in tax revenue, they saw less than $500 million. This can also be attributed to the lack of legal shops available to generate taxes. https://www.latimes.com/california/story/2019-10-01/poll-californians-marijuana-sales
Earlier this year in Florida Judge Karen Geivers ruled the cap placed on medical marijuana dispensaries was unconstitutional. “In her ruling, she made it very clear that the cap “‘erects barriers’ that increase costs and delay access to products,” and went on to say that this type of restriction is “exactly the ‘kind of regulation’ that the 2016 voter-approved constitutional amendment was intended to eliminate.” https://mjbizdaily.com/florida-medical-marijuana-dispensary-cap-unconstitutional-judge-rules/
Our firm is advocating Los Angeles city to remove all caps similar to La Mesa and allow the cannabis market to regulate itself through competition and customer preference. The city has already had a similar approach when they regulated pre-ICO’s which are shops who were in business prior to the LA cannabis ordinance. Pre-ICO’s are not required to abide by any sensitive use restrictions until 2021, including buffer zones created by other existing shops per measure M here. The amendment of the ordinance specifically states, “Existing medical marijuana dispensaries in compliance with the provisions of Proposition D may continue to operate in their current location until December 31, 2022, as long as they apply for a City license within 60 days of applications being made available and they do not expand their physical size.”
In the last round of licensing held by Los Angeles, they have received over 800 applications. Those who are compliant of the 800 should be granted a license and the city should go even further to assist shops by communicating with other city departments to prevent any further hindrance. Dealing with the illicit market requires more than just one solution as the issue is generated by multiple factors. Support can be shown in a number of ways such as vouchers or expedited services performed by other government agencies. To promote legal shops in LA for example, the city could dedicate more staff toward liaising with other government agencies on behalf of newly licensed cannabis operators. If new cannabis operators were permitted to expedite access and resources from other agencies such as the Department of Water and Power, issues such as delays on power upgrades for cultivation operators won’t be the issue they currently are. The lack of sufficient shops for LA’s population, as well as the delay and cost of such things as electrical upgrades, are the principal reasons for the proliferation of the illegal shops.
Authentic and consistent support shown to licensed cannabis operators is the best approach to defeat the illicit market and meet the demand of communities who desired safe and responsible access to cannabis.