Are pot consumption lounges coming to Sacramento? The City Council will hear a proposal

Sacramento’s cannabis manager is recommending that the City Council consider allowing dispensaries to operate pot consumption lounges, saying that the spots could be popular both with tourists and locals who want to smoke outside their homes.

But the lounge plan, one in a sweeping set of proposed changes to how Sacramento regulates legalized cannabis, faces an uphill battle in the council.

Other possible revisions include allowing dispensaries in additional mixed-use commercial and residential areas, permitting cannabis special events at various sites and authorizing dispensary owners to sell their businesses and hold minority ownership stakes in more than one dispensary.

The City Council Law and Legislation Committee is scheduled to discuss the matter Tuesday at 11 a.m. The full council could vote on the measures at its May 24 meeting.

The consumption lounges are expected to be a particularly hot topic. Davina Smith, who heads the city’s Office of Cannabis Management, said in an interview she favored them.

“There are people who don’t want to consume cannabis at home for a variety of reasons,” said Smith. “They may have kids. They may want to do it in a social environment. And so I think it’s just allowing a place, just like we allow brewpubs, bars, where people can congregate, be social and have a beer, or to have a cocktail, in that same environment.”

On a visit to a lounge in San Francisco, Smith said, management told her it was popular with tourists, something that could boost Sacramento’s visitor economy.

“They told us literally they will get people coming in there with luggage,“ Smith said. “They’ve just got off the plane. People want to experience this.”

Sacramento City Councilman Jay Schenirer, the committee chair, said he has reservations about lounges and expects others on the four-member panel will also have concerns.

“I think we have enough on our plate right now,” Schenirer said of a council dealing with a homelessness crisis and housing affordability issues. “I have to be convinced it’s the right thing to do.”

Schenirer said another committee member, Jeff Harris, has expressed concerns about allowing lounges before breathalyzer tests are developed to determine if patrons are impaired from smoking cannabis.

Harris did not respond to requests for comment.

Still, Schenirer said even if the committee rejects the proposal it could be overruled by the full nine-member City Council, including Mayor Darrell Steinberg, who has a council vote.

Steinberg didn’t respond to requests for comment.

California law allows consumption lounges but only a handful exist, including two in San Francisco and one in West Hollywood. All three are connected to dispensaries.

Under state law, only cannabis can be sold at the lounges. But the West Hollywood dispensary, The Artist Tree Studio Lounge, has made arrangements with a food delivery service to offer meals.

Several other consumption lounges are scheduled to open in West Hollywood in coming months.

Smith said in her recommendations to the council that if the lounges are allowed, staff should be trained to monitor the well-being of guests, tracking them via surveillance camera and limiting visits to perhaps 30 minutes.

‘Preconceived notions’

Another hot-button issue is whether to authorize special events, such as comedy or music festivals, where pot is consumed.

Only one location in Sacramento is authorized at present to hold such events, the Cal Expo site on Exposition Boulevard.

Using the Cal Expo site requires both state and city approval. Since recreational marijuana became legal in 2018, only one such event has been held at the site.

Sacramento’s 30 licensed dispensaries, which converted from selling medical marijuana to recreational cannabis when it became legal in January 2018, are currently restricted to commercial and industrial areas. Smith said it was time to consider a change.

“Four years into regulation it appears that the cannabis industry has outgrown the zones where cannabis businesses were expected to be located based on preconceived notions about what cannabis businesses bring with them (i.e. unpleasant odors, crime,traffic, blight and a decline in property value),” she said.

She said dispensaries and other cannabis-related businesses have not affected property values in a negative way, citing a recently commissioned city study.

In addition, 58 services offer delivery of cannabis but have no brick-and-mortar showrooms. Smith is also recommending that the city drop a cap on delivery services along Power Inn Road corridor on the city’s eastern edge. The number was frozen at 50 in the area because of concerns that the cannabis businesses would drive up the rents for other tenants.

The City Council approved plans for ten more dispensaries in October 2020, all going to core equity applicants that the city deemed were negatively impacted by the criminalization of marijuana.

None of those dispensaries have opened yet, but some of the successful applicants have been pushing for the consumption lounges, arguing that they would help build their businesses in a competitive marketplace.

Smith is also recommending that the city allow dispensary owners to sell their businesses as long as one of the original owners was still involved in the operation. The new core equity dispensary owners would be required to maintain a 51% interest for at least ten years.

The city put a moratorium on dispensary ownership changes after The Sacramento Bee disclosed in 2019 that the prior law limiting such transfers was not being followed. That ban sunsets on May 11, before the full City Council meeting on May 24.

Smith is also proposing that dispensary owners be allowed to have minority interests in other dispensaries.

A city audit in 2020 following The Bee investigation concluded that at least 18 dispensaries had changed ownership interests following the legalization of recreational marijuana and that one group of owners consolidated nine dispensary permits under the same group.

Schenirer said the ownership questions revolving around dispensaries will certainly be discussed at his committee meeting.

“What we’re trying to do is have kind of a comprehensive discussion about the cannabis industry and where it is and how it is doing in Sacramento,” he said.

This story was originally published May 6, 2022 at 3:00 AM with the headline "Are pot consumption lounges coming to Sacramento? The City Council will hear a proposal."