California Weed

Sacramento prepares to license and tax marijuana cultivation rooms

The Sacramento City Council moved cautiously Tuesday night toward allowing commercial marijuana cultivation, passing broad guidelines to delay any operating permits and requiring that nearby businesses and residents be given notice of potential grow rooms.

The council’s 8-0 vote signals that the capital city, which now has 30 medical marijuana dispensaries, is prepared to license and tax marijuana cultivation rooms that supply the product.

However, the city’s cultivation ordinance would impose a 45-day moratorium on cannabis cultivation, with potential extensions meaning that no permits will be issued for any grow rooms for now.

During the moratorium, city staff is to work on drafting specific rules for issuing conditional-use permits that will set standards, such as security and other operating rules, for indoor marijuana cultivation of up to 22,000 square feet per site.

The intense debate Tuesday night reflected both planning challenges and potential tax revenue opportunities of state medical marijuana regulations signed by Gov. Jerry Brown in October. Those rules will create a governance system for marijuana businesses, with both state and local permits required for commercial operations.

But a small parade of business owners sounded alarm to council members that licensing marijuana grow rooms in the city could scare other businesses away and attract crime. They insisted that council members require conditional-use permits for the businesses, which would require notification of neighbors and a stricter review process.

“Our tenants have the right to know who their neighbors will be,” said Bernardo Hubbard of Jackson Properties Inc., a commercial real estate firm with extensive properties in warehouse districts and other areas where cultivation potentially could occur. “And they should have the right to help shape this industry in our community.”

The business interests were countered by medical marijuana advocates who said the facilities were needed to supply current medicinal users and that announcing the location of the businesses could endanger employees and the public.

“Our concern is that a conditional-use permit puts out exactly where we’re at,” said Lynette Davies, co-operator of the Canna Care dispensary in north Sacramento and supporter of allowing commercial cultivation facilities. “We want our neighborhoods to be safe. We want ourselves to be safe. And we are concerned as a medical provider that we will not have the supply for our patient base.”

Councilman Eric Guerra said it was up to the marijuana business owners to guarantee security and public safety for cultivation centers.

“If the (marijuana cultivation) business doesn’t make necessary safety improvements, then you have no business being in Sacramento,” Guerra said.

City officials say Sacramento already has numerous unregulated marijuana cultivation facilities, many supplying medical marijuana dispensaries licensed by the city.

The capital city has long taken a tolerant attitude toward medical marijuana. Sacramento began licensing the marijuana stores in 2010 and collected $2.86 million in local medical marijuana taxes in the 2014-15 fiscal year.

But the city’s effort to take the next step – and license actual commercial cultivation – split members of the City Council.

Councilman Allen Warren and Guerra complained that zoning rules drafted by city staff would place the overwhelming majority of marijuana growing facilities in their districts – Warren’s District 2 in north Sacramento and Guerra’s District 6 in the city’s southeastern sector.

Both district have a concentration of light industrial and warehouse spaces deemed suitable for marijuana as well as for planning rules to keep marijuana facilities more than 600 feet from parks or schools.

On Tuesday night, the council passed guidelines that will give the city time to decide whether to extend that distance requirement to 1,000 feet – as well as set a cap on the number of cultivation rooms to be allowed in city limits.

Councilman Jay Schenirer, who has taken a lead in advocating licensing cultivation facilities, last week pushed the City Council’s law and legislation committee to endorse a plan to ask voters to raise the city’s business occupancy tax of 4 percent to 5 percent in the case of commercial marijuana growers. The increase would have to be approved by a two-thirds vote, and it’s being considered for a June ballot initiative.

Schenirer said the cultivation taxes could amount to $5 million annually for the city. His proposal also calls for the tax revenue to be spent on youth programs. The council is to discuss the tax proposal next week.

Sacramento attorney Robert Kitay, who represents marijuana businesses in the city, say Sacramento dispensaries now sell 50 to 100 pounds of marijuana each a month. He estimated that taxing related cultivation could exceed Schenirer’s estimate by millions of dollars.

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