San Diego may loosen cannabis rules to help minorities gain a piece of lucrative industry

San Diego is launching a comprehensive analysis of its laws governing cannabis businesses to see how they could be loosened to allow more minorities and low-income residents to become part of the lucrative industry.

City officials say changes may include lifting a cap on the number of dispensaries, allowing on-site consumption lounges and softening rules that bar cannabis businesses from opening near schools, churches and other “sensitive receptors.”

Another possible change is ending a requirement that deliveries come from dispensaries with retail storefronts, which would broaden access to the industry by shrinking start-up costs for low-income people.

City officials say they also will consider lowering taxes on indoor cannabis farms and factories that make edible cannabis products, a move that could spur more of those businesses to open locally.

City Council members expressed support for potentially loosening the rules and lowering taxes during a meeting last month of the council’s Land Use and Housing Committee.

Opponents of cannabis legalization said loosening the rules would be catering to drug dealers, contending that San Diego residents aren’t asking for such changes and don’t want them.

Industry leaders expressed general support for looser rules. But they urged the city to crack down on illegal delivery operations before allowing new competitors into the city’s legal cannabis industry.

The leader of the city’s newly established Cannabis Business Division said it was possible some of the rules San Diego adopted in 2014 for cannabis businesses had turned out to be too conservative and restrictive.

“We are seeing now that there may be unintended constraints causing trouble,” P.J. Fitzgerald, head of the new division, told the council’s Land Use and Housing Committee on April 22.

Only 23 of a maximum 36 dispensaries have been approved, more than seven years after the city legalized them, and only 21 of the 23 have opened. Meanwhile, 12 of 40 approved cannabis manufacturing businesses have opened.

Fitzgerald and industry leaders say more dispensaries haven’t opened primarily because potential sites are nearly impossible to find. Dispensaries are allowed only in light-industrial zones and must be at least 1,000 feet from parks, churches, schools and other sites deemed sensitive.

Fitzgerald said those constraints had been a big obstacle to city plans for cannabis equity: helping minorities break into the industry because the war on drugs disproportionately affected them, primarily with long prison sentences for selling a drug that is now legal.

“As the city moves forward with adoption of a cannabis social equity program,” Fitzgerald said, “we will certainly need room for growth and expansion, and so we’ll need to study changes to the city’s cannabis program.”

Councilman Stephen Whitburn agreed.

“Our zoning framework, as it stands today,” he said, “precludes and discourages many minority and low-income San Diegans from benefitting from an industry that historically disadvantaged their communities and livelihoods.”

Councilman Sean Elo-Rivera said things must change.

“At this point in time, the industry is fairly exclusive,” Elo-Rivera said. “Only those with access to significant capital, attorneys and consultants have had the ability to compete for an operating permit.”

Legalization opponents said these changes were industry-driven, not a response to community feedback.

“No one but drug dealers are clamoring for this expansion,” said Scott Chipman, leader of San Diegans for Safe Neighborhoods, an anti-legalization group.

Barbara Gordon, another member of that group, said city leaders should listen to residents.

“I bet most residents would rather have a grocery store than a pot shop in their neighborhood,” Gordon said.

Carrie Jaquess, of Hope United Methodist Church in Rancho Bernardo, urged city officials not to eliminate churches from the list of sites deemed sensitive, and not to soften distance requirements for cannabis businesses, contending churches are hubs for local youth programs.

“Please do not sell out our youth and communities by sacrificing their health and safety in favor of the cannabis industry,” she said.

San Diego is one of the only governments or agencies in the state restricting how close cannabis businesses can be to churches.

The city’s restrictions go further than state law and the restrictions of most other local governments on how far cannabis businesses can be from sites considered sensitive. San Diego requires a 1,000-foot buffer; San Francisco’s buffer is 600 feet.

San Diego also restricts hours of operation for cannabis businesses to 7 a.m. through 9 p.m., while state law and most other cities allow operation from 6 a.m. to 10 p.m.

Regarding cannabis delivery businesses, industry leaders said they were open to “reasonable expansion” but stressed that illegal deliveries accounted for as much as half of local cannabis sales.

“We are cautious about rapidly expanding the number of locations to the point where businesses don’t have the chance to compete with the black market, but instead only compete with each other and drive each other out of business,” said Phil Rath, who leads a coalition of local dispensary owners.

Fitzgerald noted that San Diego managed to shut down hundreds of illegal cannabis storefronts, but illegal deliveries have been harder to stop because they can change locations quickly after police shut them down.

Police Officer Radford Pajita, of the narcotics squad, said there were no easy answers. He suggested that more money for staff and enforcement efforts could help.

San Diego could use some revenue from the 8% tax the city levies on all cannabis businesses to fund more enforcement. The tax is projected to generate $22.7 million during the fiscal year that ends June 30.