San Jose wants to double pot shops to increase revenue

San Jose wants to more than double the number of cannabis dispensaries to increase tax dollars, but officials are struggling to find a policy that works.

Last week, the San Jose City Council voted 10-1 to relax various regulations. Councilmember Matt Mahan was the lone dissenter. The new policy aims to change three issues to make it it easier for dispensaries to set up shop: adjust the way the city measures distance between dispensaries and sensitive areas like schools and homes; eliminate the distance requirement between dispensaries; and remove the crime restriction which prevents new retailers from opening in areas with high crime rates—the latter restriction implemented earlier this year.

The goal is to enable dispensaries clustered in East San Jose to move into other areas while also increasing the amount of cannabis business licenses that exist in the city from 16 to 37.

It will be a few months until these proposed changes are official, as an ordinance is expected to come back for council approval early next year.

The policy is the city’s second easing of cannabis rules this year. In February, officials voted to allow cannabis retail storefronts already registered with the city to open a second location in commercial areas, instead of the industrial zones as previously permitted. The move is estimated to bring in $1 million annually in city revenue per dispensary. But despite loosening regulations, cannabis retailers have been unable to find any qualifying sites, according to city documents.

“We thought we had passed an ordinance that was really going to do what we would hope it would do, (but) unfortunately it didn’t turn out that way,” said Councilmember Pam Foley. “The cannabis businesses started to research where they could go and found there were a lot of prohibitions on where they could be.”

The main point of contention is the removal of distance requirements from other cannabis storefronts. Mayor Sam Liccardo asked city officials to find a compromise and enact a small distance requirement between dispensaries.

Councilmember Sylvia Arenas said removing the distance requirement may recreate another cluster of dispensaries—a problem the new policy seeks to solve. She also worries if retailers move closer to each other, bigger retailers may just absorb smaller cannabis storefronts, or smaller storefronts will purposely locate to bigger dispensaries to access their consumers.

“When we look at equity and we think about the smaller businesses, I’m thinking about how some of those smaller businesses will survive and then potentially some of the larger businesses will continue to dominate this industry,” Arenas said.

Cannabis retailers agreed there should be some distance between dispensaries, but are excited about the other changes.

Dispensaries are required to have a 1,000-foot buffer between sensitive areas like schools, day care centers, rehab centers and residential uses—that is not changing. What will change is how the city measures the distance between them.

The prior policy measured the distance between a site and a dispensary regardless of what was between them, even if a highway or supermarket was in the path. The new policy calculates the 1,000 feet from the front door of a home to the front door of a dispensary based on walking or driving.

Rich de la Rosa, a lobbyist who represents the cannabis business Canna Culture, said the new distance calculation will make a world of difference for dispensaries looking to expand.

“San Jose wanted to keep the schools and (sensitive areas) at a distance, so if they’re going to do that, then make it a true distance,” de la Rosa told San José Spotlight. “People don’t climb over fences and walls and freeways and expressways as a normal path. So this helps with that.”

De la Rosa said the previous policy was so strict that not a single cannabis retailer was able to find another storefront. For example, de la Rosa thought he had found a spot until the city realized a residential day care’s backyard corner was six feet too close. The new policy change would allow de La Rosa to use that site because walking from that day care to the proposed site would be more than 1,000 feet.

The city is also looking to remove the crime restriction. Currently, 14 out of San Jose’s 16 dispensaries operate in high crime areas because they were built years before that policy was put into effect. City officials said because dispensaries have private security—they support reversing the policy.

Purple Lotus CEO Matt Krishnamachari is excited because it makes other sites available for them to expand. The dispensary, which is one of San Jose’s firsts, said it has been struggling to find a site that fits all the requirements and their biggest obstacle was the crime areas.

“In the end it’s about customer access,” Krishnamachari told San José Spotlight. “The more we’re able to provide that access to more places, the more we’re happy.”

Contact Jana Kadah at [email protected] or @Jana_Kadah on Twitter.