The Long Beach City Council will approve eight new licenses for cannabis dispensaries, but it will wait another week while amendments are made to help applicants already in the queue maintain their chances of being selected.
The changes will put off formal adoption by a few weeks, but city cannabis business regulators expect that the eight applicants could be selected by November. It would take one to three years for them to actually open up for business.
All eight licenses will be reserved for “equity” business owners that have lower net worths, whose family has been affected by the war on drugs or who meet other metrics outlined in the city’s cannabis equity program. The city established this program because all 32 of the city’s allowed retail storefronts have already been claimed.
The city already has 156 equity applications in the pipeline, and the council wanted to ensure that eight of those applicants will end up opening a dispensary by adding a moratorium on new people applying.
“We’re talking about 156 applications and only eight people are going to get licenses,” Councilmember Al Austin said. “Tomorrow, once this is announced, you’ll probably get another 50 applications. The people that have been in this process should be rewarded.”
Councilmember Cindy Allen’s proposed change would require potential business operators to propose a 10-year business plan and require equity owners to maintain majority control of the dispensary for 10 years instead of the originally proposed five-year window.
“I understand that these folks may want to sell at some point in time, but letting non-equity businesses buy them could compromise the viability of the program,” she said.
The city program has sought to introduce more people of color and less wealthy business operators into the industry by helping them monetarily through grants and guidance through the application and permitting process.
However, it wasn’t until last year that the council began to explore the idea of adding more dispensaries for equity owners. A voter-approved ballot measure in 2016 capped the number of dispensaries at 32 citywide.
Applicants hoping to land one of the eight licenses to operate retail businesses—the most lucrative area of the industry—called for changes to the proposed ordinance that would have allowed new entrants into the candidate pool, even those who were not verified as qualifying equity candidates.
Other industry representatives said that a way to help drive business to the newly created storefronts would be to allow them special privileges, like the ability to host events where customers could consume products on-site to offset the likelihood that the premium locations have already been claimed by existing operators.
Part of the city’s expansion will reduce buffers around schools by aligning them with the lower state standard of 600 feet instead of the existing 1,000-foot buffers in place in Long Beach. It would add 600-foot buffers around city playgrounds and community centers. Buffers around beaches and parks would be eliminated entirely.
The changes could free up 3.1 square miles of potential landing sites in the “Green Zone” for the eight new dispensaries to operate.
The applicants will be vetted by a panel that will consist of industry operators not tied to existing Long Beach cannabis businesses as well as experts in economic or business development and those active in social equity issues.
The council could take the first of two procedural votes to approve the new ordinance as soon as next week.
‘Lower taxes, higher access’
Councilmembers also voted to reexamine the tax structure in the city when it comes to adult-use cannabis, which is taxed at a higher rate than medicinal cannabis. Business owners have complained that a combination of state, city and sales taxes are leading to customers seeking out the black market.
The council voted unanimously to ask for a feasibility study to be prepared in the coming months that would show what could happen if the city cut the current adult-use excise tax (8%) to the medicinal cannabis rate (6%). The report will also show what kind of hit the city’s general fund would take if it was dropped to 5% or 4%.
The city’s cannabis excise tax that voters adopted through Measure MA has generated millions of dollars for the city’s general fund and has helped pay for services like public health, police and fire.
Elliot Lewis, a dispensary owner and one of the more vocal critics of the high tax rate, said the charges amount to a “vice tax.” He asked for Long Beach to lead on lowering them to help snuff out the black market and let city businesses thrive. Lowering taxes could lead to “higher access” for patients and customers seeking safe products, Lewis and others said.
“At the end of the day the government is creating the demand for the black market,” Lewis said.
Cannabis products are taxed at about a 45% rate when accounting for the various taxes and fees, including from the state and general sales tax. Long Beach reduced its cultivation tax earlier this year.
Allen proposed the study, saying she understood cannabis taxes are an important funding source for the city, but that “it’s just flat out unfair to the industry.”
The City Council also approved throwing the city’s support behind two state legislative bills that could eliminate or suspend the state’s cultivation tax of $161 per pound and lower the excise tax.
Assembly Bill 2792 would suspend cultivation taxes until July 2025 and reduce the excise tax to 8%, and Senate Bill 1281 would eliminate the cultivation tax and reduce the excise tax to 5% if adopted by state lawmakers. Whether either of the bills is signed into law could affect what Long Beach does with its local tax rate.
The council will vote in the coming weeks to approve the new licenses, but the tax rates will likely be a part of the 2023 fiscal budget process. The annual budget is required to be adopted by October.
Long Beach will look at cutting cannabis cultivation tax to help growers be more competitive
Long Beach could get 8 new cannabis dispensaries as City Council weighs expansion, tax cuts