Chula Vista has approved a regulatory framework that could create the biggest marijuana marketplace in San Diego County.
The City Council on Tuesday passed an ordinance that positions the city to gain a regional advantage in an industry that is estimated to generate $5 billion in California this year.
Under the ordinance, the city would allow up to 12 cannabis retailers — split between dispensaries and delivery services — 10 cultivation sites and an unlimited number of testing and manufacturing facilities.
The retail limits make it possible for Chula Vista to have more cannabis shops per capita than the city of San Diego, which limits dispensaries to 36 but has more than four times the population of Chula Vista.
And Chula Vista will be the first city in the county to regulate recreational marijuana delivery businesses.
“This is a huge deal,” said Manny Biezunski, the board secretary for the San Diego Cannabis Delivery Alliance. “Chula Vista made history last night. This is something we’ve been fighting for at least a couple of years in San Diego.”
The local delivery industry was essentially shut out of San Diego when the city declined to include delivery services in its regulations. The fact that the second-largest city in the county is regulating deliveries is a big win for the industry, Biezunski added.
Recreational-use marijuana became legal in California when voters approved Proposition 64 in November 2016. On Jan. 1, it became legal to sell and cultivate marijuana products.
Chula Vista’s ordinance sets it far apart from other communities.
Most North County cities have outlawed marijuana sales. Oceanside has proposed allowing sales and commercial cultivation of medical marijuana only, and Vista’s council has discussed allowing a limited number of dispensaries.
No East County city allows recreational marijuana dispensaries, though voters in La Mesa and Lemon Grove passed laws that allow for medical marijuana dispensaries to open in certain parts of their cities.
In the last year, illegal dispensaries kept sprouting throughout Chula Vista. Even though the city has closed more than 30 in the last year, more open.
The council sees regulation as a possible solution to the problem, especially if funds from sales tax revenues go toward enforcement.
“The kids are buying it from their dealer or they are going to an illegal dispensary that is not regulated in Chula Vista,” said Councilman Stephen Padilla. “So, the question is, are we going to put in a scheme that increases the chances that there’s a responsible access to responsible product and that we have some better degree of control?”
City Council members also see the ordinance as a way to ensure they write the regulations instead of leaving it up to a ballot initiative.
Chula Vista’s 4-1 approval vote came after more than three hours of public comments and debate among council members.
One point of contention was a staff recommendation to have a two-tier selection system in which applicants demonstrate they have enough capital, secured a lease, and meet a base level of experience before going into a lottery system.
City Manager Gary Halbert argued the lottery method protects Chula Vista from potential lawsuits from applicants who were not selected.
Despite the recommendation, City Councilwoman Patricia Aguilar persuaded the rest of the council to approve a merit-based system.
Aguilar’s decision came after reviewing arguments in favor of a merit-based system submitted to the council. She argued the city should be able to have the final say in choosing who sells marijuana in Chula Vista.
“I’m not convinced that the lottery is the best way to go,” she told Halbert. “I understand what you are saying, that it’s the most legally safe way to go. But on the other hand, it’s important to me as a council member to have businesses in the city who are good corporate businesses.”
Mayor Mary Salas expressed concern over the fact that changes being proposed to the ordinance were made by people connected to the industry.
City Manager Halbert noted that most of Tuesday night’s public testimony came from people with a personal financial interest in the ordinance.
“Most of what I have heard this evening are different perspectives from industry,” he said. “Bear in mind that a lot of the comments and a lot of the recommendations you are hearing are to favor a particular client.”
Ultimately, the council replaced the lottery system with a merit-based system.
The original draft of the ordinance didn’t have any limits on cultivating facilities. Councilman Mike Diaz said he would only vote for it if they limited cultivation to 10 sites, which the rest of the council agreed to.
There won’t be limits on testing facilities or manufacturing facilities, which make products like edibles and oils from cannabis extract.
The lone ‘no’ vote came from Councilman John McCann, who said he’d only vote for the ordinance if the cap on dispensaries was reduced from eight to four.
McCann noted that the current cap limit would result in more retail businesses per capita than in San Diego.
Now that the council passed its ordinance, the city needs to write specific regulations in order to create the application process.
“We needed to get this ordinance approved tonight because we didn’t want to invest a ton of time starting to write regulations if they weren’t going to approve the ordinance,” said Deputy City Manager Kelley Bacon. “We have a lot of work ahead of us right now to put all of our regulations in place.”
The city expects to pull in as much as $6 million a year through a gross-receipts tax and square-footage fees imposed on commercial cannabis businesses, recovering the costs of licensing and enforcement. The tax, however, must be approved by voters in November.
But in order to have the measure on the November ballot, the city needs to finish writing regulations by August, Bacon added.