Delay for Petaluma pot industry

With only a few days left before California legalizes commercial cannabis businesses, those hoping to open marijuana enterprises in Petaluma still aren’t able to apply for local permits and face a delay of several months beyond the Jan. 1 start date for the industry.

Though the city council Monday voted 6-1, with Councilwoman Kathy Miller dissenting, to approve a set of regulations and fees for permitting commercial cannabis manufacturing, testing and delivery businesses, the city won’t issue licenses until tweaks are made to the city’s zoning code, according to Economic Development Manager Ingrid Alverde. The application process also needs to be finalized, she said.

Changes to the zoning code to identify allowable locations where cannabis businesses will require at least three separate public hearings, with a 30 day grace period for the rules to take effect after they’

Meanwhile, licenses that last for 120 days will be issued by the state starting Jan. 1, but business must first have local permits to apply, Alverde said. Both state and local permits will be required to operate a business in the city.

The policy adopted Monday follows a months-long process to update the city’s rules following last November’s passage of Prop. 64, which legalized recreational cannabis. After much debate, officials opted to continue a decade-long ban on brick and mortar dispensaries, but allowed for two delivery businesses and an unlimited number of facilities that manufacture edible and topical cannabis products and test quality.

Though specifics are still up for debate, proposals from city staff suggest that cannabis enterprises be limited to business parks and industrial zones. Merchants will have to maintain a certain distance from areas such as schools, parks, youth centers and neighborhoods. It’s not yet clear how many buildings fall within those zones, or how many of those spaces are vacant, Alverde said.

Permits will be issued on an annual basis and will initially cost $3,500, with a $2,500 renewal fee for subsequent years. Those fees will be used to cover the city’s costs for processing the applications and enforcing regulations. The city still hasn’t taken up the issue of levying an additional tax on cannabis sales, and is viewing the process much like its regulations to rein in short term rental operators in the city, focusing on preserving the quality of neighborhoods rather than generating revenue, Alverde said.

“At this point, the purpose of the regulations is less about economic development and more about creating the community quality we’re looking for,” she said.

Officials still need to tailor a request for proposals for delivery service operators, a process that will be used to vet applications that will ultimately be approved by the police chief. Manufacturing and testing businesses will also need to submit an application for city review.

Cannabis businesses can only operate between 8 a.m. and 8 p.m. with security cameras, alarm systems and other safety measures in place. Staff can revoke permits or deny the renewal of permits if those regulations aren’t met.

Employees must be at least 21 years old, and will be subjected to state and local background checks. The city will also have the ability to inspect businesses and audit their books.

Suzanne Cardiff, who hoped to create topical cannabis ointments from her Petaluma home, said the regulations quash her business plan. Among other issues, Cardiff criticized the fee structure, and implored the city council to reduce the costs and establish a sliding scale similar to the state’s methodology. Under state law, a processing fee of $1,000 is charged for all applications, but the licensing fees range from $2,000 to $75,000, depending on the gross annual revenue of the business.

“The city’s recently proposed regulations would make it impossible for me to engage in my business in Petaluma,” she wrote in a Dec. 17 letter to the council.

In Cotati, the closest city that allows medical marijuana dispensaries, a dispensary review requires a $4,500 deposit with actual costs charged, including hourly staff time. In Sonoma County, base fees for cannabis operations range from $2,800 to $7,761. Cotati and Sebastopol approved recreational cannabis sales to begin Jan. 1, while Santa Rosa’s dispensaries can start selling to adults at the end of next month.

Petaluma Vice Mayor Teresa Barrett, a vocal supporter of allowing dispensaries inside city limits, was skeptical of the fees.

“I think they’re high but I would be OK approving them if we have the intent to review and revisit those fees in the same way that we did when we were looking at Airbnb to see whether or not we actually are spending that amount of money,” she said.

The council also expressed a desire to encourage Petaluma operators into the city, giving them preference over out-of-the-area projects. As proposed, the city’s process assigns points for financial backing, past industry experience and references.

“I would love for local folks be able to open a business here in town as opposed to the way it’s proposed,” Councilman Gabe Kearney said. “A large San Francisco corporation might have a better leg up on selling a home delivery service.”

The city council expressed a mutual desire to revisit policies within a year as the legal landscape continues to unfold.

“Some of us wanted to go full bore rapidly, others initially to do a test drive and others preferred to not go at all,” Mayor David Glass said. “What we’ve got here is legislation that’s crafted to allow us to move into it slowly.”

(Contact Hannah Beausang at hannah.beausang@arguscourier.com.)