Most Local Governments on Sidelines of California Cannabis Rush, But for How Long?

The number of licensed cannabis businesses in California continues to rise.

For the state’s three types of licenses — temporary, provisional and annual — the latest figures show roughly 2,700 businesses licensed by the Bureau of Cannabis Control, which includes retailers, distributors and laboratories.

But a more telling number for those interested in the cannabis business is one that shows that relatively few cities and counties in California allow commercial cannabis sales in their local jurisdictions.

Three-quarters of local jurisdictions have banned commercial sales, according to a study from Leafy that examined data up to May.

These are barriers to growth, but they may not last long.

“There’s definitely been quite a bit of interest in getting into the licensed industry,” said Alex Traverso, a spokesman for the bureau. “The problem is that there are still a majority of cities and counties in California that ban commercial cannabis activity.”

However, the bureau has seen one jurisdiction after another change its mind on letting in cannabis businesses.

It could be to take advantage of the massive local tax potential, or those entities could be yielding to public opinion, which increasingly looks favorably on recreational use. Most (84%) of Americans favor legalization for medical or recreational purposes, while 60 percent say they would embrace measures to tax and regulate it, according to a survey in April from PSB Research, Civilized, Burson Cohn & Wolfe and BuzzFeed News.

“It seems like on a daily basis you see a city or county pass an ordinance,” Traverso said. “Those folks will soon come to us with applications for annual licenses.”

States like Colorado and Washington, where recreational use was legalized several years earlier, have far fewer local prohibitions — 65 percent of cities and counties ban commercial sales in Colorado, and it’s 35 percent in Washington.

“Local cannabis bans tend to happen predominantly in suburban and rural districts in the aftermath of statewide legalization,” the Leafy study states. “At city council meetings, citizens and elected officials often voice fears about retail stores as a visual blight and a locus for criminal activity. Parents worry that a store could offer their children easier access to cannabis.”

California’s licensing structure is a work in progress.

In January 2018 all cannabis operators had temporary licenses, which were good for four months. Businesses could extend them for additional time if they paid a $1,000 fee and submitted their application for their annual license.

The last day the Bureau could issue temporary licenses was December of 2018.

A bill was passed by the legislature last year to create a provisional license good for a year, and anyone who had a temporary license could slide into one of those and then pay the licensing fee, according to Traverso.

“We had a huge rush from people looking to get temp licenses in November and December — more than 1,000,” Traverso said. “Now, next month we have a large amount of those licenses due to expire and we need to get those folks into provisionals.”

The most recent figures show 42 annual licenses, 1,834 temporary licenses and 859 provisional licenses.

Most of the licenses are for distributors (more than 1,100), and brick-and-mortar retailers (more than 600). There have also been roughly 300 licenses issued for transport operations, and 160 licenses for transport operations.