2025 COUNCIL STUDY ISSUE
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Title
CDD 25-03 Allow Commercial Marijuana Activities in Certain Zoning Districts
BACKGROUND
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Lead Department: |
Community Development Department |
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Support Departments: |
Office of the City Manager |
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Office of the City Attorney |
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Department of Finance Department of Public Safety Department of Public Works Environmental Services Department |
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Sponsor(s): |
Planning Commission |
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History: |
New Study Issue |
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Council Strategic Priority: |
Yes |
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(At time of sponsorship) |
Equity, Access and Inclusion |
SCOPE OF THE STUDY
What precipitated this study?
In January 2016, three state laws, collectively known as the Medical Cannabis Regulation and Safety Act (MCRSA), became effective to govern cultivation, processing, transporting, testing, and distribution of medical marijuana/cannabis to qualified patients. The Sunnyvale City Council adopted Ordinance 3077-16 in April 2016 to clarify prohibition on cultivation, distribution, sale, and delivery of medical marijuana in the City.
Later in November 2016, California voters approved Proposition 64 - the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), which legalized recreational use, possession, and cultivation of marijuana throughout the state. The AUMA also authorized a comprehensive state system to regulate commercial marijuana activities. The AUMA allows cities to adopt and enforce local ordinances to regulate marijuana businesses, such as storefront dispensaries, or completely prohibit the establishment or operation of such businesses within a city’s jurisdiction.
The City currently prohibits all commercial marijuana activities and outdoor cultivation in all zoning districts as affirmed by Ordinance 3125-17 in 2017. A study issue to allow cultivation for research and development (R&D) purposes was proposed in 2018 (CDD 18-07), but was deferred in 2019 and dropped in 2020. The use, possession, cultivation, and sale of marijuana for both medicinal and recreational purposes remains unlawful at the federal level.
Former Planning Commissioner Howard provided a Study Issue Form to staff on June 4, 2024, to study reversing the prohibition on marijuana businesses in order to increase tax revenue and patronage of retail areas. The study issue idea was subsequently agendized for discussion at the June 24, 2024, Planning Commission hearing where the commissioners supported the idea on a 7-0 vote.
Commissioners noted attitudes about marijuana use have changed since statewide legalization; the successful operation of dispensaries in other jurisdictions; and the recent actions taken by the federal government to reclassify marijuana off the list of Schedule I drugs. Commissioners mentioned marijuana deliveries still occur in Sunnyvale, but the City does not gain tax revenue. Moreover, the City allows uses with potentially more harmful products such as liquor stores and firearms dealers in commercial areas. Commissioners acknowledged public safety and quality of life concerns, and that careful consideration would be needed on potential locations for zoning marijuana businesses.
What are the key elements of the study?
Currently, San Jose and Mountain View are the only cities that allow commercial cannabis programs within Santa Clara County. The City of San Jose permits retail storefront and delivery businesses, as well as distribution, testing, and manufacturing. San Jose’s Cannabis Regulatory Program includes zoning and operational requirements, and subjects businesses to a local marijuana business tax. San Jose’s Division of Cannabis Regulation is operated directly out of the Office of the Chief of Police and works directly with staff from the City Manager’s Office; City Attorney’s Office; Planning, Building and Code Enforcement; Fire Department; and City Finance in a collaborative effort. The City of Mountain View allows a maximum of three non-storefront marijuana businesses with limitations on personal and commercial uses. Only one non-storefront business is currently permitted to operate in Mountain View, and applications are subject to a selection lottery by the Zoning Administrator. The Mountain View Police Department oversees the administration of permitting and operational regulations. Marijuana businesses in Mountain View are subject to a local cannabis business tax.
The study would involve a review of current regulations and an analysis of the potential impacts associated with reversing the prohibition. Staff would explore the potential zoning districts where businesses could be located and develop a draft ordinance with permitting requirements. There would be extensive community outreach, as well as coordination with other jurisdictions that allow marijuana businesses, and consultation with the California Department of Cannabis Control.
Reversing the prohibition would be a large-scale effort with coordination across several City departments. The Department of Public Safety (DPS) would need to be closely involved with the study in reviewing whether reversing the prohibition would increase calls for service, crime, and create staffing challenges. According to anecdotal conversations with San Jose Police Department staff, there are frequent calls for service at San Jose dispensaries, quality of life complaints from surrounding businesses and residents, and an increase in crime in terms of underage consumption, smoking in public, other drug use, etc. The Fire Prevention Division would also consult on fire safety concerns.
Other responsible departments include the Office of the City Manager for outreach and equity considerations; the Office of the City Attorney for legal review; the Department of Public Works for consultation on locations where businesses could be allowed as well as public improvements that could be required; the Environmental Services Department to review refuse, stormwater, water, and sewer impacts; and the Department of Finance for fiscal and tax implications.
Lastly, the Planning Commission should clarify whether this study scope would include reversing the prohibition on outdoor cultivation. Currently, only indoor cultivation of up to six live marijuana plants is permitted in Sunnyvale within a single private residence, or upon the grounds of that residence or inside an accessory structure.
Staff does not provide a recommendation on the merit of the study issue at this time per the Study Issue Policy. Sponsored study issues would be considered by the City Council for ranking at the February 13, 2025, Study Issues/Budget Proposals Workshop.
Estimated years to complete study: 1-2 years
FISCAL IMPACT
Cost to Conduct Study
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Level of staff effort required (opportunity cost): |
Major |
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Funding Required for Non-Budgeted Costs: |
Unknown |
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Funding Source: |
Will seek budget supplement - General Fund |
Costs are unknown at this time. The study would involve hiring consultants for project management and public outreach, researching policy based on best practices from other California jurisdictions, and studying fiscal impacts, including developing a recommended tax for sales transactions.
Cost to Implement Study Results
Unknown. Study would include assessment of potential costs, including capital and operating, as well as revenue/savings.
EXPECTED CITY COUNCIL, BOARD OR COMMISSION PARTICIPATION
Council-Approved Work Plan: Yes
Council Study Session: Yes
Reviewed by Boards/Commissions: Planning Commission
RECOMMENDATION
Recommendation
Vote whether to sponsor the study issue from the Proposed Study Issues list.