The redistribution could force some San Diego cannabis dispensaries to close

Some San Diego cannabis dispensaries could be forced to close if new city council district boundaries change the number of dispensaries in each district, causing local cannabis industry leaders to seek a solution.

Each of the city’s nine parishes is restricted to four pharmacies under the 2014 city law, which for the first time allows legal pharmacies in San Diego. Three of the nine districts have already reached this limit.

If new county lines are drawn this year to move some pharmacies to other counties, some counties could then go over the limit of four.

City Attorney Mara Elliott said pharmacies in a district where the cap is being exceeded will not have to close immediately, but she said they will likely have to close when their five-year conditional use permits expire.

Industry leaders reached out to city authorities on Friday to resolve the issue quickly, which city officials apparently did not expect when they wrote the pharmacy law seven years ago.

Industry leaders told the city council’s business development committee that a pharmacy operator shouldn’t be forced to close just because they suddenly relocate to a new parish.

“This is an unnecessary and unfair result,” said Phil Rath, chairman of the United Medical Marijuana Coalition trade association. “The city should change the municipal code to recognize the existing operation and to make it grandfather against changes in the district boundaries.”

Gina Austin, one of the local cannabis industry’s foremost lawyers, said San Diego should follow the lead of other cities like Chula Vista, where pharmacies will continue to be assigned to the district they were in when they were allowed to open.

“That would be an easy solution for the city,” said Austin.

Industry leaders said it was important for the city to resolve the issue before completing the redistribution process, which is expected in early 2022. The district boundaries are redrawn every 10 years based on new census data.

The city’s legislation was extended in 2014 to include the upper limit of four pharmacies per district, so that no single district would be significantly more affected by the legalization of cannabis pharmacies than others.

In a recent statement, Elliott said that conditional use companies have many legal rights, but expiration dates are very important.

“If the grantee has incurred significant costs and acted in reliance on the permit, the grantee has acquired ownership of the permit and is entitled to due process protection before the permit can be revoked,” she wrote.

“However, this acquired right to work under an approved (conditional use permit) is unlikely to go beyond the CUP expiration date,” she wrote. “When a CUP has been issued and contains a term of expiry, the courts have determined that the grantee has consented to be bound by the terms of the permit, including the expiry, and there is no implied agreement that the permit will be renewed.”

The three districts that have reached the cap are District 2, District 6 and District 8, so there will be a problem if newly drawn boundary lines move an additional licensed pharmacy to one of these districts.

In Elliott’s opinion, it appears that the city would renew the permits of the first four pharmacies in that district whose permits are expiring, leaving the pharmacy unlucky to expire last as the one whose permit is being revoked.

The problem can extend beyond the three counties that have already reached the cap. Three pharmacies have been approved in both District 1 and District 7, with a fourth pharmacy each nearing final approval. And a third pharmacy got final approval this week in District 9.

Industry leaders also advocated on Friday for the city to consider creating a cannabis business improvement district where pharmacies would tax themselves to raise funds to tackle the black market of illegal cannabis delivery services.

The aim is to use the money to increase consumer awareness of legal options and to drive consumers out of the “dangerous” black market, said Rath.

The Economic Development Committee unanimously approved the establishment of the business improvement district last November, but city officials failed to implement it.

Mayor Todd Gloria’s staff said Friday they had instead focused on efforts to create a city-wide cannabis equity program that would help low-income and minority people get into the lucrative but expensive industry.

“That was our priority, and that’s what we are instructing our employees about at the moment,” said Matt Yagyagan, associate director of politics at Gloria.
Councilor Chris Cate said the city could create an equity program and a business improvement district at the same time.

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