Just Three Bay Area Cities Allow Both Cultivation and Manufacturing
The California Legislature’s approval of the Medical Marijuana Regulation and Safety Act opened the door for cannabis operators to obtain state medical cannabis business licenses for everything from testing to distributing cannabis, and voter passage of Prop. 64 did the same for recreational pot. But, the most calls I receive are from cannabis entrepreneurs interested in commercial cultivation and manufacturing.
Meanwhile, in order to be licensed by the state, an operator must first acquire a local permit. And, a survey of cities across California shows that surprisingly few allow both commercial cultivation and manufacturing. In the Bay Area, just Richmond, Santa Rosa and Oakland have approved cannabis laws for both cultivation and manufacturing. Oakland’s laws come with a big asterisk, because the City has not started issuing permits. I’ll get back to this issue below.
In this overview, I summarize the three cities’ permitting distinctions, fees and quirks. An important caveat: As cities learn from experience and adjust to market conditions, regulations are expected to change. The rules listed below are not static and additional cities are expected to craft rules in the coming months for cultivation and/or manufacturing. I will review other regions of the state in future entries.
The Bay Area’s Big Two (Plus One)
For now, Richmond and Santa Rosa are it if you’re interested in applying for permits to cultivate and manufacture cannabis. In January 2017 the Oakland City Council will review amendments to cannabis legislation approved in May 2016, and permit applications should be released in the following months. The expectation is that both cultivation and manufacturing will still be allowed. Other Bay Area cities are starting to discuss cultivation and manufacturing, but have a ways to go.
Richmond and Oakland charge a five percent gross receipts tax on cannabis businesses. Santa Rosa applies tax rates to cannabis businesses based on existing industry categories, up to $3,000 annually, but is considering a 10% tax specifically for its cannabis industry. The three cities’ application and permitting fees vary widely. Each city defines cultivation and manufacturing differently and handles permitting through a distinct agency. See the highlights below.
Summary: Richmond’s medical cannabis permits are issued through the city’s Police Department and require a conditional use permit approved by the Planning Commission and the City Council. Cultivation is limited to two commercial zoning districts, and non-volatile manufacturing is restricted to industrial/office flex, and light industrial zoning. Volatile manufacturing is prohibited (volatile manufacturing is producing cannabis extracts through the use of solvents, such as butane).
- Application Completeness Review: $2,312
- Complete Application Review: $18,178
- Annual Regulation and Inspection: $16,989/Quarter
Summary: Santa Rosa’s medical cannabis permits are handled through the city’s Planning Department and require a conditional use permit approved by the Planning Commission. Cultivation is permitted in three industrial zones and the city allows non-volatile manufacturing in two industrial zones and a business park zone. Volatile manufacturing is prohibited.
Fees: The fees listed below are valid through December 2016 and total fee amounts depend of the scope of related environmental review.
- Minor Conditional Use Permit: $2,511
- Major Conditional Use Permit: $10,964
- Commission Public Hearing: $1,889
Summary: Permitting for Oakland’s medical cannabis industry will be handled through the City Administrator’s Office and operators will be required to obtain special business permits. The City has not issued permit applications because the City Council is debating economic, social and racial “equity” amendments to laws approved in May. The next Council meeting is scheduled for January 17, 2017. Permit applications are expected to be issued in the following months.
Once applications are issued, an important step in the approval process will be inspections by the Planning and Building Departments, but there will be no Planning Commission review. Based on the laws approved in May, cultivation will be permitted as of right in “light manufacturing industrial” and “research and development” zones or their equivalents. Non-volatile manufacturing will be allowed as of right in “custom manufacturing industrial” zoning or its equivalent, and volatile manufacturing will be allowed as of right in “general manufacturing industrial” or its equivalent.
- Application, Non-Dispensary Facility: $2,474
- Annual Regulatory Fee
- Gross Sales >$150,000: $11,173
- Gross Sales $50,000-$150,000: $5,586
- Gross Sales <$50,000: $2,790