San Jose cannabis enthusiasts may be starting the year off on a high.
On Wednesday, the Planning Commission approved recommendations to change zoning laws for cannabis retailers that would allow up to 21 new dispensaries in commercial locations around the city. Sixteen dispensaries are allowed under current city regulations.
The recommendations are expected to go before the San Jose City Council for consideration next week.
The changes would enable dispensaries to expand beyond industrial zoning areas and into commercial areas. Other changes include setback requirements from schools, neighborhoods and community centers, allowing existing dispensaries to open second locations and rezoning to allow up to 1,300 locations for delivery-only dispensaries, which do not exist in San Jose.
The vote passed 8-3, with some commissioners citing concerns over increased dispensaries.
“(These setback recommendations) are a lot closer than we seem to realize, and I think this is a little premature to be voting and changing zonings in the city,” said Commissioner Jorge Garcia, who joined Commissioners Deborah Torrens and Sylvia Ornelas-Wise in downvoting the recommendations. “Let’s not forget that this is still against the law from a federal level.”
The other eight commissioners felt differently, especially regarding an equity initiative to allow those disenfranchised from the war on drugs to participate in the budding cannabis industry.
The proposal would allow up to 10 new cannabis businesses for equity applicants only, up to five of which may be retail storefronts. To qualify, applicants need to be San Jose residents. Currently, three of the 16 dispensaries are minority-owned.
“I think it’s terrific,” Commissioner Michael Young said. “It’s also really good that it encourages local ownership of cannabis businesses rather than the large businesses.”
Currently, cannabis retailers—both storefronts and cultivation sites—are only allowed to operate in industrial zones. Under regulations approved in 2014, San Jose adopted a vertical integration model, which means each cannabis “collective” is required to grow and process/manufacture its own products.
Because of the industrial nature of cultivating and manufacturing cannabis, the council determined dispensaries were appropriate only in industrial areas.
“Right now, they’re in a very, very narrow set of places that are not always convenient,” Planning Commissioner Pierluigi Oliverio told San José Spotlight prior to the vote.
By allowing them in areas zoned for commercial use, such as urban villages and transit areas, it could make it more convenient for buyers and more affordable for other people to operate dispensaries, Oliverio said.
The commission recommended more lenient setback requirements for dispensaries, such as removing and reducing requirements in urban villages and the downtown core.
For example, dispensaries are only allowed to operate if they are 1,000 feet away from schools and community centers, 500 feet from rehab centers and 150 feet from religious sites and residential areas, under current rules.
Under the new proposal, those setback requirements would be removed in urban villages and downtown areas for rehab centers, religious sites and residential areas.
Commissioners are also recommending dispensaries be prohibited from areas where the crime rate is 20% or higher.
Because of the city’s “robust cannabis regulatory program and the setback requirements, staff believes cannabis storefront dispensaries can operate safely and without impacts to the adjacent areas, much like any other retail storefront,” the planning department wrote in a memo to the commission.
Having more dispensaries could also bring in more revenue to the city, especially because San Jose is the only city in the South Bay that has cannabis storefronts. However, city staff said revenue projections are pending City Council approval of the recommendation.
Lobbyist Sean Kali-rai, founder of the Silicon Valley Cannabis Alliance, said San Jose’s pot industry has nearly doubled since 2016 when revenue was at $89 million.
“It’s now estimated at $170 million,” Kali-rai said at the meeting. “And it’s the same amount of dispensaries, in the same industrial areas with double the traffic and double the customer amount—hence the need.”
However, Richard De La Rosa, a lobbyist who represents cannabis business Canna Culture, said while the city would benefit and see an increase in revenue, the new changes could hurt existing dispensaries.
“My concern is that the smaller dispensaries won’t have the same opportunities as the big guys,” De La Rosa told San José Spotlight.
De La Rosa said that’s because adding new stores doesn’t necessarily mean bringing in new customers, so more locations will disperse clientele. The bigger cannabis retailers could also afford to expand to a second location with more foot traffic—a luxury that may not be afforded to smaller operations, he said.
“It’s going to allow San Jose to collect more fees,” De La Rosa said. “So to me, that’s the main reason it’s probably being done. Because as far as sales, I don’t see any immediate benefit to that.”
However, in terms of rezoning, he said it’s “long overdue,” as staff have deliberated these changes since 2019.
Contact Jana Kadah at [email protected] or @Jana_Kadah on Twitter.