For California cities that do not permit cannabis retail
Two paths lead to the same store. Only one of them is yours to write.
A cannabis retail ordinance can reach your city by petition, and once adopted it cannot be amended except by another election. The same use can be authorised by a development agreement your City Attorney drafts, reviews every year, and can terminate for cause. We are asking for the second one, and this page explains why we think you should want it too.
- What we propose
- One licensed location
- Instrument
- Development agreement, adopted by ordinance
- Who drafts it
- The City Attorney
- City's cost to evaluate
- Reimbursed
Gov. Code §§ 65864 et seq.
How a California city ends up with a cannabis store
There are two mechanisms, and they produce very different documents. The difference is not the store. The difference is who holds the pen, and whether anyone can change it afterwards.
By ballot measure
Elections Code, division 9, chapter 3- Qualifies on signatures from ten percent of the city's registered voters. § 9215
- On certification the Council has three options and no others: adopt the ordinance without alteration, submit it to the voters, or order a report and then do one of those two within ten days. § 9215
- The number of stores, the rate and every operating condition are fixed by the measure as drafted.
- Once adopted, it cannot be repealed or amended except by another vote of the people, unless the measure itself says otherwise. § 9217
- Proponents draft it. The City reviews it after it is already fixed.
- No annual review. No audit right. No termination for cause. Nothing to renegotiate.
- Timing is an election, not an ordinance cycle. Whether that election is early is the Council's discretion. § 1405
The City inherits a document it did not write and cannot correct.
By development agreement
Government Code, sections 65864 et seq.- A legislative act, adopted by ordinance after a Planning Commission recommendation and a noticed public hearing. § 65867.5(a)
- Approved only if the Council finds the agreement consistent with the General Plan. § 65867.5(b)
- The City Attorney drafts the instrument, or reviews ours. Either way the City's counsel has the pen.
- Annual compliance review, with the City's audit rights over gross receipts. § 65865.1
- Amendable by mutual consent. Terminable for cause on triggers the City defines.
- Recorded against the property, so it binds successors. § 65868.5
- Subject to referendum like any other ordinance — the same public check a measure would have had. § 65867.5(a)
The City writes the terms and keeps the ability to change them.
We are able to take the first path. We are asking for the second.
A local initiative is available to us. It is also available to any other operator, to any trade association, and to any group that can gather signatures from ten percent of your registered voters. That is what the Elections Code provides, and no city can prevent it. We say so here because you would work it out anyway, and because our reason for not doing it is the substance of what we are proposing.
A measure we wrote would be a measure you could not fix. Section 9217 locks an initiative ordinance against amendment except by another vote of the people. If the buffer turns out to be in the wrong place, if the hours are wrong, if the security conditions prove inadequate once the store is open, the City is left holding somebody else's drafting with no way to correct it. That is a poor outcome for a city. Over a ten-year operating life it is a poor outcome for an operator who has to live in that city, in front of that Council, with that Police Department.
An agreement is the opposite instrument in every respect that matters. It is negotiated rather than imposed, reviewed every year, amendable by consent, and terminable for cause. It costs us the permanence that section 9217 would have handed us. We think that is the right trade, and we would rather say so on the record than hold it in reserve.
Where we are in discussion with a city, we do not file. We will commit in the agreement itself not to file, circulate, fund or sponsor any local cannabis initiative in the city, and not to fund any City Council campaign or local ballot measure committee while a permit is in effect. These undertakings bind us only. No city has asked us for them.
What we propose
The commercial shape is deliberately narrow. One store, a higher effective rate than a competitive market produces, and a floor under the City's revenue so the City carries no downside.
A single retail location
One store, sited where the City directs, subject to any buffer the City wishes to impose beyond the state minimums.
A higher effective rate
An effective local rate meaningfully above what a competitive multi-store market typically produces, structured so that no new tax is imposed where a voter-approved rate already exists.
A guaranteed minimum
A floor payable regardless of sales volume, so the City carries no downside if the location underperforms.
Community benefits
A one-time payment at execution and an annual contribution thereafter, plus local hiring and youth-prevention funding paid to providers the school districts name.
Cost reimbursement
Reimbursement of the City's reasonable third-party legal and consulting review costs, by deposit and in advance, so that evaluating this proposal is not a charge on the general fund.
Annual review, termination for cause
Compliance review under section 65865.1, a right to audit gross receipts, breach triggers the City defines, and the City's right to suspend or terminate.
How any payment under an agreement is characterised is a question for the City's own counsel, and we expect your office to satisfy itself on it. We are glad to structure the consideration differently if your City Attorney would prefer a different form.
The arithmetic, and the control
A measure typically authorises several stores at a rate the electorate then fixes in place. That matters less for the percentage than for the base it applies to: in-city competition drives shelf prices down, and the City's percentage is charged on the lower number.
| If it comes by measure | If it comes by agreement | |
|---|---|---|
| Number of stores | Fixed by the measure. Typically more than one. | One, sited where the City directs. |
| Local rate | Fixed by the measure and then by the electorate. | Negotiated, and materially higher in effective terms. |
| Taxable base | In-city competition drives shelf prices down, lowering the gross receipts the percentage applies to. | No in-city price competition eroding the base. |
| Revenue floor | None. The City bears the volume risk. | Guaranteed annual minimum, payable regardless of sales. |
| Who drafts the terms | Proponents. The City reviews them once they are fixed. | The City Attorney drafts or reviews. |
| Oversight cost | Inspection, enforcement and administration across every authorised site. | One site to inspect, one licensee to administer. |
| Can the City change it later | Not without returning to the ballot. | Amendable by mutual consent; terminable for cause. |
| Annual review | Only if the measure provides one. | Required, with audit rights over gross receipts. |
| Cost of review | Borne by the general fund. | Reimbursed by the operator, in advance. |
| Timing | An election, on a date the Council sets. | One ordinance cycle. |
One note on the code, because it is often got wrong: the provision that used to give proponents a special election as of right at fifteen percent, Elections Code section 9214, was repealed in 2017. Any consultant still citing it is working from a repealed statute.
What the City decides
Every item below is the City's to set. We have views on some of them and no standing to insist on any.
- Where the store goes, and any buffer beyond the state minimums
- Hours of operation and limits on delivery
- Whether on-site consumption is permitted at all
- Security specification — cameras, alarms, staffing, lighting
- Signage, exterior appearance and odour control
- Local hiring commitments and a wage floor
- The breach triggers, and what suspension or revocation requires
- Annual compliance review and audit of gross receipts
- The cap on the number of permits the City will ever issue
- Whether the Police Department writes the security conditions itself
How this proceeds
- 01
Working session
Forty-five minutes with the City Manager, Finance and the City Attorney. Nothing is committed and nothing becomes public.
- 02
Model review
We hand over the full workbook. Every assumption is visible and editable, and we invite the City to substitute its own oversight cost figures.
- 03
Term sheet
A short non-binding term sheet, so both sides can see the commercial shape before anyone spends money on drafting.
- 04
Drafting and hearings
The City Attorney drafts or reviews. Planning Commission recommendation, noticed public hearing, adoption by ordinance, recordation.
- 05
Licensure and opening
State licensure through the Department of Cannabis Control, build-out to the agreed security and design standards, then annual compliance review.
Start with a conversation, not an application
If cannabis retail is not something your city is considering, say so and we will not come back. If it is worth forty-five minutes, we will come to you, bring the model, and leave the workbook behind whatever you decide.
- Principal
- Sidney Dunmore
- Telephone
- (916) 572-7210
- 3941 Park Drive, Suite 20-626
El Dorado Hills, California 95762