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File Number: 19-083 <br />to allow retail sales for adult use. Such a dual-track process would allow staff time to quickly <br />propose an amended ordinance to allow adult use sales, should the Council so choose, while <br />providing sufficient time for staff to work with the dispensary operators, the public, and other <br />relevant stakeholders to thoughtfully develop more comprehensive changes to the various other <br />sections of the ordinance. In the meantime, however, dispensary permittees would still be <br />required to comply with all of the City’s regulations, as codified in the existing ordinance. <br />Potential Time Limit for Commencement of Operations <br />The City Council’s January 7, 2019 request to consider allowing retail sales of cannabis for adult <br />use also included a request to consider coupling any such authorization with a time limitation for <br />dispensaries to commence operations and begin serving customers. As further background, <br />several years have now passed by since the operating permits for the City’s three permitted <br />dispensaries were issued by the City Council. More specifically, Harborside San Leandro was <br />issued its operating permit on September 8, 2015, Davis Street Wellness Center was issued its <br />permit on July 18, 2016, and Blum San Leandro was issued its permit on October 17, 2016 (with <br />an effective date of June 1, 2017). Out of the three, only Blum San Leandro has commenced <br />operations. If so directed by the City Council to bring back draft ordinance amendments to allow <br />adult use sales, additional language could also be incorporated into the authorizing resolution that <br />would concurrently impose a time limit, or “shot clock” that would automatically rescind the <br />operating permit of any previously permitted dispensary that fails to commence operations prior <br />to December 31, 2019. To the extent the City Council decides to move forward with allowing adult <br />use sales, staff seeks clarifying direction from the City Council as to whether to also include such <br />a time limitation. <br />Fiscal Impacts <br />Implementing a regulatory process that allows for adult use sales at previously permitted <br />dispensaries could have considerable positive impacts to the City’s budget. By broadening the <br />dispensaries’ customer base, such sales activity would increase the level of General Fund <br />revenue generated by the City’s local gross receipts tax, which was authorized by voters via <br />Measure NN in November 2016. San Leandro’s local gross recent tax is currently set at 6% <br />through June 30, 2019, and will increase to 7% thereafter through June 30, 2021, after which point <br />it will increase to 8%. Although long term revenue forecasts are inherently speculative given the <br />rapidly evolving nature of the industry, based on preliminary estimates provided by one of the <br />City’s existing permit holders that were derived from their experiences in other jurisdictions, it is <br />estimated that adult use sales could generate several hundred thousand dollars in additional <br />annual General Fund revenue for the City. <br />PREPARED BY: Eric Engelbart, Deputy City Manager, City Manager’s Office <br />Page 4 City of San Leandro Printed on 2/13/2019