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Local Municipalities are Calling the Shots in Recreational Marijuana Markets

by Sarah Cawthon December 04, 2019

As state level marijuana legalization becomes more commonplace, many states remain a patchwork of regulations with local jurisdictions choosing to implement additional rules in conjunction with state laws. In the cannabis industry, some local governments are able to exercise great authority with the law even with the state setting the statutory framework.  

California and Michigan are two of several states that are allowing their counties and cities to decide to opt in or out of admitting marijuana businesses within their borders.

In California, the world’s largest legal cannabis market, nearly two-thirds of the municipalities have banned marijuana businesses from setting up shop. To put that number in perspective, only 24 of the 58 counties and 161 of the 482 municipalities have elected to permit commercial cannabis activity in any capacity.

And Michigan, the most recent state to open recreational sales, is no different. In the state, the number of municipalities opting out of recreational marijuana sales sits at 79%. Of course, these municipalities always have the chance to opt in later on.

Many cities, including Detroit, have taken a wait-and-see approach. The city decided to opt out until legislative details including social equity can be addressed. Others have opted out of recreational sales because their communities voted against the original proposal and aim to give their constituents what they voted for; these cities are less likely to opt in later on.  

The jurisdictions that choose to opt in are then permitted to discern which types of cannabis businesses they will welcome. For instance, some may only allow for testing labs, or will permit medical marijuana businesses but not recreational, such as in San Leandro, California, where only medical marijuana businesses are permitted.

Another example includes a stretch of Interstate 5 in California that spans between San Francisco and Los Angeles where adult-use shops are nearly nonexistent attributable to local laws barring adult-use marijuana businesses. 

Furthermore, municipalities are able to dictate how many cannabis businesses are permitted as well as where they are located. According to Michigan state law, marijuana businesses are barred from establishing in exclusively residential zones or within 1,000 feet of any school for grades K-12. Local municipalities then have the authority to either reduce or expand location requirements as they see fit.

When you lay the applicable zoning over a map along with the restriction zones for schools, parks, youth centers and other sensitive uses, oftentimes very few plots are actually available to start a business.

And that’s only if you can first gain local approval to start a marijuana business.

In the County of San Diego, cultivation is legally allowed, but manufacturing and retail are not according to local law. However, within the County of San Diego, most jurisdictions ban all commercial marijuana activity, including cultivation, processing and dispensaries such as in Del Mar, Encinitas and Escondido.

There are then some municipalities that permit limited commercial activity such as in the city of San Diego which allows for medical and recreational dispensaries and the city of Oceanside which allows for limited commercial medical cannabis facilities. In short, in California, the cities have the final say.

Additionally, both California and Michigan leave their application process open continuously allowing local governments to determine when applications will be accepted in their jurisdictions. However, a city might then make applicants compete for a limited number of permits and the impact of this scarcity can severely impact who is able to contend.

This emphasizes the barriers marijuana entrepreneurs face when aiming to enter the legal cannabis market. Concisely, the process is more complex than simply deciding to open shop. As local municipalities continue to call the shots in many states’ legal marijuana markets, it’s worth examining how beneficial this is for the state and its citizens.

If you’re interested in opening a marijuana business, it’s imperative to research local law in conjunction with state regulations. Local approval is always required for final state approval to operate.