Retail cannabis is coming to Costa Mesa following a November ballot initiative and the city could get roughly $3.2 million annually of tax revenues from the shops.

Before these businesses set up shop, the city has laid some ground rules for operators on how and where they can sell their products.

On Tuesday, city council members voted 5-2 to create rules for retail marijuana shops as well as setting a 7% tax rate. Councilmembers Don Harper and Arlis Reynolds dissented.

“I’m not going to say they’re perfect. Could they be improved upon? Maybe we’ll see, but this is the best that we could do after a lot of hard work,” Mayor John Stephens said.

Some of the rules reflect recommendations from the city’s cannabis Ad Hoc committee.

One recommendation suggested that no commercial cannabis shop could be located on a property where an illegal shop has been until roughly 6 months after the unlicensed business vacated. 

The council majority changed the waiting period to a year after a request from Councilwoman Andrea Marr.

Reynolds said there’s still some unanswered questions.

“I think we’ve fallen short on outreach to the public. I think we don’t fully understand potential impacts on other businesses and I don’t think that we’re protecting against over-concentration (of shops) in a way that could be detrimental to some areas and unfair to some areas,” Reynolds said.

Council members set to finalize the cannabis shop ordinances at their meeting on May 4. If finalized in May the regulations will go into effect a month later.

The move stems from a ballot measure.

Last November, 65% of Costa Mesa voters approved retail cannabis shops and delivery services.

A couple months prior to the election, city council members voted in favor of a resolution supporting the ballot measure as a way to help bring an end to the numerous unlicensed cannabis shops in the city. 

“The demand is being filled by illicit operators or trap shops. We get no tax revenue from those shops and we don’t know what they’re selling. They’re selling unregulated products to our consumers,” Stephens said, adding it’s costing the city money to address the issue.

Some residents and advocates questioned the 7% tax rate and called on the city to lower it.

“Seven percent is not actually competitive with the other markets that are near you,” said Kandice Hawes-Lopez, Orange County’s executive director of the National Organization for Reformation of Marijuana Laws.

“If you want to be competitive with the black market and if you want to get rid of the illicit operators that are there, then 7% percent is only going to drive the consumers back to those markets.”

Storefronts would be required to be at least 600 feet from youth centers and 1,000 feet from schools and public playgrounds. 

Councilmembers Marr, Reynolds, Harper and some residents called on the council to include private playgrounds as well. 

Staff said there is no way to track private playgrounds.

Cities in the county have also looked to regulate commercial marijuana recently.

In November, La Habra residents voted to approve a ballot measure that imposes a commercial cannabis business tax and allows for four delivery-only cannabis facilities in town. The city is expected to approve permits for the businesses next month.

Meanwhile, Fullerton city council members repealed an ordinance that allowed cannabis store fronts earlier this year.

Retail cannabis stores in Costa Mesa will need conditional use permits to operate. There is no cap on the number of permits for such business that the city can approve, but the council can implement a cap in the future through a resolution.

Hosam Elattar is a Voice of OC Reporting Fellow. Contact him or on Twitter @ElattarHosam.

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