Legalize It: Mayor and Supervisor Sheehy Introduce Regulations for Non-Medical Cannabis Businesses

Last November, Californians and 74 percent of San Francisco voters approved Proposition 64, which decriminalized the recreational use of cannabis by adults over the age of 21 and set up a state-level licensing and taxation system for non-medical cannabis businesses. The proposition immediately decriminalized recreational use but gave the state a grace period before it is required to begin issuing state cannabis licenses to businesses on January 1, 2018.

As with medical cannabis, Proposition 64 left local governments with zoning and permitting authority over businesses that cultivate, process, or sell non-medical cannabis. With the state nearing the deadline to issue business licenses, the Mayor and Supervisor Jeff Sheehy teamed up to introduce comprehensive zoning regulations (the “Ordinance”) for cannabis retailers and growers, along with manufacturers of cannabis products. The Ordinance also tweaks current rules for Medical Cannabis Dispensaries (“MCDs”) and establishes a process for MCDs to convert to general retail use.

Under the new rules, cannabis retailers would be widely permitted in commercial districts around the city, provided they are not within 600 feet of a public or private school or within 300 feet of an MCD or another cannabis retailer. In Chinatown Mixed-Use and nearly all Neighborhood Commercial Districts, cannabis retail could only be established with a conditional use from the Planning Commission. As the shopping streets that define San Francisco’s neighborhoods, these districts are often the most contentious for new businesses and have seen pitched battles over MCDs. The Conditional Use process guarantees wide public notice and an opportunity for input, meaning that cannabis retail will have a tough reception in many of these areas.

In contrast, proposed limits on new cannabis retail stores in Commercial districts (primarily downtown and along the northeastern waterfront) and Manufacturing districts, are minimal. In most instances, no discretionary approvals would be required and public notice would be minimal. The same is true in most Eastern Neighborhoods Districts, except that neighborhood notice would be required, giving neighbors an opportunity to request discretionary review at the Planning Commission. In PDR Districts, only cannabis “microbusinesses” that sell products grown or manufactured on-site would be allowed.

On the production side, no outdoor cannabis cultivation would be allowed in the city. However, indoor cultivation with up to 22,000 square feet of canopy would be classified as “Industrial Agriculture” and permitted in PDR and Manufacturing districts. Cannabis-related manufacturing would generally be permitted in the same districts.

Finally, the Ordinance puts existing MCDs in pole position to convert from medicinal to general public sales. Under a temporary program that expires on January 1, 2020, a permitted MCD can convert to general retail without the need for a conditional use. Permit applications must be filed before June 30, 2018, and must be approved by the Planning Department or Planning Commission before the end of 2019. Under this program, cannabis retailers are exempt from the minimum separation requirements from schools, MCDs, and other retailers.

Before it can become law, both the Planning Commission and Board of Supervisors must hold public hearings on the Ordinance. If recent hearings on specific MCDs are any indication, public interest is likely to be intense, and there will be changes as the legislation moves through the process. Watch this space for updates.


Authored by Reuben, Junius & Rose, LLP Attorneys Daniel Frattin and Thomas Tunny

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full-service real estate law firm. We specialize in land use, development, and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, the formation of limited liability companies and other entities, lending/workout assistance, subdivision, and condominium work.