Municipal Risk: A Problem Without a Near Term Solution

State cannabis laws can provide counties or local jurisdictions with the ability to determine whether to permit cannabis activity, and to mandate the place, time and manner in which a cannabis business can operate. There is risk though, that a county or city can change its mind.

This occurred recently in Mountain View California. The new city council voted to repeal an ordinance that permitted four cannabis dispensaries. Over 130 local residents spoke at the four hour meeting. The new mayor lost the vote to repeal the cannabis ordinance. The city council’s action raises a red flag for businesses relying on a local jurisdiction for a cannabis permit. Ten businesses that were vying for the city’s four spots invested capital and time. The risk associated with starting a business in a city changes along with administration.

The power a city or county holds over a cannabis license was also highlighted in a recent court of appeals decision in Oregon. The state granted a production license, which could not be used due to local ordinances prohibiting cannabis production. The Oregon Appeals Court sided with Kittitas county, and indicated that under current Oregon law, a cannabis license is useless without a local zoning law permitting the activity.

Municipal risk can delay the application process at any stage with resulting litigation due to local scoring methodologies and transparency requirements. Cities are also increasing this risk by rethinking how social equity programs fit into the permit allocation process as they are handing out licenses using other methodologies. Businesses seeking permits should consider local politics, stability of past city councils, and formal process setting procedures when deciding where to spend capital on license applications. A safer approach may be to purchase a license holder in a city that has stabilized, and established a track record of supporting the cannabis industry.