Addressing concerns of current cannabis business owners, City Council approves 45-day hold on new licenses

After months of discussing what to do about a decline in revenue from retail cannabis, the Palm Springs City Council unanimously decided to put in place a 45-day moratorium on the city’s approval of new applications and transfers of cannabis retail business permits.

How we got here: The city listened to concerns from cannabis business owners about the oversaturation of cannabis businesses here, high taxes relative to other valley cities, and the thriving black market.

By the numbers: Palm Springs has permitted 33 cannabis retailers to operate in the city, 27 of which are operational. That means there’s about one dispensary per every 2,100 residents, one of the highest saturation levels in the state.

• The city’s 10% tax rate on retail cannabis is the highest in the valley. Desert Hot Springs also taxes at 10%, but the four other cities that allow recreational cannabis have a 5% or 6% tax rate.

Zoom in: While the moratorium is in place, city staff has proposed several solutions to improve the health of local cannabis businesses, which council members will consider.

• City staff suggests dropping the tax rate from 10% to 5%, decreasing retail tax revenue to $1.5 million. They also suggest capping the city at 15 dispensaries, implementing a one-person-one-dispensary rule, and prohibiting dispensary permits’ sale or transfer.

At issue: Each council member present voiced support for updating city ordinances related to cannabis, but they differed on the approach. Councilmember Lisa Middleton was skeptical about whether lowering taxes would help businesses or if the main issue was oversaturation.

What they’re saying: “I understand we have oversaturation in relation to our population, but are we oversaturated in terms of the tourist economy we have?” asked Mayor Grace Garner as she joined fellow councilmembers in directing staff to analyze the city’s situation.

Bigger picture: Several residents involved in the cannabis industry spoke at the meeting in support of the moratorium. Seven business owners or employees understood that over-saturation was a problem and acknowledged that a moratorium and a cap on the number of businesses would help.

Up next: The moratorium expires on Dec. 10, but because there is only one city council meeting between now and then (on Nov. 9), council members must decide then if they want to extend the moratorium for up to 10 months and 15 days.

• City staff told council members they will have updated research and new recommendations sometime after the new year.

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