Cannabis dispensaries continue to struggle even after moratorium on new businesses, tax cut

Five months after the Palm Springs City Council voted to reduce taxes and extend an existing moratorium on new cannabis dispensaries in the city until 2028, some local retail marijuana businesses continue to struggle due to what they say is too much competition and the influence of the black market.  

The moratorium, first put in place in October 2023, was extended in February after years of concerns that too many dispensaries were opening in the city. State data shows there are 25 retail cannabis licenses active in the city right now—one for every 1,700 residents—making Palm Springs one of the most saturated retail cannabis markets in the state. At one point, there was one dispensary for every 1,350 residents.

At issue, according to some retailers, is that the moratorium did not address concerns over existing competition in the desert since. City leaders were able to stop new dispensaries from opening and cut taxes charged to consumers, but have no control over other aspects of the cannabis business in town. 

“The truth is, I think the moratorium was a little late,” says Julie Montante, co-owner of 420 Bank Dispensary & Lounge in Palm Springs.  “They should have put a moratorium on years ago and not allow as many dispensaries as there are now because it’s really hurting our industry.”  

Glenn Standridge, chief technical officer of the Green Dragon Dispensary, agrees, saying, “The right amount was when there were 10-15 dispensaries in Palm Springs, [but] I don’t think the moratorium went into effect until it was in the 20s.”

During a discussion of how to aid cannabis retailers last fall, city staff agreed that 15 dispensaries in the city could be the ideal number. However, arriving at that number could take years.

When the city first issued the moratorium last fall, there were 27 dispensaries licensed to operate here. With only two fewer active licenses in the city since then, retailers say that’s still well over the number needed to level the playing field. 

“When we opened, we were probably doing three times as well as we are now,” says Standridge.  “By letting so many stores open, the city cut business into a third of what it was, and who’s going to survive that?”

To cope with the amount of competition in the legal market alone, Montante said her dispensary has a variety of uses beyond those of other dispensaries.  

“We have an arcade, we have pool tables, we have lots of fun entertainment,” she said. “We have, you know, the greatest budtenders in the world, and that all helps us out a lot.”   

Still, dispensaries with multi-purpose uses like 420 Bank continue to suffer since they also have to deal with a black market that has a more substantial customer base than the legal one.  

“By letting so many stores open, the city cut business into a third of what it was, and who’s going to survive that?”

— Glenn Standridge, Green Dragon Dispensary

According to some owners, the legalization of marijuana strengthened the black market rather than weakened it. 

“People don’t have to go into a [legal] dispensary and pay our higher prices if they just buy off the black market,” says Montante.  

However, this trend is due to more than the market price difference.  

“There are no real penalties to go into the black market,” says Standridge.  “I had a guy show me a ticket for getting caught with 3,400 pounds of [illegal] weed. Three thousand four hundred pounds, and all he got was a ticket.”  

The moves made in February are already showing an impact on the city budget. An amended budget adopted during a June City Council meeting shows a predicted 44% decrease in cannabis tax revenue in 2024 – from $3.46 million to $1.9 million.

Even with a 5% cut in taxes charged to cannabis consumers in the city that accompanied the moratorium, dispensary owners fear conditions will need to get worse before they get better.

“I think more dispensaries will have to close for things to balance out because there’s just too many,” says Montante.  

“I feel for many other owners because I know how much of a struggle it is for us,” adds Standridge. “Everyone we talk to tells us you guys have the best chances, but we’re still like, dang, we don’t feel the wind blowing in the right direction.”

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