Palm Springs moves to let all cannabis lounges serve food, host entertainment and ticketed events

Palm Springs is moving toward allowing cannabis consumption lounges, regardless of size, to prepare and sell non-cannabis food and nonalcoholic beverages, host live entertainment and hold ticketed events under regulations authorized by a 2024 change in state law. The City Council approved the ordinance on first reading last month in a 5-0 vote.

The proposal would allow lounges to host non-ticketed events and as many as 24 ticketed events per year, subject to city requirements. A previous proposal limited ticketed events based on lounge size, but that restriction was removed.

The council spent much of its July discussion on outdoor events, particularly at lounges located directly next to a liquor store or smoke shop. Staff had recommended prohibiting outdoor events at such locations, citing concerns about customers moving between cannabis and alcohol or tobacco businesses.

Councilmember Ron deHarte questioned why the city should block the activity in advance when cannabis businesses are already subject to extensive regulation and enforcement.

“The state says you can do it. So why don’t we work hard to figure out how to do it?” he said.

The council agreed that lounges directly adjacent to those businesses could seek a land-use permit for an outdoor event, allowing the city to review the location, site plan, attendance and other conditions. Cannabis consumption would remain prohibited outdoors.

The proposed rules would retain requirements involving ventilation and odor control, security, employee protections and age restrictions. Alcohol and tobacco would remain prohibited on cannabis lounge premises.

The expansion comes as Palm Springs collects substantially less cannabis tax revenue than it did several years ago.

Cannabis tax revenue fell from about $4.23 million in fiscal 2021-22 to $3.19 million in 2022-23 and $2.43 million in 2023-24, before dropping to a forecast $1.13 million in 2024-25. The city budgeted about $1.04 million for 2025-26 and $1.05 million for 2026-27.

Part of that decline was expected after the City Council cut the effective retail cannabis tax rate from 10% to 5% beginning in May 2024. The city said the reduction was intended to match rates in neighboring cities and help Palm Springs cannabis businesses remain competitive.

Cannabis tax collections had already been declining before the rate reduction. City staff describe cannabis tax revenue as “volatile” and projects collections will remain lower through the current two-year budget period.

Tourism-related tax collections have followed a different path.

The latest data from City Hall shows Palm Springs collected $52.88 million in transient occupancy tax from hotels and vacation rentals in fiscal 2025-26, up 4.8% from $50.48 million the previous year and slightly above the $52.52 million collected in 2022-23.

The fiscal year ended on a weaker note, however, with June TOT collections of $2.12 million, down 9.7% from $2.35 million in June 2025.

The city has also placed a moratorium on new cannabis retail applications and imposed dispensary ownership limits. Staff said in July that four lounges were operating, two were temporarily closed and three additional locations were in the pipeline.

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