Novato mulls retail cannabis storefronts

OG Article

Krissy Waite

February 18, 2025

Novato may allow storefront cannabis sales.

City Council members said at a study session this month that they were open to allowing cannabis storefront retail in the city. If the city allows such storefronts, it would be the first in the county to test the market, according to city staff.

“I think the location is going to be critical, but understand that there are places that would work here. I’m really open to supporting something that makes sense,” Councilmember Mark Milberg said. “I think this community is definitely wanting it.”

Considering licensing cannabis storefronts is a goal listed in Novato’s strategic plan. California voters legalized marijuana use under Proposition 64 in 2016. Novato has issued some cannabis business licenses, but none for storefront sales — such as a dispensary — due to rules the city passed in late 2019.

“The emphasis is on ‘consider,’” Community Development Director Clare Hartman said. “Cannabis retail in particular is polarizing, or can be polarizing, in the community.”

Hartman said the city has three cannabis businesses: an indoor cultivation center and two delivery services. A cannabis testing lab closed in October 2023. The city approved the four businesses in 2021.

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“Currently, if somebody wanted to get cannabis at any time they could get delivery service, right?” Mayor Pro Tem Rachel Farac said. “So it’s already been happening in Novato.”

Still, Novato is ahead of many county municipalities in the cannabis conversation. The city allows retail delivery, distribution, testing, manufacturing and cultivation businesses; San Rafael doesn’t allow cultivation. No city or town has storefront retail, though Fairfax has a medical cannabis-only storefront, Hartman said.

“There is a market here that is unique from other areas, specifically just to the north,” said Hartman, who noted that in Sonoma County retail storefronts are allowed in all but two municipalities.

Commercial cannabis has not generated a lot in revenue for the city, Hartman said. She said it can be challenging to collect and enforce the cannabis business taxes and fees and keep the momentum going from the business proposal to opening day.

Cannabis storefront retail in the county is fairly untested, Hartman said. Available commercial real estate could be limited, landlords could be hesitant to work with cannabis retailers, and city zoning could be challenging.

If Novato does move forward with storefronts, then rules such as how many stores, and where, need to be set, she said. The City Council could decide to put a citywide cap on the total number of stores, limit the proximity between stores, regulate stores to specific districts, or prohibit stores from being close to sensitive sites.

“This has been a long time coming, given where we were at several years ago,” Councilmember Pat Eklund said. “For me, the location of a retail storefront for cannabis, the real key really is location. Location, location, location. It can’t be near any youth activities and it’s really got to be carefully looked at.”

Councilmember Kevin Jacobs said location will be important, especially when considering parking. He also suggested limiting operating hours to no later than 5 or 6 p.m, and keeping signage minimal.

Currently, Novato has restricted commercial cannabis to its commercial-industrial, light-industrial and office, and the business and professional office districts. The neighborhood-commercial, general-commercial, downtown core business and downtown core retail districts are not eligible for cannabis businesses.

Devon Wardlow, the vice president of public affairs for cannabis dispensary company Embarc, said between one to two licenses ensures the market will not be over-saturated, given Novato’s population. She said retail cannabis is most successful in commercial zones.

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“Because at the end of the day, cannabis retail is retail,” Wardlow said.

Other policy considerations include whether events or on-site consumption is allowed, and how to add and collect a cannabis business fee. Novato currently imposes a public benefit fee on cannabis businesses between 3.5% and 4% of their net gross income. A tax would require a ballot measure, Hartman said.

Council members had a variety of views on how to move forward.

Farac suggested allowing two operators to encourage competition, with a 6% community development fee. Milberg agreed, but suggested a 5% fee. Eklund suggested between one and three locations.

“I am not in favor of an onsite café or consumption, at this point,” Jacobs said.

The Economic Development Advisory Commission was supportive of introducing storefront retail in Novato, however a cap on stores — no more than three — was recommended, Hartman said. Commissioners were unsure about allowing on-site consumption at the stores, and supported the public benefit fee.

Novato Chamber of Commerce board president Dale Kline said the chamber supports any legal business in Novato. He said capping the number of storefronts will ensure the retailers are successful.