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Palm Springs issues temporary ban on new cannabis dispensaries while it considers changes

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The Palm Springs City Council voted unanimously Thursday to enact a temporary ban on new cannabis dispensaries.

However, the council members did not yet seem to be on the same page about what — if any — long-term steps to take to address a industry that some of them say has become oversaturated and is on the decline.

The moratorium, which was pitched as a way to give the council time to consider its options without letting more businesses open under existing rules, will be in effect for the next 45 days. However, the council will consider extending it at its next meeting on Nov. 9.

A report provided to the council ahead of Thursday's meeting stated that cannabis tax revenues dropped for the second straight fiscal year in Palm Springs and have also been dropping in cities across the valley. The average amount of sales generated per dispensary has also been dropping in the city, which reported having 28 operating dispensaries in January.

The council also discussed the several recommendations made by city staff ahead of the meeting about ways to manage the cannabis industry. Those recommendations included capping the number of dispensaries at 15, prohibiting the sale or transfer of existing cannabis permits and cutting in half the existing cannabis taxes, which are among the highest in the Coachella Valley.

Cap concept receives mixed reception

While the council didn’t make any decisions beyond implementing the moratorium, Councilmembers Jeffrey Bernstein and Lisa Middleton appeared to generally favor taking more aggressive steps to manage the cannabis industry and limit the number of dispensaries. Mayor Grace Garner and Councilmember Ron deHarte generally voiced more uncertainty or skepticism about doing so.

The fifth council member, Christy Holstege, recused herself from the discussion, as she typically does on this topic because her spouse, Palm Springs real estate agent Adam Gilbert, has business ties to the cannabis industry.

Bernstein said he supports a cap because the allure of cannabis has led longtime businesses to lose their leases and landlords to raise rents in areas popular with cannabis retailers, only for the dispensaries to eventually close. He also said that by letting cannabis businesses proliferate so much, the city has hurt an industry still in its infancy rather than helping it.

“I would rather help,” he said.

Middleton agreed with Bernstein and was also concerned about the industry’s impact on the real estate market, especially in what she sees as the likely event that many of the existing dispensaries don’t make it.

However, she said that while cannabis taxes are higher in the city then surrounding ones, she believes oversaturation is ailing the industry more than overtaxation. She said that she was open to cutting taxes, but concerned about the hit to city revenues.

“What we're seeing is city after city trying to cut their taxes significantly in order to save an industry that is just simply overpopulated with distribution points,” she said.

DeHarte said he did not understand the rationale for one of the proposals, which would anyone from owning multiple dispensary locations in the city, and said it seemed “crazy” to him that staff believe Palm Springs has the most dispensaries per capita in California.

Garner, meanwhile, said that if Palm Springs does cap the number of dispensaries, the law should be written to ensure it maintains a variety of cannabis retail businesses, including lounges where people can consume on site. She said that's important given that a large part of Palm Springs’ cannabis market is made up of tourists.

She also said any consideration of instituting a cap must take into account not only the city’s population but the number of tourists and suggested that staff provide the council with data on the impact of retail cannabis tax reductions in neighboring cities.

While the council may vote on extending the moratorium at its next meeting, any larger decisions will likely not be made for some time. City staff said the next step would likely be to hold meetings with industry stakeholders to gather further data for the council to consider and discuss in the new year.


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