Arroyo Grande council directs staff to prepare cannabis tax measure, signals support for limited retail

Arroyo Grande — The City Council on Dec. 9 directed staff to prepare a local cannabis tax ballot measure and to return with draft regulations if voters approve, signaling preliminary support for allowing limited commercial cannabis activity in the city.

Management analyst Aliyah Burgum opened the study session by reviewing state law, noting the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) preserves local control over whether commercial cannabis businesses may operate within city limits and that state licenses may not conflict with local ordinances. Burgum said a market analysis prepared by HDL estimated a local cannabis tax set at 6% could generate approximately $460,000 for the city.

Burgum told council members, "Staff recommends pursuing a ballot measure because it provides uniformity, transparency, and long term stability," and added that if voters approve a tax, staff would return with “draft regulations for commercial retail cannabis businesses, zoning maps, and permit process, and a draft ordinance for council consideration.”

During deliberations, council members expressed consistent support for retail storefronts and delivery operations while rejecting cannabis event permits. Several members favored limiting storefronts to one or two and concentrating retail in freeway‑accessible commercial zones (for example, areas near U.S. 101 and established retail centers) to avoid neighborhoods. Council member comments also raised concerns about permitting manufacturing and testing uses due to potential environmental or nuisance impacts.

Council members largely favored a merit‑based selection process for operator permits, with several stressing the need for transparent criteria. One council member asked whether the city could instead sell a license to the highest bidder; the city attorney responded that the state regulatory framework has equity and nondiscrimination provisions and that a highest‑bidder sale is not a commonly used approach.

Industry speaker Rachel Golding, representing Steezy, told the council the company supports a merit‑based application process, strong capitalization requirements and investment in security and neighborhood compatibility.

Council direction to staff was procedural, not a final policy decision. Staff said the next steps will include drafting a tax measure for potential placement on a future ballot and preparing zoning, permitting and regulatory options to return to the council for further action if the measure passes.

The council’s decisions on whether to place a tax before voters and on subsequent regulatory detail remain subject to future council votes and any voter approval required by law.