HomeMy WebLinkAboutItem 7a. Annual Cannabis Business Program Update and Introduction of Ordinance for Zoning Code Amendments Item 7a
Department: Community Development
Cost Center: 4001
For Agenda of: 5/6/2025
Placement: Public Hearing
Estimated Time: 30 minutes
FROM: Timmi Tway, Community Development Director
Prepared By: Ivana Gomez, Cannabis Business Coordinator
SUBJECT: ANNUAL CANNABIS BUSINESS PROGRAM UPDATE AND
INTRODUCTION OF AN ORDINANCE TO AMEND SECTION 17.86.080
(“CANNABIS”) OF TITLE 17 (“ZONING REGULATIONS”) OF THE
MUNICIPAL CODE TO CLARIFY SPECIFIC LAND USE AND
OPERATIONAL REQUIREMENTS FOR COMMERCIAL CANNABIS ACT
RECOMMENDATION
1. Receive an update on the City’s Cannabis Business Program; and
2. Introduce an Ordinance entitled, “An Ordinance of the City Council of the City of San
Luis Obispo, California, amending Section 17.86.080 (“Cannabis”) of Title 17 (“Zoning
Regulations”) of the Municipal Code to clarify specific land use and operational
requirements for commercial cannabis activity.”
REPORT-IN-BRIEF
The Annual Cannabis Business Program Update is an opportunity for staff to provide an
update to the City Council on the overall progress of the Cannabis Program and to
recommend policy and regulatory changes to improve the commercial cannabis
administrative and operational processes. At the time of the last update on May 7, 2024,
no critical amendments to the program were identified as immediately necessary. Staff
returns at the annual update with recommendations for clarifying amendments based on
operational and administrative experiences.
This report presents, for Council’s consideration, 1) a review of operator permit changes,
2) cannabis tax and permit fee revenue forecast updates, and 3) recommended updates
to SLOMC § 17.86.080 to clarify specific land use and operational requirements for
commercial cannabis activity.
POLICY CONTEXT
At the direction of Council, staff returns annually with an update to the Cannabis Business
Program, including proposed text amendments to the City of San Luis Obispo Municipal
Code (“SLOMC”) to clarify specific land use and operational requirements for commercial
cannabis activity to improve operational efficiency. Per Chapter 17.124 (Amendments –
Page 243 of 625
Item 7a
Zoning Regulations and Zoning Map), the City Council may review the proposed text
amendments, including the Planning Commission’s recommendation, and take action
based on consistency with the General Plan and State Law.
DISCUSSION
Cannabis Operator Permit Changes
The City currently has two operating cannabis retail storefronts—Megan’s Organic Market
and SLOCAL Roots. A third retail storefront permit was conditionally awarded to Embarc
SLO, but its permit remains inactive due to an appeal challenging its Conditional Use
Permit for its proposed location at 2400 Broad Street. This appeal is scheduled for a City
Council hearing on July 1, 2025. Until the appeal is resolved, the City cannot accept
additional retail storefront applications due to the three-permit limit established in SLOMC
§ 17.86.080(E)(10)(b)(ii).
During the most recent application period (July 1 – August 15, 2023), the City received
three applications: two for retail storefronts and one for a microbusiness1. The
microbusiness application was unable to meet the minimum required Merit Criteria points
for issuance of a Contingent Operator Permit and was disqualified. Applications were
evaluated using the Cannabis Business Operator Permit Scoring Guidelines and the City
Council-adopted merit criteria.
Since then, the City has received no formal inquiries about new permits. Given the lack
of interest and ongoing industry challenges, staff did not recommend opening a new
application period for the current year2.
Business Business Status
Retail Storefronts
1 Megan’s Organic Market SLO Open and operating in City
2 SLOCAL Roots Open and operating in City
3 Embarc SLO Pending Appeal and CDD Permits
Table 1: Permitted Operators in the City
Cannabis Tax and Permit Fee Revenue
Revenue generated from the City's Cannabis Business Program supports a variety of
core municipal services that benefit residents of San Luis Obispo. This revenue is
generated from cannabis business taxes, application and licensing fees, and other
regulatory fees associated with commercial cannabis operations. These funds are
1 A microbusiness is a licensee that engages in at least three of the following commercial
cannabis activities at a single location: cultivation, manufacturing, distribution, and retail sale
(SLOMC § 17.156.028; Cal. Code Regs., tit. 4, § 15500).
2 Under SLOMC § 9.10.070(B), the City Manager has discretion to open a Commercial
Cannabis Operator Permit application period, which must occur between July 1 and July 31 (R-
10966).
Page 244 of 625
Item 7a
allocated to the City’s General Fund, supporting essential community and public safety
services as well as the continued administration of the cannabis program.
Cannabis Tax Revenue
Figure 1 (below) illustrates actual and budgeted cannabis tax revenue for Fiscal Years
(FY) 2021-2025. As of March 2025, actual revenue for FY 2024-25 is on track to meet or
fall slightly below the budgeted amount and the FY 2025-26 forecast has been reduced
slightly to $1.0M. Notably, cannabis tax revenue has remained stable over recent years,
regardless of fluctuations in the number of active operators. For example, in 2023, the
City had three cannabis businesses: two retail storefronts and one delivery-only business,
generating approximately $1.0M in tax revenue. In 2024, with only two retail storefront
operators, tax revenue remained consistent at around $1 .0M.
Figure 1: Cannabis Tax Revenue FY 2021-2025
The table above includes actuals for the first three quarters of FY 2024-25. Based on
year-to-date results and typically observed seasonality, it is anticipated that full year
revenue will be in line with budget or slightly below at $1.0 - 1.1M.
Cannabis Permit Fee Revenue
In addition to tax revenue, the City collects business fees to recover the costs of
administering the Cannabis Business Program. These include application fees for new
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Actual $844,939 $998,874 $1,127,744 $1,116,495 $713,841
Budgeted $400,000 $1,000,000 $1,100,000 $1,100,000 $1,100,000
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
Actual Budgeted
Page 245 of 625
Item 7a
commercial cannabis operator permits, annual renewal fees for existing operators, and
ownership transfer fees, which are less common3.
Permit Fee revenue projections are therefore based on the anticipated number of new
applications, annual permit renewals, and potential ownership transfer requests. Staff
anticipates collecting $100,000 in cannabis-related permit fee revenue for the 2024-25
fiscal year, primarily from the renewal fees of the two existing operators .
Figure 2 provides an overview of actual and budgeted cannabis permit fee revenue for
FY 2021-2025.
Figure 2: Cannabis Permit Fee Revenue FY 2021-2025
The table above shows a budgeted amount of $232,600 (rather than $100,000) and that
none of the budgeted revenue has been recognized year -to-date. As with all user fees,
the budget remained unchanged from the 2023 -25 Financial Plan, pending the adoption
of updated user fee rates. Staff anticipates collecting $100,000 from two renewals by the
end of the fiscal year. Because these fees are not due from operations until May 1, 2025,
the final revenue amount is not reflected in this staff report. The FY 2025-26 forecast has
been reduced to $100,000 in anticipation of two renewals.
3 Transfer of Ownership: In accordance with Section 9.10.120 of the San Luis Obispo Municipal
Code, transfers of Commercial Cannabis Operator Permits are allowed only if they meet specific
criteria, including compliance with the original application and Community Benefit Agreement. A
fixed fee of $13,978.00 is required for all transfer requests.
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Actual $90,449 $127,380 $147,295 $149,990 $0
Budget $296,936 $157,000 $177,000 $171,000 $232,600
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Actual Budget
Page 246 of 625
Item 7a
Proposed Text Amendments
Background
On May 15, 2018, the City Council adopted Ordinance No. 1647 (2018 Series), amending
the Municipal Code to establish regulations for commercial cannabis activity, including
adoption of SLOMC Chapter 9.10 (Cannabis Regulations) and SLOMC § 17.86.080
(Cannabis Zoning Regulations), f ormerly Chapter 17.99. On March 21, 2023, the City
Council adopted Ordinance No. 1725 (2023 Series) modifying specific rules for
commercial cannabis retail storefront operations including expansion of hours of
operation and allowing access to medicinal cannabis customers 18 to 20 years of age
with a valid physician’s recommendation.
On September 18, 2018, the City Council adopted Ordinance No. 1653 (2018 Series),
amending the City’s Zoning Regulations and Zoning Map to designate seven areas of the
City as Cannabis Business Overlay Zones (“CBZ Overlay Zones”) where cannabis
businesses may be located. Then, on May 16, 2023, the City Council adopted Ordinance
No. 1727 (2023 Series), amending the Zoning Map to expand the CBZ Overlay Zones to
include recently annexed areas of the City, including the Fiero Lane -Clarion Court and
East Airport Areas4,5.
CBZ Overlay Zones are indicated on the City Zoning Map and establish locations in the
City where cannabis businesses may operate. Allowed uses are further controlled by
zoning and required buffers within those overlay zones. Table 2-1 (Uses Allowed by Zone)
within SLOMC § 17.10.020 shows the permitting requirements per land use and zoning
district. The CBZ overlay zones were carefully and deliberately proposed and adopted,
taking into consideration state law buffer requirements, proximity to certain land uses
such as schools and residentially zoned areas beyond and within the boundary lines,
existing zoning, adjacency to arterial roads and other barriers within the built environment,
and other land use suitability characteristics.
Retail storefronts must be located at least one thousand (1,000) feet from any preschools,
elementary schools, junior high schools, high schools, and public parks or playgrounds,
six hundred (600) feet from licensed daycare centers, whether these uses are located
within or outside of a CBZ overlay zone. In addition, retail storefronts must be three
hundred (300) feet from residentially zoned areas within CBZ Overlay Zones; see further
discussion in Section “1” below). Retail storefronts are also required to be located at least
one thousand (1,000) feet from other cannabis retail storefronts.
1. Land Use Requirements for Retail Storefronts
The first proposed text amendments are to SLOMC §§§ 17.86.080(E)(4)(e),
17.86.080(E)(10)(b)(iii), and 17.86.080(E)(12)(c)(vii) within the Cannabis Zoning
Regulations, which state the buffer requirements for retail storefronts from sensitive uses,
including residentially zoned areas. Residential zones include the following zones: Low-
4 City of San Luis Obispo Zoning Map
5 The term “CBZ Overlay” is also referred to as “CAN Overlay” in SLOMC § 17.86.080(E)(5)(b).
Both terms are interchangeable and refer to the same zoning designation.
Page 247 of 625
Item 7a
Density Residential (R-1), Medium-Density Residential (R-2), Medium-High Density (R-
3) and High-Density Residential (R-4). Areas with a Mixed-Use (MU) Overlay are not
considered to be residentially zoned, as the MU designation is an overlay rather than a
base zone that is attached to some commercial zoning distric ts.
The proposed Ordinance provided in Attachment A includes text amendments to clarify
that the 300-foot buffer requirement for retail storefronts from residentially zoned areas
applies only to residentially zoned areas located within CBZ Overlay Zones, consistent
with the original legislative intent. The May 1, 2018 and September 4, 2018 Council
Agenda Reports explicitly state that residential buffers were intended to apply only to
residentially zoned areas within CBZ Overlay Zones, which were established based on
local conditions such as major roadways and railroads that serve as barriers from
sensitive land uses.
The May 1, 2018 Council Agenda Report to establish the City’s Cannabis Regulations,
including the adoption of specific buffer requirements, clearly states that the buffer from
residentially zoned areas was to apply within a CBZ Overlay Zone only. Page 3 of the
report states the Planning Commission’s recommendation that: “Within overlay zones,
sensitive uses like schools and parks should provide 1,000-foot buffers, and residential
zones should provide 300-foot buffers, to retail stores. No other cannabis business activity
should be subject to buffers.”
This is further confirmed in the September 4, 2018 Council Agenda Report to establish
the CBZ Overlay Zones. Page 3 of the report states, “While there is no buffer from
residential uses in state law, the City has established a 300 -foot buffer between
residentially zoned land and retail stores. However, this buffer only applies from
residential zoning that occurs within that same overlay zone. There are two locations
where this occurs, one is in the Broad Street Corridor CBZ, and the other is in the Airport
Area CBZ.”6
It is important to note that the May 1, 2018, report established the regulatory foundation
for cannabis buffers, even though the CBZs were not yet formally designated. The buffers
were a key policy decision that directly influenced the later creation of the overlay zones.
When the CBZs were adopted in September 2018, their boundaries were drawn in a way
that accounted for these pre-established buffers. This clearly demonstrates that the
legislative intent was always for the 300-foot buffer from residential zones to apply only
within CBZ Overlay Zones.
The City’s official Zoning Map further reinforces the legislative intent by clearly indicating
that the 300-foot buffer applies to residential zones within the South Broad CBZ (see
Figure 1). As stated above, the staff report fromSeptember 4, 2018 to establish CBZ
Overlay Zones notes only two locations in the City where residential zoning occurs within
a CBZ.
6 The area that was previously zoned residential in the Airport Area CBZ has since been rezoned
such that it is now zoned Service Commercial (C-S). There is now only one location in the City
where residential zoning occurs within a CBZ Overlay Zone – the South Broad CBZ Overlay.
Page 248 of 625
Item 7a
Figure 1: City of SLO Zoning Map and Legend – South Broad CBZ Overlay as Adopted by
Ordinance No. 1727 (2023 Series)
The need for this clarifying amendment was brought to staff’s attention by an appeal
regarding the Planning Commission’s approval of a Conditional Use Permit (CUP) for a
cannabis retail storefront at 2400 Broad Street. The appeal raised a number of concerns,
including questioning the project’s consistency with zoning regulations, including buffer
requirements from residentially zoned areas. The proposed text amendment is
recommended to ensure clarity and regulatory consistency for both pending and future
projects. This clarifying text is a statement of what the ordinance has always intended to
mean and to reflect the City’s application of the buffer requirements since their adoption.
The appeal for the Broad Street project is currently scheduled to be heard by the City
Council in July.
Additionally, staff recommends adding specific language to Section
17.86.080(E)(10)(B)(iii) and 17.86.080(E)(12)(c)(vii) to clarify that land uses established
after the approval of a Use Permit for a retail storefront do not impede the continuation of
an existing use as a cannabis retail storefront. In other words, a new adjacent sensitive
use will not affect the continuation of an existing use that was issued a Use Permit under
Page 249 of 625
Item 7a
the standards of the Municipal Code. This approach aligns with the principle that legally
established land uses, often referred to as "nonconforming uses," are permitted to
continue despite subsequent zoning changes or the introduction o f new adjacent uses.
This principle ensures that property owners can maintain their lawful operations without
disruption, even as neighboring properties undergo changes. The proposed language is
as follows: “A subsequently established use described herein shall not affect the
continuation of a retail storefront in possession of a Use Permit issued under the
standards of this Section and Chapter 9.10.”
2. Commercial Cannabis Development Standards
The term “CBZ Overlay” is referred to as “CAN Overlay” in SLOMC § 17.86.080(E)(5)(b).
Both terms are interchangeable and refer to the same zoning designation. The proposed
Ordinance provided in Attachment A includes an amendment to SLOMC §
17.86.080(E)(5)(b) to replace the term “CAN Overlay” with “CBZ Overlay,” consistent with
the City Zoning Map and Table 1-1 “Zones Established” within SLOMC § 17.06.020(D).
This amendment is to provide consistency throughout the code.
3. Regulations for Retail Storefronts within a Microbusiness Operation
3.1 Hours of Operation for Retail Storefronts Within a Microbusiness Operation.
On March 7, 2023, the City Council adopted Ordinance No. 1725 (2023 Series) amending
Chapter 9.10 (Cannabis Regulations) and Chapter 17.86.080 (Cannabis Zoning
Regulations) of the Municipal Code, modifyin g specific rules for commercial cannabis
retail storefront operations. The amendments expanded the allowable hours of operation
from 9:00AM and 8:00PM daily to 7:00AM and 9:00PM daily. However, the Ordinance did
not consider microbusiness operations, which are operations that engage in at least three
(3) of the following commercial cannabis activities under one location: cultivation,
manufacturing, distribution, and retail sale (SLOMC § 17.156.028; Cal. Code Regs., Title
4, §15500.) As currently adopted, SLOMC § 17.86.080(E)(12)(c)(v)(ix) (Microbusiness
Development Standards), states that the hours of retail sales shall be limited to between
9:00AM and 8:00PM. Under state regulations (Cal. Code Regs., Title 4, § 15500),
microbusinesses authorized to engage in retail sale are required to comply with all rules
and requirements applicable to a retailer license. Similarly, SLOMC §
17.86.080(E)(12)(c)(i) requires microbusinesses authorized to engage in retail sales to
comply with the regulations established for retail commercial cannabis activity. Therefore,
staff is recommending updating the hours of operation for retail storefronts within a
microbusiness operation to be consistent with the hours of operation for a retail storefront
only business: between 7:00AM and 9:00PM daily.
3.2 Required Signage for Retail Storefronts within a Microbusiness Operation.
Ordinance No. 1725, referenced in the preceding section, also modified age restrictions
for commercial cannabis operations. Specifically, the adopted ordinance allows
individuals 18 to 20 years of age who have a valid physician’s recommendation for
medicinal cannabis to enter and access retail storefronts that possess a valid state of
California cannabis retailer license with M-designation (For Medical Use) (Cal. Code
Regs., Title 4, § 15000.2). Prior to this, only individuals 21 and older could enter
Page 250 of 625
Item 7a
commercial cannabis retail storefronts. When this change was made, the signage
requirements for retail storefronts were amended to reflect the appropriate age
restrictions, however, the signage requirements for microbusinesses , which can have a
retail storefront component and are located in a different code section, were overlooked.
Therefore, staff is recommending an amendment to SLOMC § 17.86.080(E)(12)(c)(v)(x),
which states the entryway signage requirements for retail storefronts a ssociated with a
microbusiness to ensure that signage accurately reflects current age restrictions .
4. Purpose Statement – Reference to Federal Law
As discussed in the Annual Cannabis Business Program Update in 2024, at a federal
level, there has been discussion of rescheduling cannabis from Schedule I to Schedule
III under the Controlled Substances Act (CSA). However, there is no concrete timeline on
when or whether the U.S. Drug Enforcement Administration (DEA) will take action. Staff
recommends removing the specific CSA classification of marijuana (cannabis) from t he
Cannabis Zoning Regulations “Purpose” statement found in SLOMC § 17.86.080(A).
Instead, the proposed revised purpose statement states that the provisions of Section §
17.86.080 are not intended to affect or alter federal law, regardless of the classification.
This avoids having to update this section whenever the federal government changes the
classification of marijuana while still reinforcing that the provisions of the cannabis zoning
regulations are not intended to affect or alter federal law.
Previous Council or Advisory Body Action
The Planning Commission reviewed the proposed text amendments at a public hearing
held on April 9, 2025, and has adopted R-1100-25 recommending the City Council adopt
an Ordinance (Attachment A) introducing amendments to SLOMC § 17.86.080 to clarify
specific land use and operational requirements for commercial cannabis activity.
Public Engagement
The proposed text amendments were noticed in accordance with SLOMC Chapter 17.122
(Public Notices and Hearing) and Cal. Gov. Code, Title 7, Sections §§§ 65854, 65090,
and 65091. Prior to the Planning Commission hearing on April 9, 2025, n otice of the
proposed text amendments was published in the local newspaper on Thursday, March
20th. Prior to the City Council hearing on May 6, 2025, notice of the proposed text
amendments were published on Thursday, April 10, 2025.
CONCURRENCE
Some of the proposed amendments are declaratory of existing law, ensuring clarity and
regulatory consistency for both pending and future projects, and others are intended to
conform City regulations to allowances under state law. The Director of Community
Development and the City Attorney’s Office have reviewed the proposed amendments to
the City’s Cannabis Zoning Regulations and have found them to be consistent with State
Law and the legislative intent of the adopted Ordinance.
Page 251 of 625
Item 7a
ENVIRONMENTAL REVIEW
Adoption of the proposed amendments to Section 17.86.080 of the Municipal Code have
been reviewed in accordance with the California Environmental Quality Act (CEQA)
Guidelines. It has been determined that the amendments are exempt from environmental
review under CEQA Guidelines Section § 15301(b)(3) (General Rule Exemption), which
applies to activities that can be clearly seen to have no potential for significant
environmental impact. Project-specific environmental review will be required for any new
commercial cannabis activity.
FISCAL IMPACT
Budgeted: Yes Budget Year:
Funding Identified:
Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $0 $0 $0 $0
State
Federal
Fees
Other:
Total $0 $0 $0 $0
This item has no fiscal impact, as it does not propose any changes to the adopted budget
or result in new expenditures or revenues at this time. The update is informational in
nature and reflects existing operations and fee structures previously approved by the City
Council as part of the 2023–2025 Financial Plan. The proposed amendments to the
Municipal Code are intended to clarify existing regulations and do not establish any new
requirements.
ALTERNATIVES
1. The City Council may decide not to adopt the recommended changes to the
Zoning Regulations. The proposed changes to Sections 17.86.080(E)(4)(e),
17.86.080(E)(10)(b)(iii), and 17.86.080(E)(12)(c)(vii) are declaratory of existing law,
and without adoption of the recommended changes, unintended ambiguity may persist
regarding existing land use and operational requirements for commercial cannabis
activity. The proposed changes to Section 17.86.080(E)(12)(c)(ix)-(x) are intended to
reflect what is permitted under current state law, and without adoption of the
recommended changes, the City’s cannabis regulations will remain inconsistent
therewith.
Page 252 of 625
Item 7a
2. Modify the recommendation. The City Council may modify the recommended text
amendments prior to introducing the proposed Ordinance.
3. Continue the item. The City Council may continue the item to a date uncertain if
additional information is needed to address the proposed text amendments.
ATTACHMENTS
A - Draft Ordinance amending to Section 17.86.080 (“Cannabis”) of Title 17 (“Zoning
Regulations”) (CODE-0051-2025)
Page 253 of 625
Page 254 of 625
DRAFT ORDINANCE NO. ____ (2025 SERIES)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, AMENDING SECTION 17.86.080 (“CANNABIS”)
OF TITLE 17 (“ZONING REGULATIONS”) OF THE MUNICIPAL CODE
TO CLARIFY SPECIFIC LAND USE AND OPERATIONAL
REQUIREMENTS FOR COMMERCIAL CANNABIS ACTIVITY. THE
PROJECT IS EXEMPT FROM ENVIRONMENTAL REVIEW (CEQA).
WHEREAS, on May 15, 2018, the City Council adopted Ordinance No. 1647 (2018
Series), amending the Municipal Code (“SLOMC”) to establish regulations for commercial
cannabis activity, including adoption of SLOMC Chapter 9.10 (Cannabis Regulations) and
SLOMC § 17.86.080 (Cannabis Zoning Regulations), formerly Chapter 17.99 ; and
WHEREAS, on March 21, 2023, the City Council adopted Ordinance No. 1725
(2023 Series) modifying specific rules for commercial cannabis retail storefront operations
including expansion of allowable hours of operation from 9:00AM and 8:00PM daily to
7:00AM and 9:00PM daily and allowing individuals 18 to 20 years of age who have a valid
physician’s recommendation for medicinal cannabis to enter and access retail storefronts
who possess a valid state of California cannabis retailer license with M -designation (For
Medical Use); and
WHEREAS, on September 18, 2018, the City Council adopted Ordinance No.
1653 (2018 Series), amending the City’s Zoning Regulations and Zoning Map to
designate seven areas of the City as Cannabis Business Overlay Zones (“CBZ Overlay
Zones”) where cannabis businesses may be located. Then, on May 16, 2023, the City
Council adopted Ordinance No. 1727 (2023 Series), amending the Zoning Map to expand
the CBZ Overlay Zones to include recently annexed areas of the City, including the Fiero
Lane-Clarion Court and East Airport Areas; and
WHEREAS, upon adoption of the initial cannabis regulations on November 17,
2018, the City Council of the City of San Luis Obispo directed staff to return annually with
an update to the City’s Cannabis Business Program, including recommendations for
improvements based on operational and administrative experiences; and
WHEREAS, the Planning Commission of the City of San Luis Obispo conducted a
public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo,
California on April 9, 2025, and voted to recommend the proposed amendments to
Section 17.86.080 (“Cannabis”) of Title 17 (“Zoning Regulations”) of the Municipal Code;
and
WHEREAS, the City Council of the City of San Luis Obispo conducted a public
hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California
on May 6, 2025, and voted to introduce an Ordinance including proposed amendments
Page 255 of 625
O- ____
to Section 17.86.080 (“Cannabis”) of Title 17 (“Zoning Regulations”) of the Municipal
Code; and
WHEREAS, notices of said public hearing were made at the time and in the
manner required by the law; and
WHEREAS, the City Council has duly considered all evidence, including the
testimony of interested parties and the evaluation and recommendations provided by
staff, presented at said hearing.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of San
Luis Obispo as follows:
SECTION 1. Findings. Based upon all evidence, the City Council makes the
following findings:
1. The proposed amendments to Municipal Code §§§ 17.86.080(E)(4)(e),
17.86.080(E)(10)(b)(iii), and 17.86.080(E)(12)(c)(vii) are consistent with State Law and
are declaratory of existing City code, ensuring clarity and regulatory consistency for both
pending and future projects. These amendments are declaratory of existing land use
requirements for commercial cannabis activities and are consistent with the legislative
intent of the currently adopted Zoning Ordinance. These amendments are intended to
reflect the City’s interpretation and application of the buffer requirements since their
adoption.
2. In adopting Municipal Code § 17.86.080 (formerly Chapter 17.99) on May
15, 2018, this Council found that the regulations balance the City’s competing interests in
allowing certain commercial and research-related cannabis activities desired by the
majority of voters, with the public health, welfare, and safety concerns of the City. The
proposed amendments to Municipal Code §§§ 17.86.080(E)(4)(e),
17.86.080(E)(10)(b)(iii), and 17.86.080(E)(12)(c)(vii), as declaratory of existing code,
accomplish the same.
3. The Council Agenda Report dated May 1, 2018, to establish the City’s
Cannabis Regulations, including the adoption of specific buffer requirements, clearly
indicates that the City Council intended the buffer from residentially zoned areas to apply
within the CBZ Overlay Zones only.
4. The Council Agenda Report dated September 4, 2018, to formally establish
the CBZ Overlay Zones states that the three-hundred-foot buffer requirement between
residentially zoned land and retail storefronts applies from residentia l zoning that occurs
within a CBZ Overlay Zone. Additionally, the CBZ Overlay Zones were designed to
incorporate natural physical barriers—such as railroads and major roads—that inherently
serve as buffers from sensitive sites, thereby minimizing potential impacts on public
Page 256 of 625
O- ____
health and safety. Applying the 300-foot buffer requirement outside these overlay zones
would unnecessarily restrict allowable commercial cannabis sites beyond what is
necessary to ensure health and safety, as contemplated by the adoptio n of the overlay
zones.
5. The terms “CAN Overlay” and “CBZ Overlay” have been used
interchangeably. The proposed amendment to Municipal Code Section §
17.86.080(E)(5)(b) replaces “CAN Overlay” with “CBZ Overlay” to align with the adopted
Zoning Map and Table 1‑1 (“Zones Established”) in SLOMC § 17.06.020(D).
6. The proposed amendments to Municipal Code §§ 17.86.080(E)(12)(c)(v)(ix)
and 17.86.080(E)(12)(c)(v)(x) are consistent with State Law and the California
Department of Cannabis Control (“DCC”) Regulations, specifically with DCC Regulations
§§§ 15400, 15403, and 15500, which define regulations for commercial cannabis retail
and microbusiness license holders.
7. The proposed amendments to Municipal Code §§ 17.86.080(E)(12)(c)(v)(ix)
and 17.86.080(E)(12)(c)(v)(x) are consistent with Municipal Code § 17.86.080(E)(12)(c)(i)
which requires microbusinesses authorized to engage in retail sales to comply with the
regulations established for retail commercial cannabis activity.
8. The proposed amendment to Municipal Code § 17.86.080(A) does not alter
or affect federal law, and it revises the purpose statement to remove the specific CSA
classification of cannabis. This change ensures that the regulation remains effective
regardless of any future federal scheduling changes.
SECTION 2. Environmental Determination. The recommended actions were
reviewed in accordance with the California Environmental Quality Act (CEQA) Guidelines
and are determined to be exempt from environmental review pursuant to CEQA
Guidelines § 15301(b)(3) (General Rule Exemption), which exempts activities that can be
seen with certainty to have no possibility for causing a significant effect on the
environment. Project-specific environmental review will be required for any new
commercial cannabis activity.
SECTION 3. Action. The City Council hereby adopts an ordinance amending
Section 17.86.080 (“Cannabis”) of Title 17 (“Zoning Regulations”) of the Municipal Code
to clarify specific land use and operational requirements for commercial cannabis activity.
Section 17.86.080 (“Cannabis”) of Title 17 (“Zoning Regulations”) of the City of
San Luis Obispo Municipal Code is hereby amended as follows:
17.86.080 Cannabis.
A. Purpose. The purpose of this section is to protect the public health, safety, and
welfare, enact strong and effective regulatory and enforcement controls in compliance
Page 257 of 625
O- ____
with state of California law, protect neighborhood character, and minimize potential for
negative impacts on people, communities, and the environment within the city of San
Luis Obispo by establishing land use requirements and development standards for
cannabis activities. Cannabis activity, as defined in Section 17.156.008 (C Definitions),
includes the cultivation, possession, manufacturing, processing, storing, laboratory
testing, labeling, transporting, distribution, delivery, or sale of cannabis or a cannabis
product for either personal or commercial use. Therefore, this section recognizes that
cannabis activities require land use controls due to state legal constraints on cannabis
activity, and the potential environmental and social impacts associated with cannabis
activity. Nothing in this section is intended to affect or alter federal law., which identifies
marijuana (cannabis) as a Schedule I controlled substance.
B. Applicability. Nothing in this section shall be construed to allow any conduct or
activity relating to the cultivation, distribution, dispensing, sale, or consumption of
cannabis that is otherwise illegal under local or state law, statute, rule or regulation. It is
neither the intent nor the effect of this chapter to condone or legitimize the illegal use,
consumption or cultivation of cannabis under state or local law and nothing herein is
intended to interpret, alter, interfere with or in any way affect otherwise applicable
federal law.
C. Definitions. See Chapter 17.156, Land Use Definitions (Table 2-1: Uses Allowed by
Zone). Terms used in this section that are defined terms under state cannabis statutes
or regulations shall have the same meaning as the respective state definition, as now
defined or as the definition may be amended by the state in the future, except as
otherwise specifically provided in Chapter 17.156, Land Use Definitions (Table 2-1:
Uses Allowed by Zone), or Chapter 9.10, Cannabis Regulations.
D. Personal Cultivation.
1. Indoor Personal Cultivation. Indoor personal cultivation of cannabis does not
require a permit and is allowed in all private residences subject to all the following
minimum performance standards:
a. All indoor personal cultivation shall occur only inside a private residence or
fully enclosed and secure accessory building or structure to a private residence.
Accessory building or structure for indoor personal cultivation of cannabis does
not include a greenhouse or hoop structure.
b. Structures and equipment used for indoor cultivation, such as indoor grow
lights, shall comply with all applicable building, electrical and fire code
regulations as adopted by the city.
c. All accessory buildings and structures used for indoor cultivation shall
comply with the city’s zoning regulations and building codes.
Page 258 of 625
O- ____
d. Indoor personal cultivation of cannabis may occur inside a dwelling and/or
an accessory building or structure, subject to the following restrictions:
i. The cumulative cultivation for cannabis shall not exceed six cannabis
plants per private residence.
ii. All personal cultivation shall be conducted by persons twenty-one years
of age or older, and the cumulative total of cannabis plants per private
residence, indoor and outdoor, shall not exceed six cannabis plants,
regardless of the number of persons residing on the property.
e. Personal cultivation of cannabis shall not interfere with the primary
occupancy of the building or structure, including regular use of kitchen(s) or
bathroom(s).
f. Cannabis cultivation must be concealed from public view at all stages of
growth and there shall be no exterior evidence of cannabis cultivation occurring
at the property visible with normal unaided vision from any public place, or the
public right-of-way. Personal cultivation of cannabis shall be shielded to confine
light and glare to the interior of the structure.
g. Nothing in this section is intended, nor shall it be construed, to preclude any
landlord from limiting or prohibiting personal cultivation of cannabis by tenants.
h. Nothing in this section is intended, nor shall it be construed, to authorize
commercial cultivation of cannabis at a private residence.
i. Personal cultivation of cannabis shall not create: offensive odors or
excessive dust, heat, noise, light, glare, smoke, traffic, or hazards due to the
use or storage of materials, processes, products or wastes, or other
unreasonable impacts to persons of normal sensitivity who are living, working or
lawfully present in the vicinity of the personal cultivation.
j. Cannabis cultivation areas in a private residence shall be locked at all times
when the cultivator is not present.
2. Outdoor Personal Cultivation. Outdoor personal cultivation of cannabis does not
require a permit and is allowable at all private residences, subject to all of the
following minimum performance standards:
a. Outdoor personal cultivation of cannabis is not permitted in the front yard
between the public right-of-way and the private residence. Outdoor personal
cultivation is only permitted in a rear or side yard that is entirely enclosed by a
solid, opaque fence that is associated with a private residence used for
residential purposes.
Page 259 of 625
O- ____
b. The cannabis plants shall be placed at a minimum setback of five feet from
the edge of canopy to the property line.
c. Cannabis cultivation must be concealed from public view at all stages of
growth and there shall be no exterior evidence of cannabi s cultivation occurring
at the property visible by normal unaided vision from a public place or the public
right-of-way. Cultivation may occur within a greenhouse or hoop structure (as
long as it complies with the performance standards), but mixed light cu ltivation
is prohibited.
d. All outdoor personal cultivation shall be conducted by persons twenty -one
years of age or older.
e. The cumulative total of cannabis plants cultivated outdoor shall not exceed
six cannabis plants per parcel containing a private residence, regardless of the
number of persons residing on the property, and regardless of the number of
private residences on the parcel.
f. Nothing in this section is intended, nor shall it be construed, to preclude any
landlord from limiting or prohibiting cannabis cultivation by tenants.
g. Nothing in this section is intended, nor shall it be construed, to authorize
commercial cultivation of cannabis at a private residence outdoors.
h. Outdoor personal cultivation of cannabis shall not create: offensive odors or
excessive dust, heat, noise, light, glare, smoke, traffic, or hazards due to the
use or storage of materials, processes, products or wastes, or other
unreasonable impacts to people of normal sensitivity living, working or lawfully
present in the vicinity of the personal cultivation.
E. Commercial Cannabis Businesses.
1. Commercial Cannabis Operator Permit.
a. No person or entity shall operate or conduct a commercial cannabis activity
or commercial cannabis business without first obtaining both a commercial
cannabis operator permit from the city pursuant to Chapter 9.10, Cannabis
Regulations, and a use permit from the city pursuant to this chapter to conduct
the commercial cannabis activity at a specific location. Any permit authorizing
commercial cannabis activity pursuant to this chapter shall be conditioned upon
the holder obtaining and maintaining a city commercial cannabis operator permit
and the appropriate state license for the activity.
Page 260 of 625
O- ____
b. A commercial cannabis activity pursuant to this chapter may be transferred,
assigned, or bequeathed, by operation of law or otherwise as described in
Section 9.10.120.
c. The commercial cannabis operator permit must be renewed each year.
d. Expiration of the use permit shall be consistent with Section 17.104.070.
2. No Vested Right to Operate. No person shall have any entitlement or vested
right to operate a cannabis business solely by virtue of licensing under these
regulations. Operation of cannabis activity(ies) requires both the approval of a
conditional use permit and a commercial cannabis operator permit under Chapter
9.10, which is a revocable privilege and not a right in the city. The applicant bears
the burden of proving that all qualifications for licensure have been satisfied and
continuously maintained prior to conducting a cannabis business at an otherwise
allowed location within the city.
3. State Application Required. Filing a local application for cannabis activity(ies)
with the city does not constitute an application with the state of California. A
separate state application and license process must be followed through with the
state.
4. Application Requirements. All commercial cannabis activities require
qualification through the commercial cannabis operator select ion approval process
in Chapter 9.10, Cannabis Regulations, a state license and a use permit for a
specific location pursuant to this chapter. The application for a use permit shall
include the following information:
a. Site plan, floor plans, and a general description of the nature, square-
footage, parking and type of cannabis activity(ies) being requested.
b. An operations plan including:
i. A security plan to the approval of the chief of police, pursuant to criteria
approved by resolution of the city council, including but not limited to on -site
security measures both physical and operational and, if applicable, security
measures for the delivery of cannabis associated with the commercial
cannabis business and payment of taxes and fees;
ii. Plan for restriction of access by minors;
iii. Employee safety and training plan;
iv. Odor, noise and light management plan;
Page 261 of 625
O- ____
v. Estimated energy usage and energy efficiency plan;
vi. Estimated water usage and water efficiency plans;
vii. Waste management plan; and
viii. For retail sales, provide an educational material dissemination plan.
c. Proposed signage:
i. Must comply with city’s sign regulations for size, area and type of sign,
no exceptions allowed.
ii. Internal illumination of signs is prohibited.
iii. No portion of the cannabis plant may be used in any sign visible from
the public right-of-way.
iv. Provide sign size, height, colors, and design of any proposed signage at
the site.
v. Must include a sign inside the premises that states: “Smoking, ingesting,
vaping, eating or consuming cannabis or cannabis products on this site or in
a public place is prohibited.”
vi. Must include a sign at each entrance of a retail storefront that prohibits
persons under twenty-one years of age from entering.
d. An analysis that demonstrates neighborhood compatibility and a plan for
addressing potential compatibility issues.
e. Applications for retail storefronts shall include a vicinity map showing at
least one thousand feet of surrounding area and the distances to the following
uses: 1) one thousand feet from any preschool, elementary school, junior high
school, high school, public park or playground, whether located within or outside
a CBZ Overlay Zone; 2) six hundred feet from any licensed daycare center,
whether located within or outside a CBZ Overlay Zone; and 3) three hundred
feet from a residentially zoned areas located within a CBZ Overlay Zone. Youth
centers do not require a buffer. Distance shall be measured from the nearest
point of the property line of the site that contains the commercial cannabis
activity to the nearest point of the property line of the enumerated use using a
direct straight-line measurement.
f. Proof of ownership, option to purchase, (or lease agreement or option to
lease with landowner’s express written consent to the proposed commercial
Page 262 of 625
O- ____
cannabis activity(ies) to be conducted on the premises) or ot her proof of right to
apply for the permit at the location.
g. A list of all other uses on the property.
5. Commercial Cannabis Development Standards. Each cannabis business is
required to meet the following standards:
a. Qualification through the Chapter 9.10, Cannabis Regulations, commercial
cannabis operator selection process to apply for a commercial cannabis
operator permit. Submittal of a use permit application to conduct the commercia l
cannabis business within the zones specified for each type of commercial
activity listed below.
b. Commercial cannabis facilities shall be allowed in areas demarcated with
CAN CBZ overlay zoning and as allowed in the underlying zone for each type of
commercial cannabis activity.
c. All commercial cannabis facilities shall be sited and/or operated in a manner
that prevents cannabis odors from being detected off site. Commercial cannabis
activities shall not create offensive or excessive odors, dust, heat, noise, light,
glare, smoke, traffic, or hazards due to the use or storage of materials,
processes, products or wastes, or other unreasonable impacts to people of
normal sensitivity living, working or lawfully present in the vicinity of the
commercial facility.
d. All commercial cannabis operations must be concealed from public view at
all times and there shall be no exterior evidence of cannabis or cannabis
products occurring at the property visible with normal unaided vision from any
public place, or the public right-of-way. Commercial manufacturing of cannabis
or cannabis products shall be shielded to confine light and glare to the interior of
the structure.
e. All commercial cannabis facilities shall include adequate measures that
address enforcement priorities for commercial cannabis activities, including
restricting access to the public and to minors and ensuring that cannabis and
cannabis products are only obtained from and supplied to other permitted
licensed sources within the state and not distributed out of state.
f. The use permit to be issued under this chapter shall include, but is not
limited to, the following conditions:
i. The obtaining and maintaining of the commercial cannabis operator
permit and appropriate state license.
Page 263 of 625
O- ____
ii. Payment of all applicable current and future state and local taxes and all
applicable commercial cannabis fees and related penalties established by
the city council, including but not limited to application, administrative
review, inspection, etc.
iii. The commercial cannabis operator permit or a controlling interest in the
permit may not be assigned, transferred or bequeathed, by operation of law
or otherwise, unless permitted as described in Chapter 9.10, and the permit
shall terminate automatically on such event.
iv. Any commercial cannabis operator permit issued pursuant to this
chapter and Chapter 9.10 expires after one year, unless renewed.
v. Prohibition of on-site consumption of cannabis at: (A) a commercial
cannabis business or commercial cannabis activity location; (B) any other
business, club or cooperative or event, regardless if open to the public or
only to members; and (C) anywhere an entry or other fee is charged to
attendees or the host or thing of value or consideration is received or
exchanged.
vi. Prohibition of the possession, storage, sale, distribution or consumption
of alcoholic beverages on the premises, or the holding of license from the
State Division of Alcoholic Beverage Control for the sale of alcoholic
beverages, or operating a business that sells alcoholic beverages on or
adjacent to the commercial cannabis activity site.
vii. No cannabis products or cannabis accessories may be displayed in
windows or visible from the public right-of-way or from places accessible to
the general public.
viii. Prohibition of minors and persons under the age of twenty-one on the
premises, even if accompanied by a parent or guardian, unless the person
is at least eighteen years of age and is also in possession of a valid
physician’s recommendation for medical cannabis.
ix. Outdoor storage of cannabis or cannabis products is prohibited.
6. Commercial Cultivation.
a. Commercial Cannabis Cultivation. Commercial cannabis cultivation may be
conditionally permitted indoors only, subject to the requirements of this section
and the obtaining and maintaining of a commercial cannabis operator permit
pursuant to Chapter 9.10, Cannabis Regulations, and appropriate state license,
in the following zones:
Page 264 of 625
O- ____
i. Service commercial (C-S);
ii. Manufacturing (M);
iii. Business park (BP).
b. A maximum of seventy thousand square feet of cumulative canopy area
(includes total canopy of either horizontal or vertical growing situations) for
cultivation and nurseries shall be allowed for indoor commercial cannabis
cultivation in the city within the zones identified above, including
microbusinesses under subsection (E)(12) of this section.
c. Outdoor commercial cannabis cultivation, including but not limited to
cultivation in greenhouses, hoop structures, and by mixed light (part
daylight/part artificial light), is prohibited. All commercial cannabis cultivation
shall be conducted only inside a fully enclosed, legally permitted structure that
meets all applicable building and other codes.
d. Commercial cannabis cultivation conditional permits include the following:
i. Specialty Cultivator. A maximum of no more than five thousand square
feet of canopy of indoor cultivation (either in horizontal or vertical growing
situations) and includes processing.
ii. Small Cultivator. A maximum of no more than ten thousand square feet
of canopy of indoor cultivation (either in horizontal or vertical growing
situations) and includes processing.
iii. Nursery, Cannabis. A maximum of no more than ten thousand square
feet of indoor propagation area (either in horizontal or vertical growing
situations).
e. Development Standards.
i. Compliance with subsection (E)(5) of this section, Commercial Cannabis
Development Standards.
ii. Canopy areas shall be easily identifiable for inspection and
measurement. Each unique area included in the total canopy calculation
shall be separated by an identifiable boundary such as an interior wall or by
at least ten feet of open space (see “Canopy” definition in Chapter 17.156).
iii. All indoor cannabis cultivation shall be designed to accomplish zero net
energy use from the start of the operation.
Page 265 of 625
O- ____
iv. Pesticides and fertilizers shall be properly labeled, stored, and applied
to avoid and prevent contamination through erosion, leakage, or inadvertent
damage from rodents, pests, or wildlife.
7. Manufacturing.
a. Manufacturing (Nonvolatile) Permissible. Nonvolatile cannabis or cannabis
products manufacturing may be conditionally permitted indoors only, subject to
the requirements of this section and the obtaining and maintaining of a
commercial cannabis operator permit pursuant to Chapter 9.10, Cannabis
Regulations, and appropriate state license, in the following zones:
i. Service commercial (C-S);
ii. Manufacturing (M);
iii. Business park (BP).
b. Manufacturing (Volatile) Prohibited. Cannabis or cannabis products
manufacturing involving volatile solvents, processes, compounds or substances
is prohibited.
c. Development Standards.
i. Compliance with subsection (E)(5) of this section, Commercial Cannabis
Development Standards.
ii. Outdoor manufacturing of cannabis or cannabis products is prohibited.
iii. A complete description of all products used in the manufacturing
process including the cannabis supply chain, liquids, solvents, agents, and
processes.
iv. Storage protocol and hazard response plan.
v. Employee safety and training equipment plan, plus materials safety data
sheet requirements, if any.
8. Distribution.
a. Commercial cannabis distribution may be conditionally permitted, subject to
the requirements of this section and the obtaining and maintaining of a
commercial cannabis operator permit pursuant to Chapter 9.10, Cannabis
Regulations, and appropriate state license, in the following zones:
i. Service commercial (C-S);
Page 266 of 625
O- ____
ii. Manufacturing (M);
iii. Business park (BP);
b. Development Standards.
i. Compliance with subsection (E)(5) of this section, Commercial Cannabis
Development Standards.
9. Testing Laboratory.
a. Commercial cannabis testing may be conditionally permitted, subject to the
requirements of this section and the obtaining and maintaining of a commercial
cannabis operator permit pursuant to Chapter 9.10, Cannabis Regulations, and
appropriate state license, in the following zones:
i. Service commercial (C-S);
ii. Manufacturing (M);
iii. Business park (BP);
iv. Office (O).
b. Development Standards.
i. Compliance with subsection (E)(5) of this section, Commercial Cannabis
Development Standards.
ii. The cannabis testing laboratory, as proposed, will comply with all the
requirements of the state for the testing of cannabis, including dual licensure
and participation in an authorized track-and-trace program.
iii. The owners, investors, permittees, operators, and employees of the
cannabis testing laboratory will not be associated with, nor have any
financial interest in, any other form of commercial cannabis activity.
iv. The cannabis testing laboratory is accredited by an appropriate
accrediting agency as approved by the state and further described in Health
and Safety Code Section 5238 and as it may be amended.
v. The cannabis testing laboratory operating plan demonstrates proper
protocols and procedures for statistically valid sampling methods and
accurate certification of cannabis and cannabis products for potency, purity,
pesticide residual levels, mold, and other contaminants according to
adopted industry standards.
Page 267 of 625
O- ____
10. Retail—Storefront.
a. Commercial cannabis storefront retail may be conditionally permitted,
subject to the requirements of this section and the obtaining and maintaining of
a commercial cannabis operator permit, and the appropriate state license, in the
following zones:
i. Retail commercial (C-R);
ii. Service commercial (C-S).
b. Development Standards.
i. Compliance with subsection (E)(5) of this section, Commercial Cannabis
Development Standards.
ii. Only three retail storefronts, which must front arterial streets, will be
allowed within the city. Selection of the retail commercial cannabis operator
will be selected from qualified commercial cannabis operators as set forth in
Chapter 9.10, Cannabis Regulations. One of the retail storefronts shall have
a medicinal license and may also have an adult use license.
iii. Retail storefronts shall be located at least: 1) one thousand feet from any
preschool, elementary school, junior high school, high school, public park or
playground, whether located within or outside a CBZ Overlay Zone; 2) six
hundred feet from any licensed day care center, whether located within or
outside a CBZ Overlay Zone; and 3) three hundred feet from any residentially
zoned area located within a CBZ Overlay Zone. Youth centers do not require
a buffer. Distance shall be measured from the nearest point of the property
line to the nearest point of the property line of the enumerated use using a
direct straight-line measurement. A subsequently established use described
herein shall not affect the continuation of a retail storefront in possession of a
Use Permit issued under the standards of this Section and Chapter 9.10.
iv. Retail storefronts must be separated from each other by at least one
thousand feet.
v. Hours of operation shall be limited between seven a.m. and nine p.m.
vi. Retail storefronts that possess a valid state of California cannabis
retailer license with an A-designation must include a sign at each entrance
of a retail storefront that prohibits persons under twenty-one years of age
from entering. Retail storefronts that possess a valid state of California
cannabis retailer license with an M-designation or both an A-designation
and an M-designation must include a sign at each entrance of the retail
Page 268 of 625
O- ____
storefront that prohibits persons under twenty-one years of age from
entering unless the person is at least eighteen years of age and is also in
possession of a valid physician’s recommendation for medical cannabis.
11. Retail—Non-Storefront (Delivery Services).
a. Commercial cannabis non-storefront retail may be conditionally permitted,
subject to the requirements of this section and the obtaining and maintaining of
a commercial cannabis operator permit pursuant to Chapter 9.10, Cannabis
Regulations, and the appropriate state license, in the following zones:
i. Service commercial (C-S);
ii. Manufacturing (M);
iii. Business park (BP).
b. Development Standards.
i. Compliance with subsection (E)(5) of this section, Commercial Cannabis
Development Standards.
ii. Hours of delivery shall be limited between six a.m. to ten p.m.
12. Microbusiness.
a. Microbusinesses fall into two groups as described below and may be
conditionally permitted, subject to the requirements of this section and the
obtaining and maintaining of a commercial cannabis operator permit pursuant to
Chapter 9.10, Cannabis Regulations, and the appropriate state license, in the
following zones:
i. Microbusinesses with no more than fifty percent of the gross receipts
being from cultivation, distribution and manufacturing are allowed in the
following zones:
(a) Retail commercial (C-R).
ii. Microbusinesses with no more than fifty percent of the gross receipts
being from storefront retail sales are allowed in the following zones:
(a) Manufacturing (M);
(b) Business park (BP).
Page 269 of 625
O- ____
iii. Microbusinesses located in the service commercial (C-S) zone are not
limited by gross sales receipts from cultivation, distribution, manufacturing
or retail sales.
b. Microbusinesses are subject to the seventy thousand square feet of canopy
cultivation citywide limitation (either in horizontal or vertical growing situations)
and the limit of three retail storefronts fronting arterial streets citywide set forth
in subsection (E)(10) of this section.
c. Development Standards.
i. Compliance with subsection (E)(5) of this section, Commercial Cannabis
Development Standards.
ii. A maximum of seventy thousand square feet of cumulative canopy for
cultivation and nurseries shall be allowed for indoor cultivation in the city
within the allowed land use zones.
iii. All indoor cannabis cultivation shall be designed to accomplish zero net
energy use from the start of the operation.
iv. Pesticides and fertilizers shall be properly labeled, stored, and applied
to avoid and prevent contamination through erosion, leakage, or inadvertent
damage from rodents, pests, or wildlife.
v. Only three retail storefronts, which must front arterial streets, will be
allowed within the city. Selection of the retail commercial cannabis operator
will be selected from qualified commercial cannabis operators as set forth in
Chapter 9.10, Cannabis Regulations. One of the retail storefronts shall have
a medicinal license and may also have an adult use license.
vi. Any microbusiness with a retail storefront shall require a planning
commission use permit.
vii. Retail storefronts shall be located at least: 1) one thousand feet from any
preschool, elementary school, junior high school, high school, public park or
playground, whether located within or outside a CBZ Overlay Zone ; 2) six
hundred feet from any licensed day care center, whether located within or
outside a CBZ Overlay Zone; and 3) three hundred feet from any residentially
zoned area located within a CBZ Overlay Zone. Youth centers do not require
a buffer. Distance shall be measured from the nearest point of the property
line to the nearest point of the property line of the enumerated use using a
direct straight-line measurement. A subsequently established use described
herein shall not affect the continuation of a retail storefront in possession of a
Use Permit issued under the standards of this Section and Chapter 9.10.
Page 270 of 625
O- ____
viii. Retail storefronts must be separated from each other by at least one
thousand feet.
ix. Hours of retail shall be limited to between nine seven a.m. to eight nine
p.m. and delivery shall be limited to between six a.m. to ten p.m.
x. Retail storefronts that possess a valid state of California cannabis retailer
license with an A-designation must include a sign at each entrance of a retail
storefront that prohibits persons under twenty-one years of age from entering.
Retail storefronts that possess a valid state of California cannabis retailer
license with an M-designation or both an A-designation and an M-designation
must include a sign at each entrance of the retail storefront that prohibits
persons under twenty-one years of age from entering unless the person is at
least eighteen years of age and is also in possession of a valid physician’s
recommendation for medical cannabis.
SECTION 4. Severability. If any subdivision, paragraph, sentence, clause, or
phrase of this Ordinance is, for any reason, held to be invalid or unenforceable by a court
of competent jurisdiction, such invalid or unenforceability shall not affect the validity or
enforcement of the remaining provisions of this Ordinance, or any other provisions of the
City’s rules and regulations. It is the City’s express intent that each remaining portion
would have been adopted irrespective of the fact that any one or more subdivisions,
paragraphs, sentences, clauses, or phrases be declared invalid or unenforceable.
Page 271 of 625
O- ____
SECTION 5. A summary of this ordinance, together with the names of Council
members voting for and against, shall be published at least five (5) days prior to its final
passage, in The New Times, a newspaper published and circulated in this City. This
ordinance shall go into effect at the expiration of thirty (30) days after its final passage.
INTRODUCED on the 6th day of May 2025, AND FINALLY ADOPTED by the
Council of the City of San Luis Obispo on the ____ day of ____, 2025, on the following
vote:
AYES:
NOES:
ABSENT:
___________________
Mayor Erica A. Stewart
ATTEST:
________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of
the City of San Luis Obispo, California, on ______________________.
________________
Teresa Purrington
City Clerk
Page 272 of 625
Annual Cannabis Business
Program Update
Including Review of Text Amendments to Section 17.86.080
(“Cannabis”) of Title 17 (“Zoning Regulations”) of the
Municipal Code
City Council Hearing – May 6, 2025
Recommendation
1. Receive an update on the City’s Cannabis Business Program.
2. Introduce an Ordinance entitled, “An Ordinance of the City Council
of the City of San Luis Obispo, California, amending Section
17.86.080 (“Cannabis”) of Title 17 (“Zoning Regulations”) of the
Municipal Code to clarify specific land use and operational
requirements for commercial cannabis activity.”
Commercial Cannabis Operator Permits
3
Pending Appeal
280 Higuera St 3535 S Higuera St 2400 Broad St
Current Fee and Tax Rate Structure
Cannabis Tax Rates
Testing Labs – 1% of gross receiptsRetail – 6% of gross receipts
Cultivation - $7 per sq. ft. of canopyDistribution – 2% of gross receipts
Microbusiness – 2.5% of gross receiptsManufacturing – 2.5% of gross receipts
5Cannabis Tax Revenue FY 2021-25
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Actual $844,939 $998,874 $1,127,744 $1,116,495 $713,841
Budgeted $400,000 $1,000,000 $1,100,000 $1,100,000 $1,100,000
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
Summary of Proposed Amendments
• Clarify land use requirements for retail storefront operations.
• Remove repetitive language (“CAN” vs “CBZ”; SLOMC § 17.86.080
Purpose Statement).
• Clarify operational requirements for microbusiness operations.
Cannabis Business Overlay Zones & Buffer Requirements
Buffers:
• Adopted May 15, 2018.
• Apply to retail storefronts.
o 1,000 ft from schools and public parks/public playgrounds.
o 600 ft from licensed daycare centers.
o 300 ft from residentially zoned areas within CBZ Overlay Zones.
Cannabis Business Overlay Zones (CBZ):
• Adopted September 18, 2018.
• 9 designated areas where cannabis businesses may operate, subject to zoning.
• Shown on the City’s Zoning Map.
• Account for buffers and local conditions (e.g., roads, railroads).
8
South Broad
Cannabis Business
Zone as shown in the
City Zoning Map and
Legend
Land Use Requirements – Retail Storefronts
SLOMC §§§ 17.86.080(E)(4)(e), 17.86.080(E)(10)(b)(iii), 17.86.080(E)(12)(c)(v)
• Retail Storefront Buffer Requirements:
o 1,000 ft from schools and public parks/playgrounds, whether located
within or outside a CBZ Overlay Zone.
o 600 ft from licensed daycare centers, whether located within or outside a
CBZ Overlay Zone.
o 300 ft from residentially zoned areas within a CBZ Overlay Zone.
• Land uses established after approval of a Use Permit do not affect
continuation of existing use.
09-04-2018 Staff Report establishing Cannabis Overlay Zones (Excerpt)
Remove Repetitive Verbiage – “CAN vs CBZ”
SLOMC § 17.86.080(E)(5)(b)
• The term “CBZ Overlay” is referred to as “CAN Overlay” in
SLOMC § 17.86.080(E)(5)(b). Both terms are interchangeable
and refer to the same zoning designation.
• Replace “CAN Overlay” with “CBZ Overlay,” consistent with the
City Zoning Map and Table 1-1 “Zones Established” within
SLOMC § 17.06.020(D).
Remove Repetitive Verbiage – Purpose Statement
SLOMC § 17.86.080(A)
• Remove specific Controlled Substances Act (CSA) classification
of marijuana (cannabis).
• Avoids having to update section whenever federal government
changes classification of cannabis.
• Still reinforces that provisions of the cannabis zoning regulations
are not intended to affect or alter federal law.
Operational Requirements - Microbusinesses
13
SLOMC § 17.86.080(E)(12)(c)(v)(ix) - SLOMC § 17.86.080(E)(12)(c)(v)(x)
• Microbusinesses engage in at least three of the following: cultivation,
manufacturing, distribution, and retail sale.
• Ord. 1725 expanded retail storefront hours (7AM-9PM) and updated age
restrictions (18+ with valid ID) but did not apply these to microbusinesses
engaged in retail.
• Microbusinesses with retail sale must follow retailer rules (SLOMC §
17.86.080(E)(12)(c)(i); DCC § 15500.
• Amendment proposed to align microbusiness regulations with retail
storefronts for hours and age restriction requirements.
Recommendation
1. Receive an update on the City’s Cannabis Business Program.
2. Introduce an Ordinance entitled, “An Ordinance of the City Council
of the City of San Luis Obispo, California, amending Section
17.86.080 (“Cannabis”) of Title 17 (“Zoning Regulations”) of the
Municipal Code to clarify specific land use and operational
requirements for commercial cannabis activity.”
15Cannabis Permit Fee Revenue
AssumptionsFY 2024-25
Assumes two Operator Permit Renewals
in May of 2025 (two existing operators).$100,000
Annual License
Fee (Renewal
Fee)
Assumes no applications due to no open
application period in 2024.$0Application Fee
$100,000Total Permit Fee
Revenue
16Cannabis Permit Fee Revenue FY 2021-25
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Actual $90,449 $127,380 $147,295 $149,990 $100,000
Budget $296,936 $157,000 $177,000 $171,000 $232,600
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Cannabis Business Overlay Zones (CBZ)
17
The City’s Zoning Map identifies areas
where cannabis businesses may operate,
including:
• South Broad
• Mid-Higuera
• Duncan McMillan
• Sacramento Industrial
• Higuera Commerce Park
• Margarita
• Airport
• East Airport Area
• Fiero Lane – Clarion Court
05-01-2018 Staff Report adopting Cannabis Regs & Buffers
Requirements for Retail Storefronts (Excerpt)
2. Buffers
The relationship between buffers and overlay zones is important to understand. The purpose of overlay
zones, which were carefully selected for compatibility with surrounding uses, is to provide clarity for
residents, property owners, and business owners regarding where a cannabis business can be
established. In selecting the overlay zones, staff closely evaluated the buffer maps and identified areas
that were mostly outside of any buffers. Where buffers extend into an overlay zone area, there is
typically another barrier such as a major roadway, the railroad tracks, topographical changes, or other
features that provide the same effect as a buffer.
As a result, buffers are only intended to be evaluated as part of a land use application when there is an
activity within an overlay zone that requires a buffer. For example, the Moylan Terrace property in the
Broad Street Corridor area is zoned R-3 and any retail store with public access would need to be located
300 feet away from the closest residence within that zone. However, a retail store could be located along
Broad Street even though it is within 300 feet of residential land on the west side of Broad Street
because buffers would not be calculated from residential land located outside of overlay zones (in this
case across Broad Street). The reason for this is that Broad Street itself acts as a significant physical
barrier and provides the functional equivalent of a buffer based on distance.
19
20
21
22
Table 2-1 (Uses
Allowed by Zone)
23
24