The City of Sonora is preparing to sue the California Bureau of Cannabis Control over new state regulations that are forcing local officials to talk about possibly allowing sales of the substance for recreational use, as opposed to only medicinal use with a doctor’s recommendation.

The Sonora City Council voted 5-0 in closed session Monday afternoon to initiate litigation against the agency in charge of regulating the state’s legal cannabis market that was approved by voters through Proposition 64 in 2016.

“It won’t just be us,” said Mayor Jim Garaventa when asked if other cities were planning to sue. “I think they’re garnering support from around the state.”

Earlier in the meeting, the council talked with Deputy City Attorney Nubia Goldstein about the new regulations that effectively prevent cities and counties from banning sales of cannabis by delivery for both medicinal and recreational use by adults 21 and older.

Goldstein said there is talk of possible legislation or legal action to challenge the regulation because Proposition 64 included the option for cities and counties to ban commercial cannabis activity in their local jurisdictions.

The council directed city staff to prepare a proposal for taxing sales of cannabis via delivery under the powers granted to them through Measure N, which was approved by city voters in the Nov. 6 election.

Measure N created an ordinance that allows the council to impose a business license tax on cannabis business and tax gross sales up to 15 percent.

“The city council had the foresight to consider putting this on the ballot as a way of having something in place should a situation like the one we’re presently in arise,” Goldstein said.

A similar ordinance approved by voters in the unincorporated area of the county as Measure M grants the same authority to the Tuolumne County Board of Supervisors, despite opposition that argued passing it would only encourage the board to allow commercial cannabis sales and cultivation.

In an effort to enforce the tax, the council also wants to require delivery services to obtain a business license from the city or potentially face a fine if caught operating without one.

“The implementation, the tracking of this and catching bad actors who don’t follow the rules is a different story, but for now we’re looking at just laying the groundwork,” Goldstein said.

The council approved a three-year pilot program in January 2018 that allows some cannabis businesses to operate within the city under a special development agreement, but dispensaries were restricted to being for medicinal use only.

The county currently bans all cannabis businesses in the unincorporated area.

Hazy Bulldog Farms at 1243 Mono Way opened last month as the first medical-only cannabis dispensary in the city to get approved through the pilot program. City Administrator Tim Miller said an application for a second dispensary is under review.

One of the council’s concerns was that the new state regulations could put those medical-only dispensaries in the city at a competitive disadvantage because delivery services would be allowed to legally serve cannabis for both medicinal and recreational use.

“I certainly don’t think it’s fair to make our local storefront operators at a disadvantage and carry the financial burden of marijuana in this community,” said Councilwoman Colette Such.

The development agreement for Hazy Bulldog Farms was approved by the council in November and requires the dispensary to pay the city $10,000 a month or 5 percent of gross sales, whichever is greater, to cover costs associated with enforcing cannabis regulations.

Jeff Muzio, co-owner and operator of Hazy Bulldog Farms, also had to give the city a $25,000 deposit up front to get through the permitting process.

Muzio spoke at the meeting Monday afternoon and said he would rather keep the medical-only requirement for dispensaries in place and renegotiate his agreement with the city to pay less per month.

“There’s a lot of people who are very happy that this program is here,” he said. “Half of my clientele are 60 or older. They come from the hospital, they come from the cancer center and they’re very happy this is here.”

If the city allowed another dispensary to sell cannabis for recreational use, Muzio said he would also have to consider doing so in order to compete.

Muzio said about five to 10 people come into his dispensary per day and leave after they find out they are required to have a valid doctor’s recommendation in order to purchase cannabis.

“I’m way short of the numbers, I’m needing to make profits, but I am jumping up pretty quickly,” he said. “Any new business typically takes two to five years to make money, but I’m hoping to get there a lot quicker.”

The council agreed to move forward with process of imposing a tax on cannabis delivery services, requiring delivery services to obtain a business license from the city, and determining what the fines or penalties should be for not following the rules.

Four of the five council members also agreed to bring back an item for discussion about allowing dispensaries in the city to sell cannabis for recreational use as well, meaning without the need for a doctor’s recommendation.

“As much as I don’t like adult (recreational) use, I think we should bring it back and talk about it,” said Councilman Matt Hawkins, who serves as mayor pro-tem.

Councilwoman Connie Williams said she believed it was too early to begin talking about potentially opening the city’s legal cannabis market to recreational use. She was also the only one to vote against the medical-only pilot program in January 2018.

Such said she also believed it was too early, but the council should hear from the people of the city about where they stand on the issue.

Contact Alex MacLean at amaclean@uniondemocrat.com or (209) 588-4530.

22501972