Like many other jurisdictions, Guadalupe is working out kinks within its cannabis ordinance.
The Guadalupe City Council unanimously voted during its May 28 meeting to increase pre-license, inspection, and annual regulatory fees for commercial cannabis businesses, and pushed staff to enforce a $3,000 community benefit fee that operators have yet to pay nearly a year after receiving City Council approval.
Guadalupe adopted its cannabis ordinance in 2021 as a way to increase revenue coming into its general fund. During the ordinance’s development, the city included a community development agreement in its language—which required each retailer to outline how it would help the community—and required a $3,013 fee. Between 2022 and 2023, the City Council approved two new cannabis dispensaries—Root One and Element 7—to join shops in downtown Guadalupe and approved a cannabis processing facility.
As part of its ordinance, the city established a $10,500 application fee that was intended to cover the cost of time spent by city staff and consultants evaluating the legalization of commercial cannabis uses, enacting the ordinance, creating the application procedures, and administering the process, according to the staff report.
“However, once the conditional use permits were approved, the ongoing costs the city expected to incur related to the creation, negotiations, and execution of the required community benefit agreements for the selected cannabis businesses—as well as certain regulatory and pre-license fees—did not have adopted fees approved by the council to cover these additional costs,” according to the staff report.
To address the financial gaps, the city worked with consultant HdL Companies in 2023 to calculate fees that would be necessary to ensure full cost recovery—including a $3,013 community benefit fee, $1,600 pre-license inspections fee, and a $19,904 annual renewal fee.
“The council adopted the fees last year but hadn’t had the opportunity to impose it because [cannabis retail businesses] haven’t even exercised their permits … and this doesn’t kick in until then. It’s a renewal fee essentially,” City Attorney Philip Sinco told the council. “We don’t have somebody supervising the program yet. We’re working on that with the grant coordinator to have somebody follow through and monitor these things.”
In a follow-up fee study, HdL found that the pre-license and annual regulatory fees should be increased—with the pre-license inspections jumping to $2,500 from $1,600 and the annual regulatory fees to $20,904 from $19,904, according to the staff report. HdL didn’t recommend any increase for the community benefit agreement fee since these expenses have been incurred.
“We also want some direction as to the essentially $3,000 fees that we have not imposed on them, and some time has passed,” Sinco said. “At staff level, we’re fine telling them they should have been imposed, pay them now, it was on the books; or basically as a show of good faith we could waive those costs.”
According to the staff report, it’s been nearly a year since the City Council approved the first cannabis permit, and more than eight months since it approved the last.
“Once there’s a forgivable absence of being on top of it, we felt awkward asking for it. We wanted to make sure we were acting appropriately,” Sinco said.
City Council agreed that staff should enforce the $3,000 community benefit fee since businesses have received their permits. Councilmember Eugene Costa Jr. asked about the status of the two dispensaries in town.
“That’s beyond the scope of the report,” Sinco responded. “We do know one is going to open in July, and we have no information on the other one.”
