San Diego on Monday may join a small group of California cities willing to allow a local marijuana supply chain in addition to permitting storefronts to sell the drug to both medical and recreational customers.

The City Council is scheduled to consider a proposal to legalize local cultivation, manufacturing and testing of marijuana and related byproducts like edibles when new state laws take effect in January.

Supporters say the proposal would boost the local economy, increase city revenue through steep taxes on the drug, and improve the quality and safety of local marijuana by eliminating the need to truck it in from elsewhere.

San Diego has allowed storefronts to sell marijuana to medical patients since 2015, and agreed early this year to allow 16 approved medical pot dispensaries to expand their sales to recreational customers next year.


The only other cities in the county that allow dispensaries are La Mesa and Lemon Grove, where voters forced the hands of city leaders by approving ballot measures last November. And only La Mesa has indicated it may allow cultivation.

It’s not clear whether a majority of San Diego’s politically divided nine-member council will support allowing cultivation, manufacturing and testing. The panel’s five Democrats have shown more enthusiasm than the four Republicans.

The city’s Police Department and planning staff are recommending the council reject the proposal based on concerns about crime and safety.

Police Chief Shelley Zimmerman said she anticipates a significant increase in calls for service at cultivation and manufacturing sites, where explosions and fires could be relatively common.


She also raised concerns about marijuana tourism and the new, mostly cash-based industry attracting organized crime to San Diego.

Local legalization opponents said they plan to lobby the council on Monday.

“It’s been well documented that this is a lawless industry,” said Scott Chipman, leader of a nonprofit called San Diegans for Safe Neighborhoods.

Chipman also said California already produces many times more marijuana than gets consumed in the state, contending that means there is no reason to allow cultivation or manufacturing in San Diego.


Legalization advocates and leaders of the local marijuana industry say it’s crucial to have a local supply chain for the drug, not just dispensaries selling it.

They say there is essentially no other industry allowed to sell its product, but not allowed to grow, manufacture or test it locally.

And a local supply chain would decrease prices by eliminating transportation costs, said Phil Rath, executive director of an association of local dispensaries called The United Medical Marijuana Coalition.

And lower prices play a crucial role in persuading customers to buy marijuana at legal dispensaries instead of on the black market, which includes unpermitted pot shops and unauthorized delivery services.


Rath said the local industry is confident the city can effectively allow and regulate cultivation, manufacturing and testing.

“The city has learned quite a bit about how to regulate the industry from the last several years from going through the process of permitting retail facilities,” said Rath. “They’ve used a lot of that knowledge to come up with a pretty solid proposal that’s well-crafted and well thought out.”

Rath said, however, that there are concerns with roughly 5 to 10 percent of the proposal.

Those concerns focus primarily on a plan to limit the number of cultivation and manufacturing businesses to a maximum of two per City Council district, and to prevent such businesses from opening next to retail dispensaries.


Rath said the two-per-district cap, which would mean a maximum of 18 throughout the city, would make it impossible to meet local demand.

“To meet local, legal demand, the number of these permits is going to have to be somewhere in the range of 40 to 50,” he said.

Some have suggested a citywide cap instead of a maximum number per district.

Rath said it makes no sense to require cultivation and manufacturing businesses be at least 100 feet away from dispensaries.


“We don’t see why it would be harmful to anyone to have the two uses next to each other,” he said, adding that vertical integration could further lower costs. “There’s no public safety benefit from doing that.”

Many proponents have focused on a boost to the city’s tax revenue.

San Diego voters approved a local tax on recreational marijuana last November that would start at 5 percent and rise to 8 percent in July 2019.

That tax, which could rise as high as 15 percent with council approval, would apply to pot farms and factories as well as dispensaries.


Councilman Chris Cate unveiled last month some suggested regulations for cultivation and manufacturing businesses, many of which aren’t included in the proposal the council will debate on Monday.

They include outlawing any signs on such businesses, requiring them to have a “positive impact” on the surrounding community and mandating they have a round-the-clock liaison to respond to any complaints.

Cate may ask to amend the proposed legislation to include some or all of those.

The council must also decide how to handle 27 businesses — 17 manufacturers, eight cultivators, one testing lab and one warehouse — that don’t actually have any legal standing despite being given city business tax certificates.


Some or all may be “grandfathered” in — allowed to continue operating — or be given priority for permits.

Monday’s council meeting is scheduled to begin at 2 p.m. at City Hall, 202 C St.


david.garrick@sduniontribune.com (619) 269-8906 Twitter:@UTDavidGarrick