MH council considers cannabis business

Cultivation ruled out at Feb. 27 meeting

In November, Morgan Hill residents voted overwhelmingly to tax cannabis if it were to be allowed in the city. The 79 percent approval rate gave the council reason to pursue the idea of allowing cannabis businesses in Morgan Hill.

At a Feb. 27 workshop, the council spent several hours hearing from law enforcement, cannabis experts and community members on possibilities for cannabis business in Morgan Hill. The council ultimately directed staff to come back with ordinance language options and answers to council questions about retail, manufacturing and testing.

The council may have some additional motivation for pursuing a cannabis ordinance sooner rather than later. After the passage of proposition 64—which legalized adult-use cannabis in California and left it up to individual municipalities to decide whether or not the businesses were allowed—the state allowed any city that passed an ordinance before July 2019 to forgo California Environmental Quality Act assessments for the ordinance as a whole. Individual businesses would still need to comply and be assessed.

Despite passing the tax by a large margin, when it comes to allowing cannabis businesses within the city, Morgan Hill voters are not as sure. A majority of Morgan Hill residents–58 percent–voted to approve Proposition 64. But in a study commissioned by the city and conducted by Godbe Research, only 48 percent of Morgan Hill residents supported recreational marijuana sales in the city.

There was much larger support for medical marijuana sales in the city, with 61 percent of respondents supporting it. Voters also approved a 6 to 10 percent tax on adult-use sales, a $10-$15 tax per square foot on cultivation, a 4 to 10 percent tax on manufacturing and a 2 to 10 percent tax on testing. These taxes could generate more than $500,000 annually in local tax revenues, according to experts.

The council decided by an informal vote not to pursue any additional information on cultivation.

David McPherson works for cannabis consulting company HDL, and has come before the council a number of times about the possibility of a cannabis ordinance. He told the council that the difference between recreational and medicinal cannabis is becoming increasingly blurred. Potential patients can now purchase cannabis products available for adult use instead of getting a prescription.

Coming up with a plan for cannabis in Morgan Hill was part of the city’s 2019-20 strategic plan. While council members had differing opinions on the future of cannabis business in the city, all agreed to getting more information from staff.

Yvonne Martínez-Béltran, council member for District B, was vocal about not wanting any adult-use cannabis storefronts in the city. Martínez-Béltran said she was open to other cannabis businesses, and the council agreed pursuing agriculture tech businesses could bring high-paying jobs to Morgan Hill.

Council member René Spring was the most vocal about supporting a future ordinance and cannabis storefronts in the city. “We always talk about (how) we want to be open for business, and this is a business,” said Spring. “Once in a generation, you have a new wave of businesses coming that presents new opportunities. The longer we wait, the more we’ll miss out on these opportunities.”

McPherson estimated cannabis businesses could bring between $350,000 and $700,000 in tax revenue to the city and that Morgan Hill may be able to capitalize off business from surrounding areas like South San Jose, San Martin and Gilroy, creating a potential customer base of 120,000 people.

The City of Morgan Hill and the council have long taken a conservative stance on cannabis, having consistently voted to prohibit medical marijuana business here before Prop. 64 passed statewide.

The city is still several steps away from approving a cannabis ordinance, but the workshop was a step toward creating a plan for cannabis in the city. City Manager Christina Turner told the council at the February meeting that several cannabis businesses had already reached out about bringing their companies to Morgan Hill.

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