Council to vote on planners’ unanimous OK of cannabis businesses

Morgan Hill is one step closer to allowing selling, producing, and testing cannabis products.

The Morgan Hill Planning Commission’s unanimous approval of a wide-ranging cannabis ordinance Aug. 27 set the stage for a city council vote in October. 

The new ordinance would allow retail sales, manufacturing, distribution and testing facilities or laboratories for cannabis products in the city.

Morgan Hill has been slowly moving towards adoption of some form of cannabis ordinance after California voters approved proposition 64 in the 2016 election, which allowed the sale of adult-use marijuana in the state—and after Morgan Hill voters last year overwhelmingly approved taxing cannabis businesses if they subsequently were allowed in the city. 

The state’s Medicinal and Adult‐Use Cannabis Regulation and Safety Act allows municipalities to dictate whether or not cannabis businesses will be allowed to open within the city. In an effort to gauge how Morgan Hill residents felt about allowing cannabis businesses in the city, the council had placed Measure I on the November 2018 ballot.

Measure I said the city could tax cannabis businesses if they were allowed to open in Morgan Hill. The measure was approved by 79 percent of city voters.

Despite passing the tax by a large margin, when it comes to allowing cannabis businesses within the city, Morgan Hill voters have been more divided. A majority of Morgan Hill residents—58 percent—had voted to approve the statewide Proposition 64. But in a random survey commissioned by the city and conducted by Godbe Research, just 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 in that survey, 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 in Morgan Hill, according to experts. 

In February 2019 the city council had a workshop where potential cannabis businesses were discussed. The council directed staff to move forward in exploring options for a cannabis ordinance. The ordinance approved unanimously by the planning commission is expected to come before the council in October.

David McPherson works for cannabis consulting company HDL, and appeared before the council at the Feb. 27 workshop. He estimated then that 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 where cannabis sales are still disallowed —like South San Jose, San Martin and Gilroy—creating a potential customer base of 120,000 people. 

Coming up with a plan for cannabis in Morgan Hill was part of the city’s 2019-20 strategic plan.

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