Council sets stage for expansion of city’s marijuana industry

In an effort to become more competitive with nearby cities for marijuana revenue, the City Council has agreed to allow new standalone cannabis manufacturing, distribution sites and testing labs in San Jose.

An industry that just several years ago was the “wild, wild west” has “matured,” Mayor Sam Liccardo said before a packed meeting Tuesday in which the council voted to allow such businesses to operate in certain, mostly industrial parts of San Jose.

While the number of actual dispensaries allowed in the city will stay at 16 for now, the move to expand the city’s marijuana industry could create more jobs and revenue. Now, some of the dispensaries are permitted to do some manufacturing and distribution. But testing hasn’t been allowed, and standalone manufacturing and distribution companies haven’t been permitted to operate in the city. The marijuana business tax is currently expected to generate some $14 million for the city in 201819, up from $13 million the previous year. In the future, that figure could rise significantly.

Later this year, the council also will consider whether to reduce the tax rates for marijuana businesses, including creating tiers — another move to make San Jose more competitive with surrounding cities, many of which have lower rates. Now, San Jose taxes 10 percent of gross receipts.

“We’re very excited,” Kevin Lewis of CannaSafe Labs, which analyzes the potency of marijuana, among other things, told the council.

The city could begin accepting applications as soon as March, although it will likely take companies months after that to work through the steps required to operate legally.

Several council members, including Magdalena Carrasco and Sylvia Arenas, pushed to create a new program that would make sure people of color who were disproportionately criminalized before marijuana became legal have equal access to business opportunities now.

“I think all of us up here are just trying to integrate the folks who’ve been left out,” Arenas said.

But the council ultimately decided not to move forward immediately with such a program, noting the city is tight on resources and setting it aside for future consideration.

Also Tuesday, the confirmed District 1 Councilman Chappie Jones as the new vice mayor. Jones, a moderate member of the council, replaces Carrasco, who leans more to the left.

And, after hours of debate and intense feedback from residents and the company, the council also voted to continue negotiations with California Waste Solutions, which provides recycling services to more than three-quarters of the city’s single-family homes. The city’s Environmental Services Department had suggested putting out a bid for a new provider, arguing the company did a poor job and generated a number of complaints from residents. But council members said they’d heard from workers afraid of losing their union jobs and Vietnamese residents proud of the company, which is owned by David Duong, who came to the U.S. as a Vietnamese refugee, and want to find a solution that works for them and ratepayers.

To continue working in the area, the council said the company must meet a series of new targets, to be aligned with targets for the city’s other single-family recycling contractor. The company had argued its current targets were disproportionately tough and impossible to meet. If the city and company don’t agree to a deal within 30 days, the city manager will move forward with putting out a bid.

“We’re eager to work something out,” Joel Corona, the company’s vice president of business development, told the council.

On a separate item, the council voted to accept an audit of the city’s towing program, which said, among other things, that the cost in San Jose to get a car out of impound is significantly higher than in other nearby cities and that towing companies in San Jose don’t always respond to towing requests. The council asked for a number of changes to towing services, including stiffer penalties for companies that don’t meet their contractual obligations and a possible reduction in towing fees.

The meeting marked Liccardo’s return to City Hall after a bike collision on New Year’s Day left him with a couple of broken vertebrae and a cracked sternum.

“Kids, wear those helmets,” he said while talking to reporters before the meeting began, adding that the outcome could have been much worse had he not been wearing head protection.

The mayor, who is now just using over-the-counter pain medication, will wear what he joked is the “latest model exoskeleton” around his mid-section to prevent him from moving too much as he heals.

His goal, he said, is to run the Rock ‘n’ Roll half marathon in October.

“I’m very grateful,” Liccardo said, “to be back at the job I love.”