Los Gatos to consider allowing cannabis dispensaries in city

Council to vote on retail sales, adding tax question to ballot

Los Gatos is considering allowing commercial cannabis to help boost the town's revenue, but at a community workshop last week, several residents spoke against the idea.

The dozen residents who tuned in to the May 4 meeting said they feared legalizing dispensaries could give youth easier access to marijuana, risk public safety and result in increased crime.

Los Gatos passed strict ordinances to keep dispensaries out of town after marijuana was legalized at the state level in 2016, but the Town Council is now looking into the possibility of legalizing dispensaries to increase local tax revenue to help offset the town's rising expenses.

“Cannabis is being purchased and consumed within town limits. So the key decision really is whether that activity should be licensed, regulated and taxed by the town or continue to take place outside regulatory oversight,” Ajay Kolluri of HDL Cos. told the council.

The town hired HDL in January to evaluate the pros and cons of allowing commercial cannabis. The consultant projected that dispensaries could bring in hundreds of thousands of dollars in yearly tax revenue amid the town's rising expenses and a projected $10 million budget deficit over the next five years.

The town council has the final say on whether dispensaries could pop up downtown. The council is set to vote on legalizing marijuana sales and adding a marijuana tax question to the November ballot at its June 21 meeting.

“We are still in the exploratory phase,” town manager Laurel Prevetti said. “Council may also say, `Thank you very much, I think we've learned a lot and maybe this isn't quite the time for us.' The June date will be a very important milestone in this process.”

Neighboring cities that sell marijuana products, such as San Jose, collect all the tax revenue from purchases regardless of where the consumer lives.

HDL projected that two retail cannabis dispensaries that each make about $4 million in sales annually could bring in anywhere from $410,000 to $570,000 in added revenue to the town, depending on how highly the town chooses to tax the products.

Two delivery services bringing in $1.5 million each in annual revenue could mean $153,750 to $213,750 would go to the city.

Still, youth access to marijuana was a top concern among those attending the meeting. Kolluri said licensed retail storefronts have some safeguards to keep minors from purchasing cannabis, like checking IDS at the door, tracking and tracing all products, and having employees present at all times.

“Studies do show that underage sale or purchases, underage possession typically comes from family, from friends or from the illicit market,” Kolluri said. “So that is a problem, but it's primarily a problem with the illicit market.”

Los Gatos could impose stricter local regulations such as creating a youth decoy program, funding youth prevention services and requiring annual license renewals, Kolluri said.

Joanne Rodgers, a Los Gatos resident, has spoken at nearly all council meetings since January against the dispensaries.

“Marijuana is not a safe drug; it's different than alcohol. Marijuana remains in the fat cells of the body for months, alcohol is water-soluble, but they are both gateway drugs,” Rodgers said at the April 5 council meeting. “There are other ways to raise money in our town; let us brainstorm these ideas together.”

Resident Lee Fagot asked whether the dispensaries would increase costs for the Los Gatos-monte Sereno Police Department because of higher crime rates or crime prevention tactics.

“I'm particularly concerned with the incremental cost to police. Has there been any analysis in communities that have gone from no cannabis to retail sales and seen what's happened to their police cost?” Fagot said.

Police Chief Jamie Field said the department is conducting a “resource analysis” of neighboring police departments that have dispensaries to learn more about how the retail cannabis locations changed their police operations.

HDL Cos. was set to start sending a survey to a random sample of 300 residents to see how they feel about legalizing commercial cannabis in town. The findings of the survey will be presented at the council's June 21 meeting.

Last January, the town