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Temporary ban in place while city considers ways to boost industry

Palm Springs will likely go a year — and potentially much longer — without seeing any new cannabis dispensaries open after the city council voted this week to extend a moratorium on new dispensary permits for 10½ more months. The measure also bars the transfer of existing permits to new owners.

The council voted last month to implement that moratorium while the city develops new rules to improve the health of an industry that some in the business — and many city leaders — say has become oversaturated. The moratorium will now remain in place for a full year unless the council decides to do away with it earlier.

Prior to Thursday’s vote, it was set to expire Dec. 10, 2023. It will now end Oct. 25, 2024.

Palm Springs has around 30 operating dispensaries, which online data suggests makes it one of the most dispensary-saturated cities in the state and nation on a per capita basis. However, tax revenue from dispensaries has dropped for two straight years and is down by over 20% from the high it reached during the COVID-19 pandemic. Several dispensaries have also closed over the last two years even as the city has added more.

City Attorney Jeffrey Ballinger said state law only allows the city to initially establish an emergency ordinance for 45 days, but the council can then hold a second vote to extend it for up to one year, which is what it did.

He added that the city had received a request from a permit holder who is not currently operating a dispensary for the city to drop the rule disallowing the transfer of permits. However, he said city staff opposed that idea because it would likely lead more dispensaries to open.

During the meeting, the council also discussed a request from the Reefer Madness dispensary to immediately cut the city’s current 10% tax on retail marijuana sales in half. Several councilmembers have called for a reduction, given that the city has higher cannabis taxes than most other cities in the Coachella Valley. A representative of the dispensary said doing so would support dispensaries during what he called the “current financial crisis the cannabis industry is facing.”

Many cannabis owners in California say a combination of high taxes, overproduction of cannabis in the state, challenges posed by cannabis’ complex legal status and other issues have made it difficult to make a profit, problems that locals say are only compounded by the intense competition in the area.

However, Ballinger said that a tax cut would take multiple meetings to implement, and the discussion ultimately ended without a majority of the council expressing a clear commitment to do so in the immediate future.

While the moratorium will give the council up to a year to consider other changes to the city’s cannabis laws, several council members said Thursday they don’t want to wait that long. Staff presented the council with several initial recommendations for new regulations that ranged from tax cuts to outright capping the number of dispensaries.

Councilmembers Jeffrey Bernstein and Ron deHarte said they hoped city staff would come forward with a package of final recommendations by January based on council feedback. They also said they would like to see the council vote on at least some changes, including tax cuts, piecemeal if a whole package isn’t ready by then.

Councilmember Lisa Middleton, meanwhile, said only that she wanted the city to move as quickly as possible.

Paul Albani-Burgio covers breaking news and the city of Palm Springs. Follow him on Twitter at @albaniburgiop and email him at paul.albani-burgio@desertsun.com.

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