Hayward City Council Moves Forward with Cannabis Licensing and Business Regulations

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Hayward, California appears headed to offer a vigorous licensing program for both medical and adult-use cannabis. While a number of details remain to be resolved, the licenses will be awarded based on a competitive RFQ process after the program returns to the Council for final approval this fall.  

On Tuesday, July 18, the Hayward City Council met to review its staff’s proposal for commercial cannabis businesses in Hayward. The initial proposal, including the draft regulatory ordinance, is available here.

By a 5-0 vote, the City Council gave staff directions to move ahead with developing and amending the proposed regulations. Here are some of the key recommendations made by City Council:

  • The number of permits issued in Hayward will be more than three. Under the proposed ordinance, any type of permit (other than a testing or lab permit) would count against an annual three-permit limit. The Council unanimously voted to increase the number of permits issued to more than three. Council Member Al Mendall suggested issuing three permits per licensing category. The Council will likely wait to see the types and quality of applications being submitted, before settling on a limit.  
  • There may be retail and distributor permits issued to businesses in commercial areas. Under the draft regulatory ordinance, permits would not be available to retailers or distributors other than small vertically integrated microbusinesses. The proposal also limited cannabis businesses to industrial zoning areas. However, the Council voted unanimously to consider allowing retail and distributor businesses in selective commercially zoned areas.  
  • Applicants will be selected via a weighted point system rather than a lottery. Council Members discussed their various concerns about the lottery system and unanimously voted for a more subjective process that would give the City additional control over which businesses receive permits. Council Members suggested various factors that might be considered, including the community benefit, the type of business, the potential tax revenue, and priority for local business owners and residents.
  • The application processing fee is $5,000. Staff recommended an application fee of $2,000 and the City Council voted unanimously for a $5,000 fee. This fee is a deposit and is standard for many Hayward permits. Should an application take less money to process, the fee is returned to the applicant; should an application take more money to process, the applicant will be billed for the additional amount.
  • Hayward’s tax rate on cannabis sales will be competitive. Under Measure EE, Hayward voters authorized the City to impose a tax of up to 15% on the gross sales of cannabis. However, the staff proposed a rate of between 6-10%, and the Council expressed some concern that a 10% tax rate may be too high considering the lower tax rates in neighboring cities like Oakland, Berkeley, and San Leandro.
  • The Council voted unanimously to allow the City Manager to begin accepting applications. Although the application and selection process will be developed in the coming months, the City Manager is authorized to begin accepting applications as soon as the City finishes developing its request for proposal and releases the request to the public.
Hannah Strassburger