Staff Report re Study Session – Cannabis Business in Colma Page 1
STAFF REPORT
TO: Mayor and Members of the City Council
FROM: Dan Barros, City Manager
MEETING DATE: October 8, 2025
SUBJECT: Study Session – Cannabis Business in the Town of Colma
RECOMMENDATION
This item is a study session for information purposes only. No City Council action will be taken; the purpose of this item is to provide information on the cannabis industry within San Mateo County and discuss with City Council and members of the public the potential for Colma to incorporate the cannabis industry within its business landscape and provide direction to staff.
COUNCIL ADOPTED VALUES
The staff recommendation is consistent with the Council adopted values of:
•Vision
•Fairness
BACKGROUND
Medical cannabis use has been legal in California since 1996. In 2016 California voters approved Proposition 64 (the Control, Regulate and Tax Adult Use of Marijuana Act — AUMA), which legalized nonmedical use of marijuana by persons 21 years of age and over. AUMA outlined a state regulatory system governing the commercial cultivation, testing, and distribution of nonmedical cannabis, and the manufacturing of nonmedical products. The legislation also introduced state excise and cultivation taxes.
After AUMA voter approval, the State Legislature passed SB 94, the “Medical and Adult-Use Cannabis Regulation and Safety Act” (MAUCRSA), combining existing medical and adult-use cannabis regulation into one licensing structure overseen by a newly established “Bureau of Cannabis Control” (BCC). The BCC began issuing commercial cannabis licenses in 2018.
However, MAUCRSA also provides for “dual licensing” of commercial cannabis activities, necessitating both state and local permitting to operate cannabis businesses.
State law gives local governments the authority to adopt and enforce local ordinances to regulate licensed cannabis businesses, including land use requirements (e.g., zoning) and/or business licenses. Local jurisdictions may also establish regulations regarding health and safety, environmental protection, testing, security, food safety, and worker protections that exceed state standards. Furthermore, local governments can prohibit cannabis businesses within their jurisdiction.
AGENDA ITEM #5
Staff Report re Study Session – Cannabis Business in Colma Page 2
ANALYSIS
The State’s regulatory framework seeks to protect consumers by requiring licensed businesses to adhere to strict standards for product safety and information. California regulations focus on ensuring cannabis products are free from contaminants, accurately labeled, and packaged appropriately. Furthermore, it is still illegal to consume cannabis in public, drive under the influence of cannabis, or transport cannabis across state lines. Importantly, State law established an excise tax of 15 percent on purchasers of cannabis and cannabis products, and a cultivation tax (eliminated in 2022), with tax exceptions for medical cannabis.
Local Power to Regulate Cannabis
California law sets up a comprehensive system governing cannabis business at the State level while also allowing local governments to regulate cannabis and related activities. Within San Mateo County, 10 cities allow at least one cannabis business type and 10 cities prohibit all cannabis business types, including Colma (2022 survey). In unincorporated county areas, the County allows cultivation. In general, Cannabis businesses are categorized into six types for regulatory purposes. Table 1 presents an overview of local jurisdiction cannabis regulation in San Mateo County (Note: Green indicates local regulatory allowances).
Table 1 San Mateo County Local Cannabis Regulations (2022 Survey)
Retail
Storefront
Retail
Delivery Distribution Manufacturing Cultivation Testing San Mateo County 0 0 0 0 1 0
Atherton 0 0 0 0 0 0
Belmont 0 0 0 0 0 0
Brisbane 0 1 1 1 0 1
Burlingame 0 1 0 0 0 0
Colma 0 0 0 0 0 0
Daly City 1 1 0 0 0 1
East Palo Alto 0 0 0 0 0 0
Foster City 0 0 0 0 0 1
Half Moon Bay 0 0 0 0 1 0
Hillsborough 0 0 0 0 0 0
Menlo Park 0 0 0 0 0 0
Millbrae 0 0 0 0 0 0
Pacifica 1 1 1 1 0 1
Portola Valley 0 0 0 0 1 0
Redwood City 1 1 0 0 1 0
San Bruno 0 0 0 0 0 0
San Carlos 0 0 1 1 1 1
San Mateo 0 0 0 0 0 0
South San Francisco 0 1 1 1 1 1
Woodside 0 0 0 0 0 0
Source: California Department of Cannabis Control, Updated 2022
Staff Report re Study Session – Cannabis Business in Colma Page 3 Storefront Retail – Retail storefronts that sell cannabis are referred to as “dispensaries.” After an initial period of rapid growth, cannabis dispensary openings in California have slowed, with the number of new active licenses declining in recent years. The market is characterized by consolidation, increased competition, and challenging business conditions. Statewide retail sales have been declining since 2021. However, opportunities for new cannabis retail establishments may exist in underserved markets and locations.
Retail Delivery – Retail cannabis is commonly supplied to consumers at private residences via delivery service. The COVID-19 pandemic accelerated the use of cannabis delivery services, a trend that has persisted. Consumers appreciate delivery for its convenience, discretion, and accessibility.
Distribution – Cannabis distribution refers to the transporting wholesale cannabis (i.e., excluded retail delivery), along with related services. Distributors may move cannabis and cannabis products between cultivation, manufacturing, or distribution premises; move finished cannabis goods to retail premises, provide storage services, and/or arrange for testing of cannabis goods. Distribution businesses typically require industrial real estate locations, along with a vehicle fleet.
Manufacturing - Cannabis manufacturing transforms raw plant material into finished products, including edibles, vape cartridges, tinctures, and topicals. Manufacturing requires specialized extraction equipment, commercial kitchens, and/or other facilities for processing. The State requires unique permitting for cannabis manufacturing businesses that use volatile solvents (i.e., flammable gas or vapor). Manufacturing businesses typically require industrial real estate locations.
Cultivation – Cannabis can be grown using a variety of methods, including at outdoor sites and indoor facilities. Outdoor licenses are for cultivators who grow cannabis outside without using any artificial lighting on mature plants. Indoor licenses are for cultivators who grow cannabis in a permanent structure using artificial lighting. Mixed-light licenses are for cultivators who grow cannabis in a greenhouse or similar structure. Outdoor growing occurs on agricultural sites while indoor commercial growing typically occurs in warehouses.
Testing – In California, all cannabis goods must be tested by a licensed testing laboratory before sale. Testing ensures that cannabis does not contain harmful contaminants. To comply with State permitting, cannabis testing labs in California must maintain International Organization for Standardization (ISO) accreditation. Laboratory testing typically requires clean rooms and sophisticated heating, ventilation, and air conditioning (HVAC) systems. Laboratories are found in industrial and office real estate types.
FISCAL IMPACT
There is no fiscal impact in reviewing the cannabis activity within San Mateo County and discussing its potential for Colma. Future outreach efforts for both residents and businesses alike are likely to yield minimal expenses to ensure the information is received which the Town is currently budgeted for. A future ordinance allowing for cannabis business within the Town of Colma has the potential to generate revenue for the Town. However, this would not be automatic, and the Town would need to build in a financial mechanism to financially benefit on
Staff Report re Study Session – Cannabis Business in Colma Page 4 allowing the use. This would likely be through a tax measure on cannabis uses which is contingent on the voters approving it.
ENVIRONMENTAL
The City Council’s action in holding a study session is exempt from environmental review pursuant to CEQA Guideline 15306 as information collection to gather information from both the Council and public on allowing cannabis uses. No approval or action will be taken at the study session and any future allowance would be subject to independent CEQA review.
CONCLUSION
Staff is seeking guidance and direction from the City Council regarding allowing commercial cannabis activity in Town.
After receiving information from staff, Council may elect to direct staff to host a series of community meetings with both residents and business alike to seek additional feedback on this topic in more depth. Such meetings may offer more insight into the level of public support for cannabis and also help identify any specific types of business ventures that are equipped to succeed for Colma. This feedback is critical so that City Council can provide future direction for a potential local ordinance to allow retail, delivery, distribution, manufacturing, testing and/or cultivation in Colma. This process will offer City Council the ability to indicate policy preferences, such as the number, location, business license obligations, taxation level, and/or other possible local regulatory requirements for cannabis businesses. Council may also express disfavor for one or all of the cannabis business types described above.