California voters approved 12 local ballot measures in the 2022 midterm elections that will either expand or create retail cannabis markets in a dozen municipalities, with most of the gains centered in Los Angeles and San Diego counties.
All in, the wins should translate to more than 70 new retail licenses and countless other business opportunities for plant-touching and ancillary companies serving those retailers.
By contrast, six municipalities rejected pro-cannabis ballot measures.
L.A. County alone could create 25 retail licenses after voters in the nation’s most-populous county widely approved taxing marijuana businesses in unincorporated areas, including a 6% tax on gross retail receipts.
In San Diego County, the country’s fifth-most-populous county, voters approved a tax measure that ultimately could lead to more than 20 new retail licenses.
Measure A included a 6% sales tax for retailers.
The county, which has nearly 3.3 million residents, has approved only five marijuana businesses, according to San Diego TV station KUSI.
“Access has always been an issue,” said George Sadler, CEO of San Diego-headquartered cannabis brand Gelato. “Any progress is a big plus.”
Voters in traditionally more conservative Orange County approved cannabis business tax measures in Huntington Beach and Laguna Woods, which could create 10 retail licenses in Huntington and one in Laguna Woods.
Despite its massive population and size, Orange County is a marijuana desert.
Santa Ana, Orange County’s second-largest city with about 320,000 residents, is the only municipality in the county with operational marijuana stores, though nearby Costa Mesa and Stanton are in the permitting process.
That’s why the Huntington Beach passage is noteworthy – not only for the 10 retail licenses the city of 200,000 residents plans to issue but also because it’s now one of the few coastal cities along California’s 840-mile shoreline that allow recreational stores.
Santa Monica also bucked that trend when voters approved a city-led ballot tax initiative that included a 3% tax on non-medical cannabis retailers, a 2% tax on medical cannabis retailers and a 1% tax on other licensed cannabis businesses, with a maximum of 10% gross tax pending city council approval.
The affluent coastal city steeped in cannabis culture has only approved two medical marijuana dispensaries.
California voters rejected six cannabis-related ballot measures, including a clean sweep in L.A.’s beach cities.
“Even though people may have been OK with legal sales, they were not OK with these measures,” said Hirsh Jain, founder of Los Angeles-based cannabis consultancy Ananda Strategy, which analyzed the election results.
In Sacramento County, a majority of voters approved special taxes on gross receipts from marijuana and hemp businesses to fund homeless services, but a two-thirds supermajority was required for passage.
Passage of Measure B would have paved the way for the establishment of 20-40 marijuana retail licenses.
South Bay says no way
When Redondo Beach voters overwhelmingly rejected a special-election referendum in October to add one dispensary beyond the two the city approved in July, it surprised industry watchers.
That ripple turned into a wave of opposition that swept across L.A.’s beach cities, with voters in Hermosa Beach, Manhattan Beach and El Segundo upholding existing bans on commercial cannabis activity by wide margins.
“We had a major failure in the South Bay,” Jain said.
Though voters in those affluent coastal communities opposed expansion, they approved taxing the industry – a prevailing trend in California this midterm – if local laws change to end prohibitions.
The four ballot measures that aimed to expand retail were led and funded by Elliot Lewis, owner of Long Beach-based Catalyst Cannabis Co., who attracted plenty of fans and detractors leading up to Election Day for his brash videos on social media bashing local politicos and policy as well as touting advocacy efforts.
In Redondo Beach, the cannabis measure was tied to another ballot question asking to recall City Council member Zein Obagi Jr., a critic of marijuana business expansion.
That recall was soundly defeated.
“We didn’t help ourselves in the South Bay being who we are,” said Lewis, who learned some lessons the hard way.
“Negotiation and or getting city support is always the way to go,” he said.
“It’s really hard to go into the headwinds.”
Common thread of opposition
The marijuana ballot failures in California reflected some polling trends across the United States, particularly in Arkansas.
Opposition forces in suburban L.A. and Sausalito positioned their arguments similarly to those in Arkansas; a yes vote for recreational sales would provide a monopolistic advantage to a few benefactors.
“They felt like it was an ambush,” Lewis said of the opposition coalition.
“We should have engaged and tried to negotiate some resolution.”
In Arkansas, voters overwhelmingly quashed an industry-led ballot referendum to legalize adult-use sales, a setback to establish the first recreational marijuana market in a deep-red, conservative Southern state.
In Sausalito, voters were asked to reverse a repeal banning all marijuana sales in the small Northern California town linked to San Francisco via the Golden Gate Bridge.
That measure was written by Sausalito-based Otter Brands, the sole benefactor if it passed. The company doesn’t have an operating store in its hometown but wants one.
With 100% of votes counted, the no votes dominated, 72% to 28%.
Ballot authors included a stipulation that only businesses seeking retail approval before April 2021 could qualify, according to the Bay City News Foundation.
And the only company qualified under that criteria was Otter Brands.
“Most cities want to dictate their cannabis laws rather than allow one group to monopolize a particular area,” said Arun Kurichety, founder and chief operating officer of Petalfast, a cannabis sales and marketing agency based in Irvine, California.
The perception of monopolies or unfair business advantages can rally voters, particularly in smaller, insular communities, according to Jain.
“I would say the lesson here, both at the state level and at the local level, is most people support legal cannabis,” he said.
“But they need to believe in even-handed measures moving forward, otherwise it’s going to cause cleavages in the community.
“It’s really a wake-up call that we have to sit down and pass public policy that designs regulation, or we’re going to keep having these battles.”