Desert Hot Springs Spring City Council on Tuesday night became the first valley city to move toward allowing cannabis use in concert venues and hotels, marking a big step forward in the city’s strategic push to develop “cannatourism.”
The City Council, which met in person at City Hall with plastic partitions between members’ assigned seats, unanimously voted in favor of one ordinance to allow “marijuana entertainment facilities,” and another to allow hotels to sell cannabis.
Both items will return to the council agenda on Jan. 19 for final consideration by the council.
Councilmember Gary Gardner, who was recently appointed to be the vice-chair of the Joint Powers Authority at the Greater Palm Springs Convention and Visitors Bureau, said he was confident that the entertainment venue ordinance would be positive for the city’s image.
“I think this is one of our better ordinances,” he said. “I love that we are leading the way when it comes to cannatourism and things that will really put DHS on the map.”
Both proposed ordinances come with a host of rules, including barring cannabis use in public view. At the entertainment venues, which could include bowling alleys or concert venues, people could buy cannabis and leave without staying at the facility, while hotels could sell to registered guests only.
These proposals are being considered at a time when the California legal cannabis market is ending a banner quarter, resulting in millions in tax revenues in cities hit hard by great financial uncertainty due to the COVID-19 pandemic.
Cannabis generated nearly $307 million in state tax revenues in July, August, and September — the most since 2018 when such taxes began being collected — as well as an 80% increase over the same quarter last year.
In Desert Hot Springs, cannabis-related tax revenue totaled $4.2 million in the 2019-20 fiscal year that ended in June. That’s an increase of about $1 million, or around 31% from the prior year, with staff expecting the figure to increase this year, according to an annual financial audit report.
A quarter of cannabis tax revenues are set aside for emergencies; that reserve covered about $2.4 million at the end of June or roughly 10% of the city’s annual general fund expenditures.
New kinds of proposals
In creating the ordinances, city leaders are responding directly to the requests of cannabis industry developers who’ve generated millions in tax revenues for the city, as well as hotels that are hurting from the travel downturn caused by the pandemic and are looking for ways to make money by integrating cannabis into their offerings.
Doria Wilms, assistant Desert Hot Springs city manager, said the city has been contacted by developers who want to create cannabis-friendly entertainment venues but they weren’t permitted under current city laws.
Kenny Dickerson, co-owner of Coachillin’, a cannabis business park in the city, hopes to develop a wellness hotel that allows cannabis. He has said he also plans to develop a concert venue.
While largely supportive of the proposals, Dickerson told the council he believes Desert Hot Springs is missing an opportunity by not being able to have alcohol and cannabis served at entertainment facilities.
“I would like a really hard look at having both, I think both are integral to the concert world,” Dickerson said.
But state law doesn’t allow the sale or consumption of alcohol and tobacco at cannabis businesses; the ordinance, however, could be updated if state law changes.
The council spent about two hours Tuesday night parsing through the proposed ordinances before approving them, 5-0, on first reading.
For the hotels, no one under 21 can be on the premises, employees can’t use cannabis, while only the guests of the hotel would be allowed to buy cannabis on-site. Unlike the entertainment venues, hotels would be barred from selling to non-customers; however, people who are registered guests for the day would be allowed to purchase cannabis at the property.
The proposals also specify how cannabis would be sold to guests of the hotels — nothing can be displayed, purchases will be made from a menu. The hotels can’t give out free samples, can’t service people who are visibly intoxicated, or allow smoking and vaping outside of designated areas.
In addition, these cannabis-friendly hotels can’t be located in the downtown commercial district.
While the votes were unanimous, Betts did raise concerns about some of the wording in the proposed ordinances, saying some language was as “clear as mud.”
As an example, he pointed out a portion of the proposal that was meant to identify where the on-site consumption can take place inside an entertainment venue. It states that consumption areas can only be accessed “via non-public, secure passageways and must be located on separate premises,” and have to be out of view from the public.
“Some of this sounds like we’re developing a project and not an ordinance,” Betts said.
Mayor Scott Matas said the proposed ordinance was drafted with advice from attorneys in order to ensure that the city could allow cannabis use at venues ahead of projects that are coming to the city.
He said the “organic document” could be updated based on what needs arise from hypothetical facilities and that the city is entering new territory.
“For right now, it protects us,” he said. “I think this is a great start.”
Betts also said that while he is “totally in agreement” with the idea of cannabis use at permitted entertainment venues, allowing off-site sales will wind up increasing the number of places where people can purchase cannabis, which has been a concern for some residents. Some cannabis industry experts raised concerns earlier this year about competition from “cannatoruism” facilities.
“We’re taking the number of dispensaries from 16 to however many come along to apply,” he said.
Wilms clarified that while off-site sales are allowed, the retail components won’t be stand-alone facilities. She also emphasized that entertainment must be the primary purpose of those venues.
Council members also discussed what consumers would do with any leftovers, or whether hotel guests could take products with them off-site.
Courtney Karen, an attorney for local cannabis developer John Barry who plans a cannabis-friendly concert venue, called into the public hearing and addressed concerns about requiring re-packaging of cannabis that’s opened at a venue.
Most products have childproof packaging, which meets state requirements, whether that’s a box of gummies or a jar of cannabis buds, Karen said.
For other kinds of goods that aren’t in childproof packaging after they’re opened, opaque “doggy bags” have become standard for brownies or cookies that aren’t finished on site at lounges in other jurisdictions, Karen said.
Matas said the goal is not to allow full-service dispensaries, “but if they decide Two Bunch Palms has a lotion or a product they want to take home, they should be able to.”