Title
Resolution Establishing Business Operating Permit Fees for Cannabis Consumption Lounges [Published on 02/13/2026; 02/19/2026] [Continued at the February 24, 2026 Council Meeting]
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FileID
File ID: 2026-00667
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Location
Location: Citywide
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Recommendation
Recommendation: Conduct a public hearing and upon conclusion, adopt a Resolution establishing two business operating permit fees for Type 1 (Non-smoking Consumption) and Type 2 (All Consumption) cannabis consumption lounges.
Contact
Contact: Peter Coletto, Director, (916) 808-5416, pcoletto@cityofsacramento.org, Department of Finance; Al Romero-Gibu, Cannabis Manager, (916) 808-4772, aromerogibu@cityofsacramento.org; Fiona Mattson, Program Manager, (916) 808-8925, fmattson@cityofsacramento.org; Office of Cannabis Management
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Presenter
Presenter: Al Romero-Gibu, Cannabis Manager, (916) 808-4772, aromerogibu@cityofsacramento.org, Office of Cannabis Management
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Attachments
Attachments:
1-Description/Analysis
2-Resolution
3-Proposition 26
4-EPS Study Memo
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Description/Analysis
IssueDetail
Issue Detail: On November 19, 2024, Council adopted Ordinance 2024-0044 establishing a five-year pilot program for cannabis social consumption. This pilot program creates two types of cannabis consumption lounges:
• Type 1 (Non-smoking Consumption) - A Type 1 condition on a valid storefront cannabis dispensary permit authorizes a storefront cannabis dispensary permittee to allow persons to consume cannabis and cannabis products, other than by smoking or vaping, in a cannabis consumption lounge on the site.
• Type 2 (All Consumption) - A Type 2 condition on a valid storefront cannabis dispensary permit authorizes storefront cannabis dispensary permittee to allow persons to consume cannabis and cannabis products, including by smoking or vaping, in a cannabis consumption lounge on the site.
The proposed fees are for the regulation of consumption lounges, new applications and renewals, are as follows:
• Type 1 (Non-smoking Consumption) - $5,372
• Type 2 (All Consumption) - $7,163
These fees were developed by Economic & Planning Systems, Inc. (EPS) and have currently been assessed as part of the ongoing program permit fee study. These fees will be re-evaluated at the end of the social consumption pilot program. The fees are calculated based on the reasonably foreseeable costs required to administer and enforce the City’s regulations for the issuing, inspecting, monitoring, enforcing, and adjudicating cannabis consumption lounge conditioned permits (Attachment 2). Cannabis Opportunity Reinvestment and Equity (CORE) program cannabis businesses are exempt from these fees.
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PolicyConsiderations
Policy Considerations: The proposed fees are consistent with Council’s adopted Fees and Charges Policy and support the City’s goals of budget sustainability and fiscal responsibility.
Proposition 26 was passed by voters on November 2, 2010. The intent of the measure was to ensure the effectiveness of Propositions 13 and 218 by providing a definition of a “tax” for state and local purposes (Attachment 3). Specifically, it states “that neither the Legislature nor local governments can circumvent these restrictions on increasing taxes by simply defining new or expanded taxes as ‘fees.’” Thus, under Proposition 26, a tax has been defined broadly to include any levy, change, or exaction of any kind imposed by a local government. Therefore, the City bears the burden of proving that a fee or a charge is not a tax.
The proposed fees are not a tax under Proposition 26 because of exception 3 (business permit). The proposed fees are established to cover both the administration and enforcement of the cannabis program as it relates to the permitting and enforcement of cannabis consumption lounges, which include the permitting process, providing regulatory and compliance inspections to permitted businesses, and taking enforcement actions against unlawful consumption operations throughout the city.
Additionally, all cannabis consumption lounges will require a conditional use permit under the proposed amendments to Title 17. Proposed Title 17 amendments, if passed by the Council, the Office of Cannabis Management will make available applications for consumption lounges to all storefront dispensaries.
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EconomicImpacts
Economic Impacts: The addition of cannabis consumption lounges may increase economic activity in the commercial cannabis marketplace, as well as drive cannabis tourism and enhance surrounding businesses to the lounge.
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EnvironmentalConsiderations
Environmental Considerations: This action is exempt from the California Environmental Quality Act (CEQA) because it is the adoption of an ordinance, rule, or regulation that requires discretionary review, including environmental review, and approval of permits, licenses, or other authorizations to engage in commercial cannabis activity and because it does not have the potential for causing a significant effect on the environment ((California Business and Professions Code section 26055(h), CEQA Guidelines section 15061(b)(3)).
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Sustainability
Sustainability: Not applicable.
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Commission/Committee Action
Commission/Committee Action:
• On September 19, 2023, the Law and Legislation Committee (Committee) directed OCM staff to develop a pilot framework for cannabis social consumption lounges.
• On May 21, 2024, staff provided an informational update to the Committee regarding a framework for regulating consumption lounge business operations with preference to CORE storefront dispensaries. The Committee provided direction to return with a framework to allow consumption business operationsfor all storefront dispensaries.
• On September 17, 2024, staff presented a cannabis consumption business operating framework to the Committee. The Committee forwarded the pilot program concept for social consumption to City Council for consideration but requested a City Council workshop soliciting the expertise of public health experts regarding cannabis consumption statewide public health trends prior to Council consideration of social consumption.
• On October 22, 2024, the City Council heard presentations from public health experts discussing statewide public health trends and secondhand smoke in dispensaries.
• On November 19, 2024, the City Council adopted an Ordinance 2024-0044 amending Title 5 concerning business regulations for cannabis consumption lounges with the direction to return with an ordinance addressing the geographical inequities of consumption lounges across Council districts, as well as the ability for call-up review process for cannabis consumption lounges.
• On April 8, 2025, the Committee forwarded an ordinance limiting the number of lounges per district to address the geographical inequities and removing the call-up review process of cannabis businesses so that it will occur earlier in the overall process through the conditional use permit process.
• On September 16, 2025, the City Council adopted Ordinance 2025-00916 relating to the call-up provision in Title 5 and adopted Resolution 2025-0252, a “First-In-Line” process to authorize a storefront cannabis dispensary permittee to operate a cannabis consumption lounge.
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RationaleforRecommendation
Rationale for Recommendation: Implementing consumption lounge condition fees for dispensary permits allows the City to recover reasonable costs associated with the permit review, issuance, and ongoing costs of administration and enforcement activities. Consistent with Council approved CORE program benefits, the fee will be waived for CORE program participants.
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FinancialConsiderations
Financial Considerations: Social consumption may increase cannabis sales which would increase revenues into the General fund and the Measure L Children’s Fund. Fees will cover costs to administer the consumption lounge pilot program.
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LocalBusinessEnterprise
Local Business Enterprise (LBE): Not applicable.
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