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Commercial Cannabis Laws in Santa Cruz County – Where We Are Now?

Since we last wrote about cannabis-related legislation in Santa Cruz County, regulations have changed on both a local and state-wide level. Read on to learn more about these changes.


Changes to California Legislation


In the state of California, the following agencies issue licenses for commercial cannabis activities:

Previously, we wrote about emergency cannabis regulations that were put in place in California. On January 16, 2019, California’s three state cannabis licensing authorities announced that the Office of Administrative Law (OAL) officially approved state regulations for cannabis businesses across the supply chain and so these emergency regulations are no longer in effect. You can read more about these new regulations here.


The County of Santa Cruz


In unincorporated Santa Cruz County, cannabis cultivators, manufacturers, and distributors can apply for non-retail licenses. Retail licenses are needed for dispensaries and other storefront shops but at the time of writing, are not available; The County has already distributed 12 retail license, and does not plan to issue more in the near future.

The Santa Cruz County Board of Supervisors recently voted to streamline the process of licensing cannabis cultivation in the unincorporated County of Santa Cruz in farmland and nonresidential areas. You can read more about the changes made in this article.

If you’re considering buying real estate with the intent of cultivating, manufacturing, or distributing cannabis, various types of licenses are available depending on the size and location of your operation. Take a look at this summary of basic eligibility criteria for non-retail commercial cannabis business license which outlines the parcel size, maximum cultivation area (as applicable), and permitted zoning for these operations.


City of Santa Cruz


According to the Santa Cruz City Website, Santa Cruz City Council adopted Cannabis Regulations on November 28, 2017. Under this ordinance, the City will permit five licenses for  retail outlets in industrial and limited commercial zones. This number includes the two existing dispensaries originally approved as medical marijuana provider association dispensaries.

Commercial cultivation is limited to 10,000 square feet of indoor growth in industrial zones. Manufacturing and distribution are also allowed in industrial zones. All commercial cannabis uses require the approval of an administrative use permit at a public hearing.

Each license type is outlined in this flowchart. Note that AUP stands for Administrative User Permit. You can find the city ordinance pertaining to cannabis business activities here.


City of Capitola


On December 13, 2018, the City of Capitola Municipal Code Chapter 5.36 went into effect allowing a maximum of two Retail Cannabis Licenses within the city limits. The deadline to submit an application for a retail license expired on April 2nd of 2019. The City is currently in the review process to determine who the licenses will be issued to. You can read more about that process here.


City of Watsonville


The City Council adopted the Medical Cannabis Facilities Ordinance No. 1352-17 (CM) which went into effect on June 20, 2017 and can be found in the Watsonville Municipal code. Subsequently, the City Council adopted an ordinance which amended the Code to allow existing licensed cannabis cultivators and manufacturers to produce and sell cannabis for both the medical and adult-use markets. This amendment went into effect on March 13, 2018.

The Ordinance allows the establishment of up to nine cannabis manufacturing facilities in Watsonville. The application period has closed and no new applications will be accepted at this time.

In 2016, the Watsonville City Council adopted Ordinance No. 1326-16 (CM) to regulate the establishment of cannabis cultivation facilities. The maximum number of six permits have been approved, and no applications for new cultivation facilities are being accepted at this time.

Distribution is only allowed in conjunction with licensed cultivation or manufacturing, and no separate distribution licenses are permitted in the City.


 City of Scotts Valley


All commercial cultivation, manufacturing, and distribution of cannabis is prohibited in the City of Scotts Valley. Additionally, no dispensaries will be permitted in the city limits. Click here to read Chapter 17.64 section 020, which states the above in the City Code.

Please note: The information contained within this article is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, legal or financial advice from a professional accountant or lawyer.

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