Faced with continuous calls for a second cannabis dispensary to be allowed to make an application to the city by the Sonoma County Cannabis Group, the City Council will discuss the topic at its next meeting on September 17, 2025.
Per the staff report in the agenda for the meeting:
In June 2019, the City Council adopted two ordinances, Ordinance # 3-2019 and # 4-2019, that permit and regulate future commercial cannabis businesses that wish to operate in the city. The Council authorized one retail business, one non-storefront retail business, one manufacturing business and one testing lab in the city. On December 16, 2019, the City Council adopted resolutions approving “Administrative Regulations” and “Application Procedures and Guidelines,” “Commercial Cannabis Fees” and “Background Checks” to allow one retail commercial cannabis storefront business and one non-storefront retail commercial cannabis business.
The City issued a Request for Proposal (RFP) on January 3, 2020, and received ten proposals, from which SPARC was selected to move forward to open and operate a retail cannabis dispensary in Sonoma. SPARC received a Use Permit to operate a retail dispensary on October 5, 2020.
On April 19, 2021, the City Council adopted Ordinance # 5-2021 to allow the possibility for a second retail storefront commercial cannabis business to operate in the city. On November 17, 2021, the City Council reviewed and adopted two resolutions, Resolution # 81-2021 updating the RFP and Administrative Regulations and the Application Procedures and Resolution # 82-2021 updating fees for the RFP process, both of which are attached to this report. On April 19, 2023, the City Council considered an item to allow the opportunity for a second retail storefront commercial cannabis dispensary to operate within the City and to direct staff to issue a Request for Proposals (RFP). At that meeting, no action was taken and no RFP was issued. Council directed staff to revisit the ordinance and bring the matter back at a future meeting.
Analysis:
California remains the largest legal cannabis market in the U.S., but recent state data and industry reporting show that the taxable retail sales and statewide retail revenues have declined from their peaks and wholesale prices have fallen. The California Department of Tax and Fee Administration’s market outlook (2024/early-2025) reports falling retail-dollar sales even while licensed production and unit volumes increased. Opening a second storefront cannabis retailer would increase residents’ options when purchasing cannabis and cannabis products. However, statewide sales have declined in recent quarters and the illicit market still dominates a large share of consumption.
Opening a second storefront in a stagnant or falling market raises the risk of store failure or limited net tax gain. A second licensed retail outlet may primarily re-allocate existing licensed-store sales, producing only modest net city revenue unless it meaningfully expands the legal market or draws external customers to the City. Due to the fact that only one dispensary is currently operating in the City limits, financial details on a specific business are not public.
To evaluate potential revenue to the City, numbers were pulled using state averages to provide some context on potential revenue from a new dispensary based on different assumptions concerning an increase in customers as shown below.
Assumptions:
- Average gross retail sales per dispensary (range): $1.5M – $4.0M / year (industry average reported ≈ $3.5M but markets vary widely).
- Sonoma City cannabis business tax: 4.0% of gross receipts
- Cannibalization scenarios for new store sales (how much of the new store’s customers are new dollars vs. diverted from the existing store): 25% new (low), 50% new (medium), 100% new (high/unlikely). Calculation (three scenarios, using an illustrative $3.5M store) If one new store gross = $3.5M / year
- City tax at 4% = $3.5M × 4% = $140,000 annual gross tax receipts if all sales are net new to the city (100% new).
- If only 50% of the new store’s sales are net new (50% cannibalization), net new city tax ≈ $70,000 / year.
- If only 25% of sales are net new, net new city tax ≈ $35,000 / year. If direction is given to issue an RFP for any type of cannabis business, staff will need to review/update the currently adopted cannabis ordinance, policies, fees, application/RFP materials, and application guidelines and procedures.As part of the review, staff would also consider proximity rules, buffer requirements, and zoning restrictions based on input and direction by the City Council. To determine necessary updates, staff, legal and possibly consultant time would be required to complete the work.
Recommended Council Action It is recommended that the City Council provide direction to City Staff to either: 1. Direct staff to not issue an RFP at this time for any cannabis business types, providing staff with guidance on if/when this item should be brought back to the City council for reconsideration. 2. Direct staff to develop and issue an RFP for all cannabis business types, including returning with a draft updated fee schedule and guidelines and procedures edits to ensure the City’s regulatory framework address current laws and policies.
The staff report included potential revenue to the city from only the 4% cannabis tax. Sales tax also applies to retail cannabis sales. There is Measure T sales tax and Measure V sales tax, 0.5% each for a total of 1%, plus the city gets a share of the state 7.25% base sales tax, The city receives approximately 2% in sales tax revenue for retail cannabis sales. This increases the estimates from the staff report by 50%. So, estimated revenue is:
– $210,000 (100% new sales)
– $105,000 (50% new sales)
– $52,500 (25% new sales)
Though the staff’s Agenda Item Summary makes superficial reference to market data from the California Department of Tax and Fee Administration (CDTFA), we believe the report prepared for the Department of Cannabis Control (DCC), the state agency responsible for licensing and regulating commercial cannabis activities in California, may be a better source on the current state of the cannabis market in California.
The Agenda Item Summary’s suggestion that “opening a second storefront in a stagnant or falling market raises the risk of store failure or limited net tax gain” because statewide sales have declined is an uncritical assumption that the DCC’s Market Outlook refutes.
Per Department Of Cannabis Control: California Cannabis Market Outlook 2024, California’s cannabis market demonstrates robust growth that contradicts concerns about market saturation or industry decline. State data from 2023-2024 shows that while prices have decreased due to healthy competition, actual consumption has steadily increased across all product categories. Total licensed cannabis production increased in 2024, and the number of active retail licenses has remained strong statewide, with several counties adding their first retail locations. Most significantly for Sonoma’s situation, state analysis confirms that “lowering local costs and removing restrictions can increase the number of retail locations, which can help pull consumers into the licensed market” – exactly the outcome a competitive second dispensary would achieve. The data makes clear that California’s licensed cannabis market is growing, stabilizing, and thriving where local governments allow fair competition.
Moreover, as the market matures and stabilizes with increased licensed participation, tax revenues typically recover and grow through expanded volume even when per-unit prices moderate – meaning today’s competitive pricing can lead to tomorrow’s stronger municipal revenue streams. In short, the DCC’s findings directly address the concerns about market viability with authoritative state data to support the argument for releasing the second dispensary RFP.
Gil Latimer, Sonoma Valley Cannabis Group
I am the owner and operator of Loe Dispensary at 27 Fremont Drive in Sonoma . My family and I are local, independent operators who have spent nearly a decade navigating one of the most complex and expensive cannabis permitting processes in California. We followed every rule, paid every fee, and invested our savings because we believed the City and County would protect small, compliant operators from oversaturation.
I’m proud to share that Loe Dispensary was just awarded “Best New Dispensary of the North Bay 2025” and maintains near-perfect customer reviews across every major platform. This recognition confirms what our customers already know: Sonoma already has thriving, trusted cannabis dispensaries — SPARC inside City limits and Loe just outside.
Why Adding Another Dispensary Would Be a Mistake
1. Oversaturation Destroys Local Businesses
Santa Rosa’s experience shows what happens when too many dispensaries are allowed. In a much bigger market than Sonoma, at most a few are financially stable . The rest are failing. Oversaturation leads to:
Price deflation , squeezing margins for everyone.
Lower quality products , as shops chase survival instead of standards.
Reduced tax revenue, as prices go down and dispensaries close.
Harm to local cultivators and manufacturers , who lose shelf space to cheaper, imported products.
2. The State Market Is Shrinking, Not Growing
The California cannabis market is contracting:
Sales are down nearly 30% since 2021 (San Francisco Chronicle, July 2025).
Over 10,800 licenses are inactive statewide , exceeding active licenses (SFGate, March 2025).
Retail sales dropped 12.7% between 2023 and 2024 , despite more stores opening (Marijuana Venture, 2025).
National market value collapsed from $37B in 2021 to $4B projected for 2025 (Reuters, July 2025).
In short: the pie is shrinking. A second Sonoma storefront would not expand access — it would cannibalize existing sales and destabilize fragile, award-winning businesses .
3. Modest Revenue Gains Don’t Justify the Risk
Even optimistic models show the City could only see $35K–$70K in net new cannabis tax revenue if a second dispensary opens — barely covering the cost of staff time and ordinance updates. That small return is not worth destabilizing two existing compliant dispensaries (SPARC and Loe) and undermining regional stability.
4. Access Is Already More Than Sufficient
SPARC is already operating inside City limits.
Loe Dispensary is thriving at 27 Fremont Drive, recognized as the best in the North Bay.
A permitted Glen Ellen dispensary at 15499 Arnold Dr. is preparing to open soon.
Multiple licensed delivery operators already serve Sonoma Valley residents.
Residents are already well served. A second storefront is unnecessary.
5. The Push Is Not From the Public
There is no broad demand for another dispensary. The pressure is coming from an aggressive vocal minority — a professional activist group hostile to existing operators despite their awards and proven record of service . Their animosity does not reflect the views of the larger community, which is satisfied with existing access.
The Council’s original cannabis framework was cautious and balanced. That approach has worked. You now have one sustainable City dispensary (SPARC) and an award-winning, top-reviewed dispensary at 27 Fremont Drive that reflect positively on the City and region.
Adding another dispensary will not expand the market. It will divide it, destabilize it, and repeat Santa Rosa’s mistakes. Sonoma should. not issue an RFP for another dispensary at this time.
2 dispensaries in Sonoma city limits will not divide or destabilize anything. Santa Rosa is a large city with many dispensaries. Mr. Loe knows there is no similarity between the two municipalities. Also, SPARC the existing one dispensary in Sonoma, applied in Healdsburg when it approved an ordinance to have 2 dispensaries in city limits. Healdsburg is comparable to Sonoma in size and both dispensaries now there are doing well and providing tax income and benefits to the city of Healdsburg. SPARC was not chosen from the 8 applicants that applied in Healdsburg. SPARC also operates a dispensary that they opened very recently in Napa where there are 8 other dispensaries for SPARC to compete with. Napa has an ordinance that has no cap on the number of dispensaries allowed, as long as they meet the city requirements and are in the zoned areas allowed for them. Also I do not think Mr. Loe’s dispensary has won any awards. These are simple easy to verify facts. And using these facts it is easy to conclude if the the city of Sonoma were to move forward with a RFP for a second dispensary it would get about 8 qualified applicants, as Healdsburg did. The application fees would more than pay for any city expense in the RPF and selection process. And these applicants would not be applying if they thought this was an oversaturated market or that they would not make money. So read everything carefully and apply logic. Logic shows the there are 2 operators looking out for themselves only.
MODERATOR: Typos corrected sorry. PLEASE PRINT
Josie, that’s rude of you. And it exemplifies your approach to “truth” in your activism and writing at this paper.
https://bohemian.com/best-of-cannabis-2025/
We are a local mom and pops business. I feed my 4 small children (oldest is 6) with this business. I am a social equity operator and the guys and girls I run the store with are all from the county, from the industry, have families, and work hard every day in a difficult industry and time. We worked hard for that award AGAINST ALL ODDS with nasty folks like you dumping on us. You are not a cannabis figure. You are not a loved activist either. Stop bullying people with you comments. You are the hateful intolerant person and that is clear.
We won BEST NEW DISPENSARY OF THE NORTHBAY 2025 in the Northbay Bohemian which is absolutely the award you want to win. We didn’t advertise in that magazine. I am honored to win that with my team. What did you do? Throw shade and call shame when you are the shameful and hateful one.
For the record we are a great shop and you should check us out. It would be nice to have some fairness in the Sonoma Sunset.
FREE SPEECH or dishonest and manipulative comment moderation?