Port Hueneme Limits Cannabis Businesses to Combat Market Saturation

The city of Port Hueneme has taken significant steps to reshape its cannabis industry by halting new applications for retail cannabis dispensaries. The City Council unanimously approved an ordinance on February 17, 2024, aimed at reducing the overall number of cannabis retail establishments, including dispensaries, delivery-only businesses, and manufacturing and distribution operations. This decision is set to take effect on March 20, 2024.

The ordinance is designed to assist existing cannabis operators amid a saturated local market. City Manager James Vega noted during discussions that the strategy might seem counterintuitive but is intended to foster economic development through what he described as “addition by subtraction.” The city hopes that by limiting cannabis businesses, it can create more opportunities for other types of enterprises.

Port Hueneme was a pioneer in embracing recreational cannabis following its legalization in California in 2018. Initially, the city anticipated substantial revenue from cannabis operations. In 2022, it generated approximately $3 million from cannabis-related activities. However, this figure has dramatically declined, with projections estimating revenue to fall to around $1 million by 2025. This downturn is attributed to increased competition from neighboring cities like Oxnard and Ventura, coupled with high state tax rates and complex regulations.

In response to these challenges, the City Council agreed in October 2023 to consider amendments to the municipal code that would further restrict the number of cannabis businesses. While some cities impose limits based on population ratios, Port Hueneme has opted for a fixed cap. Currently, the city, which has a population of approximately 21,000, permits 12 retail cannabis dispensaries. In comparison, Ventura, with a population of 111,000, allows six dispensaries, while Oxnard, which has around 200,000 residents, permits 16.

Johnny Brown, a member of the Housing Authority, expressed concerns regarding the existing cap, stating, “When Port Hueneme is compared with other cities, it becomes clear that our current cap on cannabis businesses is very high given our population and market size.”

Under the new ordinance, the cap for retail cannabis dispensaries will decrease from 12 to five. Currently, seven dispensaries are operational, but they will be permitted to remain open. Any businesses with complete applications already under review will also be unaffected by the new regulations. New applications will only be considered if the number of existing businesses falls below the new cap.

The limits extend to delivery-only businesses, which will be reduced from six to five, and there are presently four in operation. Manufacturing businesses will also see a reduction in their cap from 10 to five, although only one manufacturing business is currently active. Additionally, the cap for distribution businesses will be adjusted from eight to five, with only one currently operating. The limit for cannabis lounges remains at five, with two lounges currently in operation. Notably, the existing cannabis lounges, manufacturing, and distribution businesses are linked to the retail dispensaries.

Vega articulated a hopeful vision for the future, stating, “The dream scenario – which we know probably won’t happen or at least any time soon – would be that you have five businesses who are actually doing the dispensary, the lounge, the manufacturing and the distribution.”

Feedback from local businesses regarding the proposed changes has been largely positive, indicating a willingness to adapt to the new regulatory landscape. This shift in policy reflects Port Hueneme’s efforts to navigate the complexities of the cannabis market while seeking to boost economic activity through diversified business opportunities.

This story was reported by Makena Huey, an investigative and watchdog reporter for the Ventura County Star. For further inquiries, she can be reached at [email protected]. The reporting was facilitated by a grant from the Ventura County Community Foundation’s Fund to Support Local Journalism.