The Atascadero City Council voted 3-2 on Oct. 14 against allowing retail cannabis storefronts, keeping the city limited to delivery and testing lab operations and potentially forgoing up to half a million dollars annually in new tax revenue, according to a staff report. 

“After talking to consultants, Atascadero could expect possibly up to $500,000 a year,” Community Development Director Phil Dunsmore said during the meeting. “We don’t have scientific data on that. We just know what the other communities are bringing in, which is between $500,000 and a million.”

The decision follows months of staff research and community debate over whether cannabis should be added to the city’s zoning code, according to Dunsmore. 

The discussion stemmed from its Feb. 22 goal-setting session, when council members asked staff to explore the potential for retail cannabis sales within appropriate commercial zones.

According to a staff report, Atascadero first adopted cannabis regulations in 2017 following the passage of Proposition 64, which legalized recreational cannabis statewide. A second round of zoning updates in May 2021 created comprehensive standards for cannabis use but did not add storefront sales to the list of permitted uses. 

The city also created a local cannabis tax, currently set at 4 percent of gross receipts, with a voter approved maximum of 6 percent, according to the staff report. Because the tax was established through a ballot measure, the rate cannot exceed 6 percent without another vote, but it can be adjusted by the City Council within that limit. 

According to city staff, Atascadero cannabis delivery services generate only about $32,000 in tax revenue annually. Dunsmore noted during the meeting that nearby cities report strong cannabis sales to North County residents.

“Retailers in our county are all reporting strong sales to our North County region from stores that exist in Morro Bay, Grover Beach, and San Luis Obispo,” Dunsmore said.

He added that the cities reported no increase in criminal activity associated with cannabis storefronts.

“Now, what the other retailers have told us in these other communities is that they do have extensive security plans, and the security plans are effective,” Dunsmore said. “So in these communities where this is happening, there hasn’t been any significant changes in criminal activity reported.”

If permitted in Atascadero, cannabis storefronts would be limited to existing state and local distance requirements, which prohibit cannabis operations within 600 feet of schools, parks, or child care centers. That restriction would confine potential locations to select portions of El Camino Real. 

Despite those findings, a majority of the council voted not to allow retail use at this time. Residents who weighed in with public comments were also divided on the issue. 

“Our city is in clear need of additional tax revenue to fund vital services, infrastructure, and community programs,” resident Max Zappas wrote in a public comment, adding that neighboring cities “have already taken this step and are now benefiting from increased tax income without experiencing the negative impacts that were once feared.”

Resident Beau Sterling Davis wrote in a public comment that cannabis retail stores elsewhere have shown that such operations can be “clean, secure, and would not lead to any increased crime or police presence.”

Others opposed the idea, arguing it could harm the city’s image. 

“I feel that retail cannabis storefronts in the city would not be a positive addition to the image we have and are trying to achieve,” resident Tom Fitzhugh wrote.

Following the vote, Councilmember Mark Dariz, who voted against allowing retail cannabis, posted on Facebook asking residents for feedback on the issue. 

“This decision affects everyone and should not be made based on the opinions and principles of five people,” Dariz wrote. ∆

This article appears in Oct 23 – Nov 2, 2025.