Dear Mayor and Members of the City Council,

I am writing in support of moving the consumption lounge pilot program forward and I very much appreciate including fee waivers for CORE participants. As an equity operator, I know how important that support can be when trying to sustain and grow your business in this very tough, heavily regulated industry.

I respectfully encourage the Council to consider how the proposed lounge fees may affect participation during this pilot phase. Dispensaries already carry significant annual regulatory costs, as an example 20k for our Business Operating Permit, and adding a new permit fee, particularly for a pilot program, can create additional barriers to entry.

The success of this pilot will depend on broad participation across CORE and non CORE operators. Because this is a limited pilot, it may be helpful to monitor participation and revisit the fee structure after the first year, once actual oversight costs and operational data are available.

Also reducing the fees for the duration of the pilot program would also assist in operators who are willing to make the initial investment to open a lounge.

My goal is to see this pilot succeed across the board so the City can evaluate what works, support diverse business models, and build a strong foundation for the future of our industry here in Sacramento.

Thank you for your time and consideration.

Mayor, Vice Mayor, and Councilmembers,

My name is Chris Loftin and I am submitting this comment on behalf of Crystal Nugs, a locally owned Sacramento cannabis dispensary preparing to apply for participation in the City’s cannabis consumption lounge pilot program.

First, I would like to thank the City Council, the Office of Cannabis Management, and City staff for the extensive work that has gone into developing Sacramento’s social consumption framework. The creation of regulated cannabis consumption lounges represents an important evolution of California’s cannabis industry and positions Sacramento as a potential statewide leader in responsible cannabis hospitality, tourism, and economic development.

Crystal Nugs strongly supports the concept of safe, regulated consumption spaces. Properly implemented lounges reduce public consumption, create controlled environments for adult use, and allow cannabis businesses to operate in a manner more consistent with other regulated hospitality industries.

However, I would like to respectfully provide feedback regarding the proposed Business Operating Permit fee structure associated with this pilot program.

According to the proposed resolution, the City would establish permit fees of $8,059 for Type 1 non smoking consumption lounges and $10,745 for Type 2 all consumption lounges.

While we understand these fees are intended to recover administrative and enforcement costs, it is important to recognize that cannabis consumption lounges are not being introduced as permanent licenses. They are being implemented as part of a five year pilot program adopted by Council to evaluate feasibility, public health outcomes, geographic equity, and long term regulatory impacts.

This distinction is critical.

Businesses participating in this program are not simply applying for a routine permit. Early operators are being asked to invest substantial private capital into an experimental regulatory model whose long term outcome remains uncertain.

Participation requires significant financial commitment including tenant improvements, specialized ventilation systems, fire and life safety upgrades, security infrastructure, operational redesign, staffing expansion, compliance monitoring, and ongoing operational adjustments. For many operators, these improvements represent investments totaling hundreds of thousands of dollars.

Unlike traditional business permits, these investments cannot easily be repurposed if the pilot program ends or regulatory conditions change.

In effect, pilot participants are acting as implementation partners helping the City test and refine a new policy framework. The success or failure of Sacramento’s consumption lounge program will depend heavily on whether qualified operators are willing and able to assume this level of financial and operational risk.

For that reason, we respectfully request Council consider several policy refinements to ensure the pilot program succeeds while maintaining fairness for participating businesses.

1. Align Fees With Pilot Program Risk

The proposed fees may be reasonable under a permanent licensing model. However, during a pilot phase, operators assume disproportionate risk compared to the City.

Council may wish to consider pilot specific fee adjustments such as reduced initial permit fees, phased payment structures, deferred payment options, or credits toward future licensing should the program transition into a permanent regulatory framework.

Reducing initial financial barriers will encourage broader participation, resulting in better program data, more geographic balance, and stronger long term outcomes for Sacramento.

2. Provide Regulatory Continuity for Early Operators

Businesses that successfully operate consumption lounges during the pilot period should receive priority consideration or an established pathway into permanent licensing if the program continues beyond the five year evaluation period.

Without continuity protections, businesses face uncertainty regarding whether large capital investments will remain viable after the pilot concludes. Regulatory predictability encourages responsible investment, compliance, and long term community partnerships.

Establishing continuity expectations now will strengthen operator confidence and increase participation among experienced local businesses.

3. Recognize Existing Cannabis Industry Contributions

Sacramento’s licensed cannabis operators already contribute significantly to the City’s fiscal stability and community programs.

The City Auditor recently confirmed approximately $22.6 million in cannabis business operations tax revenue for Fiscal Year 2024 to 2025.

These revenues support essential public services and contribute to programs such as the Sacramento Children’s Fund. Consumption lounges have the potential to expand this economic impact by increasing tourism, extending customer dwell time, supporting surrounding restaurants and retail businesses, and generating additional tax revenue without increasing storefront density.

Encouraging participation during the pilot phase ultimately benefits the City’s long term financial outlook.

4. Encourage Local Investment and Innovation

Sacramento has an opportunity to lead California in developing a safe, professionally regulated cannabis hospitality model.

Local operators like Crystal Nugs are prepared to invest in high quality facilities that prioritize safety, compliance, community integration, and responsible consumption practices. However, early adopters must balance innovation with financial sustainability.

A pilot program succeeds when regulatory expectations and financial structures acknowledge that participating businesses are helping build something new alongside the City.

Policies that reduce uncertainty during the pilot phase will encourage local ownership, innovation, and long term investment rather than discouraging participation through elevated risk.

5. Support a Collaborative Public Private Model

The launch of cannabis consumption lounges represents a shared endeavor between the City and regulated businesses. The City establishes standards, oversight, and public safety protections. Operators provide capital investment, operational expertise, employment opportunities, and community engagement.

A collaborative approach recognizes that early operators are essential partners in determining whether this policy initiative succeeds.

Aligning permit fees and licensing expectations with the pilot nature of the program demonstrates Sacramento’s commitment to partnership, innovation, and responsible economic development.

Crystal Nugs is proud to operate in Sacramento and remains committed to compliance, job creation, and community investment. We are eager to help demonstrate that regulated consumption lounges can operate safely, responsibly, and successfully within our city.

We respectfully ask Council to consider adjustments to the proposed fee structure that acknowledge the financial risks associated with pilot participation and provide greater certainty for the businesses helping Sacramento pioneer this new regulatory model.

Thank you for your time, your leadership, and your continued support of locally owned Sacramento businesses.

Respectfully submitted,

Chris L.
Crystal Nugs
Sacramento, California

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