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Some elected officials across Orange County are starting to potentially eye legalizing retail marijuana dispensaries to help bring in new revenue to patch up their heavily bleeding budgets.
The interest in cannabis comes as officials in Irvine, Santa Ana, Orange and Fullerton are dealing with multi-million dollar budget gaps, with the latter three eying putting tax measures on the November ballot this year to try and get voters to help them out of the hole.
Officials have long grappled with cracking down on black market cannabis dispensaries even after a few cities legalized some cannabis businesses.
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While state law allows cannabis retail shops and delivery services, state legislators ultimately left it up to local officials to allow such sales in their municipalities.
Now, a couple of city council members in Orange and Fullerton say no revenue option should be off the table to address the deficits as officials across the region are being shown bleak fiscal projections that will require deep cuts to city services and programs to stay afloat.
In Orange, leaders are more open to explore legalizing and taxing cannabis with a host of restrictions.
Orange City Councilman Jon Dumitru said all options to generate long term revenue should be thoughtfully considered including cannabis – a potential tax source that is already helping finance services from some cities in the county.
“The question becomes whether Orange should continue to forgo that revenue while residents simply go elsewhere and valuable revenue lost,” he wrote in a Thursday email.
“I would be open to supporting a well-regulated, carefully structured approach that prioritizes public safety, local control, and community input. That means clear zoning rules, strict operating standards, and ensuring that any revenue generated is reinvested back into the community in a transparent and accountable way.”
Dumitru and his colleagues are expected to move $17 million from three different spending buckets to balance their general fund budget this summer.
Meanwhile in Fullerton, City Councilman Ahmad Zahra publicly said his colleagues should consider legalizing marijuana shops during a discussion this month on upping fines and cracking down on illegal cannabis stores.
[Read: Beefed Up Cannabis Crackdown Comes to Fullerton]
In a phone interview, he said if officials hadn’t backtracked on an ordinance legalizing marijuana five years ago they would have benefited from millions in additional revenues today.
“Back then, the conservative estimates would have brought in about $3 to $5 million annually to the city, and that’s just from five commercial dispensaries,” Zahra said.
“That’s a significant amount of money that we lost over the last several years. Instead, we’re just basically playing Whack-a-Mole with the unlicensed dispensaries.”
Leaders in Fullerton are facing a projected nearly $14 million deficit in the next fiscal year that could nearly wipe out their reserves if they don’t make cuts as the city seeks a forensic audit amid concerns of an accounting error and questions if staff misrepresented their reserves.
Still, a couple city leaders in Fullerton don’t think making money off of cannabis should be a solution, while others say it might be too early to explore it.
Fullerton City Councilwoman Jamie Valencia said she opposed legalizing cannabis.
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“I have a 7 year old and some values are more important than possible city revenue. I oppose it based on my Christian morals,” she said in a Thursday text message.
Currently, six cities in Orange County allow at least one type of cannabis business within their borders.
In Orange County, Santa Ana, Costa Mesa and Stanton allow and license cannabis retail stores and delivery, distribution, testing and manufacturing businesses.
La Habra allows for cannabis delivery, testing and manufacturing, Laguna Woods allows cannabis retail stores and Irvine allows cannabis testing.
In Santa Ana, about two thirds of their cannabis tax revenue goes to fund youth services and programs as well as enforcement services like police staffing while the remaining one third remains discretionary.
Last summer, Santa Ana staff estimated the tax would bring in nearly $13 million with about $8.2 million going towards youth services and enforcement services, according to their 2025-26 budget.
According to the 2025-26 budget, Costa Mesa officials estimate raking in an estimated $3.6 million in revenue off a 7% tax on retail cannabis sales. The money brought in is used to help finance the city’s first homebuyer fund and the city’s Art and Culture Master Plan.
In Stanton, cannabis sales brought in nearly $2 million in tax revenue last year, according to their budget.
Despite the additional revenue from cannabis, officials in both Costa Mesa and Santa Ana are expected to place tax measures on the November ballot.
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Since its legalization in Costa Mesa, officials have grappled with how to regulate legal dispensaries, introducing buffer zones and capping the number of store fronts allowed in the city amid concerns from local residents while also cracking down on illegal shops.
In Santa Ana, staff said in last year’s budget cannabis tax revenue has been on the decline, pointing to increased competition from illegal cannabis sales that undercut prices from legal shops.
Officials there are now part of a host of cities in the region cracking down on local smoke shops arguing in part that they sell black market marijuana.
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Dumitru said even if Orange officials legalize marijuana, officials will have to take on news costs and consider a lot of factors like caps on the number of storefronts, location restrictions, community outreach, compliance enforcement and cracking down on illegal shops.
“It’s important to view these costs in context. Many cities structure their programs so that application fees, permitting, and local cannabis taxes offset or fully cover the cost of regulation, while also generating net new revenue over time,” he said in an email.
“Ultimately, the challenge is designing a program that is responsible, enforceable, and aligned with our community’s expectations.”
Orange City staff say a cannabis tax could bring in millions of dollars in revenue.
“Based on projections modeled on other cities with a 7% gross receipts tax, staff estimates an annual revenue of roughly $4 million from a cannabis gross receipts tax,” said Charlene Cheng, a spokeswoman for the city in a Thursday email.
Mayor Dan Slater publicly said while he opposes cannabis, officials should still consider legalizing sales of it.
“We are losing revenue to other cities because we do not allow the sale of cannabis,” Slater said at a city council meeting last month
He said people will use it regardless of whether the city allows the sale or not.
“This is a source of revenue that we’re losing with all the hospitals we have, the college’s students we have, I’m sure that they would be customers as well. Not advocating for it. I don’t use it, but people are going to continue to use it, and it’s a revenue source,” Slater said.
Councilwoman Ana Gutierrez, Councilman John Gyllenhammer and Councilman Dennis Bilodeau did not respond to a request for comment last week.
Councilwoman Kathy Tavoularis said while she never considered cannabis before, officials have to be open to hear all revenue options.
“It’s interesting that Orange has such wonderful Grade A hospitals like St Joseph, UCI, etc, and oncology centers. Probably a lot of these people are in the market looking for something after their treatments and they’re probably going to Santa Ana,” Tavoularis said in a Thursday phone interview.
“Obviously, I’m open to hearing if it’s possible.”
Councilwoman Arianna Barrios said she would be supportive of allowing only medicinal marijuana sales and only allowing stores near the quadrant of hospitals and medical centers in town.
“I would not be open to them becoming as ubiquitous as the smoke shops that are everywhere and causing us all kinds of problems,” she said.
Barrios added they’ve been losing revenue on medicinal marijuana to other cities.
“We have people who are being given prescriptions for medicinal marijuana and leaving our city to go over to Santa Ana or go over to other cities where they can get those materials instead of staying and keeping that revenue and that sales tax in our city,” she said.
In November of 2020, Fullerton City Council members narrowly voted to allow regulated cannabis dispensaries in the city, requiring permits and allowing five facilities for cultivation, manufacturing, retail and distribution.
But months later, officials narrowly repealed the ordinance after concerns from residents that the drug would be available to kids and lacked a large buffer zone between schools.
Mayor Fred Jung, who voted for the repeal back then, said officials initially projected $3 million in tax revenue from the ordinance – a number he said was inflated – and highlighted how he opposed how officials planned for one cannabis business in each of the five city council districts.
“The notion of one in each district, I think is stupid,” he said in a Wednesday phone interview. “It’s just nonsense and this is kind of the government’s pursuit of a more egalitarian society that it doesn’t need to be. Just be reasonable about where this can be and cannot be.”
Jung said now no options should be off the table when it comes to addressing their nearly $14 million deficit, even cannabis, but officials should wait for the results of their forensic audit before taking action.
“There’s no sacred cows when you’re in the budget situation that not only we are but other municipalities throughout Orange County are facing,” he said.
“Once we have clear understanding from the forensic audit, then we can go about doing a more thorough exploration of our budget challenges for this year.”
Zahra, who opposed the repeal, said there is a market for cannabis in Fullerton and it should be regulated to protect consumers.
“It’s harming our resources and missing out on opportunities for it to invest in our community. I’ve always opposed unlicensed dispensaries, but to not properly organize this and regulate this in our city is, in my opinion, bad governance,” he said.
Zahra added it is his last year on council and he doesn’t know if his colleagues have the appetite to reconsider cannabis shops.
Councilman Nick Dunlap, who also voted to repeal the ordinance, said as a father he was against exploring cannabis as a revenue option.
“If that were something that perhaps a committee wanted to vet and that’s something they wanted to put in front of voters, then maybe that’s something to explore but it’s not something I personally believe in and it’s not something that I think the city should pursue,” he said in a phone interview.
Councilwoman Shana Charles said cannabis is a viable option for revenue but not one officials will likely explore this year.
“We do know that it is a source of revenue for cities, so I don’t think it should be completely off the table for the future, but it’s certainly not something I think that we’re going to pursue this year,” she said in a Thursday phone interview.
“It would be premature to think about it for this year.”
Hosam Elattar is a Voice of OC reporter. Contact him at helattar@voiceofoc.org.
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