Oceanside soon could offer four licenses for in-store, retail cannabis sales under guidelines the City Council approved Wednesday.

So far, Oceanside has no retail cannabis shops, although it has one business – MedLeaf – that sells cannabis products for delivery only. The City Council recently asked staffers to prepare regulations that, if approved, would allow the city’s first walk-in-and-buy shop to open.

The only other legal cannabis walk-in dispensaries in North County are nearby in Vista. Countywide, there are about 70.

Previously, the Oceanside council had suggested three on-site licenses. Two licenses were to be offered to applicants at large using a lottery system. The third would be offered to MedLeaf only, if the company qualifies.

However, the owners and employees of Oceanside’s only other cannabis business, Left Coast, told the City Council Wednesday that would be unfair. Left Coast has licenses for manufacturing and distributing cannabis products to other business, but not for off-site deliveries. Each activity requires a different type of license.

“The market has shifted and vertical integration is now a necessity to survive,” said Left Coast owner Coltin Barody. “We are asking for the same opportunity that MedLeaf was provided.”

Councilmember Rick Robinson proposed the fourth on-site license to give Left Coast equal treatment.

The council also agreed to use a merit-based selection system instead of the lottery previously proposed for choosing recipients of the two open licenses. Top applicants in the merit system will be considered by a panel consisting of the city manager, deputy city manager, assistant city manager, city finance director and the police chief.

A final version of the proposed regulations will be brought to the council for approval later this year.

The changes approved Wednesday also include updates to the commercial and industrial areas where retail sales are allowed. Among the areas prohibited are the downtown, coastal zone and San Luis Rey Mission historical zones.

Mayor Esther Sanchez cast the only vote against the changes. She said she was not prepared to consider a fourth license and that she still has concerns that cannabis shops could open near schools, parks and youth programs.

City staffers said cannabis sales will not be allowed near those activities, and that approval of all applications will ultimately be up to the City Council.

“This is something that staff has taken very seriously,” said City Planner Sergio Madera. “We share the same concerns as the council.”

The updated regulations are the latest step in a steady progression since the City Council voted April 11, 2018, to allow medical cannabis businesses, including nurseries, cultivation, distribution, manufacturing, and testing labs, subject to certain restrictions.

The city lifted the medical-only restriction Aug. 5, 2020, for cultivation licenses, and then June 16, 2021, removed it for all cannabis licenses, clearing the way for recreational uses.

So far, the city has issued a total of 20 licenses for various types of cannabis-related businesses. Half of those are for cultivation, none of which are yet active. Only three of the licenses issued so far are active — one for manufacture, one for distribution and one for “non-storefront sales,” which is delivery.

The city can expect to receive about $1.3 million annually in tax revenue from three operating retail sales licenses, according to a staff report prepared for Wednesday’s meeting, and would receive more from a fourth license.