San Jose on Tuesday became the largest Northern California city to approve rules allowing medical marijuana dispensaries. But the move was a buzz kill for pot club activists, who called the new regulations unworkable and threatened to fight them in court or at the ballot box.

The City Council’s decision to allow only 10 clubs to survive capped nearly two years of debate as nearly 12 dozen pot dispensaries spread across the city, raising concerns from neighbors and more than $1 million in tax revenue for cash-hungry San Jose.

In April, the council moved toward limiting the number of pot clubs to 10, but marijuana activists lobbied city leaders to change their minds, arguing that the cap would result in Costco-sized marijuana superstores that would invite federal drug raids.

After more than two hours of debate Tuesday, however, the council voted 8-3 to stick to its guns and keep the lid at 10, with no more than two in each council district. The clubs — which city officials say have all been operating illegally — will also be restricted to certain commercial and industrial areas and required to grow all their marijuana on site.

“We’ll have something in place that will make it impossible for us to operate,” said Dave Hodges, founder of the All American Cannabis Club, one of the first marijuana dispensaries in the city.

Walking a fine line

But Mayor Chuck Reed, who voted with the majority to approve the regulations, said the city was forced to feel its way between the federal government’s ban on marijuana and California’s 1996 voter initiative allowing its use for the ill.

“We’ve had a lot of people during our public process tell us we don’t know what we’re doing,” Reed said. “I guess we’ll find out. We’re going to muddle through and figure it out, and others will learn from our efforts.”

Council members Ash Kalra, Don Rocha and Xavier Campos were on the losing end of the vote.

Kalra favored recommendations from city planning commissioners, who reviewed the proposed rules over the summer and argued that the city should allow 25 pot clubs, be more selective in evaluating them, expand the zones where they would be allowed and allow off-site cultivation.

“I do think we have more work to do,” Kalra argued. “I don’t think we’re there yet.”

Councilman Pierluigi Oliverio initiated the debate two years ago when he proposed that San Jose regulate and tax medical marijuana collectives before it was overwhelmed with a rash of unregulated pot clubs. He pointed to the difficulties Los Angeles had in recent years reining in hundreds of new dispensaries.

Oliverio proposed several modifications to allow off-site cultivation and more selectivity in choosing which of the roughly 140 clubs get to stay in business.

But the only new proposal the council passed Tuesday was a requirement that the approved collectives include a licensed physician or registered nurse as an official.

Even so, Oliverio supported the approved rules, noting that while they’re “not perfect,” they can and likely will be amended after they’re put into practice.

“We clearly should do something,” Oliverio said.

A relatively sparse crowd attended the hearing — mostly marijuana activists and collective owners urging more permissive rules.

A few city residents, however, criticized cannabis club employees as little more than drug peddlers.

Tili Ayala carried a sign reading, “Stop Selling Pot to Our Kids,” and complained of medical marijuana users abusing the law.

The city’s marijuana zoning and regulatory ordinances will become effective Oct. 27 after a second vote of approval Sept. 27. The city plans to notify the pot clubs in early November of the date to submit applications for one of the 10 permits. They would be chosen in December and registered later that month or early next year.

Threat of legal action

City officials argued against a formal bidding process in which the collectives are chosen based on evaluations, noting that the process can take nine to 12 months and cost more than $500,000 if it includes expert consultants.

Police Deputy Chief Dave Hober argued against the dispersed, off-site cultivation favored by the pot clubs, which say they are supplied by members who sell small amounts of surplus weed they grow themselves.

Hober said robbers have intercepted marijuana deliveries to clubs and that firefighters have had to douse homes that burst aflame from indoor marijuana growing under high-powered lamps.

But marijuana activists said they’d likely turn to voters or the courts to block San Jose’s new pot rules. Activists took similar action in San Diego after the city passed regulations earlier this year, gathering enough signatures to qualify a repeal measure for the ballot. That prompted city leaders to drop the rules.

“If we don’t get our due process, we’ll find somewhere else to get it, whether it’s the court or the ballot box,” warned Lauren Vasquez, an attorney and medical marijuana patient.

But Reed countered that if the clubs want to make things difficult, the “easy route” for the city would be to just “ban it altogether.”