Wednesday, June 27, 2018

Item Could Provide Needed Revenue to the City

 

By Chris Frost

Special to the Tri County Sentry

 

A potential payday for the City of Oxnard is waiting in the wings, as the Cannabis study session June 26, showed potentially $1.8 million of additional revenue for the city.

The study session examined the various types of cannabis industries the city can support along with the fiscal implications that goes along with allowing its use in the city.

The state passed the Adult Use Marijuana Act on Nov. 8, 2016, and the city council approved medical cannabis deliveries in the city on April 3, 2018 but banned all other cannabis uses.

On June 5, the city council voted to put a cannabis tax on the Nov. general election ballot.

Planning & Environmental Services Manager Kathleen Mallory said the city hired HdL Companies to conduct a feasibility analysis in April to determine the types of cannabis use the city would support. HdL maximizes government revenues by providing audits and analytical services.

“The report also outlines cannabis considerations based upon different cannabis industries, and should the city be developing regulations and presenting them to you in the future,” she said.

The city established an internal cannabis subcommittee in Feb. 2018, she said, that had representatives from the police and fire departments, along with the business licensing and finance offices, the city attorney’s office and planning commission to study the issue.

The report revealed that retail manufacturing, testing, distribution and cultivation would be supported in the city, and HdL examined the pros and cons with those uses.

“Over the past few months, the city has been receiving an increasing number of public inquiries regarding opening cannabis related businesses, retail, and manufacturing, as well as distribution,” she said. “Since council direction was to take a go-slow approach, staff has been monitoring what other communities are doing to address this cannabis issue. We’ve also been reviewing the best practices that other communities have been doing to address that issue.”

Mallory said the go-slow approach about cannabis puts the city in a good position and if the council supports the item the staff will develop land-use controls and buffer regulations.

The report the Oxnard is well-situated between Santa Barbara County which has the biggest supply of cannabis and Los Angeles, which has the greatest demand.

She said Santa Barbara County has the largest number of licensed cultivators in the state.

“The cultivation sector is oversaturated, as the number of permitted cultivators exceeds projected market demands by three to four times,” Mallory said. “Oxnard is well situated to attract distribution and manufacturing businesses.”

She said the rise in ready to use cannabis products, like foods, oils and drinks is driven by the manufacturing process.

“Manufacturing cannabis operations represents over 50 percent of all cannabis sales by price, she said.

Retail cannabis in the city is currently prohibited, which is licensed to sell goods to consumers as a retailer, microbusiness or non-profit. The report said Oxnard would support between 8 and 18 retailers, with a maximum of 8 dispensaries.

“The retail business can be either located in a retail storefront, like in a shopping center or in a stand alone retail storefront,” she said. Retail locations can generate substantial revenues compared to other retail outlets.”

The report said that cannabis can be licensed like alcohol in the city.

“We have a very robust review system with the police department, and coupled with the planning permit, it puts in place stringent conditions that are continuously monitored,” she said.

HdL reports that cannabis manufacturing is evolving, and Oxnard can support between 6 and 12 manufacturing businesses.

“We know the city has raw industrial land, and we do have the ability to facilitate industrial construction,” Mallory said. “We’re currently updating our industrial code and we’ve been working with the industrial business community and we know we have an industrial building vacancy rate between one and three percent. That’s a real issue to be considered if the city advances manufacturing.”

She said there are hazards and safety risks associated with manufacturing and operations that can be addressed through state and local regulations.

“The industry also shows there has been past problems with manufacturing because of the way the permit systems were issued,” she said. “The state’s added requirements to deal with chemicals has improved significantly. It used to be a con, but it’s getting better in how they deal with that.”

The report said that Oxnard is attractive to Cannabis distributors.

She said security measures that address public safety are imperative.

“It can be developed and implemented through conditions of approval,” Mallory said. “In order for this to be successful, other Cannabis industries such as manufacturing and retail establishments would need to be in operational in the city. It’s a bit challenging to have one without the other.”

HdL reported the city can support three distributors with between $150,000 and $225,000 of annual city revenue.

“We picked a low number to be conservative in what the city can support,” Mallory said. “Conservatively, the city looked at supporting one testing laboratory (which measures chemicals and items not in keeping with state product standards) which would generate between $20,000 and $50,000 in annual revenue.”

She said Cannabis cultivation (planting, growing, drying, curing, grading and trimming of Cannabis plant) would likely be indoors because of the climate.

“The cultivators are going inside industrial buildings, and they are taking industrial lands with good ventilation systems and they are taking industrial land use for the indoor grow approach,” she said. “Conservatively, the city can support two indoor cultivation sites and generate between $224,000 and $320,000 annually.”

Mallory said if the council supports the item, they would consider it in Jan. 2019.

During public comments, Gabriel Teran said the go-slow approach is a good approach.

“The alcohol licensing model can be used, and along those lines, ABC (Alcoholic Beverage Control) places a minimum distance of 600 feet Cannabis businesses and youth sensitive locations such as schools, parks and community centers,” he said.

Joe Kyle said he hopes the city looks at retail, distribution cultivation and manufacturing.

“I understand the go-slow approach,” he said. “A lot of cities in this county has taken the so-slow approach.”

He said there has been a lot of different numbers for cultivation.

“Everything I’ve seen so far is only looking at the medical need, and not the medical and recreational need,” he said.

Councilman Oscar Madrigal said the item is a revenue vehicle in the city.

“As a social issue, some residents may be against it based on their upbringing,” he said. “No matter what, it is in the city, legal or not and we as a city has to find a way to make it work for everyone. We need to make this as safe as possible, we need to be smart with what we do, and we need to make this fair and at the same time not throw it all on one part of the city.”

Mayor Pro Tem Carmen Ramirez praised the presentation and said the speakers during public comments raised important issues.

“If it’s going to be available to the public for medical and recreation it needs to be a safe product,” she said.

Councilman Bryan MacDonald said people think he is closed-minded because of his law enforcement background, but what people do in their own home is their own business.

“Some cultures have used this substance for centuries,” he said. “This is not something new that has come on the market in the last 60-90 days.”

He supports a cautious approach.

“My wife and I were in a city we were unfamiliar with and I Googled it and found one in the city we were in and we drove to it and see what it’s like,” he said. “You can go in, but I’m not going in.”

MacDonald said his wife walked in and asked if it was a medical marijuana facility and it was then she walked out.

“On the way out, a person from the lobby followed her and was yelling at her across the parking lot,” he said. “My wife gets in the car and the next thing I know this person is banging on the passenger side window.”

He rolled down his window and said the person offered a cell number.

“I can set you up with anything you need,” he said. “Those are the types of things I worry about that can happen in our community. We need to make sure we have the right regulations in place should we move forward with this.”

Councilman Bert Perello said he has a lot of experience with someone who has grand mal seizures and marijuana allows him to have a normal life.

“If we have the interim city manager, the police chief, advocating there are three forms that we can increase the pie, so we can move forward, this is one of them, and we are going to charry pick on what we do and what we don’t do, I don’t want to wait,” he said. “I happen to agree with Councilman Madrigal. If we’re going to get into it, we get into it.”

Mayor Tim Flynn said his biggest concern is retail.

“That’s were the majority of revenue is generated,” he said. “Just under half of all the anticipated revenue is from retail. Several years ago, Governor Brown was asked if he supported the legalization of marijuana before this proposition was passed, and his response was that if California expects to be competitive in the 21st century he didn’t think that a large number of people getting high was going to be consistent with being competitive in the new world economy.”

He said retail outlets can cause public safety challenges.

“If a younger person has an older brother or sister that’s over 21, there’s a possibility that alcohol is going to get in their hands,” he said. “I’m concerned about the kids in Oxnard. The academic performance of too many kids in Oxnard is already way too low. Marijuana is not going to help kids be competitive in the 21st century. I do not support a retail outlet in the City of Oxnard. I would probably support a research facility; a manufacturing facility may be another and maybe a distribution facility.”