Turlock’s potential future for allowing cannabis businesses inched closer to becoming a reality during this week’s City Council meeting, with Council members expressing interest in developing a plan to allow retail licenses — despite opposition from the mayor.
Recent budgetary woes in Turlock prompted the City Council to suggest revisiting its ban on commercial cannabis, which went into effect in January 2017 after recreational marijuana was legalized throughout the state. Under this prohibition, no cannabis dispensaries, cultivators or manufacturers can do business within the City, or within its five-mile sphere of influence.
The suggestion to revisit Turlock’s cannabis ban came in February following a report on the City’s finances, which showed that the General Fund reserves will be below $3 million by June 2020, breaking Turlock Municipal Code. During that Feb. 26 meeting, Councilmembers Gil Esquer, Nicole Larson and Andrew Nosrati cited commercial cannabis sales as a potential source of revenue that should be looked into further by City staff.
A presentation by City Attorney Douglas White on Tuesday showed the City Council the potential fiscal impacts of allowing commercial cannabis in Turlock, as well as the process of selecting proper candidates to operate such businesses in Turlock. Before White gave this presentation, however, the City Council had to decide whether or not they even wanted to hear it, and if lifting the ban was truly something they wanted to consider. Councilmembers voted 4-1, with Mayor Amy Bublak opposing, to move forward with hearing different options for cannabis sales and operations in town.
Bublak said it was federal law prohibiting cannabis and her past as a police officer that led to her vote.
“Just for the sake of argument, everybody needs to know that I’m a retired police officer and I believe in law and order. I believe that I took the oath to uphold federal, state and municipal codes, ergo federal still supersedes and it’s illegal,” Bublak said. “That’s just my personal belief and we can see what the rest of everybody says, but I just need to make that public statement.”
When questioned on her stance by Nosrati, Bublak emphasized that she believes the act of legalizing marijuana within a state is an unconstitutional act.
Despite this, jurisdictions throughout the state have permitted cannabis businesses to operate, which was pointed out by White at the beginning of his presentation. He showed the City Council a map of the dispensaries surrounding Turlock, in cities like Ceres, Patterson, Oakdale, Modesto, Denair and Riverbank.
“Cannabis is here already, and the question of whether or not it exists in Turlock has already been answered,” White said, later mentioning litigation by the City of Turlock and other cities and counties to stop deliveries to towns which have outlawed commercial cannabis.
By permitting commercial cannabis business in Turlock, the City would have a say in which businesses and owners to allow in town and where those various dispensaries, grows and manufacturers set up shop — a privilege unique only to the cannabis industry, White said.
He laid out the different options that could come to town when it comes to cannabis businesses, which include cultivation sites, such as indoor or outdoor grows; manufacturing locations, where cannabis products are produced; distributors, who transport product from cultivators to manufacturers and retailers; and retail, or dispensaries. He also mentioned the increasingly-popular microbusinesses, which are cannabis entrepreneurs who cultivate, manufacture and sell their own products, and testing facilities for cannabis.
“These are the things you can decide whether or not to allow within your community,” White said.
Revenue for the City of Turlock would be generated by permitted businesses through one of two ways, he explained: through a special tax placed on the ballot (cities like Modesto have gone this route, White said — a measure which passed by over 80 percent), or via public benefit fees established through development agreements, like Ceres and Riverbank have implemented.
It would cost the City of Turlock hundreds of thousands of dollars to hold a special election to vote on a cannabis tax, and the measure would need a two-thirds majority to pass. For this reason, White suggested, if Turlock were to lift its ban, the City should enter into agreements with potential dispensaries. Most storefronts that White’s law firm has worked with in neighboring cities pay a minimum of $25,000 per month of five percent of their gross receipts, whichever is greater.
“If you were to ask me how many [dispensaries] would be appropriate for your community…given the size of your population, I think at least four would be appropriate,” White said, comparing Turlock to towns like Riverbank and Oakdale, which have both approved two dispensaries.
Assuming that the four dispensaries would pay the minimum of $25,000 per month, four locations could generate $1.2 million per year or more, as White pointed out dispensaries in other cities he’s worked with generally pay more than the monthly minimum, instead providing five percent of their gross receipts. For example, one Riverbank dispensary agreed on a minimum of $40,000 per month yet instead pays the city $75,000 per month.
While White recommended four dispensaries, he said there shouldn’t be a cap on how many manufacturers or cultivators are allowed to come into Turlock as many residents in other cities “don’t even know they exist.” They are typically zoned industrial, and required carbon filtration systems ensure that no odors are emitted from the locations.
Retail sales combined with cultivation, distribution, manufacturing and other facets of the cannabis industry could generate anywhere from $3 million to $5 million annually, though with such a volatile market, White reminded the Council to look at this money as one-time funds each year.
Public benefit fees through development agreements for these commercial cannabis businesses, rather than local taxes, would give Turlock a way to generate revenue while still retaining control over its cannabis industry.
“One of the reasons I believe it’s so important to have local regulation and relicensing of cannabis businesses is that it puts a component of regulatory oversight that’s not available at the state,” White said.
In order to be eligible to operate a cannabis business in Turlock, interested companies would submit applications to be processed by City staff, along with a $25,000 fee that goes toward the process. Candidates would be judged on their overall business plans, including potential location, security measures, among other factors.
White said that during an informational meeting about cannabis businesses held in Oakdale, 17 interested businesses showed up, and eight went on to apply for a conditional use permit in the town. Nosrati asked White if there were any way Turlock could gauge what type of interest its market would draw from cannabis businesses.
“The market will be big. I can say with 100 percent certainty that the market in Turlock will be significant,” White assured him.
A dispensary that had a location ready to go could be up and running in as little as five months after going through the application process, White said, which would include approval from both the Planning Commission and the City Council. Council member Larson suggested the process be a double-blind application, as other cities have done when selecting cannabis businesses, where applications would be nameless and based off merit alone, rather than who is applying.
Following his presentation, the City Council directed White to return to a future meeting with a proposal for issuing cannabis licenses.
“[Residents] are losing it over how slow we move. If we don’t ensure that this is going to be a priority that is revisited until we’ve made our decision on a continual basis, then we’re ignoring some of the big issues,” Nosrati said. “We’re experiencing financial hardship…the most obvious thing is let’s figure out how we can bring in some money as soon as possible.”