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County cannabis strategy a success, so far
denair cannabis
The Honest Choice in Denair is one of seven cannabis dispensaries operating in the unincorporated areas of Stanislaus County under a temporary State permit while undergoing the process to obtain a permanent County permit (Photo contributed).

Since the Stanislaus County Board of Supervisors voted last year to allow the retail sale and cultivation of cannabis within County-governed areas, the conservative strategy has moved smoothly while generating revenue in the process.

In September 2017, Supervisors approved a commercial cannabis plan that would eventually yield 265 Commercial Cannabis Activity permit requests submitted to the County in October 2017, all vying for the opportunity to grow, distribute and sell marijuana in the area.

In order to apply for the program, applicants were required to submit their application along with a non-refundable $4,359 deposit. From there, the County conducted interviews with candidates and scored them based on background investigations, plans for safety, security and parking.

Today, over a year after the conservative strategy was put into place, there are seven retail cannabis storefronts operating in the unincorporated areas of Stanislaus County — all of which are continuing to go through the “comprehensive” process to receive County permits through the program while operating under temporary State permits. The sites include Natural Remedies Consulting, Medallion Wellness, People’s Remedy and Jayden’s Journey in Modesto, Empire Health and Wellness in Empire, Bynate, Inc. in Crows Landing and The Honest Choice in Denair.

For Fiscal Year 2017-2018, the seven retail locations in Stanislaus County licensed to sell cannabis brought in $206,000 in sales tax.

According to County Assistant Chief Executive Officer Keith Boggs, the County is currently 33 percent through initial Development Agreement negotiations with the seven potential permitees in Phase V of the process.

“Thus far, it has been a very clearly defined effort. The industry has been very supportive,” Boggs said, adding that elected officials, including the Board of Supervisors, have shown confidence in the staff’s ability to implement the conservative allowance strategy, which he described as “time consuming.”

“We have no intention of rushing this effort — do it right the first time…This is a new industry and we are literally developing policy from the ground up,” he said.

While original plans for the conservative allowance strategy called for various fee obligations that dispensaries are expected to pay once they receive a County permit, applicants are still working with County staff to clearly identify what their fee obligations will be moving forward. For example, the City of Ceres has approved two retail cannabis dispensaries and one manufacturing facility — each pays the city monthly fees varying from $50,000 to $100,000.

The County so far has received only the appropriate share of sales tax generated from retail sites operating under temporary State permits, Boggs said. For Fiscal Year 2017-2018, the seven locations brought in $206,000 in sales tax alone.

The State of California, which collects a 15 percent levy on purchases of all cannabis and cannabis products, along with cultivation taxes of $9.25 per ounce of buds and $2.75 per ounce of dried cannabis leaves, brought in $93.1 million for 3rd quarter returns received through Oct. 31, 2018.

The County’s revenue from commercial cannabis activities is only expected to increase once Development Agreements are reached, and according to Boggs, no new criminal elements have been experienced in the County’s unincorporated areas in relation to the fledgling cannabis program.

Despite this, Boggs said he did not have an opinion on whether or not cities looking for additional revenue — like Turlock — should consider the cannabis industry as a solution.

“There are a lot of variables to take into account,” he said. “Each community has its own culture and approach.

The Turlock City Council made it clear in January 2017 that there would be no marijuana dispensaries in town when they voted to prohibit all commercial activities related to cannabis, including cultivation and cannabis deliveries within the city. In January 2018, the Council also adopted a policy to deny approval to any cannabis-related enterprise within Turlock’s sphere of influence in the county.

The City’s recent budgetary woes, however, which include trouble recruiting and retaining qualified police officers, have seen a resurgence in community and business interests asking the Council to reconsider.

Local attorney Mike Warda, representing clients seeking to grow and sell cannabis in Turlock, presented the idea of the Council revisiting the City’s ban on marijuana operations during a May special meeting. According to Warda, if Turlock allowed marijuana grows and dispensaries it would mean $3 million a year in sales tax and another $3 million a year in special fee obligations which would go directly to the City.

While Turlock’s new Mayor Amy Bublak said during her campaign that she would like to see the City follow Federal law, stating so during a Journal-hosted candidate forum in September, President Donald Trump has publicly endorsed the STATES Act — an amendment that would federally legalize marijuana by allowing states to regulate their own medical and recreational cannabis markets, which the U.S. Senate is expected to vote on this week. California legalized recreational marijuana with the passage of Proposition 64 in November 2016.

Boggs said that if Turlock should explore cannabis as an option for additional revenue, the County would be the best entity to ask for advice. Cities in Stanislaus County that have approved their own commercial cannabis operations include Ceres and Oakdale, while Modesto is in the process of accepting permits for retail locations.

“If a currently dry community decides to engage, I would strongly recommend that they meet with us (Stanislaus County) or one of the other communities that have engaged and get a best sense of the process and effort needed to be successful,” Boggs said.