by Ruth Musser-Lopez and David G. Buckley
Needles’ effort to ensure for itself a piece of the action by facilitating private sector profiteering off of the production and sale of marijuana went awry earlier this month when one of those operations allegedly suffered an operational setback and sought to stiff the city for its major production costs, including water and the electrical cost of its grow lights over the last several months.
Despite the fact that Needles is the county’s smallest city population-wise and by most yardsticks also the county’s poorest municipality, it historically was one of just two of the county’s 24 cities that could lay claim to being a full service city. That is, Needles boasted its own police department, fire department, public works department, water department or utility, municipal hospital, electrical department or utility, recreation department, animal control department, and cemetery division. Over the years, it has shed key elements of that autonomy, so that now the county sheriff’s department does its policing, the county fire department handles fire management and paramedic response for the community and the city no longer owns its hospital, the Colorado River Medical Center. Nevertheless, its legacy of municipal independence persists in the survival of its water division and electrical utility, which features guaranteed access to low cost electricity from the Western Area Power Authority generated at the nearby hydrodam.
After Needles voters in November 2012 approved the adoption of a marijuana business tax ordinance and authorized the collection of a marijuana business tax of up to 10 percent of gross receipts, city officials began migrating toward utilizing California’s nascent cannabis industry as an economic development tool, though some elements in the community protested that the city evinced favoritism in its granting of the cannabis marketing franchises. Last year, the city went even further than tolerating end-use marijuana retail shops to allowing those establishments to become producers, as cultivators of the plants. Due to pressure from local community members, the city opened the market for cannabis related operations including grow-ops, product manufacturing, testing and distribution, while continuing its exclusivity with regard to the five existing local retail marijuana medical clinics or “cooperatives.”
City officials calculated they could reap a double and maybe even triple benefit. They stood to make oodles of money by supplying the water and electricity used by the growers; they would further cash in taxwise when those growers sold their product wholesale to retailers; and they would collect even more tax revenue when the drug was retailed to individual smokers.
At the March 7 Needles Utility Board meeting, it was revealed that one of the city’s licensed cannabis operations had “lost” the marijuana it had cultivated and harvested. It has not yet been publicly disclosed who “lost” the crop and how much exactly was misplaced. Unofficially, there are reports that the loss was a result of embezzlement by a partner who absconded with the product when he was forced out of the operation because of the discovery of his status as a felon. Statements by city manager Rick Daniels at recent public meetings regarding a potential felon in the Needles market to some degree bolsters that report.
The city’s cannabis ordinance prohibits a felon from entering the market up until the tenth year after conviction.
Daniels contrasted household utility use arrearages that typically might entail a customer getting behind by $600 over the course of six months with a “22,000 square foot building using between a million and a half and two million [dollars] worth of electricity.” Growers said this overestimates the amount of electricity needed to raise a crop.
The subject of the city’s potential losses in the millions of dollars at the hands of deadbeat cannabis growers did not come up again until the “board requests” at the end of the meeting. To questions from two members of the board, Daniels acknowledged that one of the city’s franchised marijuana producers suffered a “lost harvest” or other crime such as vandalism. Sources in the cannabis industry said it is unlikely that an entire crop would fail.
Daniels would not reveal who the cultivator was, tempting public scorn and anger. The board members did not insist that the name of the farmer be disclosed.
Attempting to allay the growing anger in the room and suggestions that the city manager was failing to look after the interests of city residents, taxpayers and utility ratepayers, Daniels asserted that the city was not showing undue favoritism toward any of the marijuana franchisees. “We help them through the permitting process, but once the permit is in place we are aggressive regulators,” he said. When this was met with skepticism, Daniels acknowledged that “The State of California has developed a protocol for lost cannabis production” but he did not say whether the law had been followed in this case.
Needles Utility Board members Mike Schneider and Phil LeJeune were having none of it.
“We can’t absorb a default on a harvest,” Schneider told Daniels.
LeJeune gave Daniels a red alert, telling him, “If this happens again, you’re done. As far as the ‘lost harvest’ thing, when it was first brought up, no one seemed to know anything about it. Now I have heard that the guy did follow the procedures of accounting of the lost pot and so on. Is there any photographic evidence of this? Have they documented it, this accounting?”
In what several people perceived as an obfuscating response, Daniels said “I’ll report back on it. There is protocol. If there is a damaged crop, they have to weigh the materials that are damaged. Every plant has a number assigned to it. We have to tie that number to the record. If that numbered plant goes bad, it has to be weighed and records kept. It’s to be ground up and mixed with soil before disposing of it. In the financial report to us, they have to identify the damaged plants…”
A week later, facts and documentation were yet to be had. Neither an identification of the operator associated with the “loss” nor documentation, including photos of damaged plants, nor an explanation as to how, or estimation of how much, this “lost harvest” would impact the City of Needles financially was offered at either the utility board meeting or the most recent meeting of the Needles City Council held on Tuesday evening, March 14.
LeJeune implied that either Daniels or the cannabis farmer had blamed electric thieves and transformer raids for the failed or “lost” harvest. He indicated he was less than fully convinced that a failed crop had actually occurred when he added “I assume the city is going to do some attendance on regulation because it really is not clear on the enforcement end of it. If we have another situation like that where they have a loss and where they are not following protocol and documentation, then we are going to nail them for the 10 grand [$10,000] fine and then we’ll do something about it.”
At present, marijuana production appears to be a relatively lucrative endeavor, with cannabisbenchmarks online listing the current price of $1,575 per pound for mid-grade grass, plus taxes.
It is unknown at this time if the grow operation was provided with electricity with the promise of payment once the crop was sold.
Daniels said the city will very shortly “start with [inspections] every other week, taking pictures, checking logs to making sure that we don’t have problems.”
“And are we going to have enough resources when we get into 30-40 operations?” LeJeune queried.
“We have to scale up,” Daniels reassured the board members, “We have to make sure there is full compliance at all times. And,” he said, “if we don’t, the feds will be coming after you or the state is going to come after you. We’re gonna have to staff up. The money will be there. We are going to invest all the ‘assignables’ to those operations. We’ll have to scale up to 40 to 50 people.”
by Ruth Musser-Lopez and David G. Buckley