By a 5 to 1 vote, the Needles City Council Tuesday night approved a new medical marijuana ordinance that will allow both marijuana dispensaries and marijuana cultivation facilities to operate within Needles city limits.
Needles formerly had the most liberal marijuana policy of any of San Bernardino County’s 24 cities. After temporarily losing that distinction, the city has regained it.
Proposition 215, or the Compassionate Use Act of 1996, was enacted on November 5, 1996 by means of the initiative process, passing with 55.6 percent of the vote statewide. It allows for the use of marijuana for medical purposes, but leaves open to local authorities the question of whether its sale is to be licensed and permitted in individual cities and jurisdictions. Most cities in the state have resisted permitting operations producing the plant or dispensing it. In San Bernardino County there was pretty much uniform resistance to permitting businesses engaged in the medical marijuana trade.
On November 26, 2012, voters in Needles approved the adoption of the Marijuana Business Tax Ordinance and authorized the collection of a marijuana business tax of up to 10 percent of gross receipts. In December 2012, the Needles City Council set the marijuana business tax at the maximum 10 percent. The current tax ordinance places a 10 percent “gross receipts” tax on all “marijuana businesses” operating with the city.
Thereafter, a number of entrepreneurs began transacting business as marijuana purveyors in Needles, putting the city at the forefront of San Bernardino County cities with respect to allowing the sale of medical marijuana. In this way, Needles enjoyed the distinction, dubious or positive depending on one’s personal perspective, as the marijuana capital of the largest county in the lower 48 states. In December 2014, with prospective marijuana operation applicants threatening to burgeon into the dozens, the city drew the line on the number of dispensaries it would allow, restricting the number to the five then functioning with fully legal permits.
Two months ago, in November, Needles lost the earmark of being San Bernardino County’s primary extoller of cannabis at least temporarily, when Adelanto, which ranks along with Needles as one of the most impoverished cities in San Bernardino County, legalized marijuana cultivation within its industrial parks. In doing so, Adelanto continued to ban retailing marijuana, that is, direct sale of the drug to end users, calculating the city stood more to gain financially by wholesaling large quantities of the product to retailers outside of the city.
Along with the state legislature’s passage and the governor’s signing of the Medical Marijuana Regulation and Safety Act, Adelanto’s action served as a wake-up call to Needles officials, who recognized that they would need to adapt the city’s existing protocols, allowances and regulations with regard to marijuana to a changing standard if the city was to exploit the availability of the drug in its community as a way of bolstering municipal finances.
The Medical Marijuana Regulation and Safety Act, an amalgam of AS 243, AB 266 and SB 643, which passed both houses of the legislature last year, is set to go into effect on March 1.The bills put in place a revamped set of regulations for physicians who recommend or prescribe marijuana for their patients and they lay down licensing requirements for the cultivation, distribution and transportation of medical marijuana, together with safety and testing requirements for the drug.
At its December 8, 2015 meeting, the Needles City Council considered a revamped ordinance pertaining to medical marijuana but held off on passing it to make further adjustments. That ordinance was tweaked and brought before the council this week, on Tuesday, January 12.
Perhaps the most significant alteration is that the new ordinance codifies the permitting of marijuana cultivation facilities, allowing only the five existing dispensaries to expand their operations to include growing the product they sell. In addition, the new ordinance layers in a redundancy of zoning, permitting and licensing mechanisms to ensure the city will make a significant amount of money from its hosting of such operations.
The ordinance passed on Tuesday provides that marijuana businesses as defined must obtain a marijuana business license for the particular purpose[s] they seek to operate, which involve either a cooperative/collective license and a marijuana cultivation license, or both; as well as a zoning permit or conditional use permit; and a city business license. The ordinance further requires that once the state begins issuing permits/licenses for commercial marijuana activities, the marijuana business must also obtain a state permit or license.
The ordinance defines two types of marijuana businesses at this time to be permitted to operate within the city, one being what is called “cooperatives/collectives,” i.e., dispensaries where direct retailing of the drug is to take place and the second being cultivation facilities.
The ordinance states, “All cooperatives/collectives that are in existence, open and operating within the city as of December 25, 2014 shall file an application with the city for a cooperative/collective license in order to operate a cooperative/collective within the city. Each cooperative/collective that is in existence, open, and operating within the city as of December 25, 2014, and which applies for and obtains a cooperative/collective license, may file an application for a marijuana cultivation license to operate a cultivation facility within the city.”
State law defines four types of cannabis operations: cultivation, manufacturing, retailing and testing. A provision of state law is that an operator of a testing facility for marijuana cannot have any other form of marijuana related license to avoid a conflict of interest. Marijuana-related operation license holders not involved in testing can have only two licenses. Thus, the new Needles ordinance passes muster with state law. That is, clinic operators are permitted under the Medical Marijuana Regulation and Safety Act to function as marijuana cultivators as well.
The city’s action on Tuesday extended only to allowing cultivation and dispensary activity. It did not pertain to manufacturing or testing, operations that officials claimed do not fall under the same March 1 deadline set by the state for establishing marijuana operation permits. Under the provisions of Medical Marijuana Regulation and Safety Act, in cities where a municipal ordinance pertaining to medical marijuana is not in place by the March 1 deadline, state regulations will apply. Though city officials indicated permitting and regulation with regard to cannabis testing and manufacturing related types of operations may be codified in the future, their exclusion was the purported reason for the sole “no” vote to the ordinance. That vote came from councilman Shawn Gudmundson, the same councilman who moved to table the ordinance in December to make sure language was included that would limit cultivation of marijuana only to the existing dispensary operators.
The terms of Needles’ new ordinance is not without controversy. As worded, the only entities permitted to make an application to establish a cultivation operation are existing dispensaries. For many, this seems to confer something approaching a monopoly upon those who met the city’s time deadline to establish a collective. City staff justified this by stating in a report, “The provisions in the proposed ordinance allowing only existing cooperatives/collectives to apply for a marijuana cultivation license is modeled after the marijuana ordinance adopted by the City of Palm Springs, California, on June 17, 2015.” No further rationale for that provision is provided.
In presenting the ordinance, officials repeatedly spoke of “five” existing dispensaries. It has been reported that there were five dispensaries on December 25, 2014, but it is generally agreed that one of those, Paradise Wellness, has not been operating a dispensary on the California side of the Colorado River for well over 90 days and thus has defaulted on its business license.
The city appears to have established marijuana business-related franchises in granting permission for the five “existing” businesses to continue while prohibiting others. This has led to insinuations that Needles City Manager Rick Daniels is involved in some order of a conflict of interest in that he has held the door open for one of the city’s formerly licensed operations, Paradise Wellness, to set up a sizable cultivation operation. That operation would run to some 20,000 square feet, theoretically generating upwards of $15 million in revenue per year. According to one report, Daniels consulted exclusively with Paradise Wellness concerning cultivation plans and publicly announced that he had toured its current cultivation site in Arizona along with planning commission chairwoman and ex-council member Linda Kidd and councilman Tom Darcy.
Without directly stating so, individuals about town have implied that Daniels has some order of interest, financial or otherwise, in Paradise Wellness. They allege that Paradise Wellness in Needles is a shell operation, and has not actually done any business for much of last year. Yet, they suggest, by keeping Paradise Wellness active on paper, Daniels has conferred upon its owners a highly lucrative marijuana cultivation operation in California.
Daniels and the city have fanned the flames of this controversy by refusing to publicly provide Needles’ medical marijuana tax collection records, which would show whether Paradise Wellness is indeed a going concern.