Within the last fortnight, a cannabis-rights and policy reform committee headed by the wealthy and contentious real estate industry tycoon and social activist Stephanie Smith has stepped up its efforts with regard to altering the regulation of marijuana-related commercial activity in Colton and San Bernardino.
On June 14, the Colton Citizens for Good Jobs and Safe Communities Committee submitted a petition bearing the signatures of more than 2,800 of that city’s registered voters requesting that the city put an initiative on the November ballot that would create a licensing apparatus for businesses engaged in the cultivation, processing, distribution, and sale of marijuana, and impose taxes on those activities.
On June 18, 19 or 20, it is anticipated that another group Smith heads will deliver to the San Bernardino City Clerk’s Office a petition with the signatures of in excess of 8,600 of that city’s registered voters on a somewhat similar but nevertheless different initiative request than the one circulated in Colton. The proposed San Bernardino initiative calls for permitting a host of cannabis-related commercial activities to flourish in that city.
Smith is almost as, or maybe even more, controversial than the issue of intensive marijuana and cannabis-product commercialization she has taken up. The current political establishment, which is long steeped in the traditional societal norm of prohibiting cannabis consumption even upon pain of imprisonment, finds her objectionable because she represents the new wave of tolerance in California in which the drug, which since 1996 could be used for ostensible medical purposes, may now by the passage of 2016’s Proposition 64 the Adult Use of Marijuana Act be imbibed for its intoxicative effect. At the same time, a number of would-be marijuana purveyors are not pleased with her because, by the way she has sought to make a niche for herself in the industry, she has challenged the initial regulation regimes some governmental entities have structured with regard to how cannabis-related activity is going to take place in their communities and has, arguably, interfered with these competing entrepreneurs’ ability to turn a profit or capture what some consider to be a corner on or monopoly of the local market.
Smith is well-fixed financially and not reluctant to throw money into her efforts, which in practical terms means she is litigious. She has launched lawsuits against Colton, San Bernardino, Hemet and Moreno Valley, asserting, essentially, that the political leadership and municipal management in those jurisdictions have abused the discretion they are entrusted under state law which grants cities authority to regulate or ban cannabis businesses as they deem proper. Those cities have, those suits contend, through the wrongheaded implementation of regulations either conferred monopolies on certain cannabis purveyors or have created circumstances where such monopolies will be the logical outcome. To the extent that such a monopolistic hold on those communities is truly a reality, Smith’s crusade is hailed as salutary. Concern remains, nonetheless, that the combination of Smith’s political, procedural and legal efforts will bear the ultimate fruit of conferring a monopoly upon her.
Smith has been able to ascend into her current position in the financial stratosphere through a quintessentially American route, involving preparation, old fashioned hard work, innovation, charisma, risk taking and bold endeavors that skirted the boundaries of legality.
After educating herself in marketing and promotion in Boston, she next landed in Phoenix and Tempe, where she arranged to buy dilapidated properties, and after carrying out some renovation on them, managed to sell them for a profit. After building a nest egg in Arizona, she departed for Los Angeles in 2005 to, first, refine her technique by attending UCLA’s Anderson School of Management and, second, assess the opportunities abounding in the Golden State. She struck pay dirt when she formed a personal and professional relationship with Dr. Craig Alan Bittner, a successful plastic surgeon to the stars who also offered liposuction to the fabulously wealthy out of his office in Beverly Hills. So intimate was the relationship between Smith and Bittner that he permitted her on occasion to perform body sculpting procedures on some of his patients, despite the state not having provided her with the licensure to engage in that activity.
Smith parlayed the money she was making with Bittner into a series of shrewd investments as the real estate market was on the rise. Rather than being undone by the financial downturn that began in 2007, Smith prospered. As real estate values plummeted and many property owners were in a full-fledged panic, Smith remained calm, swooping in to pick up properties others were bailing out of, paying fifty cents, then forty cents, then thirty cents on the dollar of what those same buildings had been selling for just a few years before. She tenantized those buildings with anyone who could pay something, hung on into the economic recovery that inevitably began in 2013, and today her company, Industrial Partners Group, owns two million square feet of industrial space, primarily in Southern California. Some of her warehouse space is utilized by national corporations. Other smaller but successful industrial concerns lease space from her. In recent years, more and more of her properties are being utilized for indoor marijuana cultivation activity.
Not far from downtown Los Angeles, a warehouse she owns was being used for growing marijuana. Authorities there raided it, seized the crop, and arrested an individual believed responsible for the operation. Smith was not arrested, though her company was the registered owner of the property.
In December 2017, San Bernardino Police made three raids on marijuana growing operations or warehouses in the city, all of which were on premises owned by Smith. They seized 25,000 marijuana plants at two locations and another 4.49 tons of marijuana at the third location. Though eight men were arrested and charged with cultivating marijuana in connection with those operations, Smith was not arrested, though she was briefly detained with regard to the raids.
In the same timeframe, authorities served a search warrant at her home, taking documents and communications devices.
Largely because of her money and her ability to afford legal representation, Smith has yet to be prosecuted, though local authorities and federal authorities consider her to be the head of an illegal marijuana cultivation, distribution and sales operation.
It is in this way that Smith has found herself at the center of an energetic advocacy for a liberalized and uniform policy with regard to marijuana as a commercial product in Southern California. By earnest and open lobbying of local officials to have them rethink and redraft their regulations such that marijuana and cannabis-products are recognized as legal commodities, it is Smith’s hope, and her legal teams’ belief, that her already known status as “California’s biggest cannabis landlord” can be legitimized. The path to acceptance of cannabis as a societal mainstay, Smith and her lawyers believe, is through the codification of regulations relating to the commercialization of the substance. Accordingly, they are doing everything in their power to write those codes, whether they are ratified by the various cities’ elected leaderships or voted into law by citizens at the ballot box.
Smith’s game plan is to ignore the suggestions that what she is doing is illegal, while relying on the declaration by voters with Propositions 64 that trafficking in marijuana is not only legal, but defensible on ethical, moral, health and economic grounds. In doing so, Smith and her lawyers have taken aim at the inconsistencies and constitutional violations in local ordinances.
In Colton, they have detected a built-in bias in the city’s code that gives limited advantage, a monopoly or so-called “duopoly,” to two favored entrepreneurs. The ordinance to be created by the initiative brought forth by Citizens for Good Jobs and Safe Communities would cure that situation, Smith and one of her lawyers, Ben Eilenberg, contend. At present, Colton prohibits entirely the retail sale of marijuana to end users, but the council in November did okay an ordinance giving city officials discretion to permit two cultivation facilities this year. Eilenberg says that is too limited. The initiative would allow more than two indoor agricultural operations in Colton, as long as they are in areas properly zoned for that use. The initiative would also permit retail sales in areas of the city zoned for such retail activity and where what Eilenberg termed a “setback” exists, meaning the operations are a specified and safe distance from conflicting uses, including schools, churches, residences and the like.
Eilenberg said the initiative contains a “tax component,” meaning the voters are being given the opportunity to approve the levying of delineated fees and taxes on the cannabis-related operations. He said a per-square foot levy on cultivation operations is specified and a percentage-of-net-sales tax is applicable to retail, manufacturing, packaging and distribution operations under the proposal.
The initiative effort in San Bernardino differs from that in Colton in some degree because of the botched initiatives relating to marijuana in the past, according to Eilenberg.
Even after the passage of 1996’s Proposition 215, the Compassionate Use of Marijuana Act, which allowed marijuana to be sold for medical purposes, San Bernardino, like virtually every other city in San Bernardino County, prohibited the sale of the drug. This did not prevent, however, the eventual emergence of entrepreneurs willing to run bootleg operations within city limits. Over the last eight or nine years, such enterprises began to proliferate, not only in San Bernardino, but elsewhere in the county, as the younger generation of marijuana consumers began to cast off the social and legal restrictions relating to the drug that had been in place in California and nationally from the time of their great-great grandfathers, and which their fathers’ generation, large elements of which were heavily steeped in the cannabis culture, simply accepted.
To a significant degree, the illicit medical marijuana dispensaries in San Bernardino County were fronts for the distribution of marijuana ultimately used for recreational purposes. With the initial wave of those illicit marijuana operations that in the 2008 to 2010 timeframe tested the resolve of the old guard and the then-status quo, local law enforcement agencies made a game effort to respond. Simultaneously, the San Bernardino County District Attorney’s Office and in some cases the offices of various city attorneys sought to keep up. By 2012, however, the sheer numbers of those willing to run the marijuana distribution restriction gauntlet had come to overwhelm local civil authorities. With cannabis use mushrooming, the district attorney’s office de-prioritized simple marijuana cases and delayed filing on or ultimately failed altogether to file on criminal cases relating to the operation of medical marijuana clinics, leaving such matters to be handled civilly.
In some case, well-heeled clinic operators put those cities through their paces, requiring vast expenditures in terms of resources, money and effort in shuttering dispensaries. In Upland, for example, the city spent upwards of $310,000 in its effort to close down a single dispensary – G3 Holistics – operated by Aaron Sandusky. In July 2014, San Bernardino City Attorney Gary Saenz, taking stock of the number of pot shops sprouting up in the county’s largest city, offered his view that the cost and difficulty of closing down dispensaries made the city’s ban on the enterprises that had existed since 2010 “futile.”
The council formed a legislative review committee composed of three council members to study the issue and promised to reconsider the ban. Saenz said the city was contemplating allowing some dispensaries to function under a strict set of guidelines that would include significant licensing fees. Nevertheless, a majority of the council, consisting of John Valdivia, Henry Nickel, Jim Mulvihill, Fred Shorett and Mayor Carey Davis, were unwilling to embrace cannabis liberalization. Ultimately, the political establishment, which had assumed that “potheads” lacked the discipline and cohesiveness to mount any kind of political effort, were stunned to learn that the cannabis availability advocates had managed the daunting task of gathering sufficient signatures to put an initiative on the ballot calling for allowing dispensaries to operate in the city.
Randy Welty, who owned, operated or had an interest in 54 marijuana dispensaries and eleven adult entertainment venues throughout California, took the opportunity to apply money of his own to get a more self-serving initiative on the ballot, one that would virtually assure he would be one the city’s marijuana entrepreneurs. Outmaneuvered by the potheads for whom they had such disdain, the council sought to catch up, putting its own commercial marijuana initiative on the ballot, one that had far greater restrictions and regulations built into it than either of the measures that had evolved organically from the city’s residents and cannabis promoters. When the three competing measures came before the city’s voters in November 2016, the city’s commercial cannabis-activity-permitting-and-regulating proposal, Measure P, went down to defeat, with 23,106 votes or 48.45 percent in favor and 24,583 votes or 51.55 percent in opposition. Besting Measure P was the proposal put forth by the city’s homegrown marijuana aficionados, Measure N, which garnered 24,048 votes or 51.1 percent, with 23,015 or 48.9 percent in opposition. That should have been good enough for passage, except that the outsider Welty’s proposal, Measure O, topped it, with 26,037 votes or 55.12 percent and 21,196 or 44.88 percent in opposition.
As the city was on track some three months later to give Welty a license to operate, Smith and her attorney, Eilenberg, stepped in and alleged that Measure O conferred an unfair advantage on Welty. Things were put on hold while Judge David Cohn considered the issue. As the city delayed, Welty, using his attorney, Roger Jon Diamond, sued the city.
In December 2017, Cohn ruled that Measure O indeed imposed on the city so-called “spot zoning,” which unfairly delineates certain properties as eligible for commercially intensive activity and grants advantages to the owners of those properties to the detriment of surrounding or nearby property owners, while simultaneously and not coincidentally creating a virtual marijuana sales monopoly for the sponsor of Measure O, i.e., Welty.
Though they had been outsmarted and outhustled at the ballot box, the establishmentarian members of the city council were able to utilize Judge Cohn’s ruling disqualifying Welty’s Measure O to take a second bite at the apple. In February, the council passed an ordinance of its own creation allowing a limited number of marijuana-related commercial businesses in San Bernardino to function on one-year duration permits that will be renewed or discontinued annually dependent upon whether their owners and operators comply with state and local law.
The ordinance allows up to 17 cannabis-based businesses within the 61.95-square mile city, and is intended to supersede Measure O. The ordinance as drafted sets a ratio of one cannabis-oriented business per 12,500 residents, which translates into a maximum of 17 marijuana concerns. What was not specified is the ratio to be maintained among the types of businesses – that is, dispensaries, cultivation facilities, research facilities and testing labs, and wholesale distribution warehouses. Under the ordinance, the city council has ultimate discretion in determining what kind and how many such businesses will be permitted.
What the city did is highly problematic, Eilenberg told the Sentinel.
Part of the problem, he said, is the milieu in which Measure O and its competing ordinances were hatched. Measure O, passed the night that Proposition 64 was approved by voters up and down the state, applied only to medical marijuana dispensaries, which meant it was obsolete the moment it was approved, Eilenberg contended, since recreational marijuana is now being sold legally. That Judge Cohn has invalidated Measure O, Eilenberg said, should mean that Measure N, which passed with the next number of votes in favor, should become law. Eilenberg pointed out, however, that a typographical error in the language of Measure N disallowed cannabis related operations rather than permitting them.
As with the Colton initiative, Eilenberg said, the intention with the San Bernardino initiative is to allow operations to flourish wherever the zoning for them is applicable and in numbers dictated by the readiness of those with venture capital to start such businesses applying for and receiving operating licenses. He said that limiting the number of cannabis-related businesses in the city carried with it the possibility of creating a monopoly. As in Colton, Eilenberg said, the initiative specifies proper setbacks from incompatible uses and imposes a taxing system in which agricultural uses are assessed a fee based upon square footage and other operators pay a flat percentage of gross sales.
The ordinance proposed under the initiative will also, if the initiative is passed, Eilenberg said, do away with an unconstitutional element contained in the city’s current ordinance which allows the city to deny a license to any individual who previously violated the city’s ban on operating a marijuana-based concern.
“That provision in the city’s ordinance violates the due process clause because it allows the city to disqualify without a hearing anyone from getting a licensed based on the city deciding the applicant was involved in unpermitted commercial cannabis operations in the past, either as an owner or operator or employee or even as a customer,” Eilenberg said.
The proposed initiative, Eilenberg said, “is a simple petition. It says that if a particular use is proper for the zoning and meets the setbacks, then it is permitted. The city has light industrial properties that are proper for all [cannabis-related ] uses. And this is an application where you will not need to go through a conditional use permit process.”
Eilenberg suggested that the city council has previously allowed its ideological bias against marijuana use in general to be a swaying factor in how the city has come to terms with the will of the electorate, which with regard to marijuana availability runs counter to its own, while using the flaws in the past measures related to marijuana sales in the city to shut the door on cannabis-based businesses entirely.
“The initiative is there to take the discretion out of the city’s hands,” Eilenberg said. “So far the city has not done a good job of interpreting and instituting the will of the voters.”
This week, San Bernardino city officials communicated with the group circulating the San Bernardino petition, informing them that they would need to submit all of the petition signatures at once and could not submit a first batch on Monday and continue to collect signatures thereafter, which if done would be a violation of Sections 9114 and 9115 of the California Election Code.