In the two years since conditional use permits were awarded to three marijuana dispensaries in Banning, not one has opened yet.
The failed promise of generating tax revenue has resulted in the city hinting its interest in going another direction, by potentially allowing microbusinesses, or smaller “boutique” dispensary-type businesses that might be more nimble in getting off the ground.
City Manager Doug Schulze requested the council’s direction as to how it wanted to alter its existing cannabis policy, and how to address microbusinesses, which are not currently allowed, simply because there is no ordinance governing them.
He also wanted the city council’s direction as to whether to keep the limit of three dispensaries, or remove the cap.
Councilman David Happe explained that the ordinance in place when it was adopted in 2018 gave city council discretion as to how and what to implement permits for dispensaries; yet, “the net result in 2020 is zero dispensaries,” Happe said during the Nov. 10 council meeting.
Of 24 initial qualified applicants, there are 10 with renewed regulatory permits.
“That’s 10 potential businesses that can contribute jobs, tax revenue, development — it’s local employment,” Happe said.
He wondered if the city should allow for other conditional use permits to be approved while the three otherwise inactive ones aren’t demonstrating any activity, and suggested that a more competitive policy might motivate current permit holders to get moving.
Community Development Director Adam Rush cautioned against such a policy, noting that “We’d be offering entitlements and having applicants spend money, only to not allow them to do business,” suggesting that doing so “would get us into hot water by allowing those 10 in the wings to move forward.”
Happe said “We were counting on that revenue two years ago,” noting that “it’s been a major source of frustration on the council … It was our intent to generate tax revenue” by allowing for three cannabis retailers.
Further, limiting the number to three gives potential business owners outside the city looking to invest in Banning the impression that the city is anti-business. “Let’s face it, in tough times, why make it tougher?” Happe said.
Mayor Pro Tem Colleen Wallace asked about the obligations the city would have to the remaining applicants who were initially approved, should a cap on the number of dispensaries allowed be removed.
Rush’s initial thoughts were that the city would be out at least the $5,000 for each application that would need to be reimbursed.
Happe inquired as to whether creating a separate ordinance allowing cannabis microbusinesses could coexist with the current one that only allows for retail cannabis.
City Attorney Kevin Ennis said that the city would have to establish a separate lottery, possibly on a first come, first serve application basis, and the council would have discretion for that approval process.
City manager Schulze said that “Doing away with the lottery” that governs the three original applicants creates concerns as to how to process applications without creating legal issues, explaining that at the moment, 10 applications have been vetted and been through the conditional use permit process; if one of the three existing retailers ends up quitting the process, or goes out of business, the next one in line selected during the lottery process gets to move forward.
Happe said that he did not favor dissolving the 10 on the waiting list, since they have already done their underlying work and paid money to be on hold.
“At the same time, in the spirit of competition and such, to start a new list for microbusinesses would have influence on the original list” forcing those three retailers to pay attention, Happe said. “We’re looking for businesses willing to perform and execute.”
As for potentially removing the cap of three, “I understand the fear that there could be 30, 40 retailers,” but the city has checks in place through its planning process, and city council approvals, Happe pointed out. “Keeping it locked down at three has not been successful. Opening it up to more interested business operators will put them under new — not grandfathered in — regulations, and applicants would be racing to the finish line to open their doors.”
Councilman Kyle Pingree was worried that, based on conversations he has had with law enforcement personnel, “Our officers are understaffed. The more we bring in” and allow other dispensaries, “we don’t have enough staff to monitor that. We’ll have money in the long run, but we don’t have it right now” to ensure public safety.
Mayor Daniela Andrade reminded them that dispensaries are required to hire security.
Development Director Rush said that all three dispensaries have promised to have armed security, particularly during business hours, and will have security cameras that provide 90-day backup of footage.
During public comments on the issue, resident John Hagen reminded council that the argument to get an ordinance passed that was promised to voters was that there would be only three marijuana retailers permitted, and that they would be confined to a particular area.
“There have been at least four attempts to change the ratios and setbacks” as to where those dispensaries could be located, Hagen said, and hinted that either someone on the council, or someone working within the city’s administration, has a vested interest in the industry, considering how diligently the council seemed to be promoting an agenda of expanding its ordinance. “Three stores can sell just as much product” as several stores spread throughout a city, Hagen said. “You don’t have to make it convenient, just available. To allow more stores, you’d be opening up zoning which would impact existing businesses in the city. The only extra revenue is the cost of permits and licenses, which would not cover the costs of policing and headaches” to surrounding areas.
As to Happe’s interest in resorting to allowing microbusinesses, he accused the city of looking to circumvent its own process.
“Don’t open the whole city up. You’re just adding more problems,” Hagen said.
Jack Kawaja approached the dais to lend support to a free market approach, noting that “You don’t limit restaurants. Some make it, some don’t. If you allow a free market, you weed out complacency. The important thing is to have an efficient business that works within the community to make a difference, and not just be an operator that can take, take, take” without investing back into the city.
Councilman Art Welch said “We talk about cannabis coming to town and a lot of money and fees coming in. If there’s that much to be made in retail cannabis, then why are the three we have here dragging their feet to open?”
He acknowledged that “the geography we allowed for them to set up” along a portion of Ramsey Street is probably not ideal for commercial entities.
Restaurants, Welch noted, “Have products that’s acceptable to everyone,” whereas that is not the case with marijuana dispensaries. “There has to be control on substances, marijuana, cannabis and tobacco. I’d like to see: if this is such a good market, why these three didn’t get into a big hurry with the 10,000 cars driving by” on the freeway, to rush to open their doors. “I’m not understanding that this is such a lucrative, volatile market; but people are taking their time with it? Those don’t match.”
Happe would later suggest that “Maybe they aren’t moving quickly because they have family members doing business well elsewhere” and can relax about jumping through the city’s hurdles, since the retailers’ permits are good for three years.
Councilman Pingree asked City Attorney Ennis whether it would be a conflict of interest for someone on council to be voting on the matter if they have a direct personal interest in the industry.
Ennis explained that if there was an immediate family member involved, then it would be; or, if the council member has a financial relationship with someone involved in the industry.
Happe was the only one to declare that he has no personal vested interest, nor is he nor any of his employees at The Station Taphouse, which he owns, have invested ties to any marijuana-related businesses.
“The conflict of interest has to do with license holders,” Happe insisted.
Andrade told the council that she has previously visited a microbusiness in the desert, describing a venue that “was clean and provided a lot of jobs.”
“Since I’ve been here, I’ve always been advocating for cannabis dispensaries and anything involved. It brings a lot of money to the city,” Andrade said. “If it’s regulated, it can be organized and successful. I’m all for open markets. The cap needs to go. Our ordinance set us up to fail; it takes three years for dispensaries to get set up, and I think the market should dictate how many are allowed. If we constantly set up restrictions, we’re set up to fail over and over.”
Andrade motioned to remove the limitation of allowing only three dispensaries in the city, seconded by Mayor Pro Tem Wallace. They were joined by Happe in passing the measure, with council members Welch and Pingree voting against.
Wallace then motioned to allow microbusinesses, seconded by Andrade. That measure passed 4-1, with Pingree being the lone dissenter.
City staff will now work on the details of how it all will work, and iron out legal issues pertaining to the removal of a cap on dispensaries, and will plan workshops to demonstrate how microbusinesses would conduct business within Banning before coming back to council with a proposed ordinance.
Staff Writer David James Heiss may be reached at email@example.com, or by calling (951) 849-4586 x114.