(Editor’s note: the requested ordinance has been placed on the June 20 city council agenda)
At its May 2 meeting, the Long Beach City Council voted unanimously for a draft ordinance to be brought back to council within 30 days that would allow the city to apply penalties on property owners and shut off utility services to unlicensed and illegally operating marijuana businesses.
“There’s an opportunity for us as a council to ensure that patients, businesses and impacted communities are protected from unlicensed and illegally operating marijuana businesses,” 3rd District Councilmember Suzie Price said during the meeting. “This council and many other cities in the region have had problems with illegal dispensaries that have really drained the cities of millions of dollars.”
Price explained that in order to avoid the pitfalls of the city’s previous attempt to allow medical marijuana facilities, the local government needs enforceable tools to reduce the likelihood of bad actors. She suggested that fines be substantial – in the thousands of dollars range – and that best practices in surrounding cities be examined when drafting the ordinance. Price added that she does not want the ordinance to focus on individuals growing marijuana plants on their private properties but rather commercial businesses.
During public comment, union representatives and legal dispensary owners praised the ordinance. They claimed that illegal dispensaries could be detrimental to the health of patients due to noncompliance with health regulations and would create an unfair playing field by being able to offer products at lower cost because they are not paying the taxes and fees. Additionally, commenters said legal dispensaries are high-paying union jobs that offer benefits, which are good jobs for the community, while illegal dispensaries do not adhere to any such practices.
“This is a no-brainer. I’m happy to support it,” Vice Mayor Rex Richardson said. “Being around for the last round when there were so many illegal operations and seeing the challenges that folks had dealt with, we need every tool that we can get to make sure that we protect quality of life for our neighborhoods.”
The council decision comes three weeks after the deadline for finalized non-priority medical marijuana dispensary business license applications.
Because Measure MM on last November’s ballot was a voter-driven initiative, city officials did not have any say in the number of businesses allowed in the city. The ordinance allows for up to 32 medical marijuana dispensaries to operate in the city, which can only be changed through another ballot initiative. There is no cap on other medical marijuana business types, which include cultivators, manufacturers, lab testers, distributors and transporters.
The city also cannot restrict the number of dispensaries or other marijuana businesses per district or neighborhood. The location restrictions for dispensaries are as follows: areas zoned exclusively for residential use; within a 1,000-foot radius of public or private schools, public beaches or another dispensary; or a 600-foot radius of public parks or libraries.
Dispensary applicants are broken down into two groups: priority, which are those who were previously awarded a business license to operate a medical marijuana dispensary in 2012, prior to the ban, and non-priority. The city received 179 non-priority business license applications and 16 priority applications as of June 2. An additional 8 priority applications can be submitted until July 24.
Once a priority application has been deemed complete and meets ordinance requirements, the applicant can immediately move on to the planning review phase and then plan check, according to Ajay Kolluri, assistant to the city manager. Of the priority applicants submitted, 14 have been approved to enter the planning phase and could begin construction within a couple of months. Five of these 14 dispensaries are located at 1957 Pacific Ave., 1735 E. 7th St., 5227 E. 2nd St., 2512 E. Anaheim St. and 1501 Santa Fe Ave.
The city cannot begin to approve non-priority licenses until all 24 applications are turned in or the deadline is reached. In the meantime, city staff is scoring each non-priority application on a 23-point system that examines multiple points relating to suitability of the proposed property, suitability of the security plan, suitability of the business plan and financial record keeping, criminal history, regulatory compliance history, community service, and labor relations. The point system criteria were taken verbatim from the ballot initiative.
“Then once the priority window closes, we’re going to move forward with posting the priority point ranking results,” Kolluri said. “If there’s a tie in the number of points that applications receive and the number of ties exceeds the number of licenses that we have remaining, then it goes to a public lottery.”
Kolluri explained that with no marijuana businesses legally operating in Long Beach, the city is not seeing any revenue. However, with city staff processing nearly 200 applications, some costs are being accrued, though he could not say how much.
As per the ballot initiative, dispensaries, manufacturing facilities, laboratory testing facilities and distributors will pay 6% of gross receipts, while cultivators pay an annual tax of $12 per square foot of maximum cultivation canopy. These rates may increase to 8% and $15 per square foot, respectively, by vote of the city council.
Initial projections of revenue from the medical marijuana industry in the city were approximately $8 million, which will be used to offset the additional cost of enforcement and education, according Kolluri. This estimate has not been updated because it is unclear how many medical marijuana businesses will begin operations in the city.
The application process for cultivation and testing began on May 1, while applications for manufacturing will not be accepted until August 1. Kolluri explained that the city must stagger the application process for different sectors to be able to complete each in a timely manner.
Once the application processes for each sector are complete, city staff will have a better idea of the actual revenue stream. However, until then, Kolluri said there is no way to give an accurate prediction. Additionally, he explained that even the initial $8 million estimate is a long-term figure and will take time to achieve. Revenue generated will go into the city’s general fund.
“The budget process will address a lot of this,” Kolluri said. “The costs of marijuana enforcement and marijuana regulation and administration will be called out more as we move forward through the budget cycle. As businesses start to open, it will start to trickle in.”