Southeastern Los Angeles County is quickly emerging as the epicenter of the region’s burgeoning aboveboard cannabis marketplace as several Gateway cities look to license marijuana businesses.
With the city of Los Angeles still months away from voting on a ballot measure that would give the council authority to implement a licensing system, Lynwood, Maywood, and Huntington Park are seen as easier entry points for entrepreneurs and investors, among them Aaron Herzberg, a principal at Santa Ana marijuana real estate investment firm CalCann Holdings.
But opportunities are limited. For example, Huntington Park has only granted licenses to three medical dispensaries, and Lynwood will allow as few as five cultivation and manufacturing sites. Meanwhile, Lynwood and Maywood’s ordinances are not yet finalized, and it’s unclear whether their permits will allow recreational operations in addition to medical marijuana businesses.
“The reality is there are a lot of people who will apply for licenses that won’t get them,” said Herzberg, who owns a dispensary in Santa Ana and has already scooped up two properties in Lynwood manufacturing zones. “It takes a lot of financial resources to get things up and running, and most people don’t have the capital to make the upfront investment.”
Meanwhile, statewide regulations are still in flux as politicians and regulators scramble to meet mandated deadlines. A bill introduced last week in the state Assembly would harmonize the provisions of Proposition 64, which made recreational pot legal in November, and the Medical Cannabis Regulation and Safety Act, which legislators passed last year.
Still, the opportunity for huge profits has speculators snapping up buildings in areas where favorable zoning laws will likely allow marijuana businesses to operate. (See story on page 1).
While Herzberg said he’s heartened at the progress made toward licensing cannabis businesses in the southeast county, he’s mindful that operations will likely take a significant amount of time to come on line.
“It always takes longer than people expect,” Herzberg said. “We don’t get involved unless there’s strong support from the city council.”
Local control
While councils in southeast county cities have shown more support for marijuana businesses than almost any other place in the region, there are still divisions.
In Lynwood, where the City Council passed an ordinance on Dec. 6 allowing marijuana cultivation and manufacturing but not retail storefronts, dozens of speakers advocating for each side pleaded their cases before the vote. After the ordinance passed 3-1, opponents chanted for a recall of the council members who voted for the pot law.
The detractors, including Councilman Salvador Alatorre – the lone dissenting vote – were concerned with how the new businesses would impact the community and whether the promised windfall in development fees would be a net benefit for Lynwood. Alatorre said in an interview after the meeting that he disagreed with the way other council members interpreted the impact of Proposition 64.
“They made it seem like Prop 64 is something municipalities are forced to accept, which is not true,” Alatorre said. “We still have the option to ban (marijuana businesses) completely.”
For now, however, that option is in the rearview mirror. Aide Castro, the strongest proponent of the cannabis ordinance on the council, said the focus going forward should be on refining the law to create a system whereby Lynwood would gain both jobs and a revenue stream from marijuana.
“We’re trying to implement this in a way that is really beneficial to the economic development of the city,” Castro said. “We want the (cannabis equivalent of) distilleries and breweries, not the liquor stores on every corner.”
That means no dispensaries in Lynwood and a hard cap on the number of licenses handed out. While the ordinance could still undergo revisions, Mayor Maria Santillan-Beas said the city will likely charge businesses a development fee between $10 and $20 per square foot of use. The city also plans to implement a rigorous pot license application process to screen for the best possible operators.
Other cities are taking different tacks. Huntington Park handed out three dispensary permits by blind draw in June.
Maywood, which introduced a proposed marijuana ordinance to little fanfare at a City Council meeting on Dec. 14, could ultimately be the most permissive city in the region. The council voted 4-1 to approve the initial introduction of the ordinance, which, upon final passage, would allow dispensaries, and cultivation, manufacturing, and distribution operations in the city.
According to the current wording of the law, no cap would be placed on the number of licenses available.
Ticking clock
A major catalyst for these pot-related civic actions is time. With statewide licensing regulations set to go into effect on Jan. 1, 2018, marijuana businesses that don’t have a local permit will be considered noncompliant, and be unable or at least experience delays in obtaining a state license. The dual licenses are required for all types of pot operations in the state.
The time line, however, has been called aggressive by many of the state’s regulators. According to industry insiders, Gov. Jerry Brown and the state Legislature could move to push back the deadline further into 2018 or even 2019 in order for both state and local governments to iron out a regulatory system.
However, no official word has come from the Governor’s Office or Legislature on this front.
Alex Traverso, a spokesman for the state’s newly created Bureau of Medical Cannabis Regulation, said his agency is proceeding under the assumption that no changes will be made.
“We’re focused primarily on getting regulations in place first for medical marijuana and then for recreational by Jan. 1, 2018,” Traverso said. “We don’t have any control over what happens with the Legislature.”
