First of two parts.
Like the city’s budding cannabis industry, Calexico’s Cannabis Overlay Zone is a work in progress.
From a bird’s eye view, it’s a funny-shaped thing. From its northernmost tip to its relatively small southern boundary, it almost appears like the Titanic sinking into the North Atlantic.
The zone’s 354.02 acres are bordered to the north by the sweeping curve of the Adler Canal, a diagonal stretch of the Union Pacific Railroad to the west, a stutter-stepping vertical section of Van de Graff and Scaroni avenues to the east, and a bottle-necking several hundred yards along Weakley Street and Camacho Road to the south.
It’s the only area in town where a legal pot purveyor can set up shop, a move made in two parts by the Calexico City Council in July 2017. The zone was established in one ordinance. Concurrently, a second ordinance allowed commercial cannabis cultivation, manufacturing, laboratory testing and distribution only, Assistant City Manager Miguel Figueroa told this newspaper during a July 11 interview at city hall.
Divided almost perfectly in half by the ever-developing West Cole Boulevard, west of Highway 111, to drive the zone’s northern portion is to pass a dusty patchwork of undeveloped lots and what appears like a number of empty warehouses, which Calexico officials say are a coveted find if you can lease or buy one.
To drive its southern end, development seems a bit more active, even lively, along the south face of Cole Blvd. and the southwest corner of Cole and Portico, where dozens of vehicles can be seen in an expansive lot.
Figueroa and consulting planner Chris Velasco say there are numerous cannabis businesses in the making.
Both local merchants and industrial-scale developers are doing tenant improvements on some of those empty warehouses, or building new ones. That is in preparation for the first wave of retail storefronts and delivery services to open for business and sell legal medicinal or recreational cannabis. (It’s no longer cool to use the M-word: marijuana.)
The city didn’t approve the permitting of retail, nonretail (delivery) and microbusiness until December 2018/January 2019, Figueroa said. That was after a taxing structure and streamlined permitting process were overwhelmingly approved by Calexico voters under Measure K in November 2018.
Literally toiling away in the zone are plenty of prospective growers, manufacturers, shippers and labs, all in some phase of development, and many with city permits in hand. But many are likely slowed by either a lack of infrastructure (existing buildings and warehouses) or a grindingly slow permitting process at the state level--a cannabis business must obtain both city and state permits to begin operations.
As of mid-July, there was only one open cannabis business in Calexico --- well, two technically --- cannabis distillate manufacturer Trinity 341 LLC and its shipping arm, Calexico Distribution Co., both located behind a fenced-off lot at 2421 Enterprise Blvd., north of Cole.
Anytime now, Trinity 341 is expecting state approval on its cultivation permits, and its city and state permits for retail and nonretail (delivery) sales, Trinity principal and co-founder Jim Sprouse said from his San Diego office on July 15.
Sprouse said Calexico has been great to work with, fast-tracking and streamlining the permitting process at every turn. But Sprouse said in many cases the state is lagging months behind in its licensing efforts, seemingly mired in a confusing nexus of different agencies approving different kinds of permits under the unwieldy direction of the Bureau of Cannabis Control in Sacramento.
One could argue it’s the glacial pace of the state that is to blame for the city’s grossly overestimated cannabis revenue projections in its fiscal 2018-2019 budget. City officials had projected revenues of $650,000, when the reality was more like an estimated $40,000 at the June 30 close of the 2018-2019 budget cycle, City Manager David Dale has said in an early June interview at city hall.
In the city’s recently approved budget for the 2019-20 fiscal year, which started July 1, Calexico Finance Director Karla Lobatos included what she called a “worst-case scenario” conservative projection of $250,000 in cannabis revenues.
Calexico Mayor Bill Hodge, who serves on the city’s cannabis sub-committee with fellow council member Morris Reisen, said he can see that projection easily being beaten.
“The way the demand is growing (for retail permits) … I’m expecting probably even more sales,” Hodge told the Calexico Chronicle during a July 13 interview. “I think we’ll surpass what is estimated.”
THE PERMITTING PROCESS
Figueroa is the city’s authority on cannabis permitting, and he’s acutely aware of the history of the process: “When we began in July 2017, we as a city learned along with our initial applicant (Trinity 341) what it entailed to establish a cannabis operation in our city.”
Trinity 341 had to go through a project review committee, negotiate a development agreement with the city and its legal team, get approved by the city council and, finally, get a development agreement issued. The firm was awarded its first batch of what are known as “Commercial Cannabis Activity Regulatory Permits” in late August 2018, more than a year after the process began.
Trinity holds two distribution permits, four in manufacturing, three cultivation, and one conditional-use permit each for storefront and non-storefront retail from the city, Sprouse said.
He added the tenant improvements were completed and approved through the city Building Department --- another separate but reportedly well-oiled process. Finally, the firm received state permits for Trinity 341’s manufacturing and Calexico Distribution Co.’s distribution, both of which opened in January 2019 in the first of a two-phase business plan, Sprouse said.
Important for the city through the navigation of that labyrinth, Figueroa and planner Velasco said the city really began to learn from its miscues, including the need for a formal taxing structure and streamlined process that would be created with the drafting of Measure K.
The measure’s main appeal was the revenue it could generate for the city by placing added taxes and fees on cannabis businesses based on gross receipts and square footage. However, officials said it’s real power came from the birth of a second, faster process that cut out the city council and development agreements from the approval process of cannabis operations, making it possible for the city Planning Commission to award the required city permits, Figueroa explained.
Velasco, who was initially hired earlier in 2019 as a consultant working solely on cannabis concerns, said the new permit process can go from application to city permits-in-hand in as few as 60 days. The prior method of garnering council approval and negotiating development agreements—still an option--has been shaved down to around 90 days, Velasco added.
There’s the will in city hall to make things happen quickly, Trinity’s Sprouse said.
“I have told other operators around the state that Calexico is a very good place to set up shop,” Sprouse said, adding the administration “pays attention, answers phone calls and emails right away, is communicative” and is “a really great partner.”
The state is where the snagging can and does occur, said Sprouse, who is well-acquainted with the process in Sacramento.
The state’s lead agency is the Bureau of Cannabis Control. It is ultimately responsible for the licensing of retail, distribution, lab-testing, microbusinesses and temporary cannabis events, according to the government’s official California Cannabis Portal website.
Growers are permitted through CalCannabis Cultivation Licensing, a division of the state Department of Food and Agriculture. Yet another agency, the Manufactured Cannabis Safety Branch, a division of the state Department of Public Health, is responsible for the licensing of all commercial cannabis manufacturing.
“The state has really done a disservice to a lot of operators with how they are handling the licensing process,” Sprouse said.
He added that in some cases the Bureau of Cannabis Control is six months behind, and he has been waiting for his cultivation licenses from CalCannabis Cultivation Licensing for eight months.
Figueroa and Velasco don’t see the state being quite so behind, choosing to describe Sacramento’s process in more diplomatic terms, with Figueroa saying, “policy in California continues to evolve” and Velasco saying the state tends to take “a little longer.”
Regardless, Figueroa said the city has also taken on the role of advising prospective cannabis businesses what to expect from the state bureau so merchants new to the process can be better prepared.
“I think that’s a city’s role,” Figueroa said. “We’re setting businesses up to succeed.”
Velasco said there is even a process in place to timestamp and initial all permit applications.
He is also responsible for the development of a three-page “bulletin,” a literal one-stop-shop publication that is updated monthly. It describes the 60-day conditional-use permit route or the 90-day development agreement route in written and visual detail; the tax structure created by Measure K; a map of the Cannabis Overlay Zone; and, the most important element, a graphic representation of what kinds and how many use and regulatory permits are available as of a certain date.
The most recent publication is updated through June 19, Velasco said.
Of the speedy path to permitting, Mayor Hodge said:
“I’m pleased. I believe with the leadership of Miguel Figueroa and staff, they have done a very efficient job. We have a very streamlined and accurate process that tells investors what’s necessary, structurally and strategically. The city has done a wonderful job.”
Next part 2: Who received what permits, cannabis revenues outlined.