Sacramento’s growing marijuana industry is about to get even bigger.
On Thursday, city leaders announced the finalists for ten new pot shop permits. The demand for these licenses is huge and big money is at stake.
Maisha Bahati just learned she is among the ten budding business people selected for the City of Sacramento’s new cannabis permits.
“It was insane. We were so excited, we had gone out and bought champagne last night just in case,” Bahati said.
More than 100 people applied for the coveted licenses, which would allow them to open a marijuana storefront dispensary.
“They gross anywhere from 4 to 8 million dollars a year,” said Davina Smith, the Sacramento City Cannabis Director.
Sacramento currently only allows 30 cannabis shops – and none are black-owned. These ten new licenses are an effort to diversify the marketplace. Applicants were judged not only on their business plans but on their personal stories.
“The drug war impacted me in some profound ways,” said Malaki Seku Amen, a cannabis business applicant.
He says his father was a casualty of marijuana criminalization.
“He was working to prevent the violence caused by the drug war and he was shot and killed,” Seku Amen said.
And others who were selected have been on the wrong side of the law in the past. But these ten lucky finalists still have a lot of work to do.
“They’re celebrating tonight but the work starts tomorrow because they have to go through every step of the permitting process that anyone else would,” Smith said, and later added, “people could be opening in six months. It could take others two years.”
Many hope the new infusion of income will benefit Sacramento’s economically disadvantaged neighborhoods.
“We’re going to pull from our community, we’re going to hire women, it’s just going to be a diverse business, something that’s different from what’s out there now,” Seku Amen said.
Sacramento places a 4% tax on all cannabis products sold in the city. That’s expected to generate about 17 million dollars this year.
More than a fifth of the cannabis companies in Sacramento, California, are confronting the possibility of at least a temporary suspension of operations on the first day of February.
City regulators sent notices to dozens of registered marijuana businesses in December as a reminder they had not formally completed the process for acquiring a Sacramento business operations permit.
Though many have finished the process since then, officials in California’s state capital said last week that 58 businesses still have not completed the paperwork and might have to cease operations as of Feb. 1 until they can get it in order.
“We felt that it was our obligation to ensure that our applicants were moving forward, and if they weren’t, then they’re no longer going to be able to continue to operate,” Sacramento Assistant City Manager Leyne Milstein said.
Here’s what you need to know:
The city has a total of 265 pending marijuana business applications, including many that are already operational, Milstein said.
So far, the city has issued 107 licenses, including 85 operating permits for companies that have completed the entire process.
The 58 that face closure are cultivators, manufacturers, distributors and delivery services. None are retail storefronts, Milstein said.
Milstein noted letters went out to license applicants last July, reminding all that they needed to finish the permitting process. Since then, many have complied.
Any of the 58 that do not comply with the order to cease operations could face civil fines.
At least one of those companies has already filed a legal challenge, asking a judge for a stay on the Feb. 1 deadline, said attorney James Anthony, who represents Marpe, a state-licensed cultivator in Sacramento that received one of the December warning letters.
Anthony said Marpe is working on complying with the city regulations but that it could take another six months to a year.
“Now I guess we’re going to slug it out in front of a judge,” he said.
Another state-licensed Sacramento operator who received one of the letters, Teri Apple, who has run cannabis delivery service STC Alternative Healing since 2016, said she’s uncertain whether she can make the Feb. 1 deadline.
Apple said she’s been trying to come into city compliance since receiving a notice in July that her building wasn’t up to code, but the city building department has repeatedly identified new problems for her landlord to handle. That’s delayed her ability to finish the permitting process, Apple said.
Her landlord will have to complete new electrical work and interior remodeling – all of which is unlikely to be finished by the start of February, Apple said.
“If it wasn’t for the building department throwing different things at us, we would have been completed,” she said.
Apple is worried that even a temporary closure would force her out of business.
“To have me shut down, even for a week, it could be the death of me,” she said.
Medical cannabis collectives would gather at word-of-mouth events, where patients would meet suppliers at farmers market-like settings
“Prop. 64 killed medical marijuana!” Jose Lara shouted at a pop-up medical cannabis collective marketplace in December. The sales representative for NorCal Nectar, a cannabis oil extraction company, was lamenting the January 9 repeal of California’s Medical Marijuana Program Act, which now bans medical cannabis collectives from gathering and selling products in a farmers market-like setting. This also means that patients who once joined these collectives to afford their medicine must now buy directly from higher-priced medicinal and recreational dispensaries.
Cannabis collectives, also called cooperatives, are private nonprofits whose member patients and suppliers gather at “sesh” events such as December’s pop-up known as an Orbit Show, where patients speak directly with product representatives and receive significant discounts over dispensary prices. Collectives were conceived as part of Proposition 215 in 1996, and their legal protection was reaffirmed in 2003 with passage of Senate Bill 420.
After voters approved Proposition 64 in 2016 to legalize recreational cannabis, state regulators overruled the medical provisions. In January 2018, the deadline was set for collectives to relicense or reduce their size to “caregiver gardens serving no more than five people,” according to the state Bureau of Cannabis Control.
But because reaching full compliance would be too costly for such small groups, most collectives have disbanded.
The 1130 Club collective averaged more than 700 patients at its last few Terpy Thursday events, according to operator Will Hennessee. At the December event, hip-hop music spilled out into the cold air, while the smell of Philly cheesesteaks from a food trailer wafted back inside. As patients shopped for cannabis, some said goodbye to their favorite vendors and wondered about the future.
“It’s been an emotional three days,” said Karrie Stackpoole, a sales representative for SpOILed Gold Country extracts. She said she heard talk of organizing secret meet-ups, but was apprehensive about the risk. “I don’t want to go underground,” she said.
An early indicator of her future was a patch inside a display case reading, “In Memory of Prop 215, 1996-2017.”
“Wasn’t California supposed to protect the small growers, and patients like us?” asked Debra Cowen, a massage therapist and medical cannabis patient since 2013. While buying vape cartridges for her joint pain, Cowen repeated a common view in the medical cannabis community that “politicians threw medical marijuana under the bus for the taxes.”
Some dispensary owners agree.
“As a patient and dispensary owner I understand what many of these patients feel, and how hard it was before to afford your medicine,” said Haley Andrew, owner of Dixon Wellness Collective. “Hopefully our regulators are understanding why patients are using sesh parties … and can help on the regulatory side to lower the taxes on cannabis.”
The view is also echoed among dispensary owners who applied for recreational business licensing, in addition to operating as a longtime medicinal haven.
“When we advocated for state regulations, we expected that all businesses in operation would be able to transition into the regulated market,” said Kimberly Cargile, executive director of A Therapeutic Alternative in Midtown. “It is very sad because most of the people stuck in the unregulated market are there for the right reasons, they just want to help patients safely access affordable cannabis.”
Alex Traverso, communications chief at the state bureau, said it plans to work with collective operators to help transition them over to the legal market. He also said that the bureau has already issued temporary licenses to businesses operating as collectives.
“I would love to comply,” said Hennessee of the 1130 Club. “But we don’t have the money to compete with the big companies.”
Hennessee scheduled a meeting with member suppliers to consider their future in the new regulated climate.
“I do not know of any collectives that were able to transition without taking on partners that either brought money or business experience to the table,” Cargile said.
Critics argue that on-site cannabis consumption at sesh events violates local ordinances. Organizers of these pop-up marketplaces would regularly change the event locations to stay under the radar of local authorities. The state Bureau of Cannabis Control has pledged to increase enforcement in 2019.
When asked about the likelihood of local prosecutions, Sacramento Chief Deputy District Attorney Steve Grippi told SN&R in an email that the office doesn’t offer “charging opinions on hypothetical arrest scenarios.”
Still, Orbit Show organizer Jose Agacio was philosophical about the future.
“It’s been well worth the endeavors and obstacles,” he said. “With the community staying strong, the support and dedication of every one, we shall see a brighter day.”
Gov. Jerry Brown on Thursday signed a bill to give adult cannabis users some privacy.
Assembly Bill 2402 by Assemblyman Evan Low, D-Campbell, extends the same privacy protections to recreational cannabis users that medical cannabis users receive, with two exceptions. Information can be shared in conjunction with processing payments and to government officials, such as police, performing official duties.
The measure is largely aimed at preventing buyer information form being sold or traded for commercial use.
The bill also clarifies existing law “that all personal information of medical cannabis users is kept confidential by deeming identification cards issued to medical cannabis users to be ‘medical information’ under state law and therefore protected from unauthorized disclosure,” according to a statement from Low’s office.
The bill passed the Assembly 63-10 and the Senate 29-9. The law takes effect Jan. 1.
More than seven months after marijuana became legal in California for adults over 21, advocates have a lot to be thankful for and yet still much to be desired.
Cities up and down the coast where Proposition 64 in 2016 passed by some of the ballot measure’s highest margins have banned dispensaries.
They have prevented individuals from growing cannabis in their backyards.
And now, with the state’s California Bureau of Cannabis Control poised to adopt new rules permanently governing the adult use of marijuana, cities are lining up in opposition to a provision that would force them to allow delivery services. A 60-day public comment period on the rules ends Aug 26.
“We always wanted to preserve local control,” said Dustin Moore, a Manhattan Beach resident who served as the deputy campaign manager for the Yes on 64 campaign.
Local control was baked into the proposition, he said, giving cities the ability to prohibit if they wished how many dispensaries operated in their city, if any at all.
“Even in the eyes of what’s being interpreted now around delivery services, I would still argue it allows for local control,” Moore said. “What they (cities) don’t have the ability to do is prevent someone from driving on public roads and deliver to a private residence.”
Although many cities passed laws prohibiting delivery services, law enforcement officials have said there is virtually nothing they can do to enforce such restrictions. The issue of delivery services is essential to the original Compassionate Use Act of 1996, which said patients must be allowed safe and legal access to medicinal marijuana, Moore said.
A proposed initiative aims to overturn Pomona’s ban on commercial marijuana use.
A review of Weedmaps.com, a website dedicated to connecting patients to dispensaries, delivery services and doctors, show numerous services that deliver throughout the South Bay – where every city bans the business practice.
Many of those delivery services are not charging taxes or operating under any business license at all, putting them in a sort of gray market, observers say. Some dispensaries, located in unincorporated areas of Los Angeles County, out of the jurisdiction of cities with prohibitions, may also be operating under quasi-legal circumstances.
What cities also can’t control is the ability for an individual to grow up to six plants in the privacy of their own home. The proposition also decriminalized marijuana offenses and expunged past convictions depending on the amount involved.
Among Los Angeles-area beach cities, Long Beach is the only municipality that permits dispensaries through a voter-approved medical-marijuana initiative in 2016, which allows up to 32 licenses. The City Council approved last month rules that set up fees and licensing requirements for medical-marijuana dispensaries that also want to operate as adult-use ones; those fees run between $7,000 and $8,500, but they have yet to take effect.
Ivan Jimenez, a Long Beach resident who grows cannabis for his own business in Northern California, told the council at the time of the rulemaking process that he’d like to open up in his home city but he finds the fees too high.
“I would love to come here and invest money in the same industry,” Jimenez said during public comment. But “I believe the city of Long Beach is taking advantage of the taxing and taking advantage of the fees.”
Devil in details
Since January, when the adult-use law went into effect, dispensaries across the state have been adapting to new emergency regulations put in place to bridge the gap before permanent rules could be established.
Those emergency rules required by July 1 that all products, medicinal and recreational, be tested and labelled. The new rules also barred giveaways and allowed governments to impose taxes, some as high as 35 percent in combined local, county and state taxes.
Moore believes what bans and excessive taxes and fees are doing is “throwing gas on the illicit market.”
In Los Angeles County, where 59.5 percent of voters approved Prop 64, only 20 percent of municipalities allow some kind of operating license to sell pot. That’s not to say, however, that every supporter wants a dispensary around the corner from their house, Moore said.
“When you voted for Prop 64 what did you actually vote for. Were you voting for cannabis to be sold in your neighborhood or for cannabis to be made legal and end the war on drugs.”
Jonatan Cvetko, who heads the non-profit Emerald Angels that works toward responsible cannabis regulation, said rules such as one that requires child-resistant bags were a good thing. Like other advocates, Cvetko fears that the legal market is not given an opportunity to succeed.
“If the majority of the bans stay in place there will be no access for residents to find clean and safe products,” Cvetko said. “It’s not that the black market will come back, it’s that it hasn’t gone away. The goal was to allow existing operators to transition, so without any pathways for operators they have no choice but to stay in the illicit market.”
In Redondo Beach, the council was unified against the state’s rulemaking allowing delivery services even in cities with laws prohibiting them. The council directed staff to draft a letter to that effect. Similar letters were recently addressed to the state agency by the League of California Cities
While it opposed one important aspect of the rules, the Redondo Beach City Council also instructed the city manager to form a Cannabis Steering Committee. Mayor Bill Brand said that doesn’t mean the city is giving the green light to dispensaries.
“This is brand new legislative territory, so I’m looking forward to the recommendations from the city manager’s task force and more importantly, what the residents feel is appropriate for Redondo Beach,” Brand wrote in a statement. “No decisions will be made before a full vetting of all the issues.”
For more information on the cannabis industry in California and to comment on the proposed rules visit Cannabis.ca.gov.
A cloud of smoke hung over Cal Expo Friday afternoon as thousands gathered for the High Times Cannabis Cup, the first permitted event in California to allow recreational use of marijuana.
Organizers expected upwards of 15,000 people over the course of the two-day festival, which boasts musical performances from acclaimed artists, including Lauryn Hill, Lil Wayne, Gucci Mane, Rich The Kid, Cypress Hill, Rick Ross and Ludacris.
The event was at risk of becoming a music-only festival until the Sacramento City Council approved a license for on-site consumption and sales in a 6-2 vote Tuesday. Weeks earlier, a similar High Times event had its permit denied by the San Bernardino City Council just before it was scheduled to take place.
At Cal Expo, crowds maneuvered their way through the rows of booths Friday afternoon, sometimes stopping to take long drags from blunts or sample products. In between puffs from a neatly-rolled joint, Brian Johnson said he was grateful to the city for approving the license.
“I think it was really cool for the city of Sacramento to trust the cannabis community to do something like this,” Johnson said. “I think we’ll hold up our end and have a great event with no mishaps. We’re just out here having fun, trying to socialize and enjoy our products.”
Other attendees, like medical marijuana user William Bennett, said they simply came to learn more about the cannabis industry.
Bennett said he wanted tips for growing marijuana at home. Bennett, who said he suffers from chronic pain caused by a back injury, began using medical marijuana about five years ago as an alternative to prescription opiate painkillers, which he said caused him unbearable side effects. Bennett has since started to grow his own.
“I’m kind of on the fence with recreational, but in the long run, it’s better than people drinking and doing other things,” Bennett said. “You don’t hear about people having big brawls and fights at (events like this). Everyone’s just sitting back.”
Bennett’s wife, Dianne Kirk-Bennett, said she was impressed with how expansive and well-organized the event was.
“If this is your thing, this is the place to be,” Kirk-Bennett said.
The event has approximately 280 vendors, selling marijuana-themed apparel and art, vape pens, concentrates, topicals, edibles and a variety of other cannabis products.
High Times Chief Revenue Officer Matt Stang said it felt “incredible” to host the event, which he characterized as a watershed moment for the industry.
“It gives me a feeling that we’ve really progressed as a country. We’ve come to a point where we can have a peaceful gathering to consume and purchase cannabis with a state sanction,” Stang said. “The ability to do this legally — it’s been a long fight. High Times has been doing this for 44 years. We started as the voice of the opposition, and now we’ve grown into the majority. ”
Security was tight during for the strictly 21-and-up event. Unlike most music festivals, no alcohol sales were allowed.
Joe Devlin, Sacramento’s chief of cannabis policy, said the event would generate more than $200,000 in tax revenue. Devlin said High Times “has a distinguished track record of hosting safe, successful and compliant cannabis events,” noting that the company had developed a “comprehensive security plan” that was approved by law enforcement and had organized a ride share program for those attending the festival.
Stang said High Times had contracted with two separate security firms to ensure no attendees purchased more than the legally-allowed amount and to check for impaired drivers. Ticket buyers were given Uber and Lyft codes at the time of purchase in order to minimize the risk of attendees driving under the influence.
For those in the industry, the event served as a safe demonstration to convince skeptics and state government officials.
“We want to make sure that people understand what a great, compliant, adult-use event can be, because we want this to be the model for the rest of the country,” Stang said.
As the first executive director and general manager of the city of Los Angeles’ Department of Cannabis Regulation, Cat Packer will lay the legal foundation for how the United States’ second-largest city handles marijuana. But it wasn’t until three years ago, in her last semester of law school, that she even knew what she wanted to do professionally.
That’s when she took a life-changing law class on marijuana.
“I will admit, before taking the class, I was completely oblivious to the many interesting conversations happening around the country about this subject,” Packer said.
A growing number of students across the United States have taken some of the country’s first marijuana-themed university classes and found nearly instant success with this unique knowledge.
“Think about it: If you graduated from law school 10 years ago, you couldn’t study this, because the reforms hadn’t happened yet,” said Douglas Berman, the Robert J. Watkins/Procter & Gamble Professor of Law and the creator of Packer’s Marijuana Law, Policy & Reform Seminar at Ohio State University’s Moritz College of Law.
Berman is proud of Packer, but when he started the course in 2013, not all students were as enthusiastic as she. Some said they didn’t enroll out of concern that future employers wouldn’t like it, according to Berman.
As marijuana has become more mainstream, his class now fills quickly. And even if students don’t go into the field like Packer did, with medical marijuana legal in more than half of the United States and recreational pot legal in nine, chances are that what they learn will come in handy.
“And with all that heat in this space on this still controversial topic, I try to emphasize, lawyers should be bringing more light, rather than heat, to these conversations, armed with the facts,” Berman said.
The facts about marijuana are still at the center of the debate, because while states are more permissive, federal law still puts marijuana in the same category as heroin: a Schedule I drugwith “no currently accepted medical use,” at least in the eyes of the federal government.
That leaves researchers and universities offering classes in uncharted waters.
Despite the limits, a handful of determined professors have stepped up, without textbooks or well-trod academic territory, and created courses to try to ensure that the next generation is prepared to match the public’s interest. There seems to be only one “weed major,” the medicinal plant chemistry program at Northern Michigan University, but a growing number of weed-themed classes are being offered on campuses across the country in law, business, medicine and general science.
Demand outpaces science
In 2013, the Washington Attorney General’s Office provided Beatriz Carlini, a research scientist at the university’s Alcohol and Drug Abuse Institute, with funds to develop training modules for health professionals who can get continuing education credit. They learn about how cannabis works and about its best uses; a second module teaches best clinical practices.
Marijuana is legal in its recreational and medicinal forms in Washington, and with more legal access comes a public desire for more education. But unless your doctor is in his or her late 90s and can remember before 1942, when it was legal to prescribe cannabis, more than likely they learned nothing about its benefits in medical school.
“Hopefully, we can help patients make good decisions,” Carlini said. “People won’t wait for these things to resolve federally.”
Yu-Fung Lin teaches the physiology of cannabis at the UC Davis School of Medicine. Physiology is a branch of biology that looks at the functions of living organisms and their parts.
The elective focuses on how cannabis and cannabinoids impact the body. It also looks at physiological impact, therapeutic values and history. It’s the first class of its kind in the University of California system.
Lin, an associate professor who usually teaches medical students, didn’t know what to expect from her 55 undergraduates. “I’ve been quite impressed by their commitment,” she said.
She hopes her class will inspire future research. “Just knowing what we know, and the limitations of what we know, should inspire students, and they in turn could do research that would be really helpful in this field.”
The Larner College of Medicine at the University of Vermont can’t create classes fast enough. Its on-campus medical cannabis class was so popular, it had to relocate twice, settling into the largest available lecture hall according to the University. Its online continuing medical education program and the cannabis science and medicine professional certificate program have wait lists. Enrollees have come from as far away as Thailand. It has created webinars and a cannabis speaker series, and even the school’s farm extension provides original plant research about hemp.
Dr. Kalev Freeman, an emergency room physician, and Monique McHenry, a botanist, helped create these courses to address several needs. Freeman said he’s seen too many people taken off ambulances after overdosing on opioids, and he hopes to offer information about a “safer alternative to the public.” McHenry wanted to find a topic attractive to “young minds to get them interested in science.”
Their classes focus on basic science, the drug’s physiology, molecular biology and chemistry. The professional training also drills down on practical issues like effective dosing, delivery methods and drug interactions.
“The more we can do to focus on getting evidence-based facts out to more medical professionals and the public, the more we will have a real success,” McHenry said.
Freeman agreed: “It’s a disservice to the public if professionals aren’t equipped with this knowledge.”
The bud business
The skills that students in Paul Seaborn’s Business of Marijuana class learn at the University of Denver are in demand, and other professors have noticed. He’s gotten calls from all over the world, asking how the class works.
“People want to learn from the Colorado experience,” Seaborn said. “It’s been fascinating to learn the pros and cons of the business in real time as state and federal laws evolve.”
Understanding the rules of the game is key, since those rules create a “unique set of challenges,” Seaborn said. His students learn about marijuana law and history, and they tackle its complicated finances, accounting, marketing and management.
The university’s location presents unique opportunities because so many market pioneers live in the neighborhood and are happy to be guest speakers. Colorado was the first to legalize recreational adult marijuana use, so the industry bloomed there, creating more than 18,000 full-time jobs and generating $2.4 billion in economic activity, according to a study of the market in 2015.
“It’s a rare thing to have an industry start from square one in your lifetime and grow so quickly right around you,” Seaborn said. From his most recent class of 27, three or four students immediately went to work in the industry, and others will probably soon follow.
“There is certainly caution over an industry like this, especially with the federal legality in question, and there is still ongoing discussion and careful thought about how this works, but we want our graduates to come at this from an informed perspective,” he said. “The industry is not going to wait.”
Packer, the Los Angeles marijuana czar, would agree. “We’re in a real moment of transition,” she said. “These conversations about marijuana are incredibly complex. I found I can’t have a conversation about the law without talking about health and social justice issues and enforcement issues.”
It sounds like the perfect material for more college classes.
To view the revolution taking place in California’s commercial cannabis industry, head to the Central Coast.
Turn off Highway 101 in the Salinas Valley. Look for the clusters of greenhouses protected by fences with razor wire, security cameras and guards. There you will find some of the largest marijuana grows in the state.
Inside, removable curtains are used to periodically block sunlight and trick the plants into flowering sooner than normal. Fabric tunnels send in cool air, while rubber tubes deliver water and other nutrients to the marijuana.
“It’s a marriage of old-school growing with ‘Big Ag’ technique,” said Gavin Kogan, co-founder of Grupo Flor, which operates a 6-acre farm in Salinas.
Pot grows in California historically have been small scale, a result of prohibition as much as the cultivation demands of the plant. California’s outlaw growers operated in rugged and hard-to-reach locations like Big Sur and Humboldt County’s Mattole Valley.
The tradition of modest grows was expected to continue for at least five years under California’s system of legalization approved by voters in 2016. The law contained protections for small farmers worried they would be crushed by big agricultural interests. But in an unexpected move, the California Department of Food and Agriculture scrapped a planned 1-acre cap on cannabis farms in November.
No place has benefited more from that change than the Central Coast, which covers Santa Barbara, San Luis Obispo, Monterey and Santa Cruz counties. The region is now challenging the Emerald Triangle — long the epicenter of cannabis cultivation in California — as the state’s capital of commercial weed..
State records show that the Central Coast had 1,065 cultivation licenses as of March 28, compared to 1,159 in the Emerald Triangle, which is made up of Humboldt, Mendocino and Trinity counties and is about the same size as the Central Coast. The two regions account for more than two-thirds of all the cultivation licenses in the state, with Los Angeles, Sacramento and other urban counties taking up most of the other licenses for indoor grows.
“The supply chain in California is changing,” said Andrew DeAngelo, co-founder of the Bay Area’s Harborside Health Center dispensary and operator of a 4-acre farm in Salinas. “These are seismic changes.”
The Emerald Triangle produces more marijuana than the Central Coast, but most of that pot comes from smaller farms. The Central Coast leads the state with multi-acre grows.
The Department of Food and Agriculture will not approve a single license for a farm over an acre, but large farms are getting approved by obtaining multiple licenses for a single property. On the Central Coast, each grower has an average of 5.75 licenses, almost four times the average of 1.62 in the Emerald Triangle.
In the most extreme case, a grower in Santa Barbara County has received 89 licenses for a 20-acre farm.
The Central Coast has great advantages for big growers: a well-established agricultural community with an extensive labor pool, flat land and an abundance of greenhouses. Local government also has been more tolerant of cannabis on the Central Coast than in other farming regions in the state. Cannabis farms must receive state and local approval.
Supporters say the growth of commercial cannabis on the Central Coast has brought increased tax revenue and jobs. But critics say its large cannabis farms are undermining the will of voters and keeping thousands of small farmers in the black market, thus threatening the future of legalization.
Such arguments have gotten increasingly personal.
“I want to be careful what I say because this is the kind of thing that can get you punched,” said Kogan, standing in front of his Salinas facility. He acknowledges that Grupo Flor, a “vertically integrated” company that grows, manufactures and sells retail cannabis, could not operate the whole farm under a 1-acre cap. If the state chose to implement the cap, he says, Grupo Flor would operate 1 acre and lease the remaining space to other growers.
“It’s elitist,” Kogan said of the policy. “It says there is only one way to grow — small boutique grows.”
Hezekiah Allen, executive director of the California Growers Association, takes issue with Kogan’s argument and his choice of words.
“The broke farmers that are working hard to obtain a single license to sustain and transition their family business are the ‘elite’?” he said. “License stacking is a privilege only accessible to the select few. I understand folks disagreeing with the policy, but to hear the policy described as ‘elitist’ is laughable. It has the same ring as ‘let them eat cake.’ ”
Protecting small growers, particularly in the Emerald Triangle, was an issue for Allen and other supporters of Proposition 64, the 2016 ballot initiative that legalized cannabis. Small growers had helped defeat a previous legalization initiative because they worried it would invite big companies that would put them out of business.
Proposition 64, also known as the Adult Use of Marijuana Act, promised that the “marijuana industry in California will be built around small- and medium-sized businesses by prohibiting large-scale cultivation licenses for the first five years.” The law would limit the number of licenses growers could receive and said individual licenses for farms over an acre would not be available until 2023.
The Department of Food and Agriculture signaled its support of the law right before it issued emergency regulations in November, stating in an environmental impact report that cannabis farms would “not exceed the total acreage cap of 1 acre established by CDFA.” Emergency regulations were issued so growers could start cultivation while the state prepares final regulations.
But, inexplicably, emergency regulations were released that effectively eliminated the planned cap. At the time, a Department of Food and Agriculture spokesman said it was a last-minute decision but gave no reason for the change. Since then, the department has declined to discuss the decision, citing a pending lawsuit by the California Growers Association that seeks to have the cap reinstated. The lawsuit in Sacramento Superior Court appears to be on hold until the department decides whether to include a cap in its final regulations due later this year.
Adding to the mystery of the department’s decision, Amber Morris, branch chief of the division responsible for the regulations, resigned just weeks after they were released. Allen and others said they believe her resignation was due to the removal of the cultivation cap. A department spokesman has declined to say why Morris left. Morris declined to comment when she was reached by phone and later did not respond to specific questions sent to her personal email account.
The decision paved the way for some unprecedented grows. For instance, Central Coast Farmer’s Market Management has 89 licenses for a grow in Santa Barbara County, enabling the company to grow more than 20 acres of marijuana. The company did not respond to requests for an interview.
Santa Barbara County, which has been known for its strawberries but not for marijuana, now has more cannabis cultivation permits than any other county — 737 as of late March. Like Monterey County, Santa Barbara County has an abundance of greenhouses. It also is close to the biggest cannabis market in the world, Los Angeles.
Grupo Flor’s Kogan and DeAngelo of Harborside offer similar critiques of cultivation limits, saying the market and not government should resolve the concerns raised by Allen and small growers in the Emerald Triangle.
“We have to be more creative and not take something out of Lenin’s playbook,” DeAngelo said, referring to the former head of the Soviet Union.
Kogan and DeAngelo say large farms don’t have to mean the end for small farmers. They can thrive by providing different products than big growers. High-end cannabis demands more attention than large farms can give, they acknowledge. Small farmers can serve more discriminating customers while big farms provide product for more cost-conscious consumers, Kogan and DeAngelo say.
Kogan says the differences between each region’s cannabis were summarized by Steve DeAngelo, Andrew’s brother. “We’re going to be the Mondavi of weed,” said Kogan, referring to the popular wine maker and paraphrasing DeAngelo. “They can be the Champagne of weed.” Grupo Flor, Kogan adds, is shooting for something more like Opus One, a higher quality wine co-created by Robert Mondavi.
Inside one of his Salinas greenhouses, Kogan repeatedly raises the importance of bringing efficiency to cannabis cultivation, with the goal of lowering costs. The greenhouses are jointly owned by a cut-flower farmer, who has helped Grupo Flor incorporate large-scale farming techniques into cannabis cultivation, Kogan said.
Grupo Flor has 19 full-time cultivation employees, most of whom are Latino, reflecting hiring practices for agriculture generally.
Tod Williamson, who manages the facility, said Emerald Triangle growers went to extremes to carry gear to remote locations not easily detected by authorities. But with legalization, cannabis cultivation needs to come out into the open, he said.
“If you’re going to serve California, you can’t do it with guys and their backpacks,” he said. “Those days are over.”
Still, some areas are trying to protect smaller farmers, including San Luis Obispo County, just south of Monterey County. The state’s decision to remove cultivation caps does not prevent local and county government from approving their own limits on the size of grows. County supervisors in San Luis Obispo set a limit of a half-acre on indoor operations and 3 acres for outdoor.
Industry consultant Sean Donahoe said the local policy means San Luis Obispo County is falling behind other Central Coast counties. In December, Donahoe started a signature-gathering campaign to overturn the policy, which prevented growers from applying for temporary licenses. It also required the largest grower in the county, CFAM Management Group, to reduce its greenhouse operation by 90 percent.
Others in the industry opposed the referendum, and the debate grew testy at times. Donahoe pulled the proposal days after starting it, saying he had reached an agreement that satisfied some of the company’s concerns, although the size cap remains in place.
Supervisors specifically said they wanted a “slow roll-out” of commercial grows. The county would allow only operators who previously registered with the county in 2016 to apply for local licenses in 2018, which had the effect of giving local, smaller-scale operators a leg up.
The county has limited applications to about 160 growers; about 110 are in the local application process. Only a handful have been approved by the state.
Jason Kallen, executive director of SLO NORML, an advocacy group, and president of City Boy Farms, supports the county’s approach.
“It guaranteed they got local operators and not outside corporate interests,” he said.
In the largest operation of its kind, federal agents swept across the Sacramento region Tuesday and Wednesday targeting about 75 homes serving as suspected marijuana growing sites that authorities say are operated by a Chinese organized crime syndicate.
The raids, which involved more than 500 federal, state and local agents, hit homes from Elk Grove to Sacramento to rural areas, and are aimed at forcing the forfeiture of about 100 homes to the federal government, an effort valued at hundreds of millions of dollars in real estate and marijuana.
“This represents one of the largest residential forfeiture efforts in the nation’s history,” the U.S. Justice Department said.
The investigation began in 2014 as authorities began to see an uptick in marijuana growing operations concealed in residential neighborhoods throughout the Sacramento area, and escalated in the last year as agents used utility bills and sophisticated financial analysis to track millions of dollars coming from China into the United States for the purchase of the homes.
The buyers, typically Chinese citizens in the country legally, are suspected of turning the homes into pot-growing operations that then shipped the marijuana through trucks, mail and couriers to the Eastern seaboard for sale, authorities say.
This week‘s raids resulted in the seizure of more than 61,050 marijuana plants, 200 kilos of processed marijuana valued at up to $100 million and about $100,000 in cash, as well as 15 firearms, officials say. Those numbers are expected to grow as the final tallies are calculated.
The bulk of the raids took place this week, although a couple dozen had been searched in prior weeks, including one in the 9900 block of Pianella Way, in a quiet subdivision in Elk Grove, about two months ago.
Neighbors said they saw authorities hauling away black bags filled with marijuana plants and taking a female occupant, who appeared to be Asian, into custody.
“I just woke up one morning, cop cars everywhere, and all the pot plants were in black bags in the garage,” said Mar Caballero, who lives across the street. “There were guys in hazmat suits.” He said the occupant was taken away in handcuffs.
The home was later put on the market, and a Realtor’s sign says a sale is pending. Wang Xiong, who works for HP Real Estate, was checking on the property Wednesday afternoon but said he had no information about the buyer, seller or the raid. “It’s all news to me,” he said. Caballero said he had no previous interaction with the woman but her living arrangement seemed strange. She lived alone but had a minivan, which was almost always parked in the driveway. “It was kind of odd: a minivan, only one woman, no kids,” he said.
Another neighbor, Steve Johnson, said he believed other people lived there as well, but that he had no inkling of any wrongdoing.
“I had no clue that they were growing marijuana there,” he said. “This is a very quiet neighborhood.”
Federal officials said many of the people tending the grows inside the homes were essentially “indentured servants” forced to remain there and have food and supplies brought to them. Those individuals were offered victim assistance during the raids, and a handful accepted the help, officials said.
In an unusual twist, no arrests have yet been made as the investigation continues and focuses on the manner in which the homes were purchased and the identity of suspects federal authorities believe handled the transactions.