Housing and Economic Development Committee examines Cannabis Equity Program and cultivation

Planning and Sustainability Manager Kathleen Mallory. (File photo by Chris Frost)

By Chris Frost
[email protected]

Oxnard– The Housing and Economic Development Committee, Sept 8, provided input and comments on the Oxnard Cannabis Equity Program, with consideration on how to allocate the one percent local equity donation.

The report included programs and recommended percentages; and provided input on advancing a cannabis cultivation ordinance.

Voters approved revenue from a cannabis tax in Nov 2018, creating revenue for the city’s general fund.

The Oxnard City Council received a presentation regarding the city’s conceptual Cannabis Equity Program on July 30, 2019. The city opened the cannabis manufacturing, testing, and distribution window in November 2019. During the approximately 60-day application window, it received no testing applications.

The city received five distribution applications and six manufacturing applications. On Jan 17, 2020, they selected five manufacturing applicants and three distribution applicants (the max per type based on Council’s July 30, 2019 direction). Of those eight applications, five applicants submitted for a development design review.

HdL, the city’s cannabis consultant, reviewed approximately 50 retail cannabis applications. Retail cannabis interviews will occur in late September. After the interview, applicants will be notified and provided a deadline to submit their application for a Special Use Permit. Under Council authorization, only eight retail cannabis permits / Special Use Permits can be granted at this time, but additional permits may be considered in program years 3-5.

The city received feedback through its community meetings, which included not giving local permits to local residents based on residency and increasing the local operator hiring percentages. The public did express that a one time $25,000 donation is low. Many potential operators wanted to direct the money and how it would be used in the community.

“It’s important to note that the survey was completed by residents, local businesses, and members of the cannabis industry located outside Oxnard,” Planning and Sustainability Manager Kathleen Mallory said. “During the Oct community meetings, in addition to the surveys, it was about a 60-40 split. We had 40 percent of the input through participation at the workshop, follow-up conversations, and surveys. There was 40 percent of that input that came from local residents and businesses.”

The city retooled the program to respond to the community, she said, and in 2019, the council recommended that some of the permits get held back for local residents.

The report in 2020 does not ask for the city to hold back permits for local residents.

“The feedback and correspondence we’ve been receiving are you hold back those two licenses for retailers or three for manufacturing for local residents,” she said. “I want to make it clear that the application procedures guidelines that have been out for community review, extensively has been posted with our letters inviting applicants to apply for the permit. When they were selected to move to phase two, as well as phase three, the interview, it lays out how we are going to evaluate the applicant. For the labor and employment criteria, there’s a reference that points will be allocated to applicants that have local management and ownership, along with qualifications as seasoned cannabis operators. While we don’t necessarily recommend holding back two licenses for retail dispensary owners that would live here locally, the evaluation criteria that give points and a methodologically to differentiate local applicants not residing in Oxnard.”

The recommendation in 2019 was a $25,000 one-time payment by the applicants, she said, and the new staff report increases the fee to $250,000 for retail and $50,000 for testing and cultivation.

“The 2019 report recommended a 50 percent local hiring requirement, and the staff report before you tonight recommends increasing that to 75 percent,” she said. “By increasing the requirement of who’s hired locally, you’ll be providing upward mobility through jobs. You’ll provide revenue for families to increase their quality of life.”

Mallory said the other requirements demand one percent of gross revenue gets targeted for specific programs.

“We did hear a lot in that community meeting that there was interest in how that fund should be allocated,” she said. “That is one percent of their gross revenue for the equity component. There’s nothing that stops selected applicants through the community benefits agreement donating specifically to other entities, groups, or organizations that the business feels compelled to support. We are recommending the one percent of gross revenue gets targeted to specific programs. We evaluated a number of different opportunities. When an applicant goes through the cannabis equity program, a community benefits agreement would be required. There’s also the required voter’s tax that goes to the general fund.”

Based on the staff’s recommendation, the one-time revenue donation, based on the income levels Mallory laid out, is approximately $2.2 million of one-time revenue.

One suggestion for that money is used to create a property-based improvement district for Elm and Saviers streets and Yucca Road.

“It’s to improve that overall area and move forward renovations in that specific corridor,” she said. “Additionally, it’s recommended that some of the money goes toward renovations at Camino Del Sol; it’s known as the multi-service building. It currently houses the Colonia Library, Food Share, and a number of after-school programs and art classes. We are aware that the building has a fair amount of needs for renovation and upgrades to comply with state requirements.”

Mallory expects the one percent revenue donation to be around $373,000, based on assumptions that HdL helped them prepare. While it seems like a lot of money, in actuality, it’s not as much money that was initially envisioned.

“When we looked at how to program that money, at one point, there was a conversation about taking that money and allocating it through four different programs,” she said. “There was a facade improvement program, business grants; the city had that program a number of years ago, as well as grant-making and homeless services. If the city took that $373,000, we’d be diluting the effectiveness of the program after we deduct out some of the administrative costs. With that, we recommend the $373,000 go toward funding homeless services for the next 10 years, with the understanding that we can reevaluate that in five years as we see fit.”

As a condition of approval on the permit, the requirement would be that the community benefits agreement is required and specify the terms for how you verify compliance. It also establishes the timeframe for making those donations.

“These are the community benefits that are over and above the equity requirements that I laid out,” she said. “All the applicants would be required to comply with the equity requirements. That would get memorialized in that community benefits agreement. That would be memorialized as a condition of approval that would be signed by the applicant and the city.”

The city council considered land-use maps concerning cannabis cultivation in 2018, she said, and they decided to wait on the cultivation ordinance to see how the cannabis process worked out.

“The staff has looked at this issue, and we’re recommending that we move forward with the consideration of an indoor cultivation ordinance with specific requirements to look robustly at the regulations to address the impacts of cannabis odor, water, energy, sustainability, safety needs and goals,” she said. “Multi-story grows are where it’s at now. There are different ways that you can capture water usage, so we’re recommending that the committee provides feedback on this, so we can advance that conversation to the council.”

Based on the HdL2018 market analysis, the city would receive between $224,000 and $320,000 in revenue annually.

“That would be money going specifically to the general fund,” she said.

She doesn’t advocate outdoor grow houses.

“That’s due to theft, and you can grow more robust product within a building,” Mallory said. “You can provide multi-floor grows, security, and the overall odor issues. That’s why we’re recommending cultivation in the Santa Clara area.”

This story will continue on Sept. 18.

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