Hollister City Council approves amendment to ordinance to allow adult-use in cannabis supply chain, excluding dispensaries

Taking into consideration that recreational marijuana will eventually out pace medical use, the council approved a change to city ordinance to allow recreational production and distribution, but no dispensaries.
Will Pennstrom claimed that as regulated adult-use of cannabis increases, teen use decreases.
Patrick Orosco said a typical cannabis facility could generate $1 million in tax revenues for the city.
Sean Donohoe said a state senate bill has combined adult-use and recreational regulations.
Jack Kirk asked the council to slow down and let medical cannabis get established before moving on to adult-use

After holding a public hearing, Hollister City Council unanimously approved an amendment of the chapter “Business Licenses and Regulations” of the city’s municipal code and administrative procedure for issuing cannabis facilities regulatory permits and regulations for operating cannabis facilities and medical cannabis dispensaries.

In a staff summary for considering the amendment, it was explained that the city adopted Ordinance 1131 and 1131A, which governed medical cannabis operations and facilities within the city limits. The city subsequently adopted a temporary urgency ordinance on Dec. 18, 2017, that prohibited any adult use cannabis facilities and ratified non-medical personal-use cultivation. The amendment council passed on Feb. 5 regulates the future of adult use or recreational marijuana cultivation, manufacturing and distribution— excludes dispensaries.

Staff recommended a number of changes to be included in the amendment:

  • Compliance with the State of California for non-medicinal personal use cultivation.
  • No outdoor cultivation permitted.
  • “Adult Use” cultivation, manufacturing, testing, and distribution permitted only within the zoning districts currently approved for medical cannabis.
  • Retail sales for “adult use” are prohibited throughout the city, including permitted medical dispensaries.
  • All “adult use” cultivation and manufactured cannabis goods/products are for sale and export between licensees and licensed premises only.
  • Packaging of all cannabis products shall be in compliance with California’s Public Health Department. All products shall clearly be identified with an “A” for Adult Use and “M” for medical.
  • California residency requirement has been removed to be consistent with the State of California regulations.

During the public hearing numerous individuals with cannabis affiliations spoke in favor of approving the amendment and only one resident, Jack Kirk, advised caution and slowing down of the process. Will Pennstrum said he was speaking on behalf of AgriPharma (formerly Zyte Oil LLC) and other supply chain operators in the city. He said he had five years of cannabis management experience in Colorado, where he developed a manufacturing facility with 60 full-time employees.

“I’ve seen first-hand the benefits to the community adult-use operations can bring,” he said. He also said there were not only obvious benefits, such as tax revenues, but also not-so-obvious benefits, including teen and child-use of cannabis. He claimed that in cities that allowed legal adult-use, there was a reduction of teen use. “One study through a national survey on drug use and health from the Substance Abuse and Mental Health Services Administration states that in Colorado teen cannabis use has dropped 12.5 percent in the year before recreational sales were allowed to 11 percent in the first year of sales all the way down to nine percent at the end of 2017. To put it simply, teens us cannabis less when it’s properly regulated.”

He emphasized the importance of packaging designs that would not appeal to children. He said even though he wasn’t pushing for the allowance of adult-use dispensaries, he wanted the council to understand that everyone in the supply chain would do everything possible to keep cannabis away from those who are under age.

Patrick Orosco, who said his background was as a shopping center developer, explained that as tenants looking for retail space decreases his job is to look for businesses that are expanding. He related how a single Target store might generate $60 million in retail sales annually, of which a city will receive about one percent, or about $600,000 in tax revenue. He said he had been studying 10 cannabis businesses for employment opportunities and tax revenue potential, ranging from 15,000 to 200,000 square feet.

“The average first-year revenue to the city of one of those 10 operators was over $1 million,” he claimed. “That is a combination of the increase of tax revenue from property taxes and cannabis-use tax. I’m here to compel you to do the same things you’ve been doing in attracting the competitive environment for cannabis uses by approving this ordinance because from just 10 operators you have the opportunity to generate the equivalent of between 10 and 15 times a single Target’s tax benefit to the city.”

Carl Saling, who works with the cannabis company, Hollister Holistics, said over the last year as Hollister was creating its cannabis ordinance state regulations have changed. This has created a situation, he said, where most cannabis sales at dispensaries will be for adult use rather than medical because those who need medical cannabis will no longer need a doctor’s approval and can simply purchase recreational cannabis. He said it was imperative that the council approve adult use in the supply chain in order to guarantee the survival of the cannabis industry in the city.

Saling said over the last few months Hollister Holistics has worked closely with the Hollister Police Department (HPD) and other departments regarding safety and security. He said HPD visits the facility on a regular basis. He said HPD has real-time access to its security monitoring system and described the measures the company has gone through to guarantee the security of the facility, and that the public cannot enter it. He said the city’s ordinance spells out security measures for all cannabis operations in the supply chain.

“There will not be an increased safety impact to the community by approving adult use for the supply chain,” he assured the council. “There will be zero increase in traffic to our facility or any of the other facilities that focus only on the supply chain. We are private and only serve the industry on the wholesale level.”

Sean Donahoe, a former lobbyist, now a consultant for the cannabis industry, said Senate Bill 94 combined medical and adult use supply chain into an integrated set of regulations.

“There is no difference between the regulations that will be imposed on medical or adult use,” he said. “Every single level of scrutiny, lab testing, track-and-trace responsibility of taxation is identical. What we’ve seen in other regulated markets, particularly in Washington, is the medicinal market being subsumed by a larger adult use market. After all, this product is just cannabis. A plant when being grown doesn’t know whether it’s a medicinal plant or an adult-use plant.”

Jack Kirk, a long-time opponent of cannabis, asked the council to slow down and give medical marijuana operations a chance to function before moving into the recreational side.

“You don’t have to do this change of the ordinance tonight,” he said. “Prop. 64 allows people to have access to six plants. You’ve asked them to grow inside, like the county has. One plant will give you roughly three pounds. There’s a lot of use from six plants that will take care of people’s personal needs, whether it’s recreational or medicinal. Let us integrate the medical portion before you jump into this next level.”

While Mayor Ignacio Velazquez said there needs to be more meetings and discussions about dispensaries for recreational cannabis, he said it was time to start what was promised to the public.

“I don’t have any issues where the industry has gone,” he said. “I understand the cultivators and manufactures have to be able to compete. We do need to take this step by step and not get ahead of ourselves. One thing I’ve learned, any community that got ahead of itself got into trouble pretty quick. We’ve put together a good ordinance and I’m willing to be involved in tweaking it a bit, but a discussion about recreational dispensaries, we’re not there yet.”

Other cannabis news.

The city council also approved a cannabis use permit and development agreement for High Sierra Analytics Inc. to operate a testing laboratory at 1851 Airway Drive. Also, two appeals from California Finest Manufacturing and LLXP Corporation were rescheduled until March 1

John Chadwell

John Chadwell is a BenitoLink reporter and an author. He has many years experience as a freelance photojournalist, copywriter, ghostwriter, scriptwriter and novelist. He is a former U.S. Navy Combat Photojournalist and is an award-winning writer who has worked for magazine, newspapers, radio and television. He has a BA in Journalism and Mass Communications from Chapman University and underwent graduate studies at USC Cinema School. John has worked as a script doctor and his own script, God's Club, was released as a motion picture in 2016. He has also written eight novels, ranging from science fiction to true crime that are sold on Amazon. To contact John Chadwell, send an email to: