The Hollister City Council approved a resolution Sept. 5 that would authorize the identification and recruitment for staffing of two positions for storm drains maintenance and six cannabis-related jobs. Not surprisingly, most of the council’s comments focused on those involving cannabis.
Bill Avera, city manager, explained to the council that the staff was recommending recruiting a cannabis affairs manager, a police sergeant, a police officer, an IT analyst, an account technician, and a deputy fire marshal
He said the analyst would work at the police department and would deal with the track-and-trace system to assist with systems that cannabis operations would be using. The account technician would work in the finance department to handle the money, with some funds being set aside so the county auditor could pay for any forensic audits that might be required. The fire marshal would most likely spend most of his or her time in cannabis facilities, especially those that are using volatile extraction methods.
Avera said the potential financial outlay for the six new positions would be approximately $800,000, which he said is an estimate most likely on the high side. He said the cost would be offset by revenues from cultivation, which he said is an estimated $1.16 million. He said that figure does not count manufacturing or dispensary sales.
“We feel this is a good start that will be able to give us the manpower necessary to get us off the ground,” he said. “As the industry grows and there’s more square footage we can evaluate that and see if we need to add anybody, but right now we feel pretty comfortable with what we’re looking at.”
Avera suggested when it comes to the law enforcement the police would not be focusing on companies that have the city’s permission to operate. Instead, it would focus on tracking down people who are breaking the law. To make sure that business is successful he said the city needs to make sure it isn’t under-cut by illegal operations.
Councilwoman Mickie Luna wondered what role code enforcement personnel might have. Avera explained that the fire marshal was now handling code enforcement. He said that person will probably spend most of their time working on code enforcement infractions. She asked if there was only going to be one account tech and he responded that one was probably sufficient, backed up by a services agreement with an auditing firm if needed.
Mayor Ignacio Velazquez said he believed fees and licensing should cover the upfront costs and not taxes because of costs yet to be determined. He said he was taking his lead from San Jose officials who advised him to make sure that the fees and licensing covered all costs. Avera answered that the ordinance doesn’t talk about a fee to cover upfront costs. He said there is an application fee and a processing fee and a per-square-foot fee, as well as the tax on sales.
“There isn’t another magical fee that covers those costs,” he said. “Cultivation and the other types of fees actually pays for the costs associated with the industry. Also, you can’t just charge businesses a fee and not provide a service. We need to have some justification for fees we are charging.”
The mayor maintained his position, based on what he was told by San Jose officials, that fees should cover all costs. He said license fees in San Jose were more than $60,000, and wondered if perhaps that was somehow missed in drafting Hollister’s ordinance. Avera said the city does not have a $60,000 annual license fee. As he has done numerous times before, Velazquez suggest, “…we step back and address that issue,” adding that the city should not think taxes will cover the costs. Councilman Ray Friend said he thought the fee-per-square foot was intended do that. Avera said that was his understanding too and that he was never aware the council intended to impose an additional fee on top of everything else. Velazquez maintained that he had always been clear on his position and advised someone make a phone call to San Jose to have the process explained to them.
Councilman Jim Gillio said everyone needed to remember that the council had already approved several cannabis businesses and they should move forward. He also said anyone who is hired for the city positions should know up front that should cannabis-related dollars decrease their jobs could go away. He said the city needs to be out in front and that the $1.16 million more than covers the costs. He said he is comfortable moving forward in hiring a cannabis staff to regulate the industry.
Sean Donohoe, a lobbyist who is also associated with Traditional Roots, which was also on the agenda to be considered for a use permit/development agreement to operate a cultivation and manufacturing facility at 1091 San Felipe Road, commented that enforcement costs for San Jose have little to do with those of Hollister. He said San Jose has many more dispensaries and that the city was concerned about enforcement costs, whereas there will only be two dispensaries in Hollister.
“We’re not looking to provide additional funds to regulate above and beyond that which the city is talking about licensing,” he reasoned. “We’re only talking about regulating the facilities authorized by the city. I don’t see the merit of revisiting an ordinance that was finalized six or seven months ago simply because four or five years ago San Jose had a completely different situation in terms of unlicensed dispensaries.”
Already knowing the answer, the mayor quizzed Donohoe if San Jose has a license fee. Donohoe said it does. Velazquez asked him how much it is and when Donohoe hesitated, the mayor said it was $130,000 the last time he heard about it. Donohoe explained that the fee reflected a multilayered industry in a densely populated area where the fee would be paying for a much larger staff. Resident Marty Richman said no one knows what the numbers will actually be and that he was concerned by the general perception in the community that cannabis would be the cure-all in regards to it bringing in millions to pay for services.
“If 80 or 90 percent of it goes to enforcing the cannabis ordinance, the only wonderful thing you’ll do with the money is enforce the ordinance,” he said. “What I’m concerned about is we’re going to get $800,000 up front and everybody says that’s a year’s worth (for hiring), but you’d be surprised when you start looking at union rules for hiring and firing, and all of a sudden people are on the books with benefits. We’re going to be $800,000 in the hole and the first thing we’re going to start looking at is ‘how do we make that up?’ and it falls apart.”
When one person insinuated that Hollister was going to price itself out of the competition with other counties, the mayor said if that’s the goal then they’ve already gone down the wrong path and that Hollister should never strive to be the cheapest location to attract the cannabis industry. Cannabis advocate Elia Salinas said the state will be issuing a license fee and no one knows how much that might be. She said with the city’s $7,500 permit fee, plus the square foot tax, sales tax, the $1.16 million the city will receive from the permits already granted, plus the fact that 80 other permit requests that are still in the pipeline, she did not understand what the problem was.
“Every year, these applicants are going to have to apply to the city, and then starting in January, these applicants who have been approved are going to apply for licenses with the state, which might charge $50,000 or even $200,000; we have no idea,” she said. “So, you either want to make these companies succeed or you want them to fail. You can’t be greedy all of a sudden. This comes back to you, Mr. Mayor, zero percent of $1 million is zero.”
In other cannabis news:
The council voted—after Council members Karson Klauer and Jim Gillio, as well as the city attorney recused themselves—to continue discussions to Oct. 2 on approving cannabis use permits/development agreements for Higher Level of Care Hollister to operate a medical cannabis dispensary at 1802 Shelton Drive. Also moved to Oct. 2 was a similar resolution that would authorize the staff to initiate the reconsideration of a development agreement for a dispensary operated by Haven, which the mayor had objected to in August because of its proximity to a nearby neighborhood.
Klauer and Gillio returned and voted with other council members on a permit/development agreement for Traditional Roots to operate a medical cannabis cultivation and manufacturing facility. In August, when they first applied, they also were asking approval for a dispensary, but have since pulled back on that to concentrate on cultivation and manufacturing. In August, the mayor also objected to it because its location is near the food pantry and the soon-to-be-built homeless shelter.
This time, though, with a full council—last time Gillio and Klauer abstained and with just three members there needed to be a unanimous vote—the motion to approve the Traditional Roots’ permit carried, 4-1, with Velazquez again voting against it.