Business / Economy

One cannabis dispensary approved, as are multiple manufacturing, distribution, lab facilities

When the smoke clears after debate, the Hollister City Council manages to license a single dispensary while approving numerous other manufacturing facilities

When the Hollister City Council took their seats Tuesday night, Aug. 14, the plan was to listen to six cannabis companies make their pitches in consideration for the two dispensary licenses being doled out, as well as 14 other applications to obtain permission to set up manufacturing, distribution and testing facilities. By the end of the meeting, only one company —Purple Cross Rx — received a dispensary license and 11 applications were approved to allow companies to begin working on manufacturing, cultivation and testing facilities. But what came to pass along the way was a study in small town jurisprudence, rancor between council members, and a not-so-veiled threat of economic retaliation by a spurned dispensary.

And, as far as Councilman Raymond Friend figured, the failure to move forward was because of one person—Mayor Ignacio Velazquez.

There were three interrelated resolutions under consideration: The first was the cannabis presentations and interviews with the goal of selecting two businesses to receive dispensary licenses. The second was to approve cannabis use permits and development agreements for the two companies that City Manager Bill Avera recommended to receive the dispensary permits: Higher Level of Care and Layla’s Landing Inc. And the third was to approve cannabis use permits and development agreements for manufacturing, cultivation, testing and distribution.

The first hint that all might not go as planned came after Councilmen Jim Gillio and Karson Klauer recused themselves because of potential conflicts of interest, and then city attorney Soren Diaz did likewise, not because he personally had a conflict, but because the law firm for which he works — L&G LLP — represents a number of cannabis firms.

This left only Velazquez, Friend and Councilwoman Mickie Luna on the council dais, and before leaving, Diaz told them that for an agenda item to pass it would take all three to vote in favor of it. It soon became evident that the six cannabis candidates were in for a bumpy ride and disappointment when Velazquez said he would not vote in favor of any of them because of his objections to the city’s cannabis ordinance. In particular, he voiced opposition to the lowering of set-back distances between a cannabis business and homes, schools or other establishments from 600 feet to 150 feet.

The six companies under consideration for dispensary licenses were Haven, Higher Level of Care, Layla’s Landing, Purple Cross, Monterey Bay Alternative Medicine, and Traditional Roots.  After the six made their presentations and comments were received from residents, Velazquez said he had concerns about the city’s cannabis ordinance.

“I was not happy with the changes we made,” he said. “I don’t think it (dispensary) should be anywhere near a neighborhood. I think it should be 600 feet at a minimum. If anything I picked up tonight, it is that we are lacking information. The distribution part is what has always concerned me. When you lose control of that portion, you lose control and it’s very tough to get it back.”

He went on to say the city is not ready to approve dispensaries and more work needs to be done to revise the ordinance and that even if it is not perfect they needed to revisit certain issues. He said it was unfortunate, but he could not support the agenda items because he did not feel the presentations and following interviews provided enough answers to his concerns. He recommended that the application process begin anew after revising the ordinance and re-implementing the 600-foot rule and gaining control of the supply chain.

Luna made it clear she adamantly disagreed with Velazquez.

“We’ve spent so much time on this. We have done our best and we are now to the point we need to move on,” she said. “When the ordinance was being put together, we had community input. We took that information, made changes. You recommended we hire an outside attorney. I asked that attorney if we could go back and change that ordinance and she said, ‘yes, you can amend it later.’ People have waited long enough. We have studied long enough. We need to make a decision.”

Luna said that even if the council members were to begin the process all over again, ultimately, they will continue to disagree. She applauded the city staff for their work to incorporate the many changes to the ordinance.

“I think it’s unfortunate at this point of time you don’t agree then we don’t have nothing,” she said. “But in order to get this going, I’m ready to do it tonight and if we don’t have the three votes, it’s dead in the water.”

When it was Friend’s turn to speak, the longer he talked, the more frustrated he appeared. He said he couldn’t believe the city had been working on the ordinance for two years after listening to citizens during two dozen meetings.

“It would be stupid for us not to make a decision,” he said. “We can kick the can down the road further and stick our heads in the sand we’re not going to do this. The majority of the council voted this resolution in and we need to do something about it.”

Friend said some of the six applicants met the mayor’s qualifications and they needed to move ahead.

“I don’t understand why you’re not ready to move,” he said, addressing Velazquez directly. “It’s mind-boggling and I think you need to explain to the voters why we’re going to spend all this money and not make a move.”

Velazquez said his reasoning was simple: the ordinance changed.

“If we cannot understand that basic concept, we will fail, and I cannot be a part of this failure,” the mayor said. “I want to make sure we do it right the first time out. You both have the right to make a motion on this, but at this point, from what I’m hearing tonight, I’m not comfortable.”

He asked Friend and Luna if they had a motion. Friend made a motion to approve Purple Cross. Velazquez reminded him that Purple Cross was not one of the two companies Avera was recommending. Avera commented that he had recommended Higher Level of Care and Layla’s Landing. Avera said if those did not receive motions, he asked the council to give him guidance on which two they preferred and said that whomever the council selected, the staff would do everything in its power to assure that the companies operate at the highest performance levels possible.

“There is new state legislation almost every week on cannabis,” he warned. “We’re never going to be in a position to be in front of the state because we don’t know what that’s going to be.”

Any company approved would be operating according to state laws and would be continually reviewed, Avera said, reminding the council that it had the ability to change the ordinance at any point.

“There are safeguards,” he assured them. “As you say, Mr. Mayor, you want to do it right. This is ‘doing it right.’ There’s no other way to do it better. I will never know what magic two dispensaries you want to do unless you tell me. Tonight is an opportune time to do that.”

When Velazquez asked Friend and Luna if they wanted to make motions to approve either of the two applicants that Avera had recommended, no motions were made. Then Friend immediately made a motion to consider Purple Cross and Monterey Bay Alternative Medicine. Luna second the motion and they both voted in favor of it, while the mayor voted against it. As he began to explain his reasoning, Avera interrupted and reminded him that the ordinance had passed by a majority and told him that by using a “veto power” and if the ordinance came back before a full council, he wasn’t sure what would change.

“We end up in this stalemate forever,” Avera said. “That’s not the most appropriate direction to go. You have a room full of people who have sizeable investments or want to make sizeable investments in this community. I’m not going to sit here and be a proponent of this industry, but I would say moving down this path is a huge detriment to this city because who are we going to get to come to this town as an economic development if we lead people down a path and then we change directions on them?”

Velazquez responded that because council members and the city attorney had to recuse themselves, it was an issue that needed to be addressed. Luna asked again if the ordinance could be brought back to be fixed after approval. Avera assured her they could bring it back at any time for amending, adding that it would have been more appropriate to have done so four months ago. Velazquez encouraged Luna to bring the ordinance back after adjustments were made.

“You’ve made a joke of this!” Friend burst out, cutting Velazquez off. “You look like an idiot.”

As people in the audience began to applaud, Luna interjected passionately, “Mr. Mayor, I will not bring this ordinance back. It’s your idea. If you want to turn everybody down tonight, then it’s your vote against us and everybody here. We voted and we had a majority.”

The mayor tried to calm things down by saying he would be willing to work with them on Purple Cross and that he would like to see local resident Taylor Rodriguez’s Haven be considered, as long as his proposed dispensary location was 600 feet away from a residential area. As it turned out, however, the storefront Rodriguez was proposing in the shopping center at Maple Street and San Felipe Road was not at least 600 feet away from homes, so the mayor would not be able to support it. Friend asked if he could make a motion for just one facility. When told he could, he made a motion again to approve Purple Cross. Velazquez agreed and the motion passed.

The council moved on to hearing and voting on resolutions for cannabis use permits and development agreements, the first being for Playa Breeze to cultivate medical cannabis at 817 Industrial Drive, the building that had been purchased for $2.150 million in cash in June. FBT Jordan also asked for a permit to manufacture cannabis at the same location.

The mayor told Friend and Luna he objected to Klauer, who had returned, coming in and out of chambers because there may or may not be a conflict regarding the building next door (there is a family connection, but Klauer has no financial stake in that building). The city attorney, who also had returned to chambers, suggested that instead of bundling the resolutions, they should be broken down into separate items with a public hearing for each; there would be 14 public hearings and any council member who may have a conflict on one resolution could be present for others.

“My understanding as to why they were all grouped together under one agenda item was just to save paper,” Diaz said. “My recommendation is to handle each item separately, open a public hearing on each, and close it and then move on to the next one.”

The mayor wanted assurance they could do as Diaz proposed even though it had not been posted for the public. The city attorney said they could and the council moved forward, taking each of the 14 resolutions one-by-one.

The first was for Playa Breeze, which would be operating at 817 Industrial Way. Among the public speakers Amy Oelrich, who has objected to any cannabis operations on the street in the past, blamed Klauer (not by name) for the mayor’s stance on revisiting the ordinance. She maintained it was not acceptable to locate the cannabis operation on a street where hundreds of children attended various venues. When the mayor asked for a motion, Friend and Luna remained silent, so he declared that the resolution was “dead for a lack of a motion.”

When they moved on to the next company, FBT Jordan, which would also be located at 817 Industrial Way, one of the representatives of both FBT Jordan and Playa Breeze came up to speak. He said he did not realize he had an opportunity to speak on the previous resolution, which had been summarily turned down for lack of a motion, and wanted to assure the council that he and his partners had been cooperating with the city throughout the process and had only purchased the building after assurance they had met all requirements in the ordinance.

“This is very upsetting to us to lose this opportunity when we believe we’ve done everything right and we have cooperated,” he said.

During public comments, Todd Winter, who is on the management team of Playa Breeze, as well as two other applicants that will be in the same building, said extensive research was conducted on the city’s ordinance. He said the building’s purchase was based solely on the ordinance and because there was no cap on the number of manufacturing and cultivation applications that could be made. He said the building would be secure and would not attract children. He also wondered why there was no objection to the Ozeki Sake facility across the street, making the comparison between what he said are the inherent dangers of alcohol and the relative safety of cannabis.

“I’m severely disappointed at what I’m seeing here at this city council,” he said and then went on to say what more than one in the audience took as a threat. “The failure of the city council to approve these uses at this location could prove to be severe consequences to the city. We don’t want to have to proceed this way, but there are millions of dollars on the line. If this proceeds the way it appears to be, there will be consequences, which will cost Hollister much more than the extreme benefit that our client was going to bring to the city.”

Hollister Holistics was applying for two permits for two facilities on Shelton Drive, near the Hollister Municipal Airport, for cultivation and manufacturing. Both were approved. Traditional Roots requested a manufacturing and cultivation license for a location at 1091 San Felipe Road. It failed to pass because the mayor objected to it being located near the food bank and the future homeless shelter, which he reasoned would house both addicts and children in a daycare portion of the building. California Finest Manufacturing, which would be part of Purple Cross and would be located at 1785 San Felipe Road, was approved. LXXP Corporation, which would manufacture medical cannabis at 1971 Airway Drive, was approved. Lucid Analytics, an associated company with LXXP, wanted permitting for a laboratory to test medical cannabis at the same address. It was approved, as was a third arm of the company, High Class Distribution. Pacific Organics Wellness was approved to operate a medical cannabis distribution center from 1802 Shelton Drive. Additional licenses were approved for Agripharma Nursery/Extraction (formerly Zyte Oil), JAM USA LLC and YHL Inc.

On Aug. 15, Avera told BenitoLink that Purple Cross was the only company that will be considered for a dispensary at the first meeting in September, and unless one of the council members put forth a resolution to recommend one of the other five companies, they were “dead in the water.” He said staff will not keep guessing who the council wants.

“They’re the ones who are going to have to start initiating their decisions,” he said. “They’ve had the applications for months. If they want one of those as a dispensary, they can do that, or they can set up another application period, but they’d have to be careful because you can’t keep accepting money from somebody if you’re not going to make a decision.”

He explained that each applicant typically pays nearly $7,500, which he said can generate revenue, but it’s wrong if the council denies awarding the license. He also said the mayor doesn’t have legal standing in demanding a 600-foot setback.

“He’s taking some sort of veto power, and the bottom line is he is not respecting the council’s desires on the ordinance that was adopted,” he said. “That is one of the fundamental issues we have with him. You may not like something, but you move forward with the rules you’re living under.”

Avera also said there may be no reason for Klauer or Gillio to recuse themselves in the future. Gillio had sold product to Purple Cross and since it has already received one of the licenses, there is no longer a conflict. And because the 817 Industrial Way location is no longer being considered, Klauer also does not have to recuse himself. So, the reasoning is that with a full council, the mayor will be prevented from blocking any more cannabis-related resolutions.

“If Mickie (Luna) were to say she wants to bring back Monterey Bay, and Ray (Friend) seconded it, Karson and Jim do not have a conflict, so it could pass,” Avera said. “That’s the only way any of these can come back.”

John Chadwell

John Chadwell is a freelance photojournalist with additional experience as a copywriter, ghostwriter, scriptwriter, and novelist. He is a former U.S. Navy Combat Photojournalist and is an award-winning writer, having worked for magazine, newspapers, radio and television. He has a BA in Journalism and Mass Communications from Chapman University and graduate studies at USC Cinema School. John worked as a scriptwriting consultant, and his own script, "God's Club," was produced and released in 2016. He has also written eight novels, ranging from science fiction to true crime, which are sold on Amazon. To contact John Chadwell, send an email to: [email protected].