Marijuana Law, Policy & Reform

Editor: Douglas A. Berman
Moritz College of Law

Tuesday, May 10, 2016

Highlighting the economic potential of marijuana reform in the California desert

Images (1)Regularly readers know that I view the potential economic development benefits of marijuana reform to be one of the most important, and yet least discussed, transformative aspects of the nationwide reform movement.   Consequently, I was pleased to see this lengthy new article in the Los Angeles Times headlined "This California desert town is experiencing a marijuana boom." Here are excerpts:

As the first city in Southern California to legalize large-scale medical marijuana cultivation, Desert Hot Springs has been inundated by marijuana growers and developers.  They are buying up dusty desert land — some with no utilities or roads — in hopes of cashing in as California's marijuana growers come into the open under new state regulations.

"It's pretty chaotic," said Coachella Valley real estate broker Marc Robinson. "I'm getting tons of calls from all over the world, all over the United States.  My newest clients flew over from Germany."

Despite a sizable need for new infrastructure to support the indoor growing projects, the rush has officials in this downtrodden town dreaming of new income.  "I can only imagine what we can do with the tax revenue," Mayor Scott Matas said. "We're in need of parks, our roads are dilapidated. All around — our sidewalks, curbs, gutters."

The city is pushing hard to help developers get their projects up and running as it increasingly faces competition from a number of desert cities also eager to bring growers to town.

Desert Hot Springs' foray into marijuana stemmed from financial need, officials said. The city has long tried to position itself as a Coachella Valley tourist destination alongside its resort-town neighbors south of Interstate 10, but it's never managed to attract the same level of development. Median household income here is $33,500 — far below the state median.

The town's destinations simply aren't enough "for it to become a vibrant and viable city instead of just a dusty little town north of the I-10," said Heather Coladonato, president of the Desert Hot Springs Chamber of Commerce, which is working closely with growers.

In 2014, after the city declared a fiscal emergency, the council voted to legalize dispensaries and cultivation. Zones where growing was permitted were established, including on a stretch of barren desert dotted with a couple of churches and auto repair shops. Since the ordinance passed, officials have approved applications for at least 11 businesses with plans for more than 1.7 million square feet of cultivation operations.

Each year, the city will tax growers $25 per square foot of cultivation space for the first 3,000 square feet and $10 per square foot after that. At least eight other projects are in the approval process....

No cultivators are up and running yet, though a small number could be growing by this summer, officials said. Growers, many of whom have been quietly practicing their trade in garages and other underground spaces for years, are eager to "come out of the shadows," said Jason Elsasser, who is planning a 2-acre project in town.

The rush to set up shop in cities that permit cultivation was pushed forward by state legislation signed into law late last year. Growers will be able to apply for state licenses by 2018, but they will have to show they have local licensing before they can get a state permit, said Steve Lyle, a spokesman for the California Department of Food and Agriculture.

The crush of developers in Desert Hot Springs led to a tripling of land prices in the area, real estate brokers said.

But there are signs that the projects — which require intensive lighting and air conditioning — could face long infrastructure delays. In recent weeks, owners learned it could take years just to get sufficient electricity to some of the businesses. Southern California Edison spokesman Robert Laffoon-Villegas said the utility expects that some growers' power needs could be so large that "it would be like adding a small city to the system."...

In nearby Cathedral City, officials recently began accepting applications from growers and dispensaries. So far, they have received about 20, said Community Development Director Pat Milos.

In San Bernardino County, Adelanto began accepting applications from growers late last year. That city, which has been on the brink of insolvency in recent years, has asked applicants to sign a statement acknowledging its financial hardship and agreeing to "support, and not oppose, any initiative that the city or the voters of the city initiate to raise business taxes and business license fees." So far, it has approved at least 30 applicants who have proposed operating more than 1.2 million square feet of cultivation space. Some, like in Desert Hot Springs, would be in now-vacant desert plots.

The city of Coachella, meanwhile, has opened an area to growers previously zoned for auto wreckage yards. Mayor Steven Hernandez said he expected the businesses to bring better-paying jobs to the city's low-income residents, particularly migrant farmworkers. "I've got a lot of people working in the fields every day," he said. "If I can get those guys into the middle income … they can buy themselves a nice house in Coachella and maybe not have to work so much."

http://lawprofessors.typepad.com/marijuana_law/2016/05/highlighting-the-economic-potential-of-marijuana-reform-in-the-california-desert.html

Business laws and regulatory issues, Medical Marijuana State Laws and Reforms, Recreational Marijuana State Laws and Reforms | Permalink

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