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SLO sets guidelines for city marijuana businesses — and fees could run close to six figures

Cannabis 101: Here’s what you need to know about recreational marijuana

Budtender Danny Cress gives a crash course in recreational marijuana, legal in California as of Jan. 1.
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Budtender Danny Cress gives a crash course in recreational marijuana, legal in California as of Jan. 1.

San Luis Obispo has established its criteria and fees for allowing new cannabis businesses in the city — and costs to perspective business owners could be among the highest in California.

Locals will also be given preference in the application process to set up shop.

The City Council unanimously approved annual permit fees between about $65,000 and $95,000 depending on the type of business (retail stores will be the most expensive); the application fee for city approval to start a new business will cost about $22,000.

The costs are designed to cover 100 percent of the city’s oversight of the cannabis industry, including policing, administrating, monitoring and educating the public on issues related to the budding new business.

The council voted, however, to be flexible on the fees, allowing for reduced costs if less administrative work is needed than currently expected.

“I’m struggling with the overall (fee) number, and I hope we can eventually refine those down,” said Councilman Dan Rivoire. “But reading through the many things that staff will be doing and the amount of hours it will take them (to administer local cannabis business), it feels like a lot of hours. I would love for us to be on path to a refined program where it doesn’t take this amount of time to do things.”

The council also expressed a desire to re-examine a cost structure for cottage industry operations of smaller sizes, which could be charged less in city fees than larger businesses.

Non-retail businesses will be charged $7,431 of the $22,519 application fee, until those applicants are awarded a business license and they then will be expected to pay the rest (retail applicants will be assessed the full $22,519, no matter if they’re accepted).

The fees are significantly higher than in some other California cities such as Oakland (about $2,800 to about $11,000 for an annual permit) and Grover Beach ($5,000 to $20,000).

The city expects to see about 18 cannabis businesses established, costing $1.34 million in annual administrative, policing and regulatory costs; application review costs are expected to require about $442,000 in city resources.

Police Chief Deanna Cantrell said she expects police to have a significant uptick in demands for law enforcement work, whether it’s enforcing laws around businesses, reviewing applications or other work.

“Having come from another city, and living here for the past three years, this is a very needy city,” Cantrell said. “We have folks who have a high level of expectation of service of all levels of government, including police service. So regulating it here is different than San Jose or Oakland or elsewhere.”

The City Council also voted unanimously to approve a set of scoring guidelines in awarding business licenses.

That includes points for prospective owners who earn at or below the median household, employ local labor and buy local supplies, and for those who contribute more than $1,000 per month to community programs such as park cleanups and donations to youth programs.

The scoring is weighted to principal owners of a proposed new business who have operated a local cannabis business for five years or more and remained in compliance with state laws.

While some of the speakers at Tuesday’s meeting supported the idea of a local preference criteria, others said it would weed out qualified applicants who happen to live outside of the county.

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Megan’s Organic Market, a cannabis delivery business, is owned Megan Souza and Eric Powers seen here at their marijuana farm in Los Osos. Souza said Tuesday she supports the SLO cannabis guidelines for starting a business. Joe Johnston jjohnston@thetribunenews.com

Megan Souza of Megan’s Organic Market applauded the city’s ordinance.

“This is the best (local) ordinance that we have seen,” Souza said. “As a longtime, local cannabis retail operator with five or more years of experience in SLO, I love all of the criteria and think you should keep it the way it is. It favors operators with a deep understanding of and experience in working with the local community.”

But Sean Donahoe, a cannabis industry advocate, argued against the criteria.

“By granting only credit to operators of five years or more, the overwhelming majority of applicants are likely to be excluded, despite experience that may be shy of five years,” Donahoe said. “By also eliminating any points for local non-cannabis business experience and by weighting the points granted for local cannabis experience so heavily, this may further predetermine the winning applicants.”

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Sean Donahoe, a cannabis industry consultant. David Middlecamp dmiddlecamp@thetribunenews.com

Nick Andre, a consultant to local cannabis industry operators, said it’s important to grow the city’s industry with a local identity.

“If we let large, out-of-town operators come in and take over, we won’t be able to brand and build our local identity,” Andre said.

Prospective cannabis businesses include manufacturers, testers, cultivators and retail store owners (the council has limited the number of retail stores to three).

Michael Codron, the city’s community development director, said the city’s first application review process will be held in January 2019, and he expects some businesses to be up and running before the end of the fiscal year on June 30, 2019.

“We are working toward getting the first businesses up and running in April or May to achieve this target,” Codron said in an email.

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