Emerging Enterprise

A new measure makes Costa Mesa the latest city in Orange County to permit medical cannabis businesses. Permits will be available for facilities that conduct cannabis research, manufacturing, distribution, testing and transportation in Costa Mesa. However dispensaries, storefront shops and cultivation will not be permitted.

On April 17, the Costa Mesa City Council voted unanimously to initiate a fee schedule based on Measure X, a voter-approved initiative that allows for commercial cannabis businesses to operate in the city. “The businesses that will be permitted are manufacturing, distribution, transportation, research and development, and testing,” Rick Francis, Assistant City Manager of Costa Mesa told CULTURE. “Cultivation and retail dispensaries are expressly prohibited.”

“The businesses that will be permitted are manufacturing, distribution, transportation, research and development, and testing. Cultivation and retail dispensaries are expressly prohibited.”

On November 8, 2016, Costa Mesa voters approved Measure X by 54.6 percent, which creates an industrial zone designated for cannabis businesses. Measures V and X would have allowed dispensaries, eight or four dispensaries respectively, but were both defeated.

The city plans on having application packets ready for applicants by the end of May, according to a city spokesman. “The length of the process will depend on a number of factors such as the complexity of the project, the thoroughness of the applications, and an applicant’s overall readiness to meet all of the requirements that are set forth in the ordinance, as well as the terms and conditions set forth in the Conditional Use Permit process.” He also stated that all operators and cannabis business employees will have to submit and pass criminal background checks with the state and federal government. This could make the application process take up to four months or longer.

It will cost business owners nearly $50,000 in necessary permits to open up in Costa Mesa. The medical cannabis business permit will require a fee of $21,525, and a required medical cannabis conditional use permit will cost an additional $27,508. If a conditional use permit is denied, it will cost the applicant $3,915 to appeal the denial. On top of that, it will cost $341 for an individual background check and $59 for police fingerprinting. If no background check is available, the city can charge applicants $300 to have a third party perform the background check. Each business must renew the medical cannabis business permit every two years. The permits will be awarded strictly on a discretionary basis.

“The length of the process will depend on a number of factors such as the complexity of the project, the thoroughness of the applications, and an applicant’s overall readiness to meet all of the requirements that are set forth in the ordinance . . . ”

Costa Mesa’s cannabis business fees are based on the estimated amount needed to recoup the cost of implementing the measure. “Most of the owners I have been in contact with were not fazed by the permit fees,” Francis said. “One even said they should be higher!” Some of the more established cannabis companies believe $50,000 is a small price to pay, considering the amount of money they expect to make. Councilmember John Stephens said that he expects the cannabis industry to make two-thirds of what South Coast Plaza makes. South Coast Plaza is crucial to the city’s economy.

Businesses will be able to operate in the industrial zone north of the Interstate 405 and west of Harbor Boulevard. Anaheim, the largest city in Orange County, is taking a less favorable approach. The Anaheim City Council decided to ban commercial cannabis operations on April 25, in anticipation of January 1, 2018 when recreational cannabis becomes legal on a state level.

This is a major step for Orange County, which allows cities to regulate medical cannabis businesses at their discretion. Costa Mesa embracing medical cannabis businesses could provide a cornerstone for the city’s economy. The city could also serve as an example for other cities in the county that are unsure of allowing commercial cannabis or cannabis sales.