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Slow Pace of Dispensary Openings Leaves Fresno, CA. with Budget Shortfall
Fresno, California is facing a budget shortfall of more than $3 million caused by the slow pace of cannabis dispensary openings in the city.
The slow pace of retail cannabis dispensary openings in Fresno, California has led to a budget shortfall of more than $3 million for 2023, prompting city leaders to consider changes to expedite the process to get the businesses up and running.
California voters legalized cannabis for adults in 2016 with the passage of Proposition 64, a ballot measure that passed with more than 57% of the vote. Two years later, Fresno voters approved an ordinance to tax retail sales of recreational marijuana, setting the stage for adult-use cannabis dispensaries to open in the city.
In 2019, the Fresno City Council amended civic ordinances to regulate recreational cannabis, and in 2021 the city began awarding the first of 19 preliminary retail cannabis dispensary licenses issued to date. But more than a year later, only two recreational marijuana retailers have opened in Fresno, a pace that is wreaking havoc with the city’s budget projections.
The city budget approved for 2023 projected that cannabis taxes and fees would generate $5.37 million in revenue for the city’s coffers. But with only two dispensaries open for business so far, the city is now projecting the cannabis tax revenue to be $2,113,100, a deficit of more than $3 million. Councilmember Nelson Esparza said that the situation is “insanity.”
“We keep over-projecting cannabis every fiscal year,” Esparza said.
Only Two Dispensaries Open So Far in Fresno
The dispensaries that have opened in Fresno, Embarc and The Artist Tree, began serving recreational marijuana customers on the same day in July 2022. The remaining 17 businesses awarded preliminary licenses have submitted their applications for conditional use permits (CUPs), which must be approved before building permits are issued and construction or renovations of the site can begin. So far, 13 of the 17 pending CPU applications have been approved, and new dispensaries could open as soon as May of this year.
Sontaya Rose, Fresno’s director of communications, noted that the timeline for construction and opening the dispensaries is controlled by the business owners, not the city.
“So, we can’t say for sure,” Rose said in an email to The Fresno Bee.
“Overall, it is taking longer for the sites to open than was originally anticipated.”
City leaders and business owners in the cannabis industry cite several reasons for the slow pace of dispensary openings. Several of the coming dispensaries will be located in old buildings that require extensive renovations before they can open and begin serving customers, according to the city. Others have had to make accommodations for their landlords, including waiting for current tenants to vacate the building so renovations on the site can begin.
Lauren Carpenter, the CEO of Embarq, which has received preliminary approval for two cannabis dispensaries in Fresno, says that her company has experienced delays at both of the locations. The company is “working expeditiously to open our second location later this year,” Carpenter said.
“A variety of factors influenced the timing” of the first and second location, she added, “including site conditions, driving duration of build out and the speed in which tenants were able to vacate the premises.”
“Fortunately, our first location affords us the ability to serve Fresnans while training our team to become leaders in our second,” said Carpenter.
Lauren Fontein, founder of The Artist Tree, said that the state of California’s regulated cannabis industry is also influencing the opening of new businesses. Wholesale prices for cannabis have plummeted in the state, squeezing profit margins throughout the supply chain. High taxes and licensing fees for cannabis businesses also take a hefty bite out of the bottom. Many companies are struggling, and some have had to lay off workers to stay afloat.
“There’s much less an appetite for investing in the cannabis industry,” Fontein said. “It’s not this kind of cash cow business that people thought it was.”
Civic leaders in Fresno have looked to several jurisdictions for possible solutions and are considering several options to expedite the opening of additional adult-use cannabis retailers in the city. In West Hollywood, the city council amended its cannabis ordinance so more licenses could be issued, while Riverside conducted an additional round of licensing to add to the city’s roster of cannabis dispensaries. Fontein said that Fresno is considering adding deadlines to its ordinance to encourage a quicker opening of new dispensaries.
“The city just kind of needs to get practical at this point,” she said.
But the city has few options. While businesses are given a one-year deadline to submit CUP applications, the city ordinance does not have provisions that set a timeline for dispensaries to open for business.
Rose wrote in an email to the Fresno Bee that the city manager’s office is working with the staff at the city attorney’s office “to determine options for establishing additional deadlines for applicants to make progress towards opening.” But she was unable to offer a timeline to get the businesses up and running.
Until that happens, Fresno will continue to see a shortfall in projected cannabis tax revenues that could impact the city’s ability to provide services.
Source: https://hightimes.com/news/slow-pace-of-dispensary-openings-leaves-fresno-ca-with-budget-shortfall/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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