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Stanislaus County leaders slam pot legalization, but approve rules for dispensaries, indoor grows

Buildings including Tenth Street Place in downtown Modesto, Calif. in 2016
Buildings including Tenth Street Place in downtown Modesto, Calif. in 2016 Joan Barnett Lee

Stanislaus County leaders grudgingly approved measures Tuesday for permitting marijuana businesses, but also promised tough enforcement of local regulations to control the cannabis industry.

Supervisor Dick Monteith made a motion for a total ban on commercial marijuana activities in the county, and Supervisor Jim DeMartini referred to non-permitted cannabis businesses as "criminal" operations.

Other supervisors were sympathetic with Monteith's views, but there was no second for his motion. The county policies, which will allow no more than seven dispensaries in the unincorporated area, were approved on a 4-1 vote, drawing applause from cannabis merchants and growers in the board chambers.

The county will accept initial applications from interested parties between Oct. 2 and 3 p.m. Oct. 20. The county will approve a maximum of 61 permits for greenhouses, nurseries, testing labs, distribution, transportation and dispensaries. Outdoor cultivation won't be allowed in Stanislaus County.

The limit of seven dispensaries, or one for every 16,000 residents, is consistent with a state average, county staff said.. The county expects that permits and fees charged to commercial operations will take effect Jan. 18.

California voters approved a statewide initiative last year to legalize marijuana. Counties and cities can regulate and tax commercial cannabis and make growers and dispensaries comply with zoning laws.

Noting that some cities will allow retail marijuana outlets, Stanislaus County developed a strategy to permit a limited number of cannabis businesses and collect community benefit fees to cover the cost impacts of legalization.

The county fees will be 8 percent of gross sales for dispensaries and 2.5 percent for testing labs. The rates for indoor cultivation will range from $5 per square-foot for growing areas of 5,000 square feet or less to $10 per square-foot for areas larger than 22,000 square feet. The county projects from $4 million to $7 million in annual revenue from marijuana fees.

To enforce the regulations, it's estimated the county will need an additional 19 staff members in the sheriff's and district attorney's offices, county counsel, planning, public health, probation and agricultural commissioner's offices.

Supervisor Terry Withrow said legalization runs contrary to the county's Focus on Prevention effort dealing with the root causes of homelessness, crime and other social problems. Withrow said he believes drug and alcohol abuse are a chief cause of social decay.

The supervisor wants to see enforcement against illegal operations begin as soon as permits are in effect. Monteith doubted that existing marijuana operations that jumped ahead of the Jan. 1, 2018, start date for commercial activities will comply with the county rules.

"I think a lot of this stuff is going to go underground," he said.

Officials believe there are 14 dispensaries and hundreds of cultivation sites in the unincorporated area. Monteith noted that other states that legalized pot, such as Colorado and Washington, have not received the anticipated revenue.

During a comment period, Attorney Nicole Neubert of Clark Neubert LLP lauded the county for creating clear and predictable rules for marijuana.

Mark Gray, who ran a medical cannabis service in downtown Modesto, said pot gave him an appetite during chemotherapy treatment and helped control his nausea.

Jim Gonzalez, a former San Francisco supervisor, said cannabis helped alleviate symptoms for patients during the AIDS epidemic. He said regulations including a track and trace program are needed to prevent growers from using harmful chemicals on marijuana plants.

Stephen Endsley, a retired cardiologist and land investor, said the county's apparent intent to shut dispensaries that don't receive one of the seven permits will close family businesses and force people to draw unemployment.

According to Endsley, the director appointed to manage the state bureau over cannabis regulation said at a Southern California conference that the state will issue regulations in October and will be ready to issue temporary licenses Jan. 1.

County leaders disregarded Endsley's proposal that the county and Modesto form a "public/private cannabis board to guide the development of cannabis and report back to government and elected leadership with guidance."

He proposed serving as the mediator of the board made up of county and city staff members and three members from the public.

His plan distributed at Tuesday's meeting suggested the five county supervisors and seven council members meet for six to eight weeks with a mediator to discuss opportunities and sharing of cannabis revenue.

The meetings would not be open to the public, the plan said. Stanislaus will have a track and trace system to review activity at every point in the cannabis supply chain from production to retail sales. Proof of provenance stamps will bear the county's name to verify the safety and security of products.

After the initial applications are submitted in October, a county committee will use a scoring system to decide which dispensaries are permitted based on a sheriff's criminal background check, plans for security and parking and other criteria.

A scoring system will be used for approving permits for indoor cultivation, manufacturing and other operations if there are more than 54 applicants. "If you have a felony on your record, don't apply," Chiesa said.

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