Stanislaus County takes hard look at cannabis permits. Could see dollar signs soon.

Cannabis businesses are advancing through the permit process in Stanislaus County, giving county leaders some hope of seeing significant revenue from the legal marijuana industry.
Cannabis businesses are advancing through the permit process in Stanislaus County, giving county leaders some hope of seeing significant revenue from the legal marijuana industry. Sacramento Bee

Cannabis businesses are advancing, and stumbling, through the permit process in Stanislaus County, giving county leaders some hope of seeing significant revenue from the legal marijuana industry.

County supervisors approved the first permit Feb. 12 for Lyfted Farms to cultivate cannabis plants and package products in a 19,500-square-foot warehouse on Jerusalem Court, just north of Modesto. A second permit for Lyfted on Jerusalem Court was rescheduled due to a county agenda paperwork error.

Permits for Legacy Farms to operate marijuana nurseries at two sites on California Avenue, west of Modesto, and a permit for an indoor growing operation, south of Yosemite Boulevard, in southeast Modesto are headed for hearings at the Board of Supervisors meeting at 6:30 p.m. March 19.

One of the two Legacy sites received a recommendation from the county Planning Commission, while the other was turned down after running into neighborhood opposition. And planners did not endorse an indoor cultivation permit for Prem Gen Corp. on El Roya Avenue in southeast Modesto. But supervisors will have the final say.

The first five cannabis businesses that have decent odds of earning permits could generate $1.16 million in revenue over the life of five-year development agreements. The total would include $955,000 in community benefit fees earmarked for law enforcement; that is, code enforcement and law officers to enforce the county’s cannabis program and shut down illegal operators.

It also would include $202,000 in contributions for community programs, local charities and public projects primarily focused on youth, the county says.

A county ordinance approved in 2017 allows up to 61 commercial cannabis permits, including seven permits for retail shops. In the past year, a county team has reviewed and vetted 84 permit applications, with the Sheriff’s Department screening the backgrounds of business and property owners.

More than 30 applicants who passed the initial review are now seeking 44 permits and land use approvals, which include development agreements that determine the fees they will pay to the county.

County leaders say 61 permits are far less than what’s allowed in other counties where the cannabis industry took hold after passage of Proposition 64 in November 2016. Stanislaus County voters were split over legalization, and the county’s top officials have promised to shut down black-market operators as soon as resources are available.

Supervisor Kristin Olsen asked county staff at the Feb. 12 board meeting if additional enforcement personnel could be hired in anticipation of fee revenue. “I think we would want to start enforcement sooner than later,” Olsen said.

The county is looking at enforcement strategies in other counties and is running an analysis on projected fee revenue from permitted cannabis businesses. Officials believe $4 million to $7 million in annual marijuana fees can be extracted from permitted businesses.

The county is talking with the Stanislaus Community Foundation about administering funds from what’s called the “community benefit contribution” in development agreements with cannabis permit holders.

Tera Chumley, a senior management consultant for the county, said the funds could help support the nonprofit foundation’s cradle to career efforts, but also would support programs not associated with the community foundation, such as Safe Routes to School, Police Activities League and other youth programs.

Some speakers who opposed the permits for Legacy Farms before the county Planning Commission this month said spending cannabis money on youth programs will send the wrong the message.

Keith Boggs, an assistant executive officer for the county, said the funds can be spent on park improvements or sidewalks in unincorporated areas without promoting cannabis as the funding source.

As for enforcement, the Sheriff’s Department has a sergeant and crime analyst focused on the illegal marijuana trade.

The county’s cannabis program budget has also included two positions in the District Attorney’s Office, a code enforcement officer, five sheriff’s deputies and a community service officer.

“As the revenue comes in, we are looking at funding a cannabis unit in the Sheriff’s Department,” Boggs said.

As the county tries to permit locally controlled marijuana businesses, a steady flow of cannabis permit applications is being scheduled for Planning Commission and Board of Supervisors meetings in the next several months.

“The dust won’t settle on this until after the Fourth of July,” Boggs said.

Stockton attorney Zach Drivon, who has helped Lyfted with permitting, said Stanislaus is ahead of nearby San Joaquin County in issuing permits for commercial cannabis.

“You have to come into the process knowing the framework the state has laid out and be prepared to jump through a lot of hoops,” Drivon said. “It definitely is not a simple process. I don’t know that anyone expected it to be.”

Ken Carlson covers county government and health care for The Modesto Bee. His coverage of public health, medicine, consumer health issues and the business of health care has appeared in The Bee for 15 years.