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Learning from The First Wave Part 3: Seven Basic Questions About Local Cannabis Ordinances & Real Estate

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Part 1 of this series dealt with the question of how the regulated cannabis market can only be understood in relation to the previous medical market as well as the current “traditional” market. Part two of the series describes how regulation defines vertical integration in California cannabis.

When considering getting into California cannabis, imagine the following sentence in ten-foot-tall letters made up of recently lit $ 20 bills:

Before wagering any money on property, carefully review local cannabis regulations and tax rates.

This article was written in the form of advice to a new California cannabis entrepreneur, but it covers topics that are also of concern to investors and (to varying degrees) cannabis entrepreneurs in other states.

Here are seven basic questions you need to ask about local regulations (in order, except for number 7).

1. What is your jurisdiction?

If you are in city limits, it is the city. If you’re outside the city limits, it’s the county.

2. Does the jurisdiction allow cannabis activities?

If the answer is yes, move on to the next question. If the answer is no, choose a different jurisdiction.

3. Where does the jurisdiction allow cannabis activities?

A zoning ordinance limits where you can set up a business. The limitation will likely vary depending on the license type.

4. How does local regulation affect facility costs?

The short answer is, in many ways. Your local ordinance is a Pandora’s box of legal requirements, especially facility-related requirements.1 Read your local cannabis ordinance very carefully.

In general, the Cannabis Regulation sets out two types of requirements – those that are specific to cannabis and those that apply generally to any business.

Looks good though. . . Where are the sprinklers? Does it need a seismic upgrade? How about floor drains?
Photo by Wilhelm Gunkel on Unsplash

Cannabis-specific requirements:

  • Usually take state cannabis laws by reference.
  • Has significant overlap with state cannabis laws. For example, wherever cannabis can be found in a particular building, the state requires off-the-shelf locks and security cameras. Local ordinances generally contain similar requirements. Note that you must adhere to a combined standard that meets these requirements both state and local requirements 2
  • Vary widely depending on the type of activity. For example, manufacturers must comply with the requirements of the Health & Safety Code, which can have a significant impact on construction costs.
  • Vary widely by jurisdiction when it comes to stock programs.

General requirements:

  • For reference, add building and fire safety codes, which can require very expensive improvements. Note that this means your facility will be inspected by the construction department and the fire department.
  • Can include anything from Americans with Disabilities Act (ADA) requirements to city-specific requirements such as: B. Design guidelines.
  • Avidly enforced because you are a cannabis business.

5. What is the Enforcement Policy?

Your local jurisdiction may issue you with temporary local approval after you meet some, but not all, of the requirements. For example, once you have submitted your cannabis permit, zoning, and business permit application to your city or county, you may be able to start operations. In that jurisdiction, you could at some point have your building updated after this They start operations.

On the other hand, your local jurisdiction may require you to meet everyone Requirements – from cannabis-specific safety requirements to general building codes and ADA requirements – In front You can start operations. Depending on the type of cannabis business (and the state of the facility), this may not matter. Or it could mean paying more than a year of rent (or mortgage) before you can start making money.

6. Can you choose a facility that will save you time and money?

Of course, you don’t have to spend a lot of time or money updating your facility when it is already up to date. How likely you are to find such a facility depends heavily on the type of cannabis activity involved. In general:

  • Service-side activities (delivery retail, store retail, distribution) are in many ways similar to those of non-cannabis. From the point of view of the institutions, the main differences arise from the safety requirements. This can potentially save you time and money by choosing a facility that can already be coded for a similar use.
  • The manufacturing operations are more difficult because you need food grade facilities and equipment. You can potentially save money by setting up a business in a commercial kitchen.
  • Extraction with volatile solvents is a special (and particularly expensive) case as it is inherently dangerous and requires special facilities.
  • Growing outdoors can be relatively unproblematic if a suitable water source is available.
  • Indoor cultivation is expensive due to the air conditioning and lighting requirements. Buildings that may be suitable for large-scale indoor cultivation often have significant problems. Former warehouses usually require major power upgrades, while previous factories may have inconvenient architecture and / or hidden toxic waste. In all cases, internal reconstruction is likely to be required, triggering all kinds of building and fire safety regulation requirements.

7. What are the local cannabis taxes?

Cannabis tax rates can be determinative. For example, Oakland has a 6.5% gross income tax for manufacturers with gross revenues less than $ 5 million and 9.5% for manufacturers with gross revenues greater than $ 5 million. In comparison, Santa Rosa only charges manufacturers a gross income tax of 1%.

Local cannabis regulations and taxes can affect or affect your business. So you need to understand them before deciding on a location. The seven basic questions listed above should get you started.

This article is the author’s opinion and is not intended to be legal or other advice.

References

  1. See, for example, Part II of the Oakland City Bylaws and Performance Standards and Los Angeles City Rules and Regulations for Cannabis Process No. 3 (A) (14).
  2. For example compare 16 CCR § 5044 (“Video surveillance system“) With The City of Los Angeles Rules and Regulations for Cannabis Trial No. 10 (A) (7).

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Robert Dunfee