The California Cannabis Countdown: The City of Coachella

Coachella California cannabisUntil recently, the “Wild West” of U.S. cannabis lacked robust statewide regulations which left California cannabis companies subject to unclear rules and risk of federal shutdowns. The Medical Cannabis Regulation and Safety Act (MCRSA) created these regulations, but ultimately left control in the hands of local cities and counties.

At last count, California has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we plan to cover who is banning, who is waiting, and who is embracing the change to legalize marijuana — permits, regulations, taxes and all. For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your cannabis business, how to keep it legal, and what you will and won’t be allowed to do. Our last California Cannabis Countdown post was on Los Angeles County, and before that, the City of Los Angeles, the City of Desert Hot SpringsSonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County and the City of Emeryville.

Welcome to the California Cannabis Countdown.

Coachella is another California desert city that has recently discovered cannabis as a solution to its economic woes. Since passing regulations to permit cultivation, manufacturing, testing, distribution, and transportation within multi-acre facilities, the City has already authorized a proposed medical cannabis site that is expected to bring in millions in local taxes and fees, as well as create a new line of “Coachella” branded cannabis to put it on the proverbial marijuana map.

LocationCoachella is the easternmost city in the Coachella Valley area of Southern California. Located in the state’s desert region, the City’s community is largely rural and agricultural and low wages of farm workers may explain why it is one of the ten poorest cities in California.

History with Cannabis. On February 14, 2007, the Coachella City Council adopted a temporary moratorium on medical marijuana dispensaries, which it later extended on February 28, 2007, and again on January 23, 2008.

On March 11, 2009, the City Council passed Ordinance No. 1008, adding Chapter 17.84 to Title 17 of the City of Coachella Municipal Code to prohibit the establishment of medical marijuana dispensaries within the City.

On January 27, 2016, the City Council adopted Ordinance No. 1083 to permit medical marijuana cultivation as well as other cannabis-related activities while still prohibiting the establishment of marijuana dispensaries.

Current Cannabis LawsUnder Chapter 17.84 of the Coachella City Code, cannabis dispensaries and delivery of cannabis from dispensaries to patients are prohibited in all zoning districts within the City. Thus, no permits will currently be issued for the establishment or operation of either storefront dispensaries or mobile dispensaries in Coachella.

Under Chapter 17.85 of the Coachella City Code, medical cannabis cultivation, manufacturing, distribution, testing, and transportation facilities are allowed with proper permits. A conditional use permit is required for the location of the facility and a regulatory permit is required for operation of the facility.

Under the City’s regulations, a “medical cannabis cultivation facility” encompasses any facility where medical cannabis is planted, grown, harvested, dried, cured, graded, trimmed, manufactured into cannabis products, tested, distributed, or transported, as well as a facility that does all or any combination of these activities.

Currently, medical cannabis cultivation facilities are only permitted in wrecking yard zones (M-W zones) and must be located at least 1,000 feet away from residential zones. Medical cannabis cultivation facilities may not be established on any existing multi-tenant industrial park or business park sites, but instead, conditional use permits will be granted to develop new stand-alone facilities or multi-tenant facilities. What’s more, permits will only be granted to sites that are a minimum of five acres in size.

Only indoor cultivation is allowed and it must take place in permanent structures where the marijuana plants are not visible from the outside, which means that greenhouses and other non-permanent structures may not be used unless they are located inside a permanent structure. Outdoor cultivation is therefore completely prohibited.

Conditional use permits granted under Chapter 17.85 will not take effect until the City Council approves a development agreement for the site or until a local tax is passed on commercial cannabis cultivation in the City.

Proposed Cannabis LawsCoachella currently has no proposed plans to change its prohibition on marijuana dispensaries, however they may be changes to the regulations for all other medical cannabis activities as the Staff Report for Ordinance No. 1083 revealed that the ordinance was passed quickly to meet the (now repealed) March 1st deadline under the (now renamed) MCRSA. Thus, the Report indicated there would be a “need to update and revise the ordinance” after its adoption, and detailed some of the concerns expressed about the current version of the ordinance.

In the mean time, the City is moving forward with permitting and made headlines last month with its approval of a 111,500 square foot medical cannabis cultivation facility which is being called the first of its kind. The facility is being developed by Cultivation Technologies and will perform cultivation, manufacturing, testing, distribution, and transportation activities, thus incorporating all phases of the marijuana supply chain in a single location. The proposed facility will include four 22,000 square foot indoor cultivation sites, two buildings, research labs and 9,000 square feet of space for manufacturing. Flowers and extracts created at the facility will be sold under the new brand name “Coachella Premium Cannabis.”

Cultivation Technologies claims that its facility will also be good for the local community by allowing third party cultivators and manufacturers to use their equipment to produce non-“Coachella” branded products, which it will then help to test, distribute, and transport. In addition, the company has entered into a development agreement with the City to contribute $1 per square foot of cultivation and manufacturing space under the “Coachella” brand name and will pay an estimated $4 million per year to the City in taxes and fees. Construction on the facility has already begun and is set to be complete by November of this year, just in time for the vote to legalize recreational marijuana in California under Prop 46 (aka the Adult Use of Marijuana Act).

There are many cannabis entrepreneurs taking advantage of California’s green rush, but for those who might be feeling green with envy, Cultivation Technologies’ success in Coachella is a good lesson. The company’s president recently stated that the company “saw an opportunity in the city of Coachella” and worked with the City to create an ordinance in line with the MCRSA in advance of state licensing, in turn receiving six acres of land from the City for its brand of Coachella cannabis. We frequently advise our California clients to work with local City Council and County Board of Supervisors to craft their cannabis ordinances as this is a great way to get the regulations you want while also developing a good rapport with the people that will ultimately decide who should receive a cannabis permit. See California’s MCRSA: What You Need to Know NOW to Have a Recreational Marijuana Business Later. There is still time for cities and counties to get on board before state licensing begins in 2018, so if you are interested in obtaining a local marijuana permit now is the time to get involved.

EDITOR’S NOTE: Speaking of California cannabis, three of our California cannabis lawyers (Tiffany Wu, Alison Malsbury and Hilary Bricken) will be putting on a FREE webinar on September 14, moderated by our lead cannabis corporate lawyer (Robert McVay). This webinar will focus on what you should be doing now to prepare your existing or future cannabis business for California’s soon to be legalized landscape. Go here on Eventbrite to sign up to attend.