The Visalia City Council continues to inch forward on new city ordinances that will allow retail cannabis sales inside the city limits, establishing fees and imposing taxes, but still has no plans to start issuing business licenses.
City strategizing for new state laws concerning cannabis sales
At the latest council meeting on Monday, March 16, city economic development manager Devon Jones unpacked the latest tweaks and changes to a set of proposed ordinances that would give City Hall the right to oversee and tax recreational cannabis businesses. The process began in May 2024, and this is the third time the plans have been presented for council review.
Yet there’s still no indication the city will ever issue licenses to sell recreational cannabis, even if the proposed changes to the law are eventually enacted.
“The direction currently is to establish the entire regulatory framework for a cannabis business program, but set the number of licenses to be issued for all use types to zero,” Jones said. “This at any point in the future could be changed by a simple resolution at whatever time either the council desires to open that up, or maybe the state perhaps passes the mandate in the industry.”
The work is being done now to get ahead of any possible changes to state law that could force cities to allow recreational sales. A similar state mandate in 2023 forced Visalia to begin allowing the delivery of medical cannabis inside the city limits. It’s been a particular concern since then for Councilman Brian Poochigian.
“Let’s put some kind of tax measure on the books so we have it there so the state doesn’t come down and say, ‘Hey, you have to allow this, and this is where the money goes,’” he said of the proposed code changes. “I’m glad we’re setting up a framework where we locally can determine – if we ever decide to do this – where the money is going to go to best help our community. So, I like what we’re doing.”
City’s Cannabis Consultant to Craft Fee Schedule
In the end, the council approved spending another $12,000 on consultant fees to continue shaping the future of the city’s potential cannabis industry. HdL Companies, which serves as Visalia’s cannabis law consultant, will assist staff at City Hall with a fee schedule for various types of potential cannabis businesses.
HdL’s job is to make sure Visalia taps all available revenue from the future potential sales of cannabis, Jones said.
“Obviously fees are an important part of this entire regulatory framework,” he said. “And they (HdL) will help us in the finance department, more specifically, make sure we’re covering all bases in terms of all the applicable fees for this.”
The planning going on now is intended to ensure the city maximizes its portion of the revenue flow while making doing business reasonable. And it will not be cheap to operate a cannabis business in Visalia.
“A clear thing that we’re going to indicate is that all licensees will be expected to pay an annual minimum to the city of $50,000 or 1% of annual gross receipts, whichever is greater,” Jones said. “How we came to that figure, there was some research conducted (in) neighboring jurisdictions, I won’t go through all of it, but that number on an annual basis seemed to be appropriate.”
Visalia Studies How Other Cities Handle Cannabis Business
The city’s research included evaluating how Tulare, Porterville and Lemoore have approached licensing and fees. Data from Farmersville, Woodlake and Lindsay was not included. The three cities studied have all negotiated individually with the various retail cannabis businesses. These agreements sometimes include initial fees, and each city requires annual payments.
As the cannabis code stands now, Visalia would not charge a large initial application fee. However, one could be added.
“There’ll be application fees, like some of them you notice an annual license fee,” Jones said. “We’ll have those kinds of things, obviously.”
Each city has set its own cannabis tax rate, which varies in Tulare County from 5% to 10%. Visalia has yet to fix its retail cannabis sales tax rate, though it has set a maximum.
“The tax rate of course will be factored in,” Jones said. “Currently, we have the ability to charge up to 10%. That’ll be something we have to establish at a later time.”
The city could also reverse course on initial lump-sum payments for new applicants, Jones added.
“The initial kinds of fees are something else that could be considered,” he said. “We’d create new licensing fees. That’s something to be determined.”
City Manager to Control Applications, Appeals
Should the city ever allow retail cannabis businesses to operate in Visalia, they’ll all be required to get a conditional use permit (CUP) from City Hall to open their doors. Delivery of cannabis for medical use will be exempt.
Retail shops open to the public will be allowed in established regional and service commercial zones, as well as in commercial mixed zones. But they won’t be allowed in the city’s downtown microbrewery district on East Main Street. Businesses without storefronts – such as distributors, processors, testing labs and manufacturers – will be confined to the city’s Industrial Park.
“That would mean the industrial park proper west of Shirk (Road),” Jones said. “There are pockets of industrial zoning in town, and some light industrial. So we’re just being clear that this is specifically the industrial and light industrial zone we’re wanting to include.”
The businesses will be allowed to operate from 9 a.m. to 9 p.m. daily. Because of state law, medical cannabis delivery will be allowed from 6 a.m. to 10 p.m. The plan is to roll the current medical cannabis ordinances into the set of regulations now being crafted.
An entirely separate city ordinance will cover the license application process and how the applicants will be selected. The city manager will have control of who can apply and oversee the qualification process. However, those who ultimately receive the licenses will be chosen by lottery.
“The city manager is authorized to make all decisions concerning the issuance of renewal licenses and the licenses themselves,” Jones said. “And similarly, all appeals will be heard by an appointee designated by the city manager.”
By choosing licensees from a pool of qualified applicants, the city hopes to avoid becoming entangled in long appeals with applicants who ultimately don’t win the right to do business.
“This is more of the current industry standard in terms of establishing this kind of business framework. (We have a) strong recommendation from our consultants at HdL,” Jones said. “It’s kind of more streamlined, and a process that we believe will assist us with the likely appeal process that will occur for any unselected applicants.”
Loads of Paperwork Await Cannabis Biz Applicants
The application process for getting a cannabis business license in Visalia will be rigorous. Applicants will have to prove they have a location to do business and the landlord’s OK. They’ll also have to provide documentation from an insurance company that their business can be covered. The city also wants its own exposure minimized, requiring inspection agreements, statements of limitations on liability and background checks for owners and managers.
Jones said the city will look at four areas of concern.
“First is the business plan, which consists of such things as the owners’ prior licenses that they’ve held and their jurisdictions, whether they’ve had any licenses suspended or revoked in any other jurisdictions, their proof of capitalization for the project, including their construction budget,” he said.
Applicants will have to present a neighborhood compatibility plan to show the business will have adequate buffers from things like churches and schools. They’ll also need a safety and security plan, and a community benefits plan that shows how they intend to be an asset to the city beyond creating revenue.
“Knowing that we want to select quality applicants in the process, staff and the consultant worked hard on ensuring that there were certain requirements in the application process that kind of ensured quality applicants,” Jones said. “But also post-selection means to ensure that people are delivering on their development plans.”
Once a license is issued, it cannot be transferred or sold for at least five years. When a license is transferred, the city will look as thoroughly at the exchange as it looks at new applicants.
“It’s going to basically be prohibited to transfer a license during that timeframe,” Jones said. “And also any transferees or (applicants) who might want to transfer a license are approved by the city manager, and the process is essentially treated like a new application.”
Mayor Brett Taylor still has concerns about license transfers despite these precautions. He’d like the ordinance to include a considerable fee for transferring existing recreational cannabis business licenses.
“I’d like to do that, because at the end of the day what we’ve heard from the consultant that we met with is that they (cannabis business owners) just play games, change up management, change up ownership,” Taylor said. “I prefer that if we catch that, we just hit them with a transfer fee of $500,000 or $1,000,000 or whatever it may be. So if they’re going to play games, there’s going to be pain.”
When Will Visalia Allow Cannabis Sales? Not Yet!
As city officials and staff are quick to point out, there is no plan to allow recreational cannabis businesses to open in Visalia. But all the pieces are moving into place.
“We don’t exactly have a timeframe,” Jones said about creating a fee schedule. “I would assume a couple months to get the work conducted and then come back.”
And there’s apparently no sense of urgency at City Hall.
“Really, because we’re still going to be establishing the licenses at zero, we could take this in chunks,” Jones said.
Meanwhile, the public remains of two minds. Visalian Gabriel Jaquez spoke of his concerns over how cannabis businesses were certified, as well as the effect of cannabis on homelessness and mental health, and the reduced ability of workers to pass drug tests as a result.
“Anytime you have drugs and alcohol, it’s not a good thing,” he said. “Cannabis is a drug.”
Adolpho Ace Castillo, owner and operator of the popular retail cannabis outlet Banyan Tree in Fresno, spoke in favor of the city opening itself to recreational sales.
“As an operator, I just want to take you behind the curtain,” Castillo said. “At a 4% rate that the city of Fresno (charges) and at about a 600 to 700 customers per day that come into the Bayan Tree, an average of $25,000 to $26,000 or around that a month goes to the city as a local tax, and close to $200,000 a month to the state of California.”
He also asked the city council to keep ownership of cannabis businesses limited to those who already live here.
“I just want you guys to consider local ownership as a bonus of some sort as deciding who’s going to get this license,” Castillo said. “Especially in a city like Visalia, it’s going to be very limited. Please keep it local.”