Last Tuesday, the Board of Supervisors in Riverside County approved an ordinance allowing the following commercial activities starting on 26th December: Testing, Manufacturing, Distribution and Wholesale Nurseries. There is now a 60-day deliberative period regarding the cannabis businesses in Riverside based on the newly approved ordinance. The Board also voted to allow a limited number of dispensaries and cultivators to operate in 2019. Up to nineteen dispensaries and fifty grows will be permitted in unincorporated Riverside County as decided by a 3-2 vote following a public hearing that last nearly four hours. The Board also approved an “Implementation Plan for Retail and Cultivation” uses that is scheduled for process in early January 2019. The proposal process will include pre-registration by interested applicants, and the issuance of a Request for Proposals by the Planning Department. However, there are certain conditions that will be enforced regarding additional taxation and fees associated with each of these activities as determined by the Planning Commission.
Consistent with other county and city proposals that have been made in California since Prop. 64 passed, various existing restrictions created through local legislation are gradually being lifted. Before the most recent ordinance, Riverside had been subject to county-wide bans on commercial cannabis as ordered by Ordinance 925, which was established before Prop. 64 was enacted. The Board of Supervisors in Riverside recently contracted HdL, an accountancy firm in Brea, CA, for $42,000 in order to calculate annual income projections for commercial cannabis activity in the county. They estimated that the county could gain up to $17 million from permitting cannabis businesses. Whether or not this figure accounts for development agreements made between each business and the county, any prospective businesses in Riverside County, its cities, and indeed anywhere else in California where bans on commercial cannabis are being lifted, should take these fees into strong consideration.
Local taxation is subject to voter approval, but as we’ve seen in numerous cities in the south-western region of California, the tax can range from 2-15% for all activities. This figure is on top of the excise tax of 15%, cultivation tax ($9.25 per dry-weight ounce of cannabis flowers) and state sales tax. Some cities have attempted to discourage cultivation licensing by requesting higher fees of up to $20 per square foot of canopy, such as Palm Desert. A recent draft of a development agreement released by Commerce suggested a monthly “operating fee” of $12-14 per square foot, which could amount to $70,000-308,000 of monthly revenue that would go towards a discretionary city or county fund. Generally speaking though, most municipalities are suggesting a more realistic amount of roughly 6% annually for cultivation operations.
More details will be released about the upcoming licensing process in Riverside County over the next few weeks, but it is likely to be highly competitive on account of local development agreements playing larger roles in the licensing process, as well as harsher zoning restrictions. For instance, the California Code of Regulations § 5026 states that a licensed cannabis business cannot be located with 600 feet of any K-12 school, youth center or day care center. But Riverside County will implement a 1,000 foot radius for the same provision on a local level.
In terms of the cities in Riverside that have considered permitting cannabis businesses, Jurupa Valley, Moreno Valley, Palm Desert, Perris, Banning, and Hemet have measures in place to consider commercial activity. On November 6th, these cities will vote to approve further legislation regarding cannabis businesses.
If you are considering applying for a commercial cannabis license in any cities or unincorporated areas of Riverside County, please feel free to contact Margolin and Lawrence at (323) 653-9700 or via email at firstname.lastname@example.org to set up a consultation.