Encinitas City Council sets permit fees for cannabis businesses

Cannabis retail sales stores will need to pay nearly $11,250 in city business registration and application fees in order to set up shop in Encinitas under a new fee system approved by the City Council Wednesday night, Oct. 20.

Establishing the fee schedule is one of the first steps the council must take as it enacts provisions of Measure H, a citizens’ initiative passed by the city’s voters in November. Measure H allows up to four cannabis retail sales stores to open in the city. It also permits commercial cannabis cultivation in greenhouses on agriculturally zoned land and it allows cannabis kitchens, distribution facilities and product manufacturers to go in some parts of town.

The measure was narrowly approved by the city’s voters and enacting its provisions, particularly the retail sales shop portion, have been controversial. A half-dozen people, primarily public health advocates who work with area youth, urged the council to delay a vote on the proposed fee schedule Wednesday night, Oct. 20, saying more information was needed on what the fees would cover.

“I think it would be a gift to all of us if we could do that,” said Judi Strang, executive director of the San Dieguito Alliance for Drug-Free Youth, as she asked the council to postpone its vote.

Noting that the state’s Coastal Commission hasn’t yet finished its review of the Measure H ordinance, Strang argued that Encinitas officials still had time to host a public workshop on the fee proposal and collect comments from regional health advocates who have experience with other cities’ problems with cannabis shops. That would save the city “a lot of grief” later on, she said.

City planning department employees and two representatives for the city-hired consulting company disagreed with her view about delaying the vote. They said the state Coastal Commission could conclude its process within the next two months and it would be best if Encinitas had its permit fees in place before that happens.

Leslie Devaney, interim city attorney, said the city also could be subject to a lawsuit if it “unreasonably” delays implementation of the provisions of the voter-approved initiative.

“I think it’s very important that this process keeps going,” she said, stressing that the city doesn’t really have any flexibility when it comes to the cannabis business ordinance because voters have already approved it.

Council members ultimately voted 3-1 in favor, with Councilman Tony Kranz opposed and Mayor Catherine Blakespear absent. Kranz said he wanted to wait and host a public workshop as Strang suggested. Councilwoman Joy Lyndes initially said she was leaning toward postponement, but voted in favor after Councilwoman Kellie Shay Hinze and Councilman Joe Mosca said the fee schedule could be modified later, as needed.

Mosca stressed that the fee schedule is designed to recoup 100 percent of the city’s expenses related to permitting cannabis businesses.

“All of the the services that we provide, the taxpayers will not foot the bill,” he said.

A prospective cannabis retail shop owner will initially need to pay a $6,528 city registration fee. Part of that fee revenue will cover the cost of reviewing and ranking the prospective business owner’s application. Those who gain a high ranking in the initial screening will then participate in a lottery for the four retail sales permits.

The retail lottery winners and applicants who wish to start cultivation, manufacturing or distribution businesses in town will next owe a $4,712 application fee. This fee will cover the costs of making certain that the state and local regulatory requirements are met, including everything from proof of insurance to documentation that cannabis products will be securely stored on the proposed business site, city paperwork indicates.

The registration and application fees are one-time costs. The fee schedule also includes annual license costs and other fees, including one for appealing a city permit decision.