By Alfredo Santana
LYNWOOD — The City Council voted 5-0 Aug. 2 to allow up to six cannabis dispensaries to open within the city with the caveat that a local sales tax should be assessed on them before permits are valid.
Another condition is that cannabis dispensary operators should own more than $1 million in liquid assets before soliciting a permit.
According to city staff, the tax rate should fall between 5 to 10%, in addition to about 15% the state of California levies on all cannabis storefront sales.
Permits for cannabis vendors would be issued for 10 years, with the possibility to be extended two years twice unless they are suspended or revoked for any law violations including a state license suspension, City Attorney Noel Tapia said.
With the decision, Lynwood joins Maywood, Bellflower and Commerce as the only cities in Southeast Los Angeles to fully regulate brick-and-mortar cannabis vendors targeting adult recreational and medical customers, only if the vendors meet a long list of safety, health and business preconditions.
Tapia estimated the city stands to increase its income from $3 to $6 million a year depending on the eventual sales tax rate.
Councilman Oscar Flores noted that regulating cannabis dispensaries is a new subject moving quickly in Southeast Los Angeles, and he wants the city to exercise control on it soon.
“I want to make sure that we, as a body, are putting ourselves in the best position for our future in working with this industry,” Flores said.
Interim Community Development Director John Yonai said local tax rates on pot dispensaries run the gamut, and suggested to apply a flat lower tax rate for medical and recreational marijuana sales that compounded with the state’s would not be too heavy.
“What we have noted is that the higher rates have impacted local sales to many cannabis businesses,” Yonai said.
He added that Lynwood has to recognize that many customers still purchase cannabis from black market suppliers, and prices should be competitive to compete with the black market.
The proposed sales tax will be discussed by the City Council in upcoming meetings and eventually approved, unless a rate higher than 10% is sought, which would require voter approval
Under the city’s business and professional code, the new cannabis retailers would be allowed to operate in facilities located more than 650 feet from schools and day care centers, and 950 feet or more from parks or youth centers.
The storefronts would only operate in zones defined as medium commercial districts, heavy commercial districts and manufacturing districts, and each retailer would have to submit plans to prevent odors from reaching the streets or neighborhoods.
Also, the dispensaries will have to submit architectural and designs plans consistent with surrounding properties and provide a neighborhood compatibility plan to ensure the retail shops do not represent a burden to public health, or pose a threat to public safety or to residents and visitors.
Although Lynwood has not opened the process to accept applications for cannabis retailers, a list of eight forms posted on the city’s website offer a glimpse of the initial costs and procedures operators need to clear to obtain licenses.
The application process will be divided in four phases, with initial costs of $300 to cover criminal background checks for each principal and landlords if applicable, and additional $124 to pay for a live scan to get state and federal clearance.
Applicants will also incur a $235 fee for a zoning verification letter obtained from the Building, Safety and Planning Department, followed by submittal of the commercial cannabis business form and a non-refundable payment of $3,701 via cashier’s check or money order along with all the previous documents.
The city will notify the person identified in the application by email if the process advances to phase two and subsequent phase three. A fee of $954 is due before the start of phase two and $1,719 for phase three.
Before reaching phase four, members of an ad-hoc committee would interview a maximum of 12 potential qualifiers, and grade them anew so eight applicants with the best plans can move forward at hearings with the City Council.
Eligible applicants that reach phase four will have to pay an additional $729 for final consideration.
All the interested cannabis retail applicants are required to submit a business plan, proof of lease or ownership of a commercial unit where the dispensary would stand, and renderings or photos of interior and exterior with pitched colors.
To this end, Lynwood devised a scoring program of 1,000 points based on the applications of managers and owners, plans and overall location, business operations, security and safety, neighborhood compatibility, community benefits and labor and employment.
The applicants should have access to $1 million in assets such as stocks, bonds or cash obtained at least 90 days before submitting the forms. The requirement can be met with a promissory note issued on behalf of the party that demonstrates dated control of the money.
City Attorney Tapia said permits can be revoked for lack of business operations.
“A retailer’s failure to commence lawful operations within 24 months or following initial commencement of lawful operations” for 120 consecutive or cumulative days would result in loss of license, Tapia said.
Flores said that Lynwood hopes to attract quality cannabis operators that comply with all the rules, create jobs and provide consistent services that benefit the community and the city.
In comparison, neighboring cities such as Maywood let a few cannabis dispensaries operate within city limits, banned new applicants after May 10, 2018, and renews licenses once a year to vendors that were vetted using a similar points scoring scale.
In Maywood, the current licensed cannabis storefronts are named Cookies, Firehouse 365, Haven and Bonafield.
The city also has issued permits to three cannabis manufactures, ION Distribution LLC, Corona Sky Inc., and Universal Herbal Center, the latter operating under the name Pineapple Express.
Bellflower has issued six permits for dispensaries, but is not currently accepting applications to add more stores.
Other area cities such as Huntington Park have ordinances that allow store vendors to sell to online buyers willing to pay for deliveries made on vehicles, and to licensed medical patients.
Huntington Park also permits cannabis manufacturing and cultivation to a few operators.
Montebello has banned marijuana storefronts but allows home deliveries with registered employees on purchases made on websites.
According to the California Department of Cannabis Control, the agency that licenses and regulates cannabis businesses, all dispensaries, growers and manufactures should operate safely, handle products free of contaminants and label them to inform purchasers, and keep products away from children.
The state allows cities to adopt their own rules on how dispensaries operate and how residents can file complaints, and even allows ordinances to be more specific than statues or regulations, as long as they work in tandem.