Will high license fees really weed out bad operators?
By Silvia San Nicolas, Esq.
Today, April 18, 2017, at 7 p.m., Costa Mesa City Council is expected to adopt Resolution No. 17-30, setting fees for the permitting of medical marijuana businesses pursuant to Measure X. On Nov. 8, 2016, the voters approved Measure X, the City of Costa Mesa Medical Marijuana Measure. Costa Mesa is the only city in Orange County to allow for medical marijuana manufacturing, laboratories and distribution. Measure X does not allow for cultivation or dispensaries. Measure X requires these businesses to obtain a Medical Marijuana Business Permit, a Conditional Use Permit and a Business License before they may conduct business in the city.
To operate in Costa Mesa, a Medical Marijuana Business Permit will cost you a whopping $21,525, and that doesn’t include the cost of the required background checks which the city states will range between $341 to $641, depending on if the city needs a city consultant to perform the background check or not, which adds $300 to the tab. Additionally, a Conditional Use Permit will run $27,508. If you want to appeal the CUP, well that’s another $3,915. The CUP fee will not be effective until June 19, 2017.
If the fees are approved, the city hopes to have application packages ready in 45 days. A meeting was held earlier this month that discussed the $50,000-$55,000 range of fees proposed, where it was reported that city officials told stakeholders the price was calculated to allow the city to recoup costs related to implementing the measure. According to the City Council Agenda Report, the city has concluded that proposed fees represent estimates of the time required by staff and outside consultants to process the applications that will allow medical marijuana businesses to be established and operated pursuant to Measure X. The report also stated that the city has retained outside consultants to assist in developing the permitting requirements and in reviewing applications for medical marijuana businesses.
At the meeting on April 5, Assistant City Manager Rick Francis was reported to say that the high cost was also intended to “weed out” bad operators indicating the city wants the cream of the crop. But others argue that fees like this are excessive and actually create a barrier to entry for many legitimate yet less financed operators and incentivize a grey-market environment by making permits likes these out of reach for the majority of operators that want and need to operate under proper permitting and licensure. But in a market like this, where local permits are like mana from heaven, there won’t be any shortage of applications from those with the cash. What remains to be seen is if these types of higher fee structures will in fact result in more compliant operators.