Pittsburg Approves First Commercial Cannabis Permit in 4-1 Vote

On Monday, the Pittsburg City Council approved a commercial cannabis permit with Canyon Laboratories, Inc. for a period of 5-years.

The approval could result in more than $100,000 a year in new revenue to the City after the proposed operating agreement would require Canyon Laboratories, Inc. pay the City a cannabis business tax of 5% on all gross receipts up to $10,000,000, 2.5% on all gross receipts between $10,000,001-$20,000,000, and 1.25% on all gross receipts over $20,000,000.

The move was approved in a 4-1 vote with Councilman Jelani Killings being the dissenting vote.

According to staff, the facility, which is located at 780 Clark Ave, would begin manufacturing a variety of cannabis related products from creams, ointments and lotions. Staff also added some ingestible products will also be available.

They will not be processing actual plants or buds. Under the agreement, Canyon requested permits to operate as:

1. a Type 7 Manufacturer of medical cannabis products
2. a Type 7 Manufacturer of nonmedical cannabis products;
3. a Type 11 Distributor of medical cannabis products
4. a Type 11 Distributor of nonmedical cannabis products.

Richard Fischler, CEO of BioZone, spoke during the meeting saying they will be producing products they already make, just without the cannabis extract.

“Really, all the products we are planning to produce, BioZone already produces,” said Fischler. “Canyon Laboratories will make these same products with the addition of cannabis extracts. The ingredients we are bringing in are not viable ingredients outside of the produces we are producing.”

Fischler added that they are committed to security and the enterprise is business to business and not engaging with the public or people from the community coming to the facility.

Vice Mayor Sal Evola thanked the applicant for being the first application to come forward under their modified ordnance.

“I truly feel and just want to applaud is one of my council members already has an applicant working in such a positive fashion with staff and especially the PD helps to set the bar and the tone as to what we would expect any other business to be amenable to. As far as the tax rate goes, I agree with the recommendation from staff. Zero percent of zero is zero,” said Evola. “I do feel that we need to look within what we have approved and try to create incentives where at the end of the day, if the projections come forward as set forth, you just heard it would be one of the largest tax rates from any single business in the city.”

Evola said he supported the operating agreement brought forward to council while concerns he had were being mitigated.

Councilman Juan Antonio Banales called this a tremendous opportunity.

“I think this is a tremendous opportunity to show that we are supportive of the businesses and the manufacturing businesses, especially here in town that we want to grow that base here in town,” said Banales.

He highlighted how the applicant had been working with the city since September and it went through many committees and commissions with lots of opportunities for public input.

“I know that staff has worked closely with the applicant on this, the police department especially, the concerns and looking at the security plan and the operating plan that I had were answered by the police department. I think that the operating agreement and security plan or are well crafted and well designed,” explained Banales.

Councilman Jelani Killings, the lone dissenting vote against the applicant, highlighted the difference in tax rate

“I understand we want to encourage, but for me in terms of process, it seems that it was a moot point to approve a 10 percent approval of a tax rate if it can just be negotiated through each application,” said Killings. “So I’m still kind of wary on that sense as far as how that five percent with a tiered rate can just be put into the operating agreement. Understanding that this resolution you’re saying to the city attorney would be acceptable. But for me personally, it just seems moot to approve a 10 percent effective rate for cannabis tax and then it not be relevant with every application that comes forward. So that’s kind of my reservation.”

Councilwoman  Merl Craft said the business had been in the community for many years and have proven to be a good neighbor—many not knowing they even existed.

“The fact that they want to branch out and we did get a chance to visit the facilities and we went with the police department and some of their concerns and we got to walk through and everything else in every single thing that was talked about from that meeting going forward has been addressed,” explained Craft. “That’s not something that we get from a lot of our businesses. We get more pushback from the businesses when they have to do additional expenses in order to get a permit going through.”

Mayor Pete Longmire proclaimed the attitudes of the Pittsburg community have changed and in 2016 the voters of California said they wanted to use cannabis—with 60% approval.

“This venture for the city is something new and it can be very scary to all of us and very scary to members of the community,” said Longmire. “But if we’re going to proceed down this path, I’m very happy that we have capable staff that will comb through the issues, a comb through the processes. I am glad that we have, are responsible applicant this been in the community that is willing to work with pretty much whatever we wanted to do because in my mind, when the voters set that, is it okay if we, if when they approved the taxes in my mind there were saying, if we go down this path, if we go down this path, then yeah, you can and they left it up to the five of us to frame whatever situation that the city is going to be in, whatever arrangements that’s gonna be what’s gonna be best for the city, what’s going to be best for the citizen, and having a very capable police department that it’s gone out and done risk assessments, time and time again, working with the applicant, having a willing applicant, and then putting processes in place that we can monitor and if we need to, that we could shut the business down.”

He continued.

“So I think that we have positioned ourselves well. I think that staff and from the statements on my colleagues are making a I’m courageous statements that they’re open to moving forward with some very serious conditions,” said Longmire. “From what I’m hearing tonight, there’s no doubt in my mind that the applicant has got to follow those conditions. And if not, then the police departments, city staff, as well as our legal will take every step necessary to shut the business down if need be. So I am going to be supporting this.”

The council then voted on the item and it passed 4-1 with Killings dissenting.

According to the staff report, operational hours would be 5:00 a.m. to midnight, Monday through Friday, with occasional Saturdays, while deliveries to and from both locations would be limited to the hours of 5:00 a.m. and 5:00 p.m.

As part of the agreement, a Security Plan was also established which was reviewed and approved by the Chief of Police. The plan includes:

1. limit the total amount of THC stored onsite to ten kilos
2. make all inventory, testing, or other logs as required by the operating agreement available to the Police Department upon request
3. maintain a professionally-installed and monitored security system with 24-hour monitoring and 360-degree coverage;
4. use of commercial-grade locking mechanisms and card readers at any location cannabis is stored and all ingress/egress points of buildings;
5. submit to background checks as required by the Police Department; and
6. ensure that one manager-level employee remain on-call at all times in case of emergency.

The Chief of Police may also require Canyon to provide additional public safety measures, including but not limited to, additional video cameras, additional exterior lighting, hiring licensed and bonded security guards approved by the Police Department, or such other measures as determined necessary by the Chief of Police at the business owner’s sole expense.

According to the Staff Report, Canyon is a sister company which would be held under the same ownership and employ the same people of BioZone Labs, a long-standing business that has operated for 26 years in the community. Canyon and BioZone estimate the combined companies could see substantial growth in its consumer and medical products by utilizing cannabis. The major focus for Canyon would be the delivery of cannabis pain management products, and the company is not proposing to cultivate or import any cannabis plant cuttings into the City. If successful, Canyon estimates a substantial increase in combined employment of Canyon and BioZone within three years of implementation, from approximately 80 to 160 employees.