The city’s next step to begin legal cannabis sales will be to decide just who gets to open up a storefront in town.

At Tuesday’s regular Tracy City Council meeting, cannabis advocates and council members agreed that they wanted local people operating local businesses. It’s now up to the council to establish policies that define just how local a business owner needs to be.

Bill Dean, the city’s assistant director for development services, expects that his department will start seeing applications for cannabis-related businesses starting in April. By June, the city will begin reviewing those applications, with permits issued sometime in the fall.

The city’s new laws allow businesses that specialize in indoor growing, manufacturing, delivery and testing of cannabis products, though no outdoor cultivation will be allowed.

Retail storefronts will be limited, though, with only four cannabis shops or dispensaries to be allowed within city limits. Most of the council’s discussion Tuesday revolved around who would get those permits.

Dean suggested a lottery system, divided into two parts. First, all businesses that fit the definition of “local ownership” would get priority, with a lottery for them to get the first permit. Those would be the businesses where a majority of the owners — at least 51% — has lived in Tracy for at least one year. Another lottery for the other three permits would include those not picked in the first lottery, plus everybody else who applied.

When it was the public’s turn to talk, the council heard from professionals in the cannabis marketplace, including some Tracy residents, who urged the city to put a bigger emphasis on local ownership.

They also asked the council to be mindful of the startup costs in the new industry, considering that the application process that the city has outlined includes a requirement that any cannabis business applying for a permit in Tracy needs consent from the property owner where the business would be located. Instead, they suggested, the acquisition of the permit should be a first step in setting up a retail storefront, ahead of making a commitment to a specific location.

“If the city was to choose the applicant first, then require the applicant to choose their location within the city’s zoning guidelines, it would give the best applicants access to the best locations,” said Kimberly Cargile, owner of A Therapeutic Alternative in Sacramento.

She added that the city should judge applicants for the limited retail permits based on their potential to run a successful business.

“A lottery will not provide the city with the best applicants as a merit-based system would,” Cargile said.

Michaela Toscas, a Tracy resident and CEO of H.E. Community Collective, a delivery dispensary, stressed local ownership for the four retail permits.

“I believe we should be prioritizing locals more and granting storefront permits to 75% of the preference pool and 25% from out of town,” she said. “I also suggest the one-year residency requirement be raised to at least three years. Most local jurisdictions have a five- to 10-year requirement for their city specifically to be considered a local.”

Alex Monceaux, a Tracy resident since 1995 and CEO of Green Rush Distribution, said all four local dispensary permits should go to Tracy people.

“Since we’ve passed the ordinance, we’ve had people come from Sacramento, Oakland, Modesto, all now coming in to apply for these. That’s going to make it hard for locals to compete,” he said, noting that the bigger urban outfits would have more resources than local startups.

He also said that securing a location before getting a permit could turn out to be prohibitively expensive, especially if the timeline to actually acquire a permit is extended.

“This application process you guys are saying will start in June; you’re hoping to have it concluded by September,” Monceaux said. “Modesto said the same thing and it ended up taking them a year longer than planned, and everybody who was in the application process ended up paying 18 months’ worth of rent before they could even know if they were opening, and then they still had to do buildouts, get product, hire staff. It’s almost two years of just rent before they have an operational business.”

Council members agreed that rather than picking businesses at random through a lottery, the city should develop a system of evaluating applications to sort out which have the best chance of success and which represent positive examples of this new type of business.

“While I agree with a lot of the work that’s been done, I would be more in favor of a merit-based system, because what this in effect lacks is the ability to assess and evaluate different applicants when they’re placed next to each other,” Councilman Dan Arriola said.

Councilwoman Rhodesia Ransom also wanted to create a merit-based application system that would help define how new cannabis businesses would fit in with Tracy’s existing business mix.

“I do believe in the local hire and local preference,” Ransom added. “I feel like five years of residency is reasonable. I don’t want people to move here just to take advantage of an opportunity that we’re trying to provide for our local economy.”

Council members discussed other potential “social equity” requirements, like wages and benefits for employees, income requirements for owners, and support for community services.

“We’re going to include a lot of those things, in terms of business plan, community relations plan and security plan, things that our ordinance speaks to,” Dean told the council. “Those will be baked into this process one way or the other in terms of scoring in addition to the other things you mentioned this evening.”

Mayor Robert Rickman added that the city should be cautious that it doesn’t micromanage or overregulate the process.

“It’s counterproductive if we’re going to open dispensaries and it’s 200% cheaper if you go down the street,” Rickman said.

Contact Bob Brownne at brownne@tracypress.com or 830-4227.

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