CA: Pot Growers Are Flooding Sacramento With Applications. Some Areas Say Enough Is Enough

Photo Credit: Jack Guez

One company is proposing to use more than 200,000 square feet of warehouses in the industrial Power Inn Road corridor of south Sacramento to cultivate, manufacture and distribute marijuana. The facility would be “Sacramento’s first truly integrated cannabis campus,” according to the firm’s application, and would occupy a large lot in a neighborhood where more than 80 groups have applied to open marijuana-related businesses.

On the other side of town, an applicant this week asked to grow marijuana inside a 48,000-square-foot warehouse on a dead end street running off Del Paso Boulevard in North Sacramento. A separate city application was filed for two more warehouses on the same street last week, one of many pending requests in the neighborhoods north of the American River.

Sacramento has quickly emerged as a marijuana capital since the state of California and local governments began issuing permits for companies to cultivate, manufacture and distribute pot in recent months. But that explosion has some neighborhood leaders and elected officials here nervous as large clusters of marijuana-related businesses are popping up in a handful of areas.

They are particularly concerned that marijuana growers are driving up rental prices and pushing out other businesses that may provide more jobs or other benefits to neighborhood residents.

The City Council’s Law and Legislation subcommittee voiced its support Tuesday for capping the amount of warehouse space in the Power Inn Alliance business district that can be used for marijuana cultivation. During the committee hearing, some council members said they would also support caps in other parts of the city, most notably North Sacramento and Del Paso Heights.

Sacramento, as one of the few California cities approving marijuana cultivation businesses, has seen a flood of operators seeking to do business here. Where Sacramento ranks statewide in permit applications is unclear, but the city is believed to be at or near the top.

Very few urban counties have any cultivation licenses, with Riverside leading the group with 58 and Sacramento second at 38, according to data from the California Department of Food and Agriculture. However, Sacramento County’s licenses are all in Sacramento, while Riverside County’s are spread throughout a number of desert cities that have embraced the cannabis industry, including Palm Springs.

For the most part, interested marijuana cultivators in Sacramento have gravitated toward the Power Inn and North Sacramento areas. However, smaller clusters of interest lie south of Sacramento City College, in South Land Park and along the northern edge of the central city.

More than half of the 162 permit applications for cultivation filed since last year with the city have been for space in the Power Inn corridor, according to city officials, raising concerns that long-time businesses are being forced out of the neighborhood as property owners seek higher and higher rental rates.

The Power Inn Alliance asked the city to cap the amount of square footage in the neighborhood that can be dedicated to the cultivation, delivery and distribution of marijuana. The group also requested that the limit apply to dispensaries, but it’s unclear whether those businesses will be included. The issue is expected to return to the Law and Legislation Committee in the coming weeks before eventually heading to the full City Council for a vote.

Marijuana growing operators have applied to use an estimated 2.5 million square feet of warehouse space in the Power Inn area – or roughly 10 percent of the total warehouse space in the district. The result, business owners said, is that the vacancy rate in the area has plummeted to 2 percent and rents have doubled. Power Inn businesses asked that the city limit the marijuana growing operations to 2.5 million square feet in the district.

“You have long-term tenants, people who have been in the district for decades, and when they can no longer afford to stay in that location, then that becomes an issue,” said Tracey Schaal, executive director of the Power Inn Alliance. “The success to any economy is diversity. For us, as the city’s manufacturing and construction core, we just want to ensure that there are still opportunities for those businesses to locate here.”

Councilman Eric Guerra, who represents the Power Inn area, said he thinks the 10 percent cap is “reasonable.”

“Now that we know where the applications are (being filed), it’s time to think about what undue concentration means and what is the best fit for the city,” Guerra said. “We don’t want to lose out on other industries that might be beneficial to the city.”

At the same time, Councilman Allen Warren has been vocal in his opposition to allowing marijuana growers in his North Sacramento district’s business corridors. If the City Council declines his request to prohibit pot businesses in certain areas, he said he will support a cap on the operations similar to the one under consideration near Power Inn Road.

“I do not want my redevelopment opportunities for traditional retail to be stymied by cultivators coming in and putting in marijuana cultivating businesses and creating walls of buildings with locked doors,” Warren said. “It further depresses communities that have been left behind that we now have an opportunity to redevelop and resurface.”

Warren’s colleague, Councilman Steve Hansen, said Tuesday that he supports “a fair citywide standard” for an undue concentration of marijuana businesses. He cited Warren and his district, saying “we (the City Council) have a colleague in a community that has consistently come to us, and we have not yet had a strong response to their inquiry and their ask for help.”

Joe Devlin, the city’s chief of cannabis policy and enforcement, said “a citywide policy (on undue concentration) has been the ultimate goal.” But, he said, it’s been difficult developing that policy given that “undue concentration means different things to different parts of the city.” Councilman Jay Schenirer said the Power Inn policy could be used as a model for other parts of the city, but that “I don’t think we have a one-size-fits-all on a percentage.”

Schenirer stressed in an interview that the city is not exploring a cap on the number of cultivation businesses that will be permitted citywide.

Norm Marshall, a cannabis industry consultant, said the cap on grows is an overreaction. He said the restrictions could hamper a growing industry still in its infancy.

“It’s a bad idea to start limiting businesses,” said Marshall, who is representing a grower who plans to locate in the Power Inn area and is negotiating with other potential applicants. “Everybody is rushing to judgment.”