Katelyn Baker
Well-Known Member
Desert Hot Springs was among the first cities in California to approve the large-scale growing of medical marijuana on its land, with a city council vote in November 2014. Now, real estate agents say industrial land prices in the city have increased exponentially. And the city's leaders, once grappling with narrowly escaping bankruptcy two years ago, are talking about doubling the city's budget.
This spring, Cathedral City and Coachella - two other Coachella Valley cities that have historically had small tax bases and small budgets - approved marijuana cultivation too. The difference is that both have significantly less land available for growers. Coachella has also imposed a steep hiring requirement - 50 percent of workers in cultivation facilities must be local. Meanwhile, Cathedral City has not yet discussed how growers might be taxed differently from dispensaries.
Even so, Desert Hot Springs may not be fully prepared for the boom of marijuana cultivation, as questions arise about whether the local electric grid can support millions of square feet of greenhouses.
"I don't think we really wrapped our heads around how big it was going to be," said Scott Matas, mayor of Desert Hot Springs. "When we opened the door as one of the first cities to have our ordinances in line, to have an area big enough that multiple developers could come and grow in, I don't think we really understood at first. Now that we've wrapped our head around it, met with Edison, met with the water district, now we're trying to get them to understand how big it's going to be."
At the same time, growers continue to buy land and permit applications keep pouring in.
Transformation in Desert Hot Springs
Cultivation is already transforming DHS in at least one way: Prices of land and industrial buildings have skyrocketed.
Paula Turner, an agent with Desert Pacific Properties, said her brokerage sold its first plot of cultivation land in DHS in February 2015, about three months after the ordinance passed. At that time, 14.6 acres fetched $18,000 per acre. The same land would be going for $200,000 an acre now, Turner said.
Since approving cultivation in November 2014, the city has permitted 11 projects and has eight more in the process, officials said. Mayor Matas estimated that the approved projects cover nearly 2 million square feet, or about 46 acres.
The city is taxing growers based on how many square feet their facilities cover - $25 per square foot for the first 3,000 square feet and $10 per square foot after that. Matas expects the city to take in at least $17 million per year in tax revenue once it's all developed.
"We could double our budget," which is currently around $15 million, through cultivation taxes, Matas said. "It's huge for our small city."
Customers at the city's three marijuana dispensaries, which grow small amounts of cannabis for sale, currently pay a 10 percent sales tax on those products. In 2015, that tax brought the city about $200,000, according to budget documents.
This summer, Matas expects three cultivation facilities to start growing marijuana. He thinks those products could bring in as much as $500,000 next fiscal year.
Ata Gonzalez, founder of G FarmaBrands, said he started eyeing Desert Hot Springs in mid-2015. His cultivation company has been growing marijuana in California since 2009, and Gonzales said the company has been looking for a city that would host an expanded facility. Desert Hot Springs was the first to fit. The company's planned seven-acre facility will include greenhouse space, research labs and manufacturing space for cannabis-infused baked goods, and will create about 70 jobs, Gonzales said.
Paul DePalatis, director of planning at MSA Consulting, has advised companies on more than a dozen proposals for cultivation projects in Desert Hot Springs. He said that by being first to have ordinances in place, Desert Hot Springs distinguished itself.
"Early in 2015, there really weren't a lot of options out there statewide. When people looked around for a place they felt was going to be predictable, reliable, well-managed, they saw Desert Hot Springs and thought this was a good place to be," DePalatis said. "I think there's been a certain amount of momentum generated because of that."
The prospect of such rapid financial growth in a city is attractive. And so when California required cities to put marijuana cultivation guidelines in place before a deadline - initially March 1, but later eliminated - Coachella and Cathedral City began to design policies of their own.
Coachella and Cathedral City
On Jan. 20, Coachella's city council decided to allow marijuana growers to set up on a 93-acre industrial strip formerly reserved for auto wreckage. Real estate agent Noel Ramos, who works with valley-based Baxley Properties, said that he's finalizing leases on one of the last empty buildings and that the land has gone fast.
Coachella mayor Steven Hernandez said the city is actually taking it slow.
"We stayed away from shotgunning it - in other words, saying we're going to open up 3,000 acres (for cultivation)," Hernandez said. "We've really created a zone that has infrastructure in place. We're looking at other properties that are right next door to the zone, and possibly even moving to other areas throughout the city, but they'll be slowly."
In mid- May, the city council signaled openness to adding as much as 1,973 extra acres to the cultivation zone, but did not change the city's policy. So far, the city has received three applications for projects — growers generally buy land or rent space before applying for their permits — which, if approved, would cover more than a third of the available land area, at the corner of Avenue 48 and Harrison Street.
Finance director Bill Pattson said council will likely vote on a tax structure in July. The current draft proposes a tax of up to $15 per square foot on cultivation and manufacturing facilities and up to 6 percent on gross receipts from sales of marijuana and its products. The city has approved 363,680 square feet of cultivation space so far, and at $15 per square foot, that space could produce $5.4 million for city coffers.
Cathedral City, which approved cultivation with a council vote on April 27, has received 12 applications from growers and five more from companies that want to open dispensaries, said communications manager Chris Parman. DePalatis, the planner, said many of the companies he's talked to are looking at Cathedral City's swath of existing buildings for needs like packaging and manufacturing, as well as additional growing space.
The city's cultivation zone stretches along industrial Perez Road, covering about 65 acres, Parman said. Most applicants are planning to use existing industrial buildings, and the city doesn't anticipate a strain on its infrastructure, like water and electricity.
Currently, Cathedral City is taxing all marijuana - cultivation and distribution - under a rule voters approved in 2014, which puts a tax of 10 percent on all medical marijuana sales. The city has talked about creating a per-square-foot tax for growers, but Parman insisted the city has not estimated how much money either policy would bring in.
Cathedral City does not have a local hiring requirement. But Coachella does. Hernandez said the city will require cultivators to hire half their employees in Coachella — a steep requirement compared to Desert Hot Springs' 20 percent hiring order. The mayor said Coachella, with 43,000 people, has thousands of residents with agricultural expertise.
"We don't want to mess this up," Hernandez said. "I've told the folks in the industry that they should feel the same way because there is a bright future ahead of us."
The Torres Martinez Desert Cahuilla Indians
The Thermal-based Torres Martinez Desert Cahuilla Indians announced last year that it would launch a marijuana cultivation subsidiary.
Mary Belardo, vice chair of the subsidiary, told The Desert Sun in March 2015 that the tribe hoped to be growing and selling marijuana by July 2015. She said the tribe planned to grow cannabis on about 40 acres in Mecca and supply the plant to dispensaries, rather than selling it directly to patients.
The company, called Sovereignty Medical Tribal Corp., capitalized on new guidelines from the U.S. Department of Justice. In 2014, that agency told federal prosecutors that relationships with American Indian tribes needed to be handled on a "government-to-government" level, effectively protecting tribes from local enforcement of federal marijuana policy.
Belardo did not return requests for comment on this story.
Boom Expected to Continue, For Now
Electric power might be the only thing that can slow down the desert's marijuana boom, planner DePalatis said. For example, Desert Hot Springs mayor Scott Matas said Southern California Edison, which serves the city, can provide enough power to the projects the city has approved, but may need years to develop the capacity to power 1,400 acres of greenhouse space.
He believes the city will begin talking this summer about forming its own utility. "We'll have the money that's going to come in from the (tax) revenue. There's no reason we can't move past Edison," Matas said.
Hernandez touted cheap power provided by the Imperial Irrigation District to Coachella as one of that city's most attractive qualities.
Desert Pacific Properties is now marketing the "Coachillin' Business Park," a master-planned business park at Indian Canyon Drive and 19th Avenue. As of June 3, eight plots of land had sold in six weeks on the market. Ten lots remained, with prices ranging from about $726,000 for two acres to $1.92 million for seven acres.
Land prices have increased "substantially" in Desert Hot Springs, Coachella and Cathedral City, said Noel Ramos, a real estate agent with valley-based Baxley Properties. "The demand is so great that it allows most of these owners to increase prices accordingly."
But some of the highest-priced properties are sitting on the market, proving that demand is not limitless, Ramos said.
DePalatis said other jurisdictions are keeping up, however, soon cultivators will have more options. "You want to make the economic climate attractive" in each city, he said.
Cities across California are developing cultivation ordinances, and state legislators are working on statewide regulations too. Californians may vote on the legalization of recreational marijuana in November. And soon, these vanguard cities — the first to welcome, and benefit from, a burgeoning industry - may need to strike a balance between filling their coffers and keeping these lucrative businesses local.
News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: Palm Springs Are Cities, Tribe Vie For Marijuana Wealth
Author: Rosalie Murphy
Contact: (760) 322-8889
Photo Credit: Jay Calderon
Website: The Desert Sun
This spring, Cathedral City and Coachella - two other Coachella Valley cities that have historically had small tax bases and small budgets - approved marijuana cultivation too. The difference is that both have significantly less land available for growers. Coachella has also imposed a steep hiring requirement - 50 percent of workers in cultivation facilities must be local. Meanwhile, Cathedral City has not yet discussed how growers might be taxed differently from dispensaries.
Even so, Desert Hot Springs may not be fully prepared for the boom of marijuana cultivation, as questions arise about whether the local electric grid can support millions of square feet of greenhouses.
"I don't think we really wrapped our heads around how big it was going to be," said Scott Matas, mayor of Desert Hot Springs. "When we opened the door as one of the first cities to have our ordinances in line, to have an area big enough that multiple developers could come and grow in, I don't think we really understood at first. Now that we've wrapped our head around it, met with Edison, met with the water district, now we're trying to get them to understand how big it's going to be."
At the same time, growers continue to buy land and permit applications keep pouring in.
Transformation in Desert Hot Springs
Cultivation is already transforming DHS in at least one way: Prices of land and industrial buildings have skyrocketed.
Paula Turner, an agent with Desert Pacific Properties, said her brokerage sold its first plot of cultivation land in DHS in February 2015, about three months after the ordinance passed. At that time, 14.6 acres fetched $18,000 per acre. The same land would be going for $200,000 an acre now, Turner said.
Since approving cultivation in November 2014, the city has permitted 11 projects and has eight more in the process, officials said. Mayor Matas estimated that the approved projects cover nearly 2 million square feet, or about 46 acres.
The city is taxing growers based on how many square feet their facilities cover - $25 per square foot for the first 3,000 square feet and $10 per square foot after that. Matas expects the city to take in at least $17 million per year in tax revenue once it's all developed.
"We could double our budget," which is currently around $15 million, through cultivation taxes, Matas said. "It's huge for our small city."
Customers at the city's three marijuana dispensaries, which grow small amounts of cannabis for sale, currently pay a 10 percent sales tax on those products. In 2015, that tax brought the city about $200,000, according to budget documents.
This summer, Matas expects three cultivation facilities to start growing marijuana. He thinks those products could bring in as much as $500,000 next fiscal year.
Ata Gonzalez, founder of G FarmaBrands, said he started eyeing Desert Hot Springs in mid-2015. His cultivation company has been growing marijuana in California since 2009, and Gonzales said the company has been looking for a city that would host an expanded facility. Desert Hot Springs was the first to fit. The company's planned seven-acre facility will include greenhouse space, research labs and manufacturing space for cannabis-infused baked goods, and will create about 70 jobs, Gonzales said.
Paul DePalatis, director of planning at MSA Consulting, has advised companies on more than a dozen proposals for cultivation projects in Desert Hot Springs. He said that by being first to have ordinances in place, Desert Hot Springs distinguished itself.
"Early in 2015, there really weren't a lot of options out there statewide. When people looked around for a place they felt was going to be predictable, reliable, well-managed, they saw Desert Hot Springs and thought this was a good place to be," DePalatis said. "I think there's been a certain amount of momentum generated because of that."
The prospect of such rapid financial growth in a city is attractive. And so when California required cities to put marijuana cultivation guidelines in place before a deadline - initially March 1, but later eliminated - Coachella and Cathedral City began to design policies of their own.
Coachella and Cathedral City
On Jan. 20, Coachella's city council decided to allow marijuana growers to set up on a 93-acre industrial strip formerly reserved for auto wreckage. Real estate agent Noel Ramos, who works with valley-based Baxley Properties, said that he's finalizing leases on one of the last empty buildings and that the land has gone fast.
Coachella mayor Steven Hernandez said the city is actually taking it slow.
"We stayed away from shotgunning it - in other words, saying we're going to open up 3,000 acres (for cultivation)," Hernandez said. "We've really created a zone that has infrastructure in place. We're looking at other properties that are right next door to the zone, and possibly even moving to other areas throughout the city, but they'll be slowly."
In mid- May, the city council signaled openness to adding as much as 1,973 extra acres to the cultivation zone, but did not change the city's policy. So far, the city has received three applications for projects — growers generally buy land or rent space before applying for their permits — which, if approved, would cover more than a third of the available land area, at the corner of Avenue 48 and Harrison Street.
Finance director Bill Pattson said council will likely vote on a tax structure in July. The current draft proposes a tax of up to $15 per square foot on cultivation and manufacturing facilities and up to 6 percent on gross receipts from sales of marijuana and its products. The city has approved 363,680 square feet of cultivation space so far, and at $15 per square foot, that space could produce $5.4 million for city coffers.
Cathedral City, which approved cultivation with a council vote on April 27, has received 12 applications from growers and five more from companies that want to open dispensaries, said communications manager Chris Parman. DePalatis, the planner, said many of the companies he's talked to are looking at Cathedral City's swath of existing buildings for needs like packaging and manufacturing, as well as additional growing space.
The city's cultivation zone stretches along industrial Perez Road, covering about 65 acres, Parman said. Most applicants are planning to use existing industrial buildings, and the city doesn't anticipate a strain on its infrastructure, like water and electricity.
Currently, Cathedral City is taxing all marijuana - cultivation and distribution - under a rule voters approved in 2014, which puts a tax of 10 percent on all medical marijuana sales. The city has talked about creating a per-square-foot tax for growers, but Parman insisted the city has not estimated how much money either policy would bring in.
Cathedral City does not have a local hiring requirement. But Coachella does. Hernandez said the city will require cultivators to hire half their employees in Coachella — a steep requirement compared to Desert Hot Springs' 20 percent hiring order. The mayor said Coachella, with 43,000 people, has thousands of residents with agricultural expertise.
"We don't want to mess this up," Hernandez said. "I've told the folks in the industry that they should feel the same way because there is a bright future ahead of us."
The Torres Martinez Desert Cahuilla Indians
The Thermal-based Torres Martinez Desert Cahuilla Indians announced last year that it would launch a marijuana cultivation subsidiary.
Mary Belardo, vice chair of the subsidiary, told The Desert Sun in March 2015 that the tribe hoped to be growing and selling marijuana by July 2015. She said the tribe planned to grow cannabis on about 40 acres in Mecca and supply the plant to dispensaries, rather than selling it directly to patients.
The company, called Sovereignty Medical Tribal Corp., capitalized on new guidelines from the U.S. Department of Justice. In 2014, that agency told federal prosecutors that relationships with American Indian tribes needed to be handled on a "government-to-government" level, effectively protecting tribes from local enforcement of federal marijuana policy.
Belardo did not return requests for comment on this story.
Boom Expected to Continue, For Now
Electric power might be the only thing that can slow down the desert's marijuana boom, planner DePalatis said. For example, Desert Hot Springs mayor Scott Matas said Southern California Edison, which serves the city, can provide enough power to the projects the city has approved, but may need years to develop the capacity to power 1,400 acres of greenhouse space.
He believes the city will begin talking this summer about forming its own utility. "We'll have the money that's going to come in from the (tax) revenue. There's no reason we can't move past Edison," Matas said.
Hernandez touted cheap power provided by the Imperial Irrigation District to Coachella as one of that city's most attractive qualities.
Desert Pacific Properties is now marketing the "Coachillin' Business Park," a master-planned business park at Indian Canyon Drive and 19th Avenue. As of June 3, eight plots of land had sold in six weeks on the market. Ten lots remained, with prices ranging from about $726,000 for two acres to $1.92 million for seven acres.
Land prices have increased "substantially" in Desert Hot Springs, Coachella and Cathedral City, said Noel Ramos, a real estate agent with valley-based Baxley Properties. "The demand is so great that it allows most of these owners to increase prices accordingly."
But some of the highest-priced properties are sitting on the market, proving that demand is not limitless, Ramos said.
DePalatis said other jurisdictions are keeping up, however, soon cultivators will have more options. "You want to make the economic climate attractive" in each city, he said.
Cities across California are developing cultivation ordinances, and state legislators are working on statewide regulations too. Californians may vote on the legalization of recreational marijuana in November. And soon, these vanguard cities — the first to welcome, and benefit from, a burgeoning industry - may need to strike a balance between filling their coffers and keeping these lucrative businesses local.
News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: Palm Springs Are Cities, Tribe Vie For Marijuana Wealth
Author: Rosalie Murphy
Contact: (760) 322-8889
Photo Credit: Jay Calderon
Website: The Desert Sun
