Filling the Coffers With Cannabis Cash
Some communities are cashing in on medical marijuana and raking in millions.
When its state contract was terminated in 2011, the Claremont Custody Center was a relatively small prison, housing just over 500 of California’s thousands of inmates. For years, its 77,000-square-foot expanse sat abandoned punctuating the misfortune of Coalinga.
The city, which has a population of over 16,000, started as an oil strike. Chevron still maintains an oil field that provides local employment, but until 2011, locals also had relied heavily on the CCC and nearby Pleasant Valley State Prison for jobs, with a local mental hospital and the agriculture sector picking up some of the remaining slack.
But in early 2016, Coalinga’s local government decided expand its industries and take a chance on the Green Rush. Though Fresno County, where the city resides, is notoriously anti-cannabis, the five city council members voted unanimously to permit commercial manufacturing, delivery and even a dispensary within the town’s limits.
By doing so, they attracted the attention of Kelly Dalton and his sister Casey, owners of Ocean Grown Extracts, a producer of cannabis concentrates with outposts in Los Angeles and Olympia, Washington.
“Over the next several months, we became more familiar with the people of Coalinga as we teamed up with members of the community to discuss pros and cons in bringing medicinal marijuana into its small town,” Kelly Dalton said.
The Daltons partnered with Damian Marley, marijuana entrepreneur and youngest son of reggae legend Bob Marley, to acquire the prison and turn it into their newest manufacturing plant.
The purchase cost Ocean Grown and Marley $4.1 million, flooding the city’s coffers with more than enough to cover about $3.3 million worth of debt it was carrying.
In an interview with Vice, Marley predicted the new plant would create at least a 100 jobs and raise $1 million in tax revenue for the town each year.
And what’s happening in Coalinga could be the start of a positive trend in the rest of the state.
In 2015, Gov. Jerry Brown signed the Medical Marijuana Regulation and Safety Act (MMRSA) into law. MMRSA permits medical cannabis businesses to operate as for-profit entities for the first time.
And as California makes the shift towards recreational marijuana under Proposition 64, Coalinga isn’t the only small California city with big potential for huge earnings. In fact, many are already cashing in: Three hundred miles away, in Desert Hot Springs, growers are already buying up land left and right. Meanwhile, southeast of Sacramento, Calaveras County had accrued almost $4 million in licensing fees from aspiring entrepreneurs by last November.
Experts estimate that the Golden State may raise $1 billion a year from the 15 percent excise tax it’ll collect on both recreational and medical sales. This money that will be set aside into a special fund and given to communities negatively impacted by prohibition, universities for research and youth education.
Municipalities are also allowed to levy their own taxes on cannabis sales, but there are plenty of other ways for cities like Coalinga to benefit from cannabis, from collecting local licensing fees from new businesses to soaking up the potential influx of tourist dollars. But it’s up to local governments to take that chance, and while some cities are embracing opportunity, plenty of others — from small towns to San Jose — have already passed bans or limits on marijuana cultivation, manufacturing and sales.
Michael “Bud” Green, president of the Fresno Cannabis Association, said some people still fear the societal dangers associated with cannabis because of lingering social stigma.
“You have to convince people that allowing state-licensed commercial cannabis activities versus banning them will make their communities safer and more prosperous,” Green said. “One thing we learned this year is that cannabis taxes are popular with voters, and that can be a strong economic incentive for local governments.”
While it may seem like recreational marijuana dominates this new economy, in Colorado, medical sales still make up 30-40 percent of the $1 billion cannabis market. So it may be easier to convince communities frightened of adult use to embrace medical instead.
Though Fresno County leaders haven’t been receptive to economic arguments in the past, Green is hopeful they’ll take have a change of heart.
“Most cities and counties in the Central Valley will ban adult-use businesses initially, but that represents a real opportunity to distinguish ‘legitimate’ Prop. 215 patients from other consumers,” Green said. “Even in Fresno and Fresno County, many officials have acknowledged they are sympathetic to patients but uncomfortable with large grow sites and rogue dispensaries.”
If these communities can find a happy medium, they stand to make big bucks.
For now, there’s no telling how much money Coalinga and other communities like it stand to make. In addition to the Ocean Grown plant, Coalinga voters approved a dispensary within the town’s limits this past November.
Green describes this success as groundbreaking, because activists didn’t do the heavy lifting — it was all the local government’s doing.
“The city council took a lot of heat from the county, but they put the city in the black with a zoning ordinance and two ballot measures,” he said. “Ocean Grown did their homework and worked with the city … If that’s not progressive, what is?”
Coalinga City Manager, Marissa Trejo, has plenty of advice for other communities looking to do the same.
“Be transparent with the community,” she said. “Hold workshops that provide factual information, both positive and negative. Let the citizens ask questions. Maintain open dialogue. Address concerns.”
It will be awhile before Ocean Grown Extracts’ new plant is open in Coalinga. The company initially promised to employ more than 55 locals, but after a job fair and two days packed with hundreds of interviews, Kelly Dalton already predicts they’ll surpass that number by the end of 2017.
Kelly said the city seems to be welcoming the brothers and their business with open arms.
“Every week we see more growth and more smiles around town,” he said. “Local residents continue to introduce themselves to us, and we can’t help but feel the positivity that continues to spread throughout Coalinga as this become a reality.”
Originally published in Issue 25 of Cannabis Now. LEARN MORE
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