Fresno’s underwhelming roll-out of retail cannabis business leaves more questions than answers.
By Dave Fountinelle | firstname.lastname@example.org
On December 13th, 2018, the City of Fresno adopted the Cannabis Retail Business and Commercial Cannabis Business Ordinance, which established the regulatory requirements and permitting process for medicinal and adult-use recreational cannabis businesses in the city. In 2019, the permit application process began with dozens of cannabis businesses vying for one of only 14 retail business permits citywide – later increased to 21 – along with a dozen or so cultivation and distribution permits. The City of Fresno ultimately awarded 20 retail dispensary permits. Today, 19 of those permits are held by businesses, with one held as “open” and unfilled. Currently, only two of those 19 cannabis businesses have actually opened to the public, Embarc and The Artist Tree. Why the other 17 dispensaries have not opened is unclear. The City of Fresno Office of Cannabis Oversight webpage does not provide any information about the status of these businesses.
However, the Office of Cannabis Oversight’s zoning map may shed some light on why a significant portion of the approved businesses have yet to open their doors. Many of the proposed locations for these retail dispensaries are now located in “red zones,” areas with close proximity to a school, university, public park, liquor store, or other sensitive business that prohibits a cannabis dispensary from operating. Several approved businesses found themselves stuck in operational limbo as they began building or improving their locations, only to be informed they could not open there after all because the location was now considered to be in a red zone. The dispensaries maintain that it was the City of Fresno’s responsibility to determine whether the proposed locations were acceptable as part of the approval process, as it is the city that designates these red zone areas.
The issue of how the red zone areas are determined has created problems with a number of the proposed dispensary locations in Fresno. For example, Cookies had a significant reversal of fortune for its proposed dispensary location for a Cookies-official store, as the permit was preliminarily awarded and then unexpectedly rescinded when their location was determined to be in red zones. Efforts to reach a compromise with the City of Fresno have been fruitless. At the time of writing, it appears they have abandoned plans to open a Cookies-official dispensary in Fresno. However, the company still holds the license for Dr. Green Thumbs in the Tower District.
And then there are the persistent whispers of inconsistency in the way the rules are applied by the City of Fresno. The sentiment by many of the retail dispensary applicants is that the City of Fresno has been moving the goalposts by amending policy decisions, doing so arbitrarily and in a way that puts a prohibitive financial burden on the applicants. Such unforeseen changes have essentially forced some to abandon their plans to set up shop.
One dispensary (that wished to remain anonymous) was awarded a permit and told later that, in order to keep their permit, they would have to build some improvements around their proposed location, including streetlights and an access road. The problem? These improvements are civic projects, already funded in the City’s operational budget. The cost of these projects is more than the business’ entire budget to build their storefront. As a result, they have been forced to put everything on hold while they explore their options.
Two years ago, the Fresno Flyer reported on some of the shady deals and accusations of “pay for play” that were dogging the permit approval process. Last year, we published a list of the businesses that had been approved, with prospective opening dates and job information for interested readers considering a career in the legal cannabis business. Now, with only two retail dispensaries open and no word on when, or if any, will be joining them, many of the same questions about the retail cannabis industry in Fresno continue to arise, as do some familiar names.
Terrance Frazier, who’s racial discrimination lawsuit against the City of Fresno over his Granite Park project officially began in April 2022, is embroiled in another legal battle with the City over his application to acquire a dispensary permit for The Catalyst. Frazier’s wife, former council member and current state assemblywoman Esmerelda Soria, was accused by another Fresno developer and rejected dispensary applicant, Cliff Tutelian, of being involved in a “pay for play” scheme along with fellow council member Miquel Arias. Tutelian and other cannabis permit applicants have alleged that Soria and Arias both had conflicts of interest that should have either forced them to recuse themselves from the permit approval process, or disqualified the applicants with whom they were tied. Arias partnered with a cannabis business that applied for a permit in Soria’s district, while Soria’s then-fiance Frazier was applying for a permit in Arias’ district. Both applications were ultimately rejected, which has led to Frazier filing a suit against the City alleging his rejection was a retaliatory move in response to his Granite Park lawsuit.
Perhaps the biggest smoking gun in Fresno’s controversy-plagued cannabis business rollout lies in its Social Equity program. The Cannabis Social Equity Program was created by the State of California to address communities that have been disproportionately adversely affected by the war on drugs. The goal of the program is to provide equity to these communities by allocating a portion of cannabis business permits to applicants from these impacted areas. Additionally, the state would provide grants, “technical and financial expertise,” fee waivers, and other resources to assist applicants who typically wouldn’t have access to these things otherwise. While all of that looks good on paper, applicants under the Social Equity Program allege that the so-called “technical assistance” is outdated and inadequate, and the “financial expertise” is predatory, setting applicants up for exploitation and, ultimately, failure.
Fresno has received $1.2 million to date in grants from the state to implement a Social Equity Program for the districts most adversely impacted by the war on drugs. Social Equity applicants were supposed to make up at least 3 of the 21 originally proposed dispensaries in the city. After that number dropped to 19, only two Social Equity applicants remain approved. Currently, there are no Social Equity cannabis businesses of any kind operating in the city.
So where is the $1.2 million going? Much of it is being earmarked for “community liaisons” and other vaguely official-sounding positions described as “intermediaries between law enforcement and the communities” or “advocates for safe cannabis use.” It is uncertain what use these liaisons and advocates are when no social equity cannabis businesses have broken ground. Furthermore, many (if not all) approved dispensaries are already planning to create their own individual community liaison positions. At best, this makes these additional liaison positions from the city redundant. Some of the advisors helping to determine how these funds are spent also have direct ties to the Fresno Police Department (“FPD”), including former officers.
The City of Fresno recently partnered with The City of Mendota in a joint application for nearly $2 million in prop 64 grant funds. Those funds were awarded by the State of California in early December. FPD received over $250,000 in direct funding from this grant to create yet another “advocacy” position. This one is a “Community Services Officer” described as “a liaison between the Fresno City Council, licensed retail cannabis businesses, the community, and FPD” – a similar description as those positions funded with the Social Equity grant money. It is unclear, exactly, what all of these seemingly redundant City and FPD-created community liaisons will do with less than 10% of the approved cannabis applicants actually open for business and no word on when, or if any, others will join them. The only thing that does seem to be clear at this point is that the City of Fresno has wasted no time spending that state grant money.
As the City of Fresno continues to drag its feet in bringing retail cannabis business to the residents who have overwhelmingly voted for it, there has been increasing talk of the State of California stepping in and taking over the licensing and regulating process for brick-and-mortar cannabis businesses statewide. Since passing prop 64, the Adult Use of Marijuana Act, in 2016, the State of California has been losing tens if not hundreds of millions of dollars in potential tax revenue due to inconsistencies in the way each municipality in the state chooses to participate – or not participate – in allowing legal cannabis businesses to operate. Some cities, like Los Angeles and San Francisco, were quick to approve a massive amount of businesses and have been generating millions in cannabis tax revenue, while smaller cities like Fresno have been reluctant to allow any business at all. This has led some cannabis consumers to travel to other towns, use delivery services, or patronize underground “seshes” to meet their needs. As a result, the black market for cannabis in Fresno is still a major problem for law enforcement, as well as a significant missed source of revenue for the city and state.
Cannabis delivery services have been allowed to operate in Fresno since 2016, as they are regulated solely by the state, not individual municipalities. Because delivery businesses service large areas of the state that include multiple cities and counties, trying to accommodate different policies for each city and county would be a logistical nightmare. As a consequence, both the regulation of delivery services and the collection of tax revenue have been uniformly applied statewide. Advocates in Sacramento have increasingly pushed for the state to take over licensing and regulation for all cannabis businesses the way they have for delivery services. By centralizing the cannabis industry in California at all levels, cannabis businesses would be able to open more locations throughout the state, operate under the same regulatory guidelines regardless of location, and ultimately generate enough tax revenue for the state to meet the fiscal expectations it’s been falling well short of thus far.
For the cannabis consumer in Fresno, that could mean that many of the cannabis businesses currently in limbo with the city for one reason or another would be able to finally open their doors. Additionally, more cannabis entrepreneurs would potentially be able to open more dispensaries or other cannabis businesses to accommodate consumer demand.
While state takeover is debated in Sacramento, and future dispensary approvals in Fresno are slowly moving behind closed doors with little or no transparency or public input, cannabis connoisseurs in Fresno do at least have two dispensaries available to choose from. Embarc and The Artist Tree are both currently open for business and happily providing their customers with high quality cannabis in a variety of delivery methods.
In the meantime, it appears that the business of legal cannabis in Fresno will only get murkier while a smokescreen of ever-changing policies, cloudy oversight, and low public visibility make it harder and harder to follow the money trail.