Encinitas to pay cannabis consulting firm additional $500K

ENCINITAS — The Encinitas City Council has voted to approve nearly $500,000 in additional funding to a cannabis consulting firm to help review and process a higher-than-expected number of applications from businesses seeking cannabis licensing and cultivation rights in the city. 

By a 5-0 vote at a meeting on March 16, the council voted to approve an amendment to its agreement with HDL companies, a cannabis compliance organization hired by the city last year to assist in the development and review of the cannabis business registration and application process, and the creation of a marijuana sales tax on marijuana.  

Under the approved amendment, Encinitas will allocate an additional $470,250 in funding for HDL for a total contract value of $568,900. This increase in expenditures will be more than covered by an additional $1.3 million in revenues that the city is collecting via application review fees from businesses who applied through HDL during the 2021-2022 fiscal year, according to Planning Manager Jennifer Gates. 

The expansion in funding through the contract was necessitated because the city received nearly ten times as many applications from businesses seeking licensing and cultivation rights than what was expected, Gates said.  

Out of over 200 applications received, however, only four businesses will ultimately be granted such rights. 

Despite the council’s unanimous approval of the amended contract, some Encinitas residents expressed concern and skepticism over the decision. 

In an email correspondence to the city, longtime resident Elena Thompson criticized the decision to put the contract discussion on the council’s consent calendar, which she said prevented further discussion and public input on the issue that should have taken place.

“I think it is wrong for the city to conceal this expenditure by putting it on the consent calendar, thinking the public won’t see an expense of this size for a drug-related topic, and also for not calling it what it is in the agenda, trying to again conceal it by not stating “cannabis” or “marijuana” on the title,” Thompson wrote. “Where is the transparency? Where is the fiscal restraint? Where is the public discussion on all of this, especially considering a budget item of this size? Is this legal?” 

Thompson argued the contract amendment allocated far too much money to an issue that is deeply divisive among residents and lacks a broad consensus of public support. 

Measure H, which allows for the zoning and regulation of cannabis retail and cultivation in Encinitas, passed with 51% of the vote in 2020. 

“This is just the beginning of a sizable problem and expense for our city, local youth, and will bring more crime in Encinitas,” Thomson wrote. “It’s also a failed experiment in California. The taxes promised are not materializing and the costs for the growing bureaucracy are now exceeding the promised income, amongst other problems. Cannabis, like the Encinitas Equity Committee, is not good for Encinitas or Encinitans.” 

At last week’s meeting, resident Mark Wilcox expressed concern about the ripple effects of increased marijuana cultivation on public health.

In particular, Wilcox said that he wonders who will be liable for the harmful effects that marijuana can have since he said that city officials have publicly absolved themselves and HDL of any liability stemming from marijuana licensing and cultivation in Encinitas. 

“What about [liability] when it comes to marijuana cultivation businesses and their myriads of problems, not the least of which is the emission of biogenic volatile organic compounds?” Wilcox asked. 

Biogenic volatile organic compounds are chemicals produced by plant organisms that affect atmospheric processes and ecological interactions and include alcohols, carbonyls, terpenoids and alkanes. 

“Several residents have experienced firsthand the toxic effects of pesticides sometimes used in cultivation, Wilcox said. “Up until the city has passed the buck to the county and the federal government for these damages. And what about the manufacturing facilities that make marijuana products?

“There are biological hazards associated with this [as well], bacteria and fungi from [manufacturing marijuana products] can cause respiratory issues, eye, skin, and throat irritation, nasal congestion, and other adverse health effects, or what about the mold exposure due to high levels of humidity required for marijuana production?” 

Neither Thompson nor Wilcox’s comments were addressed at the meeting. 

In November, the County of San Diego Department of Agriculture, Weights and Measures issued a report following an investigation into a hemp farm in Encinitas after neighbors complained the company’s use of pesticides led to headaches, respiratory problems and other health issues.

While the county’s investigation found no connection between residents’ medical complaints and pesticides used in operations at Cultivaris Hemp or adjacent Fox Point Farms, the county’s report found hemp farm was using ProKure D as a pesticide in violation of state and local regulations.

Councilman Tony Kranz emphasized that given the passage of Measure H, the council had no choice but to pass the amended contract in order to effectively implement the law. 

“[Thompson] isn’t alone,” Kranz said. “There are lots of people in our community that are not all inclined to have this kind of activity in our city, but my response to her is that we didn’t have any choice. We have to implement the law, we’re required to select up to four operators to open retail cannabis applications and so we’re spending money on HDL to navigate this and analyze which of these applications meet the requirements of the law.” 

Kranz added that he personally didn’t support Measure H, which he feels has put an undue burden on both city staff resources.

“I did not support Measure H, because of the administrative burden that I thought it would place on the city,” Kranz said. “I knew that adopting this ordinance would create conflict in the community and cause a significant amount of staff time dedicated to implementing this ordinance, and that came true for sure. 

“This is going to be an ongoing source of consternation for many, nobody really seems to be happy that we’re working our way through the implementation of Measure H, but that won’t change any time soon. My hope is that we can get done in a way that minimizes impacts on everybody as much as possible.”