After a State Audit, County Will Tweak Cannabis Licensing

Small changes such as “blind scoring” will enhance fairness, officials said.

On the heels of a report from the state Auditor’s office, county officials announced some minor steps this month to strengthen impartiality and public safety in cannabis permitting and licensing.

The state released its report on March 28 following a yearlong study into how cannabis zoning permits and business licenses were being handled in six California jurisdictions — the counties of Santa Barbara and Monterey and the cities of Fresno, Sacramento, San Diego and South Lake Tahoe.

The auditors urged all six counties to consistently follow their own policies in granting cannabis permits; document and review criminal background checks, and require employees involved in the review of cannabis applications to sign impartiality statements.

“All of the local jurisdictions we reviewed did not always take reasonable steps to ensure fairness and prevent conflicts of interest, abuse and favoritism,” the auditors said, adding that Fresno and Santa Barbara County could benefit from implementing “blind scoring” as an additional safeguard in reviewing competitive cannabis retail applications.

The auditors also found that the six jurisdictions did not always follow their own local policies and procedures for granting cannabis permits.

Of the six jurisdictions studied, Santa Barbara County had by far the largest number of active state cannabis licenses — 2,052 as December 2022. Monterey County was a distant second, with 532 licenses. The six represented a small sample of nearly 240 jurisdictions in California that allow at least one type of cannabis business to operate, such as retail, cultivation and manufacturing. (More than half of California jurisdictions do not allow cannabis businesses within their boundaries.)

On April 17, in response to the state report, the Santa Barbara County Executive Office announced that from now on, all county employees who sign off on a cannabis business license, including law enforcement, firefighters and planners, will sign impartiality statements, asserting that they do not have personal or financial interest that might affect their decisions. In the past, such statements have been made verbally to a supervisor.

“This will enhance public confidence,” said Deputy CEO Brittany Odermann, adding that the county’s cannabis permit review already includes many checks and balances.

“One person can’t influence this process,” she said.

The CEO’s office also will implement blind scoring on future applications for cannabis retail operations, in which the operator’s name, business name and address are redacted from application materials to avoid improperly influencing government employees. Six cannabis retail shops are allowed in unincorporated areas of the county, and three have received zoning permits. Two have been granted business licenses and are operating in Santa Ynez and Isla Vista.

“While there are no specific recommendations required of us and the audit found no financial or legal deficiencies, we acknowledge the value in assessing and enhancing processes related to issuing local permits,” said Nancy Anderson, the county’s Chief Assistant CEO.

Years of review

State auditors also looked at the permitting process for a sample of 20 cannabis applications in each of the six jurisdictions under study. In Santa Barbara County, they found that cannabis applications in Santa Barbara County underwent an average 3.4 years of review before zoning permits were approved, compared to 2.6 years for the six jurisdictions overall. Other cannabis applications in the county had been pending for 4.4 years, on average, compared to an average 3.2 years for all six jurisdictions, the auditors found.

Since late 2021, Santa Barbara County has required cannabis applicants to apply for county business licenses within 30 days of their zoning permit approvals; but some were given much more time, according to the state report. Of seven cannabis applicants who obtained zoning permits and were reviewed by auditors, four were allowed to apply for their business licenses after the 30-day window had closed, including one who was allowed an extra 183 days to apply.

“Required time frames in local ordinances may not shorten the amount of time taken to process applications if local jurisdictions do not consistently enforce these requirements,” the report said.

With regard to the time cannabis projects spend under review in Santa Barbara County, Anderson said, “infrastructure improvements, environmental mitigations and safety upgrades … require time to implement inspect and approve,” and project appeals have added “significant delays.”

“The program continues to evolve, and processing times have improved in the last two years,” she said.

In the Carpinteria Valley, dilapidated flower greenhouses from the 1970s and 80s were converted to cannabis and had to be brought into compliance with modern zoning regulations, causing lengthy delays in permitting. A number of structures had been built without permits and had to be demolished or brought into compliance. Also, roughly half of the 33 cannabis projects in the valley were appealed by citizens’ groups seeking stronger regulation of the industry.

The state report showed that as of 2022, Santa Barbara County had some of the lowest fees for cannabis zoning and business permits, estimated at $14,275. Permit fees in Monterey County were $13,530. In contrast, permit fees for cannabis applicants in Fresno were estimated at $41,710; in South Lake Tahoe, $40,855; in San Diego, $29,590, and in Sacramento, $27,940.

Background checks

State auditors found that none of the six jurisdictions “was able to demonstrate that it consistently reviewed or documented” the results of the criminal background checks for cannabis applicants and their associates, calling into question “whether that local jurisdiction adequately addressed public safety concerns.”

In Santa Barbara County, all cannabis owners, supervisors, employees and people with a 20 percent financial interest or more in a cannabis operation must undergo a background check. The Sheriff’s Department conducts the checks and keeps them on file.

To date, no Santa Barbara County cannabis applicants have been disqualified because of their background checks. But the auditors noted that of 13 applicants they reviewed, 11 were granted permits without the CEO’s office “first verifying and documenting that the Sheriff’s Department performed background checks on each owner.”

The Sheriff’s Department will now provide documentation to the CEO certifying that cannabis applicants have passed their background checks, county officials said.

Finally, the state report noted that only one of the six jurisdictions — the City of Sacramento — had an ongoing equity program that waives fees and provides technical support to cannabis business owners from populations that have been negatively impacted by cannabis-related crime, such as African-Americans and Latinos.

Monterey County and the cities of Fresno and San Diego are in the early stages of implementing equity programs, though local jurisdictions are not required to do so. Santa Barbara County and South Lake Tahoe currently have no plans to develop such programs.