Jason Fish, a cultivation manager at Airfield Supplies, irrigates marijuana plants in the mother room on Wednesday, Oct. 13, 2016 in San Jose, Calif. (Karl Mondon/Bay Area News Group)

Southern California

Lynwood looks to fill gap in local supply for legal cannabis by allowing commercial cultivation

Lynwood is poised to become one of the first cities in Los Angeles County – and one of just a handful in all of Southern California – to license and regulate commercial cultivation of marijuana.

Leaders of the small southeast L.A. city, which borders Compton, still need final approval for a plan for five indoor grow facilities. But industry professionals and consumers who’ve long been forced to rely on product shipped from licensed growers in Northern California, or from gray market manufacturers, hope Lynwood’s move signals the beginning of a steady local supply of legal cannabis.

“There’s tremendous pent-up demand for cultivation and manufacturing facilities near Los Angeles,” said Aaron Herzberg, whose Costa Mesa-based marijuana real estate firm CalCann Holdings has property throughout Southern California.

Pot grows are banned in unincorporated L.A. County. The city of Los Angeles, which is often said to have more pot shops than Starbucks, has a checkered history of permitting then blocking grow facilities. And while Long Beach residents on Nov. 8 approved a ballot measure allowing for medical cultivation, it’ll be some time before those businesses are up and running.

Southern California cities that have welcomed commercial marijuana cultivation include Desert Hot Springs, Coachella, Adelanto and California City – all desert towns about 100 miles from the greater L.A. area.

Lynwood leaders saw an opportunity to tap a new revenue stream, provide new jobs and step out in front of an emerging industry, according to city spokesman Robert Alaniz.

On a 3-1 vote, the City Council on Tuesday approved first reading of an ordinance that would allow up to five commercial marijuana cultivation and manufacturing facilities.

For now, the businesses would be allowed to grow only medical marijuana. But the ordinance – which was in the works long before Californians legalized marijuana for all adults under Proposition 64 – states the city council can amend it to include recreational pot. And Alaniz said he anticipates that will take place before the final ordinance is voted on at the Dec. 20 meeting.

The city still won’t allow dispensaries. Lynwood leaders determined the city could make more revenue from cultivation than shops, Alaniz said. Also, he said there are fewer public safety concerns with keeping a warehouse safe than a store that’s open to the public.

Rather than put a new tax on the ballot, Alaniz said the city intends to get revenue from the cultivation businesses through agreements with the developers. Details of how that will play out aren’t yet determined, he said.

There also aren’t details available as to how the city will determine which five businesses will get to set up shop, Alaniz said.

Some cities choose from a lottery of all qualified applicants. Others develop a system to rank perspective businesses, filling available slots with the top-rated applicants.

Herzberg’s company hopes to start a grow operation in a 46,000-square-foot warehouse it’s pursuing in Lynwood. But he knows it’s going to be “highly competitive” to get one of the city’s five permits. And even if they do, he said he expects it would be nine months to a year before they could actually start growing marijuana.

“What’s exciting now is the amount of action there is,” said Amanda Ostrowitz, an attorney who heads up Denver-based CannaRegs, which tracks cannabis regulations.

In the past week alone, CannaRegs has followed 55 discussions taking place at California city council or county board meetings to regulate marijuana.

The majority of those were temporary moratoriums or bans on marijuana businesses in the wake of Prop. 64. But some local governments are studying whether to permit cultivation or other activities, Ostrowitz said. And many more cities are expected to take up discussions in the coming weeks.

“It’s not slowing down anytime soon,” she said.

In the meantime, Alaniz said Lynwood leaders are looking to Colorado and other places with a history of regulating marijuana businesses so they can put best practices into play as they roll out details of their cultivation program.

“We know there’s a lot of eyes on the city of Lynwood now,” Alaniz said. “They definitely want to set the goal standard, with strict controls and regulations in place.”