California CannabisUntil recently, the “Wild West” of U.S. cannabis lacked robust statewide regulations which left California cannabis companies subject to unclear rules and risk of federal shutdowns. The Medical Marijuana Regulation and Safety Act (MMRSA) created these regulations, but ultimately left control in the hands of Until recently, the “Wild West” of U.S. cannabis lacked robust statewide regulations which left California cannabis companies subject to unclear rules and risk of federal shutdowns. The Medical Marijuana Regulation and Safety Act (MMRSA) created these regulations, but ultimately left control in the hands of local cities and counties.

At last count, California has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this California Cannabis Countdown series, we plan to cover who is banning, who is waiting, and who is embracing the change to legalize marijuana — permits, regulations, taxes and all. For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your cannabis business, how to keep it legal, and what you will and won’t be allowed to do. Our last California Cannabis Countdown post was on Sonoma County, and before that, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County and the City of Emeryville.

Welcome to the California Cannabis Countdown.

Desert Hot Springs found the solution to its financial troubles in the recent California green rush. In 2014, it became the first California city to pass local ordinances to permit large-scale, commercial cultivation of medical marijuana. The city has since approved permits for several sizable cultivation sites which are expected to begin operations this year.

Location. Desert Hot Springs is located in the deserts of Southern California within the Coachella Valley region. As such, it is subject to a hot and dry climate. It is located near an aquifer that supplies the city with hot mineral water used in spas and resorts for tourists as well as fresh water for city residents which has received rewards for its exceptional taste.

History with Cannabis. In 2014, Desert Hot Springs declared a fiscal emergency, and in an effort to obtain financial solvency, the City Council voted to legalize medical marijuana dispensaries and cultivation.

On October 21, 2014, the City Council passed Ordinance Nos. 552 and 553 to regulate and permit medical marijuana facilities.

On November 4, 2014, the voters of Desert Hot Springs passed measures to create marijuana taxes for the sale and cultivation of medical marijuana within the city. The measures also included future marijuana taxes for if and when recreational use of marijuana is legalized or decriminalized in California.

Current Cannabis Laws. Medical marijuana facilities operating in Desert Hot Springs are required to obtain both a regulatory permit for the operation of the facility and a conditional use permit for the location of the facility. Medical marijuana facilities encompass dispensaries as well as cultivation sites.

Under Chapter 5.50 of the City Code, medical marijuana facilities that wish to receive and maintain a regulatory permit will need to comply with several operating requirements. Facilities must have a comprehensive security plan and may only be open during the hours of 8:00 a.m. to 10 p.m., seven days a week. All marijuana must be kept secured and if marijuana edibles are sold at the facility then approval of health services is required for handling food products. Facilities must also utilize an electronic point of sale system and specific odor control measures.

Under Chapter 17.180 of the City Code, to qualify for a conditional use permit, dispensaries must be located in Commercial Districts and are limited to growing no more than 99 plants on site. Cultivation facilities that grow more than 99 plants must be located in Industrial Districts and only indoor cultivation is allowed.

Permitted medical marijuana businesses are required to pay a monthly 10% distribution tax on the proceeds from any sales or provisions of medical marijuana. Cultivation facilities owe an additional annual cultivation tax based on the size of their cultivation space, at a rate of of twenty-five dollars ($25) per square foot for the first 3,000 square feet and then ten dollars ($10) per square foot for any remaining space.

There are no permit caps or cultivation size limits currently in place in Desert Hot Springs. However, many are finding that the harsh desert climate makes building the necessary infrastructure for operations a timely and expensive process. But that hasn’t deterred prospective investors and business owners from flocking to the city to set up massive cultivation sites primed and ready for state licensing in 2018 and for the possible legalization of adult use marijuana later this year.

For cities like Desert Hot Springs, the potential tax revenue from new marijuana businesses is an attractive enticement for local marijuana legalization. Something to keep in mind for those still struggling to convince their local cities and counties to implement marijuana ordinances.