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Last updateTue, 18 Sep 2018 1pm

Last month, I examined the economic boom expected in the city of Desert Hot Springs as a result of its decision to embrace the cannabis industry. It was the first Southern California city to allow legal cultivation—and economic opportunities from the cannabis industry are helping turning the city around.

As for the other eight Coachella Valley cities … almost half of them so far have yet to welcome any sort of marijuana businesses.

The five that have opened the door in some way to the cannabis industry understand that it can help create a diversified economy that is less dependent on tourism and the resulting service-oriented businesses. Anyone who owns a business in the Coachella Valley knows that summers can be tough—but the new cannabis industry offers more year-round business and increased professional opportunities.

Dirk Voss, a lead cannabis consultant for Urban Management Strategies, is a former chairman of the Desert Hot Springs Planning Commission. He was directly involved in the approval processes for many of the cannabis businesses in the city and has watched the industry evolve throughout the valley. Voss said the cannabis industry can offer cities a “multiplier effect,” because the year-round economic stability of cannabis bolsters other business sectors, including entertainment, recreation, housing and more.

Because Coachella Valley cities have each embraced—or eschewed—cannabis in different ways, Voss predicts each city will eventually have its own cannabis “flavor” or “culture.” For example, Palm Springs has approved lounges, which makes sense for the city and its downtown tourist culture. The city is positioning itself to become a cannabis tourist destination based on its distinct assets, much like Desert Hot Springs has by promoting health and its mineral spas.

In contrast, Cathedral City has positioned itself for large-scale cultivation. The city has utilized vacant land and existing yet unoccupied shopping centers for such facilities, helping revitalize portions of Date Palm Drive, Highway 111 and Perez Road. Because Cathedral City had a lot of vacant buildings—with existing utilities and infrastructure—new marijuana businesses were able to save money by locating there. In other words, city leaders found a great way to utilize the city’s specific assets to accommodate the cannabis industry.

The city of Coachella has taken a different approach, mandating that projects have a five-acre minimum and be part of a master-plan development with specific cannabis zoning. Voss said these mandates have presented challenges to some interested cannabis businesses, “especially since power has been an issue. However, the city is evolving and expanding its plan to get the best economic development possible. The city has some catching up to do, but it is also in line to have a culture of major cultivation opportunities in the city.”

Palm Desert, meanwhile, has taken a slow, methodical approach to introducing cannabis businesses to the city—limiting the number of licenses to allow for slow growth. While this means the city may not see the economic windfall that, say, Palm Springs and Desert Hot Springs will, it also means the cannabis industry can be carefully incorporated into the city culture, thus avoiding over-saturation and allowing for manageable growth while the cannabis industry evolves.

At this point, cannabis businesses are not allowed in the cities of Indio, La Quinta, Indian Wells and Rancho Mirage—and this isn’t necessarily a bad thing. Because surrounding or nearby cities have embraced cannabis, residents and visitors can still enjoy the benefits of the cannabis industry without dealing with the hassles and costs of regulating it in their cities.

Because the cannabis industry is so new, it’s also somewhat unstable—meaning there may be growing pains for the cities that have embraced marijuana. Voss cautions some organizations will be bought out; some will close; and others will try to sell their licenses while the industry adjusts. It is crucial, according to Voss, that each city “design their ordinances and codes around their ability to adapt in an industry that is constantly changing.”

There is no doubt that marijuana can help the Coachella Valley evolve from a seasonal tourist-driven economy into an area with a stronger year-round economy.

“Each city will eventually find its fit, which will only lead to an overall economic boom within the entire Coachella Valley,” Voss said. “The industry is naturally designing its own characteristics for each city based on the needs, wants and use of cannabis by its residents.”

Robin Goins is a business consultant for DR.G Consulting and works extensively in the cannabis industry in the Coachella Valley. For more information, visit www.drrobingoins.com.

Published in Cannabis in the CV

With the rise of the cannabis industry in the Coachella Valley, many would-be investors are wondering whether to jump into the industry—and how/when to do so, if the answer is yes.

If you are entertaining the idea of investing in cannabis—specifically, the growth and cultivation of marijuana—there are a several important things to keep in mind.

How much do you want to invest … and how do you want to invest? The cannabis industry is growing and expanding at a rapid pace, and there are numerous levels and types of investments to consider, but the main question for investors is: Are you going to “touch the plant,” or get in as an “ancillary” business?

“Traditional investors do not want to touch the plant and are looking for ways to get into the industry without actually being in the industry,” said Michael Dickerson of EcoMaster Corporation, which is currently building the Coachillin’ Industrial Cultivation and Ancillary Canna-Business Park in Desert Hot Springs.

Dickerson said these types of investors are generally developers, landlords and builders—basically, investors in any business that helps address the challenges of the grower. He said investing in service industries that are risk-adverse makes for a good rule of thumb—because he predicts that 90 percent of growers will go belly up, while ancillary businesses will be less affected by shifts in the industry.

Why does he think growers are going to have such a tough time? State environmental approvals are difficult to get, and long-term sustainability will be challenged by water resources, water rights and environmental compliance.

Kenny Dickerson, also of EcoMaster, notes that many in the industry are unprepared for regulation; after all, they’re garage-growers who aren’t necessarily experts on business models … making ancillary businesses a wiser place to start for investors.

Greg Rutten, COO of Mochi Holdings Group in Desert Hot Springs, also said that cannabis is risky because it is an emerging industry.

“Most private lenders will only lend 50 percent of a construction (amount), so operators need to raise 50 percent as equity and will (often) give a piece of the company or stock in the company or a preferred investment rate,” Rutten said.

Rutten said potential investors should make sure any grow operator has the necessary licenses from the state and municipality where it’s located, and has landlord approval for cannabis use. As with any business, investors should also fully read the grower’s business plan and make sure the business model clearly addresses all aspects of the business. In other words: Potential investors need to do their homework to make sure they’re making a sound investment.

One final thing to keep in mind when considering investing in the industry is the instability of local and state authorities, who are scrambling to keep up with the new and growing industry. Katherine Dickerson, also of EcoMaster, echoed and emphasized Rutten’s point about making sure any marijuana business has all the necessary permits—because they’re incredibly difficult to get.

“The state is saying they are relying on (permits being issued at) the local level, but there are people at the local level making laws who are not in the industry and do not understand it,” she said. “(Investors need to) do their homework to ensure that what they are investing in is prepared to deal with the red tape as the industry morphs and becomes standardized and becomes more consistent. It is going to be a bumpy ride for the next five years.”

Robin Goins is a business consultant for DR.G Consulting and works extensively in the cannabis industry in the Coachella Valley. For more information, visit www.drrobingoins.com.

Published in Cannabis in the CV

After California’s legalization of cannabis in January 2018, many people in the Coachella Valley noticed the start of a “Green Rush” of business—and have questions about how it will affect the economics in the valley.

Since this is a new industry in the state, that question can be answered, at least in part, by examining the outcomes in states that already have a history of legalized cannabis, such as Colorado. There is a great deal of data that can be gathered from that state showing the Coachella Valley may be on its way to—pardon the pun—much greener pastures.

In March, The Denver Post reported the results of a landmark study done by Colorado State University-Pueblo in Pueblo County, which found that legalized marijuana had an unprecedented impact on the economy. It found that the cannabis industry contributed $58 million to the local economy of Pueblo County alone in 2016. Once the costs of the industry were deducted—such as additional law enforcement and social services—the county still netted a $35 million economic benefit.

Other positive outcomes have included an increase in jobs, home values and philanthropic contributions, such as school scholarships and other community investments. A September 2017 article in Denver newspaper Westword reported on a study by the University of Wisconsin-Madison showing that the average property value for homes within a tenth of a mile of a dispensary increased by $27,000 after legalization. Westword reported that the study “also identified some underlying factors that may have increased property values in vicinities closest to dispensaries, including lower crime rates, additional amenities nearby and a surge in housing demand because of Denver's growing marijuana sector.” The study concluded that the industry had created 23,407 full time jobs in the state by January 2017.

In other words … so far, so good on the economic front. However, newly legal marijuana brings with it more than just business. In 2016, Andrew Freedman, then Colorado’s director of marijuana coordination—often called the state’s “marijuana czar”—told High Times: “At the end of the day, the debate shouldn’t be about tax revenue. ‘Should we lock up fewer people for marijuana?’ vs. ‘Is this going to create more of a burden on public safety?’—that’s where the debate should be.”

Fortunately, the news thus far is good regarding public safety, too. I have seen no data that suggests legalization had any impact on homeless rates or marijuana use among youth—two frequent concerns in communities when marijuana is first legalized—and some peer-reviewed studies show legal marijuana actually decreases crime. A 2017 study published in The Economic Journal concluded: “We show that the introduction of medical marijuana laws leads to a decrease in violent crime in states that border Mexico. The reduction in crime is strongest for counties close to the border … and for crimes that relate to drug trafficking. In addition, we find that MMLs in inland states lead to a reduction in crime in the nearest border state. Our results are consistent with the theory that decriminalization of the production and distribution of marijuana leads to a reduction in violent crime in markets that are traditionally controlled by Mexican drug trafficking organizations.”

So … what does all of this mean for the Coachella Valley, as more and more cities began allowing dispensaries and other businesses? The overall outlook is excellent as the one-year anniversary of state legalization approaches. Yes, challenges remain as local governments continue to grapple with what they will allow; however, the economic impact cannot be denied: There’s no doubt there are great financial gains to be had throughout the valley as we go green.

Robin Goins is a business consultant for DR.G Consulting and works extensively in the cannabis industry in the Coachella Valley. For more information, visit www.drrobingoins.com.

Published in Cannabis in the CV