CALIFORNIA CITY -- California City Council rejected three appeals for marijuana delivery permit renewals in a series of 3-2 votes during the Tuesday, June 23 meeting. Mayor Chuck McGuire and Councilmember Nick Lessenevitch were the dissenting votes on all three decisions.
For two of the three appellants - Grandma’s Stash, LLC. and MACC Consulting, Inc., the discussion revolved around permits the city erroneously issued.
Cal City Natural Delivery failed to adhere to renewal requirements under city ordinance.
The appeals came after the council revoked and denied renewal at the council’s direction on April 28 based on grounds that the three businesses had not followed the requirements for holding the permits, including renewing 60 days prior to expiration and not being in operation for four months.
Twelve permits were issued based on a score sheet in April 2019. Two storefront permits were issued as well as 10 delivery permits. Two of the delivery permits were issued to the storefront businesses.
California City can reject a permit renewal under certain circumstances, including failure to file at least 60 days prior to expiration or if the business was not in operation for at least four months prior.
Attorney Sean Maddocks, who represented Grandma’s Stash, LLC., said that he believed his client satisfied the burden of proof to have its permit renewed in a written appeal.
The city based its decision to revoke the permit because it was “issued in error.”
Grandma’s Stash is a business venture by Jennifer Herren, Carlos Zepeda and Jade Suyematsu.
In the business’s written appeal, it was pointed out the city issued the permit in August 2019 instead of April of that year based on a letter the business received from City Manager Anna Linn’s office; the city did not select Grandma’s Stash delivery permit in the initial selection process.
Linn was not city manager at the time the permits were issued, a role held by Bob Stockwell prior to his termination in May 2019.
According to Maddocks, the letter stated that “met all the requirements necessary per the City of California City’s Cannabis Regulations and Ordinances and currently qualify” to hold a permit.
Grandma’s Stash obtained a state license in October 2019, according to Maddocks.
Between November and January, the business attempted to establish a conditional use permit hearing so it could go forward with operations. Maddocks said the city even accepted a payment for a plan check fee needed for proposed tenant improvements related to the delivery-only marijuana business.
While the business initially had a conditional use permit hearing scheduled for Jan. 22, Maddocks said a hearing was rescheduled or delayed multiple times, including those created by Newsom’s stay-at-home order.
Maddocks said the delays contributed to the business’s inability to sustain operations for the four-month period required under the city ordinance.
“Had they been able to move forward, I believe they would have been in continuous operation as early as Feb. 24,” Maddocks said.
Maddocks in his written appeal also stated that the August letter was consistent with the city ordinance for permits, and as such wasn’t issued in error.
Linn, at Tuesday’s meeting, noted that she had no authority to issue initial permits but that the letter served as local authorization to move forward to obtain a state license — a necessary requirement under city ordinance.
She later explained that two cannabis storefronts would also receive delivery permits, which bumped Grandma’s Stash from 12 to 14 on the overall list, but failed to be relabeled as such on an Excel sheet.
“Staff looked at it (the list) and saw the name was next to 12,” Linn said.
The data was not corrected on an Excel spreadsheet used to conduct rankings, and Grandma’s Stash was later included in the August letter the business received.
“The letter was in assumption and error that the business was number 12 on the list,” Linn said. “We looked at it and I signed the letter. The letter is not a permit, but the letter does carry the same weight with the state because the state did declare they (Grandma’s Stash) did qualify.
McGuire added that decision for initial permit authorization falls to the city council.
Maddocks also noted because of the date it was issued, the 60-day deadline to renew a permit ended on June 24.
“It seems odd that the city would allow my client to move forward, have the CUP continued to be processed and a date set for a hearing and collect a plan check fee if the permit wasn’t moving forward,” Maddocks said.
Linn noted a score sheet ranked Grandma’s Stash as number 12 in the list of total permits granted. She added there was a mistake and that Grandma’s Stash was ranked at 14th on the list.
Maddocks said based on that letter “my client made substantial reliance and detrimental investments to mature their interest in what they believed was a permit assigned by the city.”
He added there was a nine-month period before Grandma’s Stash received notice that a permit was issued in err.
“They’ve done everything possible to get up and running,” Maddocks said. “They’ve contacted the city, had constant communication and tried to move forward with their permits.”
Councilmember Ron Smith, noting that while he wasn’t on council in April 2019, said “it was very clear for those who were there and pursuing a dispensary [that knew] it was the council who was doing the awarding and [the council] went off staff recommendations.”
He later added the delay between permits being approved and Grandma’s Stash receiving a letter should have been a clear red flag for the business, something Linn confirmed.
“Everyone who qualified on April 27, 2019, was notified right away,” Linn said.
Mayor Pro Tem Donald Parris noted that California City can revoke a permit issued in error and should be the case for Grandma’s Stash.
Suyematsu, one of the owners, said the ranking wasn’t correct because all the businesses were re-tallied during the April 27 meeting.
“We were never given any written notification that our [permit] was revoked,” Suyematsu said. “If we had been given notification then we would not have continued to pay fees for a license and permit that doesn’t exist.”
Suyematsu added the council awarded the initial 10 licences and believed her business was next in line and waiting to hear from the city.
Parris said he distinctly remembered that Stockwell had mentioned the two dispensaries received delivery permits. He added that the meeting was live streamed and that Stockwell mentioned Grandma’s Stash fell outside the 12 ranked businesses.
Councilmember Lessenevitch acknowledged mistakes had been made, on top of a nexus of other events including losing a city manager and having an interim step in and staff using different information sources that resulted in a green light for Grandma’s Stash.
“Right or wrong, the city has given them encouragement to do something that is legal in our city,” Lessenevitch said, adding the cannabis industry was decided to be one to be beneficial for the city’s future. “I think the right thing is to allow them to renew the application and proceed.”
Parris argued the city council should not violate the municipal code, but McGuire countered in his personal belief “that the city messed up” and should consider Grandma’s Stash permit valid.
“I think that in this case we would be amiss to turn down business for the city, the potential of tax money for public safety,” McGuire said. “However we got down to this road, we ought to make things right.”
After the council denied the appeal, Maddocks said he was sorry “my clients were injured in this way” and that the decision made an “antagonistic relationship that was unfortunate for three individuals who invested large portions of their life savings to essentially be robbed by the city council and staff.” Maddocks added that he appreciated McGuire and Lessenevitch for their support.
MACC Consulting, Inc.
Yvette McDowell, attorney for MACC Consulting and its owners Victor and Rebecca Maccharoli, noted that her clients faced a similar scenario to Grandma’s Stash.
MACC Consulting was sixth on the list eligible for permits during the April 2019 meeting. Unlike Grandma’s Stash and Cal City Natural Delivery, MACC was not present at the meeting and was disqualified.
Out of the gate, while McDowell acknowledged the decision for cannabis permits lie with the council, she asked the city manager “to overturn her own decision” in revoking the delivery permit.
Linn said that her decision was made at the council’s direction and “was the ultimate decision.”
McGuire backed Linn’s statement, adding it was the council's decision to point her in the direction decided on April 28.
McDowell said her clients have attempted to be on top of everything.
“They did everything that was requested of them,” McDowell said, except to show up at the initial April 28 hearing. McDowell said that was because her clients never received notice.
McDowell said MACC Consulting attempted numerous conversations with the city to become operational.
“The reason they made these calls is because they heard nothing in writing as to when a hearing would be before the city council,” McDowell said. “When they did get in reach with someone, they asked who was in charge of cannabis and the answer was ‘I don’t know, that’s not my department.’”
McDowell said her clients received a letter from John Sellers on April 19, 2019, congratulating the company on moving to the next stage of the delivery-only permit process. However, she said there was no indication that they were required to appear at the meeting in which the permits would be issued.
Both councilmembers and Linn initially had never heard the name John Sellers, but later clarified that he worked for the firm that conducted the vetting and background checks.
McDowell said her clients never received any notification. On June 26, 2019, MACC was notified that it was being accepted for a secondary review decision for a council meeting and was ranked No. 6 “from what they had been told” but had never been told they were disqualified “for failing to appear when there had been plenty of time to notify them.”
She said MACC moved forward with the process of building out their facility. From June 25 to July 12, the business made 10 calls to the city asking for more information with no success.
After Rebecca Maccharoli spoke with a building department staff member, they were told if they wanted to get a permit, they would have to speak with Mayor McGuire. McGuire confirmed that he had spoken with Maccharoli.
McGuire said he had informed the staff member that while he thought MACC should receive the permit, the decision rested with the entire council.
McDowell said that the conversation included an offer of proof at multiple communication attempts, but was told that was not necessary and had been told it was an ongoing issue with the building department in general. She added at the end of the conversation, McGuire had said he would “speak with some people and get this sorted out ... and see if you couldn’t get their permit the following week.”
McDowell said that in July, during a phone conversation with the mayor, McGuire asked if Maccharoli would want to come pick up her permit that day and that “she was ecstatic” but still had not received any information that were originally disqualified due to a no show at the April 2019 meeting. She added that while on the phone Maccharoli said MACC was willing to stand in front of the council to provide information.
McGuire said he had signed a letter (which McDowell said was on a city letterhead) and took it over to the building office for pickup.
Linn, the city manager, countered that while there was a phone call that day and she had offered condolences to Maccharoli and would look into the matter.
“I committed to nothing,” Linn said.
When the permit was picked up, Linn recalled the city clerk saying they were not on the list of granted permits.
“The permit was issued in error and we understand because the signature on it was not from the city council proving that,” McDowell said. “But again, MACC has never been told at time verbally, email or snail mail that they were disqualified.”
MACC continued with its building out, investing over $100,000 according to McDowell.
Councilman Ron Smith asked why McDowell’s timeline included a June 26, 2019, phone call stating MACC had been disqualified. Maccharoli, calling in to the meeting, said that she had never been told she had been disqualified and only McGuire could clear it up.
When asked if anyone from MACC had watched the video of the April 28, 2019, meeting, McDowell said no; Smith said Stockwell, the city manager at the time, made it clear people who did not show up would be disqualified.
McDowell said with that perception, MACC applied for and received a state cannabis licence in October and in the interim continued to build out its facility, passing inspections in January.
“I was ready to open my doors on January 24, all I needed was the city license,” Maccharoli said. “I was under the impression that the mayor had given me a permit.”
On Jan. 24, MACC went to city hall to fill out paperwork for a local license in order to obtain cannabis product. McDowell said at that time they were told they were disqualified, were asked for a permit and provided a copy of it to staff. Upon consultation with the city council, they were told to come back after April and “that the city would try to accommodate them” and were assured they could get their license then.
McDowell added when she spoke with the city manager in February, she was told the city had “been in error for denying the permit.”
Linn said that in all conversations with MACC, any decision regarding permits would be decided by the council.
When a motion was made to deny the appeal, it failed for lack of votes. Councilman Bill Smith asked if a condition could be included in an appeal approval that MACC could produce results within 30 days.
City Attorney Christian Bettenhausen confirmed that can be the case, reiterating MACC’s claim to be up and running immediately to start conducting delivery-only sales.
Councilman Ron Smith noted that “our ordinance has totally been torn to shreds” because MACC never presented information before council. McDowell reiterated that her clients have been asking for that opportunity and have no problem providing information.
Bettenhausen said approval could be granted subject to presentation.
“You can impose whatever condition you want,” Bettenhausen said. City Planner Shawn Monk noted that the business never went through a staff development review and would need to be finished before it commences operation. Their location in a M1 zone doesn’t require a conditional use permit.
Ron Smith voiced opposition, calling it “a sham for them to go through and SDR and be able to open in 30 days.”
Mayor Pro Tem said based on the SDR requirement, MACC was not ready to go and should not receive a permit.
Council denied the appeal in a 3-2 vote, with McGuire and Lessenevitch dissenting.