CANNABIS DISPENSARY TAKES ARCATA TO COURT OVER CULTIVATION BAN

ARCATA - An Arcata cannabis dispensary has filed a petition in
Humboldt County Superior Court over the Planning Commission's
decision to prohibit commercial cultivation of medical marijuana
downtown. The petition names the City of Arcata, City Council and
Planning Commission as respondents.

In papers filed Tuesday, July 1, Humboldt Medical Supply (HMS) asks
that the Planco's decision, later upheld by the City Council, be
stayed so that it may cultivate cannabis at its new facility at 855
Eighth Street next to the Arcata Post Office.

At its Feb. 26 meeting, the Planco determined that dispensary-scale
marijuana cultivation qualifies as agriculture, and that agriculture
is not an allowable activity in the Central Business District under
the General Plan and Land Use Development Guide (LUDG). The decision
was appealed to the City Council, but upheld by the council on April 22.

The Planco had taken up the matter after another nearby dispensary,
The Humboldt Cooperative (THC), applied for a building permit for its
pre-existing on-site grow, which forced the issue to come before the
commission. THC and the neighboring Humboldt Patient Resource Center
(HPRC) have for years cultivated cannabis at the former Isackson Ford
dealership located on I Street between Sixth and Seventh streets.

However, HMS, which had just completed construction of its new
offices and relatively modest grow rooms the month before, was unable
to initiate cultivation because of the City decision. This, alleges
the dispensary, means the "clear loss" of its $188,000-plus
investment in the new facility, which was designed to integrate
cultivation, processing and dispensing at the same location.

Deal or no deal?

HMS is represented by Oakland land use attorney James Anthony and
local attorney Gregory Allen. Both say they have gone to court
reluctantly and only after exhausting procedural remedies.

Anthony said his preference is that the City to simply suspend the
Planco decision and restore what he called the "status quo" a; HMS's
previously permitted ability to grow as well as process and dispense
cannabis at its downtown facility.

"We just want the original deal," Anthony said. "HMS was fully
permitted and approved, and on the basis of those permits, the
landlord and tenant spent an enormous amount of money on these
facilities. In that situation, the government doesn't get to change
its mind and say, 'No, you don't get to do this.'"

He said timely suspension of the council/commission decision would
render moot any further legal action, such as suing for an actual
reversal of the decision or for damages. He said judges are "very
sensitive" to property rights, and expressed confidence that the
court would be sympathetic to HMS's request.

City attorney Nancy Diamond, who had just completed a preliminary
review of HMS's court filings, said Tuesday afternoon that she is
optimistic that the dispute will not reach the lawsuit level. "My
hope is that we can stay any action on the lawsuit pending
development of City guidelines," Diamond said.

She said the HMS petition doesn't inhibit the Planning Commission or
City staff from continuing to consider new guidelines under which the
dispensaries may operate.

Tuesday afternoon, Community Development Director Larry Oetker met in
closed-door session with representatives of all four Arcata cannabis
dispensaries to discuss the draft body of dispensary regulations
pending before the Planco. Oetker had invited each dispensary to send
one representative. In attendance were Tim Littlefield of the Arcata
iCenter, Eric Heimstadt of HMS, Mariellen Jurkovich of the HPRC and
Carla Ritter of THC.

The nature of the discussions was not immediately known. At
Jurkovich's request, no pictures of the group gathering to meet at
City Hall were allowed, with Oetker closing the door of the City
Manager's Conference Room on a photographer as participants took their seats.

Oetker will likely summarize for the public the issues discussed at
the meeting during the Tuesday, July 8 Planco meeting.

Cannabis contradictions

HMS's application for a stay notes that while THC and HPRC continue
to grow marijuana within two blocks of its location, despite THC
having been denied the required building permit on Feb. 26. States
the HMS petition, "That the City has done nothing to stop growing or
dispensing again shows that the City has little interest in affecting
the other medical cannabis dispensaries."

The petition further casts the Planco decision as groundless and
inconsistent with City policies, since nothing on the medical
cannabis scene had changed between the time HMS received its
operating permits and the subsequent Planco ruling that downtown
growing isn't allowed.

The petition claims that the loss of on-site growing will render HMS
"unable to continue in business." This, it says, will result in loss
of employment for the dispensary's 10 employees.

Plans, permits and process

Planning commissioners have staunchly defended the integrity of the
General Plan in this and other, unrelated land use matters such as
the Trillium Creek subdivision, which was denied June 24 on grounds
that would have violated grading regulations.

In denying THC's building permit, commissioners have stated that
prime retail space downtown ought not be displaced by non-retail use
such as agriculture.

The Planco decision still allows cultivation in industrial and
agricultural zones, but dispensary operators have resisted relocating
their grows off-site, citing security and safety concerns, plus the
expense of maintaining a separate facility.

The HMS petition contests the commission's definition of its planned
248 square foot grow as agriculture, and casts the Planco ruling as
an after-the-fact reversal of policy for the City, rendered without
adequate notice or due process.

This, HMS claims, abruptly revoked previously-issued City permits and
negated the dispensary's good-faith efforts at compliance.

As listed in the petition, those efforts include:

Extensive discussions beginning in late 2006 with City planning and
building officials, Community Development and members of the City Council.

Retention of an architect, creation of blueprints and construction
plans and obtaining of a 10-year lease on the Danco Group-owned
property on Eighth Street.

Obtaining a City-issued building permit in October, 2007.

Obtaining a City-issued final occupancy permit on Jan. 17 of this year.

The petition claims that no notice was given HMS prior to the
game-changing Feb. 26 decision. It cites case law to support its
claim of a "vested" right to cultivate on site, in that HMS had
complied with and completed a City-defined process over a period of a
year and a half.

Now they tell us

Alleges the petition, "At no time from initial discussions with the
City to the issuance of the final vested permit was there ever a
suggestion from anyone in the building department or City Council
that there was any possible problem with this project."

Since the February Planco ruling, both THC and HPRC have continued to
cultivate on a much larger scale than HMS had planned. THC maintains
several active grow rooms to cultivate medicine for its 6,000-plus
patients. THC, like the Arcata iCenter, augments its cannabis supply
with purchases of unknown origin from private vendors.

In contrast, HMS expected to use just 248 square feet - about six
percent of its 4,040 square foot leased space - to grow cannabis for
an eventual 200 or so patients.

Heimstadt, HMS's CEO, has extolled his unused downtown cultivation
facility as state-of-the-art and overcompliant with all safety
requirements and building codes, utilizing stringent fire prevention
measures and NASA-grade ventilation.

HMS currently carries 80 patients and cultivates medicine in
Heimstadt's private home outside city limits a; an arrangement HMS
would like to end.

"We do this with heavy hearts," Heimstadt said, calling the court
filing a "last resort." The law allows 90 days from the April 5
council rejection of HMS's appeal to file a legal challenge, the last
day being July 1, the day the petition was filed.

"If we had had the same information a year ago, or even six or eight
months ago, we would have rented an industrial space. But the City
said, 'go go go.'" Now, he said, after making the nearly $200,000
investment in a fully integrated facility, HMS can't afford to
construct an entirely new off-site grow facility.

Heimstadt said he has had expressions of support from several
planning commissioners and city councilmembers. Some neighbors active
with the anti-grow house "Nip It In The Bud" movement have stated
support for cultivation at dispensaries and HMS in particular as a
means of reducing residential grows.

"It's everyone but four planning [commission] people," Heimstadt said.

Some HMS personnel have publicly called for dismissal of Planning
Commission members who have ignored instructions from the City
Council. In sending the matter of dispensary regulation back to the
Planco on April 2, the council specifically directed that the
commission look for ways to allow dispensaries to cultivate on site.

But commissioners have resisted that direction, holding fast to their
finding that commercial cannabis cultivation is agriculture and that
ag isn't allowed downtown under the General Plan and LUDG

Precedents, PDPs and permits

The City has routinely granted building permits allowing medical
cannabis cultivation since the late 1990s, when the now-defunct
Humboldt Cannabis Center operated an upstairs grow at its former H
Street location.

Heimstadt said his permits explicitly refer to on-site cultivation
and were signed by City officials. But after the Planco decision,
"they crossed off the sign off," he said. During a later study
session, the City Council seemed to settle on limited on-site
dispensary cultivation as an alternative to residential medical
grows, previous decisions notwithstanding.

The Planco has discussed the possibility of implementing Planned
Development Permits (PDPs) for the existing dispensaries in the
Central Business District. The PDPs would enable "overlays," which in
effect allow exemptions to existing land use regulations such as the
ban on agriculture.

Though non-compliant in the wake of the Planco's building permit
denial, THC has not applied for a PDP. Nor has HPRC. Prior to the
meeting with Oetker and other dispensary representatives Tuesday,
July 1, HPRC's Jurkovich said that her dispensary is fully permitted
to cultivate, process and dispense, and doesn't need a PDP to
continue its current operations.

Respecting regulation

The HMS petition and possible lawsuit added yet another cross-current
to Arcata's roiling cannabis scene, now caught up in controversies
over residential cultivation, neighborhood impacts, environmental
issues, patient and property rights, the proper role of media and
government, contradictions between local, state and federal law and
other related matters. HMS attorney Anthony said he and his client
recognize the City's authority to regulate cannabis, from grow houses
to dispensaries. But he said he also expects the City to adhere to
its agreements.

"The City Council and the Planning Commission are our regulators," he
said. "We want to be regulated, controlled and taxed. We thought we
had a deal, and they reneged on it." If the City doesn't suspend its
ban on agriculture downtown, he said HMS could petition for an
outright reversal of the decision, or press ahead with a damage
claim. It might even consider a City buyout of the dispensary.
"That's a possibility, I suppose," he said.

Anthony, considered one of California's leading attorneys with regard
to cannabis and related land use issues, said that the City is fully
within its rights to set guidelines for grow houses. "It's completely
legal for them to have some rational set of regulations for
high-intensity agriculture in residential areas," he said.

That opinion contradicts assertions by some Arcata cannabis activists
and dispensary operators that the recent state Supreme Court ruling
on SB420 renders illegal any City efforts to regulate Prop
215-related cultivation in private residences.