POT RULE SLAMS BRAKES ON TWO

Ordinance issues death sentence to Greenlight, Green
Well

With a new ordinance regulating medical marijuana dispensaries hanging
in the balance, the Santa Barbara City Council, in a furious hunt for
votes, ventured into uncharted territory last week, issuing a death
sentence to two small businesses that it had permitted just months
before.

The ordinance passed with a resounding vote of 6 to 1. Councilman
Grant House registered the only objection. Although he supported the
bulk of the hard-fought ordinance, he said he simply couldn't chase
out two businesses -- marijuana dispensaries -- that had recently
opened with the city's blessing.

"It just gets down to fundamental fairness, not to mention legal
defensibility aE&" House told the Daily Sound during an interview the
day after the vote. "Causing a reputable business whose obeying the
law to literally go out of business, that's not an appropriate action
for us, the city."

When the council voted on the ordinance last week, the event marked
the culmination of nearly two dozen meetings this year, many by the
city's ordinance committee, that had a singular focus: marijuana.

Many of the gatherings were exhaustive, exasperating and painstaking.
As a result, the ordinance that was hammered out was widely considered
the product of a thorough and fair process.

But at the city council, when politicians began the process of weaving
their personal wishes into the ordinance, mincing words and brokering
compromises in the quest for votes, something unusual happened: the
ordinance was made retroactive, and a pair of dispensaries, the
Greenlight Collective and Green Well, were given six months to close
up shop.

For House, the city's new ordinance raises a fundamental, yet rarely
asked, question: "When is it appropriate for city government to create
a new ordinance and apply it retroactively? That's my concern," he
said. "We've always been careful not to damage the businesses that are
affected and this is a really strange application of the law."

Supporters of the ordinance say closing the dispensaries was a
necessary evil along the treacherous road to passing a more
restrictive marijuana ordinance, which many community groups, and all
council members, agreed was needed.

"I was not thinking about particular businesses one way or another,"
said Councilman Dale Francisco, in an interview after the meeting. "I
was thinking about the city."

The city's ordinance committee, made up of council members House,
Frank Hotchkiss and Harwood "Bendy" White, drafted a number of changes
to the old ordinance. But it was two seemingly minor amendments, which
traditionally would have been benign, that came back to bite the
Greenlight and Green Well.

The Green Well, 500 N. Milpas St., is located just over 500 feet from
the nearest school, just enough to comply with the city's original
ordinance. But the new ordinance stretched the distance to 600 feet.

The Greenlight, located in a century-old building at 631 Olive St., is
far from a school. But during one ordinance committee meeting, the
city block where the dispensary is located was circled and made
off-limits to dispensaries.

If the committee had been regulating bakeries, auto body shops, or
even liquor stores, these changes wouldn't have had any impact on
existing businesses.

According to Paul Casey, the city's community development director,
existing businesses caught in the backwash of new ordinances are
typically allowed to remain open under the designation "existing
non-conforming."

"Usually something like this would get grandfathered in," he said
after the meeting. "And so this is different and unique."

For example, Casey noted that when the city changes an ordinance
affecting the physical nature of one's property, like setbacks or
building heights, the city doesn't force property owners to shave
several feet from their structures.

There are many obvious reasons for this, the main one being that the
costs associated with knocking down walls and trimming building
heights whenever a city council decides to tweak an ordinance would
likely spell financial ruin for those involved.

It is also widely regarded as being unfair.

But when the small businesses being told to shut their doors were
marijuana dispensaries, the majority of the city council didn't
publicly register significant worry that two business owners --
nonprofit owners, actually -- would lose their livelihoods and
investments.

Indeed, the same city that had only months before given a stamp of
approval to the two dispensaries, has, in the opinion of the
dispensary owners, undergone a devastating change of heart.

It's "classic injustice," said Sefton Graham, director of the
Greenlight. "That's why I think we're going to win, somehow; because
it's just too in-you're-face not fair."

THE GREENLIGHT

"Just make sure it's legal."

That's what Graham's mother, a retired schoolteacher, told her son
before lending him money to open the Greenlight.

Graham soothed his mother's concerns by telling her about the about
the city's ordinance. Rather than be discouraged by the city's
restrictions on where, when and how a marijuana dispensary could be
operated, he was encouraged.

"That's the only reason we went for it," Graham said. "We waited until
they did their ordinance."

In late 2008, Graham submitted his permit application, thus beginning
a yearlong slog through the city's planning process -- the same
journey, but quite possibly riddled with more bureaucracy -- that
hoteliers, restaurateurs and many other business owners must take.

Graham picked his location from a map he found on the city's Web site,
which showed possible locations for a dispensary. Once city planners
signed off on the spot, Graham signed a lease.

In the months that followed, Graham and his checkbook were at the
behest of city planners, who told him he must install a fire wall,
fire sprinklers and a larger water line. He landscaped around the
small parking area, which now has a handicap parking space. He
installed wheelchair ramps to make the place compliant with the
Americans with Disabilities Act.

When a city planner told him she didn't like the pavers he'd selected
for the front walkway, explaining that she preferred a more expensive
brand, he didn't argue.

When the planning commission asked that a dispensary-paid security
guard patrol the neighborhood and nearby Ortega Park to make sure
people weren't smoking pot, Graham and all of his employees became
certified security guards, just to make sure one was always on duty.

When someone raised the possibility that the 100-year-old building
might be historically significant, Graham put off opening and paid for
historical review, which came back negative.

And when a planner insisted that the olive trees Graham wanted to
plant out front be fruitless, he was told to commission new plans that
read just so.

A quarter of a million dollars and roughly a year and a half after
filing for a permit, Graham opened the Greenlight, a bona fide
nonprofit co-op -- precisely the kind the city had spelled out in its
ordinance.

But as Graham navigated the potholes of city planning, the political
winds changed, and the city, with a few new faces on council, began
drafting a fresh ordinance.

Even so, Graham said he wasn't terribly concerned. That is, until a
few weeks ago, when the city council took a hatchet to the ordinance.

Under the ordinance that went to the city council, five dispensaries
would have been allowed to remain in business, the Greenlight and
Green Well among them. It was clear that some council members wanted
to cap the number at three. So the Greenlight and Green Well would be
allowed to stay open under existing non-conforming status.

The exact word used to deal with the pair was "attrition," meaning
that when they closed, no new dispensaries would be allowed to open, a
process that over time would lead to three dispensaries.

However, Graham's ears perked up while watching one city council
meeting when the word attrition was replaced with amortization.

"I'm thinking, 'holy shit, what does amortization mean,'" Graham said
during an interview last week at the Greenlight as members of his
co-op came and went, buying strains of marijuana with names like
"Diamond OG," "God's Gift" and "Pineapple."

He would find out that stuck between the words "six-month" and
"period," the Greenlight was officially given an execution date.

For Graham, a soft-spoken 35-year-old with blond hair that hangs below
his shoulders, the city's decision to default on its end of the deal
wasn't entirely surprising. From the start, he said he felt like the
city, or someone, was gunning for him.

Still, Graham and his mom sunk a good chunk of money into an operation
that the city christened with a permit -- a piece of paper that
typically gives business owners the piece of mind that months or years
down the road, the city won't walk in and order them to close.

Some have said Graham could make his money back in the next six
months. But under the rules of a nonprofit, he said most of his
profits go to co-op members, who provide the inventory.

And since it took a year to get through the city's process the first
time, and three existing dispensaries have already been tabbed to stay
in business, the likelihood of Graham opening somewhere else is doubtful.

Now, Graham says he has few options other than to file a monetary
claim against the city.

"I don't want to sue the city," he said. "We're trying to be a low-key
collective. We're just trying to be what [Proposition] 215 wants us to
be."

On at least one front, city leaders may have gotten off easy: "They're
lucky I didn't bring my mom to the city council meeting," Graham said.

THE GREEN WELL

James Lee and Nat Reinke could have started growing a crop of pot in
some backyard, have a bunch of people sign on as co-op members and
start selling marijuana from their house -- a relatively risky, and
even dangerous, process that in the state's murky and ever-changing
interpretations of Proposition 215, might well be legal.

But the city had an ordinance and would issue a permit to anyone with
enough patience to jump through the regulatory hoops.

"We didn't want to go anywhere that didn't have an ordinance," said
Lee, who after becoming disillusioned with his career in corporate
financial planning, relocated to Santa Barbara to focus on opening the
Green Well. "It was a legal climate that we felt was right for this
type of solution."

Like Graham, Lee and Reinke set about inching through the city's
permitting process.

Among other conditions, they were told to hire an outside security
firm to guard the doors. A few weeks ago, Lee, needing money for rent,
said he sold his 1998 Chevy Tahoe to the security guard. Reinke joked,
somewhat seriously, that the security guard was the only person
pulling down a steady paycheck.

When neighbors expressed concern that 18 to 19-year-old students from
nearby Santa Barbara High School might purchase marijuana and take it
to school, Lee said he hiked the minimum age for co-op members to 20.

Lee and Reinke now face the same reality as Graham: closing in six
months or filing a monetary claim against the city, neither of which
they want to do.

"I apologize to the taxpayers of Santa Barbara, although it shouldn't
be me apologizing, it should be the city council," said Lee. "It's
going to cost them around a half a million dollars if they want to
settle the damages with us."

Looking back, Lee and Reinke wondered why they bothered to obtain a
city permit in the first place. Or, for that matter, why any
prospective business owner would ever bother to apply for a city
permit again, since in the case of the Green Well, the city's word
wasn't worth the paper it was written on.

"It doesn't matter what business it is," Lee said. "What the city
council has done is they've turned the permitting process into a
complete joke."

Lee and Reinke aren't the only ones who recognized the potentially
damaging message the city's decision sends.

Councilman House, who owns a sewing machine shop on Canon Perdido
Street, said he wouldn't take kindly to the city council deciding that
sewing machines couldn't be sold on that street.

"I can't imagine what it would be like to be those two fellas on the
corner of Haley and Milpas streets," House said, referring to Lee and
Reinke. "They'll be effectively out of business with leases that they
have to honor, or find somebody to take over, and a lot of money put
into improvements."

House continued, noting that the Greenlight and Green Well bent over
backwards to be the kind of businesses the city wanted: "It's not as
if they did something that was contrary to the city's ordinance to get
into that situation. These were ones that were a real example of what
we're talking about."

Councilman Williams, who voted in favor of the ordinance, said the
fate of the Greenlight and Green Well was the most unfortunate result
of the process.

Nevertheless, he said the need to get a new ordinance on the books
trumped, in his mind, the future of the Greenlight and Green Well.

"I kind of feel like we're punishing the folks who are playing by the
rules and aren't punishing the ones who aren't playing the rules and I
think that's a problem," Williams said, making a reference to one
dispensary, the Pacific Coast Collective, that has run into legal
problems but could stay open under the city's new ordinance. "However,
the reason I voted for it is because it's an untenable situation to
not have these regulations in place."

Williams said he put forward a number of proposals to the council that
would have preserved the Greenlight and Green Well, but nothing stuck.

Despite his support for the ordinance, Williams acknowledged the
inequity, saying the Greenlight and Green Well, in his opinion, were
being treated "worse than any other commercial business that has ever
existed." He went on, saying the ordinance and its treatment of the
pair of dispesaires was "precedent setting and every business owner
should be concerned."

When Lee and Reinke sought a permit, they did so because they assumed
it offered certain legal and procedural protections, they said.

Supporters of the new ordinance, like Councilman Francisco, noted the
fluid nature of the laws regulating medical marijuana. Although he
conceded the demise of the Greenlight and Green Well was unfortunate,
Francisco said any dispensary owner should have known that the rules
could change.

"I agree that changes like this can be a hardship on a business, no
question about it," Francisco said. "But it's the reality of this
particular kind of business, not just here but all over the state."

But because the owners of the Greenlight and Green Well purposely
waited until regulations were in place to open, they were blindsided
when the city wrote its new ordinance in stone and went back on its
word.

"By the end of that meeting we had been traded out of the deal," Lee
said. "We're collateral damage in the political negotiations."

A CHANGE OF HEART

When the entire city council took its first look at the draft
ordinance, the five-dispensary model was in tact, and the required
number of votes -- five -- to put the new laws on the books, existed.

But an eleventh-hour change of heart by Councilman Hotchkiss threw the
ordinance into flux.

A few days before the ordinance was expected to go before the council,
Hotchkiss, who had helped draft it, withdrew his support, saying he
became convinced the new regulations weren't adequate.

"There are just too many things wrong with [dispensaries]," he told
the Daily Sound on June 7, in a story about his unexpected U-turn.
"You try to repair one problem and another becomes apparent."

The fallout from Hotchkiss' lack of support was vast. In addition to
sparking a flurry of compromises from various council members, who
jockeyed for the adequate number of votes, it prompted a suggestion
that a measure be placed on the November ballot that, if approved,
would simply ban storefront dispensaries altogether.

But one of the key compromises that led to the Greenlight and Green
Well being written out of the ordinance, according to Councilman
White, was the reduction of allowable dispensaries to three -- a
number White himself was in favor of.

"They went through a very arduous planning process, and yet at the end
of the day, this was a key ingredient in putting together a compromise
that resulted in a new ordinance," White said last week in an
interview. "There would not have been a new ordinance without [the
number three] being part of it."

It was presumed that Francisco and Councilwoman Michael Self never
would have gone along with the ordinance, five dispensaries or not.
Their eventual support hinged on the inclusion of a ballot measure.

Francisco's unwillingness to support a new ordinance was built on his
belief that storefront dispensaries, even the nonprofit kind, aren't
allowed under state law. But with a ballot measure as part of the
deal, Francisco and Self went along.

Asked if he felt making the new ordinance retroactive sent a dangerous
messages to local businesses, Francisco said he didn't. And unlike
some of his colleagues, Francisco said he didn't see the new ordinance
as being particularly rare.

"It's not unprecedented," he said, noting that in the 1970s, the city
down zoned the number of residential units that could be built per
parcel, which sucked value from many properties. "And the decision,
again, was based on what people wanted to see in Santa Barbara."

Asked last week about the fate of the Greenlight and Green Well,
Hotchkiss, channeling concerns by community members that the
dispensaries weren't following the rules, said: "None of these guys
could legitimately say that they were a collective. They were wolves
in sheep's clothing and council rightly saw that and said 'Sorry guys,
take a hike.'"

For Lee and Reinke, who have gone to great pains to make sure the
Green Well is operating as a true nonprofit, Hotchkiss' accusations
were surprising.

"I don't even think that's worth responding to," said
Lee.

Reinke, making reference to Hotchkiss' last-minute switcheroo on the
ordinance, said: "He made a joke of the ordinance committee."

The Greenlight and Green Well will likely have their doors open in
November when voters have their say on the future of storefront
dispensaries in Santa Barbara.

But regardless of what the electorate does, the grinding wheels of the
legislative process has left Graham, Lee and Reinke floored by the
audacity of a city that told them to go ahead and open their
businesses, only to turn around and make them close.

"They've made it clear that it's not necessarily about following the
rules," Lee said. "It's about who you know in this town aE& It is
about politics."