City Council to consider cannabis ordinance; Tahoe Wellness Cooperative hoping to settle lawsuit
January 14, 2019
A settlement proposal to terminate a lawsuit between South Lake Tahoe's only legal cannabis business and the city fell short Tuesday, but the discussion did spark a slight bit of optimism.
City Council met in closed session to consider the proposal put forward by Tahoe Wellness Cooperative. The discussion lasted about 30 minutes.
While the specific language of the settlement was rejected, the conversation between the two sides continues, according to James Anthony, an attorney representing Tahoe Wellness.
While unwilling to go so far as to say he's "cautiously optimistic," Anthony told the Tribune he is hopeful Tahoe Wellness and the city can agree to terms that would allow them both to dismiss the lawsuit.
The two sides have been locked in a legal battle since the city rejected Tahoe Wellness' renewal application in 2016 on grounds that it was insufficient. A court ruled in the city's favor, and Tahoe Wellness appealed. The case is currently before the appellate court.
The ongoing negotiation is happening as the city continues to work on a cannabis ordinance to allow recreational marijuana businesses in South Lake Tahoe. Council is expected to consider the latest draft of the ordinance Tuesday, Jan. 15.
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How that ordinance addresses Tahoe Wellness is at the heart of the effort to squash the lawsuit.
Specifically, Tahoe Wellness is seeking assurance that it will have the ability to apply for a permit after a three-year grace period established in the current draft ordinance.
They also want to operate under the new city code and current state laws, rather than the city's medical marijuana code, which was created years ago and would be rendered meaningless following the adoption of a new ordinance.
And, Tahoe Wellness wants the ability to expand, in accordance with all building codes and requirements, should it choose to do so.
3 sticking points
City Council last debated the cannabis ordinance in December. It was the first meeting with three newly elected members — although Councilor Cody Bass, who founded Tahoe Wellness, recused himself from the cannabis discussion due to his business interest in the industry.
Similar to previous drafts, the ordinance would have allowed a limited number of cannabis businesses in the city through individual development agreements.
It also would have allowed Tahoe Wellness to continue operating in its current location under the city's old medical marijuana ordinance for three years while allowing it to expand to "adult use retail."
"Adult use" is used to describe non-medical marijuana business.
After some discussion, council agreed that the intent of the three-year exemption period is to allow Tahoe Wellness to continue all its current uses — which include cultivation, retail and several others — for adult use during those three years.
Council changed the language to allow Tahoe Wellness to operate all its current uses for "adult use" during the three-year exemption.
The three years is intended to provide Tahoe Wellness time to come into compliance with the zoning — the city maintains the zoning in that area does not allow for the type of license Tahoe Wellness would need in order to continue all its current uses for adult use.
Tahoe Wellness would achieve compliance either by changing the zoning through the Tahoe Regional Planning Agency or by relocating.
Anthony said that despite the fact that creates a difficult situation for Tahoe Wellness, they are willing to agree to the three-year exemption as a compromise.
However, they want assurance that they can receive a license should they achieve compliance by the end of the three years.
The ordinance, as it stands, allows for a limited number of each type of license.
As Anthony explained, Tahoe Wellness does not want to put in the work to achieve compliance only to be told, when all is said and done, that there are no licenses currently available.
Aside from assurance that there will be a license available at the end of the three years, Anthony said TWC also wants to be held to the city's new cannabis ordinance, not the old medical marijuana ordinance.
Although that has yet to happen, City Council moved in that direction in December when it revised the draft ordinance to apply two elements of the new law — the requirement of a public safety license and the ability to share revenue with the city — to Tahoe Wellness.
"It seems like the new council is moving in that direction," Anthony observed.
Tahoe Wellness also wants to delete language barring it from expanding its footprint.
If an agreement on those three points can be reached, Anthony said Tahoe Wellness will agree to settle its lawsuit, which is currently before the appellate court, against the city.
Tahoe Wellness also would agree to not seek a referendum against the new cannabis ordinance, and it would agree to not file a lawsuit seeking to strike down the ordinance.
However, agreement on some or all of those three points would require changes to the cannabis ordinance, which would further delay its implementation.
That would likely be unwelcome news for some hopeful entrepreneurs who have been waiting to jump into South Lake Tahoe's legal adult use cannabis business.
Mayor Brooke Laine told the Tribune the city has tried to work in good faith with Tahoe Wellness throughout the process. At the same time, the city has to look at the big picture when it comes to establishing a legal adult use cannabis industry in South Lake Tahoe.
Some of those individuals hoping to enter that industry have angrily pointed to Tahoe Wellness, saying that it has single-handedly delayed the process at the expense of those hoping to establish a cannabis business.
Anthony successfully spearheaded a referendum effort in 2018 against a cannabis ordinance approved by the previous City Council. The ordinance would have allowed for a limited number of adult use cannabis businesses in the city. It also would have allowed TWC to continue operating as a medical business only, although it could have applied for adult use permits.
In response to the characterization that Tahoe Wellness has bullied the city to ensure its own self interests, Anthony said he understands the frustration by some hoping to open a cannabis business in South Lake Tahoe.
But, he added, it is ironic that the anger is being directed at a business that has fought for years for cannabis rights.
"I understand that it's frustrating when you're trying to start a new business, and TWC wants nothing more than to have a vibrant, broad-based cannabis industry in South Lake Tahoe … We want that."