Pot Clubs Prepare to Close as Permitting Deadline Approaches

Closing time has come and gone for about 30 pot clubs in San Jose since the city enacted a sweeping regulatory program over the summer.

Judging by a database of permit applications from the city, at least a couple-dozen more will soon fall under the axe because they fall outside of allowable zoning.

Of the 80 pot clubs open in San Jose earlier this year, 47 have applied for zoning permits. So far, 20 were denied, 20 are under review and six were approved. Those clubs still have to apply for separate operational permits.

The deadline for clubs to submit that set of applications to the city—one for zoning and the other for operational compliance—comes Friday. Adding teeth to the new rules, the City Council in September adopted a slate of fines ranging from hundreds of dollars for minor infractions to $50,000 for multiple violations.

Under an ordinance passed by city leaders in June, only 1 percent of San Jose was zoned for use by cannabis clubs. Dispensary owners whose stores lie outside those areas are scrambling to find a legal site to relocate. Unincorporated areas are out—Santa Clara County banned them last month.

“It’s a war zone out there trying to find a parcel,” said LeAnna Gomez, a manager at Papadon’s, which already shuttered one of its two storefronts. “People are coming in with hard cash—up to $2 million—purchasing parcels way above fair market value in the junkiest areas of town.”

Clubs that submit both applications by 5pm Friday will be allowed to stay open—provided they comply with this newly adopted part of the municipal code limiting clubs above and beyond state law—while the city considers whether to approve or deny their permit. Because that could take up to a year, that buys some collectives time to scout out a new location if they have to (and if they can afford to).

The remaining Papadon’s location lies too close to a mobile home park, violating the city’s 150-foot residential buffer rule, so it probably won’t last that long. Since the business ran out of cash fighting the city leading up to the ordinance being passed and can’t afford to pay more than the asking price on a new facility, Gomez expects it to close sooner rather than later.

Aside from choking out the majority of clubs with land-use rules, the city also requires all pot shops to sell only products grown and manufactured onsite. That rules out just about everybody at the moment—even those six that have earned the city’s coveted stamp of zoning approval.

“All of San Jose’s dispensaries must cease operations at the close of business son Oct. 17, except for those that are operating in strict compliance with the city’s new regulations (i.e. selling only what is grown and cooked onsite),” Buddy’s Cannabis Patient Collective tells customers on their. “We are unaware of any dispensary that meets these new regulations.”

Buddy’s admits it doesn’t. But they’re among the lucky few in one respect: They found a new site. The 20,000-square-foot complex about seven miles from their Stevens Creek store includes enough space for grow rooms, a commercial kitchen and retail space—though it will take more than a year to settle in and re-open. In the meantime, they urge customers to take advantage of their storewide fire sale, which ends whenever the city shuts them down, which could be any day after Friday.

“While timing remains uncertain, the city has recently indicated that it may begin closing clubs as soon as Oct. 17,” owners noted on their website.

Others expect to power through a little longer—at least while their permits pend official blessing.

City spokesman Dave Vossbrink said the real crackdown comes next July, when date the city set for collectives to come into full compliance. Oct. 17 is for applications to be filed, July 17 is the cutoff for everything to get settled.

"At that point there will be clearly legal and clearly illegal operations with reference to San Jose ordinances," Vossbrink said. "No one turns into a pumpkin on Oct. 18, but we will continue to respond to complaints and pursue nuisance issues that stem from any dispensary that is causing overt problems."

Jennifer Wadsworth is the news editor for San Jose Inside and Metro Silicon Valley. Email tips to [email protected]. Follow her on Twitter at @jennwadsworth.

14 Comments

  1. Unfair business competition sucks. All the clubs without zoning verification certificate will lose in court and have to pay restitution to all the legal clubs.

  2. Its complicated – really. Legalization at one level just opens up so many unanswered questions that lead to problems as Jen did so well explaining here. First there are the Fed laws. It is difficult for banks to accept $ from business’ that the feds can grab them up in “facilitating” drug organizations. That leads to many subset problems just at that level.

    At the local level officials must balance a variety of community interests. and there are many.

    On the substance level – no one knows where this will lead. Some states like CO and WA are just now starting to wade through the thicket of unanswered questions such a regulation, enforcement, taxation, grades or levels of intoxicants ie THC.
    then there are the issues of Black Market pot and what that brings. Tax the legal too much – illegal moves in. but taxes needed to cover cost of issues mentioned above. As well we will come to face substance abuse and like any other controlled/regulated thing – gambling, alcohol – it all just becomes another societal issue to deal with.
    Just my 2c

    • People will get their Meds , no matter what . So why not legalize and regulate it AND use the massive income that it could have brought.

  3. It is not just difficult for banks to accept medical marijuana funds: they’ve been told, on a case-by-case basis, it is flat-out illegal. A bank doing business with a medical marijuana business can be prosecuted under the RICO (Racketeer Influenced and Corrupt Organizations) Act.

    What is the effect of this? Business people then stockpiling mounds of cash, making them targets for criminal thuggery. Awesome! Perfect side effect of a poorly-thought out policy. But then, this is the federal government, which also claims marijuana is a Schedule 1 drug meaning, it has NO medicinal value. Really feds, none? Tell that to the parents of kids whose epilepsy is under control thanks to medicinal use of marijuana.

    And since marijuana is a Schedule 1 drug, scientists are prohibited from doing medical research to determine how better to modify and use marijuana for medical problems.

    Look, speaking as someone in his mid-40s who has literally never smoked marijuana… if people want to use marijuana even recreationally, as long as they don’t drive under the influence, what is the problem? Why should anyone object? I just don’t get it.

    San Jose was happy to take dispensary taxes, but simultaneously seem bent on destroying the businesses… If they didn’t want 90 dispensaries, why not just authorize a dozen licenses and then auction them off? Since the dispensaries existed, that indicates there’s a market. If people have their cards or referrals (“I have night blindness”), hey, that’s the law — blame the state. But we should just let people buy their weed, use it in the privacy of their own homes, and stop legislating morality.

    Meanwhile, San Jose government: you idiots have been screaming about a budget crisis, then you essentially axe an entire industry? Do you realize how many street-ready police officers you could have deployed based on the marijuana dispensary taxes? But I’ll bet as soon as the new mayors takes office, San Jose taxpayers will be asked to approve a new sales tax, right?

    Hypocrites and morons…

    • Colorado benefitted to tune of $19 Million Dollars for one months time . Tell me San Jose couldn’t have used that Money for Education,Public safety,Libraries,streets, what ever. absolute stupidity

      • You’re stating the gross revenues of an entire state and then saying that’s how much money a city will get. Just because the state if Colorado had 19 million in revenues doesn’t mean a city half way across the country will net the same. Also, if you haven’t noticed already, we have different politics then Colorado so we can’t just say. “Look at them so it’s just that easy”. It’s not that easy. If you think it is, and if you think you can make a city net the same amount of dollars as an entire state then go run from Mayer jack ass

  4. This shutdown will not hurt the people’s access to the products as probably every dispensary that shuts down will simply convert to a delivery service. Each of these dispensaries have a database of thousands upon thousands of customers EACH. Until Calif. becomes recreational in a few years, delivery service companies will rule the day.

  5. Moving from San Jose to southern Ca , the lack of legitimate brick and mortar collectives with Craigslist ‘delivery services’ filling the void , be ready for poor quilty , scamers and such

  6. The war on drugs is big money for some folks, and they do not want marijuana to be legal. Marijuana is a weed, and grows practcally anywhere. What will the city do if residents who cannot go to a nearby dispensery grow their own?

  7. Hey at least drug dealers and the black market is open 24/7 and doesn’t card minors!!!!!

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