M is for Marijuana and Money in Hermosa Beach election
by Kevin Cody
Last year, Hermosa Beach Mayor Mike Detoy, City Manager Suja Lowenthal, and Police Chief Paul LeBaron met with Adam Spiker, and Manhattan Beach Councilman Richard Montgomery.
Spiker represented the Economic Development Reform Coalition of Southern California (EDRCSC). The group’s goal was to convince South Bay city officials to lift their bans on cannabis retail sales and home delivery. Spiker had hired Montgomery to arrange introductions to his fellow South Bay city officials.
In the meeting with Hermosa Beach officials, Spiker pointed out cannabis’s tax potential. (Hermosa City Attorney Mike Jensen, in his “Impartial Analysis of Measure T,” the cannabis tax measure on the upcoming November 8 ballot, estimates Hermosa’s tax revenue from two cannabis retailers at $700,000 to $1.5 million annually.)
Spiker also pointed out that over 70 percent of Hermosa residents voted for State Proposition 64, in 2016. Proposition 64 legalized cannabis sales in California, except in cities that banned the sales. The Hermosa Beach city council passed an ordinance banning retail cannabis sales just months before Proposition 64’s passage.
Hermosa officials were not receptive to Spiker’s arguments.
“No resident has ever asked me to allow cannabis sales in the city,” Mayor Detoy recalled telling Spiker.
Spiker responded to the Hermosa officials’ indifference by saying his group would ask voters to lift the ban.
Last October, EDRCSC began gathering signatures in the three Beach Cities, and El Segundo to put cannabis initiatives on the upcoming November 8 ballots. Signatures were required from 10 percent of the cities’ voters. In March, EDRCSC submitted 1,650 Hermosa Beach signatures to Hermosa City Clerk Myra Maravilla, well over the 10 percent, or 1,421 signatures, required to qualify for the November 8 ballot.
If approved, the Hermosa Beach Cannabis Regulation and Public Safety Measure, also known as Measure M, will require the City of Hermosa to issue at least two business licenses to qualified cannabis retailers. And to give exclusive cannabis delivery rights to the two licensed cannabis retailers.
According to campaign finance reports, as of September 24, EDRCSC had spent $75,000 in support of Measure M. HB Residents against Measure M had spent $1,951.
(In Manhattan Beach, EDRCSC had spent $57,000 in support of its Measure MB, as of September 24.
In Redondo Beach, as of September 24, EDRCSC had spent $214,000 in support of its Measure E. The Redondo cannabis measure failed in a special election last Wednesday, by a vote of 75 percent opposed, and 25 percent in favor.)
South Cord Management, a primary supporter of the three Beach City cannabis measures, also contributed $10,000 to the Los Angeles County Democratic Party, on October 14. Two weeks earlier, the LA Democratic Party endorsed the three Beach City cannabis measures. Following the endorsements, Hermosa voters received a mailer headlined, “Endorsed by the Los Angeles Democratic Party.” It continued, “Join local Democrats throughout Hermosa Beach and the Los Angeles County Democratic Party in voting for Measure M.”
“[The endorsement] highlights the highest labor standard of any cannabis initiative ever put forward. We applaud the L.A. Dems for recognizing the policy,” Elliot Lewis, owner of South Cord Management, and Catalyst Cannabis Co. told Easy Reader following the endorsements. Catalyst Cannabis Co. owns 14 Southland cannabis stores.
South Bay Democrats were furious over their party’s pro cannabis measure endorsements.
State Assemblyman Al Muratsuchi, a Democrat, said he was out of town when his party voted to support the cannabis measures. He sent party leaders a letter protesting the endorsements.
The Beach Cities Democrats responded to the endorsements by voting to oppose the local pro cannabis measures.
“The L.A. County Democratic Party failed to ask any of the six Redondo Beach elected officials, who are Democrats, what their positions were on this measure,” Redondo Mayor Bill Brand said.
Hermosa Measure M
Measure M is a 37-page ballot document, drafted by attorney Damian Martin, a partner with Lewis in South Cord Management, and Catalyst Cannabis Co.
“I have helped to shape beneficial, and reasonable, local cannabis policy in Southern California, and my regulatory language has become the law of the land in multiple cities, including Culver City, Pomona, and El Monte,” Martin told Easy Reader last November.
This week, Martin responded to questions about Measure M with an email, which states in part:
“Measure M is a gold standard cannabis ordinance that uses a multi-phase, merit-based scoring process for the selection of cannabis dispensary permit winners, which is now the standard in California. In other words, only the best applicants will be awarded the two cannabis dispensary permits available under Measure M.”
Daniel Herrera would like to apply for one of those two licenses (“pending approval from my wife,” he said). Herrera understands cannabis retail at least as well as any other Hermosa Beach business owner. He has owned Hermosa Smoke and Gift, on Hermosa Avenue, at Second Street since 1976. His store sells cannabis paraphernalia, including pipes, rolling papers and incense.
But he believes Measure M’s applicant scoring process disqualifies him financially.
Among Measure M’s applicant requirements are:
- Access and control to over $400,000 in liquid assets.
- Have generated at least $3.5 million in gross receipts in a consecutive six-month period in the year immediately preceding the date of the application.
Nor, if Measure M passes, does Herrera believe he could qualify for a cannabis business license at a later date because “The term of each commercial cannabis business permit shall be indefinite,” Measure M states. And “the maximum number of commercial cannabis permits …may not be amended.”
Attorney Martin, in his email response, explained that Measure M’s financial requirements “will only result in the selection of permit winners that are certain to successfully develop and operate highly regulated cannabis dispensaries…”
“Measure M’s requirement to show $400,000 in liquid assets,” he explained, “is to ensure that applicants actually have the funds to back up their proposal and successfully establish their business . . . in fact, and given its importance, providing proof of funds/capitalization is standard in nearly all California dispensary ordinances. Measure M’s scoring criteria of showing $3.5 million in gross receipts is worth 150 points to award applicants with a proven track record of successful operations . . . Measure M only wants successful operations in Hermosa Beach.
All five Hermosa Beach council members signed the November 8 ballot “Argument Against Measure M.”
Among the reasons for the council’s opposition is that Measure M prohibits the council from imposing CUPs (Conditional Use Permits) on cannabis retailers. CUPs are commonly used to impose hours of operation, and other conditions on businesses.
The council also objected to the absence of a cannabis business tax in Measure M. To address this omission, the council placed Measure T on the November ballot, which would impose a business tax of up to 10 percent on cannabis sales.
Similarly critical of Measure M is a 15-page City of Hermosa Beach staff report, titled “Report Regarding Policy, Safety, and Health Considerations Related to the Cannabis Industry — Sponsored Initiative (Measure M).”
The city issued a press release about the report on October 15.
“The provisions of Measure M provide a one-size-fits-all policy, tailored specifically to benefit the cannabis-industry sponsors, and are almost identical to initiatives on the ballots in other South Bay beach cities,” the report begins.
It goes on to caution, Measure M:
- Limits the City’s ability to revoke or adjust regulations to address any potential impacts.
- Places an enforcement responsibility on the City and its public safety resources without tax support.
- Places cannabis retail storefronts in closer proximity to the City’s adolescent population.
The report further argues, “The existence of a cannabis retail outlet has been associated with increases in nuisance-related crimes, [according to] a recent study published in the Journal of Regional Science and Urban Economics.”
The staff report stops short of asking residents to vote No on Measure M. State law prohibits taxpayer dollars from being spent on ballot measures.
Instead, the report concludes: “For the reasons described herein, the City of Hermosa Beach encourages voters of the electorate to carefully weigh the merits of Measure M and determine whether the ordinance represents objective and responsible local policy.”
Measure M is also opposed by HB Residents Against Measure M. The group has rallied opposition through social media, lawn signs and letters to the editor. They argue that cannabis stores would have a socially corrosive effect on Hermosa.
Former council member Carolyn Petty, a leading member of the group, wrote in a recent Easy Reader Letter to the Editor, “Dispensaries have large amounts of cash, and product that entice criminals.” She further argued, “Cannabis companies have unlimited resources. They do not believe in limits to the number of dispensaries, and have the resources to litigate for years, forcing us to eventually acquiesce, and increase the number of dispensaries beyond two…. More disturbingly, recent exposes by the LA Times uncovered the political corruption currently happening in other jurisdictions as cannabis companies vie for the limited number of licenses.
Something for everyone,
except in Manhattan Beach
Last Thursday, following the failure of EDRCSC’s Measure E in Redondo Beach’s special election, Catalyst’s Lewis acknowledged on Instagram, “It’s not the result we wanted.” But he then made the argument that the Redondo council’s recent approval to allow two cannabis stores in the city was a response to EDRCSC’s ballot initiatives.
“Redondo Beach now has access [to cannabis retailers], and Catalyst is responsible for that,” Lewis said.
Following the November 8 election, Lewis will be poised to make a similar claim about Hermosa, whether or not residents approve Measure M. Though Hermosa’s council has not lifted the ban on retail cannabis sales, it did, effective October 13, lift the ban against cannabis delivery. The purpose was to deprive EDRCSC of the argument that cannabis sales will remain illegal in Hermosa if Measure M fails.
The Manhattan Beach City Council, in contrast to Hermosa and Redondo, adopted a winner-take-all strategy in its opposition to Measure MB. Taking a page from EDRCSC’s playbook, Manhattan’s council placed Measure V on the November 8 ballot. Like Measure MB, Measure V will remain unalterable, even by the council itself, absent a repeal by voters.
But instead of legalizing cannabis sales, Measure V will ban its sales. If both Measure MB and Measure V are approved, the measure with the highest vote count will prevail. ER