Oceanside growers look to get into medical marijuana business

The push is on in Oceanside to begin legally growing, processing and distributing medical cannabis under an ordinance the city approved last year.

So far, 16 applications have been received for the five cultivation licenses available in the city. Additional applications have been submitted for manufacturing, distribution, testing and non-storefront retail licenses.

Some of Oceanside’s most experienced farming families, who have sought legalized cannabis for years, are among the applicants.

“It’s just a plant that we all can grow,” said one of the applicants, Mike Mellano.

His family’s business, Mellano & Co., has been farming in California since the 1920s, but his cannabis application is for a separate entity, Green Venture Farms Inc.

Mellano & Co. has 375 acres in San Diego County, including Oceanside, and grows and sells flowers to florists and other consumers around the world. The company also supplies blooms for special events such as the Oscars and Emmys, and it provided hundreds of thousands of cut orchids, irises, chrysanthemums, carnations and — of course — roses to make 25 of the floats in the 2019 Rose Parade in Pasadena.

Cannabis is essentially another flower, and with legalization by the state and now the city, the field is wide open for Oceanside growers, Mellano said.

“The market is huge,” he said. “We are going to be selling legal cannabis in the entire state of California.”

Traditional northern San Diego County crops such as avocados, citrus and cut flowers are being forced out of the region by development and the increasing costs of labor and water. Local farmers say marijuana is the logical next step for them.

Michelle Keeler, also a Mellano family member and a longtime employee of Mellano & Co., has her own application on the Oceanside list. Her new business is called Oceanside Craft Farms Inc.

“We would be growing in what’s called a mixed-light facility, like a greenhouse,” Keeler said.

Keeler and Mellano said they each expect to hire 20 to 30 people once their cultivation operations get underway, which could happen by the end of this year or early next year if their licenses are approved.

Six different types of medical cannabis licenses are available under the Oceanside ordinance, which does not permit any form of recreational marijuana.

The application process involves four phases, beginning with a preliminary determination of eligibility. The city processes the applications in batches, based on the order they were submitted, with a new group beginning about every three months.

“We have two rounds that are under review right now,” said Megan Crooks, a senior management analyst for the city. “We probably will be making recommendations to the city manager by the end of February.”

Most of the applicants are from businesses in Oceanside or nearby communities, she said.

Four applications have been submitted so far for the city’s limit of two non-storefront retail licenses. Those licenses allow a business to sell medical marijuana for delivery, but not to walk-in customers.

The retail applications were submitted later than the others because the city’s ordinance initially did not include any retail licenses. Those two licenses were added later by the City Council.

The city also has received seven applications for manufacturing and six for distribution licenses, for which there is no limit. The city also will provide testing lab licenses, but so far nobody has applied for one.

All applicants are required to get a police background check for a fee of $582 and a “zoning verification letter” from the city to verify that the proposed location meets the city’s requirements. The review process for the letter typically takes 10 to 15 days, and the fee is $221.

Fees are collected at each stage of the four-phase application process. Phase 1, the determination of eligibility, costs $3,471, the city website states. Phase 2, the initial ranking of applicants, carries a fee of $2,448.

Both the second and third phases of the process include a detailed ranking system with a total of up to 4,000 points available based on evaluations of a business plan, safety and security, neighborhood compatibility and more. The final phase is review and approval by the city manager.

In all, successful applicants for any of the cannabis-related licenses will pay almost $11,000 in fees to the city. And there are other start-up expenses.

In addition to the license, applicants also will need a conditional use permit from the city, which is subject to the City Council’s approval. The CUP application requires an $8,000 deposit, which may or may not cover all the fees involved.

Any cannabis venture also may need other city permits for things such as building, grading, storm-water drainage or other issues, any of which can require additional fees. And a state permit also is required.

“There’s a considerable amount of money invested in these applications,” Mellano said.

Still, there’s a lot of profit for the entrepreneur and tax revenue for the city.

Most other North County cities have passed ordinances to ban cannabis businesses. In most cases, the local laws supersede state law.

Nationwide, marijuana remains illegal under federal law, further complicating the situation.

Diehl writes for the San Diego Union-Tribune.