Megan Souza went all in on someone else’s dream.
Her partner Eric Powers wanted to get involved in the cannabis industry. Souza, having used the drug to handle anxiety and temporomandibular joint syndrome, joined in.
The two began working together by investing their life savings in the budding industry — an industry marred with stigmas and stereotypes. Souza and Powers began a delivery service, and customers soon came in.
“It was sort of easy to be successful because we were doing it differently,” Souza said.
Souza, who began operating a delivery service, said she is hoping to open Megan’s Organic Market — one of the three permitted cannabis dispensaries in the city of San Luis Obispo — in March 2020. Souza also runs Megan’s CBD Market in Atascadero and Morro Bay.
“The tradition was, this guy who looks sort of shady — carrying a duffel bag, carrying jars of weed and a scale — shows up at your door, and it’s not very wholesome,” Souza said. “So our tagline was ‘making cannabis wholesome.’”
Souza said financial incentives also came with being in the cannabis business.
Souza has student loans incurred from her undergraduate degree and graduate studies, the latter being an unfinished master’s in English at Cal Poly. Souza also has debt from from starting up her cannabis business. All of those would be paid off from the business itself.
There was a problem, though.
The Central Coast Cannabis Council (C4) hopes to “create a regulatory system where the deserving companies and the deserving people can get licensed” in the area, according to C4 President Adam Laurent.
For that to happen, Laurent said the speed at which the county operates and regulations go through is “glacial.”
In order to transition into a more traditional trade organization, more cannabis businesses need to get involved within the group. For that to happen, local governments across the county need to cooperate with these industries, Laurent said.
Souza, along with many of her competitors and the rest of the local cannabis industry, is now looking to gain respect for her industry from the local government.
“For all projects in [San Luis Obispo] County, every single developer will say how challenging [it is] to say get a building built or [get] a project approved,” Souza said. “But for cannabis, you can imagine everything is more challenging.”
After ensuring local businesses can have “a level playing field,” Laurent said the objective of the council is to establish a more traditional trade group, akin to the Paso Robles Wine Country Alliance.
Money in cannabis
Recreational cannabis was legalized in California after voters approved Prop 64 and San Luis Obispo city residents approved cannabis dispensaries in 2018. However, Laurent said the “political will” of the county government has made progress slow in processing dispensary applications, despite massive financial incentives in the cannabis industry.
The Grover Beach City government projected 12 percent of its $12.46 million budget for the 2019-20 fiscal year to come from the city’s cannabis tax, according to the city’s budget overview. The cannabis tax is Grover Beach’s third-highest source of revenue. Only property and sales taxes, respectively, are greater revenue sources.
At the state level, the economic interest that exists within California’s cannabis market has a much higher stake.
California’s legal cannabis market was projected to reach $3.1 billion in consumer spending in 2019 and $7.2 billion in 2024, according to an Aug. 15, 2019 report released by Arcview Market Research and BDS Analytics.
The report called California “the world’s largest cannabis market” since the state legalized recreational marijuana Jan. 1, 2018. By comparison, Canada, which legalized recreational cannabis, was projected to have a cannabis market worth $6.9 billion (CA$9.2 billion) in 2025.
While California is projected to have more than $7 billion in the cannabis market in five years, Laurent said county governments across the state are not cooperating with local cannabis businesses.
In addition to his role as C4’s president, Laurent operates Pilothouse Management, a local management consultancy company that specializes in the cannabis and hemp industries.
“They’re poking holes in it and extending the process,” Laurent said, adding that local governments are “creating pain where pain doesn’t necessarily need to have been experienced.”
The business cost of cannabis
Souza is now C4’s vice president. Souza said the process of opening up her dispensary in the city of San Luis Obispo was “agonizing.”
“Of course we don’t own all our dispensary, because it’s taking millions of dollars to get it off the ground,” Souza said. “And we didn’t have millions of dollars to get it off the ground.”
Annual renewal fees for cannabis retail businesses within the city of San Luis Obispo are $93,563.98, while manufacturing businesses and cultivation businesses have renewal fees of around $74,000 each, according to San Luis Obispo city public records. The initial application fee for cannabis storefronts was $23,262.13.
For comparison, annual renewal fees for retail storefronts in Grover Beach are $15,000, according to Grover Beach city public records. Renewal fees for cultivation and manufacturing ranges from $10,000 to $15,000.
Souza said she formed partnerships to ensure that she can get her dispensary off the ground in San Luis Obispo while working with property owners in “green zones,” the permitted areas in which cannabis dispensaries can be operated within San Luis Obispo.
While Souza said the city of San Luis Obispo was “super wonderful to work with” in setting up her dispensary, she said other business ventures in Morro Bay were much more difficult for her.
“We had to hold a very expensive building that we were planning on having just [be] the dispensary, and hold it for a year and a half,” Souza said.
The application process for getting the Morro Bay dispensary included submitting applications, going through several months of background checks and paying around $6,600 per month for the building as part of the application process, according to Souza.
“And in the end, we didn’t get that permit,” she said.
The ballot box and cannabis
Among all U.S. college students in 2018, 42.6 percent reported using cannabis within the last year and 24.7 percent reported using cannabis within the last 30 days, according to a University of Michigan survey released Sept. 5, 2019. The University of Michigan reported that this is the highest percentage of usage among college students within the last 35 years.
C4 member Sean Donahoe has been involved in the policy and business sides of the regulated cannabis industry since 2013. Donahoe co-founded the California Cannabis Industry Association trade group and advocated for cannabis in the state Capitol, but has since taken on a consultancy role within the local cannabis industry.
He said the prevalence of usage among college students is enough reason for students to consider cannabis when voting at the ballot box.
“They don’t have access to regulated, safe cannabis delivered in a regulated fashion that you know where the money’s going and that you know the product’s being tested and it’s a safe standard,” Donahoe said. “Even if you aren’t planning on going into the cannabis industry, you should care about safety.”
In addition, the cannabis industry is the “most exploding industry all across the country,” according to Donahoe, and its prevalence will transform food, energy and “everything else for the next generation.”
The regulations placed on the cannabis industry in San Luis Obispo County have hindered any sort of progress, according to Donahoe.
“We’ve moved backwards as a county,” Donahoe said. “Previously, there were 330 registered cultivation operations within the county and the world didn’t end. And now we have fewer than 20 licensed operations.”
San Luis Obispo County Supervisor Debbie Arnold said that the county government has taken a slow approach to cannabis because of the industry’s relative newness.
“We knew when we created our ordinance here that our county is a smaller size county and that we did not have the resources to put everything we had into permitting the cannabis industry,” Arnold said. “The planning and building department has been doing the best it can to get these businesses through the process.”
Donahoe said his frustrations are why he considers cannabis to be an important issue in upcoming San Luis Obispo County elections.
“From the hemp and the farm bill and the cannabis perspective, if you’re interested in these industries as a potential career, you should be very frustrated that in your backyard there’s not a good opportunity to explore these career pathways,” Donahoe said.
Elections for the San Luis Obispo County Board of Supervisors, which are set to take place in 2020, includes a pro-cannabis candidate in District 5: former Atascadero mayor Ellen Beraud.
District 5 is represented by Arnold and covers portions of the city of San Luis Obispo, along with the yakʔitʸutʸu residence halls.
“It is very important for voters to know that they have the ability in the next upcoming election to change how our county legislates on cannabis,” Souza said.
Arnold said she is not anti-cannabis or against any industry, but that she wants to be aware of all conflicts that exist in the county. This includes any land use conflicts involving homeowners, event venues, wineries and other property uses, according to Arnold.
“The increased revenue is nice to have, but not at the expense of existing land uses,” Arnold said. “We have to be careful that we’re not creating serious problems for the people that already live here and the businesses that already exist here.”
While Laurent said the setbacks he and many others have experienced are “a game meant to provoke failure,” his optimism and experience as a cyclist at the 1996 Olympic Games in Atlanta, Georgia made him familiar with competition.
“It’s not a sprint, it’s a marathon,” Laurent said. “This is an endurance event, and you have to have planning, and capital, and perseverance and the willpower to see that through.”