Cali Kosher on Yosemite Boulevard just outside the Modesto city limits had been doing business in Stanislaus County since 2016. Its last day of operation was Thursday after it didn’t pay outstanding county fees.
Despite celebrating the passage of Measure P, which will set cannabis tax revenue based on income, retail businesses are having trouble keeping up with currently assessed county fees.
Of the four retail cannabis businesses in unincorporated Stanislaus County, two will be closed for business before the measure goes into effect.
Cali Kosher has $168,000 in past-due fees under its development agreement with the county, which expired after five years. Darron Silva, the owner of Cali Kosher, said though it has locations in Patterson and Oakdale, only the dispensary in the unincorporated area near Modesto is being hit with a bill.
Posted on the door of The People’s Remedy just outside the west edge of Modesto, a handwritten sign reads, “The county taxed us out of business, sorry we are permanently closed. Tell the county f*** you! Go Support Jayden’s! They are trying to shut him down also.”
Erica May Inacio, the Stanislaus County deputy executive officer, responded in an email, “Based on feedback from the operators, the County implemented a process that allowed operators to negotiate amendments to DAs [development agreements] that would recognize situations where the operators had lower revenues than they initially projected.”
People’s Remedy owner Mark Ponticelli, said he closed the Lone Palm Avenue shop on Nov. 1 after he was charged around $380,000 by the county in outstanding fees. He said the county could get millions of dollars in tax revenue from his shop over the lifetime of a renewed agreement under Measure P’s tax structure.
“First it was NRC [Holistic Health Services], then it was me – just my store alone would pay them almost $3 million, but they didn’t care, they didn’t want to negotiate,” he said. “They don’t want to do anything to help any cannabis company, they’re just trying to gouge them until they shut down.”
Inacio said in her email that the board has terminated three agreements since their inception: Natural Remedies Consulting in December 2023, Bynate in April 2024, and People’s Remedy in August.
The county Board of Supervisors adopted a motion to cancel the development agreement with The People’s Remedy in October, after the retail business failed to pay $30,000 of the outstanding fees. Inacio said in an email that business closed on Aug. 16, 2024.
Rod Cullins, 62, of west Modesto has been going to The People’s Remedy for about five years. “Well, I’ll need a new shop, which isn’t convenient,” Cullins said. “Most others aren’t as friendly.”
One owner ‘hopeful’ but also ‘wiped out’
Jason David owns Jayden’s Journey, a medicinal cannabis store that opened on Pentecost Drive off McHenry just north of Modesto in 2016. To keep up with the fees, he said he had to sell his second location in Ceres.
“We’re really thankful that we have a hopeful chance with this new [measure] that came out,” David said. “But we’re wiped out – we’ve done everything we can to survive.”
He started the business as a way to help patients like his son, who has epilepsy and is the business’s namesake.
“Financially, to help people, we used to do a lot of support groups. We used to give out free medicine as much as we could, but we are barely hanging on by a thread,” David said. “There’s been years of saying yes, but now it’s so hard saying no, it’s heartbreaking.”
A couple of years ago, David was able to renegotiate his development agreement with the county so that he is paying only the 8% of gross receipts instead of the higher set amount. Still, he said, he’s paying fees after the product has already been taxed.
“It’s still hurting us,” he said.
Inacio said in her email that in July 2022, Jayden’s Journey’s fees were reduced by 43% from $475,000 to $268,460.
The county Community Benefit Rate (CBR) fees were based on the projected income when the development agreement was originally created and are intended to help pay for enforcement of illegal cannabis operations within the county.
The five-year development agreement with Cali Kosher expired in 2024, leading Silva to pursue renegotiation.
Income projections didn’t pan out
“We’re not able to make as much as we projected five years ago,” he said. “We were projecting it to skyrocket, we weren’t projecting it to fall this fast.”
Silva said they were able to work out deals in Patterson and Oakdale by showing them their numbers and how the market was operating. “We also showed the county, but they didn’t care at all.”
Ponticelli went to renegotiate with the county at a planning commission hearing in March and tried to set up a payment plan but said he had no luck. “No other business in Stanislaus County was paying as much as our cannabis stores.”
When the development agreements were put in place, Ponticelli said they were based on income expectations that didn’t pan out and don’t reflect the actual take-home pay of the businesses.
“These numbers were negotiated in 2019, when everybody was doing great business, but they won’t renegotiate with anybody,” he said. “I was paying $90,000 every quarter just to do business in the county.”
Inacio said the county had approved an amendment to reduce People’s Remedy’s fees by 48% from $635,000 to $331,200 in July of 2022.
Cannabis companies have had revenue shortfalls throughout the state. If his payment was based on income, Ponticelli said, it would be about a third of the current cannabis fees the county is assessing.
The development agreement was supposed to address how the business impacts the community financially, “but the county has never done an audit, so they are charging us millions of dollars,” Ponticelli said.
Silva is trying to scrounge up the funds to pay the outstanding fees for the county, hoping that when Measure P does go into effect, it will help him recoup the funds and set things back on track.
Even after paying the outstanding fees, Silva said he has to renegotiate their development agreement with the county, and there are concerns that they won’t be approved a second time.
“The County has been consistent in ensuring compliance with the terms of each individual Development Agreement,” Inacio said.
Both David and Silva mentioned that recently the county has been less willing to work with cannabis businesses. “I do have some concerns,” Silva said.
Silva said he plans to move his employees to other locations for the time being. “We want to continue to do business– we have employees that rely on us for their jobs.”
For Ponticelli, this was the last straw.
“They ruined it for us. They put us in so much debt,” he said. “They did it to every single store.”
H/T: www.yahoo.com
