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Pot company sues Calif. city after spending $10M trying to open pot shop

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A California cannabis dispensary is suing its local government for failing to give it a permit to open, which it says is costing it $110,000 a month as it waits for the final approval.

High Seas, a dispensary in Costa Mesa, California, said in a press release last week that it has spent over $10 million on building out a pot store in the Orange County city. Per the release, the dispensary is spending $110,000 a month on fees, salaries and maintaining the property while still waiting for its final business license from the city. Not only has the license not been granted yet, but “the city has not provided High Seas any legitimate reason in writing as to why they are withholding the final permit issuance,” it said in the release.

High Seas has now turned to the court system, filing a lawsuit in Orange County Superior Court last week that asks a judge to force the city of Costa Mesa to issue the company’s final cannabis business permit.

“Our right to operate has been infringed upon by the city's unwarranted lack of action,” said High Seas majority owner Rachel Xin in the Nov. 7 press release. “These delays are costing us exorbitant monthly fees as we work to retain our highly trained employees and pay mortgage rates with no income — not to mention the lost tax revenues the city isn't collecting.”

High Seas said the city gave the dispensary preliminary approval two years ago and the company has since spent $4.5 million improving its Costa Mesa property and additionally “several million dollars” applying for city permits, according to the lawsuit. The dispensary has since earned a state license, passed all local building and fire inspections and is now waiting for a final cannabis business license from the city.

Yet Costa Mesa has completely “stopped communicating with High Seas,” despite multiple attempts by the company to contact the city government by email, by phone, in person and with a written legal letter, according to the lawsuit. High Seas hasn’t heard back from the city since it received its final building department inspection on Sept. 26, according to the filing.

“All inquiries have been ignored and no response as to the reason for not issuing the [cannabis business license] given,” High Seas said in the lawsuit.

Local governments across California have been accused of mismanaging cannabis permitting and making it nearly impossible for legal pot companies to permit. A recent study conducted by the University of California, Berkeley, found that on average it took two years for a cannabis farm to get a local license.

Jonatan Cvetko, executive director of the United Cannabis Business Association, said he’s seen retail pot shop owners run out of money waiting for local governments to grant their licenses. He explained that local governments in California often require business owners to rent a property before they can apply for a permit, even though it can take years for the city to actually approve the license. The gap can leave business owners paying rent for years before they can make a single sale.

“It makes it nearly impossible to have a viable business when they raise their money and most of those funds go to just keeping the project alive before they even open,” Cvetko said to SFGATE.

The city of Costa Mesa did not respond to SFGATE’s request for comment. It’s not clear whether it’s responded to Xin’s petition yet.


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