Southern California desert town wants to be the 'Silicon Valley of medical marijuana'

In a plot of desert surrounded by Joshua trees and aging factories, developer James Previti — in a suit coat and Louis Vuitton shades — watches as construction workers build the roof of a concrete building that from afar looks like a future Costco.

Previti has spent years developing homes around the Inland Empire. But this is something new for him: a 30-acre industrial park in Adelanto divided into 21 units that will be sold to marijuana cultivators for $7.5 million each.

As California moves toward issuing permits for large-scale medical marijuana cultivation next year, a number of struggling desert cities, such as Adelanto and Desert Hot Springs, have sought to establish themselves as destinations for growers.

Just by approving ordinances allowing industrial cultivation before state licenses were issued, the cities set off land rushes — with dusty plots selling for many times their original value.

The question now is whether that speculation will turn into the cannabis boom officials have been hoping for.

The San Bernardino County community of Adelanto is looking to medical marijuana to boost its economy. (Irfan Khan / Los Angeles Times)

In Adelanto, people like Previti — investors with backgrounds in real estate development, law, even the NBA, but little experience growing marijuana — have come to town saying they can make it happen.

They envision a town bustling with marijuana-related businesses — cultivation warehouses, cannabis-oil extraction facilities and a host of associated projects to supply California’s massive market.

As Mayor Richard Kerr puts it, the city will be the “Silicon Valley of medical marijuana.”

But there is plenty of uncertainty about how this will play out in this long-struggling city, where 40% of residents live in poverty.

Financing for cannabis projects is difficult because marijuana remains illegal at the federal level and the Trump administration has given mixed signals about how it will approach enforcement. The city also faces competition from communities throughout California that have legalized cultivation.

Ultimately, the real test of whether Adelanto can bank on long-term income from marijuana is whether the new ventures setting up here can operate within the law as stable, profitable businesses.

In April, California released a 58-page list of proposed regulations governing everything from plant labeling to managing waste. They are to be finalized before the state begins issuing licenses to growers on Jan. 1.

Hezekiah Allen, executive director of the California Growers Assn., said those rules have shown prospective investors that cashing in on marijuana won’t be simple.

“As we see the detailed regulations and folks understand this is not going to be an easy, free-for-all transition, I think that’s starting to temper the expectations of easy returns,” Allen said. “The gold rush, gold fever led a lot of folks to make some business decisions that aren’t as in touch with California’s marketplace, but I think that is mellowing down a bit.”

Related: Prison town goes to pot: Desert city Adelanto hopes cultivating marijuana will save it

Adelanto’s leaders have been desperate to cure the city’s economic woes for years. In 2013, the city of 32,000 residents declared a fiscal emergency and has since continued working to stave off insolvency. There was talk of dis-incorporation and bankruptcy.

In recent years, the town has welcomed prisons to bring in needed revenue. There’s now an immigration detention center, a county jail and a privately run prison housing state inmates.

But officials say marijuana has the most potential to improve the city’s finances, and the benefits are already starting to show.

“We were $2.6 million in the red,” Mayor Kerr said. “Now we’re about maybe a half a million to three-quarters in the red. By June we should be in the black.”

Some of that comes from development fees paid by prospective cannabis companies, which help cover the city’s planning and engineering costs, Kerr said. Some of it also comes from unrelated projects — like a new gas station.

Robert Acosta, cultivator, right, and an assistant planting marijuana plants in one of many portable trailers at Critical Mind Inc. where a massive warehouse building is under finishing stages. Critical Mind Inc. is in a marijuana cultivation business in Adelanto. (Irfan Khan / Los Angeles Times)

Adelanto has so far approved only large-scale medical marijuana cultivation, which Kerr says remains the city’s focus. California will not issue permits for large-scale recreational marijuana cultivation until 2023.

Throughout the city’s 360-acre cultivation zone, former factories and warehouses have been sold to marijuana entrepreneurs and are being refurbished.

Since the city allowed cultivation, 56 businesses have secured permits, but only a dozen firms have so far secured a business license, the final step before they can open, city officials said.

A few of those have started growing marijuana, though city officials said they don’t know exactly how many.

Former Mayor Cari Thomas said she worries what will happen to the city when — as she figures will ultimately happen — cannabis cultivation is widely permitted in other parts of the state and country.

“We’re afraid then we’ll have empty business parks because the cannabis people have bought up all the land and all the businesses,” she said.

A number of local businesses have left town because of the cannabis land rush, Thomas said. Some, who owned their buildings, were paid lots of money to sell. Others, who rented, moved out once their properties sold.

Still, Thomas, who was mayor from 2010 to 2014, said she understands officials’ need to look for new revenue.

“It’s just not a way I would have chosen,” she said. “It’s kind of uncharted territory.”

Bryon Russell, a former NBA player, and Spencer Vodnoy, a lawyer who spent years representing clients accused of drug crimes, are among those who say they are ready to make cannabis cultivation work in the city.

While they renovate a 20,000-square-foot former furniture factory for cultivation, they are growing marijuana in four trailers parked next door.

Their company, Critical Mind Inc., announced recently it will produce cannabis and cannabis oil for Chong’s Choice, comedian Tommy Chong’s marijuana brand.

Vodnoy said that entrepreneurs with legal backgrounds like his are critical to the success of legal, large-scale marijuana cultivation.

“We need to do it the right way as we implement it because we want to keep our license,” Vodnoy said.

Corey, the company’s director of cultivation, said lots of growers are troubled by legalization and the rush of entrepreneurs looking to cash in.

“More often than not, the people that I have been affiliated with for the last 20 years like working in the gray area … These guys are old, salty, locked in their ways,” said Corey, who asked that his last name not be published because marijuana remains illegal at the federal level.

He says he works closely with Vodnoy and others who make sure he complies with local and state rules. For example, each plant has been tagged with a bar code as the company prepares for state requirements to “track and trace” each plant from seed to sale.

“You can scan it like Target does,” he said.

Spencer Vodnoy, Co-Founder and CEO of Critical Mind Inc., a marijuana cultivation business in Adelanto. (Irfan Khan / Los Angeles Times)

While Adelanto was among the first cities in Southern California to approve industrial cultivation, it increasingly faces competition from throughout the state. Communities in the Salinas Valley say they have the agricultural know-how and ideal climate for marijuana. Those in Northern California have a long history and culture of large-scale cultivation.

Adelanto, meanwhile, has positioned itself as an eager partner for cultivators, a place where warehouse after warehouse could grow cannabis less than a two-hour drive from Los Angeles, one of the largest markets in the world.

Kerr, the mayor, said he doesn’t worry much about other cities muscling in on Adelanto’s turf. The city has already gotten a jump on the competition by being among the first in the state to bring growers out into the open.

Besides, he added, California’s market for marijuana is massive.

Adelanto is 53 square miles. “If I put a plant every 12 inches,” the mayor said, “I couldn’t supply enough cannabis.”

© 2017 Los Angeles Times (Los Angeles, Calif.) Visit The Times at www.latimes.com Distributed by Tribune Content Agency, LLC.

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