Why California’s third-largest county remains a marijuana industry desert

Image of the interior of a Sweet Flower cannabis store

The interior of a Sweet Flower cannabis store in Southern California. (Image courtesy of Sweet Flower)

The border separating Orange and Los Angeles counties is known in some Southern California circles as the Orange Curtain, a knock distinguishing the more conservative, insular bedroom communities from their more progressive, urban neighbors to the north.

The term might have new meaning in the age of legal marijuana, since the vast majority of Orange County cities still maintain bans on medical and recreational marijuana businesses, despite solid support countywide for adult-use legalization when it was on the ballot in 2016.

Overall, 52% of Orange County voters approved Proposition 64, the 2016 state ballot initiative that legalized recreational marijuana and established a regulatory framework.

But more than five years later, the state’s third-most populous county – with nearly 3.2 million residents – has allowed only 117 cannabis businesses of any type, with just one city home to operational retail stores, according to an MJBizDaily analysis of state data.

That stands in contrast to counties such as L.A., San Francisco, Alameda and Humboldt, each of which boasts hundreds – if not thousands – of licensed cannabis companies.

A marijuana desert

Which begs the question: Why has Orange County become a marijuana industry desert?

The reasons are as diverse as the county’s economy and demographics.

Orange County has been a Republican stronghold for decades, and many of its cities still lean socially conservative, such as Garden Grove and Westminster, home to the largest Vietnamese communities in the nation.

Nimbyism also plays a role, particularly in the county’s older, smaller communities, wealthy south suburbs and along the coast.

Newport Beach and Laguna Beach are prime examples.

Two of the most affluent cities in the nation overwhelmingly approved Proposition 64, the ballot measure that legalized recreational marijuana.

Yet, both ban cannabis businesses.

They’re among 25 of Orange County’s 34 cities that approved Prop 64, yet only a handful have commercial marijuana programs, a reflection of the statewide local moratoriums hampering the legal industry.

Industry status

Most Orange County cannabis businesses are in Santa Ana, the county’s second-largest city with about 320,000 residents.

The City Council approved 30 commercial cannabis retail locations, with the application period ending in March 2018.

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So far, Santa Ana has permitted 27 dispensaries. The remaining three are “pending,” according to a city spokesperson.

The other 37 marijuana operators include distributors, cultivators and manufacturers.

Costa Mesa, which borders Santa Ana, has issued 36 licenses – including a mix of manufacturing, distribution, processing, transportation and research and development labs – in a single-zoned industrial part of the city.

However, Costa Mesa hasn’t yet permitted any retail locations, though it reviews applications for 15 marijuana stores at any time and there is no cap on the number of shops.

Sweet Flower, which has storefronts in West Hollywood, Studio City, Culver City and Los Angeles, is among the applicants.

“There’s a very strong brand fit and a lot of customer fit for us in Costa Mesa,” Sweet Flower CEO and co-founder Tim Dodd said. “We would like to be open in the summer.”

Orange County, Dodd added, has an “amazing demographic.”

The county features a diverse economy, a healthy mix of real estate, tourism, technology and finance, boosted by a strong base of highly educated and well-paid professionals and entrepreneurs.

Little movement in bigger cities

 Anaheim is Orange County’s most populous city, with nearly 347,000 residents, and is home to Disneyland, Knott’s Berry Farm and two professional sports teams.

The city prohibits the sale, commercial cultivation and processing of recreational or medical marijuana.

Anaheim’s City Council has considered a cannabis ordinance in recent years, but no marijuana license opportunities are expected – despite the continued presence of illegal dispensaries and related enforcement costs, according to city spokesperson Mike Lyster.

“While there is nothing expected before the council in the near term, we could always revisit and reevaluate the issue,” he said, leaving the door open for possible future marijuana businesses in Anaheim.

In early 2020, Anaheim lawmakers expressed interest in potentially putting the issue to voters.

But those efforts stalled, prompting some advocates to kick-start an initiative on their own.

“We are aware there is a voter initiative in the early stages,” Lyster said.

“It has not qualified for an upcoming ballot in our city at this point, and we continue to monitor.”

Irvine, a pro-business suburb with one of the nation’s densest corporate hubs, prohibits commercial cannabis activity, including deliveries within its borders.

Testing labs are allowed in Irvine, Orange County’s third-largest city with 307,000 residents.

Irvine was among several cities that didn’t respond to MJBizDaily inquiries. Costa Mesa, Garden Grove, Huntington Beach, Newport Beach and Stanton also did not respond.

The outliers

 Despite the moratoriums on cannabis businesses throughout the county, two of the industry’s more influential companies are based there.

Cannabis e-commerce and advertising platform Weedmaps has called Irvine home since the company was established in 2008.

And Costa Mesa-based Gold Flora is positioned to be one of the state’s largest retail operators: After its December acquisition of San Jose-based Airfield Supply Co., Gold Flora is projecting annual revenue of $150 million.

Under the agreement, Airfield Supply founder and CEO Marc Matulich will lead expansion efforts, including adding potential retail locations in Costa Mesa and Corona in neighboring Riverside County.

New business potential

 Last month, Huntington Beach’s City Council held a study session to discuss the possible development of a cannabis program.

Momentum has been building for a voter initiative in Orange County’s fourth-largest city, which counts nearly 200,000 residents.

“It’s not a matter of if you’re going to have it. It’s a matter of when you’re going to have it,” said David McPherson, cannabis compliance director for HdL Cos., a consulting firm that has worked with several municipalities in Orange County and across the state to craft marijuana business ordinances.

“Are you going to be proactive or reactive?” McPherson asked rhetorically, referring to the choice before local California authorities when it comes to legal cannabis.

The consumer marijuana market is attractive in Huntington Beach, already a draw for domestic and international tourists.

In Stanton, roughly 11 miles north of Huntington Beach, four retail licenses are available.

But Orange County’s smallest city has yet to grant any marijuana business permits, despite closing its application deadline in late October 2020.

The application process for Stanton included steep requirements to operate, including a $100,000 refundable application fee.

Chris Casacchia can be reached at ccasacchia@hotmail.com.