Nevada City cannabis business permit seekers cause concerns |

Nevada City cannabis business permit seekers cause concerns

It’s somewhat of a Catch-22 for cannabis cultivators, distributors and manufacturing businesses trying to get legit.

Adult-use marijuana is now legal in California, but licensing is lagging far behind. In Nevada County, a cultivation ordinance is still being hashed out and might not be ready for next year’s growing season. Only eight local growers had acquired their temporary licenses as of two weeks ago, less than one percent of the county’s cultivators.

Nevada City has approved a medical-use dispensary, as well as ancillary manufacturing and distributing businesses, with 14 in the pipeline but only three including the dispensary having completed the permit process.

Would-be licensees face a difficult decision. Shut down their source of revenue during the permitting process — or continue to grow or manufacture, gambling they won’t get caught?

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“The reality is that many of the businesses being permitted right now were already operating in a gray area prior to the state rolling out its regulatory structure,” said Diana Gamzon, the executive director of the Nevada County Cannabis Alliance. “That was the whole idea, to bring operators out of the shadows and into licensed facilities.”

But, Gamzon continued, that doesn’t mean businesses can skirt the law.

“With that said, now that we have regulations, they must be followed. All cannabis businesses must adhere to strict regulations while undergoing this tremendous transition. Many farmers are navigating new sets of changing regulations without access to banking or loans. People are transitioning from operating under Prop 215, which has created a lot of ambiguity.

“We will continue to work with our local cannabis businesses to help during this evolution while supporting a strong commitment to the regulations.”

compliance officer

According to local law enforcement, two applicants for manufacturing permits in Nevada City came down on the wrong side of that equation and now face potential criminal charges — and no chance of making it through the permit process.

Nevada City Police Lt. Chad Ellis said other issues are cropping up as well, prompting his department to ask the city council to consider hiring a full-time cannabis compliance officer.

“Everything has now come to a head because Nevada City has no cap on auxiliary businesses,” Ellis said. “As applications come through our department, we are reviewing and giving recommendations on security. The background checks are being handled by an outside company, and it’s our opinion they’re not doing a very good job.”

The problem, as Ellis sees it, is that firm does not have access to a lot of the criminal history and records available to the police department.

“There is a small handful of applicants who passed the background that in fact have a criminal history,” he said. “We as the police department obviously see that as a significant concern. We want to tighten up those parameters, maybe use a different company or even an in-house investigator at the police department with access to our information.”

According to Ellis, what has turned up after the Planning Commission OK’d some of the permit applications was old drug charges related to marijuana. He said these did not necessarily end in convictions, but that applicants were listed as suspects, for instance.

In cases like those, the police department would certainly want to investigate further, he said.

The Nevada City Police Department wants to be in closer communication with the Planning Commission and has asked to begin sending them a list of concerns to take into consideration before approving any new permit applications.

Although there is no cap, it is not clear how many more businesses could potentially apply for permits in the small footprint of Nevada City.

two labs dismantled

Ellis cites the recent arrest of Todd and Alaina Dougherty on drug manufacturing charges by the Nevada County Sheriff’s Narcotics Task Force as a prime example of what can go wrong with the permit process.

Detectives executed a criminal search warrant at their residence in the 18000 block of Connie Drive in Alta Sierra, reportedly locating a sophisticated, illegal cannabis oil alcohol distillation lab. They also reportedly found approximately 10 pounds of finished cannabis oil, an estimated 1,000 small envelopes with a company name, used to package the cannabis oil, and several hundred small envelopes containing cannabis oil. No criminal charges have been filed yet by the District Attorney’s Office, according to the online court filing system.

The Alta Sierra couple had applied for a medical cannabis business permit and received the OK from the planning commission. Their business, Sky Farms, has not completed its conditions of approval and has not yet been issued a permit.

According to Ellis, the business’ owners had asked city staff if they could remove Todd and Alaina Dougherty as principals, leaving co-owner Jason Gilbert as the sole principal, and continue on with the permitting process.

“Our recommendation is to revoke the permit in its entirety,” Ellis said.

Another major concern has cropped up regarding Highest Health Collective Enterprises. Its owners, Laurel and Max Gladish and Daniel Carter, applied for a manufacturing permit that was OK’d in July. They then submitted an application for a distribution arm under the name Nevada City Trading Company.

But that application — and the status of their current permit — now are in limbo due to an ongoing criminal investigation.

In September, the Narcotics Task Force served a search warrant on a property on Tracy Drive and discovered a complete set-up for a methanol distillation lab, said Sheriff’s Sgt. Justin Martin, the head of the task force.

“We found indicia for one of the partners for HHCo,” Martin said. “We also found approximately 130 vape pen cartridges filled with what appeared to be cannabis oil, inside pre-packed boxes with the HHCo label.”

According to Martin, no one was present at the property and no arrests have been made. He said the investigation was continuing and that any potential charges would be forwarded to the DA for review.

Ellis suspects the partners for Highest Health had been manufacturing product illegally off site and packaging it in anticipation of starting their business legally.

“It’s absorbing a lot of my time,” he said. “We need to make sure the community is safe and the applicants are legitimate.”

Contact reporter Liz Kellar at 530-477-4236 or by email at

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