Three months after agreeing there was no urgent need to require distance buffers between retail marijuana shops, Eugene city councilors have decided to take another look.
Councilors have directed City Manager Jon Ruiz to return with language for a draft buffer ordinance by late July to further the discussion.
Councilor Mike Clark, who requested the second look, months earlier had said he didn’t see a compelling reason for the city to impose a buffer.
Recreational marijuana stores are regulated by the state, but local governments can require distance buffers if they feel there are drawbacks to the stores clustering too closely.
State law requires that at least 1,000 feet — roughly 21/2 blocks — separate pot retail shops from schools. But there’s no such buffer between competing businesses. The law allows cities to adopt a 1,000-foot buffer, if they choose. Like Eugene, Corvallis, Salem and Medford have not adopted buffers.
Eugene’s land-use code permits pot retail shops on properties zoned for commercial use. But the city has not set a minimum distance requirement for businesses of any type, including adult stores, since it first adopted its zoning regulations in 1948, according to a staff report.
Clark said he changed his mind about the buffer after hearing stories about commercial landlords increasing rents on existing tenants because the landlords believe pot-related businesses will pay the higher rates.
“The landlords know if these (local) guys won’t pay it, I can get the marijuana shop in here that will, because the demand is so high in the short term,” Clark said.
But ultimately, he said, that will lead to empty storefronts once market forces prompt unprofitable operations to close.
Clark said the council discussion would include additional information about incidents of marijuana-related rent hikes.
However, no one apparently has submitted to city councilors specific examples of pot-driven rent increases.
Building owners can raise rents for myriad reasons, especially during a period of strong economic growth such as that taking place now in the Eugene-Springfield area.
Although open to further discussion about a buffer, several city councilors said they are leery about regulating the marketplace.
“If it’s a relatively minor issue, if it’s only happened a few times, I’m not inclined to change an entire commerce structure for that,” Councilor Chris Pryor said, adding he would consider a buffer if rent increases driven by the pot industry were having a substantial effect on local businesses.
As of last week, 53 retail pot shops in Eugene had secured operating licenses from the state, and another 14 shops are proposed, according to the Oregon Liquor Control Commission, which regulates the stores. Securing an operating license doesn’t mean a store is open.
The most popular areas for the emerging retail marijuana industry in the city are downtown, west Eugene and near the University of Oregon.
In March, there were 38 pot shops that had secured licenses to open in Eugene.
Effect on businesses
The Register-Guard did confirm that a proposal for a pot shop resulted in the closure of one Eugene business, but that was because of a nonrenewal of a lease rather than a rent increase. Another Eugene business owner told the newspaper he’s concerned about a pot shop possibly displacing his longtime bookstore.
Marisa Siegel, manager of Barry’s Espresso Bakery & Deli, said the family-owned business closed its location on East 12th Avenue near the UO after its lease expired in May 2016.
“We were told we would not be able to renew the lease because the son of the (building) owners was starting a pot business in our location,” she said.
Casper’s Cannabis Club has operated in space next to Barry’s since January 2016, and employees say it plans to expand into the vacant former bakery by the end of the year under the name Apothca.
Daniel Karten, who lives in Florida, said he and his partners opened Casper’s after the son was unable to move forward and they learned from him of the business opportunity.
Karten and his partners bought the building, which also houses Sy’s Pizza, for $650,000 in March, county property records show.
However, a buffer rule wouldn’t have prevented Casper’s from opening at the location, because there are no other pot shops within 1,000 feet.
Siegel, the daughter of owner Barry Siegel, said the downsizing to a single shop in south Eugene worked for the family.
“We were ready for the change,” she said.
Scott Landfield, owner of Tsumani Books on Willamette Street in south Eugene, presented the council a petition signed by 450 people asking the city immediately to enact the 1,000-foot buffer.
Landfield said during the public forum at Monday’s meeting, “A lot of commercial people throughout south Eugene are talking about the rents going up … 50 to 100 percent.”
But he provided no specific examples to city councilors of building owners who raised rents to replace existing tenants with pot shops.
“There needs to be a little bit of an example in this town,” Landfield said of regulating the distance between retail pot shops. “I hope the City Council can take it seriously because it doesn’t look good.”
Landfield said after the meeting that his lease on the Willamette Street property is up at the end of the month. He said he is concerned a pot shop will move into the space.
Little available space
Eugene commercial real estate broker Tim Campbell said he hasn’t heard of a landlord jacking up rents to make way for a pot shop.
He did say, however, that marijuana entrepreneurs two years ago were offering top dollar to open in commercial space in Eugene.
But there’s little available space for marijuana shops now for two reasons, Campbell explained.
The first: A strong local economy means demand is heavy from many users for commercial space. The second: Most building owners who used mortgages backed by the federal government to buy their buildings are wary of leasing to marijuana shops.
In taking out the mortgages, the owners agreed not to allow illegal activity on their property, and marijuana remains illegal under federal law, Campbell said. A lender who finds out a building owner is allowing illegal activity can call — or demand immediate repayment of — the loan, he explained.
“That’s an instant non-starer in my book,” Campbell said.
Yet Campbell said his firm continues to receive eight to 10 calls a day from entrepreneurs interested in opening a marijuana business, either retail and production.
Eugene commercial real estate broker John Brown said he can’t say definitely that the retail pot industry is pushing out existing businesses.
He said demand for retail space by pot stores may be increasing rents in some cases — but the bigger influence has been of marijuana grow operations on industrial space.
Brown said his firm advertised an 8,000-square-foot industrial space at $4,400 a month, and a marijuana entrepreneur offered $8,000 a month — almost double the asking rate — if the owner allowed a marijuana grow.
The owner rejected the offer over concerns about the proposed use, Brown said.
Brown and Campbell said they wonder when some of the new pot stores will close as the market becomes saturated.
credit:registerguard.com
