Map of Vallejo. atdr/Shutterstock.com

Cities have wide latitude to establish criteria for allowing marijuana dispensaries to operate, including the timely payment of business taxes, the First District Court of Appeal held.

In a unanimous ruling, a three-justice panel upheld Vallejo’s request for a preliminary injunction to shut down marijuana sales at Nature’s Love Collective, a nonprofit medical marijuana dispensary operated by NCORP4 Inc. Vallejo had denied the collective’s application for limited immunity partly because of its earlier failure to pay city taxes.

A Solano trial court had refused to grant a preliminary injunction, finding that Vallejo’s requirement that dispensaries must have a city taxpaying history to continue operating an “unconstitutional ex post facto condition.” But constitutional prohibitions on ex post facto laws don’t apply to city ordinances governing dispensaries, the appellate panel said.

“Local governments may rationally limit medical marijuana dispensaries to those already in operation and compliant with prior law,” Justice Stuart Pollak wrote, “as past compliance shows a willingness to follow the law, which suggests future lawful behavior.”

Pollak’s opinion was also signed by Justices Martin Jenkins and Peter Siggins.

The case stems from Vallejo’s complex history with medical marijuana dispensaries since California voters approved of the drug’s medicinal use in 1996 without immediately putting in place many guidelines or restrictions on its sale.

Vallejo’s zoning laws have never permitted dispensaries as a legal land use. But by 2011, about 20 of the shops had opened anyway, effectively operating as public nuisances.

Vallejo had declared bankruptcy in 2008. City leaders decided they did not have the resources to shut down the dispensaries and instead placed a ballot measure before voters asking them to impose a business license tax on each medical marijuana business. Voters approved Measure C in 2011. Four years later, the city suspended the tax, finding the number of dispensaries had doubled to 40 and that taxing businesses that were illegally operating under zoning laws “tends to confuse the public as to the city’s policy and undermines enforcement of the city’s land use controls.”

In an attempt to cull the number of marijuana businesses operating in their city, Vallejo leaders in July 2015 enacted an ordinance that would grant “limited civil immunity” only to existing dispensaries that had regularly paid their taxes. In May 2016, Vallejo sued to shut down Nature’s Love Collective because it had not received the city’s immunity designation. The collective failed to pay the business license tax between 2011 and 2015, the city said.

The attorney for the collective, Scot Candell of the Law Offices of Scot Candell & Associates in San Rafael, argued that the tax-payment condition was an illegal amendment of Measure C. The collective’s owners said the city should have also allowed them to pay any delinquent taxes with penalties and interest to cure its default.

The appellate court said the collective’s argument “misconstrues Measure C,” which allows prosecution of violations “even if late payment is made.” The court also condoned the provision within the city’s  2015 ordinance requiring a good taxpaying history from a dispensary.

A dispensary’s “timely payment of business taxes provides Vallejo with a rational basis to conclude that the dispensary will continue to act in a law-abiding manner,” the court wrote. “NCORP4, which did not pay its business taxes, was reasonably denied immunity to continue operations.”

Vallejo City Attorney Claudia Quintana declined to comment Monday.

Candell said his clients had not decided whether to appeal. He did say that the facts in the case are so unique to Vallejo that “I don’t see this decision having an impact on other cities.”

Proposition 64, approved by California voters last year, gives cities and counties discretion to allow or reject sales of recreational-use cannabis when that market opens in January.