Marijuana Comes to Coalinga

Marijuana Comes to Coalinga

The weed business promised to save this struggling California town. So far, it’s been a bust.


The highway into Coalinga, California, passes a large white billboard with a brightly colored rainbow and the words “Jesus is Lord of Coalinga.” The road briefly becomes the main street as it runs through the triangle-shaped town. Off this main street sits the First Presbyterian Church, which is a block or so away from the World of Faith Christian Center, St. Paul’s Catholic Church, and the Pleasant Valley Christian Center. There are some 19 churches in a town with a population of 13,000, which often votes—as it did in November 2016—for a Republican president in this overwhelmingly blue state.

Coalinga is the sort of place where people remember when the town got its three traffic lights. Hunters spend hours in the surrounding canyons stalking wild hogs and pheasants or catching horned toads, which are raced at the annual town fair. Situated in California’s Central Valley, Coalinga is surrounded by tomato, garlic, and almond fields, and by hills dotted with bobbing oil wells. But Coalinga’s lifeblood is represented by the barbed-wire-enclosed structures on either end of town. As with other places that form part of the Central Valley’s “prison alley,” a pair of penitentiaries—Pleasant Valley State Prison and Claremont Custody Center—had brought more than a thousand jobs and lucrative revenue to Coalinga.

But, also like many small towns, Coalinga is struggling. Severe drought and fluctuations in global oil prices hit the people here hard, and in 2011, the state closed Claremont Custody Center. About 100 people suddenly found themselves jobless, and by 2016, Coalinga was over $3 million in debt. City Council members and even some private citizens tried to market the now-abandoned prison facility to lure businesses and investors. Mike Voss, 50, was the assistant warden at Claremont when the prison shut down. He has lived in Coalinga his entire life, and he was unable to find another job in corrections. In the months after he lost his job, Voss spent hours on the phone to cities like Los Angeles, Fresno, Monterey, and San Luis Obispo, trying to convince them to use Claremont as a satellite jail. He even contacted Immigration and Customs Enforcement about using the facility as a detention center, but there was little interest.

But then, two years ago, the City Council found an unlikely buyer. Ocean Grown Extracts, a medical-marijuana company that included Damian Marley, the son of reggae legend Bob Marley, as an investor, offered to purchase the facility. The council, seeing no other relief from the debt, was forced to buck the town’s deep-seated conservative ethos and sold the vacant prison for $4.1 million. Fresno County, in which Coalinga is located, had repeatedly voted against legalization, defying the trend in California, which legalized recreational marijuana by referendum in the fall of 2016. (It was the first state to legalize medical marijuana, in 1996.) Ocean Grown Extracts touted the move as an expression of the changing times: “This is symbolic and a big middle finger to the drug war and to a broken system that hasn’t worked for a long time now,” Marley’s manager told The Guardian that year.

The proponents of legalizing cannabis have long argued that doing so would help end mass incarceration. But as marijuana enters the white market in state after state, advocates have made increasingly grander promises: that marijuana can create jobs, revive struggling economies, and even rejuvenate the American heartland. “The cannabis industry continues to prove that it has what it takes to breathe new life into towns ravaged by the fall of better times,” a Forbes contributor wrote earlier this year. For Voss and other residents, however, the real story about marijuana is what happens next: Would this be a welcome change for Coalinga? Or was the promise of marijuana to revive this town overblown?

Coalinga, as the story often goes, was once a booming town. Its name is said to come from the three main coaling stations in the area: “Coaling Station A” eventually became shortened to “Coalinga” in the local dialect. But it was the discovery of oil in the late 19th century that transformed the area into a city, where churches sprouted up as fast as bars. Over the years, Coalinga’s small-town feel started to take shape. Voss recalls playing baseball late into the summer evenings and riding his bike to the creek. His father was a worker in the oil fields, his mother was secretary for the school transportation district, and he worked a paper route to earn spending money.

Another Coalinga resident, Roger Campbell, also remembers a friendlier town. “People sat on their porches and talked in the evenings,” said Campbell, a school-district board member who grew up in Coalinga and whose parents owned a liquor store. “You’d come home and find a bag of tomatoes on your porch when people had gone and picked tomatoes that day.” There were problems: a current of racism, fights between white and Latino students, growing drug use. Still, Campbell and Voss are nostalgic for a different Coalinga, one with a bustling downtown. Patty’s Jewelry stood next to the Coalinga Inn restaurant; from May Drug Pharmacy, you could walk to Sears; and just down the street was McCabe’s ice-cream parlor.

Then, one Monday afternoon in 1983, a 6.7-magnitude earthquake struck the town. Miraculously, no one was killed immediately, but the downtown was leveled, and Coalinga was left with more than $10 million in damages. The natural disaster coincided with a devastating drought, depleted oil fields, and falling global oil prices. Most businesses in town never recovered after the earthquake—McCabe’s was the last old-fashioned ice-cream parlor in town.

Meanwhile, the federal government launched the War on Drugs, which led to an enormous number of arrests. In need of facilities to house the state’s growing inmate population, California looked to the struggling towns of the Central Valley. Before long, Coalinga became home to two prisons, making incarceration one of its biggest industries—and, with a heavily unionized workforce, one that offered steady employment and job protections.

Decades later, jobs at Pleasant Valley State Prison, the larger of the two, that were supposed to go to Coalinga residents were being filled by employees commuting from elsewhere. Then the other prison, Claremont, was shut down. With a dwindling customer base, retail stores and restaurants around town were forced to close. Today, many employees are busing in from surrounding cities. The city manager and even the police chief, for example, commute from up to an hour away.

“At one time, almost every teacher in the district lived in Coalinga,” said Campbell, who has worked in the school district for more than four decades. “Now, 50 percent of teachers live outside of Coalinga. Commuting has become a way of life.” Employers wanted to use Coalinga’s land, but no one wanted to stay.

Nathan Vosburg had only lived in Coalinga for 20 years, but that was long enough to know of life before the downward spiral. He blamed the oligarchy of old families that had run the City Council for decades for mismanaging the town. Back in 2014, the council was offering two choices to manage Coalinga’s growing debt: decreased services or increased taxes. But Vosburg believed that taxes were burdening people and keeping businesses away. So that year, the 37-year-old IT analyst decided to run for City Council on an anti-tax platform, and he won. “They elected someone into office who said, ‘Let’s think outside the box,’” Vosburg recalled.

He took that victory as a mandate. California was then allowing every city and town in the state to take a position on whether to allow commercial marijuana operations, and Coalinga was drafting an ordinance banning cultivation. But when Ocean Grown Extracts approached the town about buying Claremont Custody Center, Vosburg saw it as a way to save Coalinga without raising taxes. He and another councilman, Patrick Keough, convinced the council to consider Ocean Grown’s proposal. They campaigned at the local Starbucks and on a “Coalinga Citizens” Facebook page, arguing that the marijuana industry could help save the town from bankruptcy. Marijuana wasn’t a so-called gateway drug, they told residents; instead, it was a medicine that Coalinga would help to produce.

On the evening of February 4, 2016, the City Council convened a town meeting to discuss the proposal, in what may have been the biggest assembly in Coalinga’s history. People spilled from City Hall onto the street. Mayors and sheriffs from other cities came to watch. In the chamber, Keough, usually a gregarious man, was tense as he opened the floor for public comments. For the next hour, people offered personal stories of how medical marijuana had saved family members, while others argued that Ocean Grown would destroy the moral fabric of the town.

“Operators of marijuana dispensaries in California have ties to large-scale crime organizations,” the school-district superintendent claimed, before declaring that Coalinga’s schools were submitting a “no” resolution. A pastor from Chapel Grace, the town’s oldest church, lamented that “America has lost its moral compass.” Then, turning to Keough and Vosburg, he declared, “Gentlemen, I think you have successfully divided this town needlessly.” Another pastor said he was confused by claims that the business would bring in revenue—after all, he argued, any revenue would be eaten up by emergency responders dealing with the increased crime the new business would surely bring in. Another resident, a former council member himself, said, “I could never consider prostituting my town out for money.”

Vosburg, agitated, insisted that acting on this opportunity would allow Coalinga to decide how to regulate the industry within the city’s borders rather than follow the state’s rules. Keough attempted to stay neutral and suggested tabling the discussion for the time being. “There isn’t any tricks; there isn’t any smoke and mirrors,” he promised. “It’s not going to be pushed through.”

Five months later, in July, the sale was pushed through. Despite the opposition, the City Council—afraid that it would miss a golden opportunity—passed an urgency ordinance, with one no vote, that permitted medical-marijuana companies to operate in Coalinga. Ocean Grown bought Claremont Custody Center for $4.1 million—a windfall for a town that had been in the red by $3.4 million. “I’m not raising taxes to do this,” Vosburg told me. “We’re going to fix this problem without it, and we’re going to create jobs.”

The effect on the business climate was immediate. “As soon as people found out Ocean Grown was coming in, it was like a green rush of people saying, ‘That’s not fair—you can’t just do it for them,’” Vosburg said. Coalinga sold 12 more licenses for cannabis companies to operate in the industrial lot at the opposite end of town. Delighted by the success, the City Council appointed Vosburg as the new mayor (standard procedure for selecting mayors in Coalinga, rather than by popular ballot). Even those who’d been lukewarm to the idea began to be more receptive. Voss, the former assistant warden at Claremont, had been on unemployment for a year and a half after he lost his job and hadn’t attended the heated town-hall meeting. But “sometimes,” he told me, “the writing is on the wall.”

In November 2016, on the heels of a massively funded push by George Soros, Sean Parker, and other wealthy philanthropists, voters across California legalized recreational marijuana. That same day, residents in Coalinga voted to allow a medical-marijuana dispensary in town (the dispensary opened this October in the downtown plaza, next to a nail salon and a Mexican restaurant and across the street from a smoke shop). When I met Keough a few months after the 2016 election, he told me the council’s commitment had paid off. “The grumblers, they need to take a chill pill,” he said. “They were given years to come up with an alternative plan before all this happened. Not one viable solution. At all.”

Excitement over legalization in the country’s most populous state led to speculation about an economic boom. One analysis by the cannabis-market-research firm ArcView projected that California sales would reach $7.6 billion by 2020. Yet many cities that have approved cannabusiness operations have yet to develop regulations or issue permits. With Ocean Grown, Coalinga jumped ahead of the pack and worked with consultants and lawyers to follow the state’s guidelines for licensing, compliance, and safety regulations. In the vast area between Los Angeles and San Francisco, Coalinga was positioning itself to become a marijuana hub. (A recent study published by The Mercury News found that one-third of California cities allow recreational-cannabis businesses. The study rated Coalinga 95.9 out of 100 for its permissiveness, while nearby Fresno scored a mere 0.5.)

The town plans to attract companies by lowering the cost of doing business. This was one reason why Michael Jennings, a longtime marijuana grower, applied for several business licenses in Coalinga. It’s also what attracted investors, who agreed to put almost $16 million into Jennings’s company, Next Green Wave. In early 2017, Coalinga approved its licenses for indoor cultivation, manufacturing, and distribution. “Labor is cheaper; insurance, land, water, electricity are all cheaper,” Jennings told me. “Cannabis doesn’t give a shit where it’s grown.”

Recently, Vosburg drove me around the perimeter of the converted Claremont complex, which sits at the edge of town near West Hills College. It still retains the facade of the old prison. A steel fence crowned with barbed wire surrounds a windowless two-story concrete building. Cars fill the once-empty parking lot, and armed security guards stand at the entrance. (One of them used to work there as a guard when it was still a prison.) Inside, Ocean Grown is manufacturing cannabis and has started distribution operations, but there is no sign or smell to indicate that fact. It will soon start cultivation.

Vosburg told me that Ocean Grown has about 60 employees working here, but admitted that he didn’t know how many were Coalinga residents. The company has limited interactions with the community: It hosted a shaved-ice stand at Coalingafest and it once donated blue light bulbs for National Police Week. It’s also given tours to the City Council, police, and mayors of nearby towns. Though it insists it’s active in the community, Ocean Grown has largely adopted the attitude of an aloof proprietor. It requires employees to sign a nondisclosure agreement, and many of the people that I spoke with in town didn’t even realize it was operating.

These days, residents on the “Coalinga Citizens” Facebook page have stopped arguing about the morality of marijuana and instead inquire about how to get jobs at Ocean Grown. Although Campbell, the school-district board member, was an early vocal opponent, he conceded that if marijuana brought in money for the district, he would take it, even if it was “dirty money.” The $4.1 million from the sale of Claremont went toward wiping out Coalinga’s debt, and revenue from the sales of some cannabusinesses will go to various entities, including the school district.

Last June, I visited the marijuana-business zone at the outer edge of town, a large empty plot of land for which the city has now sold some two dozen licenses. At the corner of Enterprise and Mercantile streets, a massive skeletal steel structure towered above the pistachio orchards across the road. Several construction workers in neon-green shirts and hard hats were drilling a hole, with piles of dirt and a tractor nearby. This was the beginning of the Coalinga branch of Next Green Wave, Jennings’s company. The whole lot—all 22 acres—is zoned for cannabis, but Next Green Wave is the only business that seems to be operating. Vosburg pointed to a plot of land where a portable office sat, but it was closed. Another plot was empty but for a sign bearing the name of a company. Vosburg suspects that the businesses did not have the funding to get up and running—or that the Trump administration’s anti-cannabis stance had spooked companies. “It’s been quiet,” Vosburg admitted.

Across the state, the cannabis industry is struggling to meet market projections. A sales tax on marijuana, imposed after legalization in 2016, has driven up prices, encouraging the persistence of an illicit market. Tax income from cannabis sales and cultivation in the first six months of 2018 was $40 million less than the state had projected. On the supply side, the industry is operating under unclear and shifting licensing rules that have forced some businesses to pause or go under. Those that are running do so under a temporary license. “If you’re an undercapitalized grassroots guy, this is a nightmare, because a change in regulation that costs you $40,000 can sink your entire project,” Jennings noted.

With most of these expected marijuana companies not yet in business, Coalinga is losing millions of dollars in taxes and licensing fees. “There was a firestorm of people that came in and found out it was a lot more money and rules in the legal sphere,” one city official told me. “A lot of people backed out in land acquisition.”

But even with the millions potentially coming in from Ocean Grown, Coalinga remains in the red. When Ocean Grown bought Claremont, the city had one of the most business-friendly tax rates in the state. It taxed Ocean Grown’s cultivation at a mere $25 per square foot for the first 3,000 square feet, and $10 per square foot thereafter. But once California voted to legalize pot in 2016, other towns in the state and the Central Valley started to reach out to the new industry. City councils in nearby towns, inspired by Coalinga’s example, have allowed limited operations or have launched efforts to convince their residents of the new opportunity.

“When we first started this, our tax rate at the time was a decent tax rate,” Vosburg told me. “We thought definitely people would come and they’d want to pay that rate—and they wanted to. But as soon as it opened up in California for everyone, that tax rate is no longer a competitive tax rate. So we’re going to have to change it.”

At a meeting this spring, City Council members discussed slashing taxes to lure companies. Among those present was a woman from Sacramento who said she’d worked on Wall Street for almost two decades and now served as a consultant for cannabis businesses and cities. Coalinga would need to offer greater incentives, she told the council, and suggested lowering the tax rate and negotiating for longer-term development agreements. The council agreed; the city cut the tax rate for cultivation from $25 to $7 per square foot, and for nurseries from $25 to $2 per square foot. “They’ve kept their end of the bargain,” Casey Dalton, CEO of Ocean Grown, told me. “They were family, and kept themselves flexible and competitive.” Far from being a miracle economic cure, the cannabis industry was proving to be like every other industry in America: in search of cheap labor and low taxes.

Even as Coalinga courted cannabusinesses with sweetheart tax deals, it was still running out of money—so the council leaned on residents to generate revenue while the city waited for the businesses to come flocking. Last fall, it proposed a sales tax. Voters refused. This past January the city, running dangerously low on funds, cut nine police and three firefighter positions. Faced with the possibility of more cuts to public services, voters agreed in November to a sales tax. “Now that I’m in city government, I don’t understand how these people think they deserve things but are not willing to pay,” said Vosburg, who had campaigned on an anti-tax platform back in 2015. “There is no revenue stream.”

Earlier this year, a scandal at the town’s medical center involving mismanagement of funds had forced the center to shut down. The nearest hospital is now at least a 40-minute drive away. Only two ambulances operate at a time in Coalinga, and they would now be occupied by the commute for hours at a time. Recently, a major grocery store shut down, the summer farmers’ market was discontinued, and the staff of Coalinga’s only newspaper was reduced to a single reporter, who writes and produces the paper by herself. “People use the phrase around here, ‘We’re a dying town,’” one resident said. “When you lose a newspaper, you lose a bloodline.”

Last year, Kmart started emptying its shelves as it closed several stores in the area. Coalinga lost the $82,000 a year it made in county sales taxes from the retail chain. There isn’t anywhere else in Coalinga to buy clothes or toys, said Hilda Crawford of the town’s library. Crawford is the daughter of migrant fieldworkers and has lived in the area her entire life. When she saw Vosburg, she told him, “You fought really hard and worked your ass off to get that marijuana facility. Are you going to work hard to get a replacement for Kmart—or do I make my chonies out of hemp?”

Clearly, California’s cannabusinesses, investors, and consumers are still adjusting to the new reality of legal marijuana. It’s possible that, once the compliance rules are firmly in place, Coalinga will be able to capitalize on a lucrative market. But the cannabis industry, in the end, is a business, and the jobs that the City Council once thought these companies would bring to Coalinga still depend on the needs of that business. Jennings, the owner of Next Green Wave, told me that he would much rather hire people who have experience farming and have never touched cannabis over people who grow marijuana in their basement. But many other jobs in the industry, like those of technician and researcher, require particular skills. “From a fiduciary standpoint, I can’t commit to employ 80 percent of local residents if we only get 20 percent who are qualified,” he said.

Coalinga’s local community college, West Hills, which has long trained students to enter industries in the surrounding area, has a large agricultural program, but it currently has no curriculum to train students in marijuana cultivation. Vosburg’s own enthusiasm about the marijuana industry seems to have been tempered. One company recently made a pitch to Coalinga, estimating that it would bring in over $1 million in tax revenues. “Those are just numbers, because we’ve heard all kinds of companies tell us they’re going to bring in all kinds of things,” Vosburg said. “I’ll believe it when I see it.”

The biggest employers in town remain those that Coalinga has long relied on: oil, prisons, agriculture, and the school districts. Ever since he graduated from high school, Voss has moved among all of them except agriculture. Currently, he teaches a course in crime-scene investigation at the high school, training kids for jobs in corrections, an industry that’s already established in Coalinga. As the school district faced cuts, Voss was at risk of losing this job, too, but his wife, who is also a teacher, and the teachers’ union fought on his behalf and saved it. In the prisons, oil fields, and schools, unions have helped save the limited number of jobs in a dying town. There is little promise that marijuana companies, looking for incentives in a competitive market, will do likewise. So far, Ocean Grown, the only company currently up and running, doesn’t offer union jobs.

As I spoke with Voss in his home, he and his wife named the old families who no longer live in Coalinga and the businesses that were leaving town. “I worry about Coalinga right now,” he told me. “We’re in a big downturn.” For now, it seems, the promise of legalized cannabis has failed to deliver. And yet there is no other promise on the horizon. “There’s no industry that’s coming in,” Voss said, “other than marijuana.”

Corrections: The text has been updated to reflect the fact that it was Damian Marley’s manager, not Marley, who was quoted by The Guardian in 2016, and that, according to Next Green Wave’s CEO, investors have put nearly $16 million, not $18.5 million, into the company. And Ocean Grown Extracts is manufacturing but not yet cultivating cannabis at the converted Claremont complex.

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