The Lemoore City Council called a special session Thursday to approve the original proposal for a cannabis-infused lemonade manufacturer after the manufacturer said no to conditions the council added during Tuesday’s regular meeting.
During Tuesday’s meeting City Manager Nathan Olson introduced a projection development agreement and cannabis regulatory permit for Flavor Fusion, LLC. The agreement included a fee structure, part of which was a 1% fee on gross receipts for manufacturing, not to exceed $45,000.
Olson explained during the meeting that the fee ceiling would only kick in if the plant was producing more than $45 million a year. He said the fee structure was designed to make Lemoore competitive for potential cannabis-product manufacturers.
While some cities offer a 0% manufacturing fee, Olson said companies are leery of entering into agreements with those cities because they can change the fee rate. While Lemoore’s agreement has a cap, he said companies like the long-term fee tied to a 25-year PDA.
Councilmember Frank Gornick asked that a provision be added to revisit the fee rate after five years of production. A motion passed 5-0 to approve the PDA, under that condition.
Thursday’s meeting was called after Flavor Fusion responded negatively to the provision. Olson brought the item back, asking the council to approve the agreement as it was originally presented.
“Right now, typically, everyone we have on PDAs with manufacturing, it’s capped at $45,000,” Olson said. “So this is in line with everyone else for a maximum.”
Gornick asked what kind of revenue the company is making in Washington, which is the only other state Flavor Fusion produces and sells in. Olson said, as far as he knows, they are selling $30-40 million.
The council unanimously passed the agreement as originally presented, without the five year revisit to the manufacturing fee.
Olson said Flavor Fusion is looking to start production in April 2022, and will be the first cannabis-product manufacturer in the city, though other cannabis companies have manufacturing provisions in their PDAs.
With the new cannabis businesses in Lemoore, the city has already seen around $35 million in investment, which Olson said is the biggest investment in the community for nearly 20 years.
The project will now be allowed to proceed.