A struggling California desert town bets future on marijuana

NEEDLES, Calif. >> Jeff Williams, the incoming mayor of this small desert city near the Arizona border, arrested a lot of people for selling marijuana in his days as a county sheriff. He voted against legalizing the stuff in a 2016 statewide referendum.

But Williams also knows the city he has called home since he was in second grade has seen better days. The railroad jobs have mostly gone away. And people don’t stop off on the old Route 66 as they used to.

So Williams, a slender 54-year-old, has become the unlikely leader of Needles’ unlikely effort to turn itself into a new kind of industry town dedicated to the growing business of cannabis.

“If a small community like this isn’t growing, it’s dying — and that’s what we were doing,” Williams said. “We needed to do something.”

The City Council in this solidly Republican community of 5,000 people has approved 81 permits for cannabis businesses since 2015. Four stores are selling marijuana to the public — about 100 times the number of dispensaries per person over the entire state.

Almost every block in Needles has a rundown building like the old Relax Inn, which is being converted into a cannabis growing facility. Or a new building going up for manufacturing oils and edibles. If all the projects pan out, local officials hope they will generate more jobs — an estimated 2,100 — than Needles has altogether right now.

“You would be hard-pressed to find someone in town who their brother, uncle, sister, aunt, cousin or themselves isn’t involved in the industry,” Rick Daniels, the city manager, said in an interview at Needle’s single-story City Hall.

If Needles, California, rings a bell, there is a reason. The historic Route 66, the road traveled west by many of Southern California’s 20th-century settlers, cuts right through town. Needles was the Joad family’s first California stop in “The Grapes of Wrath,” by John Steinbeck.

Needles also was the first place train crews swapped out on freight trains headed east out of Los Angeles. That created hundreds of jobs.

But like many other small towns on the way to Los Angeles, Needles used to be a lot more important. The railroad cut the size of its train crews, and the elegant depot building in Needles is mostly empty. Needles lost its last grocery store in 2014. More than a quarter of the city’s residents live below the poverty line. Bit by bit, the jobs and the people were leaving.

In Williams’ first go-round as mayor from 2006 to 2010 (he was also a member of the City Council for four years), he tried to attract the solar industry. When that failed, he was drawn to the opportunity in marijuana by a friend who wanted to open a dispensary. California residents had voted to allow medical marijuana years earlier, in 1996.

Williams spoke with doctors about the potential benefits and slowly got over some of the antipathy toward the drug that his parents and his years as a police officer had instilled.

“It was like turning a battleship. It was a long process,” he said in a recent interview.

Williams, who said he still had not smoked marijuana himself, worked with the city manager and a lawyer to put together a ballot measure in 2012 that imposed a 10 percent tax on cannabis businesses. It passed with 81 percent of the vote.

“This is a very politically conservative town — but it’s got a streak of libertarianism,” Daniels, the city manager, said.

The first dispensaries in town still faced opposition, especially from local evangelical churches. But they have failed to attract the bad elements some expected. Crime has been stable over the past few years.

At the Wagon Wheel, the city’s oldest restaurant, a small souvenir shop now offers flags with the marijuana leaf and commemorative signs for Route 420, a code number of sorts for marijuana, along with the old Route 66 memorabilia.

California voted in 2016 to legalize the sale of marijuana for adult use. Most communities have been slow to embrace it because it is still illegal under federal law.

But several cities in economically struggling parts of the state have seized on the opportunity. Needles has competition from other small cities east of Los Angeles, like Desert Hot Springs and Adelanto.

With cannabis has come some trouble. Months after the first dispensaries opened in Needles, they were raided by federal agents. No charges were brought, but the products that were seized were never returned.

And federal authorities recently arrested officials in nearby Adelanto and accused them of giving out cannabis permits in exchange for bribes and personal favors. A trial is pending.

“When you open up your community and say, ‘This is a free-for-all, come on in,’ you run into danger,” said Tristan G. Pelayes, a former mayor of Adelanto who now works as a lawyer representing some of the accused officials.

Needles’ officials are acutely aware of the risks. Daniels, the city manager, has barred city employees from accepting so much as a cup of coffee from local businesses. Like other city employees, Daniels has to pass regular drug tests that ensure he never uses pot.

“This industry is so critical to this community’s future — we just cannot afford to screw it up,” Daniels said.

At a meeting of the City Council in November, three of the five items on the agenda were related to cannabis. No one voiced opposition. Most who did speak up were dispensary owners, who asked police to take a harder line on illegal drug sales.

Lyn Parker, secretary of the city’s Chamber of Commerce and a former teacher in the city’s schools, said cannabis was not the first industry most of her members would have chosen. But they have made peace with it.

“I don’t think cannabis is going to drive anything away because it wasn’t coming anyway,” Parker said. “Would we like a small industry here instead? Sure. But we’ll take anything to help our town.”

But pockets of opposition remain. Thomas Lamb, pastor at the Needles Assembly of God, said he had seen marijuana becoming more of a problem for children in the grade school he oversaw. A cannabis company asked to buy the property where his church and school sit. He quickly said no.

“The people who have come into Needles want to buy up every available piece of property, including our church, to manufacture their product,” he said. “Quite frankly, it’s a little bit overwhelming.”

The dispensaries selling joints and vape pens are only a small piece of the weed business that city officials envision. Far more tax dollars are expected to come from companies that are growing and manufacturing marijuana products for other parts of the state, like Los Angeles, where permitting and growing is more difficult.

The city’s proximity to the Colorado River provides a steady source of the water that marijuana operations need. And Needles owns its own electrical utility, which allows it to offer electricity at about a fourth of the cost of cities that rely on commercial utilities. That is important for indoor marijuana cultivation under artificial lights.

Vertical Cos., a large cannabis producer with headquarters near Los Angeles, has purchased about 30 acres in Needles. It has a campus on the edge of town with three new buildings and plans for three more.

Two of the buildings house two floors of rooms that have been wired and lighted for growing plants. The other building is dedicated to manufacturing facilities, where potent parts of the plant are extracted in a series of machines and elaborate glass beakers.

Vertical is also turning an old Kentucky Fried Chicken on Route 66 into a kitchen for candies and baked goods made with marijuana oils.

Drew Milburn, a former Marine who is in charge of Vertical’s local operations, said he had looked at expanding in other cities in California but none could compete with Needles’ electricity and water — and its openness to his industry.

“Lots of cities welcomed us with opened arms, but very few cities finished it with a hug,” Milburn said.

The cannabis industry is expected to become the biggest generator of tax revenue in town. It has already created 350 jobs and appears to have led to a revival in property prices, which have gone up the past two years after falling for nine. Starbucks recently agreed to open its first branch in Needles.

The main danger may be rapid expansion of the cannabis industry across the state, which could push down marijuana prices and make Needles’ smaller facilities unprofitable.

At the recent City Council meeting, the only moment of hesitation about cannabis came when one of the city councilors, Tom Darcy, proposed that the city open applications for a fifth dispensary.

The dispensary owners in attendance all opposed the idea. Another city councilor, Shawn Gudmundson, suggested the council stick with four.

“We are cramming marijuana down our constituents throat,” he said. “Let’s let it play itself out.”