Joint Special Council/BFPD
06/17/25 05:30 PM
Building
Amy Sanchez
Resolution
Doc ID: 6016
AGENDA ITEM
AGENDA MATTER:
PUBLIC HEARING – CONSIDERATION OF DEVELOPMENT AGREEMENT TERMINATION FOR COMMERCIAL CANNABIS BUSINESS OPERATOR ZENGROW, INC.
EXECUTIVE SUMMARY:
Staff is recommending that the City Council adopt a resolution terminating the development agreement the City entered into with Zengrow, Inc. for Zengrow, Inc.’s failure to comply with the terms of their development agreements and provisions of the Barstow Municipal Code.
DISCUSSION:
Zengrow’s Payment Obligations
As a commercial cannabis business operator within the City, Zengrow, Inc. (“Zengrow”) is subject to, and must operate its commercial cannabis business in compliance with, the development agreement it entered into with the City (“DA”). The DA requires Zengrow to comply with: (a) all provisions of the resolution that adopted the DA; (b) Barstow Municipal Code Chapter 19.27, et. seq. (Uses Related to Cannabis); (c) all terms imposed by the City-issued Commercial Cannabis Permit; (d) all terms imposed by the City-issued Conditional Use Permit; and (e) all other requirements of applicable City law and permits. A copy of the development agreement is attached as Attachment 1.
Under the DA and Barstow Municipal Code (“BMC”) Chapter 19.27, Zengrow was required to obtain a cannabis business permit and pay a cannabis permit application fee prior to operating a cannabis business within the City. Thereafter, Zengrow was required to annually renew its permit and pay the permit renewal fee established by City Council resolution to the City. The City’s Master Fee Schedule, adopted through Resolution No. 5169-2024, established Zengrow’s 2024 permit renewal fee at $14,107.85. Zengrow failed to pay this fee to the City as and when due.
Pursuant to the DA, when Zengrow’s 2024 operating and permit renewal fees became more than 30 days past due, Zengrow incurred a 25% late penalty for each unpaid fee in the amounts of $27,142.50 and $3,526.96, respectively. Zengrow has failed to pay the City these amounts.
In sum, Zengrow failed to make the following payments to the City as and when due under the below-specified sections of the DA and/or Barstow Municipal Code:
Joint Special Council/BFPD
06/17/25 05:30 PM
Building
Amy Sanchez
Resolution
Doc ID: 6016
AGENDA ITEM
Fee Type Year Amount DA / BMC Cite
Operating Fee 2024 $108,570.00 DA section 8
Late Operating Fee Penalty 2024 $27,142.50 DA section 8 Permit Renewal 2024 $14,107.85 DA section 8; BMC section 19.27.110; Master Fee Resolution
Late Permit Renewal Penalty 2024 $3,526.96 DA section 8 Community Benefits Program 2024 $43,428.00 DA section 6 TOTAL $196,775.31
Each nonpayment listed above constitutes a separate and distinct breach by Zengrow of the DA.
Zengrow’s failure to cure any one of the forgoing violations provides a basis to terminate the DA.
City’s Enforcement of the DA
The City may terminate a commercial cannabis business operator’s development agreement because of the operator’s breach thereof by providing the operator with at least 30-days written notice of the default and opportunity to cure followed by a public hearing and Council decision. The public hearing must be preceded by the City’s notice to the operator of its intent to terminate the development agreement.
On February 5, 2025, the City sent Zengrow a notice of breach informing it of its breaches, providing it with 35 days to cure by paying the past due amounts to the City, and notifying it of the City’s intent to terminate the development agreement at a public hearing. Only the inspection fees collectively totaling $1,100.00 were paid by Zengrow in response to the February 5, 2025 notice of breach. After Zengrow failed to cure all other breaches within 35 days, the City sent Zengrow a notice of intent to terminate the DA on May 14, 2025 informing Zengrow that: (a) it failed to cure the DA breaches set forth in the February 5, 2025 notice of breach; (b) the City intended to terminate the DA; and (c) the City would hold a public hearing on June 17, 2025 at 7:00 p.m. at Barstow City Hall located at 220 E. Mountain View Street, Barstow, CA 92311 to consider the termination of Zengrow’s DA.
Joint Special Council/BFPD
06/17/25 05:30 PM
Building
Amy Sanchez
Resolution
Doc ID: 6016
AGENDA ITEM
Copies of the City’s February 5, 2025 Notice of Breach and May 14 Notice of Intent to Terminate Development Agreement are attached as Attachment 2 and Attachment 3, respectively. A resolution terminating the DA is attached as Attachment 4.
California Environmental Quality Act
Adopting the resolution terminating the DA is not subject to the California Environmental Quality Act (CEQA) under CEQA guidelines Section 15061(b)(3) because CEQA applies only to projects that have the potential for causing a significant effect on the environment. It can be seen with certainty that there is no possibility that terminating the DA will have a significant effect on the environment, therefore no further environmental review is necessary.
Attachment 1 - Zengrow Development Agreement
Attachment 2 - February 5, 2025 Notice of Breach to Zengrow Attachment 3 - May 14, 2025 Notice of Intent to Terminate Development Agreement Attachment 4 - Resolution Terminating Development Agreement Between Zengrow and the City FISCAL IMPACT:
The City is not expected to incur any negative fiscal impact from terminating these development agreements.
RECOMMENDED ACTION:
That the City Council adopt the resolution terminating the development agreement with Zengrow (Attachment 4)) and direct staff to take further steps to consummate the development agreement termination.
If the development agreement is terminated, the City plans to assess its options for how to best use the property.