Encinitas hires cannabis consulting firm recently fired by Bay Area city

ENCINITAS — A cannabis consulting firm, recently hired by the City of Encinitas to help with its retail cannabis permit process, was fired by a Bay Area city earlier this year following an audit that raised concerns about the group’s accuracy.

HdL Companies, a firm out of Brea, California, offers services to cities on business license and taxes, economic development, property tax, cannabis consulting and more.

The firm was hired by the City of Fairfield, located in Solana County and situated between San Francisco and Sacramento, to help with its retail cannabis permitting process after residents approved a citywide business tax (Measure C) on government-licensed marijuana shops.

At a Fairfield City Council meeting in March, the city publicly parted ways with the company following a city audit finding HdL’s scoring system for permit applicants to be substandard.

The city had previously received input through public hearings that raised concerns about the accuracy of HdL’s scoring which prompted Fairfield to ask for HdL to conduct an internal audit.

“HdL discovered that it wasn’t just one that was scored incorrectly, there were numerous applications that they misscored (sic) and that in fact did change the placing of the top five,” said Fairfield City Manager Stefan Chatwin during the meeting.

Chatwin went on to say that HdL inaccurately scored at least nine permit applications.

“Frankly there’s no excuse for their failure here,” Chatwin said. “We paid good money to have them do this and they failed in a big way on this.”

California City News reported that a letter submitted to the council noted “we also believe it is important to the city to see and understand the significant discrepancies between the score, and what appears to be significant contradictions to what we as the applicant provided.”

According to the city, both entities agreed to terminate the contract. The city also said HdL agreed to pay back the money spent for their contract.

According to an article in the Daily Republic, Fairfield Councilwoman Catherine Moy said the firm had “poisoned” the process with their city.

“This is very upsetting,” Moy said.

Fairfield was forced to pause its retail cannabis permitting process and was unable to award permits until June following the issues with HdL after the city held public interviews with all the applicants.

The City of Encinitas, still in the process of implementing Measure H, which was passed by voters last year calling for the regulation of recreational cannabis in the city, has also hired HdL Companies to assist them in their retail cannabis permitting process.

Last month, when the Encinitas City Council finally passed an ordinance consistent with the voter-approved measure, the city said that HdL would have very little influence over the permit process.

“There really isn’t much subjectiveness to this process the way it’s laid out in the ordinance that was passed by the voters,” said City Manager Pamela Antil.

The city said HdL will have no discretion in the final selection process but they will help the city in assessing permit applications —  at least as much as the firm did in Fairfield.

The council is still waiting on approval from the California Coastal Commission for changes made to the city’s Local Coastal Plan as part of the recently adopted ordinance before accepting permit applications.

The city has not responded to an inquiry from The Coast News as to whether it was aware of the situation between HdL and the City of Fairfield earlier this year.

The City of Encinitas has worked with HdL Companies in the past, including its report on the city’s 2019 sales tax revenue.