Gambling gone bust, tribe turns to marijuana farming

A small Indian tribe in a remote stretch of San Diego County has traded in its failed dream of casino riches for what could be the next big payout: marijuana cultivation.

The Iipay Nation of Santa Ysabel — which shuttered its 35,000-square-foot gambling hall in February 2014, buried under $50 million in debt — has transformed the vacant space into a high-tech medical marijuana operation and is leasing part of the property to growers who cultivate and distribute the drug to legal dispensaries throughout the state.

On the building’s sprawling parking lot, more than a dozen greenhouses are in various stages of construction, awaiting more tenants.

The tribe is the first in San Diego County to embrace the marijuana industry in the wake of a December 2014 memo by the Justice Department that declared sovereign nations would not be prosecuted for growing pot on tribal land in states that had already legalized the drug.

Indian tribes across the nation mostly have been wary of that decision. But at Santa Ysabel, the timing of the Justice Department memo — 10 months after the casino failed — seemed serendipitous.

In 2007, when the Santa Ysabel Resort and Casino opened on a hillside off state Route 79, the tribe envisioned building a hotel to serve the hordes of gamblers who surely would flock there. That never happened. There were many other casinos closer to San Diego and major transportation corridors like Interstate 15.

The 700-member Santa Ysabel tribe had watched its neighbors get rich, but saw its own prospects evaporating.

So in early 2015, leaders quietly jumped at the opportunity for a new revenue source. They soon created laws regulating marijuana on the reservation and established the Santa Ysabel Cannabis Regulatory Agency and Cannabis Commission to oversee the venture.

For the last 18 months, marijuana cultivated at the site has been shipped to legal dispensaries across California, said Dave Vialpando, who heads the tribe’s regulatory agency.

Vialpando declined to identify the marijuana businesses that are leasing grow space, or the financial arrangement between those companies and the tribe.

He said the operation at the former casino property was still “very, very small. It’s two grow rooms, less than 1,000 plants. Mostly it’s still empty space. It’s still in development.

“The greenhouses are at various stages of construction,” he said. “It won’t be all cultivation. There will be processing rooms and trimming rooms and storage rooms. There’s a lot of infrastructure that goes with the enterprise of medical cannabis.”

Vialpando said the testing lab was about to open, and there is the possibility that other cannabis products such as lotions could be produced in the future.

Local law enforcement agencies seem to be taking a wait-and-see approach when it comes to the tribe’s marijuana operation.

The San Diego County Sheriff’s Department said in a statement that it does not license, inspect, or regulate marijuana cultivation on tribal lands. “The Iipay Nation of Santa Ysabel is operating under tribal law and tribal authority in this case,” the department said.

The district attorney’s office said it was aware of the grow operation at Santa Ysabel “and has advised the tribe that if state laws are broken in a location where we have jurisdiction, our office will review any resulting investigation for potential criminal charges.”

Vialpando — who worked as an officer with the California Justice Department before retiring in 2011 to head up the tribe’s gambling operations and then its cannabis agency — said he’s confident the Santa Ysabel tribe is doing everything by the book.

“We have a highly regulated operation,” he said. “The tribe has no ownership interest in cannabis. It doesn’t cultivate it, doesn’t process it. … We have inspections and audits and waste disposal to assure that no cannabis waste leaves the reservation.”

Though California voters approved Proposition 64 in November, legalizing the recreational use and cultivation of pot, Vialpando said the tribe’s laws only allow the cultivation of medicinal marijuana. He said the tribe has no plans to expand those rules to include recreational marijuana.

jharry.jones@sduniontribune.com

Jones writes for the San Diego Union-Tribune