The fate of a San Leandro medical cannabis dispensary may hinge on the repayment of a federal loan previously used to purchase the building where the group intends to open its business sometime next year.

The San Leandro Board of Zoning Adjustments reaffirmed its vote last Thursday to pave the way for the Davis Street Wellness Center dispensary to open in a portion of what is presently the Davis Street Family Resource Center on Teagarden Street.

The BZA gave preliminary approval for the Wellness Center’s conditional-use permit on Oct. 5, despite the city’s argument that its parking plan was suspect and placing a dispensary in the area was inconsistent with neighboring uses.

The Wellness Center and Family Resource Center are separate entities, but will share some board members

However, the city’s insistence that the Davis Street Family Resource Center pay back the balance of a $500,000 federal loan used to purchase the building  on Teagarden by Jan. 31 could be problematic, said John Oram, CEO for the Wellness Center.

“We’re not arguing to payment of the loan were simply asking for more time,” said Oram. “We will guarantee that loan will be paid before occupancy is given.”

Additional time is needed to secure funding, said Oram, but also to begin developing the business. “I think we’re being hyperbolic and overly broad on this,” he said of the city’s stance. Oram told the board there will be no distribution of cannabis until the loan is settled.

Oram and some members of the BZA, meanwhile, urged for an extension of the city’s 90-day demand for repayment of the loan which was originally made through the city’s Community Development Block Grant (CDBG) program. Board member Rene Mendieta urged for a seven-month repayment window that roughly coincided with just prior to the dispensary occupying the site. But the board disagreed, along with a compromise Mar. 31 deadline.

San Leandro city staff stated to the BZA with a degree of expediency that without quickly settling the Teagarden loan, the city risks liabilities once the dispensary opens its doors. “The goal is to protect the city,” said a city staff member. “We do not want to extend our risk or liability.” Although the sale and possession of cannabis is legal in the state, it remains illegal under federal law.

Repayment of the federal loan to the Family Resource Center has been a long-standing issue for the city. City administration contends the use of the building for a dispensary is an unpermitted use. The Wellness Center disagrees, but acquiesced to the repayment demand during last month’s BZA hearing. The city’s $500,000 loan offered in 2010 was intended to be forgivable. Its current balance is roughly $325,000, said city staff.