Fred Watkins appears before the Rutland Development Review Board during a public hearing on Wednesday, May 1. Screenshot A proposal to establish Rutland City’s first home-based cannabis cultivation site has become so contentious it could create legal precedent in Vermont’s nascent retail cannabis industry. Rutland’s Development Review Board is reassessing a home business permit that the planning and zoning administrator issued to city resident Fred Watkins in February, after more than a dozen of his neighbors asked that it be thrown out.  Watkins intends to set up a cannabis-growing operation inside a garage-like structure on his residential property, located about a mile from downtown. He hopes to generate 30 pounds of products every two to three months, which he said would be sold to dispensaries. Following a second public hearing on the issue Wednesday, the Development Review Board has 45 days to decide whether to grant the neighbors’ request to overturn the permit. The neighbors, as well as Watkins, told VTDigger they’d appeal in court if the board’s ruling doesn’t go their way. During the public hearings and in written submissions to the board, the neighbors said a cannabis cultivation site on Watkins’ East Washington Street property would ruin the area’s residential character and bring nuisance to residents. They’re expecting the cannabis operation to create increased noise, odor and round-the-clock activity, which they said are in violation of local zoning laws. The neighbors’ arguments included public safety issues, which they linked to the nature of Watkins’ business venture. “We believe the approved business is a safety concern; attracting the criminal element to the neighborhood in an attempt to burglarize the subject and adjoining properties,” 14 residents in the East Washington Street area said in a joint appeal letter.   An attorney representing Susan Kelley, a neighborhood resident who lodged the first board appeal, has also questioned whether Watkins’ home business permit application received favorable treatment from city hall due to his ties to Mayor Mike Doenges — a charge the mayor denies.  A recent court filing in a separate case alleges that Doenges and Watkins owe money to a cannabis consultant named Wesley Tipton, who said they hired him last spring to build a plant-growing system on Watkins’ property and provide operational advice. The complaint stated that Doenges and Watkins were business partners. “It just calls into question and puts a cloud over all the decisions now that (have) been made in this case,” the attorney, Tom Bixby, said in an interview. Bixby said that, according to an event timeline prepared by Rutland Planning and Zoning Administrator Andrew Strniste, Strniste’s office told Watkins on Dec. 22 that a home-based indoor cultivation facility would qualify as a cottage industry, requiring the plan to be assessed by the Development Review Board. Seven days later, Bixby said, the timeline shows the office walked back its original directive, telling Watkins his cannabis operation could qualify as a home business. It would still need a business permit but wouldn’t need the board’s approval. “They’ve given him the permission to go ahead,” Bixby said. “If it was, maybe, somebody from the outside, they wouldn’t have gotten the same treatment.” Memo from the mayor Doenges, elected Rutland mayor in March 2023, said he had never exerted influence on Strniste to grant Watkins a business permit for his home-based cannabis cultivation. Doenges acknowledged he and Watkins are friends, and they’ve explored going into various businesses together, but said he issued a memo to Strniste and other city officials in February, underscoring that city hall should not give Watkins preferential treatment in the permitting process. Doenges started off the memo by saying he had heard concerns about Watkins’ proposed cannabis business, and people knew they were friends.  “While it is true that there is a pre-existing relationship with Mr. Watkins, I want to emphasize that this relationship has not and will not influence the permit process here at City Hall,” Doenges wrote in the Feb. 8 memo, which was also addressed to the Rutland public works commissioner, building inspector and city attorney. Doenges also said he’d chosen to maintain distance in the case. “I have and will continue to abstain from any discussions or decisions regarding Mr. Watkins’ zoning permit approvals to avoid any potential conflicts of interest or perceived biases,” according to the memo, which Strniste provided to VTDigger. Doenges said he and Watkins discussed setting up a cannabis cultivation operation in the town of West Rutland last year, but not in the city of Rutland. He said those plans were reflected in state business filings. Business records with the Vermont Secretary of State’s Office show that a domestic limited liability company was formed in April 2023 by the mayor’s wife, Sara Doenges; Watkins’ stepdaughter and a member of the Rutland Board of Aldermen, Kiana McClure; and Tipton, who is now suing the mayor and Watkins. The company was classified under the agriculture industry, as “all other miscellaneous crop farming.” The business venture “did not end up working out,” Doenges said in an interview. When asked, the mayor said he did not know that Watkins had pivoted to setting up a cannabis cultivation site at his residential property until he learned of it through the municipal permitting process. He and Watkins both deny breaching a contract with Tipton or that they owe him any money. Doenges said he personally believes Watkins’ residential neighborhood was not the appropriate place to set up a cannabis-growing site. “I don’t know that that type of operation is a good fit in that area of the city,” he said, adding that he remains neutral on the issue in his role as mayor. Doenges maintains there is no evidence of wrongdoing on his part, but that some community members are roping him into the Watkins case as a strategy to win their board appeal. “I never thought that people would use my name to try to win their fight on the permitting process, like they had,” Doenges said. “I definitely didn’t think my name would get dragged into it because of a past connection.” Rick Smyrski, who is serving as spokesperson for the group of 14 neighbor appellants, doesn’t believe Doenges swayed the permitting process for Watkins. But at the same time, he said the mayor should have been more transparent about his plans to set up a cannabis business with Watkins before those were made public by the Tipton lawsuit. “I don’t believe he abused his position,” Smyrski said of the mayor. “I just don’t think that, you know, him not disclosing this looks very good.” Taking the case to court If Smyrski and his group lose their appeal with the Development Review Board, he said they intend to bring the case to the Vermont Environmental Court, which would have jurisdiction on the matter. Bixby said his client, Kelley, would also appeal. Watkins has the same plan if he loses on the board level. “I absolutely, 110%, am not backing down,” he told VTDigger. If the case goes to court, it would be one of the first lawsuits involving the state’s relatively young retail cannabis industry, said James Pepper, chair of the Vermont Cannabis Control Board. Litigation, he said, can clarify questions with the law and how it’s applied to the cannabis industry. “We haven’t seen any real litigation around this yet.” Pepper said. “Maybe Rutland will be a test case.” Strniste, the city’s planning and zoning administrator, said he decided to issue Watkins a home business permit after evaluating the impact his proposed operation would have in the neighborhood. He said he considered factors such as loud noises and odors, then made a decision in consultation with the city attorney and outside counsel.  Strniste said he also followed state government guidance that cannabis businesses not receive unique scrutiny as Vermont was working to support the industry’s growth.  “When all the cannabis stuff came down from the state, it said that we were supposed to treat cannabis as if it was any other product,” he said. “Take cannabis out of this analysis and substitute in tomato plants. The calculus, the perception, changes a little bit.” Strniste said he advised Watkins to apply for a home business permit, rather than one as a cottage industry, after a few days of having reviewed local regulations. Strniste, who was appointed to his position by the former mayor, David Allaire, said he never felt any pressure from Doenges to rule one way or the other in Watkins’ case. “I’ve always understood his partnership with Fred Watkins dealt with dealings outside the city and never inside the city,” Strniste said. Despite municipal officials’ directives, however, Watkins believes state law allows him to operate a cannabis cultivation site at home without the need for a permit. He also likens the situation to planting tomatoes in one’s yard before selling them at a market. “You don’t need a permit to grow a garden in your yard,” he said. Watkins denies his neighbors’ allegations that his indoor cannabis-growing operation would bring nuisance to the neighborhood. He has told the Development Review Board that the equipment he’d use wouldn’t create extra noise and an air filter would eliminate any smell. And because it’s a wholesale operation, Watkins said, he would deliver to dispensaries and no customers would be coming to his home.   He also dismissed public safety concerns over the business. “There’s no criminal activity in marijuana,” Watkins said, but added that he has installed multiple surveillance cameras and security alarms on his property.“The neighbors are more secure right now,” he said. Read the story on VTDigger here: Plan for home-based cannabis business in Rutland leads to fight among neighbors.