Tag Archives: zoning

Learning from The First Wave Part 3: Seven Basic Questions About Local Cannabis Ordinances & Real Estate

By Todd Feldman
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Part One of this series took a look at how the regulated cannabis market can only be understood in relation to the previous medical market as well as the ongoing “traditional” market. Part Two of the series describes how regulation defines vertical integration in California cannabis.

If you are considering getting involved in California cannabis, imagine the following sentence in ten-foot-tall letters made out of recently ignited $20 bills:

Before you put any money down on property, carefully examine the local cannabis ordinance and tax rates. 

This article is written in the form of advice to a newbie cannabis entrepreneur in California, but it will discuss issues that are also of significance to investors, as well as (to various degrees) cannabis entrepreneurs in other states.

Here are seven basic questions that you need to ask about local regulations (in order, except for Number 7).

1. What’s Your Jurisdiction?

If you’re in city limits, it’s the city. If you’re outside city limits, it’s the county.

2. Does the Jurisdiction Allow Cannabis Activities?

If the answer is yes, go to the next question. If the answer is no, pick another jurisdiction.

3. Where Does the Jurisdiction Allow Cannabis Activities?

A zoning ordinance will limit where you can set up shop. The limitation will probably vary by license type.

4. How Does the Local Ordinance Affect Facility Costs?

The short answer is: in many ways. Your local ordinance is a Pandora’s box of legal requirements, especially facility-related requirements.1 Read your local cannabis ordinance very carefully.

Generally speaking, the cannabis ordinance will set out two types of requirements – those that are specific to cannabis and those that apply generally to any business.

Looks great but . . . where are the sprinklers? Does it need a seismic upgrade? How about floor drains?
Photo by Wilhelm Gunkel on Unsplash

Cannabis-specific requirements:

  • Typically incorporate state cannabis laws by reference.
  • Have significant overlaps with state cannabis laws. For example, the state requires commercial-grade locks and security cameras everywhere cannabis may be found on a given premises. Local ordinances generally include similar requirements – keep in mind that you will need to comply with a combined standard that satisfies both state and local requirements.2
  • Vary greatly according to type of activity. For example, manufacturers will need to comply with Health & Safety Code requirements that can have a major impact on construction costs.
  • Vary greatly by jurisdiction when it comes to equity programs.

General requirements:

  • Include by reference building and fire codes, which can require very expensive improvements. Note that this means your facility will be inspected by the building department and the fire department.
  • Can include anything from Americans with Disabilities Act (ADA) requirements to city-specific requirements, such as Design Guidelines.
  • Will be zealously enforced because you’re a cannabis business.

5. What is the Enforcement Policy?

It may be that your local jurisdiction will give you temporary local authorization after meeting some, but not all, of the requirements. For example, you may be able to begin operations once you’ve provided your city or county with your cannabis permit application, a zoning clearance and a business permit. In this jurisdiction, you would be able to bring your building up to code sometime after you begin operations.

On the other hand, your local jurisdiction may require you to meet every requirement – from cannabis-specific security requirements to general building code and ADA requirements – before you can begin operations. Depending on the type of cannabis business (and facility condition), this might be inconsequential. Or it might mean that you will have to pay more than a year’s worth of rent (or mortgage) before you can start making money.

6. Can You Choose a Facility That Saves You Time and Money?

Of course, you won’t have to spend much time or money bringing your facility up to code if it’s already up to code. How likely it is that you will find such a facility varies wildly according to the type of cannabis activity in question. In general:

  • Service-side activities (delivery retail, storefront retail, distribution) are in many respects similar to their non-cannabis counterparts. From a facilities standpoint, the major differences come from security requirements. So, it may be possible to save time and money by choosing a facility that is already up to code for a similar use.
  • Manufacturing activities are trickier, since you will need food-grade facilities and equipment. You may be able to save money by setting up shop in a commercial kitchen.
  • Extraction with volatile solvents is a special (and particularly expensive) case, since it is inherently dangerous and requires special facilities.
  • Outdoor cultivation may be relatively unproblematic if it has an appropriate water source.
  • Indoor cultivation is expensive because of climate-control and lighting requirements. Buildings potentially suitable for large-scale indoor grows frequently come with significant problems. Former warehouses will typically require major power upgrades, while former factories may have inconvenient architecture and/or hidden toxic waste. In all cases, internal reconstruction is likely to be necessary, and will trigger all sorts of building and fire code requirements.

7. What Are the Local Cannabis Taxes?

Cannabis tax rates may be determinative. For example, Oakland imposes a 6.5% gross receipts tax on manufacturers that have gross receipts of less than $5M, and 9.5% on manufacturers that have gross receipts over $5M. In comparison, Santa Rosa only imposes a 1% gross receipts tax on manufacturers.

Local cannabis ordinances and taxes can make or break your business, so you need to understand them before you commit to a location. The seven basic questions listed above are designed to get you started.

This article is the opinion of the author and is not intended to be legal or other advice.

References

  1. For example, see Part II of the City of Oakland’s Administrative Regulations and Performance Standards, and The City of Los Angeles’s Rules and Regulations for Cannabis Procedures No. 3 (A)(14).
  2. For example, compare 16 CCR § 5044 (“Video Surveillance System”) with The City of Los Angeles’s Rules and Regulations for Cannabis Procedures No. 10 (A)(7).

The Hopes of Illinois Social Equity Applicants

By Taneeshia Thomas
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It is almost impossible to turn on the tv and not find a show or news conference or even live footage of an ongoing protest over “Black Lives Matter” or “Economic Equality.” The same situation exists with social media platforms, radio broadcast, etc. All sharing the common theme of social equity. While we all seek a solution, the state of Illinois is doing their part by awarding the coveted adult use cannabis business licenses for craft growing, infusion, transportation and dispensaries to social equity applicants by using a scoring system that favors the social equity applicant. We believe in this vision at TGC Group and our dream is to pay it forward.

Taneeshia Thomas and her husband, Christopher Lacy, who did 3.5 years in prison for growing cannabis in 2009.

We see the world, especially for minorities living in poverty, quite differently because of where we come from. “Black Lives Matter” is a movement to save the lives of all people and have human life viewed equally no matter the race of an individual. Economic equality is a totally different fight. Our communities that are impoverished need cash infusions. There needs to be financial infrastructure that recirculates the dollars from the poor communities and that comes from having business owners in the affected community to put their profits back into their community. There needs to be a system of lending that is not based on credit scores and criminal background checks because most people at the bottom will never qualify. An example would be my husband, Christopher Lacy: he went to prison for 3.5 years for growing cannabis back in 2009. He is not a violent man; he never even had a fight in prison. He spent much of his time in prison teaching inmates how to read, write and most importantly, he tried to teach them economics. He is educated about cannabis because he has been intimately involved with this plant and has been growing it for just about 20 years. Yet when he tried to apply for jobs in Illinois for growing cannabis, his invisible barrier starts with the resume. Just think about it, my husband, knows more about cannabis than most people in the industry today and could manage a facility with ease. No one could see his worth because of his background and work experience? This is the same situation with so many others in our poor communities. We know for a fact that there is hidden talent in the impoverished communities and prison system, and we intend to find it and empower these individuals to rebuild what was destroyed by the war on drugs. I speak for all the ghettos when I say this: give us access to the capital and we will get the rest done on our own. Conventional banks have their hands tied with this approach because they are regulated, but private funds have more flexibility. The excess capital needed to rebuild will not come from jobs, it only comes from ownership. Luckily, J.B. Pritzker and Toi Hutchinson are aware of this and hence created the social equity fund to help the social equity applicants fund their projects if and when they are awarded a license. We must find a way to give to the bottom so that the dollars can trickle up. Trickledown economics is kind of like that movie “Platform” on Netflix. There are never enough resources to get to the bottom because the people sending the resources down have no idea how to get them to the bottom floors of society. Trickle up economics can start at the very bottom rungs of society and still will reach to this highest level of the economic system because its built in such a way that it will inevitably get there.

State Sen. Toi Hutchinson (D-Park Forest), now The Illinois Cannabis Regulation Oversight Officer

These new licenses, literally pathways to financial freedom if operated correctly and efficiently, are revenue machines capable of changing our community. This change does not come from providing jobs (although jobs do help and will be available), but by providing capital to rebuild. These funds can provide scholarships, business loans, even small infrastructure projects can get accomplished via the tax revenue generated by the local governments. We have already made a written commitment to give a portion of net margins to the village. Capital in the right hands can make dreams come true. In theory, poverty can be solved. Poverty is not a prerequisite to the American way of life. That is why we were so proud to get zoning approval by our village. They see what we see. We can change neighborhoods like Beacon Hill. The dollars must recirculate in the community. Wherever you see high poverty rates you see high crime rates. This is not a coincidence. If you can lower the poverty rate you can lower the crime rates. This raises the quality of life for everyone. We see the state is on board, the county is on board, the Village of Park Forest is on board and the citizens of the community are on board. Now all we need is the license and capital to get the resurrection started.

Unlike other applicants, we were only capable of applying for one license for a craft grow facility. Some may see this as a disadvantage because only 40 licenses will be issued for this purpose. I wish we could have applied for more to increase our odds, but resources were scarce and applying was not cheap. We decided to stick with the efficient market theory and put all our eggs in the one basket that we know we can carry and be successful with. Without the help of Justice Grown, we would’ve never completed the application so shout out to them and anyone else that helped “true” social equity applicants apply.

The wheels are in motion so all we can do is wait to see who wins. I would hate to be on the team who must decide who wins these licenses. Everyone knows large corporations found ways to apply as social equity applicants because they only needed a certain number of “social equity” employees to qualify. But if you go ask the employees, not the owners, if they have been cured of their financial burdens and see if $15 has raised their quality of life to a middle-class level. The answer is emphatically NO. You cannot give out band-aids for heart attacks. If these large corporations are awarded the licenses, it will perpetuate the cycle of poverty. We do not personally have anything against the big companies. Like Toi Hutchinson said regarding the first round of dispensary and cultivation licenses: we needed the big company dollars to fund the next round of licenses. Well, the next round is here. Let’s do right by the communities that were truly affected by the war on drugs and on a more personal level and my reason for applying: let’s do right by my husband because he lost 3.5 years of his life and was excluded from participating with his family for doing what is now legal.

Opening a Dispensary on an Island: Overcoming a Barrier to Business

By Aaron G. Biros
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Martha’s Vineyard is renowned for its beautiful beaches, quaint whaling towns and picturesque rolling countryside. The island is well known as a popular vacation spot for the rich and famous, including the Obamas, the Clintons and Larry David. The movie Jaws was filmed there and the infamous Ted Kennedy-Chappaquiddick incident took place there in 1969. Its summer population of 115,000 drops to about 17,000 as the island slows down for the winter. It is also home to roughly 120 registered medical cannabis patients and a dispensary that will have to deal with the complexities of operating on an island.

In 2012, Massachusetts became the eighteenth state to legalize medical cannabis and in 2016, the state legalized adult use of cannabis. Geoff Rose, co-founder of Our Island Club, a local organization that offers discounts to full-time residents, saw a great need for a medical cannabis dispensary. Rose was granted a provisional license to both cultivate and dispense, as required by the state, on the island. Rose’s nonprofit that received the licenses, Patient Centric of Martha’s Vineyard, plans to operate in West Tisbury, a small town located in the center of the island.

Travel to and from the island is restricted to either boat or plane with the vast majority of traffic occurring on ferries operated by the Steamship Authority. But Rose cannot transport any cannabis on the ferries or even a smaller, non-commercial vessel because the waters are under the jurisdiction of the Coast Guard, a federal agency tasked with enforcing The Controlled Substances Act. The same goes for aircraft under FAA jurisdiction. Transporting cannabis products on the ferries, or any vessel for that matter, would be a felony.

Coast Guard vessel conducting training exercises off the Vineyard

Martha’s Vineyard is not just a physical island, but also a jurisdictional island where all cannabis growing, lab testing and dispensing must occur on the island. Currently, those 120 medical cannabis patients living on the island have no legal method of obtaining medical cannabis, unless they grow it themselves. Rose and his nonprofit, Patient Centric, hope to change that. We sat down with Geoff Rose to learn more about his mission to bring medical cannabis to the Vineyard and some of the legal implications associated with running a cannabis business on an island.

Cannabis Industry Journal: How did you get started with the idea to open a dispensary on the island?

Geoff Rose: Well I moved here almost sixteen years ago and as I have often said, when you move here you have three options: you can contribute to the community, you can hide and stay reclusive or you can leave. It is a very unique community and I chose to contribute. We started Our Island Club, which is a service program for year-round residents that helps them save on essential products and services as a means to cope with the high cost of living here. Clearly there is a need as there are 7,000 year round residents participating in that program. We have donated over a half-million dollars to 175 or more charitable organizations on the island. In addition to that, because of the membership fee, anyone who can’t afford it can still receive the membership.

Photo: Michelle Wyrich

I have come to launch the dispensary in the same manner. There is a need. [Legal medical cannabis] has now been law since November of 2012. Over four years later and still no dispensary on the island- I have continued to persevere because I know that there is a need.

CIJ: It is a pretty tight-knit community; did you meet any local opposition?

Geoff: Dukes County (the Vineyard) voted in favor of medical marijuana by a wide margin and 82% of West Tisbury voted in favor of medical marijuana, one of the highest in the state. Well I am currently waiting on my special permit application that I am required to apply for in West Tisbury. It has been sent to the Martha’s Vineyard Commission (MVC) for review.

There have been concerns, including from the local school. But state law requires that a dispensary be located beyond 500 feet from a school. The current location that I am asking for approval is over seven times that distance. There is a perceived concern about that. The first round of applications in 2013 included a score-based application process and while there were four competitors, none of us met the minimum score. In the second round, it moved to a compliance-based application process, and I was the only one who kept the effort alive and was awarded the license.

CIJ: There is a bit of an opioid problem on the vineyard, and multiple scientific studies have suggested a causal relationship between cannabis legalization and a reduction in opioid overdose-related deaths; do you see this as part of the solution?

 Geoff: I have seen studies, particularly one by Johns Hopkins that does show a correlation between medical cannabis and the reduction of the use of opioids. I think it is a byproduct of opening the dispensary, so yes. I shared these findings with the Superintendent of Schools. I think education is the key to really develop awareness. The state has mandated that schools are required to develop a drug education program, it’s part of the school curriculum, and I see that as a critical component in our outreach effort to the community. We have a responsibility to the community in many ways, whether it’s law enforcement or education.

Geoff Rose, founder of Patient Centric

I recently announced that we would allocate a percentage of our net profits for grant money to programs involved in drug education. Community outreach and education are very important. There also needs to be some positive education. There is a clear understanding that children need to be educated about the misuse of cannabis, which is true. But they also need to be educated about the medical value of cannabis. For example, many in the medical community will acknowledge the benefits of cannabis as it relates to cancer patients, whether it is helping nausea, appetite, pain management or being used as a sleep aid. This is an important message that needs to be disseminated to children. How does it help your family member, friend or neighbor who is suffering from the effects of cancer? That is one of the messages that would be helpful for children to receive. We can address the impact of all drugs including cannabis on the developing brain; I understand and agree, and publicly support that in an educational context. I want to be part of the solution.

CIJ: What problems do you run into trying to open a cannabis business on the island?

Geoff: I received my provisional cultivation license in September of last year. Part of the issue is the fact that cultivation has to occur on the island. The Coast Guard regulates everything surrounding the island including all the ferries, or any watercraft.

As part of my provisional license, I am required to have an independent cannabis-testing laboratory on the island that will perform the requisite testing mandated by the state. I am currently in conversations with Ph.D. chemists consulting for the laboratory. I have had numerous conversations with lab directors in other parts of the state, including Proverde Labs and MCR Labs. The Coast Guard has stated that cannabis is a Schedule One substance and therefore any transport is illegal. Unfortunately the law is very specific and not exactly written with Martha’s Vineyard in mind.

Editor’s Note: If you have further questions relating to Patient Centric of Martha’s Vineyard, you can reach Geoff Rose at geoff@patientcentricmv.org