Ohio medical marijuana companies spend thousands on real estate while awaiting licenses, Missouri MMJ businesses eye ballot measures that would prove most business-friendly, and Oregon’s top federal prosecutor calls out the state’s excess cannabis output.
Here’s a closer look at some notable developments in the cannabis industry over the past week.
Waiting for Godot
No business relishes bleeding cash even before it can open.
But that’s the situation for some medical marijuana dispensary applicants in Ohio that are spending thousands of dollars on real estate for their potential businesses while waiting for the state to issue licenses.
It’s not an enviable scenario. But any aspiring MMJ company should have planned for this possibility, one industry official said.
Jimmy Gould, owner of Ohio cannabis company CannAscend, said applicants should have been well-capitalized from the outset, with enough cash reserves to wait up to two years from when they submitted their applications to the first day of business.
He knows of dispensary applicants spending $5,000-$10,000 a month to maintain lease contracts on proposed store sites. Those with multiple dispensary site applications are spending more.
The delay is likely to eat capital for a while longer, according to Gould. He predicts Ohio dispensaries won’t begin selling MMJ until January, owing to a slow launch of the state’s cultivation and processing industry.
The state has set a Sept. 8 deadline to have a fully operational market.
“Never going to happen,” Gould quipped.
Missouri’s potential business opportunities
Missouri voters could see three medical marijuana initiatives on the ballot in November.
A plan by one campaign group – New Approach Missouri – appears to offer the most business opportunities for MMJ entrepreneurs – and relatively low taxes to boot.
Missouri officials have until August to certify the petitions; lawmakers failed last week to pass pre-emptive legislation.
Here’s how the ballot initiatives stack up from a business standpoint:
- Relatively low 4% retail sales tax.
- Numerous business opportunities: at least one cultivation facility per 100,000 people, or about 60 facilities statewide; at least one processing facility per 70,000, or some 85 in total; and 24 dispensaries for each of the eight congressional districts, for a total of 192 across the state.
- Heavy tax burden: cultivation tax of $9.25 per ounce of flower and $2.75 per ounce of leaves; 15% sales tax.
- Fewer business opportunities: At least 50 commercial cultivation and 50 processing licenses, and up to two dispensaries per 20,000 people.
- Low 2% retail sales tax.
- At least 60 cultivation and processing licenses, and 60 dispensary licenses, with successful retail applicants able to apply for two additional licenses each. But licensing would require both state and local approvals.
- The initiative is a statutory amendment that could be trumped by one or both of the two constitutional amendments above.
Voters can pass more than one initiative. Some observers worry that multiple initiatives on the ballot will confuse them.
In that respect, New Approach Missouri may have some advantages. It has been known to many voters for years: It lost an effort on a technicality to get on the 2016 ballot.
Spokesman Jack Cardetti also noted the initiative has been endorsed by the Marijuana Policy Project and Drug Policy Alliance and will be placed ahead of the others on the ballot because it submitted its signatures first.
Maura Browning, communications director for the Missouri Secretary of State’s office, wrote in an email to Marijuana Business Daily that if more than one initiative passes, it likely “would be up to the courts to meld the pieces together.”
The state is processing petitions, then will distribute them to local election authorities for review/certification. The deadline for that process is Aug. 14.
Oregon overproduction crackdown?
Some Oregon cannabis companies may be wondering where they stand with their U.S. attorney.
That’s because the federal prosecutor made noise this week around ramping up enforcement against operators that flaunt state law.
But Portland attorney Amy Margolis said the policy appears consistent with the now-revoked Cole Memo, meaning companies that play by the rules shouldn’t worry.
“For people participating in the regulated market, I think this was business as usual,” Margolis said.
U.S. Attorney Billy Williams will focus on the black market, organized crime and operators that “pose a substantial risk of violence,” according to guidelines issued by his office.
Margolis said that Williams also is taking an approach recommended by her and others in the MJ industry: Use civil enforcement means before prosecuting violators.
“I didn’t see anything in there that was unreasonable,” Margolis said of Williams’ new policies. “We’re in a challenging place in the state of Oregon, where there is a lot of cannabis that leaves the state.”
The question, she said, is how much of a crackdown on state lawbreakers there may be, given that Williams himself acknowledged a shortage of resources with which to combat black-market operators.
“You don’t put out a statement like that unless you intend to increase your enforcement,” Margolis said. “That being said, he also identified that there are limited resources to attend to this issue. So it remains to be seen” how exactly Williams’ policies will play out and what impact they’ll have.
“Where you can find funds for these things is the mystery,” she added. “I suspect we’ll see some high-profile prosecutions, but we’ll find out.”
Bart Schaneman can be reached at barts@mjbizdaily.com.
Jeff Smith can be reached at jeffs@mjbizdaily.com
John Schroyer can be reached at johns@mjbizdaily.com
