Ann Arbor Considering Types Of Marijuana Businesses It Wants In City

[bobandtorey]

ANN ARBOR, MI - What does the future hold for medical marijuana businesses in Ann Arbor, a city that's been called the cannabis capital of the Midwest? 

Under new state-licensing regulations, that's something the City Council will have to decide sometime by the end this year, City Attorney Stephen Postema told council members Monday night, May 8.

During a special work session of the City Council, Postema gave a presentation titled "Michigan Medical Marijuana Regulation: From Home Remedy to Criminalization to State-Regulated Industry."

He outlined some of the issues and questions facing local communities under the Medical Marihuana Licensing Facilities Act, which was signed into law by Gov. Rick Snyder last September and took effect in December. 

The law provides a new licensing scheme for five types of commercial entities, including medical marijuana growers, processors, secure transporters, provisioning centers and safety compliance facilities.

The City Council must decide by mid-December whether to opt into the state legislation and allow those types of facilities to operate in Ann Arbor.

"If you do nothing, if you decide that you're not interested in any of these five types of facilities being in the city, then they're not going to be in the city. You have to affirmatively do something," Postema told council members.

There already are several medical marijuana dispensaries in Ann Arbor. They began popping up after the law legalizing medical marijuana in Michigan took effect in April 2009 following approval by state voters in 2008.

Postema noted marijuana remains illegal under federal law, so there are some issues in terms of the powers of local, state and federal law. But he said the city is where the rubber meets the road and where decisions are going to be made under the Medical Marihuana Licensing Facilities Act.

"And what's interesting about it is that it allows five different types of facilities, it provides for a very extensive medical marijuana licensing board and licensing enforcement ability, it has a seed-to-sale tracking process and it provides significantly for a tax and fee structure on facilities," Postema said.

Postema outlined the five different types of commercial facilities or entities under the new state law, noting there are three types of grow facilities. Class-A growers can have up to 500 plants, Class-B growers can have up to 1,000 plants and Class-C growers can have up to 1,500 plants.

Growers cultivate and prepare medical marijuana for sale to a processor or provisioning center. They can operate only in an area zoned for industrial or agricultural uses or not zoned.

Processors purchase medical marijuana from growers and extract resin or create marijuana-infused products for provisioning centers, also known as dispensaries, which make the products available to registered, qualifying patients, either directly or through the patients' registered primary caregivers. 

Secure transporters store and transport marijuana between facilities, while safety compliance facilities receive marijuana from another facility or a registered caregiver for testing to ensure product quality.

"Now, this has proved in other states to be very big business," Postema said, describing it as "significant economic activity."

Giving council members a sense of the magnitude, Postema said the Michigan Department of Licensing and Regulatory Affairs, known as LARA, is talking about hiring up to 160 full-time state employees to handle licensing and regulating medical marijuana facilities under the new act.

"They're talking about $40 million additional cost to set up this regulatory structure," he said.

Postema said the City Council needs to decide whether to pass a local ordinance to allow one or more of the five different types of facilities to operate in the city, and he noted it's not all or nothing. For example, the city could choose to allow dispensaries but not large grow facilities.

The city also has discretion to limit the number of medical marijuana facilities permitted in the city, Postema said.

Postema said the Michigan Marihuana Licensing Board is given broad authority and it is the state that is going to license all facilities, though there still would be a permitting process at the local level.

License applications cannot be submitted until Dec. 15, 2017, which gives local governments some time to decide whether to opt in or out.

Postema said the state's regulatory responsibilities will include evaluating licenses, background checks, pre-licensure and facility compliance inspections, collection of fees, complaint investigations and administrative hearings.

When there's notification that a business has applied to the state Medical Marijuana Licensing Board for a license, Postema said, the city will have to provide certain information to the board within 90 days, including a copy of the local ordinance allowing the type of facility, any local zoning regulations that are applicable and any ordinance violations by the applicant.

The Ann Arbor City Council already spent several months drafting local medical marijuana regulations in 2010 and 2011. The council approved both licensing and zoning ordinances in June 2011, spelling out where facilities can be located in Ann Arbor, stipulating that dispensaries and cultivation facilities can't be within 1,000 feet of an elementary or secondary school.

Though dispensaries have continued to operate in Ann Arbor for the last several years, Postema noted the city never actually licensed any marijuana businesses given some of the uncertainties about the state law, and then because the Michigan Supreme Court ruled in 2013 that the Michigan Medical Marihuana Act did not allow for dispensaries to operate under a patient-to-patient business model and there likely were no viable business models for a dispensary that would be protected by the law approved by state voters in 2008.

"So we're really going to have to start over now, and the state has said everybody needs to start over," Postema said.

Postema said the city's current licensing ordinance is essentially obsolete now, and the previously approved zoning regulations for marijuana businesses did not contemplate five different types of facilities, so that needs to be revisited.

He said the zoning issues the city might want to consider include permitted zones for each facility type, distance between facilities, and distance of facilities from other uses such as residential areas, schools and churches.

He noted federal law prohibits drugs within 1,000 feet of a school, playground or public housing.

Postema said the city will be allowed to charge a fee up to $5,000 annually for each type of medical marijuana facility that's licensed, and the state will tax each dispensary at a rate of 3 percent of gross receipts. From that state tax, 25 percent will go to municipalities where marijuana facilities are located. 

Postema said regulations that are unclear at the moment include hours of operation, days of operation and signage for marijuana facilities.

Postema said the fact that marijuana is still illegal under federal law is an issue. He noted the federal Drug Enforcement Administration as recently as July 19, 2016, denied a petition to reschedule marijuana, and in 2005 the U.S. Supreme Court held that Congress has the constitutional authority to prohibit the local cultivation and use of marijuana, despite any state law to the contrary.

Nevertheless, Postema said, the Obama administration decided it would not pursue actions against marijuana businesses and users who comply with a state regulatory scheme. He said that's still the case for now and that's important.

He said the Trump administration has been inconsistent in statements on marijuana, but there does not seem to be an indication at this time that there will be a change toward enforcement of medical marijuana.

Interestingly, Postema added, the Republican Congress has banned, through budgetary restrictions, the Department of Justice from taking federal enforcement actions against states that implement medical marijuana regulations.

He believes future federal intervention in state medical marijuana laws is unlikely now that 28 states and growing have them.

"That would be a tremendous effort by the federal government suddenly to use its enforcement power against most of the states, a majority of the states, in the United States," he said. "So, I think it's unlikely."

Postema said Michigan cities are considering opting into the state regulatory system to ensure access to properly processed medical marijuana for residents with medical problems, and the federal government has implicitly allowed it. And by allowing local access, he said, residents will not have to travel far to obtain treatment that a physician has deemed medically necessary.

Postema cited new tax revenue to local governments where marijuana facilities are located as another reason for doing it.

He said other states with comprehensive marijuana regulations have extensive taxation and have profited greatly. 

For example, he noted Colorado reported $1.1 billion in state revenue from the sale of medical and recreational marijuana in 2016.

Mayor Christopher Taylor is the only member of the 11-member council still in office since the council last decided local regulations for medical marijuana.

"The city did draft an ordinance and did draft zoning, and all of that will need to be changed to accommodate the new law," Postema said.

The City Council established a committee in December to review Ann Arbor's medical marijuana ordinances in light of the new state law. 

Council Members Jason Frenzel and Chip Smith serve on the five-member committee, which includes representatives from the medical marijuana community. A final report with recommendations is expected to go to the Planning Commission and City Council by June 30.

The city's staff has drafted a new permitting ordinance that is under review, and city planning officials are discussing potential zoning changes.

Postema notes eights states and the District of Columbia have decriminalized recreational use of marijuana since 2012, with Colorado being the first, and 28 states plus the District of Columbia now have medical marijuana laws, with Michigan being the 13th state to do so.

Postema said the type of state licensing scheme being created in Michigan is likely the template to use if recreational marijuana is legalized under federal or state law in the future, and he thinks that's likely to happen within five years.

A group known as the Coalition to Regulate Marijuana Like Alcohol is hoping to collect enough signatures to put the question on the ballot in Michigan in November, legalizing recreational marijuana for people 21 and older.

Two current members of the Ann Arbor City Council -- Jack Eaton and Jason Frenzel -- spoke in favor of legal access to marijuana at the Hash Bash rally on the University of Michigan campus last month.

"My goal is to make sure that our laws here continue to support the dozen dispensaries we have in town and the tens of thousands of visitors that we have to our city, and to make sure that those folks who come to visit those dispensaries are safe and have quality product that meets their medical needs," Frenzel said at the rally. "It is critically important to our industry and to our people."

Eaton said during his Hash Bash speech the city decriminalized marijuana in the 1970s and he considers it a positive public policy.

"We're going to continue in Ann Arbor to insist that people be free to use marijuana without serious consequence," he said. "We're going to continue in Ann Arbor to fight to make sure that marijuana is legalized in all of Michigan."

Eaton said Monday night he would prefer if the city could keep its local regulations simple and not get too involved in the mechanics of marijuana businesses.

 

http://www.mlive.com/news/ann-arbor/index.ssf/2017/05/ann_arbor_considering_types_of.html