Arizona’s marijuana fairness program could benefit big business, critics say

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“It is a program which, as it is currently written, is designed to fail.”

By Jerod MacDonald-Evoy, Arizona Mirror

When Arizona voters approved recreational marijuana use in 2020, the new law included provisions to give the opportunity of a lifetime to those most affected by the war on drugs: a chance to earn a coveted license to operate a dispensary.

Now, definitive licenses to sell marijuana in Arizona are expected to be granted under the Social Equity Program, which aims to right the wrongs caused by the disproportionate policing of marijuana-related crimes. They are easily worth millions of dollars, perhaps tens of millions, and the system was designed to get those arrested for petty marijuana offenses into the business of selling cannabis.

But some advocates say the reality is that bureaucratic hurdles, corporate greed, and a rapidly consolidating marijuana market will drive those profits straight into the hands of big corporations eager to limit competition and capitalize on billions of dollars. dollars to be made by selling cannabis in Arizona.

“It is a program which, as it is currently written, is designed to fail,” lawyer Julie Gunnigle told Arizona mirror. Gunnigle until recently worked for the Arizona Chapter of NORML, an organization that advocates for reform of marijuana laws across the United States.

The social equity agenda, as it was dubbed in Proposition 207, the voting measure approved by voters in 2020 to legalize recreational marijuana, is meant to empower minority communities – those that are historically most affected by the war on drugs – the way forward to claim 26 dispensary licenses. .

But the pool of potential owners of social equity clinics is limited by both the measure and the rules approved by voters. finalized last month by the Arizona Department of Health Services. Applicants must meet three of the four criteria:

  • Have a low-level marijuana conviction – one that was struck down, if it was a felony
  • Have a family member with a low conviction for marijuana
  • Live in one of 87 ADHS zip codes identified as “disproportionately affected by the enforcement of previous Arizona marijuana laws”
  • Earn less than 400 percent of the federal poverty line; for a family of four, it would be a maximum household income of $ 106,000

And anyone who wants to participate in the lottery to win a social equity license must pay a non-refundable application fee of $ 5,000 after completing two separate two-day training courses. The deadline to complete these courses was Wednesday, about five weeks after the ADHS rules were announced.

Applications must be submitted before December 1.

Leading candidates for social equity in partnerships with large companies

For Gunnigle, the exorbitant application fees are such a big hurdle that they force potential candidates to turn to the big players in the Arizona cannabis industry for help.

The established marijuana industry is eager to find candidates for social equity. Homes in qualified zip codes have been plastered with mail and door hangers from major cannabis companies scouring the state in search of those who qualify.

Along Phoenix’s freeways, notice boards from major dispensaries and marijuana growers announce their intention to help eligible applicants through the process.

Some have even created websites, such as YourBrightHorizon.com, which was created by Copperstate Farms, one of the nation’s largest marijuana growers with a 40-acre farm outside of Snowflake, Arizona.

“The general public’s awareness of the program is quite low,” said Doug Cole, spokesperson for Copperstate Farms. “We help candidates succeed and succeed in the social equity program. “

Copperstate has helped set up free radiation clinics statewide – one of the eligibility criteria for applicants – alongside groups like NORML to find qualified applicants, often offering a monetary incentive of up to up to $ 500 to people who qualify and refer a friend who also qualifies.

“These licenses are worth $ 10-15 million before the ink dries,” said Tom Dean, a cannabis lawyer.

Copperstate herself recently bought a dispensary license in Phoenix for $ 15 million in cash, and established marijuana dispensaries have sold for over $ 20 million. Arizona dispensaries have reported more than $ 50 million in sales every month, except one since March, and the state is on track to surpass $ 1 billion in retail sales in its first year of using marijuana at recreational purposes. Wall Street analysts predict sales will hit more than $ 2 billion in just a few years.

Not only are the last 26 licenses issued in Arizona, their owners will be able to sell them, which is not allowed for other licenses issued earlier, which will make them even more valuable. Dean helped guide applicants through the process and said multi-state operators, investor groups, and industry groups have all expressed interest in filing as many applications as possible.

Allowing social equity licenses to be treated as a commodity is a bad thing, Gunnigle said, because it allows corporate interests to easily “play” with the system and reap all the benefits intended to uplift those who have. been oppressed by the system.

“Essentially, you really created a lottery program for 26 people,” Gunnigle said, saying that the people who would get those licenses would likely be inundated with inquiries about the licenses, would be inundated and would likely sell them to the same groups that operate. currently. the majority of state clinics.

The rules technically require that social equity licenses be sold to another person or business who meets ADHS requirements to apply. But Dean said there’s nothing stopping an established cannabis company from making a deal with an unlicensed applicant and “just creating a subsidiary that complies” so they can buy the license. .

There’s no going it alone, according to the cannabis industry

While critics say the system is designed to give large corporations an undeserved path to profit from licenses meant to right a historic wrong, companies like Copperstate Farms say there is no chance that licensees Social equity licenses are successful if they do not join with experienced partners. .

Although legal in Arizona and other states, marijuana is still classified as a Schedule I controlled substance under federal law. A critical effect is that many financial institutions will not make loans or accept money from institutions that derive their money from marijuana for fear of being punished by the federal government. This makes it difficult to secure start-up capital to open a dispensary, which can cost up to $ 2 million, for a social equity candidate. And all of this should be done within 18 months of receiving licenses under ADHS rules.

“The cannabis industry is a highly regulated business and involves a lot of licenses and a lot of upfront capital,” said Cole, spokesperson for Copperstate Farms.

It is often difficult to get the proper zoning in Arizona, with many cities having passed ordinances banning dispensaries within their city limits.

“We’re experts in this area, finding them and organizing them in planning and zoning meetings to get those approvals,” Cole said. And even with the expertise his company brings, “it’s going to be a sprint to get there in 18 months.”

For Gunnigle, however, the program is unlikely to achieve its goal of helping people who have been injured by the war on drugs. Likewise, Dean said it would be lamentable if the Social Equity license found itself entirely under the control of the big players in the industry.

“It’s supposed to be something that’s supposed to be a permanent fixture in the Arizona industry,” he said. “It’s supposed to be a balance in the industry [to stop] consolidation.”

But some insiders in the marijuana industry see it a little differently.

“You don’t see people flossing and selling it in mom-and-pop stores, do you? Demitri Downing, CEO and Founder of the Arizona Marijuana Industry Trade Association, said. “These are nostalgic romantic notions and well-being.”

Downing said the presence of outside groups is good for applicants as it gives them the freedom to choose their partners and get the help they need, as well as the freedom to sell their license for large sums of money. ‘money.

“Whether they turn around and sell it or not doesn’t matter, they benefit from it anyway,” Downing said. “They are members of our community and they will be rewarded. “

This story was first published by the Arizona Mirror.

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