April 27, 2018

Cannabis in Michigan: The Economic Microcosm

From the 1970's to present day shifting marijuana legislation, Michigan has had some of the most lenient laws on possession in the United States in college town Ann Arbor. A 1974 voter referendum made possession of small amounts of marijuana a mere infraction punishable by a small fine. Ann Arbor also passed a local voter referendum for medical marijuana for residents of the City in 2004. The Annual Hash Bash, established since 1972 features political speakers, live music, street vending and good old fashioned civil disobedience on the University of Michigan campus. Today the event attracts 20,000 attendees. The Cannabis history is Ann Arbor is a snapshot showing how cannabis regulation in Michigan is fought most strategically through local municipalities. 

The Rainbow Farm was established in 1993 and began producing events, Memorial Day's 'HempAid' and Labor Day's 'Roach Roast' with vendors, music stages and pro cannabis, drug policy reformists on the same panels as celebrities like Tommy Chong and Merle Haggard. High Times editors, NORML Board Members, Celebrity Activists like Jack Herer and Ed Rosenthal along with local advocacy groups discussed how the prohibition of cannabis laws could be broken down and rewritten. High Times ran an article listing Rainbow Farm as one of the top twenty five stoner travel spots in the World coming in at 17, making the annual events the center point for Marijuana Activism in Michigan. 

The conversation at the time centered around responsible adult use and decriminalizing possession. The network of growers resembled the farms established in Northern California at the time, remote, locked down outdoor cannabis farms with a lot of acreage essentially run by survivalists. Rainbow Farm owners Tom Crosslin and Rolland "Rollie" Rohm were killed in a Police Standoff September 3, 2001 after being served a warrant for tax evasion. Law enforcement found 200 plants on the property. Before the stand off was over, Tom and Rollie were dead, shot down by helicopter as they tried to flee on foot and every building structure on the campground property was burned to the ground. 

The Michigan Compassionate Care Initiative established a medical cannabis program for terminally ill patients in 2008, but was not acted upon and defaulted as a public initiative willing 63% of the vote in the November electoral season. The bill allowed patient to grow up to 12 plants or designate a caretaker to grow and process cannabis medicines for them. A designated caregiver could provide medicine for 5 patients with medical marijuana cards. 

These caretakers would move on to band together to open dispensaries (now Provisioning Centers) in municipalities willing to defend them from State closure and prosecution. They became the processors making concentrates and medicated edibles for their patient networks. This allowed the development of healthy economic microcosms throughout the State with a lot of working gray area in between. Those businesses who chose to open in municipalities where law enforcement opposed Cannabis in any form were often harassed and faced potential prosecution. 

The bills Governor Ricked Snyder signed into law in September 2016 were House Bill 4209 or Public Act 281 creating the Marihuana Facilities Licensing Act to regulate the growth, processing, transport and provisioning of Medical Marijuana, House Bill 4210 or Public Act 282 allowing the manufacture of marijuana infused products by qualified patients and House Bill 4827 or Public Act 283 to create the Marihuana Tracking Act and a seed to sale tracking system for all medical marijuana. More than a year and a half later, the State begins the process of application review. 

Because of the language of the law, the program allowed the growers to be established as caregivers who could grow for up 5 patients. These caregivers also served as processors and transporters. The 5 Licences available in the new legislation are Provision Centers serving as retailers, Marijuana Cultivators for growers, Marijuana Processors for the production of concentrates and cannabis infused food products, Marijuana Testing Facilities for Analytic Companies and Marijuana Transporters. The Cultivators Licenses are broken down to three classes setting legal plant limits: Class A - Up to 500 Plants, Class B - Up to 1000 Plants, Class C - Up to 1,500 Plants. Application fees are assessed on a local level up to $5,000 and can vary. The State's application fee is $6,000. The Regulatory assessment fee, based on the number of licenses issued, is currently set at $48,000 per application for the first year of implementation. 

Before this bill was signed into law , hundreds of dispensaries had established themselves in local communities all loosely regulated in the grey area of municipal law in receptive communities. These business owners participated in the establishment of the regulatory language in the law throughout the process, maintaining control of the legislative conversation. As these bills move forward, these businesses are slowly moving through the application process. 

Emergency rules have allowed for businesses to operate a proposed facility if the business completed the application process by February 15, 2018. The State, in the process of reviewing the first application in the current legislative session, just issued more than 200 cease and desists letters throughout the State for those businesses who were not in compliance with the application deadlines or were not issued an operating extension under the emergency rules. 

The whole time applications were being submitted and prepared for review, local municipalities have been deciding if they will allow these businesses to operate in their Cities, Townships and Villages and if so, which zones will have parcels available for these businesses to operate. The first step in the State application is facility approval from appropriate municipalities. The number of licenses in each municipality is decided by City Councils, Statewide. 

Local Cannabis Attorneys Craigs Arronoff and Travis Copenhaver of Cannabis Legal Group produce a series of legal YouTube videos with content to help the business owners navigate the complicated waters of Michigan cannabis regulation. Traveling the State to coordinate with each local municipality, they have been greeted with a full spectrum of views on regulation from communities who opted out of the conversation to those who have or are currently initiating city ordinance to define participation. Some communities are establishing lotteries for applicants, some are reviewing each on a first come first serve policy, smaller communities are having trouble finding parcels available for development. 

It's hard to forecast the long term economic viability for these niche markets. Adding complication, an additional voter initiative was passed allowing for recreational cannabis sales to be regulated in the State. The State is attractive to investors being the second largest Cannabis market after California in the United States. But it's the same State who's legislators took almost 10 years to create a system of safe access for medical marijuana patients  and will now attempt to establish and regulate a recreational market. Michigan recreational markets may appear attractive to out of State investors and the State does allow for outside money, however it will be some time before this market shows more return and with less risk.