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Gov. Rick Snyder signed into law a set of bills to regulate the growing, processing, transporting and selling of medical marijuana at provisioning centers or dispensaries. The law also allows for edible forms of the drug and sets up a statewide tracking system for distribution. Gov. Rick Snyder signed into law a set of bills to regulate the growing, processing, transporting and selling of medical marijuana at provisioning centers or dispensaries. The law also allows for edible forms of the drug and sets up a statewide tracking system for distribution. mibiz file photo by rachel harper

Pot-ential Boon? Michigan lawmakers take major step to legitimize marijuana industry

BY Sunday, October 02, 2016 02:05pm

Eight years after voters approved the use of medical marijuana, Michigan lawmakers have agreed to a regulatory framework for the commercial growing and selling of marijuana to qualified patients.

The state’s marijuana advocates have split over the design of the system, with opponents sharply critical of what they view as an over-regulation of the industry that will further incentivize the underground market.

But supporters say it’s hard to overstate the significance of setting up a legal industry around medical marijuana that allows for regulated growing operations, retail storefronts and generally safer access to quality product for patients.

The three-bill package (HBs 4209, 4210, 4827) signed by Gov. Rick Snyder on Sept. 21 deals with the growing, processing, transporting and selling of medical marijuana; allows for edible forms of the drug; and sets up a statewide tracking system for distribution. 

The bills cleared the Legislature with bipartisan support in what was otherwise anticipated to be an uneventful season before the November election. Initial versions of similar bills were first drafted five years ago, and support not only from Republicans — but also law enforcement — helped pushed them across the finish line.

“There are mixed feelings with the regulations, but overall, there is relief about a legitimate system that will be in place,” said Robin Schneider, legislative liaison with the National Patients Rights Association, which has lobbied in support of the bills from the start.

“I think we’re going to have a very productive and efficient system to get medicine to patients, and I have heard from a lot of patients who are overwhelmed with gratitude,” Schneider said. “The number of jobs and ancillary business that we’re about to see will be so good for Michigan’s economy.”

Upon signing the bills, the Governor’s Office called it “landmark” legislation.

“This new law will help Michiganders of all ages and with varying medical conditions access safe products to relieve their suffering,” Snyder said in a statement. “We can finally implement a solid framework that gives patients a safe source from which to purchase and utilize medical marijuana.”

REGULATORY STRUCTURE

In effect, the marijuana industry is set to be legitimized statewide in a major way, albeit one that falls short of legalizing recreational use. 

The Department of Licensing and Regulatory Affairs will issue five different tiers of licenses to growers, processors, “safety compliance facilities,” transporters and “provisioning centers.” Municipalities can decide whether to allow various types of licensed facilities. 

Grow facilities can produce up to 500, 1,000 or 1,500 plants. Product would need to be transported in unmarked vehicles with security personnel on board. The medicine being delivered — which is also tested in a lab — will be tracked in a statewide database accessible by law enforcement.

“It will be heavily regulated so the diversion (of legally grown product) to the black market is very minute,” Schneider said.

LARA estimates it will cost about $21.1 million annually to administer the program, including $13.2 million to hire 113 full-time LARA employees and $6 million to hire 34 employees with the Department of State Police.

The Senate Fiscal Agency says that the number of licensed locations statewide will “likely be significantly smaller” than the 17,250 licensees overseen by the Michigan Liquor Control Commission.

The bills take effect on Dec. 20. and those applying to LARA for various licenses can do so a year after that.

A 3-percent tax would also apply to gross sales at dispensaries. Revenue from that would be divided among the state (30 percent), counties with a medical marijuana facility (30 percent), local units of government with facilities (25 percent), and state and local law enforcement (15 percent). The Senate Fiscal Agency says tax revenue will be roughly $21.3 million a year in total to be split among those entities. 

Also, if sales at dispensaries are subject to sales tax, that could generate an additional $42.7 million for schools, local revenue sharing and the general fund.

“We were not in support of taxing medical marijuana at all,” Schneider said. “We understand the program needs revenue to run, and we did work to put a sunset clause in so when legalization happens, medical marijuana will not be taxed anymore.”

OPPOSITION WITHIN MARIJUANA COMMUNITY

Some marijuana advocates’ key criticism against HB 4209 and 4827 is based on over-regulation and government involvement in the industry’s activity. Further, opponents say those costs will be passed on to patients and the proposed fee structure will create higher barriers to entry and attract wealthy, out-of-state interests.

State Rep. Jeff Irwin, D-Ann Arbor, was initially a co-sponsor of the bill regulating growing facilities and provisioning centers. But he withdrew his support after changes made in the Senate.

“They layered so much cost and red tape on top and around legal medical marijuana, it’s going to give a huge advantage to the illegal market,” Irwin said. “I think that’s a big mistake.”

HB 4209 allows the Department of Licensing and Regulatory Affairs to set fees for different licenses, which will also be on top of local fees, Irwin noted.

“These fees are really out of control,” he said.

Schneider counters that the new regulations are pro-small business, given the low caps on growing plants and fees compared to states like Colorado, Oregon and Washington.

“The grows have been kept small enough to keep opportunities for caregivers to work together, form corporations and apply for licenses. The 500-plant grow licenses is capped at $10,000 or less. That’s not an obscene amount of money,” Schneider said, comparing it to Illinois, where medical marijuana grow licenses cost as much as $200,000 the first year and $100,000 for an annual renewal. “Having the resources to put together a 500-plant grow is completely achievable. I view this as one of the most small business-friendly models in the country.”

Irwin also criticized the bills for not dealing with caregiver “overages,” or excess marijuana that comes after growing for specific patients. Under the Michigan Medical Marihuana Act, caregivers can’t possess more than 12 plants or 2.5 ounces of usable product per patient at a time. Extra marijuana grown legally should be destroyed, though many growers have sold their overages to dispensaries.

“Why not a sort of mini-license for them to sell their overages within a reasonable limit?” Irwin said. He also called the seed-to-sale tracking system under HB 4827 “another example of breathless, over-eager legislation. That’s going to be an expensive system. For patients who don’t have caregiver access, they will have to suck it up and pay for that.”

Schneider said the bills unfortunately do not address overages following opposition from law enforcement groups, even though her group advocated for allowing the sale of overages to dispensaries. 

“(Law enforcement) lobbied very strong against that scenario,” she said. “They didn’t want to incentivize caregivers to grow more than they legally needed. That’s something we were not in agreement with.”

Caregivers will now need to decide whether to stay with their designated patients or apply for a grow license — they won’t be able to do both.

“There certainly is still a need for caregivers, especially for patients who aren’t mobile,” Schneider said. “For caregivers looking for more of a profit, it opens the door to have a legitimate job in a completely legal industry.”

‘FOR US, IT’S REALITY’

The bills not only significantly impact patients and others in the industry, but also municipalities. 

Cities like Lansing, Ann Arbor, Traverse City and Detroit have allowed dispensaries to operate and have made attempts to regulate them.

HB 4209, sponsored by Republican Mike Callton from rural Nashville in Barry County, gives local units of government a choice of whether to allow medical marijuana facilities or to ban them. Schneider said a per-population cap on facilities is a better alternative than certain zoning restrictions so it “doesn’t turn into a real-estate competition rather than who’s the most qualified.”

“Zoning is not a good way to control the numbers,” Schneider said. “It makes more sense to do drug-free school zones and then a reasonable per-population cap. From there, cities can opt into the program.”

Lansing City Council members have spent years working on local regulations even as dozens of dispensaries operated amid uncertainty from the state. Lately, the issue has attracted the attention of the Lansing Area Chamber of Commerce, which was also “heavily involved” in the state bills, said Steve Japinga, the group’s director of government relations.

Officials with the Michigan Chamber of Commerce and the Grand Rapids Area Chamber of Commerce said they have refrained from getting involved in the issue.

“We called for a moratorium earlier this year just to hit the brakes as shops came in so the state could give guidance to locals on what they wanted to see,” Japinga said. “For us, it’s reality. It’s here. The state legislation really gives us some guidance on what to do here locally.

“A couple of years ago, our members were like, ‘No.’ But voters have approved this, let’s figure out a solution that works for everybody and provides patients safe access. I think it will continue to get legitimate.”

UNCERTAIN FUTURE FOR GR

However, the future of the industry in Grand Rapids is much more uncertain. Until now, Michigan’s second-largest city has not allowed dispensaries to operate within city limits, and that will remain the case unless and until local regulations are adopted by the City Commission, said Grand Rapids Planning Director Suzanne Schulz.

“We will be evaluating whether we wish to allow them and, if so, how and where would be the best method to do that through business licensing, zoning and working with the Police Department and neighborhoods to make sure there are no adverse impacts,” Schulz said.

She added that “one of our concerns” to allowing dispensaries in Grand Rapids stems from the reported crime problems around some Lansing operations.

Schneider believes the industry will operate much differently than it does now.

“I would think once municipalities realize the safety features that are built into the new program, they should seriously consider opting in,” Schneider said. “It’s safer and more controllable than what we’ve had in the past, and law enforcement gets to participate in the process now. We think that’s a good thing. I’m hopeful it will help heal wounds between (law enforcement) and patients.”

The Michigan Municipal League remained neutral on HB 4209, supporting the local opt-out provision while still “looking for clarity” in other areas of the bill, according to legislative associate Jennifer Rigterink. 

She already sees the potential patchwork of local regulations based on communities that decide to regulate facilities and “personally have been taking calls all week from police chiefs and city managers across the state about what this will mean.”

“We have members all over the board on this one. Some don’t want anything to do with it, some want to dip their toe in the pond, some want to take it on,” Rigterink said. “It’s significant that there is direction now from the state level on how to deal with these businesses.” 

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