In politically conservative Calhoun County, Scott Fleming embraces the economic potential of legal marijuana businesses.
As the CEO of the Marshall Area Economic Development Alliance, Fleming remains a bit of an outlier. He speaks positively of the economic boost coming to town with a medical marijuana growing facility and a processing center. Within the next five years, the two companies are expected to create about 450 jobs combined, as well as invest millions of dollars in the community. A third company is expected soon that will focus on making edible marijuana. Fleming said he also wants to attract a compliance testing laboratory to Marshall.
While Marshall, which has a population of 7,046 people, doesn’t allow for retail provisioning centers, Fleming hopes the city becomes a “distribution hub” for medical marijuana in the coming years.
“It really is kind of a boon for the community. They’re very good partners and want to make a mark here,” Fleming said. “I think it’s a win-win in that respect.”
However, other West Michigan economic development agencies — which often help new businesses find real estate and suppliers or access tax incentives — largely are ignoring the influx of this new investment. They cite concerns about marijuana still being illegal at the federal level as well as workplace drug-testing requirements.
The decades-old “reefer madness” stigma around marijuana isn’t helping, according to Fleming and others contacted for this report.
The emerging legal business around medical marijuana created by the state in 2016 is placing economic development and traditional business advocacy groups in unfamiliar territory. As these groups wait and see how the sector matures, critics contend they are shortchanging the communities that have already approved a framework for the businesses to operate.
“It has been an outright attack on medical marijuana,” said Connie Maxim-Sparrow, principal at Sparrow Consulting LLC, which has several medical marijuana clients in West Michigan. Maxim-Sparrow is a former grant administrator for Muskegon County.
The city of Muskegon finalized rules in May to allow all five types of medical marijuana businesses — growers, processors, provisioning centers, safety compliance and transport — within a roughly 3-square-mile overlay district. To Maxim-Sparrow, the real estate activity and jobs growth around medical marijuana is the “pure definition” of economic development, even if local officials refuse to acknowledge it.
“They hold the same stonewalled perception that this is bad for Muskegon County,” Maxim-Sparrow said. “They’re doing everything but helping.”
Cindy Larsen, president of the Muskegon Lakeshore Chamber of Commerce, declined to speak in depth about the issue, but said the group does not have a position related to medical marijuana businesses.
“There’s a tremendous amount of due diligence that still needs to be done,” she said, referring to how the industry moves forward in Michigan. “The more information that gets out there will help people make good decisions. Proceeding with caution is advisable.”
‘We’re not going to engage’
MiBiz spoke with economic development agencies representing areas around Grand Rapids, Muskegon, Mt. Pleasant and Lansing. Officials with Southwest Michigan First and the Southwest Michigan Planning Commission could not be reached for comment.
Most are not getting involved with medical marijuana as they would with more traditional industries or companies considering locating in their areas.
“Since this is controversial and still illegal from the federal standpoint, we stayed out of it,” said James McBryde, president and CEO of Middle Michigan Development Corp., which covers Isabella and Clare counties. Mt. Pleasant allows all five types of businesses with a cap on growers and provisioning centers, while the city of Clare has no cap on any facilities.
McBryde cited concerns involving Central Michigan University, which receives federal grant funding, and the Saginaw Chippewa Indian Tribe reservation.
“We’re not taking a position against it, but we’re not taking a position to promote it,” he said. “Our position is very similar to a lot of economic development organizations in the state that have taken a hands-off approach.”
The Right Place Inc., the economic development agency for the Grand Rapids region, has a similar stance that was approved by the policy committee of its board of directors.
“Until things change at the federal level, we’re not going to engage in the marijuana industry,” said Tim Mroz, The Right Place’s vice president of marketing and communications.
Typically, a regional economic development agency may help a potential company with site selection, supply chain connections, water and energy infrastructure, and tax incentives. The agency often also makes introductions with the municipality the company is considering.
The Lansing Economic Area Partnership (LEAP), which covers the tri-county area around Lansing that saw some of the highest concentrations of medical marijuana dispensaries starting around 2010, says it will offer its services to medical marijuana companies in any municipality in its region that opts in to the state’s regulations. That includes Lansing, East Lansing and four outlying townships and villages.
In Windsor Township in Eaton County, developers are planning what they call the “largest medical marijuana development east of the Mississippi.” Harvest Park, a 130-acre “agricultural-centric industrial park,” will allow all types of businesses except provisioning centers.
“It’s challenging on a regional level to take a formal stance. Each (municipality) may take a different position,” said Keith Lambert, LEAP’s vice president of business attraction. “In general, (economic development) groups are taking a wait-and-see approach with the regulatory system out there.”
Real estate and talent
One of the earliest economic indicators from medical marijuana involves real estate.
“There are question marks about who the good actors are and who is purely speculating, but it affects the industrial real estate market significantly,” Lambert said. “Already (medical marijuana) has had an impact on tightening and constricting the real estate market across the Lansing region.”
Muskegon created a district of roughly 3 square miles of blighted industrial land near Seaway Drive and Laketon Avenue. It has about 20 sites available for each of the five types of medical marijuana businesses. Businesses also are required to meet regulations involving facades and blight elimination.
Sparrow Consulting issued a report in August showing the district spurred $5.3 million in real estate transactions and a 320-percent increase in property value in two months. Fifteen of the district’s sites — most of them abandoned buildings — were purchased this summer, according to the report.
Maxim-Sparrow said her firm is “closely monitoring property transactions” in 15 municipalities, mostly in West Michigan.
“We’re seeing properties moving like hot cakes, whether it’s leases or actual purchases,” she said. “In mature markets where communities have opted in, getting property is almost impossible.”
However, Muskegon’s business community has been hesitant to embrace the industry. In December 2017, Muskegon County adopted a resolution opposing the legalization of recreational marijuana. Local business groups hosted an event in April featuring Dale Quigley, a retired Colorado police officer and deputy director at the National Marijuana Initiative, a group critical of marijuana legalization. Quigley reportedly spoke at the Michigan Association of Chiefs of Police conference in Grand Rapids in 2016, describing Colorado as a “lab experiment” that is “stuck with this crap,” according to reports at the time.
In October 2017, 24 businesses in the Muskegon area — including ADAC Automotive, Baker College, Premier Foods and Mercy Health — co-signed a letter to local municipalities critical of medical marijuana, recommending local officials opt out of the state’s regulations. One of the main concerns among companies — in addition to creating a negative “image” for Muskegon — was the impact marijuana could have on their ability to find and retain workers, especially at operations that mandate workplace drug testing.
This is also the key point for the Grand Rapids Area Chamber of Commerce and the Michigan Chamber of Commerce in opposing the ballot initiative to legalize adult-use recreational marijuana in November.
According to Muskegon City Commissioner Ken Johnson, some companies have even threatened to leave if medical marijuana businesses are allowed.
“I considered that a bluff considering they invested millions of dollars and got tax breaks” in Muskegon, Johnson said. He added that he “respects and understands” employers’ concerns around drug testing.
“To me, that was not a concern that should preclude us from moving with an ordinance. It’s not something I think they should use local government to regulate. If they want a drug-free policy, that’s a conversation for the employer and the employee,” Johnson said. “In general, if they don’t want employees doing some activity on their own time, they can incentivize against that activity. If you raise wages enough, then you get more demand for the job.”
While Johnson’s support for medical marijuana is based on public health reasons, he said the city made a deliberate move with the overlay district, targeting an area in need of revitalization and investment. Additionally, the overlay district is not limited to medical marijuana companies.
“The way we structured it with the application process, we’re looking at blight elimination, landscaping and community engagement,” he said. “It looks like some very serious applicants and entrepreneurs are coming in. I think people will be surprised and happy with the outcome.”
In Marshall, Fleming says another upside is that medical marijuana businesses are eager to move to municipalities that are simply willing to have them — unlike typical deals in which cities compete through tax and property incentives and other benefits.
“We don’t have to put much on the table in terms of giving them any types of benefits,” he said. “A lot of times they are paying full price for property.”
In the long run
The hesitation around the legal medical marijuana industry is largely based on the fact that it’s so new. The Legislature passed a regulatory framework for five types of businesses in 2016. The state Department of Licensing and Regulatory Affairs issued its first business licenses in July.
In late July, Grand Rapids opted to allow all five types of licenses, including up to 53 provisioning centers and 83 other facilities for growing, transporting, testing and safety compliance. While medical marijuana supporters say the adopted regulations are too stringent, the move already has signaled Grand Rapids could be a hotspot for potential development.
“The interest in Grand Rapids has been huge,” said Joshua Lunger, government affairs director for the Grand Rapids Chamber. “A lot of companies were waiting a while for Grand Rapids to opt in. I expect there to be a lot of applicants.”
Lunger said the Chamber helps interested companies make connections in the city, “but we’re not running full-steam to pitch it as an economic development tool.”
In October, the Chamber is planning a “cannabis summit” that will host speakers from the marijuana industry in Michigan and other states. Lunger said the Chamber fields questions regularly, not just from interested companies but also from members who are concerned about how the industry might affect them, such as with workplace drug testing and impacts on property value.
“We’re just trying to do things the right way,” Lunger said. “Everyone is looking for certainty.”
Fleming said economic development officials opposed to the industry “are not looking at the whole picture. The state of Michigan is really vetting out the process very well. You’re not getting people who are the ‘Cheech and Chong’ type. These are professional people, and they’re looking at this as a business.”
Fleming said as a parent, he’s always been against marijuana. Now his children “find it humorous I’m (working with) siting some of these marijuana growers.”
“For the community, it was a hard decision” to embrace the industry, he said. “But we’re hoping in the long run it was the right decision.”