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Published in Economic Development

With vertically integrated cannabis startup, U.P. tribe forges own path to economic diversification

BY Sunday, August 23, 2020 06:58pm

BRIMLEY — The Bay Mills Indian Community views the marijuana industry as a key way for the tribe to diversify its economy, which has been devastated by the effects of the COVID-19 pandemic. 

Bay Mills detailed plans this week for a vertically integrated cannabis operation on 110 acres of tribal land south of Sault Ste. Marie in the eastern Upper Peninsula. The tribe expects to convert an existing facility into a center to grow and process about 10,000 marijuana plants and operate a retail storefront open to tribal members and the public. The first products from the grow operation should hit the shelves in about a year. 

In a demonstration of tribal sovereignty, Bay Mills will license and regulate the company independently of the state’s regulatory and tax scheme. 

“Bay Mills as a sovereign nation has always made its prerogative to control and regulate its own tribal lands,” said Whitney Gravelle, in-house counsel for Bay Mills Indian Community. “By not opting into the state license and state jurisdiction, we’re able to control how we are regulating the product that we make.” 

The Brimley-based tribe, which has 2,200 enrolled members, was the first in the state to legalize the recreational use of marijuana on tribal lands in a January 2019 vote, two months after voters passed a referendum to allow the adult use of cannabis statewide.

In passing the measure, the voting membership “authorized the tribe to engage and start looking at economic ventures as a means to diversify our economy,” Gravelle said. 

“It was an expressed blessing from our tribal citizens to go about it as a tribal business venture,” she said. 

One “really huge built-in advantage” for the tribe will be its ability to operate under its own regulations, which will allow the tribe to determine how many plants it grows and how much it will allow customers to buy. As well, the tribe’s products will not be subject to state tax, allowing it to come to market with a less expensive product. 

Products sold at state-licensed businesses collect a 10-percent excise tax and Michigan’s 6-percent sales tax.

“Bay Mills as a sovereign nation can design its own laws and regulations. We can also cultivate those laws and regulations in a way that really helps us succeed,” Gravelle said. “We’re controlling how many plants we grow in the licensed facility, we’re controlling how much product individuals can buy, we’re controlling the fees that are associated with the product. 

“What it ends up doing is it creates a more direct pathway from the consumer to the tribe.”

Profits from the tribally owned company go back to the tribe to use for the benefit of its citizens. As well, Gravelle said “it’s our plan to reinvest that back into our community.”

EYEING GROWTH 

The tribe expects to create about 24 jobs in the first phase of the project, with expectations to grow as it looks to add other dispensaries on its lands across the state, including in the Lower Peninsula. 

The tribe also is engaged in active discussions with other tribes to supply them with cannabis products for their own retail operations. However, those plans will require Bay Mills to work out some kind of agreement with the state to allow it to transport marijuana products off its reservation to other tribes’ reservations. 

“It’s something that we want to continue pursuing because it ends up creating a tribal-wide advantage in the marijuana industry,” Gravelle said. 

Complicating matters, state officials have brushed off Bay Mills’ yearlong attempts to sign a compact with the state outlining how it could enter the marijuana industry, similar to how Washington state has worked with local tribes that have opted to get involved with the industry. The tribes also have worked with the state to sign gaming compacts that outline how their casinos operate, as well as revenue sharing with state and local governments. 

“But despite our best efforts for more than a year now, the state has told us no, that there was no desire to enter into a compact or any type of cooperative agreement with the tribes to enter the marijuana industry,” Gravelle said. 

Even so, the tribe plans to move forward with its plan on tribal lands in the Sault Ste. Marie area. “Bay Mills is very up front about how we move forward,” she said. “We have discussions with the MRA, the state of Michigan and Chippewa County on a regular basis.”

A spokesperson for Gov. Gretchen Whitmer did not respond to a request for comment for this report. 

SEEKING OPPORTUNITIES

For the tribe, entering the cannabis industry offers a key way for Bay Mills to diversify its economy. The need for diversification has become even more clear during the COVID-19 pandemic, during which all 12 of Michigan’s federally recognized American Indian tribes voluntarily shut down their casinos to help curb the spread of the virus. To that end, Bay Mills closed its casino from March 20 through June 12. 

The months-long closures also idled the tribes’ economic engines, costing them upwards of $200 million, as MiBiz previously reported. As sovereign nations, the tribes direct revenues from their casino operations into their communities for services ranging from health care and education to public safety and housing — funding they will not be able to make up. 

“The COVID-19 pandemic has increased the urgency for us to find new sources of economic opportunity for our people,” Bay Mills Tribal Chairperson Bryan Newland said in a statement. 

Diversification forms an “extremely important” cornerstone of the cannabis project, Gravelle said. 

“Not only are we diversifying the (revenue) stream that the tribe would be receiving, we’re also opening up another economic venture that can operate differently from how the gaming industry operates and provide other advantages,” she said.  

To that end, marijuana businesses were deemed essential and allowed to remain open during the state-mandated stay-at-home orders. Through the first half of the year, adult-use marijuana sales reached more than $191 million across the state, according to data from the Michigan Marijuana Regulatory Agency.

A DIFFERENT APPROACH

Bay Mills is forging ahead with a tribally licensed business on tribal land as other Michigan-based tribes have sought a different path to enter the lucrative marijuana industry. 

Both the Little Traverse Bay Bands of Odawa Indians and Sault Ste. Marie Tribe of Chippewa Indians are acting as landlords for Troy-based Lume Cannabis Co., which has opened and plans additional locations on tribal trust lands across the state, as MiBiz reported earlier this month.

Lume Cannabis has leveraged tribal sovereignty by operating on trust lands within communities that have opted out of allowing adult-use cannabis businesses because those local restrictions do not apply on sovereign lands. 

“We govern our lands that are often located within other municipalities,” Joel Schultz, executive director of non-gaming Sault Tribe Economic Development, said in a prior interview. “The other municipalities may choose not to participate, and we may, which gives market opportunities in certain areas that wouldn’t exist without our participation. We do have a couple of advantages.” 

Yet at the same time, the company successfully sought licensure for those facilities from the state Marijuana Regulatory Agency, which granted the licenses even though it has no jurisdiction over tribal lands.

As such, the tribes are foregoing their ability to benefit from the sales and regulation of marijuana products on their lands. 

“We don’t begrudge anyone else who has found a different way into this industry,” stated Newland, Tribal Chairperson of Bay Mills Indian Community. “At the same time, Bay Mills has no interest in turning over our sovereign lands to private, for-profit corporations who are regulated and taxed by the State of Michigan.”

Gravelle said the approach secures the tribe’s control over the process. 

“Bay Mills as a sovereign nation can design its own laws and regulations. We can also cultivate those laws and regulations in a way that really help us succeed,” Gravelle said.

Read 3244 times Last modified on Monday, 24 August 2020 11:01
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