February 20, 2014 in City

Liquor board changes rules for marijuana grow license

By The Spokesman-Review
 
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Background and the latest updates

Bright spot

The state revenue forecast for the 2015-17 budget cycle projects Washington will collect about $51.2 million in business and sales taxes, more than half the $80 million in extra fees and taxes the state expects to see.

OLYMPIA – Faced with far more people wanting to grow legal marijuana than state rules would allow, the Washington Liquor Control Board upped more than fivefold the amount of land that can be planted with the drug. But it also put some new restrictions on would-be growers.

The board agreed Wednesday to limit applicants to one grower license per business entity, cutting down on the multiple requests some new marijuana entrepreneurs have turned in for as many as three grower licenses. It also reduced the amount of land all requests would be allowed to plant by 30 percent.

“We are going to do this right,” Board Chairwoman Sharon Foster said. “The Department of Justice is not going to have anything to complain about for the state of Washington.”

The board’s decision came as the state’s fiscal analysts made their first estimates of legal marijuana’s boost to state coffers – a possible $51 million bump in tax revenue from recreational sales – and the Legislature continued to examine ways to merge the separate existing medical marijuana system with the untried recreational system.

The state originally planned to allow some 2 million square feet to be planted in marijuana; it has applications that could cover 35 million square feet, if each grower planted the maximum allowed on the license. Spokane County alone has 241 applications to grow marijuana, and if each planted the limit allowed on their license requests, the county would have more than 4 million square feet eligible for growing.

The new guidelines for growing licenses raise the total amount of land where marijuana can be grown to between 11 million and 13 million square feet. Liquor board staff believe, however, that less land will actually be planted as licenses are phased in. A fourth of all applications processed so far are being rejected for not meeting standards for residency, clean criminal records and viable business plans. Half of those who receive a license could be out of business in 18 months, based on Colorado’s experience with its regulated medical marijuana system.

Washington will likely need more marijuana than original estimates, if licensed growers will be supplying the drug for the medical market as well, staff said.

“We’re making the best guess possible out of the data we have,” board member Chris Marr said. “This is not an academic exercise in economics. This is not a free market. This is a highly regulated business.”

Chris Kealey of Spinning Heads, which applied for three licenses covering 30,000 square feet each, said his business is spending $8 million to build a 100,000-square-foot facility. Now it would be able to plant just 21,000 square feet and will look for other growers to sublet space.

But the new rules are better than some alternatives, such as cutting all requests back by 90 percent or just awarding licenses to the first applicants until the old limit was reached, Kealey said.

The state will begin issuing licenses to producer and processor applicants next month and will continue for the next several months as investigations are completed. A lottery for stores will be announced in two weeks, and the first could open by the end of June, said Randy Simmons, liquor board deputy director.

Uncertainties in the state’s recreational marijuana business model were repeatedly cited Wednesday afternoon as the Senate Ways and Means Committee considered a bill to merge the medical marijuana system into it. The state has hundreds of medical marijuana dispensaries that would be banned in mid-2015 under the bill. The Legislature should wait at least another year, opponents said, and see if the recreational system succeeds before deciding to close the dispensaries and throw their employees out of work.

Under the latest version of the proposal, patients would be exempt from the sales tax and some of the high excise taxes that hit the recreational drug as it moves from grower to processor to stores. The price would still increase beyond what some low-income patients could afford, opponents of the bill said.


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