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Washington’s cannabis industry unveils legislative agenda

TACOMA — Members of the state Legislature, if you’re curious about what you can do for the local cannabis industry, the industry has some ideas.

Vicki Christophersen, executive director and lobbyist for the Washington CannaBusiness Association, recently briefed the media on the group’s legislative agenda for the coming session.

“We feel this is a pivotal year,” she told reporters on the call Dec. 5. In the years since legalization, “we’ve learned a lot, and we’re take this comprehensive agenda to the Legislature.”

The highlights:

• Compliance reform: Seeking a compliance program from the state Liquor and Cannabis Board so licensees can request assistance and inspections to find flaws in their systems without threat of citation. This could include written warnings before any enforcement action, provided there is no risk to health or public safety.

The group also seeks a finding that administrative violations that occurred before June 30, 2018, not count toward permanent license cancellation.

• Clarifying what is and is not a medical claim about a product: Getting rid of “curative” language (unsubstantiated claims about a product curing cancer, Crohn’s disease, etc.) has led to product descriptions being too limited, from the association’s standpoint.

According to its policy briefing memo, the association will propose legislation that “mirrors FDA (federal Food and Drug Administration) allowances to clarify what is and is not a ‘medical health claim’ to allow product labels to include such terms as, and derivatives of, wellness, maintain, support, assist, promote, and relief.”

“Licensees can’t use language or explain functionality to indicate what a product is used for,” Christophersen said. “Licensees should be able to identify functional claims in name or description of a product.”

• Allowing for out-of-state investment: According to the association, “Investment in Washington-licensed businesses has been restricted to only Washington residents, a barrier that does not exist in any other state-regulated cannabis marketplace.”

The group hopes legislation will eliminate that restriction.

“This industry is rapidly becoming a global industry,” Christophersen said.”Our fear as an organization is that Washington is going to be far behind.

“Imagine if the tech sector was strapped by those restrictions — we wouldn’t be a leader globally. We understand why (the restriction) was set up like that at the outset to encourage Washington entrepreneurs. But now they need to compete with the rest of the world.”

• Aligning cannabis sales penalties with alcohol industry standards: “A uniform approach to enforcing existing laws for alcohol, expanded to include cannabis, makes sense without undermining any safety measures intended to protect kids,” the association memo states.

“Budtenders now face a felony charge selling to a minor, but we feel that felony is too strong,” Christophersen said, adding that the association proposes changing the offense to a misdemeanor from a felony.

• Limited merchandising and sale of certain non-THC products in licensed retail stores: This would broaden store sales to include “limited merchandising in retail establishments in the form of branded clothing, cleaning products and CBD-only (cannabidiol-only) products.”

The policy change would allow cannabis shops to sell low-THC, CBD products you now can find at chain drug stores and independent retailers.

“Right now our folks can’t compete,” Christophersen said.

The handful of CBD products state-regulated stores sell are manufactured through the state Initiative 502-regulated industry. The supply is smaller than what’s available in the general marketplace or online.

Medford debates how to spend pot money

MEDFORD, Ore. — Marijuana legalization ignited years of debate in Medford, and a windfall of up to $600,000 annually in pot tax revenues has fanned the flames of controversy once again.

“It’s really personal for me,” said Medford City Councilor Clay Bearnson, who pushed hard for retail sales of marijuana in city limits. “It was a hard-fought battle to get cannabis even in town.”

The city has welcomed the pot tax money, saving $839,000 so far and expecting to have about $1.2 million on hand when the city adopts its 2019-2021 budget next July.

But it’s also facing some big bills.

The council is confronted with a $3.5 million increase on top of $11.5 million the city is already paying in the current biennial budget for Public Employees Retirement System debt.

Some councilors and others on the 16-member Budget Committee think the marijuana money should help pay for the PERS debt. Bearnson is not one of them.

“PERS would be a great abysmal pit to put it in,” he said.

Instead he’d like to invest the money on a project the community could be proud of, such as a municipal pool, helping with the affordable housing problem or dealing with homeless issues.

Bearnson said Medford voters approved retail sales in the city in 2016, so they should be able to point to a specific problem that was solved by the pot tax revenues rather than essentially flushing the dollars down the PERS hole.

Ryan Martin, Medford’s chief financial officer and assistant city manager, said he expects to see PERS increases over the next six years, which will add to the city’s budget woes.

“It’s going to be one of the biggest topics of conversation,” he said.

Martin estimates cannabis tax revenues will be about $500,000 to $600,000 a year.

Oregon legislators have discussed providing a 25-percent match to cities that have set up side accounts for PERS, so the city could add some $300,000 to the $1.2 million saved from the pot money. The state has put off enacting legislation to provide the match so far, raising doubts that it will ever be available.

‘A drop in the bucket’

Rick Whitlock, a member of the Budget Committee, said he sees two camps forming on the committee, one preferring to spend the money on the PERS debt, the other pushing to use the money for a specific project.

“It certainly has been an issue that has risen to near the top,” he said.

Whitlock said he’d love to see a new municipal pool, particularly with Jackson Pool getting to the end of its life.

He’s also of two minds about the new money, seeing Bearnson’s point that the public wouldn’t notice spending the money on PERS.

“You just wouldn’t see any obvious benefit from that money if you put it into an account like that,” he said. “Financial advisers say it would truly be just a drop in the bucket.”

Councilor Kevin Stine said the city’s primary obligation when it crafts its budget will be to pay off the PERS obligation.

“What I pushed for, and the rest of the committee agreed, is how we keep our current service levels,” Stine said. “We need to have a certain amount of money to keep what we have.”

But Stine said he sees the appeal in supporting a particular project, though he’s not sure if that project is a municipal pool.

“For me it is difficult to make a decision one way or another,” he said. “The question is how we fill the potential budget gap.”

Stine said he’d like to get more feedback from the community before making a decision on where to spend this new pot of money, or what type of project local residents support.

“At this point, I cannot say the amenity is a pool or an event center,” he said.

Councilor Dick Gordon said the city needs as much money as it can to prevent cutbacks in city services from the PERS debt, so keeping the pot dollars in a side account for a possible match is appealing.

“We need to pay down PERS as much as we can,” he said.

If the match doesn’t come through, another option is to use the cannabis money to help get federal grants for law enforcement that could free up general fund dollars to pay for PERS.

Gordon said Oregon is at odds with federal Immigration and Customs Enforcement, so it raises a question mark over the city’s eligibility for the grants.

He doesn’t think revenues from the cannabis tax are enough to pay off a municipal pool even with a 20-year bond.

Group makes push for cannabis cafes in Oregon

PORTLAND — A group wants Oregon lawmakers to allow public places such as cafes where people can smoke legal pot.

Current law says people can only smoke it in private. The New Revenue Coalition wants to change that so people can have public places to light up. The group says people aren’t able to smoke in private because many rental units bar smoking indoors.

Oregon Public Broadcasting says the group will have to persuade lawmakers to allow waivers to the Indoor Clean Air Act, which aims to protect people from secondhand smoke by creating smoke-free public places.

Dr. Tom Jeanne, an epidemiologist at the Oregon Health Authority, says the agency doesn’t take positions for or against legislative proposals but he’s concerned about the health effects cannabis cafes could have.

Oregon marijuana prices dive – and buying soars

PORTLAND — Rampant overproduction in Oregon’s market for legal, recreational marijuana has produced a 50 percent drop in prices, according to state economists. That widely documented collapse has been tough on farmers and retailers — but a boon for consumers.

A new state analysis finds the price collapse sparked a big uptick in marijuana purchases and a corresponding increase in associated tax revenue, the Oregonian/OregonLive reported.

“Lower prices are helping to drive the volume of sales higher and induce black and medical market conversions into” the legal, recreational market, said Josh Lehner of the Oregon Office of Economist Analysis.

Recreational marijuana sales in Oregon will be nearly $543 million this year, up 29 percent from 2017 and well above economists’ expectations, forecasts show.

When Oregon legalized marijuana four years ago, expectations were enormous for the newly legal market. The state created incentives for producers to leave the black market, leading to overproduction and the ensuing price decrease.

A state study found the retail cost of a gram of marijuana plunged from $14 in 2015 to $7 last year.

Recreational marijuana remains a small industry, relative to the size of Oregon’s economy. For comparison, economists note that cigarette sales are 40 percent higher than marijuana sales. But legal marijuana is growing fast — state forecasts suggest it will be a billion-dollar market in 2025.

While Oregon has no general sales tax, it does levy a 17 percent sales tax on marijuana. Marijuana taxes generated nearly $70 million in revenue last year and are forecast to generate nearly $90 million in 2018.

State forecasters believe marijuana may eventually play a more important role in the state’s economy.

“The real economic impact from recreational marijuana will come not from the growing and retailing, which are low-wage and low value-added market segments,” economists wrote in a revenue forecast issued last week. “It will come from higher value-added products like oils, creams, and edibles, in addition to niche, specialty strains.”

The rise of marijuana in Oregon could evoke the emergence of craft brewing in the state, the economists wrote, with value-added production augmented by a cluster of suppliers and support industries.

“The long-term potential of exporting Oregon products and business know-how to the rest of the country remains large,” economists wrote, “at least once marijuana is legalized nationwide.”

Green Tuesday: Crowds line up at 1st East Coast pot shops

LEICESTER, Mass. — People lined up in the rain Tuesday morning to be among the first customers at the first two legal pot shops on the U.S. East Coast, more than two years after Massachusetts voters approved of recreational marijuana for adults.

The state’s first commercial pot shops opened in Leicester and Northampton.

Items for sale in the modern and spacious stores include various strains of the part of the plant that can be smoked, pre-rolled joints and edibles such as brownies and chocolate bars.

Cannabis is sold legally in six Western states.

The first customer at the Leicester store was Stephen Mandile, an Iraq War veteran who has been using medical marijuana to treat his post-traumatic stress, a traumatic brain injury and chronic pain.

Customers were shuttled to Cultivate, the Leicester store, from a remote parking lot about a mile away as police kept a visible but low-key presence outside. Customers perused offerings kept behind counters and under glass.

Kenny Boisvert, a 33-year-old Blackstone resident, was pleasantly surprised by his purchasing experience.

“It’s a very nice place. It’s way more than I expected,” he said as he waited to pick up edibles and the part of the plant that can be smoked.

The rollout of legal pot sales has been slow in Massachusetts, with regulators saying they wanted to make sure it was done safely and without some of the supply issues other states have faced.

The two shops received final clearance from regulators to open last Friday but were required to wait three days to coordinate traffic and other concerns.

Several more stores could open in the coming months.

Washington issues its first marijuana research license

OLYMPIA — The Washington Liquor and Cannabis Board says it has issued the state’s first license to grow marijuana for research.

Verda Bio Research in Seattle says it will be growing cannabis to conduct basic research on some of the plant’s lesser-known compounds.

Chief Executive Jessica Tonani said Verda intends to breed cannabis plants to emphasize compounds that currently exist only at low levels, so that those compounds can then be studied for potential therapeutic uses.

States may take a hit as pot falls

Wholesale marijuana prices in Colorado have fallen by a third in just the past 12 months, continuing a price crash that began soon after the drug was legalized. Although this implies that some marijuana entrepreneurs are going to go bankrupt, the bigger financial hit will be felt by states that tax marijuana based on its price.

Marijuana prices are collapsing in Colorado and in other legalization states (e.g., Oregon, where the price can go as low as $100 per pound) because a legal business is dramatically cheaper to operate than an illegal one. Because states generally set their marijuana tax rates as a percentage of price, their revenue per sale sinks in direct proportion to the fall in marijuana prices. Ironically, in a bid for more tax revenue per marijuana sale, Colorado increased its marijuana tax rate from 10 percent to 15 percent last year, only to see the anticipated added tax revenue wiped out by falling prices in a year’s time.

States may have failed to anticipate this problem because of misleading predictions about the effects of legalization. Pro-legalization economist Jeffrey Miron projected in 2010 that marijuana prices would only fall 50 percent when prohibition was repealed, leaving the drug at a price that would yield high tax revenue. That was clearly a rosy scenario.

A starker prediction made by drug policy analyst Jonathan Caulkins looks more prescient every day: He forecast that legalized marijuana will eventually fall in price to the level of other easily grown, legal plants like wheat and barley, such that a joint might sell for a nickel or even become a complimentary item akin to beer nuts at the bar. If that comes to pass, taxes based on a percentage of price might not even cover the costs of the government’s regulatory system for legal marijuana.

East Vancouver Herbery to close for 10 days

East Vancouver marijuana shop The Herbery has closed temporarily, the result of a state-imposed penalty following a routine sting operation earlier this year. The closure began Sunday and the store reopens 9 a.m. Nov. 14.

The Columbian first reported in February the store at 212 N.E. 164th Ave. was facing a month-long closure after selling a marijuana cigarette in January to a 19-year-old investigative aide from the state Liquor and Cannabis Board. Purchasers of marijuana must be at least 21 years old in Washington.

At the time, store co-owner Jim Mullen said a management trainee had failed to notice the aide was underage when she showed her ID, and a budtender failed to perform a second ID check. Both employees were fired, he said.

The January violation was the second strike for the store. A second violation typically results in a $1,000 fine and a 30-day suspension of sales, but Mullen appealed the decision and requested a lesser punishment. The store was allowed to remain open while the appeal worked its way through the state Office of Administrative Hearings.

While that was happening, the store added a scanner to help check IDs and instituted a policy to no longer accept vertical-format state IDs, which can be issued to minors, according to a post on the store’s website. Also, checkout-counter employees have been instructed to double-check the IDs of anyone who appears to be under 40.

The Herbery entered into a settlement agreement with the state board in early October, in which the 30-day suspension was reduced to 10 days due to the store’s efforts to prevent further violations and in exchange for a higher monetary penalty of $10,000.

“Preventing minors from entry and not selling to a minor is our obligation. This is on us, and we own it,” Mullen said last week on the website. “We are lucky to be suspended for only 10 days — other stores have received penalties of 15-30 days. We were able to negotiate leniency because we are good players and overall run a tight and compliant business.”

The east Vancouver location on 164th Avenue is one of three dispensaries that operate under The Herbery brand. The other two are on St. Johns Road in the Minnehaha area and Chkalov Drive just north of Mill Plain Boulevard. The suspension does not affect the other locations, although the company said the revised security measures and policies have been implemented at all three stores.

Michigan first in Midwest to legalize pot

DETROIT — Michigan voters on Tuesday made their state the first in the Midwest to legalize recreational marijuana, passing a ballot measure that will allow people 21 or older to buy and use the drug and putting conservative neighboring states on notice.

Three other states had marijuana-related measures on their ballots. North Dakota voters decided recreational pot wasn’t for them, while voters in Missouri passed one of three unrelated measures to legalize medical marijuana. Utah voters also were considering whether to allow medical marijuana and to join the 31 other states that have already done so.

Including Michigan, 10 states and the District of Columbia have legalized recreational marijuana. And Canada recently did so. But the passage in Michigan gives it a foothold in Middle America and could cause tension with neighboring Indiana and Ohio, which overwhelmingly rejected a 2015 legalization measure.

“Troopers that work along the state line are very cognizant of what’s going on up north,” said Indiana State Police Sgt. Ron Galaviz, a spokesman for the agency’s Fort Wayne Post, which stretches north to the Michigan line.

He said if the referendum passed, “we know some of our citizens are going to go over to Michigan to partake.” And those who return either under the influence or in possession of pot may learn the hard way that it remains illegal in Indiana.

“We’ll enforce our laws as written,” added Galaviz, a Michigan native. “If you’re traveling to or through our state, we really don’t want you bringing it down here.”

The Michigan law will take effect in about a month, as the election first has to be certified by the Board of State Canvassers. Ten days after that certification, people age 21 or older will be allowed to have, use and grow the drug, but the process of establishing regulations for its retail sale could take about two years.

Shortages plague Canada’s pot shops

TORONTO — The name of the store is High North, but it might as well be named High and Dry because for all but about four hours of the first two weeks since marijuana was legalized in Canada, there was no pot to sell.

Trevor Tobin, one of the owners of the Labrador City shop in Newfoundland and Labrador, said they went 10 straight days without supply.

“The producers keep saying there will be some bumps in the road, but right now it’s not a bump in the road. It’s a big pothole,” he said.

His mother, Brenda Tobin, is a part-owner and said that after she tells customers there’s nothing to buy, “a lot of them are saying, ‘Oh, well. I guess it’s back to the black market.’ ”

Legalization arrived Oct. 17, and Canada became the world’s largest national marketplace for so-called recreational marijuana. But for now, it’s a superlative in name only.

The first weeks have felt more like a soft opening with few retail outlets operating and rampant supply shortages. It’s not because Canada can’t produce enough cannabis products — licensing those producers has been slow, and the federal government is taking steps to speed up the process.

The provinces are handling the sales and most of the regulations. Reports from around the country are similarly discouraging when it comes to supply.

Quebec closed its government-run shops for three days this week because of a lack of pot and will continue to keep them shut Mondays through Wednesdays until availability is stabilized. Manitoba Liquor & Lotteries said it expects product shortages in both brick-and-mortar and online stores could last six months.

Ontario, Canada’s most populous province, won’t have any stores open until April at the earliest as the new conservative government writes regulations. Meantime, police have shut down at least 11 illegal dispensaries in the province.

Ontario residents who want to make legal purchases are flooding the online government store. At least 150,000 orders arrived in the first week, more than all other provinces combined, and the store can’t keep up.

Contributing to the delivery problem is a strike by workers at Canada Post, the nation’s postal service that handles online marijuana orders that are legal countrywide.

British Columbia, the third-largest province by population and a place that historically supplied much of the country’s illegal weed, still has just one retail store.

Across Canada, people are returning to the black market. And some never left.

Corey Stone, a 32-year-old bar-restaurant manager in Montreal, and his friend were first in line at Quebec’s government-run cannabis store on Oct. 17, but he hasn’t been back because of the supply problems and has been getting his pot illegally.

In the capital of Ottawa, Ontario Capital Buds is one of the last holdouts after most of the illegal dispensaries in town closed on Oct. 16 so they could file for legal operating licenses. Business is booming — at 11 a.m. on a recent chilly, gray day, the waiting room was packed.

Blake Murchison, 62, was among the customers. He didn’t try visiting the government’s online store.

“Why? There’s a postal strike!” he laughed. “I’m not patient. It’s a matter of convenience, really. Or inconvenience.”

Devyn Stackhouse, a 30-year-old student at Ottawa’s Algonquin College, did go to the government website on Oct. 17 and placed two orders for five pre-rolled joints and a gram each of four cannabis strains. After waiting more than a week to get a delivery, Stackhouse went to an illegal dispensary.

“If (the government) were serious about access, serious about smothering the black market, then more resources would have been allocated to the OCS,” Stackhouse said, referring to the Ontario Cannabis Store website.

In Newfoundland, 25-year-old technician Elwood White has been to three legal shops and found little selection. He said the marijuana is more expensive but better quality.

“It definitely has better buzz,” he said.

Private and government retailers are dependent on licensed producers to send them products. But so far, of 132 marijuana producers approved by Health Canada, only 78 have sales licenses.

FSD Pharma Inc., an Ontario-based producer, received a cultivation license a year ago but still is waiting for a sales license.

“There is a lot of red tape,” said Dr. Raza Bokhari, co-chairman and interim chief executive of FSD Pharma. “Some of the obstacles are unnecessary. It is quite burdensome.”

Many that did get sales licenses are smaller operations, said Cam Battley, a top executive at Aurora Cannabis Inc., one of Canada’s large-scale producers.

The rollout problems have been felt in Canada’s financial markets. Cannabis company stocks that soared as legalization arrived have been hammered since.

Aurora’s stock price lost about half its value since peaking at $15.16 per share Canadian (US $11.68).