Opinions Differ as Council Discusses Medical Marijuana Sales in EL

Above: one possible exterior for a proposed medical marijuana provisioning center at the site of the former Cosi Restaurant. Photo credit: PincannaRx.

Lansing’s complicated attempts to license and regulate the medical marijuana business is casting a long shadow as East Lansing’s City Council begins its second round of discussion of where, if anyplace, medical marijuana provisioning centers will be allowed to open their doors here.

Pincanna Rx, a Michigan-based subsidiary of Compassionate Advisors LLC, wants to establish a provisioning center (medical marijuana dispensary) at the site of the former Cosi restaurant at 301 East Grand River Avenue. That retail location has remained vacant since Cosi’s closing in September of 2016.

An application for a State operating license must be accompanied by the nonrefundable application fee of $6,000.00 upon initial application, and proof of adequate capitalization is also required. According to its printed materials, Pincanna’s principals “have a significant ‘eight figure’ combined liquidity of immediately available funds.”

Questions about what to regulate

During Council’s discussion of provisioning centers on Tuesday evening, it was clear that at least one council member, Erik Altmann, may be willing to keep dispensaries out of the City entirely rather than risk “going down that path” like the City of Lansing and potentially “losing control very quickly.”

Other council members, including Shanna Draheim and Ruth Beier, expressed concern about unattractive signage, odors and other negatives that might make provisioning centers a bad fit for East Lansing’s image.

Council focused its discussion on the recommendations of East Lansing’s Planning Commission, which has now looked twice at the siting of provisioning centers. In its most recent opinion, the Planning Commission advised that since medical marijuana was recognized and regulated as a legitimate business by the State of Michigan, and East Lansing had chosen to “opt-in” — Council has already approved zoning rules for growing, processing, testing and transporting medical marijuana — it should be treated like any other legitimate business by the City.

Planning Commission, at Council’s request, specifically addressed and rejected the ideas of capping the number of dispensaries, establishing buffer zones between provisioning centers, or creating special zoning in the form of “overlay districts” which would allow provisioning centers to be regulated differently than other retail businesses.

City Planning and Zoning Administrator David Haywood explained that the Commission had suggested that Council might implement a temporary cap as a way to let East Lansing get a sense of whether and how provisioning centers were working in the City.

The possible presence of provisioning centers in the B3 zone downtown continues to be an issue. A majority of the Downtown Development Authority (DDA) has consistently opposed the siting of provisioning centers within its boundaries. The DDA recently voted 6-3 to prohibit the centers in the downtown area, and 8-1 to ask that Council delay any decision on zoning for provisioning centers for a minimum of twelve months.

Planning staff’s written report to Council advises consideration of the DDA’s position, although DDA is only advisory to Council on this matter, so Council can move ahead at will.

Various industry representatives weigh in:

Prior to its discussion, Council heard a special presentation by Kelli Hykes, Senior Associate in Government Relations for Weedmaps which describes itself as “a community where medical marijuana patients find and connect with dispensaries.” Weedmaps makes its money selling technology to the marijuana industry.

Hykes emphasized Weedmaps’ focus on “getting rid of the illegal market and raising the age at which people have their first interaction.” She told Council that an ideal number of dispensaries is 1 for every 7,500-10,000 residents, and that East Lansing should permit seven. She also claimed a 70% reduction of the illegal marijuana market in areas where there are what Weedmaps says is a sufficient number of well-regulated dispensaries.

Council also heard from Shawn O’Brien, a Senior Vice President at CBRE/Martin in East Lansing, a commercial real estate firm that arranges many retail lease deals around this area. O’Brien said there was “lots of demand for locations for provisioning centers” among his clients.

He said some clients “are concerned about what provisioning centers would do to prominent businesses on Grand River,” but said others are interested in renting to dispensaries. He told Council he hoped they would also consider East Village overlay district as a possible spot for centers.

Councilmember Altman asked O’Brien, “So you support this?” to which O’Brien replied, “Yes. I support retail. Traffic is what we need in the downtown area.” Acknowledging that not all landlords would choose to rent to a cannabis-related business, he added that he “supports them because there’s demand, and it’s going to help the real estate market in downtown East Lansing.”

Also speaking to Council on Tuesday night was Gerald Griffin, owner of a public affairs consulting firm representing Compassionate Advisors, a pro-medical marijuana group and the group behind the proposed project at the Cosi site.

Griffin encouraged Council to adopt the recommendations of the Planning Commission. He said the State of Michigan is treating the establishment of medical marijuana businesses as “not a right, but as a privilege” and that he thinks challenges from owners of nearby properties based on alleged infringements of their rights won’t likely succeed.

Above: proposed interiors for a proposed medical marijuana provisioning center at the site of the former Cosi Restaurant. Photo credit: PincannaRx.

Altmann expresses disinterest in allowing provisioning centers:

After Council discussed possible zoning, caps, and overlay districts, Councilmember Altmann expressed strong opposition to provisioning centers in East Lansing.

“Lansing,” Altmann said, “is a cautionary tale. They leapt in with both feet and are paying the price in multiple ways, and now when they try to control them they’re getting sued.”

Lansing did attempt to regulate the medical marijuana business on its own, well before the State’s Public Act 281, which regulates the industry, and Lansing is objectively having some difficulty trying to force pre-existing dispensaries into compliance with P.A. 281 or close them altogether. If East Lansing permitted provisioning centers, those centers would, from the beginning, operate under State law as a regulatory floor, plus have to adhere to any additional restrictions imposed by the City.

Altmann went on to say, “if people need this product, they can go into Lansing and get it.” He asked, “What’s in it for the City of East Lansing? I’m not sure we’re going to get what we need out of this. The excise tax isn’t enough to cover the cost of the additional police that will be necessary.”

ELPD’s Deputy Chief Steve Gonzalez told ELi in December of 2017 that studies reviewed by then-Chief Larry Sparkes “demonstrated that significantly increased crime rates did not materialize after approval of the resolutions” approving marijuana industry activities in other jurisdictions.

A possible source of revenue for the City?

Because East Lansing has “opted in” under P.A. 282, if the City allowed dispensaries to open in East Lansing, it would be eligible to receive a portion of the proceeds from the State’s 3% excise tax which will be levied on the sale of medical marijuana products. According to the Michigan House Fiscal Agency, this 3% will probably be in addition to Michigan’s 6% sales tax, but P.A. 281 is silent on the issue.

A September, 2017 article in The Bridge breaks down the revenue numbers from medical marijuana sales this way: 30% to the State; 25% to the cities that opt into the new licensing program and allow marijuana facilities; 30% to the counties where facilities are located; 5% to the sheriffs’ offices in those counties; 5% to the state police; 5% to train local law enforcement officers.

The amount of tax revenue available to East Lansing would be proportional to the number of licensed marijuana facilities located in the City.

Council members hint at how they might vote:

Tuesday’s Council meeting was a “work session,” which means no votes were taken, but remarks by members did suggest how they might be leaning.

Altmann spoke of “wading into a gray area” by allowing businesses in the City that are legal at the State level but illegal federally and that sell a product that is not clearly medicine or a recreational drug. Although he doesn’t support for-profit medical marijuana businesses, he said he could go along with “some kind of community benefit model where provisioning centers can only be run by nonprofits.”

Beier said she agrees with many of Altmann’s concerns.

Mayor Mark Meadows said that Council is not “rushing,” and hopes they can make a decision in June. He also said he’s not worried about lawsuits related to provisioning centers, since the City “could be sued for everything we do.”

Draheim said it’s easy to look at Lansing and critique, but the laws are now totally different, and the award of the Lansing dispensary licenses was “questionable.” “We can do caps, we can do overlay, there are lots of options…it can be done.”

Councilmember Aaron Stephens said he was pro-legalization of marijuana, but shares a lot of Altman’s concerns. “In Lansing, it just kind of happened,” he said. He added that “legalization of recreational pot is [expected to be] on the ballot this year…it’s coming.”