Posted Oct. 10, 2016, at 6:09 a.m.
PORTLAND, Maine — If voters legalize marijuana in Maine by voting yes on Question 1, it would sound the starting gun for businesses looking to capture part of an industry expected to grow to $200 million in Maine sales by 2020.
The road from zero to $200 million would start with new debates over restrictions of the industry at the local level and the important process of rulemaking about the nitty gritty of how retail marijuana sales in Maine would work.
“There’s always a fairly long process of writing more detailed regulations,” said Taylor West, deputy director of the National Cannabis Industry Association, which lobbies for legalizing marijuana at the federal level. “That’s where you start hashing out things like the licensing process and how you set up the business and what kind of security you’re required to have. … All of those things have a significant impact on what businesses can do as they’re preparing to enter the market.”
For businesses, there would be a patchwork of public- and private-sector challenges, including permitting at the state and possibly local levels and securing financial backing not reliant on a traditional banking system that’s still figuring out how to deal with basically cash-only businesses that grow or sell the federally outlawed drug.
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All of that would follow the more immediate decriminalization, which comes with its own gray areas. Question 1 would allow possession of up to 2.5 ounces of marijuana and limited home growing for residents over 21, though tenants and employees could still face trouble from either landlords or employers with policies specifically prohibiting marijuana.
For existing medical marijuana businesses, there would be a question of whether to expand into retail, with a scramble for licenses that would begin months after the bill takes effect.
Maine was early to decriminalize small amounts of marijuana, in 1976, and voters approved a medical marijuana program in a 1999 referendum, a program expanded in 2009 to allow larger-scale dispensaries. In 2013, Portland cast a largely symbolic vote to legalize recreational marijuana use in the city.
Under the citizen-initiated proposal on November’s ballot, experienced caregivers and board members or principal officers of dispensaries would get first dibs on licenses for marijuana product retail stores, cultivation facilities or social clubs. To qualify, they would need to be licensed and in good standing for at least two years.
For cultivation facility licenses, there’s a particular window of opportunity. The state will first open applications only to qualifying caregivers or dispensary operators for 90 days.
If those qualifying caregivers don’t fill out the full 800,000 square feet of plant canopy, meaning the area of a facility used for growing marijuana plants, the department would start accepting cultivation applications from others.
That 90-day clock wouldn’t start ticking for months after election results are in, according to the timeline laid out in Question 1.
First, the governor has to approve the election results. Thirty days later, the law takes effect. The agriculture department then has 90 days to approve its rules, which will define much of how the industry is allowed to operate, including how products are tested, labeled and tracked from cultivator to retail sales locations.
Thirty days after that, the department would begin taking applications, starting a 90-day clock.
Those cultivation licenses would be broken out in units of 100 square feet, with a maximum for any one licensee of 30,000 square feet, roughly between the size of the event floor of Bangor’s Cross Insurance Center and Portland’s larger Cross Insurance Arena.
The rules seek to prevent a cultivation behemoth from dominating the market in another way, requiring that 40 percent of licenses go to smaller cultivators, with 3,000 square feet or less. The law would allow up to six cultivation operations to locate in the same space, as long as they don’t have more than 30,000 square feet of cultivation space on the same property.
Those blocks are issued on a use-it-or-lose-it basis, where cultivators could have their licensed space cut back if they don’t use at least 51 percent of their allotted space.
Approval of those cultivation spaces may also have an impact on the retail market. Question 1 would allow a cultivator to open an onsite retail operation without seeking an additional license, as long as it complies with local regulations. If a municipality has a limit on the number of retail locations, a cultivator’s operation would not count against that total.
At the state and local level, preferential licensing and limits on the industry could put a pinch on new entrants for retail businesses and social clubs.
By the end of 2015, there were nearly 3,000 medical marijuana caregivers statewide and 35 board members and officers at dispensaries, though it’s not clear how many meet the two-year benchmark for preferential licensing treatment.
It appears many of those caregivers could qualify by the time the law would take effect, as 2,100 caregivers were registered in 2014, but the state data don’t indicate exactly how many continuously maintained their licenses over that period.
The bill gives preference to those applicants for all classes of licenses, which includes retail stores, social clubs, cultivation facilities, product manufacturing facilities and testing facilities.
Those testing facilities would operate apart from the rest of the industry, in financial terms, at least.
The bill also contains specific financial restrictions, prohibiting any owners or investors from having an interest in another type of marijuana business.
Such testing facilities would be apart from the rest of the industry, providing product information that would be printed for consumers on product labels and reviewing products for compliance with state-set limits and standards.
Other operators will be required to disclose their financial interests to the state, too, to ensure marijuana businesses are financially controlled by the holder of the applicable license.
Limits on consumer-facing retail and social club businesses would rest specifically with each municipality.
The bill would allow local governments to ban, limit or restrict retail marijuana stores or social clubs to certain areas and prohibits the state from setting any limits on those retail businesses.
Retailers would be allowed to sell marijuana products for offsite consumption and are not allowed to sell food or other items. Social clubs, on the other hand, would be able to sell products only for onsite consumption and would be able to sell food.
While state licensing generally prefers operators with experience as licensed medical caregivers or dispensary operators, it does provide an in for newcomers bumping up against municipal limits on retail businesses.
If a business that already has a license is competing for the last remaining spot in a municipality, terms spelled out in Question 1 prohibit the state from awarding another license to that operator, if it would prevent someone without a license from getting one.
In addition to the state license, the bill would allow municipalities to set up their own licensing systems.
For businesses of all sizes, passage of the law would still leave many questions unanswered, such as how much they’d have to pay for a license.
While the bill sets the sales tax on marijuana products at 10 percent, the costs for businesses looking to break into the industry still have a lot of room to move. That’s where rulemaking at the overseeing Department of Agriculture, Conservation and Forestry will come in.
The law lays out many specific limitations on how the businesses would operate — a prohibition on adding marijuana extracts to trademarked products leaves items like pot Oreos out of the question, for instance — but leaves much to be decided later.
The department’s rulemaking will include how much it will cost businesses to apply for licenses, what kind of security is required at licensed facilities, how cultivators must track products from their grow facilities to retailers’ shelves and what kind of occupational licenses will be required for employees, contractors, owners, managers and operators of any retail marijuana facilities.
And prospective businesses face private-sector challenges as well, such as proving they’ve lined up a property before getting approval for a license.
That comes alongside the challenge of finding a bank that will handle their money, though some institutions have started to service marijuana businesses after federal officials issued guidance in 2014 suggesting that they would not pursue banks for servicing legal marijuana businesses.
Despite the obstacles, data suggest Maine is fertile ground for the industry, if it’s made legal.
The industry consultancy New Frontier Data and Arcview Market Research estimated a retail marijuana industry in Maine would reach $200 million by 2020, if approved this fall. If approved in Massachusetts, it forecasts more than $773 million in sales by that year.
Beyond that, data on adult marijuana use demonstrate part of why the industry set its sights on Maine for legalization. Maine was among the highest for the prevalence of adult marijuana use by state, based on the 2013-2014 National Survey on Drug Use and Health.
The survey estimated that 20 percent of Mainers over 18 had used marijuana in the past year, a share on par with Colorado and Washington states, which both legalized marijuana in 2012.
Oregon and Alaska, which legalized retail sales and possession after the 2013-2014 survey, had similar estimates of adult marijuana use.