Marijuana Industry Association rolls out
Those hoping to get in on the ground floor of Alaska’s legal marijuana industry now have a supporter.
The Alaska Marijuana Industry Association announced it is open for business July 9 during a briefing at The Boardroom workspace in Downtown Anchorage.
Alaska Marijuana Industry Association President and board member Bruce Schulte, a pilot by trade, said the five-member board recognized a need for an organized industry resource to help a burgeoning group of cannabis entrepreneurs.
“Our focus as a group, AMIA, is the business, the commerce (of marijuana) and all the things that are entailed there,” Schulte said. “We’re a seed-to-sale industry association.”
The group is in the process of completing the requisite steps with the Internal Revenue Service to become a 501(c)(6) nonprofit eligible to advocate and lobby on political issues.
Formally organized in April, the four board members present at the introductory meeting said they have all been busy working in their hometowns across the state to help the local governments learn about legal marijuana and how they should manage associated businesses.
The board has five members now, but Schulte said the table would likely grow to 11 seats to assure each aspect of the farm-to-retail industry is included.
AMIA will be accepting guest members until businesses are able to pay for full memberships once the marijuana business is legal in Alaska, according to the board.
Full AMIA membership will be contingent upon holding a valid State of Alaska marijuana establishment license, according to the group’s maturing code of conduct.
Until then, the Marijuana Industry Association board members will continue their work pro-bono.
Ballot Measure 2, passed by voters in November and promoted as a push to regulate marijuana like alcohol, allows persons 21 years of age and older to possess up to an ounce of marijuana.
It also allows local governments to regulate or prohibit marijuana-based establishments and establish annual operating fees, creating a local regulatory authority.
Possession of marijuana became legal in February, on a timeline laid out by the statewide referendum.
The next major deadline is Nov. 24 for the recently established state Marijuana Control Board to adopt its regulations for the drug. After that, Feb. 24, 2016, is the last day the state can start accepting business license applications from those wishing to grow, process or sell marijuana — one year after it became legal to possess. The state will then have up to 90 days to review license applications.
AMIA Vice President and board member Brandon Emmett of Fairbanks is a founder of one of the state’s current leading marijuana advocacy groups, the Coalition for Responsible Cannabis Legislation. Emmett also serves on the Fairbanks North Star Borough’s Marijuana Advisory Board.
Schulte is a member of the Anchorage Assembly’s Committee on Regulation and Taxation of Marijuana.
Kasilof contractor and AMIA board member Leif Abel chairs the Kenai Peninsula Borough Marijuana Task Force.
Emmett said the Fairbanks council has been focused on zoning issues — where potential businesses of all types related to marijuana production and sale will be allowed to locate. Zoning is going to be one of the most important issues for the industry in Alaska, he said.
While ultimately an advocacy organization, AMIA will not try to push communities in their decision-making regarding marijuana, according to Emmett.
“Our goal is not to try and continue the campaign and convert these local governments that have decided not to regulate marijuana within their boarders,” he said. “But those that have, we’re going to be the resource for the industry and help provide best practices to make sure that the industry that they choose to have within their municipalities works well there.”
Schulte said the “obvious comparison” of AMIA to the Alaska Cabaret, Hotel, Restaurant and Retailers Association and alcohol is a fair one.
AMIA board member Kim Kole, founder of the Alaska chapter of Women Grow, said the group would eventually set up a group health insurance plan for its member businesses as well.
Abel said he would expect to see product on retail shelves no sooner than late August 2016, given the time it takes to grow the plants after growers could start legally operating.
Emmett and Schulte were also appointed as industry representatives to the Marijuana Control Board, giving them at least some say in how the state regulations are molded.
As a result, Schulte said the two are limited as to what they can discuss with other AMIA members and what opinions they can offer about regulatory issues.
Gov. Bill Walker announced the initial five-member board July 1. The group quickly held an introductory meeting July 2 in Fairbanks.
The board is under the state Commerce Department along with the Alcoholic Beverage Control Board.
A rough draft of the regulations would restrict anyone with a marijuana establishment license from operating within 200 feet of schools, daycares, churches or correctional facilities.
Other issues likely to be addressed include THC levels in marijuana edibles and concentrates and on-site product security for all aspects of the supply chain.
Emmett said the successes and failures of legalization and business regulation in Colorado and Washington are being studied and learned from.
“What we know from the other two states (where recreational marijuana is legal) is that the sky hasn’t fallen and they’re both making money in the form of tax revenue, but also in new business popping up,” Emmett said. “People make money, they spend money.”
Schulte said Alaska’s marijuana rules need to be acceptable to not only to those in support of legalized marijuana, but also to the 47 percent of voters who opposed the law change for the initiative to be successful.
“This is very much the ground floor of a newly legal industry. There’s a lot of opportunity; there’s a lot of unknowns; there’s a tremendous amount of work to be done,” he said. “There’s a lot of good people that are willing to operated in a rational, reasonable manner as a regulated industry. We support that.”
Taxes and financing
The ballot measure imposes a $50 per ounce excise tax on all marijuana dealt between a grower and a manufacturer or retailer.
Abel said limiting other local taxes and fees will be paramount to ensuring a healthy legal marijuana industry in Alaska can marginalize the black market.
“If we’re overtaxed, then in effect, we will not be an industry,” he said.
Abel noted that marijuana tax revenue will be a “drop in the bucket” compared to oil and gas taxes and other state funding sources.
While Colorado has a much larger population than Alaska, the tax revenue there has not been insignificant, and it’s growing as the industry stabilizes.
Through May, the State of Colorado took in nearly $102.4 million in marijuana taxes and business fees this year. That is about triple the $34.8 million generated over the first five months of 2014.
Colorado has an overall 12.9 percent sales tax on marijuana, which includes the general 2.9 percent state sales tax on all consumer goods. Recreational marijuana is also subject to a 15 percent excise tax on the average market retail price for a given quantity; medical marijuana is exempt from the excise tax.
The State of Washington simplified its marijuana tax structure July 1 to a straight 37 percent excise tax on retail customers, eliminating taxes levied on producers, processors and retailers.
Kole noted that tourists have buoyed sales in Colorado. With more than 1.5 million visitors coming to Alaska each year, the tourism market could be a big one in the state, she said.
Finding traditional financing has been an issue for many marijuana-based businesses in the first states to legalize recreational marijuana.
The Justice Department under the Obama administration has said it will respect states’ decisions in regard to marijuana, but it is still an illegal substance under federal law. How a new administration in 2017 will treat the drug is a big unknown.
As a result, federally-insured banks and credit unions are wary of providing loans or lines of credit in an industry that could get caught in a tug-of-war between states’ rights and federal authority.
That’s a big difference than saying Alaska banks are not interested in a new market, according to Emmett.
“Any financial institution, if you’re able to have a one-on-one sit-down with the leaders, they’re saying, ‘Yes, we want to be a part of the marijuana industry,’” Emmett said.
The industry has grown in Colorado and Washington on primarily a cash-only system, which has not only made security an issue, but also tax collection.
Alaska U.S. Rep. Don Young introduced the Compassionate Access, Research Expansion and Respect States Act in March with Tennessee Democrat Rep. Steve Cohen. The bill is one of several pieces of legislation with bipartisan support in the House — eight Republican and eight Democrat co-sponsors — that would allow financial institutions to provide banking services to marijuana-based businesses in legalized states without fear of federal retribution.
Young and Cohen’s bill and others would also make it a Schedule II drug, lift other federal restrictions and allow Veterans Administration doctors to prescribe medicinal marijuana.
Young said in a formal statement when the bill was introduced that marijuana is an issue of states’ rights to him.
“My position aims to reaffirm the states’ rights to determine the nature of criminal activity within their own jurisdictions, which I believe is critical for states to effectively legislate within their borders,” he said in March.
Ultimately, the marijuana industry needs what every industry needs to succeed, reasonable taxes and regulations, the AMIA board members said. Without support from the state, law-abiding businesses will not be able to extinguish a black market nobody wants.
“We’ve got to make it a better option to work with the state than to keep avoiding the state,” Emmett said.