Space is scarce for Anchorage marijuana business

  • A proposed land use ordinance would restrict marijuana businesses to certain areas. Retail would be restricted to B-3 commercial zones, in deep red on the map. Cultivation and manufacturing would confined to industrial zones, in light gray on the map. Anything within the dotted lines would violate a proposed 1,000-foot buffer zone from schools and playgrounds. Map/Courtesy/Municipality of Anchorage

The marijuana industry will have a tough time finding willing landlords for their would-be dispensaries and cultivation facilities, and the Anchorage Assembly may tighten restrictions even further.

A land crunch already plagues the Anchorage housing market, and the marijuana industry worries it will whittle storefront options as well. Anchorage is proposing three separate ordinances that would create an additional municipal licensing requirement, a sales tax plan, and a special land use requirement. The land use requirement, industry fears, will hobble the industry’s startup by narrowing already elusive leasing opportunities.

The Planning and Zoning Commission recommended a final draft of the land use ordinance to the Assembly on Jan. 4. The Assembly says it hopes to have the ordinances finalized before Feb. 24, when the Marijuana Control Board will accept the first cannabis business license applications.

All Alaska cannabis businesses must follow regulations and licensing requirements the Marijuana Control Board finalized in December 2015. Ballot Measure 2, which passed in November 2014 and legalized recreational marijuana and marijuana businesses in February 2015, allows municipalities to craft their own rules, even to the point of banning aspects of marijuana businesses entirely.

Industry stakeholders say Anchorage’s proposals are an effective, if not an outright, ban on marijuana business.

“It legitimately feels as though they’re making all these ordinances specifically to make the marijuana industry fail,” said Bruce Schulte, chairman of the Marijuana Control Board and hopeful marijuana retailer. “It’s starting to look like death by a thousand cuts. Ultimately, they open themselves up to a legal challenge for making it unreasonably impracticable.”

Marijuana business attorney Jana Weltzin said she would be willing to file such a suit if the Assembly approves certain restrictions.

The municipality says it has no dark designs to choke the marijuana industry, but is only trying to regulate mindfully. Concerns over federal reprisal, the municipality says, outweigh certain allowances the state Marijuana Control Board made for smaller localities, such as a 500-foot buffer zone for schools.

“There’s no hostility to the marijuana industry,” said municipal attorney Bill Falsey. “Our aim has always been to respect the wishes of the voters while coming up with sensible regulations.”

Federal Drug Free Zone reemerges

After backlash from industry figures during a December meeting, the Planning and Zoning Commission opened up more opportunities than the original draft, but also added additional restrictions for the Anchorage Assembly to vote on.

Broadly speaking, the municipality wants to group cultivation and manufacturing facilities in industrial zones, and retail businesses in B-3 zones.

The commission made some concessions to industry concerns of an earlier draft. In the new draft ordinance, marijuana bakeries will be able to maintain retail storefronts instead of being locked into industrial zones. The new draft also allows cultivation facilities in B-3 zones as long as they’re co-located with retail shops. This would allow for vertically integrated brewpub-style cannabis businesses.

However, the commission also renews the federal Drug Free Zone standard.

According to state regulations, schools, playgrounds, youth centers, religious assemblies, and correctional centers all maintain a 500-foot buffer zone from marijuana businesses. In the proposed Anchorage ordinance, schools, playgrounds, and public housing facilities require 1,000 feet from marijuana businesses, the federal standard.

The Marijuana Control Board kept a 500-foot school buffer zone in part to recognize Alaska’s unique cityscapes. Smaller towns are often too closely-knit for any retail-zoned businesses to be more than 500 feet from schools or other trigger areas. Localities in Southeast Alaska even requested a 200-foot buffer zone from the board, fearing they could zone out marijuana businesses entirely.

Falsey said the municipality still has concerns over the what’s known as the Cole Memo, which outlines the federal government’s marijuana enforcement priorities in states where it’s been legalized. Keeping it out of children’s hands is first and foremost. Falsey said the municipality believes Anchorage has enough space to be more cautious of federal scrutiny.

“We’ve taken a hard look at the separation requirements,” said Falsey. “The Cole Memo indicates that federal enforcement may actively challenge local authorities…it’s not clear to us why Anchorage would need the reduced 500 foot school buffer zone that say, Ketchikan, would need.”

Ultimately, this buffer zone concentrates marijuana businesses to a few areas. Midtown/Spenard has the most available retail marijuana-zoned space by far, with large pockets of pot-friendly zoning in South Anchorage. Industrial space is largely concentrated in South Anchorage. Downtown areas will be largely off limits unless the Assembly opens up B-2 zoning, which makes up a large share of downtown.

Commissioners say the intent is to start low and go slow. It’s easier to loosen regulations than tighten them after the industry has established itself.

“I think it is over restrictive,” said Tyler Robinson, chairman of the Planning and Zoning Commission. “The municipality’s policy, from what I can tell, is to be over restrictive out of the gate. Then if you need to open it up, then you open it up.”

Willing landlords

Businesses have had trouble finding space to occupy, caught between reticent landlords, zoning restrictions, and federal laws.

Commercial real estate brokers said they’ve had plenty of marijuana businesses looking for buildings, but had to turn them down. Either the available buildings violate buffer zones, or they’re financed by banks that cannot do business with the marijuana industry.

“The way they’ve made the rules, it’s impossible to go anywhere,” said Chad Graham, a commercial real estate expert working with Anchorage company Keller Williams. Graham said he control 45 percent of Anchorage’s industrial rentals, but virtually none is compliant with zoning restrictions.

“I don’t have anything for (marijuana businesses),” said Graham. “You’ve got little churches or school next to warehouses everywhere.”

According to Graham, industrial buildings in Anchorage have a 98 percent occupancy rate; retail space is looser. Much of the available space is still bank-financed; federally chartered banks refuse to deal in marijuana business, which is still illegal under federal law.

Some landlords have offered some buildings, but at triple the going rate for square footage in order to mitigate a perceived, and well-founded, risk factor. In the Lower 48, the federal government has used racketeering laws to prosecute marijuana-related businesses, including landowners and accounting services.

“The few that do open up that are lucky enough to find a spot that’s outside the buffer zones and not bank owned and has willing landlords will probably make a killing,” said Graham. “They’re going to have the whole market to themselves.”

Other commercial real estate companies and representatives in Anchorage say it’s too early in the industry’s rollout to have much experience and so have no official position but that their landlords may be reticent.

“The owners are very conservative in a lot of ways,” said Linda Boggs, an associate broker with Carr-Gottstein, one of the largest commercial real estate brokerage companies in the city. “From the nature of it, that can turn people off. We haven’t really been forced to take a position on it yet.”

Marc Dunne, an associate broker with Jack White Real Estate, said real estate companies like Carr-Gottstein are conservative enough to make renting from them a moot choice.

“There’s a lot of landlords like them,” said Dunne. “They’re patriarchs, they’re old school. Super visible. They’ll find other tenants with less brain damage associated with them.”

Alaska commercial real estate listings turned up 27 available retail spaces between 1,500 square feet and 6,000 square feet, and 19 industrial spaces between 1,500 square feet and 10,000 square feet, not taking buffer zones and bank held buildings into account.

Dunne said taking buffers and bank notes into account could whittle the number down to less than five properties for either retail or industrial space.

12/06/2016 - 4:26pm