Cannabis industry latest to be tangled in Anchorage permitting code
Brian Coyle thought his marijuana lab, AK Green Labs, would open last September.
Nobody told him he needed a “change of use,” or a “nonconforming determination,” or that he would have to solve a spatial Rubik’s cube of parking space on his property — parking spaces over which he said the Municipality of Anchorage is “holding (his building permit) hostage.”
Nobody told him he’d need five more months, private legal counsel and a former city manager turned hired gun to help him open a business the city insists it treats just like any other, or that it would take a meeting with city managers to even start clearing it up.
After weeks of sitting in city rooms, Coyle’s attorney Jana Weltzin hired consultant Ron Thompson when she and several of her other Anchorage cannabis clients had trouble fixing permitting holdups associated with Title 21.
Title 21, the Anchorage planning code, requires change of use permits for marijuana businesses. Change of use — when a building changes its function — triggers an avalanche of regulatory compliance.
Weltzin argues the city didn’t need to create a new change of use category, as marijuana could’ve been folded into a different subsection of the use code. Now she said her clients are singled out.
“This, what they’re applying, has never been applied to other businesses,” she said.
Further, many Anchorage pot businesses leased buildings before the city adopted the change of use plan in February 2016.
“When I applied for standard land use permit, they had not decided that all marijuana businesses need to go through change of use,” Coyle said. “They changed their mind, but they didn’t tell me about ‘til a day before my final inspection.”
Further, Coyle said he’s been made to address parking space issues his absentee landlord is responsible for.
Weltzin hired Thompson, who worked as the city’s building official, director of development services and public works director at various points since 1997. Mayor Ethan Berkowitz fired Thompson in 2015. Since then he hires himself out as a consultant and fixer for anyone bogged down in the city process.
The city held a meeting with Coyle, Weltzin and Thompson to talk about a temporary fix, in light of his situation being a city mistake.
Erika McConnell, the planning and zoning lead who handles most marijuana issues for the city, is apologetic about Coyle’s situation and a handful of others in particular she said came from misunderstandings and bad communications the city takes responsibility for.
Still, the process raises hackles.
“It’s silly,” said Weltzin. “Instead of thanking us for getting into buildings and making improvements and increasing their property taxes, they’re choosing to hold it all up for parking spaces, for no parking signs even.”
City workers, marijuana businesses, consultants, homebuilders and Anchorage Assembly members each have a different take on what’s making Alaska’s largest city the slowest to get the marijuana industry running. Some marijuana business representatives believe they’re being singled out unfairly, while others say they only deal with standard practices.
Since being legalized in 2014, Alaska cannabis producers have entered the world of industry regulation, trading potential prison time for potential dollars only on the other side of the federal, state and local micromanagement.
In Anchorage, business owners have stumbled into a problem Anchorage businesses already know and fear: the planning and inspection process through which builders get building.
‘The city is just really messed up.’
Something in the city process is indisputably holding back Anchorage’s marijuana businesses, and it may or may not be the standard treatment for all city businesses.
Statistically, Anchorage lags behind other population centers in terms of getting active licenses on track growing, selling, testing, manufacturing and paying taxes.
The Last Frontier’s largest city, home to 40 percent of the population, represents a third of the state’s 450 marijuana business license applications.
The Alcohol and Marijuana Control office declares a license active when it has satisfied every requirement and can begin selling, growing, testing or manufacturing whenever ready. Anchorage has 28 percent of the state’s 74 active licenses.
Despite having more active licenses than any other city in Alaska, however, Anchorage has a smaller percentage of active licenses up and running than any other major population center.
The state has declared 21 licenses active in Anchorage as of Jan. 10. Only four are either producing or selling cannabis, or 19 percent of the total active licenses in the city and 4 percent of over 100 pending Anchorage licenses at the state level.
This is well below the average rate for Alaska’s major population clusters, according to AMCO data.
The Central Kenai Peninsula, which includes Kasilof, Kenai, Soldotna, Sterling and Nikiski, has 69 percent of its 13 active licenses either selling or growing.
Roughly 50 percent of Fairbanks’ 14 active licenses are either selling or growing. In Juneau, half of the six active licenses are selling or growing.
At an Anchorage Cannabis Business Association meeting on Jan. 11, anything that touched the Municipality of Anchorage boiled into tirades.
Would-be entrepreneurs in the state’s newest industry, some nearing bankruptcy, swapped Kafkaesque tales about the building and permitting process.
Some had been told a permit requirement by one city worker only to have another tell them something different. Others spoke about lost applications eventually found wedged under municipal desks. Nearly all had a horror story about endless arguments in municipal halls over parking spots. None knew to whom to appeal.
Nick Miller, ACBA’s president and a member of the state Marijuana Control Board, lamented that none of his organization’s members had received clear instructions from the city.
“There’s no consistency,” he said. “The planning and permitting are entirely disconnected.”
Chris Constant, a Fairview Community Council leader and hopeful Anchorage Assembly member, dropped in to commiserate with what he said is another problem he hoped to fix someday.
“A lot of you learned that the city is just really messed up,” he said. “It’s exhausting to watch the process unfold with such disrespect to time.”
Business as usual
Thompson said businesses would jump the same hoops anyhow. The change of use permit requires the same as a special land use permit. The marijuana industry simply suffers from shock at the process, plus a handful of problems unique to them, he said.
Problems seem systemic, not personal — at least, not any single person anyone can name. Most marijuana industry members spoke highly of Erika McConnell and of other city workers they said have been as helpful as they know how to be, but the overall structure is daunting.
No one person knows everything or controls everything, and many people have a crucial part in the process. Building permit plans pinball between a multitude of city departments and sub-departments, each of which have a single separate chunk of a building approval process.
“I’m beat up as this point,” said Cade Inscho, who is currently waiting for footing and foundation permits on a $260,000 hole he plans to turn into a marijuana dispensary. “Nobody has the full story in that building. It’s completely wrong.”
Switching the terms and communicating the requirements poorly, Thompson said, is a particular problem with marijuana.
“I believe most of the requirements they put in place mimic what’s going on in other businesses, except this change of use permit,” he said. “That is just terminology that doesn’t work with the building system that’s in place. They created a bunch of sections for marijuana, which was a good idea … but nowhere do you tell them that they need a change of use permit.
“So there’s people that don’t understand that permitting process that created new language that doesn’t need to be there.”
The permitting laws themselves are only part of a network of colliding problems for Anchorage cannabis businesses.
Money compounds issues, McConnell said. Since the Marijuana Control Board banned all Outside investment in marijuana licenses and Alaska’s banks insist they want no part of it, shop and grow owners must bootstrap businesses, find private investors in state, or find Outside investors to buy building space the businesses can lease.
Cheap buildings have regulatory compliance issues from the get-go.
“What I have seen happen is that because marijuana business in Alaska don’t have access to normal capital,” said McConnell. “They’re working on a shoestring and they’re finding locations that are the cheapest they can find. These locations have problems.
“I can think of several examples where this has been a problem. The marijuana businesses end up having to address these issues. And it’s tough. But it’s not because they’re marijuana businesses.”
A going concern
Unfair or not, Anchorage developers and residential homebuilders know the cannabis industry’s story well.
Andre Spinelli, president of Anchorage’s Spinell Homes and the Builder’s Council co-chair on the Anchorage Home Builders Association, had only an unhappy message for marijuana businesses: welcome to the club.
“This is something homebuilders have complained about and talked about and had meetings and reports and studies about for years,” he said.
Spinelli voiced the same litany of bureaucratic miscommunications as those voiced at the ACBA meeting nights before. He said inspectors and permit reviewers spend little time helping businesses meet code, but rather simply say “no,” part of what Thompson called a citywide culture of “say ‘no’ now and let the industry prove you wrong later.”
“It just turns into wasted time and money,” Spinelli said. “It’s constantly like this game of whack-a-mole. You get 10 departments to say ‘yes’ and then a ‘no’ comes up. It’s not just me, or the homebuilders. You talk to Verizon or Walgreens about doing building in Anchorage and they’ll all tell you, there’s no department that’s quite as messed up.”
City leaders know the issue well. Anchorage Assembly member Bill Starr, who represents Chugiak and Eagle River, sympathizes with marijuana’s entry into a building permit process he called “over the top.”
“I don’t get that sense that the (marijuana) industry has had a harder time of it that anyone else,” Starr said. “I don’t think our departments are built for efficiency. They’re seeing the standard for our city.”
Starr, Thompson, and Spinelli have each suggested several fixes at various points to mayoral administrations and the Assembly — streamline codes or the departments, hire a new building manager who will consolidate department functions and provide central leadership, allow third party permit reviews, whatever it takes to get the city moving faster.
“There is a major issue to address here,” said Thompson. “It really seems like nobody wants to address it and get better, and that’s a sad thing.”
Mayor Ethan Berkowitz did call attention to the building process in 2015 during a mayoral debate opposite Assembly Member Amy Demboski.
“You want to have clarity, because people who are trying to build things should know what the rules are,” he told the crowd. “You want to have speed, because when it takes a long time to process a permit or inspect a site, then it adds cost to projects. And you want to have flexibility because one-size-fits-all rules don’t really work when you’re building things.”
A 2012 housing market analysis from Juneau-based economics firm McDowell Group underscored Anchorage’s lack of housing and available land. In the recommendations, it said the city would benefit from a more streamlined process.
Also in 2012, an Assembly taskforce of officials, businesspeople and academics recommended similar measures as Anchorage’s housing expense forced more and more people to live in the cheaper Mat-Su Valley.
These recommendations included streamlining the rezoning process, expediting the permitting process for developers and trusted planners, and assigning a “single project advocate to have responsibility and accountability for development through the entire permitting process.”
Changes never came, however.
“I feel defeated in the topic, that I was never able to make a change,” Starr said. “I was never able to figure out the key.”
Fear and loathing in Anchorage
No grieving party really knows who to talk to for a fix — though several are talking about petitions and lawsuits.
Most keep quiet. The city bureaucracy has bred a culture of fear.
Several cannabis industry members refused to comment on the record about their troubles with the city, each of them saying they don’t want to invite revenge from the inspectors, permit reviewers or any other city employee with control over a piece of the process.
Spinelli said the fear isn’t anything new for homebuilders and contractors.
“People are very wary of complaining,” Spinelli said. “They don’t want to speak out about problems with the building department because they know the building department is going to read it. They fear retribution.”
Further, he said, the complexity and disconnection make it so few people know where to isolate communication breakdowns or identify mistake origins.
“It’s just impossible to prove,” Spinelli said.
Thompson echoed Spinelli almost verbatim.
“People are so afraid of retribution by inspectors,” he said. “They have so much power, an enormous amount of acting power. They have the right to say yes or no on everything. Most people just do what they say and not argue a thing. They feel if they were to argue and question and push back, they’re gonna get a nasty inspection next time.”
Little is really known, or solved. Whatever the problems, Anchorage marijuana businesses are clearly lagging behind, and some are afraid to come forward to their own city leaders.
Thompson success in this role itself, he said, is a downbeat comment on a city that should be expanding opportunities during a statewide recession.
“I am literally making a living combating incorrect decision-making at the muni,” he said. “It’s sad that that’s how it is.”
DJ Summers can be reached at dani[email protected].