Fee hikes proposed to cover workload at marijuana office

KENAI — Cannabis business owners may have to pony up more cash in the near future for their licenses.

The Marijuana Control Board is considering raising license fees to support the operations of the office. At its Oct. 17 meeting in Kenai, Alcohol and Marijuana Control Office Director Erika McConnell presented the initial idea to the board members of raising the license fees in a variety of ways, leaving the decision up to them on how the members would like to pursue it.

“The board may want to only consider the increased license fee at the time of renewal,” she said. “Should the board want to entertain raising license fees, that would be through a regulation project.”

The Alaska Department of Commerce, Community and Economic Development — which houses AMCO and business licensing divisions — wants to see professional licensing programs and industries support the cost of regulating them through license fees.

The Legislature kicked in about $4.5 million in unrestricted General Fund money to get the program going, but wants to see that paid back eventually, McConnell said.

On top of that, cannabis business licensees have been raising concerns recently about the amount of time it takes for the office to review applications for a new license.

The current waiting time is more than five months for a completed application to be reviewed. Some applicants have waited longer. However, AMCO doesn’t have enough staff members to speed that time up with all the other requirements placed on the office, and securing more staff is tricky with continuous state government cuts over the past four fiscal years in the Legislature.

McConnell said the office managed to secure a regulations specialist this year between Legislative sessions, but will have to include the line item for the position in next year’s request to the Legislature and face the possibility that it will be cut out during the budget review process.

To provide the services requested by the industry, the office needs enough money to support more staff, she said.

Estimating revenue based on the rate of license renewal and current license costs, the office will bring in about $1.7 million in revenue, between the regular business licenses and the marijuana handling card fees. That may not be entirely accurate, though, she wrote in her report to the board.

“That estimate may be high, as some licensees submit renewal applications and fees after the June 30 deadline, so their fees go into the FY20 revenue,” she wrote.

In the report, she presented two ideas — raising the $500 license fee to $1,000 and the $5,000 license to $6,000, or raising the $500 license to $1,500 and the $5,000 license to $7,000. She also presented the idea of raising just the renewal fee for licenses, as the threshold of entry for people just getting into the industry is already high.

The board took no action at the meeting, as that would require public notice and comment first.

Cost to industry participants continues to be a major conversation driver, between trim taxes that business owners consider unfair to licensing and facility requirements.

The board also shot down an AMCO staff proposal to lengthen the amount of time required for businesses to retain their security footage. Currently, businesses have to retain their high-definition security footage for 40 days, which requires a large amount of storage space and expense to maintain.

For enforcement reasons, the staff had proposed requiring businesses to retain their security footage for 90 days. License holders objected, saying that would incur massive expense for the hard drive storage, and downloading that amount of footage when requested by the enforcement office would set them up to fail the deadline for turning it in because downloading footage of that length of time takes too long.

The board unanimously declined the proposed regulation, agreeing that the requirement was too burdensome for businesses. Board member Nick Miller, an industry representative, said there was a section in code that allowed the AMCO enforcement division to require individual businesses to keep footage longer than the 40-day requirement if necessary.

“We’ve heard a lot of discussions about how long it takes to download 40 days. I can’t imagine how long it’s going to take to download 90 days,” he said. “…I think they should (use that section of code) and not penalize the entire industry for one or two bad actors out there.”

Brandon Emmett, the other industry representative, agreed, citing the other cost strains on business owners. Growers, especially limited cultivators, are struggling to make a profit on what they’re doing and adding more expense for everyone may push some of them under, he said.

“I think that we have to weigh cost and benefit,” he said. “The cost to our growers who are struggling, there’s people going out of business, that adding this extra expense that they get no benefit from to potentially catch a bad actor or two is not prudent.”

McConnell said the office had originally proposed 120 days, but reduced it to 90 after the board members rejected the 120 days. Oregon recently raised its video retention requirement to 90 days, while other states like Nevada only require 30 days’ retention, she said.

This was the board’s first time meeting in Kenai. The board will return to Anchorage for its next meeting on Dec. 20-21.

Elizabeth Earl can be reached at [email protected].