Marijuana board accepts do's and don'ts for retail outlets

The Alaska Marijuana Control Board is parsing out what should be its business and what should be left to good business sense. Aug. 31 began a two-day meeting for the Marijuana Control Board, which is on an aggressive deadline to approve a set of cannabis industry regulations. The board is reviewing the second of three draft regulation sets. Set two concerns retail business operations, including taxes, hours, and prohibited sale practices and items, and operating requirements. Some regulations were loosened, despite pressure to conform to Colorado or Washington laws, in an effort to let businesses govern themselves. The board unanimously approved amended language that would loosen a required “restricted area” in marijuana retail stores. Prior to the amendment, the regulations specified an entire section of the store be off limits to customers specifically for storing and dispensing cannabis, ostensibly to keep thieves from stealing it and promoting a “public safety risk.” Board Director Cynthia Franklin claimed that removing such areas would be unprecedented in states with recreational marijuana legalization. “If you make Alaska stores look like that, they will be the first marijuana stores to look like that,” said Franklin. Franklin said the intent was to prevent thieves from “putting (cannabis) up their sleeve and walking out with it,” which she said could conceivably contribute to the black market. Board members elected to keep the “restricted area” definition conformed to a standard set in the security section of the regulations. Board member Mark Springer believed the incentive to keep wares secured is best business practice, and shouldn’t be under the board’s authority, a theme the board would repeat several times during the day. “The prudent business person is going to make pretty darn sure their investment is protected,” said Springer. “I don’t think we need to hold their hand.” Don’ts The board did elect, however, to hold businesses’ hands with product giveaways. Among the long list of “can’ts” for retail businesses is giving free samples. Board regulations prohibit marijuana consumption on retail store premises, like liquor stores, and samples would be too close to consumption on premises as well as create a hyper-competitive business climate. Gifting cannabis, the subject of some public question in the Alaska Dispatch News, is clearly legal between adults, the board said. Gifting from a retail store, however, is out of the question. Like many others, this was modeled on Colorado law. “It’s my understanding Colorado had it to prevent fire sale price wars,” said Franklin. The draft regulations also prohibited selling cannabis below the cost the retailer paid for it, effectively setting a floor for sales. Board member Brandon Emmett said that decision should be left to the business owner’s savvy, not to a legislative board, and that Alaska has an opportunity to expand on its predecessors’ regulations. “Alaska is its own place,” said Emmett. “Maybe we could stray and make some of our own decisions. In a place where you can’t grow outside marijuana, the profit margin is going to be a lot lower. I don’t know anyone industry who plans on selling their marijuana at rock bottom prices.” They compromised, allowing sale below retail cost but still banning free samples at retail stores. Also banned from marijuana stores is anything besides marijuana. The board passed draft regulations that prohibit retail cannabis establishments from selling cigarettes, drinks, snacks, coffee, tea, or anything consumable but non-cannabinoid in nature. The intent, according to Franklin, is threefold: to keep minors from having a reason to enter the premises, regulate on-premise consumption, which would be made difficult by selling snacks alongside cannabis-infused edibles, and prevent “confusion to customers about which things contain marijuana and which things don’t.” Board chair Bruce Schulte had argued that selling additional items presented no public safety interest, and was simply a business option. “If they think they can make a few extra bucks by selling cigarettes, that’s a commerce issue. I don’t see how that’s a public safety concern,” said Schulte. An amendment to allow non-marijuana sales failed 2-3, with Schulte and Emmett (the industry representatives on the board) voting in favor and Peter Mlynarik, Loren Jones, and Springer voting against. Branded merchandise was on the agenda for the Sept. 1 portion of the meeting. Certain regulations will go beyond alcohol’s current restrictions. Persons younger than 21 years of age will not be allowed onto cannabis retail businesses entirely, in contrast to alcohol regulations, which allow minors to accompany guardians into package liquor stores. Customers will be required to show valid ID. In a previous interview with KTUU on Nov. 3, 2014, Franklin had quoted the alcohol regulation that allows a minor to enter an alcohol package sales store if they’re in the presence of their guardian. Because of prior accepted draft regulations, a new snag now exists that will require every financial investor of a cannabis business to qualify for and possess a marijuana handler’s permit, similar to an alcohol handler’s permit all bar and liquor store employees are required to have. Unlike alcohol regulations, which allow a 30-day grace period between hire of a new employee and the employee’s possession of a handler’s license, the marijuana handler’s license is required prior to the licensee receiving the final license. Do’s Marijuana retail stores will be open 21 hours a day, from 8 a.m. to 5 a.m., unless local authorities impose restrictions. The proposal was for marijuana retail stores to be restricted to hours of operation between 8 a.m. and midnight. State alcohol regulations, however, allow alcohol package stores to operate 21 hours of the day and close from 5 a.m. to 8 a.m., though most local governments restrict these hours. Again, the board elected to leave the regulations up to business owners’ and the local governments’ sense of safety, and of profit and loss. Staying open till 5 a.m. might be allowed, Schulte and Springer argued, but that doesn’t make it good business sense. “We’re talking about a retail transaction,” said Schulte. “I can’t image that I would be open at 5 a.m., but if someone comes up with a business model where that works for them, then that’s their prerogative.” Other members thought the allowance far too liberal, and that alcohol restrictions are a poor model in some cases.  “I wish there were tighter controls on alcohol,” said board member Peter Mlynarik. “Just because alcohol does it doesn’t mean it’s the best for the public.” “Alcohol leads to boisterous if not violent behavior. Marijuana does not,” responded Schulte. “We’re not talking about the consumption of marijuana, just the purchase. We’re still leaving the door open for local jurisdiction to ratchet down.” The vote to approve the hours of operation passed 3-2, with Mlynarik and Loren Jones voting against. DJ Summers can be reached at [email protected]

Marijuana board bans giveaways, ups security requirements

Alaska cannabis businesses can sell you a hoodie, so long as the transaction is being recorded in high-definition. The Alaska Marijuana Control Board covered allowable advertising strategies or retail dispensaries, as well as security protocol Sept. 1 on the second day of an extra meeting to consider draft regulations. Board director Cynthia Franklin argued Montana’s greatest mistake was allowing too much advertising for medical marijuana. Montana legalized medicinal marijuana in 2004 only to have a ballot introduced in 2014 to recriminalize it. This followed a ballooning industry that roused the ire of the state legislators and a 36 percent minority of the population who hadn’t supported legal medicinal marijuana in the first place. Because Alaska’s initiative passed with a slimmer majority, she worries liberal advertising regulations could cause the same backlash from the 47 percent of Alaskans who voted against the ballot measure to legalize marijuana. “Advertising is a very public thing,” said Franklin. “Take a long view of this industry and don’t think that we need to advertise to the max. If we go crazy…we run the risk of attracting attention not only from our state legislators but the people who voted against this.” No giveaways, no medicinal claims The board held a lengthy discussion on selling versus giving away branded merchandise like hooded sweatshirts, pens, calendars, or other popular gear. Selling branded merchandise is legal, but giving it away for free is not, though the board plans to clarify language in a later draft to make those points clear. “A marijuana retail store may not use giveaway coupons, or distribute branded merchandise as promotional materials, or conduct promotional activities such as games or competitions to encourage sale of marijuana or marijuana products,” the draft language reads. Franklin explained that the purpose of the prohibition was to prevent the kind of marketing tobacco used with product giveaways. “A time-honored tactic of the tobacco industry was to give away Marlboro Man t-shirts and candy cigarettes,” said Franklin. “They were giving away branded merchandise to encourage promotion and purchase of their products.” Board members argued that product giveaways were part and parcel of any developing business, and that the board has no place making an economic restriction. Those decisions, they argued, should be left up to business. “Should we be removing a businesses’ ability to do this marketing?” asked board member Mark Springer. “They can’t give out a calendar. A pen. A refrigerator magnet. I’m not convinced we have any place in that. That’s economic management.” Franklin responded that the public safety concerns of product giveaways, which she said could attract minors, are just as important as free market law. “I’m not really sure it’s the board’s job to make business decision in the other way,” said Franklin, “to write rules that are designed to make businesses maximize their profits.” Springer introduced an amendment to clarify the language to say, “give away for free” rather than “distribute.” The vote failed on a 2-2 tie of the five-member board, with Loren Jones recused for a conflict of interest. The cannabis industry, including growers, brokers, manufacturers, or retailers, cannot claim any therapeutic or medical benefits, a carryover from the state’s colorblind marijuana initiative, which doesn’t distinguish between medicinal and recreational marijuana. “Do we really want to invite more federal attention by saying, ‘yeah you can put whatever you want on there?’” asked Springer. Board member Peter Mlynarik brought up a lack of substantiation for medical claims that would simply be inviting too much false advertising. Members also added language that will bar advertising on college campuses or near substance abuse and recovery facilities. The high price of security Security regulations will tack on another six figures worth of capital expense for potential cannabis entrepreneurs, regulations industry leaders say are onerous reminders of the black market lens they believe the Legislature views them through. “This treats us like criminals,” said Sara Williams, owner of Midnight Greenery, regarding a regulation that requires marijuana businesses to wait three days before disposing of waste, in order for enforcement officials to inspect and log it for tracking purposes. The bulk of public comment decried video surveillance, security lighting, and transportation regulations. Draft regulations currently require extensive video surveillance, following Colorado laws. Alaska’s proposed surveillance requirements specify cameras must be placed within 20 feet of a cannabis business entry or exit, with enough resolution to “clearly identify” features, and 40 days worth of video data storage. Larry Clark, president and CEO of Valkyrie Security and Asset Protection, said the storage requirement alone, for high-resolution storage, will cost around $85,000. Comments from the public, submitted electronically in writing to the board, expressed both fear at the prohibitive cost. Board members echoed the concerns, wondering how strict the enforcement would be. “It might violate the initiative by making business infeasible,” said Emmett. “Let’s say we pass this unamended, how strict are we going to be?” Franklin said in response that enforcement, which will be under her authority as director, will not be looking to agonize over details. “My management style over my enforcement officers is, this is our community,” she said. “It’s not designed to be a ‘gotcha’ environment.” On the transport side, the board removed a part of regulation that would have required a secure lockbox be bolted to the floor of whatever car is delivering marijuana. After an amendment, the board allowed transporting in a sealed container in the trunk of a car, already required by the Anchorage Municipality for all personal use. On a cheap note, all members of the marijuana industry will be required to complete a marijuana handler’s course, to be developed later by the board, and keep it in their place of licensed business. Lastly, the board struck down a requirement of $1 million or greater in insurance coverage for any marijuana business, the unknown cost of which insurance companies have refused to tell the State of Alaska. Insurance will be required, but in no set amount. Insurance is not required by alcohol regulations, and board members again preferred to leave it in the hands of the business owners. “I don’t see it achieves any of our broader imperatives, and I do see this as an unnecessary burden,” said board chair Bruce Schulte. “I do think it’s good business policy, but it’s up to businesses to decide that. It’s just an additional layer of regulation we shouldn’t be endorsing.”

Federal rules stymie cannabis investments

Alaska’s forthcoming cannabis regulations might stop homegrown bud businesses from seeing a dime from the hot-ticket marijuana investment scene developing in the Lower 48. Outside investment raises both industry and regulatory hackles in the Alaska cannabis scene, either as the surefire road to a federal crackdown or the harbinger of boutique-killing Big Marijuana, depending on who is asked. Due to federal law, Alaska banks and credit unions refuse to handle cannabis-related accounts or loans. Cannabis businesses without their own startup capital have few options for funding beyond bootstrapping or borrowing from private lenders. With potentially high entry costs, already-wealthy Alaskans could dominate cannabis business while smaller competitors scrabble for startup capital. Outside investment could narrow the gap, but also bring in big competitors in the $3 billion cannabis industry. Regulators, however, are fearful of violating federal money laundering guidelines, and view Outside investment dollars as a possible route for dirty money from drug cartels. Members of the Alaska Marijuana Control Board are cautious about allowing Outside investment due to the Cole Memorandum, a letter from assistant U.S. Attorney General James Cole which outlines federal marijuana enforcement priorities in the face of state-by-state legalization. “The memo said the state should have strict laws preventing money laundering,” said Bruce Schulte, chairman of the Marijuana Control Board that is currently reviewing draft regulations for commercial marijuana to be recommended to the state Legislature in November. “Our theory was that if we disallow Outside investment we don’t have as many opportunities for money laundering. The flipside is that there are Outside funding sources available that Alaskans might want to take advantage of.” Those funding resources are becoming more and more available as the market further establishes itself in the Lower 48. ArcView Group, a 470-member cannabis investment company, has sunk more than $41 million into cannabis industry startups. Even Silicon Valley tech companies’ are getting into cannabis investment — firms like Privateer Holdings, a Seattle-based marijuana investment company, which had $75 million buy-in earlier in 2015 from Paypal co-founder Pete Thiel and has raised $82 million for cannabis industry players, according to a June article in Fortune. Schulte said the board simply hasn’t received much information regarding investment regulations beyond boardroom rhetoric, and needs more. “I’m looking for a compelling argument to support that goal of industry success,” said Schulte. “What I have suggested to people is, if they have a strong interest one way or the other, come up with a compelling reason. Cite examples. Give us some legal basis for either way. So far all we’ve got to hang our hat on is the Cole Memo.” During its last meeting, the board left language in the draft regulations that would effectively ban Outside investment in cannabis industry. Under the draft regulations, the board will not issue a license to an individual, partnership, limited liability corporation, or corporation unless the shareholders and partners are residents of the state as defined by Permanent Fund Dividend application rules, which require a full calendar year of residency. Anyone with a direct or indirect financial stake in the company must be listed as a licensee, and therefore follow the same residency requirements. The draft is similar to alcohol regulations, but lack a provision that allows financial stakeholders of alcohol business to stay off the license if their total contribution is less that 10 percent of the total operating cost. During the meeting, vice chair Brandon Emmett tried to amend the language to allow “non-controlling” financial interest, but withdrew the amendment when no other board member seconded the motion. As the chair, Schulte may not second motions. Beyond money laundering concerns, members of the cannabis industry who pushed for the initiative fear Outside investment as the vehicle for big industry to carpetbag what they prefer to be an Alaska-first industry. “It’s just going to let corporations come in and take over the industry,” said Jessica Jansen, co-founder of Canna-Farm Co-op and executive director of the Alaska Cannabis Growers Association. But without Outside dollars, others say, the industry will be dead on arrival in the Last Frontier. With only 10 percent of Washington’s population and 14 percent of Colorado’s, Alaska has a smaller pool of capital from which to start the industry.  “If we want the business to be dominated by 10 wealthy Alaskan families, we’re in a good place to do that,” said Leif Abel, executive director of the Coalition for Responsible Cannabis Legislation, which publicly released a statement condemning the board’s regulation. Able attended the Marijuana Investor Summit in Denver in April, and said he gave the 1,000 or so investors in attendance the same message: don’t come to Alaska just yet. Abel’s legal counsel, Colorado attorney John Crone, said the Marijuana Control Board is being deliberately overcautious, as financial regulations already track business investment origins.  “There’s a whole scheme of securities laws and regulations that exist,” said Crone. “If you’re an LLC and want to sell a membership for example, you have to comply with securities regulations. Every business in Alaska already has to deal with this.” Abel and Crone think Alaska has an opportunity to learn from Washington’s and Colorado’s failures just as much as their successes. Washington has strict rules regarding out-of-state investment and investment in general, but more liberal than Alaska’s proposed rule. Sole proprietors of cannabis industries must meet a three-month residency requirement. Even though less restrictive than Alaska’s proposed regulations, Brendan Kennedy, co-founder of Pioneer Holdings, said in a Seattle Times interview that his company simply doesn’t look at Washington as a potential investment pool. “Every state is talking the same way: ‘We’re not going to make the same mistakes as Washington,’” said Kennedy in the interview. Indeed, Colorado voted in May to loosen some of its previously restrictive cannabis investor residency requirements. Non-residents have always been able to loan money to Colorado cannabis businesses, but with a wealth of tax-related complications and the inability of the business to actually convert the loan into equity. Out-of-state investors can now sign option agreements for future financing dependent on a two-year residency in Colorado. DJ Summers can be reached at [email protected]

Marijuana board amends regs, sets $5K fee

The cannabis industry’s growing pains are causing unease for some stakeholders, even as the newly minted Alaska Marijuana Control Board was able to favorably change certain draft regulations. The Alaska Marijuana Control Board decided on several changes to the draft regulations for the budding cannabis industry during its second meeting Aug. 10-11. The board set a license fee of $5,000, left an open window for Outside investment dollars, liberalized key cannabis business zoning requirements, removed a requirement for license holders to list their family members’ information on license applications, and estimated the number of licenses for cannabis businesses. While cannabis is legal to consume and possess, its sale is prohibited until the Marijuana Control Board issues business licenses in May 2016. Until then, the board has three sets of draft regulations to review and amend after public comment, and  before recommending to the state Legislature in November. Some changes, like the family information clause and the zoning rewrite, were a relief. Decisions about cannabis capital, however, only deepened concerns about the industry being skinned by the State of Alaska before it’s even had a chance to be sheared for tax dollars. The Marijuana Control Board has five members, two of whom — chairman Bruce Schulte and Brandon Emmett — were appointed as industry representatives. Schulte and Emmett are president and vice president, respectively, of the Alaska Marijuana Industry Association. Both the Alcoholic Beverage Control Board and the Marijuana Control Board share division director Cynthia Franklin. Some cannabis industry leaders felt that the marijuana board lacked experience enough to make needed changes to regulations that constrict, rather than enable, industry growth.   “The Marijuana Control Board was exposed to a facet of the Alcoholic Beverage Control Board that they have no control over,” said Lee Haywood, a local cannabis industry consultant. “They have to interpret the language that’s already been written by another entity rather than being able to create their own drafts. I know that’s the way it was written (by the Legislature), but I don’t know that the people who are writing these drafts are necessarily the people who voted for these drafts.” Jessica Jansen, executive director of the Alaska Cannabis Growers Association and co-founder of Cannafarm Co-op, said, “There was a lot of compromise on the industry seats’ side.” The Alaska Alcoholic Beverage Control Board wrote each set of draft regulations. The alcohol board staff, led by Franklin, drafted the proposed marijuana regulations to closely resemble alcoholic beverage statutes. During the two days, the board skipped between the first and second sets released earlier this year making either approvals or amendments, and weighing public opinion provided to them in summarized form. The summaries were not made available to the public, though the consolidated comments were. Cost of entry: $5,000 Among the most impactful decisions was finalizing the licensing fee for cannabis business operations. The board settled on $5,000, as written in the draft regulations. Emmett made a motion to lower the fee to $2,500, which failed by a 1-4 vote. Public comment was heavily weighted against the $5,000 licensing fee, which some felt is prohibitive for smaller cannabis grow operations. Grow operations are divided into two categories: those less than 500 square feet and those greater than 500 square feet of grow space. Without a tiered system of licensing with an corresponding fee structure, growers worry that the $5,000 fee will drive potential legal industry players further into the black market. From the state’s view, the fee is large by necessity. The Marijuana Control Board is funded by unrestricted general funds, which are on the chopping block in a state with a severe budget shortfall. Franklin said cannabis business fees are high because they need to get the industry on its feet quickly before it becomes a burden for the state. “We’ve got to get our agency to a place where work on marijuana is funded by licensing fees,” said Franklin. “That’s the only way we can insulate ourselves from the Legislature legislating marijuana by starving it to death.” Franklin also said the $5,000 licensing fee is “chump change” compared to that of other states where cannabis sales are legal. “Pretty much every state we saw had higher fees,” she said. “You’re funding a new industry. You’ve got to get it up and running.” The fee structure for retail marijuana in Colorado varies by local authority. In Denver, new applicants pay a $5,000 fee, according the Denver Business Licensing Center. In Aspen, marijuana businesses have a $2,000 operating fee, according to the City of Aspen’s business licensing website. In Washington, the annual issuance or renewal of a retail license costs $1,000 after a $250 non-refundable fee, according to the Washington State Liquor and Cannabis Board website. Using the $5,000 licensing fee, the board came to a rough estimate of the number of cannabis licenses that will be available. According to staff, the ACB has a $1.6 million annual budget. At $5,000 apiece, staff estimates 320 total statewide marijuana licenses, including grow operations, manufacturing, and retail. In comparison, there are roughly 1,800 alcohol licenses in the state. Outside cash and zoning During the board meeting, the need for investment capital clashed with the fiercely local-first Alaska mindset. Neither side won definitively, leaving the matter open, as Emmett puts it, to “interesting ways to find capital.”  The board kept a system of residency requirements for cannabis business license holders that satisfied neither the desires for Outside dollars nor the desire of current cannabis business advocates to keep business opportunities local to the 49th state. Due to the federal classification of cannabis as a Schedule I controlled substance, Alaska banks and credit unions refuse to handle cannabis-related accounts or loans. Cannabis businesses without their own startup capital have few options for funding. Outside investment, however, is a possibility, though an unpopular one among the cannabis advocates who lobbied for legalization and feel protective of the newly opened business opportunities. Others, like Emmett and Midnight Greenery CEO Sara Williams, acknowledge an Alaska-first preference but said allowing Outside investment will be the only way for businesses to get funding in Alaska without securing loans from the already wealthy in the state. Under the draft regulations, which mirror alcohol licensing regulations, the board will not issue a license to an individual, partnership, limited liability corporation, or corporation unless the shareholders and partners are residents of the state. Emmett argued in favor of changing the language to allow greater Outside investment, but withdrew his amendment. In industry’s favor, the board modified several unpopular regulations involving zoning and licensing procedure. In the draft regulations, an applicant for a cannabis business license would have had to provide the Social Security information for each of his or her family members. The board deleted the requirement. “It’s preposterous to think you’d have to provide sensitive information for every member of your family because you want to run a business,” said Emmett. The board voted in favor of removing a restriction that prohibited a cannabis business from operating adjacent to a liquor license holding business. Local governments provided public comment largely against making such prohibitions, citing the desire for cannabis tourism that they would likely thwart. The board also changed zoning to allow cannabis businesses within 500 feet of schools, recreation, and youth centers. This is closer than the federal Drug Free Zone standard of 1,000 feet, but farther than the 200 feet demarcation the board originally proposed. Colorado and Washington follow a 1,000-foot rule.

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.

EDITORIAL: Governor makes solid picks for marijuana board

The state of Alaska now has its first Marijuana Control Board. Selected by Gov. Bill Walker and announced on July 1, the initial board members will face a weighty task: charting a course to commercial permitting and regulation of retail marijuana sales. Given the magnitude of their responsibility, it’s a good thing the marijuana board has as much time to draw up policy as it does. Some of the five initial selections to the board will be familiar to those who pay attention to local government or state action on the marijuana issue so far. In particular, the two seats on the board allocated to representatives of the marijuana industry will be filled by the two figures most prominent in the legalization campaign and legislative process. Brandon Emmett, of Fairbanks, is the executive director of the nonprofit Center for Responsible Cannabis Legislation, which was active in promoting marijuana legalization during 2014’s ballot initiative campaign. And Bruce Schulte, of Anchorage, was the marijuana industry’s representative in Juneau. Mr. Schulte helped explain the practicalities of legal marijuana to legislators debating law changes and argued against what he saw as attempts to thwart the will of voters in making the drug legal. The other three seats on the board will be filled by representatives of the public health, public safety and rural communities. Loren Jones is a Juneau Borough Assembly member who has served as director of the state Division of Alcoholism and Drug Abuse. Peter Mlynarik is Soldotna’s chief of police. And Mark Springer sits on the Bethel City Council. All three will have valuable experience and insight that will help inform the board’s decisions as it weighs its options on commercial marijuana. The structure of the board is well crafted and, given its makeup, is likely to ensure state residents’ perspectives on the marijuana issue are represented in the determination of policy and regulation. The marijuana industry’s two seats for the coming year will ensure the voices of the majority of Alaskans who voted in favor of legalization are represented. At the same time, those likely to be dealing with some of the negative consequences of the drug’s legal status — law enforcement, health professionals and rural residents (who are sometimes short on both of the former) — will also have a seat at the table to make sure implementation of marijuana regulations protects residents from as many pitfalls as possible. There’s a knock to be made against the governor’s selections. While all of those selected are well qualified, they’re also all men. This is likely partly the consequence of the makeup of those who applied — out of 132 applicants for the board, only about one-fourth were women. But among the roughly 30 female candidates, some were well qualified, would have served the state well and also added additional perspective to the group. It will be something for Gov. Walker to keep in mind when making future selections. The members of the marijuana control board have their work cut out for them. Between now and Nov. 24, the group must draft and approve all of the state’s policy for dealing with retail marijuana growing, marketing and sale. By February 2016, they will begin accepting license applications for commercial marijuana operators, and by May 2016 those licenses will be issued and the full breadth of marijuana legalization in Alaska will be in effect. It’s going to be a tough job, but those in the newly filled board seats volunteered for it. Their first meeting took place in Fairbanks July 2 — there’s no time to waste.

Regulatory board reviews proposed marijuana regulations

(AP) — Communities could opt-out or limit marijuana businesses much the same way they do alcohol under proposed regulations put forth by the state alcohol control board. The board reviewed the first of three sets of marijuana regulations on Thursday, which included a system for community regulations. Voters approved a ballot issue in November legalizing limited recreational marijuana and directed the board to develop regulations for the industry. A new marijuana board that shares staff with the alcohol board is expected to take over that work eventually. Legislators recently passed a bill to establish the new board. The first set of regulations would allow municipalities and established villages to prohibit the new industry, or to limit what aspects of commercial or retail marijuana sales, cultivation and manufacturing are allowed in the community. Cynthia Franklin, executive director of the state alcohol board, said there will be one major difference between alcohol and marijuana regulations: Communities can prohibit alcohol possession entirely but cannot prohibit marijuana possession at home because it is protected as a privacy right under a prior Alaska Supreme Court decision. The draft regulations also included a definition of edibles that prohibits sales of prepackaged food that has been altered to include marijuana. Other definitions in the regulations include marijuana plants and possession. The board directed the state Department of Law to open a public comment period on the regulations reviewed Thursday. The next meeting on the new regulations likely will be held in July, and Franklin said the new marijuana board could take over the regulatory process at the point. The next set of regulations, which is expected to include rules for testing and certifying marijuana, will also likely be reviewed at the July meeting, Franklin said. The board also made permanent a temporary regulation that defines the public places where marijuana is prohibited.

Senate passes bill changing marijuana crime laws

JUNEAU (AP) — The Alaska Senate on March 30 got closer to having state statutes reflect what remains illegal after Alaska voters legalized limited recreational marijuana last year. Senators voted 17-3 to pass the bill, which outlines crimes for possessing more than 1 ounce of marijuana, the threshold voters approved last November for personal use by adults. It changes the crimes for possession of larger amounts of marijuana, including making it a felony to possess more than 16 ounces of marijuana, and also makes it illegal to deliver marijuana for sale. The bill also keeps marijuana on the state’s list of controlled substances and prohibits a commercial or retail marijuana industry in areas where there is no organized borough or municipality. Sen. Anna MacKinnon, R-Eagle River, said the version of the bill produced by the Senate Finance Committee balanced legalization with enforcement concerns from state officials. Bruce Schulte, a marijuana legalization advocate, wrote in a text message to The Associated Press that he would have preferred to see marijuana removed from the state’s controlled substances list. Sens. Johnny Ellis, Berta Gardner and Bill Wielechowski, all Anchorage Democrats, voted against the bill. Wielechowski said he thought marijuana should have been removed from the state’s list of controlled substances, and tried to amend the bill to make that change. That amendment failed. Other amendments to the bill were also defeated during lengthy floor debate Monday, including one from Fairbanks Republican Sen. Pete Kelly that would have made marijuana concentrates illegal in two years. That failed, with two Democrats joining four Republican majority members in support. One of the Democrats is part of the majority caucus. Those opposing the amendment said it didn’t appear to match the will of the voters. The initiative that passed in November included concentrates in the definition of marijuana, and those opposing the amendment said they thought banning them would not meet the intent of the initiative. The bill now goes to the House.


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