Marijuana in the mountains, Part 2: With Colorado pot rules mostly written, uncertainty still looms
Ryan Summerlin January 22, 2014
Marijuana in Colorado
Nov. 7, 2000
• Colorado voters approve Amendment 20, a constitutional amendment to allow the use of medical marijuana in Colorado.
• State of Colorado Board of Health approves Rules and Regulations pertaining to the administration of the program.
June 1, 2001
• The state’s Medical Marijuana Registry begins accepting and processing applications for registry identification cards.
• Denver residents vote to legalize adult possession of up to once ounce of marijuana in the city. The state attorney general calls the vote irrelevant because of state laws.
• The limit on the amount of patients that growers and medical marijuana caregivers are allowed to serve is lifted, paving the way for medical marijuana businesses to open up across the state.
• United States Attorney General Eric Holder sends a memo to attorneys in states with legalized medical marijuana stating that the Department of Justice, while committed to enforcing the Controlled Substances Act in all states, is committed to making efficient and rational use of its limited resources.” He tells attorneys that federal resources will not be spent in pursuit of individuals complying with state medical marijuana laws.
• Town of Breckenridge citizens vote to decriminalize private possession of less than one ounce of marijuana and related paraphernalia by adults over the age of 21. At the time, recreational marijuana is still illegal in the state of Colorado. The town of Breckenridge calls the passing of the ordinance symbolic and notes that it “merely removes criminal sanctions through the town’s municipal court.”
• Town of Dillon rejects medical marijuana regulations and extends a moratorium on marijuana shops through February 2010.
• Town of Breckenridge adopts a medical marijuana zoning ordinance in response to inquiries for new businesses to sell medical marijuana in town.
• Colorado State Legislature passes HB 10-1284, known as the Colorado Medical Marijuana Code, which goes into effect July 1, 2010.
• Eagle County Board of Commissioners adopts more restrictive temporary regulations to control cultivation and production of medical marijuana in effect until December 2010.
• Gov. Bill Ritter signs a bill that gives local governments the right to regulate or ban dispensaries.
• Town of Avon bans medical marijuana dispensaries.
• Town of Vail bans medical marijuana dispensaries.
• City of Glenwood Springs passes a one-year moratorium on new medical marijuana dispensaries. Nine medical marijuana centers had already opened within the city.
• Town of Gypsum passes an ordinance banning medical marijuana dispensaries.
• Town of Basalt passes a two-year moratorium banning the review of applications for new medical marijuana dispensaries. The town had approved one dispensary to open already which would be unaffected by the moratorium.
• Majority of voters in Eagle County confirm that a properly regulated medical marijuana industry should be allowed to operate in unincorporated Eagle County.
• Town of Minturn residents vote to allow medical marijuana shops in town, but the town cites federal law in not allowing business applications.
July 1, 2011
• Colorado HB11-1043, “an act concerning medical marijuana, and making an appropriation therefor,” amending Colorado medical marijuana code, becomes effective.
March 27, 2012
• Breckenridge Town Council adopts an ordinance that amends its local medical marijuana policies on licenses and regulations in response to changing state medical marijuana laws. New state laws include changing the application fee from a two-year permit to a one-year permit; increasing the setback from schools and daycare centers from 500 feet to 1,000 feet and establishing application fees for changes of ownership, location or corporate structure.
• Town of Minturn passes an ordinance banning medical marijuana businesses.
July 1, 2012
• All preexisting medical marijuana dispensaries, cultivation operations and production of medical marijuana-infused food products need to become licensed through the state by this date.
Nov. 6, 2012
• Colorado voters approve Amendment 64, legalizing the recreational use of marijuana by adults 21 and older and permitting the retail sale, cultivation, manufacturing and testing of marijuana. The amendment makes legal the growing and possession of marijuana for personal use and authorizes local jurisdictions to regulate marijuana businesses.
• Summit County commissioners vote to allow recreational marijuana sales and cultivation.
Governor John Hickenlooper signs three bills into law that address Amendment 64.
July 1, 2013
• Colorado’s State Licensing Authority passes emergency rules and a deadline of Oct. 1, 2013 for local jurisdictions to either ban retail marijuana businesses or adopt regulations for such businesses. Many jurisdictions choose to put moratoriums in place as a way to extend the deadline on making a decision.
• City of Glenwood Springs extends its moratorium on retail marijuana applications through Dec. 31.
• Garfield County commissioners ban all commercial marijuana operations for recreational purposes in unincorporated areas of the county.
• Town of Red Cliff approves future retail marijuana businesses to open.
• Town of Frisco passes rules for retail marijuana establishments, allowing them in town but under strict zoning requirements.
• Town of Silverthorne passes regulations for retail marijuana establishments.
• Town of Dillon extends a moratorium on retail marijuana establishments with a sunset date of Oct. 1, 2014.
• Town of Breckenridge votes for no new medical or retail marijuana shops in the downtown overlay district. The lone downtown store already open can continue to operate until its lease expires in September 2014.
• Town of Carbondale approves an ordinance that will allow marijuana businesses — including retail, cultivation, manufacturing and testing — to open in town.
• Town of Eagle passes a temporary moratorium on retail marijuana shops and creates ballot language for the upcoming November election that asks voters whether the town should allow retail marijuana operations.
• Colorado State Licensing Authority adopts permanent rules for retail marijuana and revised rules for medical marijuana.
• City of Aspen set to vote Oct. 15 on whether the number of recreational marijuana retailers in Aspen should be no greater than the number of medical dispensaries that were established by Oct. 1, 2013.
Colorado citizens will vote on Proposition AA, which, if approved, would:
• Impose a 15 percent state excise tax on the average wholesale price of retail marijuana when the product is first sold or transferred by a retail marijuana cultivation facilitiy, with public school construction to receive the first $40 million of any annual tax revenues collected;
• Impose a 10 percent state sales tax on retail marijuana and retail marijuana products, in addition to the existing 2.9 percent state sales tax, to increase funding for the regulation and enforcement of the retail marijuana industry and to fund related health, education and public safety costs;
• Direct 15 percent of the revenue collected form the 10 percent state sales tax to cities and counties where retail marijuana sales occur
• Allow the state legislature to increase or decrease the excise and sales taxes on retail marijuana so long as the rate of either tax does not exceed 15 percent.
Jan. 1, 2014
Once approved by state and local jurisdictions, medical marijuana business owners will be allowed to open retail marijuana businesses on or after this date.
Editor’s Note: This is part two in a three-part series on recreational marijuana issues that will be settled in the November election.
Leaf Aspen medical marijuana dispensary co-owner Jesse Miller is following state and local jurisdiction lawmakers closely this year. He, like every other marijuana business owner in the state, could easily miss an important detail if he stops paying attention even for a day.
“We have an attorney, but we don’t pay him to follow this,” Miller said. “I track it. I read all the rules when they come out to make sure we’re compliant.”
Miller has had plenty of reading material in 2013. Since voters approved Amendment 64 last year, legalizing recreational marijuana use in the state, lawmakers have been scrambling to get the proper rules in the books before new retail marijuana businesses are permitted to open in 2014.
But even with final rules adopted by the state’s Marijuana Enforcement Division that take effect Oct. 15, the need for yet another round of rulemaking arose when the State Licensing Authority identified four public safety issues — an interim production cap for retail marijuana cultivation, concentrate production safety, edible product consumer safety and mandatory testing and random sampling — during the process.
What it means is the state laws are still being written, making it hard for municipalities to write their own laws on the matter. Local governments across the state, including many mountain towns and counties, have chosen to put moratoriums on retail business applications until the industry’s challenges become more apparent.
Miller said that complicates things for medical business owners who want to make the switch to retail. Medical shops have to grow their plants mostly in industrial warehouses, which are often located tens of miles away from the actual dispensaries. Miller’s current medical grow operation is near Carbondale, and now he’s looking into getting a new grow facility in Rifle for recreational plants.
“For us as an entity, Aspen isn’t the local authority we have to deal with,” Miller said. “That’s where it gets tricky.”
State law is only allowing medical marijuana business owners the chance to apply for retail licenses for the first six months before opening it up to other applicants next June. But in Aspen, three new medical applicants popped up before the state’s Oct. 1 deadline when medical businesses had to be established in order to apply for retail.
The Aspen City Council is expected to vote Tuesday on whether the city should restrict the number of retail businesses to the same number of medical businesses established by Oct. 1, 2013.
Miller doesn’t like the mad rush for last-minute medical licenses, especially when he’s been in business for three years and has built up town relationships and respect.
“The last thing we want after having been good, upstanding citizens in doing this, is for some yahoo to come running in here with his eyes set on XGames and is just selling crap and then disappears,” Miller said. “Then we all get a bad name.”
Miller also doesn’t see how those businesses will be able to supply their operations with enough marijuana. The state is giving the first retail shop owners a one-time opportunity to supply their retail inventories with up to half of their medical plants. Otherwise, there wouldn’t be enough time to grow new plants specifically for recreational use by the opening date of Jan. 1, 2014.
While that’s the law today, some business owners aren’t sure what will be the case when the retail stores can actually start opening. Todd Carstens, a co-owner at Greenwerks in Glenwood Springs, said the rules and regulations are constantly changing.
“Since we started, it’s been like trying to hit a moving target all the time,” Carstens said.
‘It’s been tough’
In Frisco, Medical Marijuana of the Rockies owner Jerry Olson said he has all the legal information he can deal with right now. He’s working on a retail application, too, and is running into everything from strict zoning laws to financing challenges.
“In the medical industry up here in the mountains, we’re just getting by,” Olson said. “There’s a bigger population down in the city.”
Because marijuana is still illegal under federal law, marijuana business owners in Colorado can’t walk into a federally insured bank to get a loan. Most business owners can’t do any personal banking, either, if their marijuana business is their primary source of income.
“You’ve got to get a loan from someone other than a bank,” Olson said. “There’s not a lot of money around these days.”
Olson is considering selling small amounts of stock in his business to get the cash flow needed for retail, but he hasn’t made any commitments yet.
Carstens and his ownership group had to raise capital before they opened their businesses (they have two more locations in Denver). It’s also been hard to accept credit cards.
“Once they find out what you do they cut you off and you have to find a new merchant services account,” he said. “It’s been tough.”
Miller said it can be nerveracking operating a cash business. He knows many dispensary owners who walk around with wads of cash in their pockets. Many use safes and safety deposit boxes, but the anxiety over where to keep their money never eases.
Olson wants to gobble up whatever space he can find where retail marijuana is legal. Because of the strict zoning laws in Frisco and other mountain communities, Olson doesn’t think there will be a lot of space leftover for the non-medical people when they try to crack into the business later next year.
“Guys like me will consume all the zonable space,” he said.
Whether space is available or not, medical owners know market forces will solve a lot of the problems. When Miller first opened Leaf Aspen, he counted roughly 45 dispensaries in the Roaring Fork valley. Right now, he can count 13.
Thankfully, some of the failed businesses are also some of the businesses that were running illegal operations. Some owners were getting their supplies from California, Miller said, and some were even selling pot to minors out the back door.
“We were all for removing these types of people from the industry,” Miller said.
With a new industry sprouting, however, Miller isn’t sure what it means for the future. He knows he and his co-owners will be following the law and paying their taxes, which could be astronomical in some jurisdictions.
State voters will decide in November on whether the state can impose a 15 percent state excise tax on wholesale marijuana when it’s first sold and whether the state can impose a 10 percent state sales tax on retail marijuana in addition to the existing 2.9 percent sales tax. Combine that with local jurisdiction sales taxes, plus any new sales taxes those jurisdictions ask to impose on retail marijuana, and taxation could be as high as 50 percent in some towns.
In posh resort towns like Aspen, Miller doesn’t think the extra taxes will deter buyers with disposable incomes. He said an ounce in Colorado is already about half the price — about $100-$150 — of the price for the same quality product in New York City, but he expects that to change.
“Supply and demand issues will push the prices up,” Miller said. “I think it’ll end up balancing out. I think you’ll see medical go a little higher in price (than what it is today), and then retail will be higher than that, plus the taxes on top of it.”
The current tax proposal is ridiculous, though, he said.
“It’s a luxury tax and a sin tax all rolled into one,” he said. “Dial it back and put something out there we could get on board with.”
Carstens supports the taxes because prices are already relatively low, he said. He doesn’t think the taxes will end up being much of an issue.
Carstens doesn’t really know what problems will arise, though, because nobody does. Aspen City Deputy Attorney Deborah Quinn said recreational marijuana is going to be a learning curve for everyone.
“The whole idea of retail marijuana is new for the entire state. Everybody is going to be testing the waters and trying to interpret what the numerous regulations mean,” she said.
Vail Town Attorney Matt Mire advised the town of Vail to define private clubs, another hazy area of the law. In some jurisdictions such as Denver, Mire said people aren’t waiting for the legal date for retail businesses to open.
“They’re trying to get in (to the business) under clubs,” Mire said. “So we defined private club.”
The town of Vail will revisit the issue before its moratorium expires in December, Mire said. In the mean time, Mire and attorneys across the state will be watching to see what voters and state lawmakes decide in the coming weeks and months as the legal marijuana industry in Colorado continues to evolve.
Lauren Glendenning is the Editorial Projects Manager for Colorado Mountain News Media. She can be reached at firstname.lastname@example.org or 970-777-3125.
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