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Marijuana Control Board weighs business ownership, investment rules

  • Author: Laurel Andrews
  • Updated: September 28, 2016
  • Published August 11, 2015

Should Alaskans be the only ones allowed to invest in marijuana businesses? What distance should be mandated between a school and a marijuana establishment?

In downtown Anchorage Tuesday, the Marijuana Control Board grappled with these questions as it reviewed the second set of draft regulations, working through each article in turn, and often focusing on areas that had spurred the most public comment.

Tuesday's meeting was more subdued than the day before, when five businesses that had received cease-and-desist orders spoke out against any actions the state may take to shut them down. On Tuesday, markedly fewer people were in attendance, with around 20 audience members sitting through the meeting.

Changed: Distance from a school

As the board spoke, one notion that seemed to hover above the conversation was a document known as the Cole Memo, published by the U.S. Department of Justice in 2013. The memo gives guidance to states where marijuana is legalized on how those states can avoid interference by the feds.

One of the first areas the board discussed -- and changed -- in the regulations was the distance a marijuana establishment could be from a school or child care facility. The draft regulations had said businesses must be at least 200 feet from a school.

Board member Brandon Emmett initially asked that the definition of child-care facilities be narrowed, so as to be less prohibitive.

Alcoholic Beverage Control Board Director Cynthia Franklin pointed out the 200-foot limit was far less than Washington and Colorado's 1,000-foot rule – a move that invites uncertainty about how the federal government will react. But due to Alaska's unique composition of small rural villages, a 1,000-foot rule would be prohibitive for businesses looking to start in small communities, Franklin said. Thus, including a broad definition of child care was a way of striking a balance between meeting Alaska's needs and satisfying the Cole Memo.

"It's a very unusual position to be in, as there is a threat of federal prosecution," she told the board.

While board member Bruce Schulte said he "chafes" at the thought of federal overreach, he also suggested a "balanced view."

After much discussion, the board voted on a compromise: Increase the distance to 500 feet and change the wording to be less inclusive -- a "school or recreation or youth center."

Not changed: Questions of investment

In the current proposed rules, only Alaska residents can own or invest in marijuana businesses. Board members debated this ruling at length – and in the end, changed nothing.

Franklin said the residency requirements allow Alaskans to have a "first crack at the new industry." The call for an Alaska-based industry was a point she had heard over and over following legalization, she said. Franklin said she was surprised by the amount of public comment lamenting this proposed rule.

"I think we can all agree that we want Alaskans first," board member Brandon Emmett said, "but because it takes so much investment, people will be searching for capital."

Emmett said the requirement gives Alaska's wealthy a significant advantage over the less affluent. It "basically crushes the American dream," he said.

Franklin said Alaskans "need to make sure that you know where the money is coming from" or the federal government may have reason to interfere with the market -- interstate commerce is one of the federal government's biggest concerns. She said the board could adjust the residency requirements to allow investment from those outside the state.

In the end, no decision was made to change the law, which elicited grumbling from many in the audience. Midnight Greenery CEO Sara Williams said later the ability to bring in outside investors is "the difference between whether this industry succeeds or doesn't succeed."

Changed: Requirement for family members’ Social Security numbers

One section that had generated a great deal of public comment was a line requiring the personal information, including Social Security number, of "each family member" of a marijuana business applicant.

Schulte said "as a practical matter" that requirement didn't make sense. Springer agreed, saying it "puts the burden on the applicants."

The board voted to remove "family member" from the wording.

Changed: Marijuana businesses next to liquor-licensed premises

The board chose to remove a line from the draft that barred a marijuana establishment from setting up shop adjacent to liquor-licensed premises. Board member Mark Springer said the rule "kind of doesn't make any sense" before voting to remove it.

Not changed: Fees for licensing

As the day came to a close, the board looked at licensing fees, proposed as $5,000 for retailers, cultivators and manufacturers, and $1,000 for other license types.

Emmett suggested scaling back the $5,000 fees, arguing municipalities would not have any "wiggle room" to implement their own.

Franklin argued there are other types of fees municipalities can implement. She said her agency "looked at the hard, cold reality" that the Marijuana Control Board must be self-sufficient; the board does not receive any money from Alaska's general fund. The funding instead comes from fees such as licensing, Franklin told the board.

"I understand that this is high," Franklin said, but asking the Legislature for money will become increasingly difficult as Alaska's budget deficit grows more pressing.

Springer said "the industry is going to have to pay its own way." In the end, the board voted to keep the fees in place as written.

While the board worked its way through the first section of the set, much of the draft regulations remained unexamined. Schulte suggested the board meet on Aug. 31 and Sept. 1 to finish the work – even offering to pay for airfare if the state lacked the budget – but the meeting was not set definitively as the day came to a close.

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