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The NJ Assembly Oversight, Reform, and Federal Relations Committee held a hearing on town cannabis problems.
Many of the problems New Jersey cannabis entrepreneurs face are due to the laws imposed by towns.
Towns have a lot of power in New Jersey. That’s why the biggest yearly political conference is the NJ League of Municipalities conference. It has a lot of parties with free alcohol attended by notable politicians, lobbyists, lawyers, and others.
“We can potentially make it better for all of New Jersey,” Committee Chair Reginald Atkins of Union County (D-20) said.
“Municipalities were under a tight deadline in order to pass an ordinance to ban or allow cannabis establishments,” NJ League of Municipalities Associate General Counsel Frank Marshall said.
He estimated that 40 percent of municipalities are now pro-cannabis establishment.
“There are some entities out there taking a very aggressive position in saying that … there’s zero percent that has to go back to the municipality,” Marshall said about collecting cannabis taxes.
Most of those are large cannabis corporations that are Multi-State Operators (MSOs.)
“We think this is an incorrect position. There will likely be some litigation,” he said.
Marshall defended the town cannabis license approval process which has been very shady.
He alleged the processing costs justify the town application fee.
Clinton Mayor Janice Kovach of the NJLM said elders’ anti-marijuana attitude is longstanding and hard to change. Kovach noted her town remains anti-marijuana.
“When you have Multi-State Operators coming in and don’t want to pay either a licensing or application fee, I have a problem with that,” she declared. “When it’s a small business… we’re all about helping.”
In addition, Kovach did not like the cocky attitudes of MSO lobbyists seeking breaks.
“We all recognize the majority of residents want it,” she said.
However, Kovach raised concerns about children and old anti-marijuana propaganda concerns in her small, insignificant town.
“It is not going to plug budget holes with regard to the money we get,” she alleged.
“It’s not a revenue grab,” Marshall claimed. “Some of them are as high as $5,000 or 500. It varies.”
“In Jersey City, it was somewhere around 2 million. Any little bit helps,” he explained.
An Assemblywoman was curious about addressing underground legacy operators.
Marshall said the new intoxicating hemp Delta 8-THC regulation bill signed into law could address concerns.
“You got these gas stations, convenience stores, other little shops selling these products without the appropriate cannabis license,” he said.
“Folks are trying to gift cannabis. It’s explicitly prohibited under the law,” Marshall explained. “It’s difficult to quantify.”
“We have a model that has lifted up racial and social equity. We did it better than any other state in the nation,” NJ CannaBusiness Association (NJCBA) General Counsel Bill Caruso declared.
“Post COVID, when retail was decimated on Main Street, smart mayors, smart council folk, and economic development folks in town recognized the traffic that would come,” he said. “The revenue rose.”
Caruso said cannabis manufacturing businesses are attractive in post-industrial towns. He explained some want to allow cannabis companies. But, federal marijuana prohibition concerns cause Real Estate Investment Trusts (REITS) that control strip malls and warehouses to dislike it.
“There are areas where the fees are too high. Hopefully the market will dictate they will come down,” he said.
Caruso said legal cannabis cultivators can fit well in farming towns.
He also didn’t like that cannabis companies can’t advertise much due to concerns about influencing children.
(Heady NJ is a great way to advertise to passionate adult-use cannabis consumers!)
“It is downright difficult to operate a profitable business in the cannabis industry. It takes significant financial investment to start a company,” NJ Cannabis Trade Association (NJCTA) Executive Director Todd Johnson said.
He also said that there was too much government red tape in compliance.
Johnson complained that cannabis companies can’t deduct expenses, which eats into profits because of federal prohibition. TJ noted New Jersey made progress on cannabis taxes.
He said the NJCRC could raise the Social Excise Fee from $1.24 an oz to up to $30 an ounce, and he didn’t like that.
“We are eager to see the positive impact these funds and associated social equity initiatives have on impact zones and underserved communities of color,” he said.
Johnson said cultivators have to pay it. But it’s especially hard to open a growing facility since it costs $5 million to $50 million.
That is why legal cannabis grown by NJCTA members has very often been overpriced and mediocre in the opinion of most cannabis advocates, experts, and consumers.
Johnson also didn’t like the separate nature of the medical cannabis program and the adult-use recreational cannabis industry. He argued it costs companies too much to do both.
“The patient numbers in the medical program have dropped from a high of 129,00 to 72,000 at the last meeting,” he said. “It’s all the same cannabis being sold and grown.”
Prominent cannabis attorney Mollie Hartmann Lustig said a model town cannabis law would be good, along with the State providing guidance to town councils and planning boards.
“I found a shocking number of municipalities that do not understand what they are even supposed to be giving these applicants,” she said.
Lustig said it takes hundreds of thousands of dollars to get Planning Board approval.
“Some of the MSOs, some of the medical operators are better funded and able to do that. Many applicants … taking advantage of the social equity program and the prioritized license types are simply not able,” she explained.
“We’re hurting the people we really wanted to see succeed,” noted cannabis lobbyist Beau Huch argued.
He noted most small businesses fail within 10 years.
“We have a lot of people who are victims of the War on Drugs with severe PTSD who have never run a business before,” Huch explained.
He noted most are struggling with raising capital or money.
Huch thought they should be able to sell their businesses faster than the required 2 years.
“The CVS in town has enough narcotics on hand to kill half the town, and we’ve regulated them to a lesser degree,” he argued.
Huch said that attorney fees are also very expensive.
“I’m advocating against my own interest,” he noted. “I want to see these businesses succeed.”
Huch said Community Host Agreements (CHA) are sometimes bad because of burdensome requirements. He wanted the State to collect them and the NJCRC to regulate them and cancel some.
“Sometimes nothing nefarious is going on. Sometimes something nefarious is going on,” he explained.
Heady NJ has heard many rumors of very shady deals.
Huch explained the NJCRC is struggling to collect information from towns.
“Spot zoning is probably a bad idea,” he said about towns only allowing cannabis companies in a small Green Zone.
Huch said towns are doing things they shouldn’t be doing.
He said it’s a problem the NJCRC isn’t getting town cannabis information quickly enough.
“What’s the average start-up cost for a business?” Atkins asked.
Huch said $1.5 million is a good amount to have to open a dispensary.
Atkins said they can look at the town process and perhaps change things and provide more resources to entrepreneurs.
“We should have more for people,” he added about providing more grants.
“}]] The NJ Assembly Oversight, Reform, and Federal Relations Committee held a hearing on town cannabis problems. Read More