Pubdate: Sun, 7 Nov 2010
Source: Daily Camera (Boulder, CO)
Copyright: 2010 The Daily Camera.
Contact:  http://www.dailycamera.com/
Details: http://www.mapinc.org/media/103
Author: Erica Meltzer
Bookmark: http://www.mapinc.org/find?277 (Cannabis - Medicinal - Colorado)

BOULDER MEDICAL MARIJUANA SHOPS STRUGGLE WITH LAWS

New City Requirements, Fees Agitating Some Businesses Owners

The cost and effort of complying with new state and local laws has 
had a winnowing effect on Boulder's medical marijuana industry, the 
full results of which likely won't be known for a year or more.

The legislators who pushed changes to state laws earlier this year 
predicted that many dispensaries would not survive, and so far just a 
fraction of the existing marijuana businesses have applied for new 
licenses they need to stay in business.

Many of those who remain say they are struggling with the cost of 
extensive new regulations and unsure of how to comply with 
conflicting requirements, while others say it's the price they must 
pay for legitimacy.

Industry observers say many mom-and-pop operators have sold out to 
new investors with backgrounds in business and access to capital. 
Those who haven't filed for new licenses may melt back into the black 
market from which they came.

At the same time, commercial grow operations are flourishing in 
Boulder's industrial areas as dispensary owners lease warehouse space 
to comply with the requirement to grow 70 percent of their own 
supply. They account for more than half of the requests for new 
medical marijuana business licenses in Boulder.

All the while, marijuana remains illegal at the federal level, 
creating a risky Catch-22 for business owners: Every step they take 
out of the shadows -- every form they file, every permit they pull -- 
might serve as evidence of a crime. Not taking those steps is also a crime.

Adding to the confusion, state law requires every marijuana business 
to get local approval, but in Boulder, some of the local requirements 
conflict with state law.

Industry Changes in Boulder Unclear

Just a few months ago, 208 medical marijuana-related businesses held 
active business licenses, meaning they were remitting sales tax to 
the city. Of those, 112 applied for new licenses from the city of 
Boulder by Nov. 1 under a new regulatory regime, and only 46 of those 
are retail dispensaries, known under the new state law as medical 
marijuana centers.

Another 53 are commercial grow operations tied to dispensaries, 
either here or in neighboring communities, and 13 are for the 
manufacturing of marijuana-infused products, like baked goods, soda 
and tinctures.

City spokeswoman Sarah Huntley said the city doesn't have a breakdown 
of what types of marijuana-related businesses operated in Boulder 
before Nov. 1, so officials don't know yet exactly how the makeup of 
the industry has changed.

The new state law requires that all centers grow 70 percent of their 
own marijuana by Sept. 1, which sent dispensary owners scrambling for 
warehouse space. Boulder is one of the few places where landlords and 
local zoning are amenable to grows, so center owners from around the 
region, like Laurel Alterman of Louisville's AlterMeds, have pulled 
grow licenses in Boulder.

"We pitched it to Louisville, but they ignored us," Alterman said. 
The city has a moratorium on new marijuana businesses in place. 
"Boulder was the only place we could find a location."

Like many dispensary owners, Alterman hired her favorite grower as an 
employee to run the grow operation. She pulled $75,000 out of her 
business to get the warehouse up and running. Even with a positive 
cash flow and no debt, she was unable to secure a bank loan.

Regulatory Fees Add Up

Ryan Hartman, owner of Boulder Wellness Center on East Arapahoe 
Avenue, said he has not pulled a paycheck in two months as he 
struggles to pay more than $15,000 in state and local fees and bring 
his grow operation up to code. There is no guarantee Hartman's fees 
will secure him a license, and even if it does, he'll have to apply 
again in July and pay yet more fees, the amount of which haven't been 
determined.

"I own a business that grossed a million dollars last year, and I 
can't even afford a car," he said, adding that he feels like he's 
back in high school with the bully who hit him up every week for 
another $20 to not beat him up.

"Eventually we talked to the police, and he got in trouble for 
extortion," Hartman said. "Now, I can't call the cops because these 
guys are the cops."

Nick Cokas, owner of Colorado Care at 28th Street and Iris Avenue in 
Boulder, might have to remove his sister as a business partner, even 
though she has helped the former grower with the business side of his 
operation for almost two years. She moved to Colorado in January and 
doesn't meet the residency requirements of the state law.

But those who have applied for new licenses say they are determined 
to stick it out and do what they need to stay in business.

"I've been busting my ass on this for two years," Cokas said. "I'm 
not going to let them drive me out."

What will happen to those who don't meet deadlines is less clear. 
Boulder attorney Eric Moutz, who specializes in medical marijuana 
issues, said many are continuing to operate, figuring that any 
earnings they make between now and when they get shut down is money 
in the bank. (For the record, he advises his clients not to do this.)

Shops Without Licenses Take Risks

Boulder attorney Jeff Gard, who also works with many marijuana 
business owners, said anyone who operates without a license is 
playing with fire. The state law strips them of their immunity under 
the constitutional amendment that legalized medical marijuana in 
Colorado, rendering them nothing but drug dealers, if they fail to 
comply. Possessing more than 8 ounces of marijuana is a felony, and 
local jurisdictions know exactly where these businesses are.

"There better not be one plant around that business when some 
official comes knocking," Gard said. "And that person likely will not 
be from municipal code enforcement. They'll be from the drug task force."

One of the long-standing dispensaries in Boulder that didn't appear 
on the list of new applicants is Jay Epstein's Boulder Meds on 
University Hill. Reached by phone, Epstein said he has applied and it 
"must be a typo" that he's not on the list. City officials could not 
be reached late Friday afternoon to verify that.

Epstein said those who complain about the new regulations don't 
understand what other businesses go through. When his family, which 
owns Mamacita's Mexican Restaurant on the Hill, bought their first 
restaurant, they had to spend $175,000 to come up to code. They 
continue to deal with strict rules and regular inspections from the 
health department, the liquor licensing board and city code enforcement.

"They're just trying to keep us from turning into a junk show," he 
said. "Other businesses have to comply with regulations. The extra 
legitimacy brings something to the table."

Code Enforcement the Priority

Huntley said the city is in the process of cross-referencing the two 
lists of business licenses and will be sending letters to those who 
did not apply for new permits. They'll be told they either have to 
close or remove all marijuana from the premises. Then police will 
follow up with those businesses.

Huntley said she could not guarantee that no one would be criminally 
prosecuted, but the city's priority is code enforcement, not drug 
enforcement, and most offenders will be issued tickets, not hauled off to jail.

Similarly, Julie Postlethwait, a spokeswoman for the medical 
marijuana enforcement division of the Department of Revenue, called 
drug enforcement and code compliance "apples and oranges."

Once regulations are finalized and investigators are hired, the state 
will shut down businesses that don't have licenses. However, those 
who simply made mistakes on their application or have other problems 
will have a chance to appeal or rectify the error, she said.

"This is an industry that we're invested in as well," she said. "We 
want this to be a strong and robust industry and a safe industry that 
supplies a safe product to patients."

Gard, the Boulder attorney, doubts the state cares much about 
individual business owners or patients, but he predicts government 
will come to rely on the revenue generated by the industry. That will 
protect the business owners who survive the next year or two, he said.

But Moutz sees a less promising future if current political trends 
continue. Medical marijuana, which was legalized years ago, exploded 
into the open when President Barack Obama's Justice Department said 
it would not prosecute patients and caregivers in states where 
medical use is legal. That change, though, is a matter of policy, not 
law, and could change again.

"I would tell anyone I represent, if a Republican president gets 
elected, you are done," Moutz said. "You are done on election night."

[sidebar]

MEDICAL MARIJUANA RULES

State law allows for three types of marijuana businesses: medical 
marijuana centers, which sell marijuana, manufacturing of infused 
products and cultivation operations.

Applicants for a license must pay between $7,500 and $18,000 in fees, 
depending on the size of the marijuana center.

Convicted felons cannot own or work in medical marijuana businesses.

Only Colorado residents can have an interest in a medical marijuana business.

Operators do not have to be patients and they cannot be primary caregivers.

Operators must grow 70 percent of their own supply.

The state is working on new regulations that will include extensive 
tracking of marijuana, from seed to patient.

To be licensed by the state businesses also must comply with all local rules.

Boulder has its own rules and fees, some of which conflict with the 
state rules.

Local governments can ban medical marijuana businesses within their borders.

For complete text of the state law visit 
colorado.gov/cs/Satellite/Rev-Enforcement/RE/1251575120132.

By the Numbers: Med-Pot in Boulder

208 marijuana-related businesses with active sales tax licenses in 
Boulder, prior to Nov. 1

112 Marijuana-related businesses that applied for a new license by 
Nov. 1 deadline

46 Applications for medical marijuana centers, formerly known as dispensaries

53 Applications for commercial growing operations

13 Applications for manufacturing of infused-products
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MAP posted-by: Richard Lake