Despite new dispensary licenses, ‘social equity’ winners could face tough road ahead | Government-and-politics

Friday saw the Arizona Department of Health Services Offices, Phoenix, crowded with media representatives, department dignitaries and representatives of applicants who were seeking one of the 26 available positions. “social equity”You will need a license to operate a state-licensed recreational marijuana dispensary.

There was no bingo wheel, and no cage full of pingpong balls or applications. A computer processed nearly 1,300 applications numbers and selected 26 winners in a matter of minutes. Online, hundreds of candidates for Arizona’s Social Equity Dispensary Program waited anxiously to see who was lucky enough to win one of lucrative 26 issued licenses.

Although the names and numbers of the winners are now known, it is not known who the applicants were.

The majority of applicants that were selected were Limited Liability Companies, which are registered in the Phoenix region. Three of the three winning applicants had Pima County addresses in their LLC filings with Arizona Corporation Commission: Higher Than High I and Joint Junkies I. (See box to see names of those who were selected)

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The story behind how the state’s social equity program came to be is complicated. Where it goes from here is anyone’s guess, but the exclusive recreational nature of the licenses and zoning decisions by cities like Tucson could shape the cannabis market for years to come.

How social equity came to be

Prop. Prop. 207 in 2020, which legalized adult-use recreational cannabis use. They are to be issued according to the statute. “people from communities disproportionately impacted by the enforcement of previous marijuana laws.”

However, due to the exclusively recreational nature of the licenses and special zoning exceptions that could run the clock out on licensees’ time to open retail locations, new licensees might be entering the toughest portion yet in what has been an onerous and expensive process.

This could lead to some winners being forced to forfeit their licenses. However, they could also transfer the license, or essentially, sell it for a possible profit of $10-20million. Potential operators may find it difficult to operate in certain cities like Tucson.

The first issue for social equity licensees is that the new licenses are only for recreational adult-use and don’t include an accompanying medical dispensary license.

Cities like Flagstaff and Tucson have taken this into consideration. They decided to put a moratorium in place on recreational dispensaries following the passage of Prop. 207.

Prop. Prop.207 allowed already-established medical dispensaries to apply to dual-licenses and, following a 60-day process to begin selling to both recreational customers and patients, but it did not allow social equity licensees the right to apply to an accompanying medical license.

Sam Richard, executive director of the Arizona Dispensary Association — one of the main entities responsible for crafting Prop. 207 along with the state health department — explained the reason for the new licenses being exclusively recreational.

“Prop. 207 didn’t amend the Arizona Medical Marijuana act at all, so the reason why the currently established medical licenses can be kind of co-located is because they already existed,”He said. “The only new licenses Prop. 207 created were adult-use, recreational licenses.”

Jon Udell, director of politics for the Arizona branch, of the marijuana advocacy group NORML noted that there may be legislative solutions to this apparent discrepancy.

Udell, however, pointed out that a bill with language to fix the problem was dead for a while.

“Right now there just isn’t really a realistic path forward,”He said that any comprehensive solution would be required.

New zoning

An even more recent move last week Tucson’s City Council to subject potential social equity licensees to a special exception zoning process could be a game changer for both the city and state, according to Berekk Blackwell, COO of Zoned Properties, a real estate services company that specializes in the cannabis industry.

“The news out of Tucson, or I guess the rhetoric that was used, was very surprising,”Blackwell stated. “I think it was a really, really strong statement and it’s going to be really interesting to see if any of the other localities in the state of Arizona follow suit.”

Blackwell was referring specifically to the unanimous decision made by Tucson City Council members to create a special exception zone for social equity licensees. The zoning process is expected to take six months and will be presented to the mayor and council for their approval.

That move is not good in Blackwell’s eyes, or the eyes of some potential social equity dispensary operators. Prop. Prop.207 stipulates that social equity licensees must have their retail operations up and running within 18-months. This clock began April 8.

“If you aren’t able to start that process for another six months, you might be in a situation where you actually can’t look at Tucson as an option anymore,”He said.

Richard said that the 18-month window was included in the law to ensure that new retail dispensary locations are opened and to prevent licensees sitting on the license. This is something Richard explained as a result of medical licenses being issued nearly ten years ago.

One social equity applicant, Ariana Munoz — who between herself and her mother had four applications in the pool of nearly 1,300 — solidified Blackwell’s point about Tucson’s new zoning rule.

“Due to the zoning specifically in the city of Tucson, unless they do an emergency hearing to rush the process, I probably will not look into that city because I wouldn’t get anything really going for six months,” Munoz said.

Munoz didn’t win the 26 coveted licenses, but she said she believes other people will see Tucson the same way because of the special exception process.

This six-month special exception process can’t be rushed, according to Tucson Councilman Steve Kozachik, not necessarily because of any state law or statute, but because of precedence.

“If we ease it up for one, then we’re pretty much on the hook to ease it up for everybody who participates in that process,”He said. “I don’t think we can cherry pick the equity licenses and say, ‘You get a streamlined path through the special exception process. If we do that for them, then TEP is going to ask for the same thing.”

Kozachik insisted the special exception process wouldn’t restrict potential dispensary operators and will in fact open up more appropriate and “better”There are plenty of places for dispensaries to be located. He stated that even though there was a six-month wait, he believed the potential market share in Tucson would not be negligible for operators.

“I don’t think it’s as onerous as people are making it out to be,”He said that large dispensary conglomerates or MSOs, short for multi-state operators, are responsible for many social equity licensees.

“So tacking on another, you know, pick your period of time — three months or whatever — it’s not going to break their bank.”

Philosophical differences

According to Demitri Downing, CEO and founder of the Marijuana Industry Trade Association, Kozachik’s understanding of who applied for social equity licenses is incomplete.

Downing called social equity programs the idea of social equality “nebulous,” and countered Kozachik’s argument that only those with money applied.

“Half of the applicants are normal people who scratched together $4,000 and are hoping to win the lottery,”He said. “The other half are normal people who own 51% of enterprises that were paid for by existing dispensary, MSOs, intelligent people, investors, but they’re still half owned by them.”

While a significant number of applicants were either backed financially or in some other way by already established dispensary operators or other big cannabis corporations, Downing believes that now that the state has issued the licenses, it’s up to cities and other jurisdictions to decide on time, place and manner of where a social equity dispensary can go.

He sees Tucson’s special exception zoning as not just a bad idea, but one that could be disastrous for future potential dispensary operators and consumers. And he doesn’t think the city should be in the game of deciding just who is truly benefiting off social equity licenses.

“It’s just wrong,”He said. “First of all, it’s none of the city of Tucson’s business, it’s the state’s business to decide eligibility. Tucson’s there to regulate time, place and manner. But they’re confused.”

Kozachik stated that he sees special exception zoning as a way to make it easier for dispensaries to operate in more areas of the city.

He also disagreed to Downing and stated that the mayor, council, and other officials play a part in granting social equity licenses.

“Is it the city’s role by statute? No. But but nothing prevents us from seeing holes in the statute, the state statute, and pointing to them and indicating to the state government that you’re not achieving the goals that the voters voted for,”He said.

Edward Celaya works as a marijuana reporter and breaking news reporter. Since May 2021, he has been covering both beats.

Social Equity Licenses

Below are the names the 26 applicants who were selected Friday by state for the “social equity” marijuana dispensary licenses. These are the locations where applicants have listed their address for LLCs.

Applicants

AMY Investments II, Maricopa County

Arizona Tree Equity 2, Maricopa County

AZ Flower Power, Maricopa County

Blue Palo Verde 1, Maricopa County

Curious Cultivators I Yuma

Desert Boyz, Maricopa County

Dynamic Trio Holdings, Maricopa County

Graham County, Green Lightning

Grunge Free, Maricopa County

Ajo, Higher than High I

Joint Junkies I, Tucson

Juicy Joint I, Tucson

Life Changers Investments, Maricopa County

MCCSE206, Maricopa County

MCCSE214, Maricopa County

MCCSE240, Maricopa County

MCCSE29, Maricopa County

MCCSE82, Maricopa County

MCD-SE Venture 25, Maricopa County

MCD-SE Venture 26, Maricopa County

Pleasant Plants I Maricopa County

Swallowtail 3, Maricopa County

Woodstock 1, Maricopa County

Your Bright Horizon 117, Maricopa County

Your Bright Horizon 127, Maricopa County

Your Bright Horizon 192, Maricopa County

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