Detroit’s late arrival to the recreational marijuana industry spells trouble | Marijuana News | Detroit

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Courtesy of Motor City Kush

A Black Lives Matter mural at Detroit dispensary Motor City Kush.

Michigan’s recreational marijuana market is booming. The state has more than $1.1 billion in annual revenue and generates more that $100 million in new taxes every year.

But in Detroit, the state’s largest city, not a single dollar has been made since adult-use recreational cannabis sales became legal in December 2019.

It could take many months before Detroit reaps the rewards of this lucrative industry.

Last week, the Detroit City Council approved an ordinance that will allow recreational cannabis businesses to open in the City. But not everyone is happy.

If all goes as planned, which rarely happens in Detroit or in the marijuana industry, new recreational cannabis businesses won’t begin opening until late this year or early next year. That’s three years after the first recreational businesses opened in other towns and cities, which have received millions of dollars in new tax revenue.

Michigan has 110 communities with at least one recreational dispensary.

Dozens of them are in Detroit’s suburbs, and many inside the industry say there may already be too many dispensaries in the region. The new dispensaries in Detroit will have to compete with the suburbs and each other.

“Detroit already missed out and lost those customers,” Metro Times spoke with Jimmy Caudill about The Reef, a Detroit medical cannabis dispensary, on Eight Mile Road. “All the dispensaries surrounding the city have had a chance to capitalize on (Detroit’s recreational ban) and grab new customers. It’s going to be harder for shops to regain those people.”

From first to last

More than a decade ago, Detroit was at the forefront of the medical marijuana industry. Detroit saw the emergence of dozens upon approval of medical marijuana by voters in 2008. This is more than any other Michigan city.

Many of these businesses are still in existence today, but many are in trouble. Detroit is home to more than 70 dispensaries that offer medical marijuana.

Because recreational marijuana is now legal, less people are able to get medical cannabis cards. They are expensive and take a long time to obtain.

The number of active medical cards fell from more than 264,000 in 2020 to fewer than 232,000 so far this year, a 12.2% decline, according to the state’s Marijuana Regulatory Agency (MRA).

The sales of medical cannabis fell 32%, from $38.1million in February 2021 down to $26million in February 2022.

The decline in medical cannabis sales has caused serious problems for Detroit’s medical cannabis dispensaries, which have continued to wait for recreational sales to be legalized.

“The medical industry is dying,” Metro Times spoke with Al Harrington who was a former NBA player and opened Viola Brands marijuana in southwest Detroit. “A lot of people come to Detroit for business opportunities, and they have to go to border towns to purchase cannabis. It’s killing all the current medical operators in the city. It’s putting a lot of pressure on their businesses because they are losing customers every day.”

Medical cannabis was much more expensive in the early days of recreational marijuana. That’s not the case anymore.

According to the MRA the average cost of a ounce of medical flowers in February 2021 was $229.22 compared to $267.20 of recreational flower over the same period. The average price of a ounce of medical marijuana in February 2021 was $229.22, compared to $267.20 for recreational flowers during the same time period, according to the MRA.

The cash-strapped city will continue to lose millions of tax dollars each year if it does not legalize recreational marijuana. Recreational pot sales generated more than $111million for schools, roads, and communities with a 10% excise duty.

The state provided $56,400 to communities in March for each dispensary located within their borders. Medical marijuana is not subject to an excise duty.

“The funding provided directly to local governments — and the thousands of jobs created across the state — show that Michigan is leading the way in the cannabis industry,” Andrew Brisbo, executive director of MRA, said in a release.

But not in Detroit.

click to enlarge Detroit dispensaries like The Reef can soon sell adult-use cannabis. - COURTESY PHOTO

Courtesy photo

Detroit dispensaries like The Reef can soon sell adult-use cannabis.

Opting out

The Detroit City Council shocked the cannabis industry in November 2019 when it passed a last-minute ordinance preventing recreational businesses from opening.

The reasoning was good: Detroit wanted to make sure its long-time residents, who were disproportionately affected by war on drugs, had priority to be able to get involved in the cannabis industry before wealthy outsiders flooded the market. At the time, council members stated that their goal was to create new regulations by 2020.

It took the council over a year to draft an ordinance giving long-time Detroiters preference in licensing. But in June 2021, a federal judge ruled that the ordinance was probably unlawful because it “gives an unfair, irrational, and likely unconstitutional advantage to long-term Detroit residents over all other applicants.”

The council returned to the drawing board and took nine more months to approve a new ordinance, which creates two tracks for licenses so that “equity” and “non-equity” applicants aren’t competing with each other.

The new ordinance will allow for 100 retail licenses, with half reserved for social equity applicants.

“I am thankful that Detroit will finally join the 23 municipalities in Michigan that have allowed adult-use cannabis licensing within its borders,” the ordinance’s sponsor, Council President Pro Tem James Tate, said in a statement. “But the goal has never been to simply have licensing within the city, but to create policy that works to address the inequities that so many Detroiters have experienced trying to pursue an opportunity in this industry.”

According to cannabis insiders the problem is that Detroiters will have difficulty making it in the industry at this point.

“It’s fantastic that Detroit is moving forward and recognizes that while they were on the forefront of the industry a few years ago, they have fallen behind,” Mike P. DiLaura, chief of corporate operation and general counsel at House of Dank in Detroit says.

“Detroit has really missed the mark. It’s really unfortunate.”

DiLaura believes that the new ordinance is illegal and will lead to more lawsuits. He claims the social equity component has gone too far.

“With good intentions, the city is acting with economic protectionism,” He said. “While morally noble, it’s ultimately not lawful.”

Cannabis insiders warn that as time passes, the opportunities for the city’s residents and businesses will diminish.

“The market is kind of saturated at this point,” Caudill states. “A lot of these dispensaries have the same products. It’s like Meijer and Kroger selling the same produce.”

Harrington wanted to create opportunities for people of color at Viola, a Detroit medical cannabis dispensary. But getting stuck in the shrinking medical cannabis industry, he can’t hire more Black Detroiters until the city starts issuing recreational licenses.

“If we’re going to compete, we need to get to market now,” Harrington said. “At this point, it’s getting embarrassing.”

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