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A Rocky Start For Pot Stores In Washington State

By Evan Bush, The Seattle Times

SEATTLE — More than two months after the first state-licensed marijuana stores opened in Washington state, only one is selling pot in Seattle, and it might be weeks before another opens.

Meanwhile, in Bellingham — a city of about 82,000 people — four stores have opened.

What’s the problem here?

Chalk it up to unprepared applicants, difficulties for some entrepreneurs in finding legal locations for their stores and issues with city permitting, among the many problems.

Even Seattle’s first store hasn’t yet been able to bypass the red tape. Cannabis City is lacking permits to legally operate, according to the city’s Department of Planning and Development (DPD).

And without much marijuana available to sell, potential store owners say there’s little incentive to move quickly.

Many of the delays stem from the state’s retail marijuana lottery. In April, the Liquor Control Board (LCB) held a drawing to determine who could operate Washington’s 334 potential pot shops. The LCB chose 21 applicants at random for Seattle, of the 191 who applied.

The lottery was not merit-based. To qualify, applicants had to show they had the right to property suitable for selling pot under state law, but they did not have to prove their financial means or business capabilities.

In some cases, lottery winners either weren’t interested or capable of opening a store, Liquor Board spokesman Mikhail Carpenter said. “They’re not doing anything,” he said.

Killy Nichelin, whose company Iconic Cannabis received the 53rd spot in the lottery, said some winners looked to profit from their license alone, which they viewed as “golden tickets” to barter. Before the lottery, Iconic Cannabis leased and began to remodel a property in Ballard. When Nichelin’s company was not drawn, he sent an email to all the lottery winners seeking a partnership. Seven winners contacted him. They wanted his company’s location, knowledge and business plan. Some asked for money.

“These people are insane,” he said. “They got a lottery ticket, they didn’t prepare at all, and they thought they ruled the world.”

Nichelin said some of the people who wanted to partner didn’t appear to have the financial means to operate, nor did they have access to a good location. He wasn’t willing to give up prime, legal real estate to people he felt shouldn’t have been in the lottery in the first place.

“If we were to give up the building…we just handed someone a turnkey property,” he said. To afford rent on their location, Nichelin and his business partners opened a low-volume medical dispensary. They still hope to get a state license.

So far, the LCB has disqualified five Seattle lottery winners and begun to review some ranked higher than 21. The LCB this week also is sending letters to dozens of lottery winners, giving them 60 days to make significant progress toward their license or have their applications withdrawn, said Randy Simmons, the state’s marijuana project director.

Although he received the 25th lottery position, applicant Bob Ramstad said his company, Paradoxical, received a letter from the LCB in August. His application was being reviewed.

It was a surprise. Ramstad had secured property before the lottery but relinquished it when he wasn’t selected. He had to start his search anew.

Finding real estate has been difficult. Ramstad said he pored over 800 lease listings in Seattle and found just 20 that would be legal and suitable for a retail business. About half of those would require him to change the property’s allowable use to retail, which can take weeks. Ramstad said that once he signs a lease, he’ll be two months away from opening but said some landlords haven’t been willing to work with him for fear of a federal crackdown on pot businesses.

The city’s more than 400 parks, 97 public schools and about 200 child-care centers presented challenges for applicants, who are not allowed to be within 1,000 feet of them.

Trichome & Calyx’s Mehran Rafizadeh, for example, drew Seattle’s top lottery number, but his application is on hold as he and the LCB determine whether he chose a valid location.

Rafizadeh says a child-care facility opened within 1,000 feet of his location after his application was submitted.

Until a judge rules on his case, Rafizadeh doesn’t know if he can proceed where he is, be allowed to move or have his application denied altogether. He has a hearing scheduled for next month.

Two Seattle stores are scheduled for final inspections by the LCB.

One of those applicants, Oltion Hyseni, said the LCB will visit his 1960s-themed shop this week. If Ocean Greens passes, Hyseni said, that puts him on track to get his license and open the store by the end of the month.

For lottery winners who did lock down a legal location, complying with Seattle’s building and land-use code has been another hurdle.

Seth Sligar won the 12th lottery spot with his company, Bud Bouquets. Sligar said the LCB has approved his application pending a final inspection, but he’s still waiting to build out his storefront.

“I can’t swing a hammer until DPD tells me I can,” said Sligar, referring to the city’s Department of Planning and Development. There’s tons of building going on in Seattle right now. They’ll get to us when they get to us.”

Acquiring a permit to renovate a space or change its use can take six weeks to five months, said Bryan Stevens, a spokesman for DPD. Stevens said older buildings often require safety additions or seismic upgrades.

If the process takes so much time, how was Cannabis City ready to open July 8, more than two months before any other Seattle shop? It didn’t wait for the DPD, and instead filed for a change of use after opening.

That approach comes with risks. In June, the city sued its first pot producer for operating in violation of its building code.

If Cannabis City were not addressing its permit problems, Seattle could choose to take similar action.

“The space is technically not legal,” Stevens said. “However, we will allow a business to be used or remain open if they show progress to obtain a permit.”

Cannabis City owner James Lathrop said he didn’t know he needed a permit. “I took the space the way it was, and I opened it,” he said. “It’s just paperwork to move it from office to retail. It’s all in process.”

Stevens said as long as Lathrop continues on his path to compliance, he won’t be fined, but it could still be costly.

“When you’re asking for forgiveness rather than permission there’s a huge risk there,” Stevens said. “You may have to make physical changes to the space, safety changes. That can add some cost to the project.”

If any potential store owners are waiting for supply to stabilize, that could happen soon, said LCB spokesman Carpenter. Many of the state’s outdoor growers will harvest their first crop later this month or early next.

Lathrop said that if Cannabis City weren’t already operating, he would be in no rush to open his store’s doors. “There’s no supply,” he said.

Store manager Amber McGowan said pot producers are charging high prices, which has strained the retail business.

“It’s not yet really profitable,” she said. “We’re able to pay our bills and pay our staff. We have just enough money to turn around and buy product.”

Photo: Business partners Miles Thomas, left, and Killy Nichelin, right, recently opened a medical marijuana store in the Ballard neighborhood of Seattle after losing the state’s pot lottery. Meanwhile, the state has only licensed one marijuana store in Seattle. (Ken Lambert/Seattle Times/MCT)

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Begich Catches A Big Break In Alaska Senate Race

Senator Mark Begich’s (D-AK) re-election campaign may have gotten a big boost this week, when a legislative quirk pushed some Democrat-friendly referenda onto Alaska’s November ballot.

As Niraj Chokshi explains at The Washington Post, Alaska’s constitution requires 120 days between the end of the legislative session and votes on citizens’ initiatives. Because lawmakers failed to adjourn by midnight on Sunday — 120 days away from Alaska’s August 19 primary — the three initiatives that were expected to appear on the primary ballot will now be pushed back to the general election.

That could be quite helpful to Begich. The iniatives would give the legislature the power to block mining projects in Bristol Bay; legalize the recreational use of marijuana; and raise the state’s minimum wage from $7.75 to $9.75 by 2016, then tie it to inflation thereafter.

As Chokshi points out, studies have found that ballot initiatives increase voter turnout. That alone would help Begich, given Democrats’ historic turnout disadvantage in midterm elections. The specifics of the iniatives should help him even more.

Democrats have made no secret of their desire to use the minimum wage as a wedge issue in November’s elections, and now they have a golden opportunity to do so. Although the state is generally conservative — Mitt Romney won it by 14 percent in the 2012 presidential election — polls have consistently shown that Alaskans support a higher minimum wage. A recent poll sponsored by the legislature’s Republican majority found that 69 percent support raising the wage, including 87 percent of Democrats, 78 percent of Independents, and 52 percent of Republicans.

Few politicians have been more vocal about their desire to raise the minimum wage than Begich, who co-sponsored the Senate bill to raise the minimum wage to $10.10 per hour. None of the Republican candidates in the race support increasing the federal minimum wage.

Begich could use any boost that he can get in November; the first-term Democrat is one of the most vulnerable incumbents on the ballot nationwide. According to The Huffington Post’s polling average, he is deadlocked with the two top contenders for the Republican nomination, Lieutenant Governor Mead Treadwell and former Department of Natural Resources Commissioner Dan Sullivan.

Photo: SenateDemocrats via Flickr

More Than 450 Medical Pot Shops File To Renew Taxes In Los Angeles

By Emily Alpert Reyes, Los Angeles Times

LOS ANGELES — More than 450 medical marijuana dispensaries have filed renewals to pay Los Angeles business taxes this year — more than three times as many as are allowed to stay open under the city’s Proposition D.

The new numbers won’t settle the debate over exactly how many medical marijuana dispensaries are now operating in Los Angeles. Additional pot shops may be open but have fallen delinquent on their taxes. Some may have never registered to pay taxes.

But the numbers provide the latest hint at what has happened after Los Angeles voters passed new rules attempting to restrict which medical marijuana dispensaries can operate — and how — across the city.

Before Proposition D passed last spring, police estimated there were roughly 700 dispensaries, though others pegged the number much higher. Fewer than 140 medical marijuana dispensaries are eligible to stay open under the new rules, according to city estimates.

Earlier this year, City Attorney Mike Feuer announced that more than 100 pot shops had shut down since the new rules went into effect. But when reporters asked Feuer exactly how many medical marijuana collectives were still operating in its city limits, the city attorney said he had no way of knowing.

Tax records have offered one clue: More than 1,100 medical marijuana collectives are actively registered to pay business tax in Los Angeles, according to figures released earlier this year by the city finance office. The Greater Los Angeles Collective Alliance, a voluntary association of medical marijuana collectives, estimates that when duplicate registrations are excluded, that number falls below 900.

However, it’s unclear if that many medical marijuana dispensaries are actually operating in Los Angeles. A business may obtain a registration certificate but never actually open. It might also close but fail to notify the city. On the flip side, some pot shops might have never registered to pay taxes.

The newly released numbers offer another hint at how many medical marijuana businesses are currently operating: After registering, Los Angeles businesses must file an annual renewal to report their taxable gross receipts. So far this year, 457 medical marijuana collectives have filed a renewal, according to Office of Finance General Manager Antoinette Christovale.

Feuer said it was still impossible to know for sure how many pot shops were open but heralded the new figures as “a sign of continued progress.” The numbers are much lower than estimates of the number of medical marijuana businesses open before Proposition D, Feuer said Tuesday.

“My impression overall is that fewer are operating now,” said Don Duncan, the California director of Americans for Safe Access, which advocates for safe, legal access to cannabis for therapeutic use. “But it’s so hard to quantify.”

Others questioned whether the tax renewals are a good measure of how many shops are open. “People are aware that they’re being targeted for enforcement and they’re refusing to renew,” said David Welch, an attorney who represents clients in the medical marijuana industry. “I don’t think it should be used as an indication that medical marijuana collectives are closing down.”

The city has continued to register new medical marijuana collectives to pay business taxes. Earlier this year, the Office of Finance reported that after the new law went into effect, it had registered nearly 200 pot shops with no previous records in the tax system; Feuer has warned shops that “if they’ve opened for the first time since 2013, they can’t be lawful under Proposition D and … are subject to prosecution.”

Under Proposition D, medical marijuana dispensaries and the landlords who lease space to them can be prosecuted if the shops don’t meet several requirements, including being registered under past Los Angeles ordinances and being located the required distance from public parks, schools and other facilities.

Photo: KayVee.INC via Flickr

Marijuana Industry Finds New Allies Among Conservatives

By Evan Halper, Tribune Washington Bureau

WASHINGTON — Hoping to get marijuana legalized in Nevada, an investment company specializing in the fast-growing marijuana industry invited the ballot initiative’s backers to pitch 150 financiers at a Las Vegas symposium.

Within 10 minutes, they raised $150,000.

Political contributors are not the only ones taking notice of the new realities of the marijuana business, said San Francisco-based ArcView chief executive Troy Dayton, who estimated his group will spend about $500,000 this year to support legalization of pot. Officeholders and candidates now jostle for the stage at investor meetings, he said.

“A little more than a year ago, it would have been worthy of a headline if a sitting politician came to talk to a cannabis group,” he said. “Now they are calling us, asking to speak at our events.”

No clearer example of the change exists than the industry’s newest full-time lobbyist, Michael Correia. An advocate for the 300-member National Cannabis Industry Association, he is a former GOP staffer who for two years worked as a lobbyist for the American Legislative Exchange Council — the powerful conservative advocacy group that works with state lawmakers to block health care reform, clean energy incentives and gun restrictions.

“People hear the word ‘marijuana’ and they think Woodstock, they think tie-dye, they think dreadlocks,” the San Diego native said. “It is not. These are legitimate businesses producing revenue, creating jobs. I want to be the face of it. I want to be what Congress sees.”

Correia doesn’t smoke pot. It makes him sleepy, he said. And he hasn’t been in the trenches for years fighting for legalization.

For him, the work is largely about the federal government unnecessarily stifling an industry’s growth. Any conservative, he said, should be troubled when companies can’t claim tax deductions or keep cash in banks or provide plants for federal medical research.

“I have legitimacy when I walk into these offices and say, ‘This is a cause you can get behind,'” Correia said. “I am not the stereotypical marijuana movement person. I grew up supporting these principles of limited government and federalism and fairness and individual liberty. This is the ultimate poster child for all of that.”

As pranksters and protesters give way to lobbyists and consultants in pinstriped suits, longtime pot advocates welcome the reinforcements, but sometimes bridle at the bottom-line agenda.

Officials at the National Organization for the Reform of Marijuana Laws expressed annoyance, for example, when some industry players in Maine recently opposed a legalization bill in their state. Full legalization threatened to break the monopoly on pot sales that current medical marijuana sellers enjoy.

“A lot of these companies are just in it for the money, the way any entrepreneur is,” said Erik Altieri, a lobbyist with NORML.

Moreover, some marijuana advocates confess, the all-business approach has taken a bit of fun out of the job.

“I used to go to cocktail parties, tell people I was a lobbyist for marijuana, and their minds would be blown,” said Dan Riffle, who advocates for the Marijuana Policy Project. “You could see their eyes light up. They would be like, ‘Whoa, that is a real job? Tell me more.'”

Now, Riffle said, “I tell people and they are like, ‘Oh. OK. I work for the energy sector.'”

But along with a certain staidness comes new partners.

Correia’s association, for example, recently formed an alliance with Grover Norquist, the anti-tax activist who runs Americans for Tax Reform. In the fall, Norquist stood at a news conference with a longtime nemesis, Rep. Earl Blumenauer of Oregon, one of the most liberal members of Congress, to promote a measure that would allow marijuana enterprises to deduct business expenses from their taxes.

“Grover’s view is government should not pick winners and losers,” Correia said. “It is a fairness issue. This resonates with him.”

When dozens of owners of cannabis businesses fanned out across the Capitol earlier this month for a day of lobbying, Correia advised them not to dwell on philosophical issues about the war on drugs, but to talk with lawmakers and their staffs about how the federal government was undermining growth of a legitimate industry.

“What Congress wants is more money,” said Lev Mallinger, a Pasadena accountant with the firm Bridge West, which represents hundreds of marijuana sellers eager to claim tax deductions. Changing the tax law, he said, “will bring in more money. It encourages more dispensaries to be forthcoming with their financials and pay their taxes.”

Now that the industry has legitimate money, politicians would like the favors to go both ways.

The Marijuana Policy Project used to get a request for campaign donations about once a week, Riffle said. Now, “I oftentimes just don’t answer the phone when I see a 202 area code because I know it is going to be someone calling asking for money.”

Pot lobbyists acknowledged that passage of any of the half-dozen measures they currently support probably remains at least a couple of years away. But the federal government can only be out of sync with a growing number of states for so long, they said, arguing that victory is inevitable as soon as the politics of pot catch up with fast-changing realities on the ground.

The Marijuana Policy Project recently purchased a building in Washington’s vibrant Adams Morgan neighborhood, complete with a rooftop deck. On a recent warm evening, it hosted its first fundraiser there for a Republican, Rep. Dana Rohrabacher of California.

The next day, Rohrabacher noted the “evil weed” some loiterers had been inhaling outside the building: “They were smoking tobacco,” he said.

Rohrabacher is a coauthor of a bill that would require the federal government to defer to state laws that allow marijuana sales.

“If it was a secret ballot,” he said, “the majority of my Republican friends would vote for it.”

Photo: KayVee.INC via Flickr