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Nation & World

Businesses fear lack of readiness for recreational sales’ start Jan. 1

From left, General manager at Verilife medical marijuana dispensary Joe Hall, 34, Hospitality associates Robert Kuti, 28, and Brittney Hicks, 30, wait for patients to arrive as they prepare to open at 11 a.m. Friday in North Aurora. Marijuana dispensaries across the state are unsure if they will be ready for the launch of recreational marijuana in Illinois on Jan. 1.
From left, General manager at Verilife medical marijuana dispensary Joe Hall, 34, Hospitality associates Robert Kuti, 28, and Brittney Hicks, 30, wait for patients to arrive as they prepare to open at 11 a.m. Friday in North Aurora. Marijuana dispensaries across the state are unsure if they will be ready for the launch of recreational marijuana in Illinois on Jan. 1.

CHICAGO – The medical marijuana dispensary in Naperville snagged one of the first state licenses issued to sell recreational pot, creating expectations of a steady flow of new customers when sales start on Jan. 1.

But the dispensary’s plans were shelved just 5 days later when the Naperville City Council voted to prohibit recreational sales in the city.

What happened in Naperville made real an ongoing concern for many Illinois cannabis operators who are increasingly uncertain about their ability to launch by New Year’s Day because of both rules that exist and those yet to be made.

Marijuana companies say they want to play by the book, but the book hasn’t been fully written as a host of administrative rules over recreational pot have yet to even be proposed.

“There will be a lot of dispensaries not ready,” said Gorgi Naumovski, CEO of Thrive Dispensary, which has two downstate locations. “We’re all in the dark.”

When Gov. J. B. Pritzker signed the legislation to legalize recreational marijuana June 25, it started a 180-day clock for various state agencies to propose and adopt administrative rules that will help regulate the nascent industry. That deadline falls just days before legal sales of weed are supposed to begin.

A half-dozen state agencies have authority to propose rules on issues such as oversight for growers, recordkeeping for retailers, documentation of taxable income and a loan program to help “social equity applicants” obtain capital to start a cannabis business.

So far, none of those proposed rules have been published by the secretary of state’s office, the first step in an approval process that can take anywhere from 90 days to a year to complete. That, in addition to local decisions on whether to allow recreational sales, has created a fair amount of uncertainty for the industry.

Despite that, the Pritzker administration said it sees no issues for an on-time startup to recreational sales, while acknowledging the law is designed to allow for a gradual ramp up and wasn’t expected to immediately replace the black market for pot.

“From everything that we’ve seen, everything looks to be on track to make sure that we have a very robust rollout on Jan. 1,” said Deputy Gov. Christian Mitchell, Pritzker’s point man on marijuana legalization.

Many of the questions the industry is raising are answered in the law itself or in guidance issued by state agencies overseeing the rollout, Mitchell said. And those that haven’t will be answered in due time as craft growers, infusers and other businesses come on line, he said.

Industry operators say their most urgent concern is that the law, as interpreted by the administration, prohibits medical marijuana dispensaries from relocating if they add recreational pot sales.

Only businesses licensed to sell medical marijuana are eligible for the first wave of recreational licenses. The zoning requirements for Illinois’ medical cannabis program relegated some dispensaries to industrial sites that lack parking areas or signs directing customers to businesses.

Chicago-based Pharmacann wants to relocate two of its five Illinois dispensaries. One is in a medical office building in North Aurora that would struggle to handle increased customers The other is in an industrial area in Romeoville, just down the street from a truck repair shop and welding school.

“We need to be able to relocate that existing site in order to accommodate, to the extent possible, the marketplace on Jan. 1,” said Jeremy Unruh, director of public and regulatory affairs at Pharmacann said. “It’s an imperative, not just an, ‘Oh sure, it would be nice.’ “

The architects of the law, state Sen. Heather Steans and Rep. Kelly Cassidy, have gone back and forth with the governor on the issue. Pritzker noted in a letter to the lawmakers Aug. 27 that dispensary operators can still seek licenses for a second retail location.

Mitchell said the decision by Naperville’s City Council, which will keep the town’s 3C Compassionate Care Center medical dispensary from selling recreational pot, won’t change the administration’s approach.

“The opt-out was built in the law for a reason: to provide for local control,” Mitchell said. “It doesn’t seem yet that that issue is systemic. If it becomes that way, we’ll take another look.”

But the industry also has concerns about how the administration is handling the application process for those secondary location licenses.

Companies are required to open their second store in the same designated area as their existing medical dispensary. They must show the state that they have at least applied for local zoning approval, and they can’t open within 1,500 feet of another licensed medical or recreational pot shop.

In guidance issued last month, the Department of Financial and Professional Regulation said that secondary site licenses will only be issued after a new store has passed a final state inspection, essentially setting up a first-come, first-served system.

Marijuana companies say this could create a system where businesses pour capital into a new retail store only to be beaten out by another business down the street or around the corner.

“Then you have to find a new site and you did all that work,” said Chris Stone, senior policy adviser and co-owner of Ascend Illinois, which operates medical dispensaries in Springfield and Collinsville. “One of the problems is you’re not going to know about who’s next to you until everybody files their secondary license.”

The state acknowledged the possibility of such conflicts in a memo last month and advised companies to keep an eye on the competition by methods that include filing open records requests with local zoning boards.

For downstate dispensaries, like Thrive’s locations in Anna and Harrisburg, the requirement to open second shops in the same area as the first shops is also problematic, said the company’s CEO, Naumovski.

The population of the area is sparse enough that opening more dispensaries there could cannibalize business from Thrive’s existing shops, he said. Naumovski has one new location picked out, but plans to wait on the other. He wants clarity from the state before proceeding.

Mitchell contends the law includes all of the specifics necessary, including details on the license application process, for existing dispensaries to prepare for Jan. 1 recreational sales.

“We deliberately made a choice to write the requirements for that application right into the bill so that we would avoid the rulemaking process and be able to go straight to market,” Mitchell said.

He acknowledged that additional regulations will be rolled out as the industry expands. The Department of Agriculture, for example, still has to create rules for new licenses for smaller growers and companies that will make pot-infused products, but because those licenses won’t be awarded until next summer, there’s still plenty of time, Mitchell said.

Despite Mitchell’s optimism, there is plenty of history to support skepticism over the ready availability of recreational pot on New Year’s Day.

The rollout of the state’s medical marijuana pilot program, for example, was anything but smooth.

The law authorizing the sale of pot to patients with certain medical conditions took effect Jan. 1, 2014, but the first medical dispensaries didn’t open until early November 2015.

Last month, Pritzker signed a separate bill expanding and making permanent the state’s medical marijuana program. Patients with a range of qualifying conditions, such as cancer, Parkinson’s disease, autism and anorexia, are eligible to participate in the state’s medical program.

Cassidy acknowledged the “aggressive timeline” of the recreational program’s rollout, but said she thinks “we’re still on track.”

“People are concerned, obviously. And I get that – I hear from people every day,” she said.

Industry representatives have scheduled a meeting with the Pritzker administration Tuesday to discuss their concerns and seek clarification on some of the rules and regulations as they prepare for the first day of legal recreational sales, said Pam Althoff, a former Republican state senator who is now executive director of the Cannabis Business Association of Illinois.

“This is a highly regulated industry,” Althoff said. “You don’t walk into a building and flip on the lights and say, ‘OK, we’re ready to operate.’”


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