Report offers framework for Vermont’s marijuana business

Bill Lofy, former Chief of Staff to Gov. Peter Shumlin, is working to legalize marijuana with the group Vermont Cannabis Collaborative. Photo by Morgan True/ VTDigger

Bill Lofy, former Chief of Staff to Gov. Peter Shumlin, is working to legalize marijuana with the group Vermont Cannabis Collaborative. Photo by Morgan True/VTDigger

BURLINGTON — A group started by local entrepreneurs interested in shepherding marijuana legalization in Vermont released a report outlining how they would build the recreational pot industry in the Green Mountain State.

The report, unveiled at a Wednesday news conference, is the culmination of 12 months of collecting input through study groups, public forums and consulting with experts in states that have already legalized recreational pot use, said Will Raap, a founder of the Vermont Cannabis Collaborative who started Williston-based Gardeners Supply.

The report focuses on the regulatory framework and economic opportunity that a legal marijuana industry is likely to create, but Raap and other members of the Vermont Cannabis Collaborative said they recognize the importance of addressing public safety concerns such as youth smoking and driving while under the influence.

Group member Hinda Miller, a former state senator, said that young Vermonters currently have an easier time obtaining marijuana than alcohol and suggested that regulation would make it more difficult for them to get their hands on pot.

Another member, Rob Williams, a Champlain College professor, said that tax revenue could be plowed into cessation efforts, similar to what the state does with money from a massive settlement with tobacco companies in the 1990s.

Keeping impaired drivers off the road and developing a field sobriety test is a thornier issue, group members conceded, but with the momentum toward legalization in the U.S. and Canada, the motivation — and money — to find solutions will follow.

How to regulate marijuana

In a goldilocks scenario with three projections, the middle — or most likely — marijuana industry in Vermont would generate $251 million in annual sales from 55,000 pounds. That estimate comes from data in a 2014 Rand Corp. report on legalization commissioned by the state, and from consultations with industry experts from Colorado.

Citing Rand’s figures, they suggest Vermont could realize between $20 million and $70 million in tax revenue, which they suggest the state put toward medical research, public health and safety as well as combating the Vermont’s opiate crisis.

The report predicts the industry would create 4,000 jobs from lab technicians and retail associates to attorneys and accountants.

Vermont should focus on state branding as it does with products like maple syrup and craft beer, said Bill Lofy, a former chief of staff to Gov. Peter Shumlin, and the group’s de facto spokesman. There is also an opportunity for Vermont to develop laboratory testing practices as well as quality and dosage standards that currently don’t exist in states that have legalized pot.

“Our goal here is to distinguish Vermont from other states as the best-tested, highest-quality and most accurately labeled cannabis in the country,” Lofy said, as it did previously in developing standards for organic crops.

Vermont’s marijuana industry would focus heavily on craft-scale production, though industrial-scale operations would be necessary to meet demand, and people who prefer to grow their own for personal use would be permitted to do so.

Home-growers would be permitted up to six plants without a license or tax liability, but would be prohibited from selling their yield, the report says.

Craft growers would have seven to 99 plants and pay a sliding scale tax that increases for every 10 plants. The state would issue unlimited craft-scale licenses and growers in that category would be encouraged to join cooperatives, similar to Cabot Creamery, where the for-profit cooperative funnels proceeds back to members. Vermont would issue three co-op licenses allowing selected pot growers to cultivate, test and sell products wholesale or at a retail location.

The industry model would also license four industrial-scale producers that would pay a production tax when their product is quality tested. The license would cover the same activities as the co-op license. Under the proposal, the companies would have 51 percent Vermont ownership to prevent large out-of-state corporations from dominating the market. Vermont’s existing medical marijuana dispensaries would be given priority in the licensing process.

Businesses would also be able to apply for a license to make “marijuana infused products,” such as edibles. Those licenses would allow for the bulk purchase of extract from growers to make their products, but edible producers would also be permitted to seek a growers license.

The model described in the report would allow for retail sales where the pot is grown, and the authors acknowledged that security issues would need to be addressed as a lucrative black market for marijuana is likely to continue across some of Vermont’s borders and, at least initially, the marijuana industry could be a cash-only businesses.

Williams, who lives in the Mad River Valley, said farmers in that region would say the best solution to security concerns are “locks, cameras and guns.”

Many FDIC-backed banks in Colorado and Washington aren’t willing to serve marijuana businesses because selling pot is an illegal activity under federal law. While the Obama administration has adopted a permissive stance, that could change under a future administration. That’s forced a large portion of a multimillion-dollar industry to operate in cash, which presents a plethora of practical and security concerns.

Raap said three medical dispensaries in Vermont are able to bank with local credit unions, but he acknowledged that access to banking institutions is a top concern.

The federal prohibition also makes it impossible for companies to claim tax deductions for business expenses.

Alan Newman, founder of Magic Hat and another member of the collaborative, said it’s unlikely that Vermont will be able to answer logistical questions like these at the outset, but that shouldn’t stop the state from moving forward with legalization.

“If we wait for perfection we will find every state and country, Canada, around us basically taking our opportunity away from us,” Newman said.

Political prospects

Gov. Peter Shumlin, who has received thousands of dollars in campaign contributions from the pro-legalization Marijuana Policy Project, has said repeatedly that he supports legalization.

However,the governor said this week that he has not made up his mind as to whether the time is right or whether he would throw his political capital behind a push for legalization in the upcoming legislative session — his last as the state’s chief executive.

The Senate Government Operations committee is drafting a legalization bill that Sen. Jeanette White, D-Windham, plans to introduce in January.

Polls show that a majority of Vermonters support legalization, but Newman warned against treating passage as a “foregone conclusion.” He said legalization proponents will need to put pressure on lawmakers to make the legislation a priority.

The Vermont Cannabis Collaborative, which sunk roughly $20,000 into a website and the report, will host a forum for lawmakers in Montpelier Dec. 1.

Morgan True

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