Why more than 400 Michigan communities are saying no to recreational pot businesses

Nearly a quarter of Michigan’s communities have decided to ban recreational marijuana businesses from their towns, but the reasons aren’t necessarily out of a fear of reefer madness.

Instead, the wording on the Nov. 6 ballot proposal was vague enough that many communities worry about what opting into the budding marijuana market will mean for their towns.

"The problem is that what the citizens voted on was five pages of legal mumbo jumbo and some of it is just horrible," said Harrison Township Supervisor Ken Verkest. "Until the state clarifies exactly what some of this stuff means, we’re like sitting ducks here. A lot of municipalities said let’s opt out until the state figures out what all this is about."

For example, the wording on the ballot proposal says that communities can either prohibit businesses entirely or limit the number of licenses available for businesses. What the language doesn’t say is whether city officials can accept some categories of licenses and reject others.

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Andrew Brisbo, director of the Bureau of Marijuana Regulation, told officials at a Michigan Municipal League conference in March that as the state is developing rules and regulations for the recreational market, the wording on the ballot proposal could be interpreted to mean that communities can either prohibit all categories or allow all  — growers, processors, dispensaries, testing labs and transporters.

“The medical marijuana law says you can limit the number and type of licenses, but the recreational ballot proposal says you limit the number of licenses, but doesn’t address the type of licenses,” he said. "I've heard that opinion out there, so I think it's important that I share what I've heard so communities can prepare for it."

Lawyers who met in work groups with the state last week to discuss the rules and regulations that will govern the recreational market, said the ballot proposal is clear.

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"Municipalities have the authority to limit the types of facilities, not just the number and if they want to limit the number to zero, they're free to do so," said John Fraser, an attorney with Grewal Law in Okemos. "The intent of the statute was to give municipalities the flexibility to allow whatever businesses most fit with the demographics and land availability of the community."

The law's wording could create problems for communities like Ferndale, which has opted in for medical marijuana and will give approval for three dispensaries and one testing facility. But while the city also intends to allow in recreational marijuana businesses, it doesn't have available land or buildings for grow or processing operations. 

"If we have to allow all in, that would cause communities like ours to rethink our involvement with the recreational market," said Ferndale Mayor Dave Coulter. "My hope would be that communities would be allowed to maintain flexibility. If not, we’d be supportive of any kind of fix for this." 

Another issue is the tax revenue promised to communities. For those towns that have opted in for medical marijuana businesses, the 3 percent excise tax revenue that would come back to the community was a carrot that provided another reason to say yes to medical weed.

That tax revenue has now disappeared because the law that was passed by the Legislature in 2016 to regulate and tax medical marijuana included language that if voters decided to legalize marijuana for adult recreational use, the 3 percent excise tax would go away. Voters approved the ballot proposal and the tax ended on March 6.

The 10 percent excise tax that will be imposed on sales of recreational marijuana once licenses are awarded early next year will go only to communities that approve licenses for retail pot shops.

Communities deciding on marijuana businesses

More than 400 communities have decided to prohibit recreational marijuana businesses from their towns, including some that have said yes to medical marijuana businesses, according to a running tally kept by the Southfield consulting firm Banks & Company, which has several marijuana business clients.

If communities can only opt in or out of the market, more towns will follow suit, that, said Eric Foster, director of strategy and business development at Banks.

"That’s a really broad interpretation that will cause even more communities to opt out," he said. "Another six opted out last week." 

For Harrison Township, which has given approval to 22 medical marijuana grow operations, that choice was an easy one. The  township was able to limit the marijuana footprint to only gated and secured growing operations.

"We want to allow a property owner to do what they want to do with their property, without me making a moral judgment about what they're doing," Verkest said.

Recreational marijuana is a different issue. 

"As far as retail shops, a majority of our residents weren’t there yet. Our sheriff convinced us that there would be a pretty good likelihood that there could be criminal activity if you’ve got a lot of people walking around with handfuls of cash."

That doesn't mean the township won't reverse course at some point in the future, Verkest said, and enter the recreational market.

"We don't want to just take a cavalier approach and find out we're stuck with something. It isn’t worth taking a huge risk," he said. "This is probably a short-term decision until the state sorts it all out."

Chris Barnett, supervisor of Orion Township, which has adopted a medical marijuana ordinance that allows for growers, processors, testing labs and transporters, but no dispensaries, is thinking that they'll probably opt out of the recreational market.

"We’re probably leaning toward no. We want to take a wait and see approach," he said. "We're in northern Oakland County, which is generally more conservative, but the recreational (ballot proposal) passed 57-43 in our township. There is an argument that could be made that the residents did already speak on this."

The tax revenue issue for Orion was only one factor in deciding to allow in medical marijuana businesses. 

"We have new buildings going onto the tax rolls now and normally, new businesses would qualify for tax abatements, but we wrote in our ordinance that the marijuana businesses don’t qualify for tax abatements," Barnett said. "So, while we were somewhat saddened by the loss of the excise tax, we weren't planning on banking a bunch of revenue from it."

It's not unusual for communities to opt out of the recreational marijuana business. In Colorado, the first state to legalize marijuana, more than two-thirds of the state's 271 municipalities ban recreational marijuana businesses. And in California, which legalized marijuana use, sales and possession in 2018, two-thirds of the state's cities and towns ban recreational pot businesses. 

Tackling the rules for marijuana

Four work groups — representing lawyers, marijuana businesses, communities and interested individuals — met with state marijuana regulatory officials last week to try and iron out some of the wrinkles in the legal weed ballot proposal.

Matt Abel, executive director of the Michigan chapter of the National Organization for the Reform of Marijuana Laws, said the meetings will hopefully lead to the state — and communities — to begin taking the concerns of the industry to heart.

"It's a little frustrating dealing with some of the municipalities," Abel said. "To a great extent, I think their opting out is about fear. I think these boards are out of touch with the public they serve. But that's nothing new."

Chris Johnson, general counsel for the Michigan Municipal League, said he'd like to see the state try to clarify some of the ambiguities in the marijuana legalization law.

"If you’re having to limit the number of licenses, I don’t think we’ll know if you have to limit the type too until there’s a court case that decides that. So for communities, if you’re working on an overabundance of caution, you opt out," he said. "If the Legislature could make some small fine-tune revisions, it would go a long way to calm everybody down."

However, since the law was a voter-initiated statute, any changes would require a three-quarters vote in both the state House and Senate.

"Are you going to get that super majority in the House and the Senate? Maybe," Fraser said. "I don't think this is a particularly controversial issue. But the attorney general could also consider issuing an opinion on this law. It's clearly within her authority."

The state Bureau of Marijuana Regulation has until Dec. 6 to come up with the rules and regulations that will govern the recreational marijuana market, although the department expects to have a draft of the rules by this summer.

Once those are in place, the department will begin to accept applications for recreational business licenses. Medical marijuana businesses will be the first in line for those licenses for the first two years of the recreational market.

Kathleen Gray covers the marijuana industry for the Detroit Free Press. Contact her: 313-223-4430, kgray99@freepress.com or on Twitter @michpoligal.