As the state begins to implement Initiative 502 — legalizing and mainstreaming marijuana — a number of prospective entrepreneurs see it as an opportunity to get in on the bottom floor of an extremely lucrative business, while also legitimizing a longtime-tabooed product.
That couldn’t be more clear from the turnout and reaction at East County attorney Chris Crew’s first-ever Marijuana Workshop, which sold out at the Guesthouse Inn & Suites in Elma on Saturday.
For that matter, Crew sees the legal marijuana industry as such a potential boon, he’s not only applied for retail licenses to sell marijuana, he announced Saturday that he is slowly winding down his traditional law practice — Crew Law Firm — and has opened a new practice in which he will concentrate solely on marijuana law. It’s aptly named THC Law. Crew said he called around and found the state was void of legal experts on Initiative 502, so he’s decided to jump in feet first.
“I’m excited by the potential,” Crew said. “I think there’s a lot of money to be made. I think it’s going to be the biggest agricultural industry in our state in the next couple of years and the biggest tax generator in our state in terms of agriculture.”
Crew’s first marijuana workshop was an I-502 primer for 45 registrants who have applied for licenses to be either a marijuana producer, processor or retailer. The seminar was designed to help applicants navigate the legal process to become I-502 licensed marijuana producers, processors and retailers. Attendees paid between $120 and $140 each to attend the eight-hour session that featured legal advice from Crew and presentations by experts in the field of security, software and insurance. Initiative 502 features many idiosyncrasies and is peppered with vague or ambiguous language, so this sort of information-packed session is in high demand. He has two more scheduled so far, Feb. 22 in Everett and March 8 in Spokane.
Money will be an issue, with the state expecting their taxes to be paid in cash and banks nervous about even accepting deposits for marijuana-related businesses. Security will be an issue with recommendations of hiring guards in escort vehicles to ensure marijuana is safely transported — or else risk a hijacking. Frankly, Crew says, “Plan to get robbed.” And testing is consistent with every plant, every amount of marijuana marked as it goes from grower to seller.
The Marijuana Workshops website states Crew’s mission: “Marijuana Workshops is dedicated to ensuring that the I-502 Initiative is a success. The biggest threat to the legal marijuana movement is too much press coverage of licensed growers, processors or retailers being busted for rule violations. Marijuana Workshops provide attendees information they need for the success of their business and long-term compliance with the law.”
“There’s going to be uneven application of the law because it’s new,” Crew told the packed conference room. “Some of the rules just aren’t set and it’s not going to be clear when they might pull the plug on you.”
The prospective licensees had hundreds of questions for Crew and the many experts, and many said that the state’s Liquor Control Board — tasked with implementing I-502 — seems to have a tenuous grasp on the issues.
“If you call 10 different people at the Liquor Control Board, you get 10 different answers to a question,” said one frustrated potential grower. That comment was greeted by nods of approval by those at the seminar, who came from all over Western Washington for the debut workshop.
The seminar highlighted the many hoops applicants must jump through in order to procure and maintain their licences. They are loaded with nuances and idiosyncrasies.
Here are some of the innumerable I-502 particulars facing potential growers, processors and retailers.
All applicants and financiers must undergo criminal background checks. Based on a point system, if you have eight or more points, your license is denied. A felony conviction in the past 10 years is worth 10 points and automatic disqualification. A gross misdemeanor in the past three years is 5 points. A misdemeanor in the past three years is four points. If you’re currently under federal or state supervision — “parole or community custody” — that’s eight points. Non-disclosure of any of the above, including marijuana-related charges — is four points. There is a 100 percent exception for up to two misdemeanor marijuana possession convictions. Future employees of these operations will also be subject to the same points system.
BANKING AND TAXES
Here’s the written advice Crew gave everybody at the seminar:
Banking has become an exceedingly difficult issue.
On Jan. 23, U.S. Attorney General Eric Holder announced he is beginning a major shift in federal banking policy to encourage banks to work with the marijuana industry.
So far, the banks have said they want more than just reassurances that they won’t be prosecuted; they want (regulatory) changes. …
In the meantime, there are three major options:
• Cash everywhere: Keep the money in cash or bunches of (less than $10,000) cashier’s checks from banks. Hide them in secure locations such as safety deposit boxes.
• Don’t lie. Just deposit the cash in your bank. Keep meticulous books and put the money in a different account than the one you use personally. Avoid really large cash deposits; consider depositing at different locations.
• Create a holding company.
And what about paying the state its 25 percent excise tax on each operation’s gross receipts?
“They expect you to come with cash,” Crew said. “That’s, literally, the current plan.”
As for the required commercial general liability insurance, there are companies specializing in I-502 insurance and rates could range from $900 per year for a small-scale grow operation to $4,500 per year for some processors. Commercial auto insurance is also required for processors to make deliveries to retail outlets.
“Plan to get robbed. Build it into your business plan,” Crew told the assembled crowd.
And that’s even with the stringent state-mandated surveillance and security requirements that include:
• Only owners and employees can enter any growing or processing facility. Family members and friends are expressly forbidden unless certified employees of the business. Even service people such as plumbers or electricians will require special clearance from the Liquor Control Board.
• There must be alarms on all windows and entry points. The state encourages motion detectors, pressure switches, duress, panic and hold-up alarms.
• Mandated surveillance systems must include 640-by-470-pixel minimum video quality and be internet-capable. They must cover the entire perimeter and gates, the entire inside of the operation must be on camera and there must be a minimum 20 feet of coverage from all entrances. The data from these cameras must be secured on-site for at least 45 days. Lighting must be sufficient for 24-hour surveillance. The cameras must run 24/7 with the ability for high-definition facial recognition.
“You have to be capable of ‘clear and certain identification,” said Steve White, an executive with Secure Pacific Corp., which specializes in security surveillance systems. He said that includes high-definition recognition of faces and license plates.
“The more doors, windows and rooms you have in your operation, the more cameras you’re going to need,” White said. “The one kicker you’ll see over and over (in I-502) is ‘clear and certain identity.’”
White and others said applicants should plan to pay $60,000 to $70,000 for a surveillance system “because that’s what it’s going to cost you. … The smallest proposal we’ve put through so far was $26,000.”
Many of the applicants balked at the amount of money such a system will cost if installed by professionals.
“That will shut out a lot of people right there,” grumbled one potential grower.
Chris Thomas, 42, has been growing medical marijuana in Lewis County for the past three years and has an extensive background in the field of heating, ventilation and air conditioning. He said he’s confident he can buy a surveillance system off the shelves and install it himself.
“I’m a 25-year veteran of the drug wars,” Thomas said with a laugh. “They have systems at Costco that meet all the specifications.”
All growers, processors and retailers must use the online traceability system set up by the state to track everything.
• Each plant must be tagged and tracked (with bar codes) individually before growing eight-inches tall.
• Licensees must maintain comprehensive inventory of all products and by products and all points of sale.
• There is a 15-day window at start for growers to procure seeds or clones and “claim” and tag their strains. After this, growers can only use their own clones or seeds or buy them from other licensed producers in the state.
• Small samples (one- to two-grams) can be supplied to retailers for sampling. Growers sampling their own product are limited to one gram per strain per month. You can’t use it on site and only producers, retailers and employees may sample.
• When transporting product to market, the Liquor Control Board must be notified of the type of product, amount and weight, transporter names, time of departure and estimated time of arrival at each delivery point.
• The Liquor Control Board must be notified upon completion of transport.
• Transport records must be kept for three years.
• Only the licensee and their employees can transport product to retailers.
• The product must be sealed and labeled according to state requirements prior to transports and may not be opened during transport.
• The product must be locked in a lock box/safe that is bolted to the body of the vehicle and accessed from inside the vehicle (not in the trunk).
• Transportation must take the most direct routes — no joy riding or stopping for foods.
The state is also requiring all processors to undergo quality-assurance testing of each product (marijuana, hash or extracts) by lot before shipping to retailers. Marijuana is measured in five-pound lots.
That testing by an accredited lab, must include moisture content, potency analysis, foreign matter inspection, microbiological screening, pesticides and other chemical residue, metals screening and residual solvent levels.
The seminar covered many other issues, including extensive packaging and labeling requirements, selecting and hiring job applicants, seasonal labor, payroll, signage (only retailers are allowed a sign with a total area of 1,600-square inches.)
No advertising, whatsoever, is allowed by I-502. That includes websites, Facebook pages or business cards. Coverage by legitimate press organizations is allowed. There is also no sampling allowed of any product in retail outlets, though smell jars are allowed.
Crew offered numerous bits of advice on procuring employees, but stressed that hiring longtime, loyal workers is going to be a key to this industry.
“Pay your employees enough so they can support themselves and they’re not going to steal your marijuana,” Crew said.
Despite the extensive obstacles facing all the license applicants, most seemed happy and enthused about the prospects and enjoyed and appreciated all the information and networking opportunities at the first Marijuana Workshop.
“I really like what he’s doing,” said Dana Anderson, who has applied to grow and process marijuana in Mason County. “I already knew a lot, but I learned a lot, and I met a lot of interesting people. Ever since I was 17, I’ve wanted a log house, a cow named ‘Betsy’ and a pot field. I think I’m on my way.”