Dealing with the deadline

DEPOSIT PHOTOS

The Aug. 21 deadline for municipalities to decide whether they’ll be a home for the state’s earliest adult use cannabis businesses is fast approaching. As dictated by the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act, municipalities that don’t pass ordinances keeping the industry will be are open for cannabis businesses for the next five years.

As of Aug. 12, dozens of towns have said “not in my backyard.” Ten contiguous towns in Bergen County did, along with Toms River, Lake Como, Belmar, East Brunswick, Middletown, Plainsboro, and more.

Around 60 thus far have enacted ordinances permitting cannabis businesses to operate within their borders, many of which said “yes” to some types and businesses and “no” to others. Industry experts including Brach Eichler cannabis practice co-chair Charles Gormally and McElroy, Deutsch, Mulvaney & Carpenter LLP cannabis practice chair Fruqan Mouzon say that number is enough for the state’s adult use cannabis market to have a healthy start.

Both have been in and out of Zoom city council meetings for months lobbying for ordinances approving the plant. “As a local politician, you don’t know what you’re signing yourself up for yet, because the rules haven’t been established. What I tell clients who get disappointed by [bans], is things can change,” Gormally said. “When people see and go into cannabis dispensaries and realize the sky isn’t going to fall in and they’re not going to get raped and pillaged, they’re going to change their minds about cannabis.”

Gormally

The Cannabis Regulatory Commission hasn’t released the regulations for the industry. The initial rules will be announced on Aug. 21, the same day towns have to say yay or nay.

The Princeton municipal council approved an ordinance banning the cultivation, manufacturing, packaging, wholesale, transportation, delivery and retail sale of cannabis at its Aug. 9 meeting. New Jersey CannaBusiness Association President Edmund DeVeaux, who attended the meeting, commended the council for “being so thoughtful in their process.”

Princeton’s ordinance emphasizes the town’s commitment to “social and restorative justice in terms of cannabis policing and enforcement” and dictates that “social and racial justice considerations must be highly valued in all decision making” if and when they come back to the drawing board and create pro-cannabusiness ordinances.

Of the types of cannabis businesses municipalities can approve or deny in their communities, the hardest sell, DeVeaux said, is consumption lounges. The NJCBA backed the inclusion of consumption lounges in the legislation to give people in public housing a place to consume their cannabis, which even in the adult use market, for many, is their medicine. Just a handful of towns thus far, including Jersey City and Atlantic City, have approved lounges.

Jay Czerwinski, a cannabis business consultant who’s had his hands in dozens of states’ industries for the last decade, said that in any state that municipalities can opt out, many do.

He can’t imagine why they do, though. “Is it going to prevent the citizens from these towns from getting cannabis? No, of course not,” he said. “How hard is it for anyone to get cannabis in New Jersey now? It’s not. It’s simple.”

Czerwinski projects the cannabis naysayer towns “will be dropping like flies in the next few years,” but even in Colorado and California, two of the country’s longest standing legal adult use cannabis markets, hold outs remain: more than half of the towns in both states don’t allow retail cannabis sales.

Others change their tune. After initially banning the business when the state gave it the go-ahead in 2016, Modesto, Calif. joined the industry in 2019 and benefited big: in June 2020, the town reported its last fiscal year brought in $3.2 million in cannabis business tax. That’s more than the town’s hotel tax brought in that year.

“What do [cannabis business bans] mean for the local municipality? They’re losing out on tax revenue. It’s being sold in the town next door and coming right back to [the town that rejected it]. It’s completely illogical for the town to not want these businesses,” Czerwinski said.

“It really can bring back a lot of vitality to challenged towns,” said Gormally, who also practices in California. “In San Jose, I was going to dispensaries and I went to three in close proximity to each other. You could see over the years I’ve been going there that restaurants have located there, and other businesses start locating there.”

Mouzon

Mouzon said that the only people really affected by town bans are those pursuing microlicenses, which were originally built into the legalization bill to create equity for small operators.

“If you wanted to get a micro license, it has to be the town you live in or adjacent. If the town says no, you pretty much can’t exercise your entrepreneurial intentions unless you move,” Mouzon said.

While CREAMMA doesn’t specify how long one has to live in a town before setting up shop there “I don’t know how the Cannabis Regulatory Commission is going to look at [if] someone moves from Livingston and gets an apartment in Newark [to get a microlicense.] It’s kind of against the spirit of the bill. The whole point was to have local people be able to get into the business,” Mouzon said.

One of Mouzon’s clients applied during the still-undecided 2019 Medical Marijuana Program Request for Applications and, at the time, got approval to set up part of their business in Orange. Orange has since banned cannabis business operations in town. While he said his client “wouldn’t have any problems finding another location if they were granted a license” for a vertically integrated medical cannabis facility, microlicense owners wouldn’t have that option.

For business owners interested in operating in a town that’s on the fence or has already said no – or no for now – the time to change minds before the Aug. 21 deadline is running thin. The turnaround time for introducing legislation at the local level can be a number of weeks, Mouzon noted, though he “would encourage people to continue lobbying if you have a location within the town you want to use.” The deadline notwithstanding, Gormally recommends people develop relationships with the mayor and council and take them out to lunch to educate them on business possibilities.

“People serve lengthy prison sentences for this. Convince them you’re there as a member of the business to enhance the life of the town for the residents,” Gormally said. “Find out who the nonprofits are, get involved with them, lend a hand to them, offer financial support once your business is up and running. That’s how you become a good neighbor.”