Perception is one of the biggest hurdles cannabis businesses face when seeking approval from communities and municipalities, and was the view in vogue among the panel members at NJBIZ’s Business of Cannabis event Tuesday at the Imperia in Somerset, moderated by New Jersey CannaBusiness Association President Scott Rudder.
Perception is one of the biggest hurdles cannabis businesses face when seeking approval from communities and municipalities. Without grassroots support, these businesses won’t be welcome in places that might otherwise benefit from this new source of tax revenue, said Jim Minninger, corporate security specialist at Viridis Security.
Minninger’s view was in vogue among the panel members at NJBIZ’s Business of Cannabis event Tuesday at the Imperia in Somerset, moderated by New Jersey CannaBusiness Association President Scott Rudder.
“People don’t know what they don’t know. The perception is Cheech and Chong’s head shop. Folks here know that’s not true,” Minninger said. “There’s this perception that there will be a higher crime rate, vagrants coming in, people laying on the sidewalk stoned. To be able to come to an event like this where you have good folks in here — that changes the perception.”
Although the recent application round for four new Alternative Treatment Centers in New Jersey is over, another is expected as early as December, according to Bill Caruso, head of the cannabis practice at law firm Archer & Greiner PC.
Community outreach and involvement allowed panelist Rosie Naumovski, vice president of Treatment Solutions of New Jersey Inc., to change the perception of cannabis dispensaries in her home state of Illinois and open a treatment facility near a church.
Before Naumovski even had product in her stores, she invited law enforcement and community members to come see the facility as the mark of, she said, a “good neighbor.”
“If you explain to them what your plans are and do your due diligence, they appear to be more receptive,” Naumovski said.
Changing perception can be as basic as a change in vocabulary, according to Minninger.
“We’re not selling pot, we’re not selling weed. We’re selling cannabis. Let’s stop using the old school terminology to kill that perception,” Minninger said.
Perception is also a challenge when it comes to dealing with banks, the panel agreed.
Though Naumovski was initially able to find a bank in Illinois willing to work with her medical cannabis facility — something many struggle to do given marijuana remains a federally banned substance — the relationship lasted a year until the bank said to her, “You have too much cash coming in.”
Sandy Suchoff, CPA at CannaCPAs, said she believes the onus of knowing it’s a cash business is on the bank. If a bank decides to work with a cannabis business, it has to know what it’s getting into, she said, adding there exists a “virtual bank” that offsets the additional compliance work with anywhere from a 2 percent to 5 percent fee.
“The banks have to do their own due diligence and ascertain what the scope of the extra work to be performed is and if they perform accordingly, if it’s worthwhile for them — and it very well might be,” Suchoff said. “That’s why these secondary online banks can charge these transactional fees, because of the extra work that’s involved.”
Panelist George Garcia, who heads up the real estate arm at law firm Connell Foley LLP, noted there are ways to make dispensary locations themselves a bifurcated part of the business.
“The real estate play in this space can be uniquely crafted where you can utilize it to have some tax benefits, some banking side benefits, [real estate investment trusts],” he said.
Though multiple states beat New Jersey to the punch in regard to legalization, Caruso highlighted something unique to New Jersey: It could be the first state to do so through legislation and create a market.
“One thing you’re gonna see in this bill, I’m almost certain of it, is there’s going to be a local options tax added to this,” Caruso said. “It’s going to allow municipalities that house a marijuana cannabis facility inside the city limits, they’re going to be able to tax it. They’re going to be able to derive revenue directly to their town now, not passed through Trenton. That’s a game-changer.”
Additionally, New Jersey residents will have the opportunity to be part of the corporate structure of cannabis businesses, he said.
“Racial and social justice and economic development go hand in hand, and I think that’ll be the success story that comes out of our state,” Caruso said. “We will get this bill done, and it will come with a lot of add-ons … that are going to improve the quality of this program going forward, going long-term.”
The holdup in getting a cannabis bill to the Legislature, Rudder said, is a debate about the tax structure for adult use. One school of thought believes New Jersey should have a graduated tax, starting at 10 percent and ending up at 25 percent, he said.
“The thought is let us get in there softly, making sure that we’re achieving one of our main objectives, which is drying up the black market. That’s a thought process for having a reduced tax burden, so the legal market is very competitive with the black market,” he said.
The other school of thought suggests New Jersey go straight for a 25 percent tax.
“The difference between the graduated rate and 25 percent is tens of millions of dollars,” Rudder said. “It’s not an idle conversation, it’s something very significant and the people involved in this are very passionate about their position. Hopefully we’ll see in the next few days a solution to that … but it remains to be seen.”
Conversely, a consensus has been reached on the medicinal side, he said, which would make for a formidable market from 2019 moving forward.
In contemplation spurred by an audience member, the panel addressed what they saw the future of the industry to be five to 10 years down the line.
“This will ultimately become like the liquor and alcohol business. There will be bars, it will be regulated … you’ll have franchises, like coffee shops. I don’t see why this can’t be parallel to what we have now in alcohol and tobacco,” Garcia said.
Caruso sees consolidation in the industry’s future, with new cooperation from the federal government and the movement of cultivation to the South while keeping the processing and dispensing facilities in New Jersey. Additionally, he foresees job growth in the pharmaceutical and agricultural sides of the industry, particularly through partnerships with research institutions and universities.
For those looking to get into the space, or further themselves along, Garcia said, the goal is to be “proactive rather than reactive.”
“Identify your business, have a plan for your business that works,” he said. “Be aware of your local surroundings. The business is going to be what it’s going to be. If you’re really proactive and engaged, this could be the next big economy in New Jersey.”