With the release of the Washington State Liquor Control Board’s marijuana retailer lottery results earlier this month, retail marijuana operations are moving forward; however, it appears that growers may not be able to keep up.
The agency is anticipating issuing a total of 334 retail marijuana licenses for the state, but as of May 13, it had only issued a total of 32 licenses for producers and processors. Producers are growers of marijuana, and processors package and label it.
A licensee can hold both a producer and processor license at the same time, says Mikhail Carpenter, an Olympia-based spokesman for the agency. Of the 32 licenses issued, 24 are both producer and processor, seven are just for producing, and one is just for processing, Carpenter says.
There are currently nine active marijuana production licenses for Spokane County. Of those, seven are also licensed as processors. The state has allotted a total of 18 retail licenses for the county.
Part of the reason that the number of producers and processors is low is because some licensees schedule the final inspection far in advance, he says, and others haven’t gotten their facilities ready to grow in yet.
“There’s 13 (applications) where we’re waiting for the licensee to finish build out,” he says. “There’s also a few who haven’t paid for the license yet.”
Carpenter says it’s too soon to know how many producer and processor licenses ultimately will be issued. There is no cap on those licenses, so there’s no lottery and the agency is continuously processing them.
Among the upcoming retailers, however, there is some question whether producers will be able to keep up with demand once sales begin. Scott O’Neil, a retail license applicant, says the problem is already a concern on retailers’ minds.
“There’s definitely going to be a shortage,” he says. “That’s why I’ve already contracted with a grower to get his first harvest, and others too.”
The breakdown of Spokane County’s 18 retail licenses is eight for the city of Spokane, three for Spokane Valley, and seven for the unincorporated county. Applicants on the recently released list are shown in lottery order; the most likely to receive a license are the companies listed in the first eight, three, and seven spots, respectively.
Being listed within the allotted number of licenses isn’t a guarantee, however; shops still have to complete the application process and pass a final inspection before they’re granted a license. If one of the top eight applicants in the city of Spokane doesn’t pass the application process, for example, the board would then move on to the applicant in the ninth spot, and so on. The liquor control board expects to begin issuing the licenses no later than July.
It’s also possible that, as demand rises, the liquor board could increase the number of allotted licenses, says Carpenter.
“The board always has the right to reopen licensing to adjust to the market,” he says. “But right now the focus is to get the market up and running and then see if that is needed.”
One stipulation of applying for a retail license and making it into the lottery was having a retail space lined up, says Carpenter.
“They had to have demonstrated some right to the property,” he says. This could mean either a signed letter of intent or an actual lease.
O’Neil, whose company O’Neil Industries LLC was listed eighth on the city of Spokane lottery results list, lucked out: he currently manages a separately owned medical dispensary called Kouchlock Productions at 1919 E. Francis, and plans to operate his retail business in a separate suite in the same building.
The building has three suites, O’Neil says, two of which are leased by Kouchlock Productions’ parent company, Pacific Northwest Medical LLC. If the retail license comes through, O’Neil says, he’ll sublease one of the suites for the retail store and run the medical dispensary out of the other.
O’Neil also manages the Spokane outlet of Kouchlock Industries’ other medical dispensary, Pacific Northwest Medical, at 805 E. Houston.
Since the space for the retail business was already secured, O’Neil says he didn’t have to invest as much as entrepreneurs who didn’t already have a lease, he says.
“Other people who didn’t have a lease already, if they didn’t get the lottery, would be out a lot,” he says.
Pacific Northwest Medical LLC owner Sean Green received earlier this year the first marijuana grower and producer license in Washington state under the name Kouchlock Industries, O’Neil says.
O’Neil had to separate himself and form his own company in order to apply for a retail license; by law, the same company cannot sell and also grow or process. However, O’Neil says he’s contracted with Green to have the rights to the first harvest from Kouchlock Industries, which he says is probably a month away from being ready.
“We’re working to together to produce quality product,” he says.
Scott Fox, founder of Spokane medical collective Safe Alternative Medicine (SAMs), at 515 S. Thor, was one of the applicants in the lottery. However, with his application currently sitting in the 41st spot, it’s unlikely Fox will receive a license.
“We knew the risk going in,” Fox says. “We knew this was possible.”
Fox says the owner of the retail space he was planning to lease at 3801 E. Sprague has another potential retail client as well. Fox also says he was able to do some remodeling work for the owner, and has been able to hold the lease on the space for the last six months for about $1,000, he says.
Fox says he’ll continue operating his medical dispensary as long as possible. He’s also got another backup plan, he says.
“My daughter applied for a 502 grow license,” Fox says, referring to the number of the initiative that legalized recreational marijuana in Washington state. “She’ll probably get approved for that, so hopefully she’ll hire me to work for her.”
O’Neil says he had a phone interview with officials at the liquor control board on May 13 as part of his application process. He says he discussed finances and an operating plan. One of the requirements of the operating plan, O’Neil says, is having a video security system with 45 days of recording capability. This is mainly to ensure the business isn’t selling to minors, he says.
Up next in the application process is the final inspection, which O’Neil says hasn’t been scheduled yet. To be ready for inspection, he says, the store has to completely set up in its location, without product.
“The store has to be completely ready to go, ready to open,” he says. “Everything has to be laid out, except no product on the shelves or in the store.”
The final step, after passing the inspection, O’Neil says, is to pay for the license. O’Neil says he’s not sure of the exact amount he’ll have to pay, because the licenses are pro-rated based on the time of year they’re issued, but for an entire year the license costs $1,000.
Overall, O’Neil says, the application process with the state has gone well.
“They’ve been keeping us pretty informed,” he says. “With the lottery it was a pretty tense situation, but other than that it’s been pretty good.”
One of the biggest challenges retailers still are facing is the issue of where to bank, O’Neil says. While Spokane-based Numerica Credit Union recently issued a statement saying it would serve producers and processors, it’s still shying away from retailers.
“That’s the main issue right now,” O’Neil says. “We’re getting ready to open and do business, and we don’t have a bank.”
Another possible challenge facing marijuana retailers is ensuring that patrons who come from out of state know they can’t take product back with them.
“It’s one of the fed’s main concerns,” O’Neil says. “We have to post signs and stuff.”
The issue of what to do with medical marijuana dispensaries also remains a problem for the state. Although the liquor board made several recommendations to the legislature late last year, the operation of medical collectives, so far, remains unchanged.
Carpenter says, “The legislature took up several bills during the last session and none of them passed, so there’s been no change so far.”
O’Neil says he believes there could be major dissent in the medical marijuana community if collectives are shut down.
“If that happens, there’s going to be a lot of mad medical patients,” he says.
Fox, founder of SAMs, says he believes medical dispensaries will be closed within a year.
“Those of us in the medical side believe that by about March or May of next year, we’ll be shut down,” he says. “That’s what we believe, from the rumors. I believe, personally, as the 502 recreational becomes more open and established, once the medical side starts to interfere with the recreational side, we’ll be shut down … if the state actually acknowledged it as a medicine, we wouldn’t be liable for (sales) tax, and I don’t see that happening.”
As a way to talk about the future and try to coexist, retailers and medical representatives here founded the Spokane Cannabis Association about a year ago, says O’Neil, who’s a member of the association. O’Neil says the association isn’t just about business, but “furthering cannabis in general.”
The association currently has about 15 members, he says, although it used to have more.
“With the retail lottery, people got put off a little,” he says. “It’s mostly medical now.”
Along with the retailers association, there’s also the city of Spokane’s marijuana policy subcommittee, which is open to the public. City Councilmember Jon Snyder, who co-chairs the committee, says it first started meeting in January.
“It’s a public meeting where different stakeholders involved in implementing I-502 get together and discuss various facts about the policy,” Snyder says. “We’ve had presentations on everything from drug use in juveniles to tourism opportunities from I-502. We’ve had attendees from WSU, Gonzaga, the regional health district, and entrepreneurs who have applications in.”
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