Clarence “Cip” Paulsen III, of Spokane, says he plans to convert the former Costco building at 800 E. Third, east of downtown Spokane, into a 131,500-square-foot marijuana growing and processing facility.

Paulsen says he and business partner Brian Murray, a former state senator and part owner of Spokane-based Vintage Hill Cellars winery, are going through the application and licensing process to start a business called GrowState that will grow process and supply retailers with marijuana, which was legalized for recreational use through a state initiative in 2012.

Murray says he’s known Paulsen for a number of years and started discussing a potential business venture as the initiative gained momentum.

He says expects licenses will be issued by the Washington state Liquor Control Board within 60 days.

“It’s an in-depth process, and I believe there are 8,000 applications on the retail processing and producing side,” Murray says. “That’s a lot of work to do all at once.”

Meantime, GrowState has filed a predevelopment application with the city of Spokane for a $3 million to $5 million renovation project that would convert the building into an “agricultural processing facility” with ancillary office space.

Predevelopment is an optional stage of the city of Spokane’s planning process that helps the city and the applicant identify potential obstacles to a proposed project before the applicant files for land-use and building permits.

The Spokane Valley office of Boise-based architecture and engineering firm CSHQA is designing the project, which the predevelopment application says will include hydroponic growing space. Hydroponic farming is a method of producing crops year-round without soil. The method can be used to maximize plant growth or crop yield by exposing root systems directly to a controlled amount of nutrients dissolved in water.

“We do know we’ll only be allowed to grow in up to 21,000 square feet of space,” Murray says. “Hopefully at some point (the state) will allow additional square footage.”

Much of the remainder of the space could be used for processing marijuana products, which requires a separate license from production. If the state approves multiple licenses, GrowthState could start out with 30 employees, Paulsen says.

“It’s exciting, but very premature,” he says regarding plans about the operation. “From what I understand, retail outlets won’t even be open here until Aug. 1. We’ve got four months to go.”

The Third Avenue building in recent years has been used as a recreational vehicle and boat storage facility, which Paulsen says is largely a seasonal business.

“It will be emptied out within the next couple of months,” Paulsen says of the building.

Paulsen says his father bought the building, originally the home of a Chevrolet auto dealership, in 1974.

Issaquah, Wash.-based Costco Wholesale Corp. opened its first Spokane-area store there in 1983, after expanding the building. The warehouse club moved its store to a new building at 5601 E. Sprague, in Spokane Valley, in 2001.

After that, the Paulsen family listed the building on the market for $5.4 million until Paulsen started up Empire Auto Boat & RV Storage.

Paulsen is a convicted felon labeled at one time by the Spokesman-Review newspaper as a “cocaine kingpin” in regard to his 1993 arrest and conviction on charges of two counts of distribution of cocaine and possession with intent to distribute marijuana.

Paulsen’s conviction is far enough behind him that it won’t count against him in the state’s marijuana licensing process, says Mikhail Carpenter, spokesman for the Washington state Liquor Control Board, the regulatory authority over marijuana production and sales.