Medical Marijuana Licenses Up to Council

At its Jan. 31, 2012 meeting, Ann Arbor’s medical marijuana licensing board voted to recommend awarding 10 licenses for dispensaries – the same number that had submitted applications. Two of the license awards were recommended conditionally. Treecity Health Collective (1712 S. State St.) would need to move to a differently zoned district, and Greenbee Collective (401 S. Maple St.) would need to provide for adequate parking. The board also settled on some recommended changes to the city’s medical marijuana licensing ordinance.

Both issues – the award of the licenses and the changes to the ordinance – will be up to the city council to decide. The licensing board’s recommendation and report had been due to the city council by Jan. 31, according to the council resolution passed in conjunction with last year’s enactment of the licensing ordinance. But at the city council’s Jan. 23, 2012 meeting, Ward 1 representative Sabra Briere gave her colleagues a heads up that the medical marijuana licensing board would be submitting its recommendations in early February instead.

The legislation enacted by the council on June 20, 2011 included provisions for licenses and zoning requirements. The zoning requirements played a role in the recommendation to award one of the 10 licenses conditionally. Treecity is located in a district zoned for office use, which does not permit medical marijuana dispensaries.

On Jan. 25, 2012, the city’s zoning board of appeals (ZBA) turned down Treecity’s appeal of the city’s decision to deny Treecity’s application for a zoning compliance permit – a necessary component of a license application. At the same meeting, the ZBA granted the same kind of appeal to another dispensary – Green Planet (700 Tappan St.).

The tension between the board’s work and the city attorney’s office is reflected in the fact that even as the board recommended the conditional award of a license to Treecity, the city attorney has served a lawsuit against the dispensary.

The tension was also reflected during the meeting itself, as assistant city attorney Kristen Larcom reminded the board that their purview, according to the city’s ordinance, is [emphasis Larcom's] to “send to City Council a proposed resolution recommending either approval or rejection of each complete license application.”

In the city’s view, Treecity’s application is not complete, because the city has denied a zoning compliance permit to the dispensary. However the board appeared to rely on the subsequent sentence of the ordinance: “A recommended resolution may set conditions for approval.”

Also at its Jan. 31 meeting, the licensing board recommended that the initial licensing fee be established at $1,100 with the annual renewal fee set at $350.

Licenses Recommended

Businesses recommended to be awarded a license under Ann Arbor’s local ordinance were: (1) Green Planet, 700 Tappan St.; (2) TreeCity Treecity Health Collective, 1712 S. State St.; (3) Ann Arbor Health Collective, 2350 E. Stadium Blvd.; (4) OM of Medicine, 112 S. Main St.; (5) People’s Choice, 2245 W. Liberty St.; (6) Greenbee Collective, 401 S. Maple St.; (7) Ann Arbor Wellness Collective, 321 E. Liberty St.; (8) MedMarx at Arborside, 1818 Packard St.; (9) Medical Grass Station, 325 W. Liberty St.; and (10) PR Center, 3820 Varsity Dr.

The licensing board required little time at its Jan. 31, 2012 meeting to review and deliberate on each application – most of the review had been completed at previous meetings. [See previous Chronicle coverage: "Medical Marijuana: Local Board Eyes 2012" and "Medical Marijuana Board Straw Poll: Yes"]

Recommendations for Treecity and Greenbee were made conditionally – Greenbee must secure adequate parking, and Treecity must move to a location allowed under the city’s medical marijuana zoning rules.

At the board’s December 2011 meeting, it was discussed that Greenbee has only 8 of the needed 14 parking spaces for its intended use of the space as a medical marijuana dispensary. At the Jan. 31, 2012 meeting, the board’s discussion suggested that perhaps only five additional spaces were needed.

Treecity is currently located on a parcel zoned office (O), which is not one of the zones designated for medical marijuana dispensaries. In Ann Arbor, medical marijuana dispensaries can be located only in those districts zoned as D (downtown), C (commercial), or M (industrial), or in PUD (planned unit development) districts where a retail use is permitted in the supplemental regulations.

Of the licenses recommended, nine were made for businesses considered to be operating before the Ann Arbor city council imposed a moratorium on Aug. 5, 2010 for 120 days. The moratorium prohibited any additional uses of property inside the city for cultivation facilities or dispensaries. The moratorium was extended several times in the course of the council’s consideration of the medical marijuana issue.

The timing of the application process for pre-moratorium businesses for the first year’s applications was slightly earlier than for businesses established after the moratorium. And the maximum number of licenses available in the first year is a function of the number of applications received from pre-moratorium businesses – which the city determined to be nine. Those nine plus 10% (rounded up) yielded the total number of licenses available – 10. The one post-moratorium business recommended for a license is Grass Station.

The owner of the Grass Station had previously argued for inclusion for consideration as a pre-moratorium business. And previously, it appeared that possibly two dispensaries would be considered as post-moratorium applicants – Grass Station and PR Center. That would have set up a situation where the board needed to choose between dispensaries for which it would recommend a license.

However, PR Center was ultimately considered as a pre-moratorium business. The initial analysis as a pre-moratorium business had resulted from the fact that PR Center has more than one location – one of which is in a township island.

Zoning Board of Appeals

The licensing board’s report on recommended licenses and changes to the licensing ordinance was due to be submitted to the city council on Jan. 31. One reason the board did not meet until that day to take a final vote on its recommendations was to allow time for a decision by the city’s zoning board of appeals (ZBA) on two cases involving dispensaries: Treecity and Green Planet. The ZBA met to hear those two appeals on Jan. 25.

At issue in both cases was a decision by the city to deny a zoning compliance permit to the dispensaries, on the grounds that the businesses are not located in one of the zones enumerated in the city’s zoning code: D (downtown), C (commercial), or M (industrial), or in PUD (planned unit development) districts where a retail use is permitted in the supplemental regulations. Such a permit is a requirement for a medical marijuana dispensary license application.

On a unanimous vote, the ZBA overturned a decision by the city to deny a zoning compliance permit to Green Planet. And on a 5-1 vote, the ZBA upheld the decision by the city to deny Treecity’s zoning compliance permit.

Zoning Board of Appeals: Green Planet

Green Planet is located in a PUD (planned unit development ) zoning district. The PUD includes supplemental regulations that lay out types of uses allowed in the district:

a. Restaurants and Catering Businesses.
b. Grocery, prepared food and beverage sales, including retail sales of non-food items typically associated with groceries and food preparation. Examples include cookware, glassware, linens, books, kitchen utensils and implements, and small kitchen appliances.
c. Classrooms and educational instruction.
d. Tanning, massage and beauty salon.
e. Business offices, medical or dental offices, professional and non-profit organization offices. Examples include real estate and insurance agencies, attorneys and law firms, accountants, architects, engineers, travel agencies, consultants, and property management firms.

The language of the medical marijuana zoning ordinance states:

Medical marijuana dispensaries shall only be located in a district classified pursuant to this chapter as D, C, or M, or in PUD districts where retail is permitted in the supplemental regulations.

Green Planet had argued, in part, that because specific kinds of retail uses are permitted in the PUD’s supplemental regulations, they meet the ordinance description of a “PUD district where retail is permitted in the supplemental regulations.” In rejecting Green Planet’s application for a zoning compliance permit, the city argued that the kind of retail uses described in the supplemental regulation do not include marijuana dispensaries, because marijuana for medical use is not an item “typically associated with groceries and food preparation.”

The ZBA’s decision relied on the intent of the planning commission as reflected in that body’s deliberations on the zoning ordinance at its Oct. 5, 2010 meeting. Green Planet noted that the language on PUDs had been added as an amendment at that meeting and adduced the minutes of the meeting, the video, as well as The Chronicle’s reporting ["Medical Marijuana Zoning Heads to Council"] to argue its case. Green Planet argued that it had not been the intent of the planning commission to ask property owners to revise the supplemental regulations of a PUD in order to specifically allow dispensaries.

The vote by the ZBA to overturn the city’s decision on Green Planet was unanimous among the six members attending the meeting of the nine-member board. Absent were Carol Kuhnke and Wendy Carman. Jason Boggs recently resigned, leaving a current vacancy. [An application form for appointments to city boards and commissions is available on the city's website.] Attending his first meeting as a member of the ZBA was Ben Carlisle, who replaced long-time member David Gregorka.

Chairing the ZBA meeting in Kuhnke’s absence was Erica Briggs, who also serves on the city’s planning commission. As a planning commissioner, she’d actually voted on Oct. 5, 2010 against the inclusion of PUDs among those districts that are allowable zones for medical marijuana dispensaries. But given that the majority of her colleagues on the planning commission disagreed with her and the city council eventually enacted the zoning code to include PUDs, she told The Chronicle after the hearing that she was compelled to vote in favor of Green Planet’s appeal.

Zoning Board of Appeals: Treecity

Treecity is located in a district zoned as office (O), which is not one of the zoning districts allowed for use as a medical marijuana dispensary. Treecity’s appeal was based in part on its contention that a legal, non-conforming use of the property as a medical marijuana dispensary had been established before the zoning laws were passed.

The city’s position relied in part on the general principle of Ann Arbor’s zoning ordinance that: “Uses not expressly permitted are prohibited.” So the city of Ann Arbor argued that there was no legal use of a parcel within the city as a medical marijuana dispensary before the enactment of the zoning ordinance on June 20, 2011. Although several ZBA members expressed sympathy for Treecity’s situation, only one member – Sabra Briere – voted to overturn the city’s denial of the zoning compliance permit.

Treecity’s ZBA denial marked the third key disappointment for Treecity in its effort to keep its business at the 1712 S. State St. address. At the Oct. 5, 2010 meeting of the planning commission, Treecity’s attorney Dennis Hayes had unsuccessfully advocated for the inclusion of office districts as a possible zone for dispensaries. Then the planning commission (on Aug. 16, 2011), followed by the city council (on Oct. 3, 2011) both rejected Treecity’s request to be rezoned from office to C1 (local business).

At the licensing board’s Jan. 31 meeting, assistant city attorney Kristen Larcom reported that the city of Ann Arbor had actually filed a lawsuit a few months ago against Treecity, but had not served it until after the ZBA hearing. Dori Edwards, an employee who does public relations work for the dispensary, said that Treecity had been served on Friday, Jan. 27, 2012. The lawsuit, filed in the 22nd circuit court and assigned to judge Donald Shelton, alleges three counts of nuisance.

Other Recommendations

The city council resolution enacting the licensing ordinance, approved by the city council on June 20, 2010, directed the licensing board to make recommendations to the city council for any changes to the ordinance by Jan. 31, 2012. The ordinance itself also provides for regular communication from the board to the council – beyond an annual recommendation for approval or rejection of license applications. The board is also charged with reviewing and recommending licensing criteria, the number of licenses and the fee structure.

Other Recommendations: Completeness, Conditions

The issue of completeness of applications is one that has been a chaffing point between the board and the city staff. City staff have been reluctant to present the board with license applications that it does not consider complete. For example, one of the elements of an license application is a zoning compliance permit, for which the city has a separate application.

A zoning compliance permit has long been a standard part of the city’s review process, and is not peculiar to medical marijuana dispensaries. For two dispensaries (Treecity and Green Planet), the city denied had the permit because the city determined they were located in the wrong zone. So the license applications were considered to be incomplete.

Until Green Planet’s denial was overturned by the ZBA on Jan. 25, the licensing board had not reviewed and evaluated that dispensary’s application for a license. At the board’s Jan. 31 meeting, Green Planet’s Michael McCleod described how the city planning staff had subsequently been very helpful in assisting him in identifying any other gaps in his license application materials. The application requires, for example, evidence of operation before the moratorium was imposed on Aug. 5, 2010, and statements about any felony convictions for dispensary owners and operators.

So at the Jan. 31 meeting, board members reviewed the Green Planet application and came to a quick consensus that the dispensary should be recommended for a license.

At the same meeting, Dori Edwards of Treecity indicated that she’d not known she should contact city staff for help in reviewing any missing materials. But Treecity’s ZBA appeal had been turned down, so from the city staff’s perspective, the application was fundamentally not complete and Treecity had exhausted all possible avenues for making it complete. And as the board mulled the question of how to deal with Treecity’s application, assistant city attorney Kristen Larcom said she wanted to remind the board that its purview was to evaluate and make a recommendation on each complete application.

Larcom allowed that the ordinance does provide for conditional approvals, but indicated that a possible condition would not extend to the issuance of a zoning compliance permit – having that permit was a matter of completeness of the application.

Sabra Briere told Larcom point blank: “I disagree with you.” Briere is the city council representative to the medical marijuana licensing board. And Briere said that during deliberations on council, the council didn’t talk about why there’d be conditional approvals or limits on those conditions.

So the board forged ahead and included Treecity as a recommended license – with the condition that it obtain a zoning compliance permit. That would mean the business would need to move from its current location.

The attorney for Treecity, Dennis Hayes, wrote in an email to The Chronicle that he hoped the lawsuit the city has filed against Treecity would be resolved by Treecity finding a new location.

Edwards indicated at the Jan. 31 board meeting that she’s actively seeking an alternate location and hoped to sign a lease within a week or two. After that it would take perhaps a month to complete a move, she said.

Larcom stressed that for now, the dispensary use that Treecity wants to make of its current location is not legal – other aspects of the business could possibly persist, but the dispensary use violates zoning. And the city is required to uphold the zoning law – that’s why a lawsuit has been filed, Larcom said.

Related to the issue of completeness, the licensing board agreed at its Jan. 31 meeting to recommend that the explicit role of city staff in determining completeness of applications be struck from two places in the ordinance [added language in italics; deleted language with strike-through]:

7:504 (4) Following official confirmation by staff that the applicant has submitted a complete application City Council approval of the issuance of a license, a new license shall not be issued to a medical marijuana dispensary until the applicant for the license complies with all of the following requirements…

7:505. If the applicant has successfully demonstrated compliance with all requirements for issuance of a license within 10 weeks (70 calendar days) after the date of City staff’s official confirmation that the application for a license was complete City Council’s approval of a license, the city administrator or designee shall grant renewal of an existing or issue a new license…

At the board’s Jan. 18 meeting, the idea was entertained to remove staff from part of the process, by requiring that all the application materials be forwarded directly to the board, instead of to the city planning staff. Jill Thacher is the city planner who’s shouldered that task for the first year’s round of applications. Ultimately, the board weighed the volume of actual work it would take for board members to handle application materials, concluding it was more than a clerical task.

But related to the issue of what can constitute a condition on granting a license, the board agreed to a recommendation making explicit that there is flexibility in the kind of conditions that can be set.

7:502 (7) … The Board shall annually send to City Council a proposed resolution recommending either approval or rejection of each complete license application. A recommended resolution may set conditions for approval. The conditions may include a waiver by City Council of any provision or provisions of the licensing ordinance, and/or the imposition of a new provision or new provisions, if the public interest so requires.

Other Recommendations: Entry for Inspection

Licensing board member Patricia O’Rorke was particularly concerned about a provision in the ordinance that requires dispensaries to consent to inspection. The board agreed to recommend a change that makes explicit that requests from the city to inspect a dispensary would be complaint-driven:

Pursuant to a complaint, an authorized person shall consent to the entry into a medical marijuana dispensary by the Building Official and zoning inspectors for the purpose of inspection to determine compliance with this chapter pursuant to a notice posted in a conspicuous place on the premises two (2) or more days before the date of the inspection or sent and by first class mail to the address of the premises four (4) or more calendar business days before the date of the inspection.

When asked if she saw any problem with the “pursuant to complaint” language, city planner Jill Thacher said, no – that’s the way city staff handles issues like that anyway.

In weighing whether the notice given should be done by posting and mail, a brief discussion unfolded about the merits of certified mail versus first class mail and the future of the U.S. Postal Service.

Other Recommendations: Number of Licenses, Frequency of Recommendation

At its Jan. 31 meeting, the licensing board grappled with the tension between having a single annual recommendation on licenses (as the ordinance now specifies) versus a rolling recommendation as applications are submitted. Board member Jim Kenyon said he liked the idea of being responsive and meeting regularly. However, he noted that if there are a limited number of licenses available, a rolling recommendation process would result in giving privilege to those applying first.

Kenyon gave the example of the University of Michigan, which he said had wound up admitting nearly its entire freshman class through the early admission this year. “The music stopped and there were no chairs,” he said. That does not necessarily result in the most qualified applicants being admitted. On the other hand, he said, he did not want to make people wait a calendar year to have their application for a dispensary license processed.

During the board’s discussion, Sabra Briere noted that as far as evaluating one dispensary against another, the board had not faced that situation this year, and had not applied qualitative criteria to the evaluation. The board had essentially made its criteria for recommendation a matter of whether a dispensary had “jumped through all the right hoops.”

The board mulled what the number of licenses should be. With respect to potential demand, city planner Jill Thacher reported that before the city council passed its licensing and zoning ordinances, she’d fielded numerous phone calls from out-of-state people interested in setting up shop. After the Ann Arbor legislation was passed, she said, the phone calls had fallen off precipitously.

Board member Gene Ragland suggested that it should be possible to work out the math of the demographics of patients and calculate the potential consumer demand. Local attorney Dennis Hayes, who attended the meeting, ventured that there were perhaps 50,000-60,000 registered patients who did not have caregivers – that might be a way to gauge potential consumer demand. Kenyon said that he himself would not use a caregiver to obtain medical marijuana, if a dispensary were an option.

Ultimately, the board settled on capping the number of licenses at 20, which is the maximum number specified in the ordinance for the first year.

… but not more than 20 medical marijuana dispensary licenses shall be issued in the first year and shall be capped at that number.

The board also agreed not to suggest changing from the process described in the ordinance as an annual recommendation for the award of licenses. Also recommended was a standardization of the timing requirements for applications – in some places there’s a 70-day condition but in others it’s a 90-day condition. The board agreed to recommend making that timing requirement uniformly 90 days.

Other Recommendations: Operation in Compliance with MMMA

The board also recommended striking a clause in the zoning ordinance as superfluous:

5:50.1.4(k) Medical marijuana dispensaries and medical marijuana cultivation facilities shall be operated in compliance with the MMMA.

The discussion at the board’s Jan. 18, 2012 meeting on this issue included concern expressed by dispensary owner Chuck Ream, that deleting the phrase could cause alarm and attract unwanted attention to Ann Arbor if it were incorrectly perceived as sending a message that Ann Arbor’s dispensaries would not be following Michigan’s medical marijuana law.

Other Recommendations: Licensing Fee

The final issue on which the licensing board needed to weigh in was setting the licensing fee for medical marijuana dispensaries – which is separate from the application fee of $600. One point of comparison for the board was neighboring Ypsilanti’s $2,500 initial license fee, with a $1,100 renewal each year. Patricia O’Rorke was inclined to set them much lower. Sabra Briere joked that perhaps Ann Arbor’s fees should be higher because Ann Arbor was “more prestigious.”

Jim Kenyon said he felt the goal of the fee should be to make it high enough to prevent someone from applying “casually.” He continued by saying that the $600 application fee, plus a $1,100 initial licensing fee would do that.

Gene Ragland, who fills the physician’s slot on the licensing board, noted that his narcotics license cost him only $350. But Briere wondered how much Ragland’s medical education had cost. Ragland offered that when he’d finished medical school, he’d owed $8,000 in loans – and he’d paid those off in two years. But that was long ago, he allowed.

Based on Ragland’s narcotics license, the board agreed to recommend the annual license renewal fee be set at $350, to go along with a $1,100 initial license fee.

Next Step: City Council

Even if granted a local Ann Arbor license, dispensaries in Ann Arbor would still need to operate in conformance with the Michigan Medical Marijuana Act, which was enacted by statewide voter referendum in 2008. The city has explicitly required applicants for dispensary licenses to explain how their business conforms with the law, including an Aug. 23, 2011 court of appeals ruling that has been interpreted by many authorities to mean that no medical marijuana dispensaries are legal. [.pdf of the McQueen case ruling].

Ann Arbor’s city attorney, Stephen Postema, is open to the possibility that dispensary business models may exist that do conform to the McQueen case ruling, but Postema has not issued a written opinion describing business models that he believes conform. The city council will receive advice from the city attorney before it votes on awarding the licenses that the board has now recommended. Any vote by the council would come at the earliest on Feb. 21.

At the Jan. 31 meeting, dispensary owners felt it was important for Ann Arbor to demonstrate a working model for local licensing – it would provide a basis for state legislation, which may be introduced soon, that would explicitly enable local options for regulation of dispensaries.

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