Medical Marijuana: Local Board Eyes 2012

On Dec. 14, 2011, Ann Arbor’s medical marijuana licensing board met to continue deliberations on applications that the city has received for a limited number of medical marijuana dispensary licenses. At its Nov. 30 meeting, the board had taken an initial straw poll on one license application. Board members were favorably inclined to make a recommendation to the city council that a license be awarded to MedMarx at Arborside Compassion, located at 1818 Packard St.

At its Dec. 14 meeting, the board continued to review materials that had been submitted to determine completeness of other applications, and heard an argument from a business owner that his application should be considered as a pre-moratorium business.

The moratorium had been imposed by the Ann Arbor city council on Aug. 5, 2010 for 120 days – it prohibited the future use of property inside the city for cultivation facilities or dispensaries, and was extended several times in the course of the council’s consideration of the medical marijuana issue. That consideration culminated on June 20, 2011 in the enactment of zoning and licensing requirements for medical marijuana businesses.

Ann Arbor’s local laws require that businesses operate in conformance with the Michigan Medical Marijuana Act, which was enacted by statewide voter referendum in 2008. The city has explicitly required of applicants for dispensary licenses that they 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]. Based on remarks made at the Dec. 14 meeting, it appears that Ann Arbor’s city attorney is open to the possibility that dispensary business models may exist that do conform to the McQueen case ruling.

Recommendations by the board on the award of licenses, along with recommendations for any revisions to the ordinance, are due to be submitted to the city council by the end of January 2012.

The licensing board’s work comes even as some marijuana advocates have begun to recruit volunteers for an eventual petition drive that would seek an amendment to Michigan’s constitution to repeal the state’s general marijuana prohibition. If successful, such a constitutional amendment would appear to remove state-level legal hurdles to obtaining medical marijuana or operating a medical marijuana dispensary. However, the legal ability of federal agents to enforce federal drug laws would be unaffected by a change to Michigan’s constitution.

A sign-up sheet for people to indicate willingness to help with the petition campaign was passed around by audience members at the Dec. 14 licensing board meeting. To place the constitutional amendment on the Nov. 6, 2012 ballot, the beginning and end dates for the signature collection period (based on typical strategies used by petition initiatives and Michigan’s election law) translate to Jan. 12 and July 9, respectively. To qualify, 322,609 valid signatures would need to be collected.

The Jan. 12 petition start date comes a day after Michigan’s Supreme Court is scheduled to begin hearing arguments in two medical marijuana cases. One involves the growing of medical marijuana in an “enclosed, locked facility” (People v. King) and the other involves the timing of a physician’s recommendation that is needed to support a defense against prosecution (People v. Kolanek).

Summary of the Status of 10 Applications

By the time of the Dec. 14 medical marijuana licensing review board’s meeting, the city had received 10 applications. Three have foundered on zoning compliance issues, but two of those businesses have filed appeals with the city’s zoning board of appeals (ZBA). Of the other seven, five have been determined by the board to have been in business before the Aug. 5, 2010 moratorium was imposed, but the other two were not.

• Green Planet, 700 Tappan St. Status: ZBA appeal
• Treecity Health Collective, 1712 S. State St. Status: ZBA appeal
• Ann Arbor Health Collective, 2350 E. Stadium Blvd. Status: zoning issue, no appeal filed as of Dec. 31, 2011
• OM of Medicine, 112 S. Main St. Status: pending licensing board decision on recommendation
• People’s Choice, 2245 W. Liberty St. Status: pending licensing board decision on recommendation
• Greenbee Collective, 401 S. Maple St. Status: pending licensing board decision on recommendation (parking space requirements are problematic)
• Ann Arbor Wellness Collective, 321 E. Liberty St. Status: pending licensing board decision on recommendation
• MedMarx at Arborside, 1818 Packard St. Status: pending licensing board decision on recommendation
• Medical Grass Station, 325 W. Liberty St. Status: pending licensing board decision on recommendation as post-moratorium business
• PR Center, 3820 Varsity Dr. Status: pending licensing board decision on recommendation as post-moratorium business

The board discussed various pieces of additional information that had been submitted since their Nov. 30 meeting. That information included items ranging from contact information to statements about any felony convictions that people associated with a business might have. Not all the information has yet been submitted, but city planner Jill Thacher concluded that there were essentially five applications for which she’d been able to put together full staff reports.

The two dispensaries generating the most discussion were Greenbee Collective and the Medical Grass Station. For Greenbee, the issue related to adequacy of parking. For the Medical Grass Station, the issue related to its status as a pre- or post-moratorium business.

Parking Requirements

Greenbee Collective, located at 401 S. Maple, drew a question from city councilmember Sabra Briere (Ward 1) about parking space requirements. City planner Jill Thacher indicated that Greenbee wanted to work with two of the adjoining parcel owners to get the additional six spaces the business would need. Wendy Rampson, head of planning for the city, noted that what’s required to make that solution work would be to get a permanent easement – it would need to come from either Kroger or Top of the Lamp.

From the audience, local attorney Dennis Hayes ventured that Greenbee was only one of two units in the building. However, Rampson explained that parking requirements are a function of the entire building. Greenbee has 8 and needs 14, said Thacher. Briere noted that the requirement is for one off-street parking space for every 310 square feet of retail space.

Briere questioned whether the existing building currently has enough parking to comply with zoning. Thacher explained that parking is based on use, not zoning. Dispensaries are treated as retail space. Briere ventured that Greenbee’s application is not “ready for prime time.” Asked if Greenbee had an option to ask for a variance, Rampson and Thacher expressed skepticism: any such variance would be granted in perpetuity and no exceptions are supposed to be granted for existing non-conforming parking. Rampson indicated that Kroger does have excess parking, but board members expressed doubt that Kroger would grant a permanent easement. Rampson clarified that the relevant parking requirements are found in Chapter 59 of the city code.

Pre- or Post-Moratorium Applications

The status of a business in operation before the city council imposed a moratorium on Aug. 5, 2010, is important – because the application process timing is different for the two kinds of businesses (pre- and post-moratorium).

The board spent much of its Nov. 30 meeting discussing the merits of the documentation provided by different businesses to indicate that they were in operation before the moratorium. At the Dec. 14 meeting, that discussion focused mostly on the Medical Grass Station.

Pre- or Post-Moratorium: Medical Grass Station

The name of the Medical Grass Station, owned by Garth Bolgos, is a play on the former use of the building – a gas station at the corner of Second and Liberty streets. The city’s concern about the location as a possible marijuana dispensary was reflected during the city council’s deliberations in the spring and summer of 2011. At one point, the idea was floated to bump the size of the buffer around schools from 1,000 feet to 1,010 feet. The tweak would have ruled out the Grass Station’s location, because the corner of its parcel would have been nipped by the buffer around Bach Elementary School.

At the licensing board’s Nov. 30 meeting, board members had concluded that the Medical Grass Station had not been in operation before the council imposed its Aug. 5, 2010 moratorium. But Bolgos, the property’s owner, addressed the licensing board during public commentary on Dec. 14, saying he wanted to rectify misconceptions about when the Grass Station went into business. He contended that he was in business at the location before the moratorium was imposed, and described the documentation to that effect, which he’d provided to the city.

It included a tax bill for the property and a letter from a patient who’d received marijuana from Bolgos at the location as early as January 2009, as well as a letter Bolgos had written to the mayor. Bolgos also pointed to an article that had appeared in the Ann Arbor Observer, which described his plans to open a medical marijuana dispensary business there. The article, “Medical Marijuana Center,” was written by John Rosevear, who is also a member of Ann Arbor’s medical marijuana licensing board.

Bolgos described to the board how he’d struck a deal to sell the old gas station, but it had fallen through. [The arrangement was contingent on the developer of the neighboring Liberty Lofts getting approval from Ann Arbor's historic district commission (HDC) to demolish two houses next to the gas station. The outcome of the HDC's decision was to grant permission to demolish the gas station but not the two houses, so the deal was not completed. For Chronicle coverage of HDC deliberations from early 2009, see "Demolition in Historic District" and "Historic Commission: No Approval for Demolition"]

During the board members’ deliberations on the Grass Station, they reviewed how they’d concluded at their Nov. 30 meeting that the Grass Station needed to be considered as a post-moratorium business. Board member Patricia O’Rorke noted that both the PR Center and the Grass Station had been determined to be post-moratorium applications.

Board member Sabra Briere noted that during public commentary, some uncertainty had been raised about the Grass Station. Board member Jim Kenyon indicated that the board’s previous conclusion about the Grass Station had been based on a lapse in continuity. O’Rorke, too, noted that the board had decided it was a new business.

Briere then responded to the arguments that Bolgos had brought forth during public commentary. The documentation provided addressed the desire of Bolgos to open a dispensary, not the fact that he’d opened one, she said. From the audience, Bolgos said he had treated patients at the location since 2009 – it doesn’t matter how big or small the business is, he said.

Briere asked assistant city attorney Kristen Larcom if a park bench would become a dispensary if patient met their caregiver there to receive medical marijuana. Larcom stated that those were not the facts before the board – she asked if Briere’s question related to the Grass Station.

Board member Gene Ragland asked Bolgos: Did you have an interruption in the business? Bolgos told him, no – they had to move from a different Fourth and Washington location. But he met most of his patients at the gas station, he said.

The kind of documentation Bolgos had submitted was again recited: a copy of his caregiver card; a copy of a letter to the mayor saying he wanted to open a dispensary; The Ann Arbor Observer article describing how he wanted to open a dispensary; a delinquent tax notice saying he owns the property; and a letter from a patient stating she received care there.

Briere stated that the board had heard at the Nov. 30 meeting that there was a gap in service provided by the business – that the Fourth and Washington location had ceased operation. Larcom indicated that the location had been raided by LAWNET and shut down. It was not operating and there were convictions that came out of that raid, said Larcom.

Briere concluded that the board had heard evidence that there’d been a desire to open a dispensary, not evidence that one had opened at that location. Briere assured Bolgos that if the board considered his business as a post-moratorium business, it was just as fair. Ragland clarified that pre-moratorium businesses are in the queue first, but post-moratorium businesses are “still in the queue.”

Ordinance Revision Recommendations

Ragland’s assurance notwithstanding, being in the application queue as a post-moratorium business is not as advantageous as being in the queue as a pre-moratorium businesses. That’s because the number of licenses to be granted in the first year – which is the current review cycle – is tied to the number of applications received for pre-moratorium businesses.

Board members discussed the fact that they had the ability to make a recommendation to the city council on adjusting the number of licenses, as well as a number of other points.

Ordinance Revision Recommendations: Number of Licenses

The fact that a post-moratorium application likely stands a smaller chance of being recommended for a license is not explicitly stated in the city’s ordinance. But that conclusion results from the interplay between two parts of the law. First, pre-moratorium businesses had 60 days to apply after the effective date, while post-moratorium businesses had to wait until at least 75 days after the ordinance’s effective date, which was Aug. 22, 2011.

7:504(1)
Application Submission. A medical marijuana dispensary that commenced operation prior to passage of the moratorium by City Council on August 5, 2010, shall have until 60 days after the effective date of this chapter [Aug. 22, 2011] to submit an application for a new annual license. If the medical marijuana dispensary commenced operation prior to passage of the moratorium in a zoning district where its operation is not permitted under the zoning ordinance, the application shall be for a location in a zoning district where operation of a medical marijuana dispensary is permitted under the zoning ordinance. No other applications will be accepted by the City until 75 days after the effective date of this chapter.

But the number of licenses available is capped, based on the number of applications received in the first 60 days – i.e., from pre-moratorium businesses.

7:502(4)
The first year’s licenses shall be capped at a number 10% higher than the number of complete applications for licenses submitted to the City in the first 60 days after the effective date of this chapter, but not more than 20 medical marijuana dispensary licenses shall be issued in the first year. Any license terminated during the license year returns to the City for possible reissuance.

Assuming all the applications from pre-moratorium businesses result in a recommendation for a license, the number of post-moratorium applications that could receive license recommendations would be no more than 10% of the number of pre-moratorium applications. It appears the city has received seven applications from pre-moratorium businesses. So, at the Dec. 14 meeting of the board, Sabra Briere pointed out that if the board has accepted seven applications from pre-moratorium businesses, the additional 10% would allow the board to add up to one for a total of eight recommendations to be made to the council in January 2012.

What if there are five applicants for that one additional recommendation? asked Wendy Rampson, head of city planning. Briere indicated that the board would have to make a choice. There’s no guarantee that you get a license, even if you’ve jumped through all the hoops.

Briere went on to note that the board could also recommend in January that the number of licenses be changed. Responding to questions from board members about why the number of licenses had been capped at 20, Briere told them there’d been a lot of dickering about the exact number when the council deliberated on the issue.

City planner Jill Thacher raised the question of new dispensaries that wanted to apply for a license. Briere indicated that anyone who wants to apply for this first year’s application cycle should get their application submitted. Briere didn’t feel the board wanted to see new applications in January. Thacher indicated that she’d been putting people off. She said there were two dispensaries she’d told to hold off. Briere indicated that Thacher should tell those dispensaries that they need to get all their materials in. Briere noted those dispensaries didn’t need to address Section 7:504(2)(a) – proof of operation before the council established the moratorium on Aug. 5, 2010.

Gene Ragland wondered why receiving applications would not trigger the board to convene, instead of meeting to make recommendations once a year. Patricia O’Rorke echoed the sentiment, asking why someone would need to wait a year. Briere indicated that the city council [on which she serves, representing Ward 1] did not want to be confronted with the issue more than once a year. John Rosevear said he felt that once a year was appropriate, given the complexity of the situation.

Ordinance Revision Recommendations: Timing Issues

In the course of working its way through the applications for dispensary licenses, the board has identified some aspects of Ann Arbor’s ordinance that it’s found problematic. Identified at the Dec. 14 meeting were two passages that express different timing requirements for reapplication:

7:502(8) A license issued under this chapter shall expire 1 year after the date of issuance. To renew an existing license, the licensee shall submit an application in the same manner as is required to apply for a new license no sooner than 90 days before the expiration date an [sic] no later than 60 days before the expiration date.

Elsewhere, the timing requirement is given as 70 days, not 90 days:

7:504(3b) An application for renewal of an existing license shall be submitted no sooner than 10 weeks (70 days) before the existing license expires.

Board member Jim Kenyon indicated he preferred the 90-day condition.

Ordinance Revision Recommendations: Licensing Fee

Briere noted that the board would also need to recommend the amount of the licensing fee. Board members discussed the fact that the fee would need to cover the costs of administering the license. Assistant city attorney Kristen Larcom explained that building inspections would be separate from the license fee and the license application fee – the fee for licenses per se is a separate issue, she explained. While the application fee has to be limited to administrative costs, that’s not the case for license fees, she explained.

The cost of Ypsilanti’s medical marijuana dispensary license fee was briefly discussed. It’s $2,500 for the initial license and $1,100 for renewal.

Larcom indicated she was not sure what the city’s legal advice would be. Kenyon asked why there is a license fee at all. O’Rorke ventured that it’s because you pay for the privilege. Briere noted that one key difference between the medical marijuana dispensary licenses and liquor licenses is that dispensary licenses are not transferable. Kenyon indicated he would vote for a nominal amount.

Ordinance Revision Recommendations: Entry of Premises

O’Rorke questioned why a building inspector needed to be allowed to enter the premises:

7:506(7)
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 2 or more days before the date of the inspection or sent by first class mail to the address of the premises 4 or more calendar days before the date of the inspection.

Larcom pointed out that the city must provide notice to the facility. O’Rorke countered that the law says that building inspectors can come in. Larcom clarified that the law did not enable the city to break in to the facility. The dispensary can refuse. If the city wants to insist on entering the premises, the city would need to go to court to determine if there’s sufficient cause, Larcom explained.

Larcom felt it’s better to keep the language in there. O’Rorke wanted to avoid having a statement in the ordinance that allows consent to entry to determine compliance with the ordinance. Larcom responded to O’Rorke by indicating that it’s up to the board to make that recommendation. Briere noted that when the city council debated the ordinance, some councilmembers didn’t like the passage at all, and some wanted to make it even stronger.

Compliance with McQueen

On Aug. 23, 2011, two months after the enactment of Ann Arbor’s local legislation, a Michigan court of appeals ruled on the McQueen case in a way that has been interpreted by many authorities to mean that medical marijuana dispensaries are not legal. [.pdf of the McQueen case ruling]

By Sept. 30, the Ann Arbor city staff’s position had evolved to include a requirement that license applicants would need to provide a statement explaining how their business conformed with the Michigan Medical Marijuana Act, including the McQueen case, as part of an application for a zoning compliance permit. A zoning compliance permit is a requirement for a license. [.pdf of Sept. 30 letter]

The McQueen ruling found that one particular business model for dispensaries, that of Compassionate Apothecary, does not conform to the Michigan Medical Marijuana Act. And at the Dec. 14 meeting of the licensing board, Gene Ragland alluded to a representation made by the city attorney to the board about a particular vision of what would be a compliant business model, and the city attorney had described what he would consider legal. Sabra Briere agreed with Ragland’s characterization, but said the board could not assume that the city attorney’s view today would be the same.

Assistant city attorney Kristen Larcom noted that additional court opinions could be issued between now and the time the city attorney gives advice to the city council about whether to accept board recommendations to award licenses. In a subsequent phone interview, Wendy Rampson, head of planning for the city, indicated to The Chronicle that her understanding was that the city attorney’s office was open to the possibility that a dispensary business model can exist that complies with the McQueen ruling. However, no written set of criteria defining such a business model has been provided.

The advice provided to the city council by the city attorney will likely depend on the nature of the business model that applicants describe in the statements they’ve provided at the city’s request.

The statement provided by Cannabis Counsel, the attorney for MedMarx at Arborside, could be typical of the kind of argument that dispensaries will make. [.pdf of letter from Cannabis Counsel regarding Arborside's business model]

The Cannabis Counsel letter lays out why the court of appeals in the McQueen case found that the Compassionate Apothecary business model was not in compliance with the MMMA:  The problem was that Compassionate Apothecary did nothing to “assist” patients in administering or using marijuana, beyond exchanging marijuana for money. In contrast to Compassionate Apothecary, argues Cannabis Counsel, Arborside does assist patients in the manner described by the court – by assisting the patient “in preparing the marihuana to be consumed in any of the various ways that marihuana is commonly consumed.” Those ways include providing patients with “cleaned prepared de-stemmed cannabis including pre-rolled joints, medibles which have been inspected, tested, cleaned, grinded and rolled, or cooked in combination with foodstuff.”

The Cannabis Counsel letter also explicates how compliance with other aspects of the MMMA are met, including maintaining a sufficient number of caregivers on site to possess all the marijuana present there. Another point of emphasis of the letter is that no “sale” of marijuana takes place, and that money is given to a caregiver to compensate for costs associated with assisting a patient in the medical use of marijuana, which does not constitute a sale of a controlled substance under the MMMA.

Next Steps

The licensing board discussed its next meeting times in the context of its Jan. 31, 2012 deadline to make recommendations to the city council on license applications and ordinance revisions. The outcome of that discussion was to establish that they’d plan to meet again on Jan. 18, 2012. The zoning board of appeals will hear appeals on zoning issues from two of the businesses on Jan. 25. And the medical marijuana licensing board could possibly meet on Jan. 30 as well, if necessary.

Present: Patricia O’Rorke, James Kenyon, John Rosevear, Gene Ragland, Sabra Briere. Also: city planning manager Wendy Rampson, city planner Jill Thacher and assistant city attorney Kristen Larcom.

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