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The squeeze is on 

To the surprise of nobody, medical-marijuana-center owners are once again being mined for money by those in power. Of course, it may seem perfectly appropriate to those who write the rules — in this case the Colorado Department of Revenue and its Medical Marijuana Enforcement Division — but dispensary owners aren't happy that they're being told to bridge a budget gap they didn't create.

Initially, the MMED told the industry that it would collect a license fee upon approving an application. And it wouldn't do that until receiving word that a center had been approved at the local level.

But local governments fell way behind; in the Springs, for instance, as of April 30, the City Clerk's office has processed only 35 of 122 applications. By this spring, that meant a roughly $5 million shortfall at the state level.

In response, MMED told potential licensees to pony up the fees, or "the Division will not consider or process your application ..." in the words of director Laura K. Harris.

As any 5-year-old will tell you, it's hard to play ball when the rules change mid-game. But DOR spokesman Mark Couch doesn't really see this situation that way.

"The rules were always that we were allowed to collect the application and licensing fees at the same time," he says. "We didn't do that because we expected local approvals would be occurring; and that state licensing fee could be collected as those local approvals occurred. And that didn't happen at the rate that we expected."

Not that kind of green

The problem — which first came to light in early April, when the MMED transferred 17 of its 37 employees to other divisions because of the shortfall — has drawn legislative attention. Reps. Beth McCann and Tom Massey of Denver and Poncha Springs, respectively, last week introduced a bill that funds the division through the rest of the year, plus a reserve. The $7.7 million total would come from a surplus the Colorado Department of Public Health and Environment has in its $10 million fund of fees paid by people applying to become MMJ patients.

And yet, center owners are still being told to pay up.

"The lowest [license fee] is $6,500," says Tanya Garduno, who owns Amendment 20 Caregivers, and serves as president of the Colorado Springs Medical Cannabis Council. "That is for the smallest of people; that is if you only have one center and one grow. If you've got multiple grows, or you have an [infused-product manufacturer's license], the fees go up from there."

License fees can go as high as $14,000 for a center with more than 500 patients. Add on $2,750 for each grow space, or infused-products facility, and the bill increases quickly.

"I know that there's a lot of people who didn't expect to pay this fee right now," Garduno says. "When you're projecting your fees for the year, if you think that something's due in May and all of a sudden it's due in February, that's gonna affect the way that you planned your business."

That's the situation in which Robert Lovato finds himself. The owner of two Humboldt Care and Wellness centers, not to mention their respective grow rooms and an infused-products manufacturing license, is on the hook for $26,000, due immediately.

"You know, the sales haven't been stellar, so I'm gonna have to make some decisions of how I'm gonna do it," he says. "If it's going back to the partners and doing a capital call. I just don't know what to do right now, and that's what we're trying to figure out."

Commercial costs

And it's not just the fees. City land-use regulations for MMJ facilities were only created within the last year, meaning centers have recently been hit with costs as high as $175,000 to get their buildings up to code.

"Right now, in order for you to get your license, [the city's] requiring everyone to get a Certificate of Occupancy," says Garduno. "Which means a lot of the contractors in Regional Building are making some serious cash, because they're really making us jump through a lot of hoops."

Local contractor Stan Lewis, who says he might do more MMJ-related building work than anyone else in the county, says that's true, though it's to be expected considering the industry.

"The fire department probably looks a little bit closer to 'em than they would other business, but not really harsh," says the 42-year professional. "And then you get into Regional Building stuff, and they look at these stricter, as far as the electrical requirements are concerned, simply because you've got so much power going into these buildings."

Lewis says many additional costs being incurred by MMJ owners come from having to modify grow spaces to have fireproofed walls, intricate electrical systems, extensive filtered ventilation and the like. "There is nothing cheap about commercial construction."

Regardless, it leaves entrepreneurs in a bind.

"Every single center I talk to it's the same situation: Our sales are down, [and] we're expected to pay these large fees right away," says Lovato. "It's been nickel-and-diming us like crazy, and you just gotta figure out how to do it."

bryce@csindy.com

  • A state flub hurts an already reeling medical marijuana industry.

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