Groups with more pot arrests may get edge in Michigan's legalized industry

Michigan officials are exploring ways to make the marijuana licensing process easier for communities that have faced high rates of marijuana arrests in the past.

The voter-approved November ballot initiative to legalize recreational marijuana requires the state Department of Licensing and Regulatory Affairs to “promote and encourage” participation in the licensed market by people from disproportionately affected communities, including African Americans who historically have been arrested for pot possession at higher rates than whites.

How that redress is made by the state has yet to be determined.

“It’s a play on your mind when you have gone to jail for something and then you see someone making millions of dollars and you don’t have access to it,” said Mitzi Ruddock, a Detroit cannabis advocate and owner of the social use club Buds, Forks and Corks.

Communities that suffered the brunt of marijuana arrests aren’t the only ones looking for easier access into the industry. Multiple applicants for medical marijuana licenses have asked the department to lower financial thresholds they say make getting into the medical market nearly impossible.

Applicants must have up to $500,000 in assets to apply for running certain facilities, while licensing application fees annual regulatory assessment costs run thousands of dollars. 

In late March, the Bureau of Marijuana Regulation personnel heard ideas from pro-marijuana groups across the state about ways to ease the licensing process both for regular license applicants and those from disproportionately impacted communities.  

“That’s one of the key issues we want to get input on,” Bureau of Marijuana Regulation Director Andrew Brisbo said. “We see that social equity component broadly speaking being one of the key elements in a lot of the states that are implementing adult use programs via ballot initiatives.”

Unequal arrests

In a 2013 report, the American Civil Liberties Union found that though black and white people used marijuana equally between 2001 and 2010, black individuals were 3.7 times more likely to be arrested for possession.

In Michigan, African Americans during that time period were 3.3 times more likely to be arrested for marijuana possession than whites, according to the report. That arrest ratio, based on 2010 data, jumped to 8.5 times in Kalamazoo County and 7.5 times in Kent County, but dipped to 1.9 times in Wayne County.

The obstacles are clear in such places as Detroit, where only a handful of provisioning centers are owned by African Americans, said Margeaux Bruner, director of outreach and strategy for the Michigan Cannabis Industry Association.

The Detroit NAACP’s push to get people to vote no on the recreational marijuana proposal in November is in part to blame for some of the limited participation in the industry, Bruner said, but there are other factors.

“There is a high barrier of capitalization that sometimes puts that out of the reach of people,” Bruner said. “We need to do as much as possible to even that playing field.”

The Detroit NAACP didn't return requests for comment.

The state could even the playing field for African Americans and others by expunging past marijuana crimes, giving breaks on licensing fees and business loans, priority in the licensing process or reduced criminal background checks, said Ruddock of Buds, Forks and Corks.

“We also want to bring some of those dollars back into the community as well, go back to building back up what has been torn down,” she said.

The potential opportunity for impacted communities to participate in the industry is a good thing, said David LaMontaine, a retired police officer who resigned his post on the Medical Marihuana Licensing Board earlier this year.

Police officers targeting African Americans for drug-related crimes was never something LaMontaine said he witnessed in Monroe and Wayne counties, but he didn’t argue with the statistics showing a disproportionate impact on the black community.

In his work on the licensing board, LaMontaine said he always hoped the licensing process benefited minority applicants, let alone ones from Michigan.

“There are communities in our state that need help,” he said. “These are communities that are underserved from A to Z. It’s not just about weed. If you’ve got a business that can set up there and be run by a minority owner, that’s a good idea.”

Potential solutions

In Kent County, Grand Rapids officials have already taken steps to address the issue. The city created the Marihuana Industry Voluntary Equitable Development Agreement, a form that allows applicants from certain low- and middle-income neighborhoods a spot in the city’s first round of a lottery that will determine the order in which the planning commission considers medical marijuana facility license applicants.

While commissioners initially voiced a desire to give preference to black applicants, Michigan's ban on affirmative action forced the city to find creative ways to reach that goal, said Landon Bartley, a senior planner for Grand Rapids.

Instead, the city developed a form on which applicants could indicate whether they were from a specific low-income area in Grand Rapids, an area that the city knew correlated with a larger population of black residents. 

"We can't really do much to incentivize based on racial factor alone," Bartley said. "We believe this is legally defensible and still indirect."

The state remains open to feedback on how to address past inequalities in marijuana arrests, Brisbo said, while keeping in mind some communities’ concerns about an over-saturation of marijuana shops in disadvantaged areas.

“Are we looking at the people of those communities and getting them into the licensed market and/or looking at whether facilities should be provided access in those communities?” the state's marijuana regulation director said.

The state could look at community qualifiers such as a low-income level or number of marijuana arrests to determine residents eligible for some sort of relief in the licensing process, Brisbo said.

Like Michigan, ballot proposals in other states that legalized marijuana also contained requirements to compensate for a disproportionate impact from marijuana arrests, according to the Drug Policy Alliance, a group dedicated to ending the "war on drugs."

In California, regulators tried to reduce barriers by developing rules that prohibited a prior drug felony from being the sole basis for denying a marijuana license, according to an alliance report. The city of Oakland created the nation’s first “equity permit program,” which sets aside half of medical and adult use medical marijuana business permits for equity applicants.

In Portland, Oregon, part of the adult use marijuana sales tax revenue goes to women-owned and minority-owned marijuana businesses.

High cost of pot licenses

Michigan applicants argue there is a larger barrier to licensing, however, that nearly all potential medical marijuana businesses face: They can't come up with the money to meet the state's finance requirements. 

In the licensed medical marijuana market, applicants must demonstrate they have liquid and non-liquid assets between $150,000 and $500,000 depending on the type of facility for which they are seeking a license. The license fees for medical marijuana facilities include $6,000 to apply, a $66,000 annual regulatory assessment adjusted each year and potentially a $5,000 fee paid to the municipality.

The financial requirements for the licensing process always puzzled LaMontaine while serving on the medical marijuana licensing board.

“A dear friend of mine owns a number of Tim Hortons restaurant; the state of Michigan never asked him how much money he has,” he said. “Why are you adding this onerous requirement to the licensing process?”

Penny Milkey credits the high-cost requirements as one of the reasons her Houghton provisioning center is the only licensed dispensary in the Upper Peninsula.

“The capitalization requirement is tough; we had to find an investor in order to move on,” Milkey said.

Finding an investor can be tricky as well, said Mike Goldman, owner of Iron Laboratories, a licensed safety compliance facility based out of Walled Lake.

“Funding is very limited and selective,” Goldman said. “You have to be cautious on where you accept your money source from because the state does financial checks, and if you take money from the wrong source, that could be a reason for denial on your application.”

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