Not only did California stick to the proposed timeline, it appears to attempt to serve the public and won’t wreck medical for rec. Cali cannabis is about to be tamed, the sun will finally set on the wildest of the western weed states. But everything is not a bed of roses, of course, or even a bowl of buds for that matter.
In a year of industry dread and conservative backlash against cannabis’ surging popularity, there have been a few bright spots to be thankful for. Nevada’s success in launching their rec program in record time comes to mind. By July 1st, a mere eight months after voters said yes to recreational cannabis (and after knocking out a few bugs and bottlenecks in the distribution system), Vegas dispensaries were open for business and have averaged sales of thirty million a month.
Though, due to issues of scale, California’s process coalesced at a slower rate than neighboring Nevada, the steady push to create a workable recreational program has been another bright spot.
Last week in a notably timely manner, California released their emergency rules package and announced they, too, are on track to begin regulating recreational marijuana sales in what is expected to be an instant four-billion-dollar market and generate a billion in state and local tax revenue next year.
Unlike Maine and Massachusetts, who also passed legalization ballot measures in 2016 but remain hopelessly tangled in legislative quagmires, lawmakers in Sacramento have opened the floodgates for the coming wave of commercial California cannabis.
Not only did the state stick to the proposed timeline, it appears to attempt to serve the public and won’t wreck the state’s medical marijuana program.
Applications are already pouring in. Those selected will be notified by email on New Year’s Day. Workshops will be held in December to help companies understand the new state rules. Cali cannabis is about to be tamed, the sun will finally set on the wildest of the western weed states.
A “Pollyanna-istic” Timetable
Everything is not a bed of roses, of course, or even a bowl of buds for that matter. Just as longtime Nevada cannabis consumers complain that quality is spotty, and prices have nearly doubled, not all of California’s cannabis success is suntans and lattes.
California has spent nearly two decades of lax local supervision and a longtime tradition of the underground economy enmeshed with the medical market. Hacking through the levels of bureaucracy, the states attempt to build a unified program, however, has proved to be an epic process.
Though the state first decriminalized cannabis in 1975, it took until 1996 to pass a medical marijuana initiative. In 2010, the first full-legalization initiative failed miserably, in part due to efforts by the illicit industry attempting to protect their market.
Meanwhile, the state’s medical rules became overwhelmingly complex due to the thicket of conflicting state and local ordinances that built up over twenty years. California Governor Jerry Brown signed the first comprehensive revamp of the state’s previously decentralized medical program in 2015, though California cannabis operations were still adjusting to that when the legalization vote came in 2016. After voters soundly approved Prop 64 in November, a timetable some might call “Pollyanna-istic” was set into motion.
Despite a welter of calls for attention by competing interests and municipal level machinations by the score, progress trudged on.
By April, three state departments published a total of 211 pages of draft rules. The Department of Food and Agriculture would regulate cultivators, the Department of Public Health would govern manufacturers and the Department of Consumer Affair’s Bureau of Cannabis Control would oversee retailers, distributors, and testers.
Originally, the plan was for public hearings to follow on how the new recreational market and a medical program that included thousands of cannabis operations and one and a half million patients. The revised provisions were set to be ready in the fall.
Instead, in June, the California Senate rolled the funding for regulating the coming industry into their annual budget and merged oversight for the medical and recreational markets into one “unified” program. Brown signed the package and it was off to the races. However, that decision scuttled the original set of draft rules and sent the regulators back to the drawing board.
The long-awaited revised rules were finally released last week, at the first meeting of the state’s news Cannabis Advisory Committee. Hundreds had applied to be on the 22-member advisory board.
“It’s not like the regulations dropped out of the sky.”
As The Cannabist’s Brooke Edwards Staggs noted in her review of the rules package, many of the decisions in the 276-page tome are predictable, routine, even mundane, choices. Staggs provided links to PDFs of the original language for the three general areas of marijuana commerce: Regulations for shops, distributors and testers (PDF), Regulations for cultivators (PDF), and Regulations for manufacturers (PDF).
By and large, the rules are the sort of decisions that were pretty much a given. Daniel Yi, spokesman for the Los Angeles-based dispensary chain MedMen, noted, “It’s not like the regulations that were dropped today fell out of the sky.”
Many of the new provisions reveal a cautious approach aiming to rein in a cannabis culture that is already reshaping the public discourse at such a rate it makes some conservatives retreat to realms of reefer madness.
Dispensaries must close by 10 pm, have 24-hour surveillance cameras, conduct strict testing, and track all products from seed to sale; and no delivery by drones.
Consumers will be allowed to purchase “28.5 grams of flower, eight grams of concentrate, and six immature plants per visit.” They can also cultivate those six plants at their residence as long as it is out of sight from the public.
Cannabis consumption events are also provided for in the package.
Another provision drawing attention is the limits on edibles. Unlike neighboring states such as Arizona where a patient can purchase a full 1000 milligram edible, in the California market, edibles will only be sold in 10-milligram units and 100-milligram packages. The word “candy” cannot be used in marketing. And, as the L.A. Times added, “edible products cannot be shaped like a human, animal, insect, or fruit.”
Some might think the new edibles restrictions are hard to swallow, but the prices of licenses will make them absolutely choke. Top grower permits could run as high as $120,000. The state expects to make more than $4.5 million in cultivation licensing fees alone. The initial licenses are being issued as “temporary emergency licenses,” and will only be valid for 120 days and then limited to a single 90-day renewal period, while the state evaluates whether the applicant can be permanently licensed.
Some of the rules, like testing, will phase in over the first six months, allowing companies to update their packaging and products. Those testing requirements are likely to be important to a state that has a very public and ugly history of selling contaminated cannabis to medical patients. In February, a UC Davis study by researcher George Thompson of northern California medical cannabis showed that much of the cannabis in the Bay Area was tainted.
Conditions were not much better in August when Hunters Point-based Anresco Laboratories tested medical marijuana products at HempCon in the Cow Palace, and “80% of those tested from California-based growers and dispensaries were tainted with mold, fungus, bacteria, pesticides, or harmful solvents.”
“I think the state dropped the ball big time.”
Between cannabis companies adjusting their procedures and anti-cannabis politicians bedeviling the process, not all of California cannabis is going to be ready to roll in six weeks when the New Year’s ball drops. Before a cannabis business can even apply for a license with the state they have to be approved by the local government.
Cities across the state have been enacting local cannabis ordinances and taxes at a furious rate. Earlier this month, seven more cities and two counties voted to enact local taxes. In some places, the combination of state and local taxes will be as high as 45%.
Writing for CNN Money, NCIA’s Aaron Smith broke down the math:
“Consumers will pay a sales tax ranging from 22.25% to 24.25%, which includes the state excise tax of 15%, and additional state and local sales taxes ranging from 7.25% to 9.25%. Local businesses will have to pay a tax ranging from 1% to 20% of gross receipts, or $1 to $50 per square foot of marijuana plants, according to the Fitch report. In addition, farmers will be taxed $9.25 per ounce for flower and $2.75 per ounce for leaves.”
Some speculate that the additional regulatory costs on state-licensed cannabis could keep the black market thriving for years to come. In a Fitch Ratings report on California’s marijuana taxes, analysts Stephen Walsh and Karen Ribble noted that “High effective tax rates on California cannabis may complicate the state’s efforts to establish legal markets.”
Yet another problem: Not every city is ready, or even interested, in condoning commercial cannabis. According to Leafly’s Chris Roberts, “Dozens of the state’s 400-plus cities have passed severe restrictions or bans on commercial marijuana activity in advance of the legal market’s launch.”
Several major California cities have not finalized their local cannabis ordinances, including both the state’s biggest markets: L.A. and San Francisco.
Berkeley, on the other hand, is the only Bay area community that expects to be on schedule. Kern County, home of Bakersfield, California and nearly 900 residents who not only voted against allowing local recreational cannabis sales, but are in the process of attempting to phase out the county’s 24 medical marijuana dispensaries.
In San Francisco, the birthplace of legitimizing cannabis with the original compassion clubs, despite local support for Prop 64 topping 74%, following several council hearings on the matter, the local board of supervisors has not been able to commit to a set of regulations due to push-back from local anti-activists.
“It’s embarrassing that we probably won’t be ready on January 1,” said one of the architects of the state program, state Sen. Scott Wiener (D-San Francisco). The issue may not even be settled by the city council and be taken up as a voter referendum next summer.
Meanwhile, in Los Angeles, grower and retailer Donnie Anderson, has the same suspicions. “I think the state dropped the ball big time. This should have been done by June, July. I don’t think this is going to be ready.”