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Oregon Medical Marijuana Dispensaries Say Recreational Sales Fee is Unfair

Friday, September 18, 2015

 

In two weeks, already operating medical marijuana dispensaries will be allowed to begin selling to recreational customers. If they wish to do so in Portland, however, there will be a steep price to pay. The City Council announced this week that dispensaries will need to pay the city a $2,500 fee by December 1.

Now, some of the city's dispensaries are saying the fee is unfair.

“We really think it's unfair, the ways the rules were changed and manipulated,” Joel Johnson, a manager of Kind Heart Collective, a small dispensary located on North Denver Avenue, told GoLocal. “The difference between $1,500 and $2,500 is huge.”

The recently announced fee is a significant increase from the estimated $1,500 fee city officials discussed this summer and more than 37 times what the typical bar or pub pays in order to keep its liquor license with the City of Portland. The fee will be used to fund the recreational marijuana program, according to city officials.

Misconceptions

Meghan Walstatter, owner of Pure Green Dispensary, located on Northeast Sandy Boulevard, told GoLocal that thanks to her background as the daughter of a politician and a degree in public affairs, she understands why the city government feels the need to charge dispensaries fees to sell marijuana recreationally.

“I get what they're doing,” Walstatter said. “The reality is that they need money to run the program, and this is really the only way to get it. It would be great if they were lower, but the city is trying to make their best guess on what they will need.”

Walstatter also said she expected fees to drop as the program begins to ramp up. She believes it will cost less than anticipated because there will be fewer nuisance complaints that city officials must deal with.

Despite her understanding and hope for the future, Walstatter said she thinks the fees are higher than expected because of misunderstandings that surround Oregon's newest industry.

“There's a misconception that we already have that money, that everyone can afford it,” Walstatter said, referring to the $2,500 fee. “There really isn't much money in the cannabis business in Oregon, even though some people think there is, because we've yet to tap into that recreational market.

What it Will Cost

Johnson, with Kind Heart Collective, said that the increase in fees will force dispensaries, particularly smaller ones such as Kind Heart, to cut costs elsewhere.

“$1,000 is really a lot of money that could be put to other, better uses,” he said. “That $1,000 could go to charity, or to allowing us to help more patients. It could go to a lot of things.”

Walstatter said that while she fears there may be a crunch for her dispensary, which currently employs 14 people, she will do whatever it takes to keep serving her patients and customers.

“I'll figure it out and I will find a way to keep my doors open,” Walstatter said. She said she had already planned a renovation her store before the fees were announced, and is finding ways to save as much money as possible.

 “If the fees mean that we have a few less rolling, comfortable chairs on our new floor, so be it,” she said. “We'll sit on metal folding chairs if we have to. My focus is on keeping my doors open. I have patients to serve and I have employees to keep employed. I want them to keep working here, to be able to live in their house and meet their financial obligations. I will find a way, no matter what the fees are, to keep my store open.”

 

Related Slideshow: Everything You Need to Know About Marijuana In Oregon

The smoking of marijuana is a part of the fabric of Oregon - one of the first states in America to legalize usage.

See all the issues you need to know below.

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Things to learn from Washington

The following slides are things that Oregon can learn from the legalization of marijuana in the State of Washington. 

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Engage Medicinal Marijuana Industry Experts  



Washington has been criticized for not incorporating the medicinal marijuana industry or its experts, in its transition to legalization.

“Give all of the people who are legally in the medical marijuana system an easy path, keep people in place,” lobbyist Geoff Sugerman said. 

By being the first state to legalize medicinal marijuana in 1998, Oregon has the advantage of a fully functional supply chain of medicinal growers and retailers.

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Connect Growers and Retailers 

Washington Retailers say at first it was hard to find newly licensed marijuana growers. The state can help the fledgling industry by helping to better connect producers and retailers, Cannabis City in-store manager Amber McGowan said. 

Regulating wholesalers is another way to go between growers and retailers, McGowan said. 

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Phase in Retail and Production Permits together 

By proportionately phasing in retail and pot farming permits, Oregon can prevent both the short supply and flooded market that Washington experienced.  In July, retailers sold out in days, while the approved growers scrambled to meet the demand. According to McGowan,  there are too many growers and not enough retailers to sell to now. 

“There are too many farmers going out of business because there are not enough people to sell their product,” McGowan said. “To make it super successful, don’t over saturate the market with growers.”

Solstice Grown grower Alex Cooley advocates not putting a cap on the number of licenses issued at all. 

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Avoid Heavy Taxation 

In Washington, growers pay an excise tax of 25 percent tax between grower and processor, another 25 percent tax between processor and retailer, and another 25 percent between retailer and customer. 

This means a gram of marijuana, which goes for less than $10 on the black market, goes for $25 in retail stores, Cannabis City's Amber McGowan said. 

This price differential is driving customers to the black market, critics say. 

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Don't Use a Lottery System 

To limit the number of retail stores per county, would-be retailers entered a lottery through Washington's regulators to determine who was eligible to apply for a permit.

Critics say the lottery system cut out qualified retailers, some who had experience from the medical cannabis industry, while allowing unqualified people to set up shop. 

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Talk to Cities and Counties 

Taking into account the laws specific to counties and municipalities will be essential to Oregon’s success in implementation, William Simpson of Northwest Producers and Processors Association.

“The single largest mistake we could make is not talking to the attorney generals, cities and counties about moratoriums and what would be allowed,” Simpson said. In Washington, some license holders were unable to open due to county moratoriums and bans. 

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Treat the Industry like Agriculture 

Grower Alex Cooley argues that because marijuana is a plant, it should be regulated like an agricultural crop, taking into consideration harvest cycles. Washington suffered a short supply in July, and then a flooded market following the harvest of outdoor crops in the fall. 

Cooley urges Oregon regulators to allow crops on farm land, as some Washington cities are now banning grow operations within city limits. 

“It’s a plant, it should grow in the sun, not in a warehouse in Seattle,” he said.

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Things to Know

Next up are several things to know about the legalization of Marijuana right here in Oregon. 

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Drug testing will continue

Despite marijuana being as legally permissible as a pint of beer, many of the largest employers of Oregonians will continue to include marijuana in their employee drug screens. 

Fred Meyer, one of the largest employers across the state, said the company plans to continue drug testing its Oregon employees regardless of the new law. 

Melinda Merrill, Fred Meyer communications director, said the company employs truck drivers, heavy equipment operators and other positions that require drug screening. 

“We have to make our employees safe,” Merrill said.

Companies that employ heavy equipment operators are required to buy insurance. Companies that employ workers who operate machinery while simultaneously employing workers who do not are sometimes offered a lower monthly deductible if they test all of their employees across the board, as opposed to only testing a portion.

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Your neighborhood dealer may be able to stay in business

The average price for marijuana in Oregon is among the lowest in the nation at sightly over $9 per gram, according to data collected by priceofweed.com.

The economy for recreational pot in Washington failed to gain the footing that was expected by some experts. The notion of Seattle being crowned as the new Amsterdam went up in smoke after consumers saw how the state’s taxes increased the price of marijuana - three joints can run a Washington customer $75, while a gram of the plant’s dried flowers cost around $30.

While the taxation in Oregon isn’t expected to bump prices that high, customers who have grown accustomed to the state’s high quality, low-price buds and hash oils may turn their noses up at even the slightest increase.

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Taxes on pot will be different than Washington and Colorado laws

Marijuana sold from licensed vendors in Oregon will carry taxes of $35 per ounce on marijuana flowers, $10 per ounce on all marijuana leaves and trimmings and a $5 tax on all immature plants or clones. The tax rates will be reevaluated every two years and adjusted for inflation. The revenue will be allocated to support government services - 40 percent will support public schools, 20 percent will support law enforcement, 20 percent will support mental health and 5 percent will support the Oregon Health Authority.

State-licensed vendors may still face obstacles, however, when it comes to their federal income taxes. Internal Revenue Section code 280E denies any tax deductions and credits for businesses that traffic any controlled substances that are prohibited under federal law.

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You can’t smoke up wherever you please

The law stipulates that use of marijuana, including injection, ingestion and inhalation of the drug is prohibited in public places. In other words, you won't constanty be seeing (or smelling) people lining sidewalks lighting up a joint.

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There are also restrictions on growing

No one is permitted to have more than four marijuana plants at a time - considerably less than the 12 plants that Washington residents are allowed to grow. The law also restricts plants being grown in public view.

Sorry, window-sill gardeners.

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Marijuana DUIs may be addressed in future legislation

Unlike the Washington law, which included attached regulations concerning driving impairment, Oregon’s law has more room for interpretation. 

Driving under the influence of marijuana is classified as a class b traffic violation, which carries a presumptive fine of $260 and is not to exceed maximum fine of $2,000. The Oregon Liquor Control Commission has been tasked with researching the subject of drugged driving and presenting its finding to the Oregon Legislative Assembly no later than January 2017.

After reviewing the OLCC report, the state legislative assembly will decide whether passing more extensive driving regulations will be necessary.

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Legalization won't take effect until summer.

Anyone over 21 will be allowed to possess small amounts of marijuana for their personal use from July 1, 2015.

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Crossing the Columbia River with a state-licensed spliff will catch you a felony

Although marijuana is simultaneously legal in Oregon and Washington, it's illegal to transfer the drug between the two states.

Measure 91 is only applicable to Oregon and marijuana remains illegal under federal law. Even with a physician’s subscription, marijuana is classified as a Schedule I controlled substance - meaning that anyone transporting it across state lines is prosecutable by federal agencies. 

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Legalization could mean big money for financial service startups

It’s not just the vendors whose businesses will grow under legalization - companies like Greenpay are expected to expand rapidly once the new legal market gets its footing. Greenpay would allow consumers to instantly purchase marijuana using their smartphones.

Greenpay is a wholly-owned subsidiary of MyEcheck - a publicly traded company whose shares typically trade for less than ten cents on the New York Stock Exchange. With legalization efforts gaining momentum around the country, companies providing auxiliary services for the marijuana industry may create an economic boom.

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It’s spreading like the plague

In an interview with GoLocalPDX, proponents of Measure 91 said they’re focused on achieving legalization for other states, including California, in the 2016 election.

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Employers that will still test for Marijuana

The following slides are 20 companies that will continue to test their employees for marijuana. 

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Jeld-Wen

Industry: Manufacturing and distributing

Headquarters: Klamath Falls, Oregon

Number of Oregon Locations: 2

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Standard Insurance

Industry: Insurance and finance

Headquarters: Portland, Oregon

Number of Oregon Locations: 2

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Seven Feathers Casino

Industry: Hospitality

Headquarters: Canyonville, Oregon

Number of Oregon Locations: 1

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Intel

Industry: Semiconductors

Headquarters: Santa Clara, California

Number of Oregon Locations: 6

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Alaska Air Group

Industry: Transportation

Headquarters: SeaTac, Washington

Number of Oregon Locations: 4

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Fred Meyer

Industry: Retail

Headquarters: Portland, Oregon

Number of Oregon Locations: 50

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Market of Choice 

Industry: Grocery

Headquarters: Eugene, Oregon

Number of Oregon Locations: 9

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Willamette Pass Ski Area 

Industry: Recreation

Headquarters: Willamette Pass

Number of Oregon Locations: 1

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Bi-Mart

Industry: Retail

Headquarters: Eugene, Oregon

Number of Oregon Locations: 60

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Nordstrom

Industry: Retail

Headquarters: Seattle, Washington

Number of Oregon Locations: 10

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Safeway

Industry: Grocery

Headquarters: Pleasanton, California

Number of Oregon Locations: 97

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Bed, Bath, and Beyond

Industry: Retail

Headquarters: Union, New Jersey

Number of Oregon Locations: 9

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Jack in the Box

Industry: Restaurants

Headquarters: San Diego, California

Number of Oregon Locations: 54

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Costco

Industry: Retail

Headquarters: Issaquah, Washington

Number of Oregon Locations: 13

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Kaiser Permanente

Industry: Healthcare

Headquarters: Oakland, California

Number of Oregon Locations: 60

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Dairy Queen

Industry: Restaurants

Headquarters: Edina, Minnesota

Number of Oregon Locations: 105

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United Rentals

Industry: Construction equipment suppliers 

Headquarters: Greenwich, Connecticut

Number of Oregon Locations: 10

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Papé Brothers, Inc.

Industry: Construction equipment suppliers 

Headquarters: Eugene, Oregon

Number of Oregon Locations: 24

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Best Buy

Industry: Retail

Headquarters: Richfield, Minnesota

Number of Oregon Locations: 15

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Sinclair Media

Industry: Broadcasting Media

Headquarters: Hunt Valley, Maryland

Number of Oregon Locations:  4

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Washington's Marijuana Legalization Mistakes Oregon Can Avoid

The next set of slides show the mistakes that Washington made that Oregon can avoid when they legalize marijuana. 

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Supply and demand 

An imbalance of supply and demand caused a slew of startup problems for Washington producers and retailers, Cooley said. Oregon can avoid these issues by simplifying and coordinating its permit process, Oregon lobbyist Geoff Sugerman said.  Additionally, he said the three separate taxes imposed in Washington drove prices too high, and sent consumers to the black market and elsewhere. 

“What we need to make sure of is that our taxing structure is low enough that it doesn’t increase prices so dramatically it drives users back to the black market,” Sugerman said. 

Because of those taxes, the going rate for a gram of marijuana at Cannabis City, Seattle’s first recreational pot retailer, is $25. 

“Drug dealers sell it for $8 or $9 a gram,” said Cannabis City in-store manager Amber McGowan. “The focus of legalization was to have people avoid the black market. Now we’ve allowed the black market to thrive.”

For this same reason, William Simpson, founder of the Northwest Producers Processors and Retailers group, advocates putting a proposed tax onto the end of the transaction. As it stands, Oregon growers will be taxed $35 per ounce for flowers, $10 per ounce on leaves, and $5 per premature plant. 

Because Washington legislators and regulators were afraid of letting too much product onto the market, prices were at a premium when pot retail shops first opened their doors, while a handful of licensed growers scrambled to keep up with demand. Within three days, most of Washington’s marijuana retailers were out of stock. But, by summer, Cooley said the market was flooded with outdoor grown marijuana, and those retailers were paying a fifth as much as they were in July. 

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Saturated market

“There’s a glut of product in Washington,” said Cooley. 

Oregon could spare the market turmoil, Cooley argues, by proportionately phasing in retail and pot farming permits, and not putting a cap on the number of licenses issued at all. According to McGowan,  there are too many growers and not enough retailers to sell to.  

“There are too many farmers going out of business because there are not enough people to sell their product,” McGowan said. “To make it super successful, don’t over saturate the market with growers.”

But prior, some businesses that applied for a license had to wait up to a year before knowing if they would get the permit. 

The same factors driving Washington users to the black market could send them to Oregon, Simpson said.  “Washington is worried about what will happen when there’s an inexpensive market in Oregon, that people will come over the bridge and purchase it here,” he said. 

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Keep medicinal experts in place 

By being one of the first states to legalize medicinal marijuana in 1998, Oregon has the advantage of a fully functional supply chain of medicinal growers and retailers, who Cooley said should be consulted. 

“Bring in the people who have already done it well, and hold up the people who are doing it right as an example,” he said. 

Washington has been criticized for not incorporating the medicinal marijuana industry or its experts, in its transition to legalization.  Medicinal cannabis was not legal or regulated in the state until after 2012. 

“Give all of the people who are legally in the medical marijuana system an easy path, keep people in place,” Sugerman said. 

House Bill 2676, introduced for the Feb. session by Rep. Peter Buckley, would give the Oregon Liquor Control Commission (OLCC) dual licensing powers for growers and processors, as well as dispensaries by transferring medicinal marijuana dispensary regulation from the Oregon Health Authority (OHA) to the commission. 

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Sense of place 

Taking into account the laws specific to counties and municipalities will be essential to Oregon’s success in implementation, Simpson said. 

“The single largest mistake we could make is not talking to the attorney generals, cities and counties about  moratoriums and what would be allowed,” Simpson said. In Washington, some license holders were unable to open due to county moratoriums and bans. 

Prev Next

Treat it like agriculture 

Cooley argues that because marijuana is a plant, it should be regulated like an agricultural crop. He urges Oregon regulators to allow crops on farm land, as some Washington cities are now banning grow operations within city limits. 

“It’s a plant, it should grow in the sun, not in a warehouse in Seattle,” he said.

 
 

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