Merit in, lottery out for Arkansas medical marijuana dispensaries

Panel reverses draft policy

The Arkansas Medical Marijuana Commission decided Wednesday to license dispensaries based on the merit of their applications i̶n̶s̶t̶e̶a̶d̶ ̶o̶f̶ ̶u̶s̶i̶n̶g̶ ̶a̶ ̶l̶o̶t̶t̶e̶r̶y̶ ̶t̶o̶ ̶p̶i̶c̶k̶ ̶d̶i̶s̶p̶e̶n̶s̶a̶r̶y̶ ̶o̶p̶e̶r̶a̶t̶o̶r̶s̶ after listening to criticism of its draft rules during a public hearing.*

The decision undoes a draft rule that had dispensary applicants meeting minimum requirements to enter a lottery to draw numbers in order to present their plans to the commission. The commission would have then been responsible for approving or denying their license applications.

The commission acted after hearing critics of the draft policy during a public hearing at the W.H. Bowen School of Law at the University of Arkansas at Little Rock on Friday.

"That's what I absolutely wanted," said Melissa Fults, executive director of Drug Policy Education Group and one of the critics of the lottery plan. "I'm a happy camper."

[INTERACTIVE MAP: Click here for a look at how laws related to marijuana have evolved over the past two decades.]

In making the change, the commission eliminated an option for dispensaries that elect not to grow marijuana for lower costs and reduced regulation. The commission also reduced the cost for dispensaries that do want to grow marijuana.

State lawyers said having different applications for dispensary slots would not be fair and would likely result in lawsuits.

Now, all dispensaries will face a $15,000 one-time licensing fee and a $22,500 fee to renew the license annually under the commission's new rules.

Dispensaries will also need to provide proof of assets or a $200,000 surety bond and proof of at least $100,000 in liquid assets.

Application fees remain $7,500, with half that amount refunded if an application is not successful.

Before the change, dispensaries that opted not to grow faced a $2,500 annual fee and did not have minimum asset or bond requirements. Dispensaries that opted to grow faced a $25,000 annual fee and faced those requirements.

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Fults said after the meeting that she wished the fees were lower, but she understands that the bills need to be paid.

The commission also decided Wednesday to require that 60 percent of the ownership interest in dispensaries be held by Arkansas residents.

Amendment 98, as the Arkansas Medical Marijuana Amendment is known, requires 60 percent of the facilities' owners to be Arkansans, but it doesn't specify what share of the businesses' ownership Arkansans must hold.

If there were 10 owners of a dispensary, seven could be Arkansans to satisfy the amendment, but the remaining three out-of-state owners could hold a disproportionately large financial stake in the organization.

Last week, the Senate failed to pass House Bill 1371 by Rep. Douglas House, R-North Little Rock, which sought to address the ownership proportion issue.

The Senate's 17-9 vote fell seven votes short of the 24 required for changes to the amendment in the 35-member Senate.

Sen. Missy Irvin, R-Mountain View, presented HB1371 to the Senate and said lobbyists for out-of-state marijuana growers were lobbying heavily against the bill.

Sen. John Cooper, R-Jonesboro, had urged senators to defeat the bill because he said it would limit ownership by LLCs and other corporations.

Joel DiPippa, an attorney for the Department of Finance and Administration, told the commission Wednesday that it faced the risk of having its regulations rejected by the Legislature as a result of making the change.

But Commissioner Travis Story, who recommended the change, said HB1371 contained multiple provisions that were in dispute, and the commission's change -- which focused solely on ownership -- aligned with the intent of voters.

The commission also changed where dispensaries will be located. Previously, the draft rules divided the state into eight zones in which dispensary licenses would be dispersed based on population. Now, the eight zones will each have four dispensaries.

The commission will meet again on Tuesday to finalize the rule changes. From there, the rules must be reviewed and approved by Arkansas Legislative Council.

The Arkansas Medical Marijuana Amendment, approved by voters in November, allowed the commission to authorize between 20 and 40 dispensaries and between four and eight cultivation facilities.

In its draft rules, the commission authorized 32 dispensaries and five cultivation facilities.

Cultivation facilities will be chosen by the commission based on the merits of their applications. An application will cost $15,000. Unsuccessful applicants will receive $7,500 back.

Cultivation applicants must provide proof of assets or a surety bond of $1 million and proof of at least $500,000 in liquid assets.

Successful applicants will have to pay an annual $100,000 licensing fee and submit an initial $500,000 performance bond.

The Medical Marijuana Commission is one of three state agencies involved in implementing the medical-marijuana constitutional amendment. The Alcoholic Beverage Control agency is in charge of inspecting the facilities. The Department of Health is issuing registry cards for patients.

Alcoholic Beverage Control will hold a meeting Monday at 9 a.m. to discuss public comments on its rules. The meeting will be held at the 1515 Building on West Seventh Street in Little Rock.

Metro on 04/06/2017

*CORRECTION: The state Medical Marijuana Commission changed a rule Wednesday that would have required applicants for dispensary licenses to draw numbers in order to present their proposals to the commission. A previous version of this article misrepresented the nature of the now-abandoned lottery process.