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State fee to grow medical marijuana set at $100,000 a year

by Brian Fanney | January 4, 2017 at 5:45 a.m.

Arkansans hoping to grow medical marijuana will have to pay an annual $100,000 fee to operate a cultivation facility, the Arkansas Medical Marijuana Commission decided Tuesday.

Would-be growers will also need to have access to cash to ensure the stability of their business. The commission decided Tuesday to require an applicant to have a $1 million bond or assets worth $1 million and be able to show $500,000 in cash liquidity.

That's in addition to a $15,000 application fee approved last week.

In another decision Tuesday, the commission said the first five cultivation facilities will not be required to be spread to the state's five public health regions, as previously discussed.

Instead, providing economic opportunity in an area will be considered a positive thing when the commission reviews cultivation facility applications.

Created by the Arkansas Medical Marijuana Amendment passed by voters in November, the commission must develop the rules through which Arkansans can begin applying for cultivation and dispensary licenses by June 2017. The Legislature can extend that deadline by a two-thirds vote.

As in past meetings, Commissioner Dr. Carlos Roman of Little Rock argued that application and license fees for growers should be kept as low as possible to allow for the maximum number of applications. Commissioner Travis Story of Fayetteville said growers need to demonstrate the financial wherewithal to operate a cultivation facility.

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Roman proposed a $15,000 license fee. Story proposed a $185,000 fee. The $100,000 fee -- approved without dissent during Tuesday's meeting -- was the pair's attempt to meet in the middle.

"It's an expensive endeavor, so it's not something that someone could just go in with $10,000 and start a cultivation facility. The cost is very high," Roman said. "So we want to respect the price point on it, but I'm just trying to fight at every level to make it accessible to as many people -- who can put a business together to make a run at this thing -- to make it open to as many Arkansans as possible."

Because medical marijuana is illegal under federal law, potential business owners would not be able to secure loans from banks if they run short of cash, Roman and Story said in separate interviews.

"It's really proving that they have the wherewithal to keep going and to make this work. So there's a proving ground as well with this," Story said. "The thing that we're requiring is substantial proof that they are financially able to pull this off because the last thing we want them doing is finding secondary sources of financing from groups and individuals that are less reputable."

Story said his proposed $185,000 fee was based on what Connecticut does for its medical marijuana program.

Additionally, the fee is important to fund the commission and enforcement entities, he said.

According to a state Department of Finance and Administration estimate, government oversight of medical marijuana in Arkansas is expected to cost between $4 million and $6 million a year, but tax revenue is expected to total only about $2.5 million.

That leaves fees to fill some of the financial gap if the program is to be self-sustaining, unless the Legislature increases taxes on the sale of medical marijuana.

The $100,000 annual fee would generate $500,000 in annual revenue from the five cultivation facilities authorized by the commission.

Melissa Fults, who backed a competing medical marijuana measure that the Arkansas Supreme Court disqualified during early voting, said the various fees and financial requirements are adding up.

"I think it's going to be exactly what we thought it was going to be -- the ultra-rich are going to own the cultivation facilities, and the average person is not going to have a chance. It's becoming very obvious," she said after the meeting. "Dr. Roman is probably the biggest advocate for the average person out of any of them."

But David Couch, the Little Rock-based lawyer who sponsored the approved constitutional amendment, said he thought $100,000 was reasonable.

"I thought for a cultivation facility -- you look at the revenue they're going to produce and they're a limited number -- I think [$100,000 is] what I would have suggested if they had asked," he said after the meeting.

"I'm glad they landed there. I thought $185,000 was too high; $15,000 way too low."

The matter of spreading cultivation facilities around the state came up in previous meetings, but it was unclear whether a vote at an earlier meeting had formally included a proposal to spread the applications geographically.

On Tuesday, Story said he did not want to authorize a regional requirement. It would create separate application pools, he argued.

"I feel like the cultivation facilities should be located wherever we get the best applicants," he said.

Roman -- who had resisted Story's proposal in previous meetings -- said he could go along with it as long as proposed facilities in underserved areas receive some additional preference with their applications.

"Twenty-five jobs in Booneville, Arkansas, is a big deal," said Commissioner James Miller of Bryant. "Twenty-five new jobs in Little Rock -- they come and go."

The commission approved the plan without dissent.

The commission has not yet set fees or requirements for dispensaries. The panel's next meeting is Tuesday at 3 p.m.

A Section on 01/04/2017

Print Headline: State fee to grow 'pot' set at $100,000 a year


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