Thread: CO.'s medical pot business is for-profit, regulated,thriving

Colorado's medical pot business is for-profit, regulated – and thriving

By Peter Hecht
phecht@sacbee.com
Published: Sunday, Aug. 14, 2011 - 12:00 am | Page 1A
Last Modified: Sunday, Aug. 14, 2011 - 9:41 am

Coming Monday: Check out Colorado’s famously mellow, pot friendly town dubbed Stonerville, USA.

DENVER – After 15 years as a white-collar "corporate nomad," Dan Rogers found his new career in the thriving green-collar industry of Colorado, the only state in America with a for-profit medical marijuana market.

The equities trader and former investment banker now produces pot breeds "Reclining Buddha" and "Heartland Cream" in a converted printing press warehouse near downtown Denver.

In the nation's most heavily regulated medical cannabis industry, he also works under constant video surveillance.

Electronic eyes, required by Colorado's year-old Medical Marijuana Enforcement Division, track packaging of each shipment from Rogers' warehouse to his four marijuana stores, called Greenwerkz.

He submits product manifests and delivery routes for state approval. Still more cameras are recording as marijuana is unpacked and his state- licensed employees sell to state-registered patients.

"Everything from seed to sales is on video," Rogers said. "You need to know where every gram goes, where every plant is."

In Colorado, America's second-largest medical marijuana market behind California, marijuana capitalism flourishes under strict regulations approved by the state Legislature starting last year.

In California, dispensaries handling millions of dollars in transactions are supposed to operate as nonprofits – with medical marijuana users giving "donations" to "reimburse" operators and growers for costs.

Colorado stores simply pocket cash as profit. And, under new mandates that stores grow at least 70 percent of the marijuana they sell, weed industrialization is flourishing. It is happening despite U.S. Justice Department warnings over attempted large-scale cultivation in California or suspected medical pot profiteering in other states.

In Denver, the marijuana boom grows in old brick buildings and shuttered factories that only five years ago were being converted into artist lofts and live-work spaces for urban professionals.

A former truck and tractor parts factory now houses indoor farms for eight marijuana stores. Elsewhere, real estate broker John Wickens has leased a half-million square feet of space to medical pot entrepreneurs – including a 76,000-square-foot cultivation room for one store.

"This has helped the city tremendously," he said. "It steadied commercial real estate. There are buildings with 40,000 square feet sitting empty. Who else is going to take it?"

Denver interim city attorney David Broadwell said the city took in $3.5 million in marijuana sales taxes last year and hundreds of thousands in local licensing fees from 300 marijuana stores and other cannabis businesses. Colorado's medical pot market may be one-sixth of California's, yet Broadwell said Colorado's cannabis capitalism took the Golden State model "and put it on steroids."

The industry worries Tom Raynes, a former deputy state attorney general and local prosecutor who heads the Colorado District Attorneys' Council. He says Colorado pot businesses operate as an "assumption-of-risk industry" – doomed to collapse if the U.S. Justice Department, which considers all marijuana illegal, decides to intervene.

"I think they're inviting the federal battle," he said. "They're poking the tiger."

But Tom Massey, a Republican state representative from central Colorado who co-sponsored legislation regulating the industry, holds Colorado up as a national model, one that eased federal concerns by providing meticulous oversight to prevent diversion of medical marijuana to the illegal market.

"I think the feds are thinking that as long as we keep it for its intended use, they're going to turn a blind eye," he said.

Fees fund enforcement

In Colorado, where voters legalized medical marijuana use in 2000, fees on 730 retail stores and more than 1,000 cultivation centers and other cannabis businesses now fund the $10 million budget of the Medical Marijuana Enforcement Division. It is part of the Department of Revenue, which oversees the liquor and gambling industries.

Paul Schmidt is one of the division's medical marijuana G-men. An enforcement director in a black pinstriped suit, he drops in on marijuana stores and grow rooms, reviewing the security and integrity of sales transactions and cataloging plants marked for state counting with bar codes or special radio chips.

"It was really strange for me initially, because I used to call these people defendants," said Schmidt, a retired Drug Enforcement Administration agent who once directed federal raids on pot fields in Oregon. "Now I call them an industry."

With 55 employees and more than 30 compliance officers, the medical marijuana division licenses thousands of pot employees. Background checks ban anyone with a felony drug conviction from owning, investing or working in the marijuana businesses.

The state also registers all medical marijuana patients. Their numbers nearly doubled in a year to 130,000, with 20,000 more under review or rejected for improper paperwork. Last year, Colorado used $9 million in $90-per-patient medical marijuana program fees to help close a state budget gap.

Norton Arbelaez, a 31-year-old Tulane University law school graduate, is one of the emerging faces of Colorado's medical marijuana industry. He exuded professionalism as he led a tour of his River Rock store and cultivation center in a former Denver bus terminal building.

Before Arbelaez showed off his "Jack Frost Sativa" with its "very piney, very lush smell" or his "Bubba Kush" used by a favorite patient for her cancer symptoms, he pointed out his 32 video cameras.

Arbelaez and his partners invested $45,000 in surveillance, meeting state mandates that, by January 2012, will require all marijuana businesses to maintain 20 hours of video feeds that Colorado regulators can access online.

"We've waived our Fourth Amendment protections. We've given every piece of personal information to the state," he said. "It's Big Brother. Let's not kid ourselves."

Oversight costs are high

For Arbelaez and many others, it is also big business. He and partners invested close to $1 million in their retail and growing operation. They are only now close to turning a profit – but the future of his marijuana business looks prosperously green.

More than two dozen local Colorado jurisdictions have banned marijuana businesses. But in places such as Denver, Boulder and even conservative Colorado Springs, a medicinal Green Rush took off in 2009, before state regulation.

Denver's South Broadway Street was dubbed "Broadsterdam" or "the Green Mile" as pot shops opened in a frenzy. Dozens remain – mom and pop stores such as the Little Green Pharmacy with its shimmering neon marijuana leaf or the Little Brown House with its sign for "the house of the $5 joints."

"The model before (regulation) was embarrassing, uncomfortable, unwelcoming," said Alex Arguello, 25, who with two friends and his father later opened Colorado Wellness Inc., a dispensary and climate-controlled cultivation center. "I went into one business and there was a guy behind a black trash bag. He pulled it back and said, 'What do you need?' "

Arguello and partner Edward "Chuck" McLamb, who both came out of the jewelry and pawn shop business, are now comfortably operating in a state-licensed marijuana store. But many stores went under, unable to afford – or deal with – the demands and costs of new government oversight.

In Boulder, which took in $1 million in taxes and local fees on marijuana businesses in 2010, the college town that once teamed with more than 100 stores and grow rooms saw its industry shrink to an estimated 45 retail centers.

"There were a lot of people who got into this thinking this was going to be a real cash cow," said Michael Bellingham, 38, co-owner of the Boulder MM Dispensary, one of the city's original pot stores. "But a lot of them realized they were in over their heads."

Bellingham cashed out his 401(k) and borrowed from family members so he and his partner could outfit a warehouse to meet the state's marijuana store cultivation mandates. He said many stores merged with pot growers in shotgun marriages that were destined to fail.

Pair sells cannabis foods

State regulation offered the lure of legitimacy for Scott Durrah, an award-winning restaurateur known for his Caribbean-cuisine 8 Rivers eatery in Denver. With wife Wanda James, a marketing executive and leading Colorado fundraiser for Barack Obama's presidential campaign, they secured state medical marijuana licenses as "infused products" manufacturers.

Today, their Simply Pure kitchen makes cannabis foods – from marinara sauce and mango salsa to granola bars and gluten-free jam – for 285 Colorado marijuana stores.

"We grow all our own cannabis. We don't buy anything from anyone," James said. "We cook with 100 percent bud."

She said their regulated, professionally run kitchen and their personal standing in the community brought "a face to cannabis that people couldn't demonize."

But Rogers, operator of the Greenwerkz stores and two cultivation warehouses, decided he didn't want to stand out too much after Deputy U.S. Attorney General James Cole issued a memo June 29.

It said "large-scale, privately-operated marijuana cultivation centers" – even if legal under state laws – aren't immune from federal prosecution.

Rogers and his partners were considering buying two other medical marijuana retail chains – a deal that would have made them the largest pot provider in Colorado. They abruptly backed out.

"We decided there was no need to be the biggest," Rogers said. "We don't need to be the target. You don't want to poke the dog. We just walked away."

http://www.sacbee.com/2011/08/14/383675 ... z1V1i7Obne

In your opinion JohnDoe2, do you believe marijuana should be decriminalized?

Originally Posted by HAPPY2BME

In your opinion JohnDoe2, do you believe marijuana should be decriminalized?

Don't really care one way or the other.
Not my decision to have to make

Originally Posted by JohnDoe2

Originally Posted by HAPPY2BME

In your opinion JohnDoe2, do you believe marijuana should be decriminalized?

Don't really care one way or the other.
Not my decision to have to make

=======================================

Marijuana is a huge cash crop of the Mexican drug cartels.

You have no opinion about this either?

Originally Posted by HAPPY2BME

Originally Posted by JohnDoe2

Originally Posted by HAPPY2BME

In your opinion JohnDoe2, do you believe marijuana should be decriminalized?

Don't really care one way or the other.
Not my decision to have to make

=======================================

Marijuana is a huge cash crop of the Mexican drug cartels.

You have no opinion about this either?

Seems to me every city, county, state and federal law enforcement agency is already working on this issue.
I doubt that they need my help or care what my opinion on the issues is.

Legalize it and even more people will be using it. It will still get more and more expensive, thus consuming income that could be put to better use. The potheads will always be whining that the laws are not liberal enough. If someone needs it bad enough they can grow it themselves.

(Now, rollll another one!)

Originally Posted by Captainron

Legalize it and even more people will be using it. It will still get more and more expensive, thus consuming income that could be put to better use. The potheads will always be whining that the laws are not liberal enough. If someone needs it bad enough they can grow it themselves.

(Now, rollll another one!)

It could cause a larger problem then we are having to deal with today . We already have a lot of Americans that can not handle alcohol responsibly

Legalizing or decriminalizing pot won't have any affect on the cocaine and heroin that the drug cartels import into the U.S. by the tons. It would have no affect on the people, guns, money, etc. that they smuggle.

"Los Zetas, who earned a reputation for brutality by gunning down thousands of Mexicans in the battle for drug-smuggling routes to the United States, now control much of the illicit trade of moving migrant workers toward the U.S. border, experts in the trade say."

http://www.alipac.us/ftopict-246671-zetas.html

Hippie town chafes under Colorado's medical pot rules

By Peter Hecht
phecht@sacbee.com
Published: Monday, Aug. 15, 2011 - 12:00 am | Page 1A
Last Modified: Monday, Aug. 15, 2011 - 8:11 am

NEDERLAND, Colo. – The Green Rush has gone bust in the town Rolling Stone dubbed "Stonerville, USA."

Kathleen Chippi, who runs the One Brown Mouse boutique but recently shut down her medical marijuana dispensary and smoking room, cursed as she blamed the government.

"I refuse to give up my … constitutional rights to the Colorado Department of Revenue," she fumed, indignant over what she called intrusive oversight and abusive taxation of marijuana.

More than 8,200 feet high in the Rockies, state regulation arrived in this famously mellow, pot-friendly town after Colorado passed landmark legislation over the past two years to tax, license and govern the state's wild, for-profit medical marijuana trade.

Colorado now has the most heavily regulated marijuana industry in America. Even Nederland's Board of Trustees imposed a $5,000 local fee on new cannabis stores, hoping to cash in on pot prosperity.

But it has meant heartache for this hamlet of 1,400 people.

In 2010, Nederland voters passed a symbolic measure, declaring all marijuana legal in the hippie haven and former silver town renowned for its high-grade cannabis. In practice, the town already had permitted seven medical marijuana stores. As many as 14 were said to be operating – one for every 100 residents.

Now Nederland has three marijuana stores left. A bonanza in local sales taxes is drying up, and the town's marijuana growers are fed up.

Rather than pay state licensing fees and hefty costs for video security and other state mandates for selling medical marijuana, Chippi closed the doors of her Nederland store last year.

"This is insane. It's 'Reefer Madness' run amok," she said.

In Colorado, industrial marijuana cultivation thrives in warehouses in Denver and nearby Boulder. But Nederland's medical cannabis growers have been all but cut off from selling their product to the retail market by state rules requiring stores to grow their own plants or buy from other commercial centers.

The new regulations were a double blow to Nederland resident Mark Rose, 51, a former hospital trauma technician.

A marijuana grower fiercely proud of his "Chem Dawg" and "Sweet Island Skunk," Rose was forced out as a partner in the town's Grateful Meds pot store.

Years ago, Rose spent 10 days in jail after he was caught driving a pound of his personal Nederland stash to Ohio, where he briefly moved. Now Colorado's new medical marijuana rules ban people with a felony drug offense from working in the industry.

Rose sees a more universal indignity in the new cultivation rules that he says hurt small pot growers.

The rules were a buzz kill to high economic times that took off here after the U.S. Justice Department signaled in 2009 that it wouldn't target marijuana patients in states where medical use is legal.

Nederland sprouted with marijuana stores eagerly buying local weed. By 2010, town coffers brimmed with new marijuana income.

Some $80,000 in marijuana sales taxes accounted for 10 percent of the town's total. Pot tourism spiked overall sales taxes by some 50 percent as marijuana seekers from from as far away as Durango – seven hours to the west – also filled restaurants, shops and the town's hotel.

"It was like a dream," Rose said. "Everybody in town was making extra money. We had everyone from 21-year-old snowboarders to 72-year-olds supplementing their Social Security income. But the state didn't like that. They wanted the Henry Ford (production) model … It's antitrust. It's a power grab."

The boom days unnerved some local officials.

"We had people from all over the country coming in and wanting to set up shop," said town clerk Teresa Myers. "Some were clearly questionable. And they saw … a live-and-let-live kind of town."

Colorado would later ban out-of-state residents from working in its medicinal pot industry. And Nederland enacted local rules, including licensing fees on new pot businesses and renewal charges on existing stores.

As a result, no new stores came in. Most left. Local marijuana sales taxes are off by a third this year.

Nederland retains its mythical lure of legal weed – symbolized by a Florida man who stopped in recently at a local business, saying he heard this was the place he could score some pot. State law may supersede the town's legalization vote, but a sense of permissiveness persists.

"This town is chill," said Jessica Harris, 26, who sells pastries and coffee while people get their bicycles fixed at Randy's Happy Trails Bike Shop and Coffee. "People are happy, free to do what they want."

But next door, the Tea Alchemy Wellness Center – once part of the medical marijuana boom – is closed.

"Everybody wanted to get rich," said Harris. "That's the whole story. But state law is changing every second. It's made it pretty hard."

The new climate is challenging for Mike Tardiff, a construction worker who started Grateful Meds with Rose. Not only did he lose his partner, but Tardiff has had to lease Denver warehouse space to grow for the store – blasphemous in Nederland.

Chippi, who just a year ago had "2,200 patients – double this town's population" and "over 80 strains of A-plus medicine" at her dispensary, remains defiant. She said she is suing the state and will reopen her pot shop – under her rules, not Colorado's.

Rose is headed to meet with medical marijuana advocates in Michigan. He said he will argue against following Colorado's "big business" regulatory model.

"They just couldn't stand the idea," he said, "of some hippies sharing the wealth."

http://www.sacbee.com/2011/08/15/383791 ... z1V7HZsI94