Advocates see huge benefits down the road

Medical marijuana promoters say dispensaries in Hawaii could create a lucrative new market with up to 800 jobs and $65 million a year in sales.

House Bill 321 — which allows for 16 dispensaries to open in Hawaii on July 15, 2016, and potentially many more the following year — is now in Gov. David Ige’s hands.

If he signs it into law, the race will be on to see who can get the eight licenses allowed, build their greenhouses and open retail spaces to begin selling marijuana legally in Hawaii for the first time.

"It’s the beginning of a new era in Hawaii," said Michael Patterson, a medical marijuana consultant with the U.S. Cannabis Pharmaceutical Research. "It’s a historic moment for so many different reasons. It’s truly becoming legal in peoples’ eyes and it’s a turning point for how this is viewed in Hawaii."

Ige’s representatives have said he’s open to signing the dispensary bill into law, and members of his Cabinet worked with legislators in crafting the measure.

There are roughly 13,000 Hawaii residents registered to use medical marijuana. Under the current law, they have to grow their own pot or buy it illegally.

"That number is expected to quadruple once dispensaries are open," said Michael Visher, owner of Colorado’s Green Man Cannabis Dispensary. "Right now there’s no point in getting a medical marijuana card if you’re growing it yourself."

Even with just 13,000 patients, the potential market for medical marijuana is large, according to Visher. In Colorado, medical marijuana sells for an average $150 per ounce and a typical patient uses one and a half ounces a month, he said. That translates into a $35 million a year business. With the anticipated growth in number of patients signing up for medical marijuana cards, the total sales in Hawaii could grow quickly to $65 million a year, said Nate Bradley, executive director of the California Cannabis Industry Association.

The bill allows for each licensee to operate two dispensaries and two grow centers for a total of 16 dispensaries: six on Oahu, four on Maui, four on Hawaii island and two on Kauai.

Each dispensary could employ up to 30 people and each grow center about 20, according to Patterson, who along with Visher were in Hawaii this weekend to consult with investors interested in opening dispens- aries.

Hawaii Sen. Josh Green (D, Naalehu, Kailua-Kona) said the estimates of economic activity could be exaggerated.

"The people who have been pushing marijuana have been overstating the economic benefits to their communities, and the people against it are overstating the negative social impacts," Green said. "I don’t yet know whether or not it’s going to have a significant economic impact on Hawaii. There hasn’t been an honest assessment yet."

The state Department of Health would have oversight of the dispensaries from planting to sales.

The first step in opening a dispensary is applying for a license, a process that won’t be easy. For starters, applicants must prove they have $1.2 million to invest in the business. There is a $5,000 nonrefundable license application fee and a $75,000 fee due upon approval, as well as a $50,000 annual renewal fee.

The legislation allows for additional dispensary licenses to be issued starting Oct. 1, 2017, as demand for the drug grows. The bill states that for every 500 medical marijuana patients in a county, one dispensary license will be allowed.

The only tax on medical marijuana will be the standard general excise — 4.5 percent on Oahu and 4 percent for the neighbor islands. Municipal governments have the ability to impose taxes on businesses and occupational fees associated with permits specific to the marijuana industry, Visher said.

"The state will be collecting millions in taxes per year once all the dispensaries are up and running," probably in late 2017, Patterson said.

However, creating an industry from the ground up poses a number of challenges.

"What the actual cost will be to develop and successfully open a medical marijuana dispensary is difficult to determine due to so many unknown factors," including cost of land, construction, payroll and compliance, Patterson said. "But I can guarantee it will be more than $1.2 million."

Also, the proposed law doesn’t allow licensees to grow and sell marijuana in the same location. It also doesn’t allow for interisland commerce so each of the major islands will have its own self-contained unit.

"It’s going to make for some very creative business models," with many different enterprises that cater to dispensary needs, Visher said.

"Every person that steps into a marijuana facility has to be licensed," he said. "If you hire a (cleaning) crew, those people are going to get licensed and they’re going to be the only people that can clean it. If a dispensary has a plumbing issue, you have to call someone licensed by the state to allow them to come onto the premises. That license is going to be valuable."

To maintain a safe supply of the drug, Hawaii will have to invest in special marijuana laboratories, which will likely be solely for the testing of pot because it can’t be certified for other medical testing, according to Visher.

"The only thing the lab can test is marijuana, so the marijuana business has to keep the lab in business; otherwise there’s nobody to test the medicine," he said. "If no one is going to take the financial risk of opening a lab in Hawaii it’s going to make testing impossible and going to make the whole process grind to a stall."

The retail outlets can also sell manufactured cannabis products such as capsules, lozenges, pills, oils and extracts, tinctures and ointments and skin lotions.

Patterson said all this adds up to more jobs. In addition to dispensary positions there will be jobs for attorneys, accountants, security firms, transportation workers, lab technicians, bud tenders, growers and horticulture supply stores, he said.

"Colorado has added over 10,000 jobs in the marijuana industry alone," Patterson said.

In this new industry, people also have to think of how to manage commerce since marijuana is still illegal at the federal level.

Visher said he buys money orders "by the thousands" to pay his taxes and other expenses since "we can’t do nothing electronic."

"We can’t have credit cards. We have to have ATM machines," he said. "In certain cases you may not be able to use a bank since it’s illegal federally. A lot of banks will not touch this because they could theoretically be charged with money laundering. Most dispensaries don’t have a bank account. They have a big safe."

Nationally, the burgeoning business of pot is expected to more than double to a $3.5 billion industry this year from $1.5 billion in 2013, said Troy Dayton, chief executive officer of the ArcView Group, a California-based marijuana research firm.

Currently 23 states and Washington, D.C., have legalized medical marijuana.

In California, which has approximately 1.3 million patients, the medical cannabis industry employs about 100,000 people and generates about $1.3 billion in annual sales, Bradley said.

Once dispensaries are set up, experts say it will be easy for the state to push for full legalization of the drug, a move that could be a boon for Hawaii.

"A legal market in Hawaii would be insane," Bradley said. "You would expect (sales) to grow times 10. It would be almost insurmountable to estimate the economic benefit it would bring to Hawaii through jobs, increased tax revenues and the increased availability of law enforcement not having to focus on this issue."

The next likely step will be decriminalization followed by discussions about whether or not full legalization is right for Hawaii, said Green.

"We’re in the test-bed period of medicinal marijuana in America," he said.