9 minute read
Interview: New Jersey and Pot...Perfect Together?
New Jersey and Pot... Perfect Together?
Legalizing marijuana for adult recreational use was recently passed decisively by New Jersey voters. Those in favor based their decisions on a wide variety of considerations. Some were convinced by the social justice implications of decriminalization; others prefer regulation in order to ensure the safety of the cannabis products. And a third very real consideration was the financial revenue that legalization will generate for the state and municipalities. No matter where you stand on the issue, the effects will be felt. With new laws come many myths, uncertainties, fears, and questions. CM recently met with Charles J. Messina, Esq. of the Genova Burns law firm, one of the leading experts in this new area of the law.
CM: How long do you estimate it will be before dispensaries are up and running?
Charles J. Messina, Esq. (CJM): Well first, there are 13 dispensaries already in NJ serving the 95,000+ medical patient population. Once those existing Alternative Treatment Centers (ATCs) with dispensaries are able to demonstrate to the Cannabis Regulatory Commission (CRC) that they have satisfied the medical needs of their patients and have municipal approval, these dispensaries will be the first to sell to adults 21 and over. But most folks who ask me this question are curious about future adult-use retail stores. I could go on about what might go wrong to slow down a projected timeline and why building up the medical program will likely be the focus of the CRC at first...here’s the short answer: you can expect to see recreational retail stores open no earlier than the end of this year, and more realistically in early 2022.
BY LILIANN PARAS
CM: How will the locations for the cannabis dispensaries be decided?
CJM: You can apply for a license to be located in any municipality in NJ, though you have to ultimately get the town’s approval for your desired location. So if the town doesn’t want a retail facility, for example, then there is nothing you, the CRC, or even Governor Murphy can do to change that decision.
CM: What types of licenses are involved and what is the general approval process?
CJM: There are six main types of licenses you can apply for: (1) cultivator, (2) manufacturer, (3) wholesaler, (4) distributor, (5) retailer (this is the license for the dispensaries you asked about, which may include a cannabis consumption lounge as part of the store) and (6) delivery licenses. You can also apply as a “microbusiness” for any of these license types.
Similar to the last two medical marijuana application rounds for licensure in 2018 and 2019 (where our law firm represented applicants), there will be multiple categories for the CRC to consider in the approval process such as your team’s collective experience, financing, a security plan, community involvement and the like.
CM: Can you explain more about microbusinesses; does it work like a microbrewery license and give those less experienced a better shot?
CJM: Absolutely, and that’s a good analogy. I see this as preventing mega-companies from dominating the NJ marketplace, especially because at least 25% of the total number of licenses in each class are supposed to be reserved solely for microbusinesses. “Microbusiness” is defined in the new legislation as a person or entity with business operations that employ no more than ten employees. The application related fees should be less, and there won’t be caps on the number of licenses awarded for micro-growers. Similar to a microbrewery license, there are other limitations too. For instance, you can’t operate a cannabis establishment that occupies more than 2,500 square feet, process more than 1,000 cannabis plants each month, or acquire more than 1,000 pounds of cannabis in dried form for retail, resale, or processing each month.
CM: Does the law allow for growing marijuana at home?
CJM: Not yet...
CM: What is the projected state revenue?
CJM: Some are projecting up to nearly a billion in revenue over the next three years. Massachusetts is a good example because it only legalized adult use sales at the end of 2018. Last I read, they had already eclipsed $1 billion in total cannabis sales since then, and more than $539 million in cannabis purchases just this year alone, with shutdowns and all. And that’s not including the ancillary businesses economically benefiting from the plant. Then you compare this with NJ, which has a population of more than 9 million people, and how close it is in proximity to states like NY, PA and Delaware that presently have no recreational marketplace and are not yet competitors in this business.
CM: What about taxes, and will the revenue be ear-marked for special programs?
CJM: To start, towns that permit these businesses will be permitted to charge a local tax of up to 2%. They’ll be able to spend this revenue as they wish. Considering how significantly COVID-19 has bludgeoned municipal budgets, I am already hearing of several conservative towns doing an about-
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face on welcoming this green rush. There will also be a social equity excise fee, and cannabis products will be subject to NJ’s sales tax. This revenue will go towards things like administering the cannabis program, local training costs for police officers, and financial assistance to “impact zones” and qualifying residents.
CM: Since marijuana is a banned substance under federal law, how does that affect cannabis entrepreneurs?
CJM: It results in barriers to entry that traditional businesses don’t have to deal with. This includes the lack of options with respect to federal-backed banking, financing, and insurance. There are a number of tax obstacles too, such as Section 280E of the federal tax code which prohibits plant-touching businesses from deducting ordinary business expenses.
CM: What are the implications for those employers that are NOT directly involved in the cannabis business?
CJM: Vast and varied. Since July 2019, there have been protections in place with respect to NJ employers having to accommodate certain medical marijuana patients’ off-site, off-premises use. Now, there will be a slew of new issues that our team is already starting to counsel employers about, including, for example, specific conditions with respect to those companies that want to maintain or create drug-free workplace or testing policies.
CM: How are some of the fears about safety being addressed in the legislation?
CJM: I think everyone’s biggest concern is people driving while high. The legislation squarely attempts to address this and other safety concerns, including by the funding of local police for prevention training through certain tax revenue derived from retail sales. Setting up a legalized regime, and keeping products affordable and competitive, should undermine the illicit market too. There are hundreds of thousands of adults in NJ admittedly buying their unregulated and untested cannabis products illegally from dealers, who may also be offering for sale other dangerous types of narcotics. Soon those very same residents may instead be going to a store to buy legal marijuana at the same place their grandparents are getting their medicine.
Charles J. Messina is a partner at Genova Burns LLC and Co-Chair of the Cannabis Law, Franchise & Distribution, and Agriculture industry groups. He devotes much of his practice to advising canna-businesses and entrepreneurs on issues ranging from regulatory compliance to licensing as well as litigating various types of matters, including complex contract and commercial disputes, insurance and employment defense matters, trademark and franchise issues and professional liability, TCPA and shareholder derivative actions. He also teaches one of the region’s first Cannabis law school courses as an adjunct professor. You can reach Charles J. Messina at cmessina@genovaburns.com or by calling 973.646.3278.
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Louis Critelli, MBA, CRS Louis Critelli, MBA, CRS Louis Critelli, MBA, CRS Broker/Owner at Engel & Völkers Critelli Properties Broker/Owner at Engel & Völkers Critelli Properties Broker/Owner at Engel & Völkers Critelli Properties 420 Route 34, PO Box 247 Colts Neck, NJ 07722 420 Route 34, PO Box 247 Colts Neck, NJ 07722 420 Route 34, PO Box 247 Colts Neck, NJ 07722 ljcritelli6@gmail.com www.LouisCritelli.com 732.687.5482 Direct 732.858.8301 Office ljcritelli6@gmail.com www.LouisCritelli.com 732.687.5482 Direct 732.858.8301 Office ljcritelli6@gmail.com www.LouisCritelli.com 732.687.5482 Direct 732.858.8301 Office
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