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Pot Stores Are Coming To NY, But Cuomo Won't Say What They'll Look Like

"You wanna hit this?"
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"You wanna hit this?" Governor Andrew Cuomo's Flickr

The odds are strong that New York State will legalize marijuana next year, possibly as soon as the end of March. But what the system will look like — including who'll be able to sell pot, where it can be smoked, and what will be done with taxes on sales — is largely in the hands of Gov. Andrew Cuomo, who has remained mum about his plans.

Last August, the governor appointed a 20-member task force to draft legislation for “a regulated adult-use marijuana program.” Cuomo spokesperson Tyrone Stevens tells Gothamist, “We expect to introduce a formal comprehensive proposal early in the 2019 legislative session.” Legislators and legalization activists expect the governor to include this language in his January budget proposal.

Between Cuomo’s reversal on the issue and the Democrats winning a solid majority in the state Senate, the main political obstacles to legalization have disappeared. “At this point, the debate is not really about whether to allow adult use, but how to structure the industry,” says Assemblymember Richard Gottfried (D-Manhattan), who sponsored both the 1977 law that decriminalized possession of marijuana and the state’s medical-marijuana measure in 2014.

Gottfried compares the task to building the framework for a legal alcohol industry after Prohibition was repealed in 1933. Will marijuana cultivation, distribution, and sales be limited to a handful of corporations, as in the state’s medical cannabis extract program, or will the industry be open to small businesses? Will tax revenues be earmarked to aid the communities that saw the most arrests during the eras of prohibition and stop-and-frisk? Will people convicted of marijuana offenses be able to get their criminal records expunged or sealed, or their punishment reduced? Will the law allow home growing or Amsterdam-style pot coffeehouses?

The governor's office, for the moment, is remaining tight-lipped about its plans as it awaits the report of the task force. “The goal of this administration is to create a model program for regulated adult-use cannabis—and the best way to do that is to ensure our final proposal captures the views of everyday New Yorkers,” Stevens told Gothamist in an email. The governor’s office did not respond to more specific questions.

This has left the public debate largely in the hands of state legislators, who have expressed concerns about what form legalization will take. For example, a large majority of the more than 800,000 people arrested on marijuana charges in New York State in the last 20 years—more busts than anywhere else in the world—were black and Latino, primarily young men from lower-income urban neighborhoods. Therefore, many legalization advocates say, it would be only fair if the guy selling $20 sacks on Junius Street in Brownsville or Jefferson Avenue on Buffalo’s east side is provided an opportunity to get into the legalized business, and those neighborhoods should get quasi-reparations from the revenues raised from reefer.

“For me, it’s a social justice, economic justice issue before it’s a business issue,” says Assemblymember Crystal Peoples-Stokes (D-Buffalo), who last year co-sponsored the Marijuana Regulation and Taxation Act along with state Sen. Liz Krueger (D-Manhattan). To remedy the social ills caused by mass incarceration, she says, pot legalization legislation needs to have three guiding principles: sealing criminal records for marijuana arrests; investing ganja-tax revenues in job training, drug treatment, and education; and providing technical support and loans for microbusinesses.

For the New York-based Drug Policy Alliance, which advocates both legal marijuana and “harm reduction” approaches to opioid use, this form of restorative justice outweighs traditional legalization movement concerns like allowing home growing, or “social use”—allowing cities to opt in to legalization of marijuana bars and coffeehouses, subject to local anti-smoking laws.

Colorado and Washington, the first states to legalize adult use, barred anyone with a drug conviction from working in the industry, notes DPA deputy New York State director Melissa Moore. California and Massachusetts have made some affirmative-action efforts to expand participation by racial minorities and small farmers, she adds, and New York should do more.

A crucial issue here is whether the companies in the industry should be vertically integrated—handling cultivation, processing, distribution, and retail sales—as is required by the state’s current medical-marijuana program. “That’s exactly the model we don’t want to see,” says Douglas Greene, legislative director of the marijuana-legalization advocacy group Empire State NORML, citing its limited accessibility and high costs.

Setting up a vertically integrated business requires far more capital than opening a store or a farm, and so greatly limits small operators’ opportunities to enter the industry. There was “not a single minority applicant” among the 43 companies that sought one of the first five spots in the state’s medical-cannabis program, according to state Sen. Diane Savino (D-Staten Island), senate sponsor of the legislation that created the program in 2014, and only one of the five ended up owned by women.

While Gov. Cuomo initially insisted that medical-marijuana companies be vertically integrated, Krueger says the governor's staff has indicated that he's no longer seeking that requirement.

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From the NYC Cannabis Parade held in May (Courtesy Scott Lynch)

One possible approach would be to model legal marijuana on the way the alcohol industry is regulated, says Gottfried. State liquor law strictly separates production, distribution, and retail sales, with a few narrow exceptions for craft brewers and small wineries. The Marijuana Regulation and Taxation Act would have the State Liquor Authority regulate adult use, but Krueger says she now believes it would be better to create a new agency to oversee adult use, medical use, and hemp, as it would have the specialized knowledge to regulate things like packaging and labeling.

“The way the industry develops has to be responsive to the communities targeted,” says Moore. “Not just jobs, but ownership.”

Even banning vertical integration would still leave poorer New Yorkers with significant barriers to opening their own businesses, however. “The biggest problem is access to capital,” says Savino, who notes that the state falls short of its goals for hiring minority and women-owned contractors every year—and that’s in fields that are not still illegal under federal law. Even a dispensary-only license could cost $500,000, she estimates.

The best opportunities for small operators, suggests Moore, might come in such ancillary businesses as delivery services, security, production of “edibles” like pot pastries, and legal and business services.

On the other hand, Local 338 of the Retail, Wholesale, and Department Store Union, which represents workers at three of the seven medical marijuana companies in the state, told an Assembly hearing on Long Island on December 3rd that vertically integrated businesses would be more likely to provide union-scale wages and benefits than smaller operations. “I’m sympathetic to that, but we’re going to have to find a sweet spot,” says Savino, who has not yet endorsed the Marijuana Regulation and Taxation Act. One possible compromise would be requiring businesses with more than 20 or so employees to sign a “labor peace” agreement that they won’t oppose union organizing, as the state now does for all medical marijuana companies.

Another issue is protecting the established medical-cannabis industry from being wiped out once people can buy actual herb rather than the expensive extracts that are the only form of marijuana currently allowed for medical uses. It’s “not entirely clear” how that could be done, says Gottfried. One possibility would be permitting medical dispensaries to run adjacent storefronts to sell legal marijuana, which could be opened while other businesses are still waiting to get licenses. Savino endorsed this approach, with the caveat that those companies “shouldn’t be allowed to control the market” by getting an early jump on legal sales.

The Marijuana Regulation and Taxation Act would allow both social use and home growing of up to six plants. But similar provisions have been sacrificed in other states’ legislation, to placate those who don’t want to see people go to jail for pot but also don’t like the idea of “marijuana bars.”

Gottfried contends that if people can consume alcohol in a bar, they should be able to do the same with cannabis. Peoples-Stokes says not allowing social use “would be kind of unfair,” particularly because federal law now bans public-housing residents from smoking in their homes.

Savino opposes permitting home cultivation. “That’s crazy,” she says. “Do you think we’re going to [be able to] keep people from selling it?” But other states allow home gardens: The Michigan law enacted by voters in November lets people grow up to 12 plants for personal use, notes Krueger. The people most upset by that, she says, are would-be retailers who don’t want competition.

The state legislature’s Republicans, now less than 40 percent of the members of both houses, are conspicuously absent from the ranks of legalization supporters. Peoples-Stokes says she’s had “great conversations” with some GOP legislators, but “none of them are willing to go on the record.” Outgoing Senate Majority Leader John Flanagan (R-Suffolk) did not respond to requests for comment.

Another idea floated recently is to use marijuana-tax revenues to help fix the city’s subways, what former City Council Speaker Melissa Mark-Viverito calls “weed for rails.”

But while public support for legalization could soar if it would spare late-night and weekend riders from having to take shuttle buses, Gottfried is skeptical about the idea, given that the state Department of Health estimated in July that cannabis taxes would bring in $248 million to $678 million a year, while Metropolitan Transportation Authority head Andy Byford has said the subway system would need $4 billion a year to modernize. And even that higher revenue figure was based on a price and tax rate—$374 an ounce, or more than $450 after adding a 15 percent tax surcharge and sales taxes—that would risk pushing people back to the black market. (Delivery services advertise $100 quarter-ounces on Craigslist, with one Queens dealer offering ounces for $260. In legal states, a newly opened pot shop in Massachusetts charges $300, and Oregon prices are as low as $75.)

In any case, legislators say, the change in public attitudes on legalizing marijuana has been dramatic for its speed — as fast, notes Gottfried, as the rapid acceptance of same-sex marriage.

“Four years ago, people would have said it’s impossible,” says Savino. “Now, more and more people are asking ‘Why is marijuana illegal? It makes no sense.’”

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