Marijuana in Illinois: A 10-month scorecard

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At 6 a.m. New Year’s Day, Lt. Gov. Juliana Stratton stepped to a cash register at the Sunnyside shop in Lakeview and bought some cannabis-infused clementine edibles, helping to kick off the era of legal marijuana in Illinois.

In the first nine months, it produced nearly a half-billion in sales of weed and related products, over $100 million in tax revenue for the state and thousands of new jobs from South Beloit to Sauget and from Danville to Delavan.

It’s still very much a work in progress with uneven results. Recreational marijuana sales in Illinois have grown faster than expected, but new dispensaries have not. During the coronavirus lockdown, marijuana shops were deemed essential businesses, but some were targeted by looters during violence that accompanied protests over the death of George Floyd.

Fears of crime and abuse by underage users so far haven’t materialized. But neither have the promises of social equity. Tax revenue has exceeded admittedly low projections, but it hasn’t yet provided the promised new funds to communities hard-hit by the enforcement of marijuana laws during a decades-long war on drugs.

"It’s kind of the mixed bag that I mostly expected," says state Rep. Kelly Cassidy, a Chicago Democrat who helped write the recreational cannabis law. "Things that have been challenging, we expected to be hard. I’m pleased overall."

State Rep. Sonya Harper, a Chicago Democrat and member of the Legislative Black Caucus, was among the critics of the initial selection process in which just 21 applicants out of more than 900 qualified for a lottery to award 75 dispensary licenses. The state is reviewing the scoring procedures after unsuccessful applicants sued, claiming inaccuracies and inconsistencies in the process. "Overall, it’s going OK," she says. "There are definitely some places where we need to make some tweaks, though."

State Sen. Jason Barickman, a Republican from Bloomington who was an early opponent of legalizing recreational weed but eventually supported the legislation, says, "The rollout is as anticipated and has been positive. One of my primary concerns was youth access. We haven’t seen reports of abuse and leakage of product. As significant a change in public policy as it was, I don’t think the concerns that existed before the law passed have materialized."

The business of legal weed has been very good. Recreational sales are on pace to reach about $650 million by year-end, likely topping the revised estimates by BDSA, a research firm in Boulder, Colo., which already increased its initial projections by about one-third. "There’s quite a bit of upside potential for Illinois to exceed our long-term projections," says Executive Chairman Roy Bingham, who forecasts that annual recreational sales in Illinois will hit $1.5 billion by 2025.

Stronger-than-expected sales in their home market helped publicly traded cannabis companies Green Thumb Industries and Cresco Labs to beat analyst forecasts, helping their stocks shake off an ugly industrywide slump.

Sales could have been higher, but weed became legal in January, just six months after the law passed.

"There was never a question whether there was demand," says Kris Krane, president of 4Front Ventures, which owns Mission dispensary on the South Side. "Product availability was about what we expected. There were some initial shortages."

Although many growers have doubled their cultivation space, supply still hasn’t caught up. Long lines and shortages have subsided, however, helped in part by online ordering that was introduced because of COVID-19.

As a result, Illinois has the highest prices for legal weed in the country. Buyers here pay $15.59 per gram for smokable marijuana, called "flower." The next closest is Massachusetts at $11.85 a gram, followed by Maryland at $11.81, according to BDSA. Weed is cheapest in Colorado, which was the first to legalize recreational marijuana, at $4.37 per gram.

The customer base is still growing fast, says Cresco spokesman Jason Erkes, who says the company’s eight stores recorded 1,000 first-time buyers on a recent Sunday.

New stores have opened in downtown Chicago, as well as in suburbs such as Skokie and Schaumburg. Shops also opened in border towns such as Danville, Quincy and South Beloit, drawing customers from nearby states where weed isn’t yet legal. But new stores haven’t opened as quickly as expected, particularly in Chicago, where tight zoning regulations have made winning approvals a time-consuming gamble.

One of the most controversial parts of the new weed law was a provision that allowed each of the 55 medical-marijuana license holders to not only sell recreational marijuana, but to also open an additional shop. So far, there are just 67 adult-use dispensaries.

"I would have thought more dispensaries would be open by now," says Charlie Bachtell, CEO of Cresco, which has opened four new stores and has received approval for one more. "Second locations for some dispensaries are a little behind schedule. Maybe by the end of the year it’s where we thought it would be."

Opposition to recreational weed shops is softening with time. Suburbs such as Naperville, which initially rejected recreational sales, now allow it.

In Chicago, early public meetings for proposed shops in neighborhoods such as River North drew big crowds and vocal opposition. Two stores won approval.

"I haven’t heard a peep since the shops opened up," says Mike Riordan, president of the River North Residents Association.

Residents have been more preoccupied with incidents of looting and widespread damage in late May and early August, as well as the impact of COVID-19 on retailers, restaurants and office buildings in the neighborhood.

"People are more concerned about that than cannabis," Riordan adds, noting that three recent community meetings for another proposed dispensary in the neighborhood "were moderately attended. The pitchforks weren’t nearly as sharp."

Timing helps. The marijuana business is a source of new tax revenue and jobs at a time when both are being devastated by a pandemic. Cannabis companies hired nearly 2,400 people in cultivation centers this year, according to state agencies that badge new employees.

Many cultivation jobs are in downstate communities, such as Delavan, a farming town of about 1,800 people south of Peoria, where Revolution Global is doubling its footprint. The cultivation facility employs about 150 and is poised to overtake the school district as the town’s largest employer, says Mayor Liz Skinner. "It’s been huge for us," she says. "We’re thrilled to have them."

UNRESOLVED ISSUES

The centerpiece of the Illinois law—the concept of social equity, or undoing some of the harm done by the war on drugs—remains contentious. Illinois had hoped to be seen as a model for the rest of the country by putting social-equity measures in its statute.

At the top of the list was diversifying the industry’s white, male ownership. The law gave extra points to applicants for licenses to run dispensaries and other operations who had lived in places disproportionately impacted by the war on drugs as well as those who had been arrested or imprisoned for minor marijuana offenses.

The law also set aside 25 percent of marijuana tax revenue to be reinvested in communities hit hardest by the war on drugs. None of the initial $31.5 million set aside for the first round of grants has been awarded.

The statute also included provisions to automatically expunge the criminal records of people arrested or convicted of minor cannabis offenses. Officials estimated up to 700,000 arrests or convictions are eligible. Gov. J.B. Pritzker pardoned 11,000 people late last year, and about 7,500 records were expunged before COVID slowed things down.

The opportunity to break into a lucrative new industry has gotten the most attention. The list of 21 applicants who qualified for a lottery that will award 75 new retail licenses included several firms that involved political and industry insiders or wealthy businessmen.

"Social equity hasn’t panned out the way people had hoped. I think there’s a lot of disappointment," says Kayvan Khalatbari, a cannabis industry veteran from Denver.

Licenses were supposed to be issued May 1. The lottery is on hold while the state reviews the process to make sure the process was followed correctly. Pritzker says he hopes they’ll be awarded sometime this fall. Also up in the air are 40 licenses each for craft growers and infusers that were supposed to be issued July 1.

Winners and losers in the dispensary competition have sued.

David Scott, a Black business owner from Bellwood, heads one of the 13 teams that qualified for the lottery that is led by a person of color. "My heart goes out to people who didn’t win. But in correcting the wrong, don’t penalize those who did it right."

Pritzker and several lawmakers have called for changes in the statute to limit the number of licenses that applicants can seek. Current law allows applicants to apply for as many licenses as are available. It’s one of many changes to the law that are under consideration. Whether legislators will take them up in the fall veto session or the longer spring session is unclear.

The law, like the marijuana industry, remains a work in progress. "There was a lot of praise based on a statute that’s aspirational," says Bill Bogot, who leads the cannabis practice at law firm Fox Rothschild. "We don’t know yet. There are going to be legal battles over what is social equity."

When asked to grade the state on its results so far, Toi Hutchinson, a former legislator who helped write the law and now is a top adviser to Pritzker on weed, says: "For being brave enough to move a policy forward that’s this bold, we’re definitely at an A. For how the implementation and rollout has gone, we’re still doing it.

"I believe at some point we’re going to have an industry that looks different from anywhere else. We’re going to get money into communities that have been sorely lacking it. There are going to be thousands of folks with (criminal) records who have another shot at full and complete lives."

via Crain’s Chicago Business https://ift.tt/1mywUHL

October 25, 2020 at 11:29AM

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