Slow rollout of retail marijuana sales draws complaints at hearing

ALBANY – Marijuana regulators got an earful Monday from state legislators and others about problems with the state’s slow rollout of legal cannabis retail sales.

Instead of opening 20 retail stores a month beginning in January, the state just has about 27 now with a court injunction effectively blocking any more. Tax fines aren’t stopping black market sellers, who shrug it off as a cost of business, and criminal prosecution isn’t on the table.

Meanwhile, some farmers are in financial binds with approximately 300,000 pounds of crop sitting in storage. And a state decision to assess a tax on product potency could prove ruinous for some cultivators.

Those were some of the tales told at senate hearing aimed at weighing legislative action to address some of the program’s ills.

“I certainly recognize there’s been all sorts of problems that we didn’t envision,” said State Sen. Liz Krueger (D-Manhattan), chairwoman of the Senate Finance committee and sponsor of the bill that eventually legalized adult-use marijuana, early in what proved to be an all-day hearing.

At issue is the state’s bumpy phase-in of marijuana retail sales.

Gov. Kathy Hochul and legislators promised to give many of the first retail “conditional” licenses to people with past drug convictions, as a way of address past disproportionate enforcement of marijuana laws.

The state even set up a $200 million social equity fund to help – although its establishment took longer than expected. And a cumbersome process of going through a state agency to find and ready storefronts meant just 27 have opened.

Then, a lawsuit challenging the staggered permitting process stopped the conditional program and put more than 400 provisional licenses on hold.

While the case continues, the state has sought to expand the market by opening a 60-day “general” application window to grow, process, distribute or sell marijuana, and expects to soon issue 1,000 new licenses.

Still, some people are in limbo — such as Rick Burton, owner of 4 Jays in Mount Vernon, in an exchange which captured the plight of many conditional licensees.

“I have a (conditional) license that means nothing,” Burton said. “I have a lease — $10,000 a month — and I have nothing. So tell me: What do I do? Do I hold on? Do I pray? Do I guess? They told me I can apply for a general license. Am I supposed to gamble when I might not succeed?”

Grilled by lawmakers, Office of Cannabis Management officials acknowledged the frustration, but said it will take time to grow the legal sales sector. They noted it took Washington state about six years to reach a point where 90% of sales are now done through state-sanctioned retailers.

“The solution is opening more legal shops,” OCM Executive Director Christopher Alexander said.

“The problem is many of them (farmers) might be out of business by the time we get more stores opened,” Sen. Michelle Hinchey (D-Saugerties) countered.

Several business owners and farmers told lawmakers tax restructuring should be at the top of the to-do list.

“Right now, we’re 50% above the illicit market” in price, said Kimberly Tanami, CEO of HPI Canna, which grows product in Poughkeepsie.

Illegal shops — estimated to be “deep” into the thousands — also were a focus throughout the hearing. The state Tax Department has been conducting raids, which typically result in civil fines — but that hasn’t slowed operations.

“These fines really have no teeth,” said Sen. Brad Hoylman-Sigal (D-Manhattan). Later, Eric Blazak, CEO of Bristol Extracts, a hemp cultivator in the Finger Lakes, told lawmakers: “The illicit market can’t be afforded any more time to become established.”

But state officials have stressed they don’t want to “recriminalize” the drug and, at one point, Acting Tax Commissioner Amanda Hiller told legislators: “I don’t see any appetite for criminal prosecution.”

By Yancey Roy

yancey.roy@newsday.com@yanceyroy