APRIL 2024

ECONOMICS & ENTERPRISE
Growing Pains
Michigan marijuana business remains
a perilous pot of gold
BY PAUL NATINSKY
Editor’s Note: This article is part of a
series called Great Michigan Stories. It
examines the legal marijuana industry
in Michigan and the large part that
Chaldean entrepreneurs have had in
creating it. They invested early in the
fledgling industry, seeing the opportunity
to make considerable profit by getting
in on the ground floor. Savvy business
people like Justin Elias of Puff Cannabis
Company, his partner Nick Hannawa,
and Mark Savaya of Future Grow
Solutions have made a fortune off the
product. Mike Bahoura is one of many
Chaldean attorneys who specialize in
licensing and cannabis issues.
History
Even before the 2020 election that
featured a national explosion of approval
for ballot proposals legalizing
marijuana production, processing and
sales, the industry had taken off, with
Michigan among the most lucrative
states for cannabis crop sales.
However, the lure of marijuana
money comes with expensive federal
tax headaches, restrictions on trade
across state lines, and a depressed
market overcrowded with licensees.
In November 2018, a ballot proposal
made recreational marijuana sales
legal in Michigan. Prior to that, medical
marijuana sales were legal through
a “caregiver” program that evolved
into legalized medical marijuana dispensaries.
But the true boom came
with the 2018 ballot proposal. The first
recreational businesses opened after a
year of regulatory ramp-up.
A New Industry
We interviewed several sources for this
story in early 2022. In the short time
since then, the marijuana industry saw
a boom in licensees and a market oversaturated
with product and plagued
by freefalling prices. The price drop
put a number of growers at risk of failing
and sent ripples throughout the
Mark Savaya of Future Grow Solutions.
Michigan marijuana industry.
On the bright side, the cost of licenses
and land decreased and the
rush of licensees—including many
poorly qualified and capitalized entrants—slowed.
Through a name change and byzantine
series of rules, regulations and
legislation, the Marijuana Regulatory
Agency emerged as the administrator
of all things marijuana in Michigan.
The MRA created a board of five members
that considered medical marijuana
applications. Since we last wrote
about the industry, the agency’s name
has changed to the Cannabis Regulatory
Agency (CRA) to cover the wide
array of cannabis products, including
oils and edibles.
Licensing
Mike Bahoura is an attorney who specializes
in cannabis licensing issues. He
closed a marijuana dispensary in the
city of Lapeer and opened two stores
in New Baltimore and Monroe since we
last talked to him in 2022, when he said,
“It wasn’t an easy process. They were
throwing out denials left and right,
so it wasn’t easy to get approved.”
The board considered a broad range
of criteria from applicants, including
litigation history, criminal history,
bankruptcy history and moral character.
“The most memorable denial that
was issued was Calvin Johnson of the
Detroit Lions getting denied because of
some unpaid parking tickets in Georgia
like a decade prior,” said Bahoura.
The MRA dissolved the board at
the end of 2019, holding its last meeting
in December of that year. With the
approval of recreational sales, the
process has evolved from being very
restrictive to being more like applying
for a liquor license. “They started
granting approvals unless you had
something on your record,” said Bahoura.
“They were looking for ways to
approve you rather than ways to deny
you.”
Bahoura says the CRA has made
strides toward effective regulation on
the licensing end, but is still inconsistent
and capricious when it comes to
doling out discipline. Fines and penalties
are case-by-case and very arbitrary,
he says.
Operating Challenges
With the loosening of the state licensing
process came the rush for real
estate. The state grants licenses, but
city governments establish the zoning
rules governing where marijuana
growers, processors and retail dispensaries
can operate, and under which
conditions and caveats.
Outrageous real estate prices have
since plummeted, with relaxed government
attitudes toward the marijuana
industry. Still, local regulations
vary wildly. As of 2022, Harrison Township
does not allow retail sales, but
permits growing and processing facilities.
Ferndale allows retail sales, but
not growing and processing.
There are also conditions attached
to where marijuana operations can do
business. Restrictions on how close
the facilities can be located to schools
and neighborhoods are not uncommon.
And grow and processing operations
are often restricted to areas of cities
zoned for industrial activity.
As convoluted as all of this sounds,
it is better than the contentious process
that preceded it, in which applicants
were scored on a point scale and
the top scorers were awarded licenses.
A spate of lawsuits against municipalities
brought the current system—and
the subsequent rush of applicants.
Growing Green
It also brought city treasuries and
state coffers a lot of money. License
fees are limited for cities to $5,000 per
year. State licenses correspond to a fee
schedule and depend on the size of the
operation and in which part of the process—cultivation,
processing, retail—
the licensee works. Bahoura says state
license fees range in cost from $7,000
to $24,000, and that money flowing to
the CRA far exceeds that of any other
state agency of its kind.
Despite the economic boon marijuana
brings to the state, Bahoura said
larger, national banks still won’t accept
marijuana industry deposits. Marijuana
is still an illegal controlled substance
under federal law, so federally regulated
banks and credit card companies cannot
work with those growing, processing or
selling marijuana. It takes bank loans
off the table and makes marijuana a
cash-only business, forcing businesses
to transport large amounts of cash and
face the attendant security risks.
42 CHALDEAN NEWS APRIL 2024