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Bahoura said building costs of $1 million with build-out costs of another $1 million are not unusual for grow operations. That is not inclusive of added costs for water, light, and equipment or operating expenses. If a crop becomes infested, fails to pass inspection, or other difficulties occur, an entrepreneur can sink very quickly. On the retail side, a busy store requires upward of $1 million in inventory to remain competitive. Retailers are also hampered by IRS Code 280E, which classifies marijuana retailers as controlled substance sellers and takes away the standard expense deductions available to other businesses. Despite the increasingly mainstream culture forming around the marijuana industry, vestiges of its outlaw roots seem buried everywhere. Future Grow Solutions owner Mark Savaya says his company cannot transport or test its own product. By law, those services must be outsourced. For those who met the buy-in threshold, navigated the regulatory minefield, and shined the tarnish off a once illegal industry, gold did indeed appear at the end of the rainbow. Nagging legacy regulations and major tax hassles have not stopped the industry from maturing and growing. Some companies have formed a rather large footprint. Justin Elias is president of Puff Cannabis, a business that operates 10 locations of cultivation, processing, and retail operations in Michigan. Puff has expanded substantially since forming in 2009, from its original nine employees to its present roster of 500. Elias says Puff had revenues of $7 million in its first year, charted $150 million last year, and expects to see $250 million next year. When we talked to Elias and Coowner Nick Hannawa, Puff was doubling its staff and planning to move into a new 20,000-square-foot headquarters in Troy. Future Grow Solutions owner Mark Savaya made the move from the convenience store industry to marijuana a few years ago, when “caregiver” operations were permitted to grow a limited number of plants. Before dispensaries. Before recreational sales. Savaya saw the potential in the industry and moved to North Carolina to learn about hydroponic towers that feature vertical towers to maximize space, water recycling and no soil. The grow The Risks of Cannabis April is National Cannabis Awareness Month, so we wanted to take the opportunity to give you an update on the industry and on the status of the opposition to legalized marijuana. The legal industry is still young; we know that many Chaldeans have gotten in on the ground floor, capitalizing on their shrewd business skills. But others are not happy with the new legal status. Scientists are still learning about the benefits as well as the risks of cannabis. The CDC reports that nearly 31% of 12th graders in one study reported using marijuana in 2022, and almost 6 ½ % reported using marijuana daily. Using alcohol and marijuana at the same time will likely cause greater impairment and risk of physical harm than using either one alone. The CDC study shows that teens who use marijuana may be less likely to graduate high school or attend college. Even more alarming, research shows that using marijuana during your teen years can cause damage to the brain, which is actively developing until around age 25. Usage may impair thinking, memory, and learning itself. Marijuana use has been linked to depression and social anxiety in adults. While there have been studies on the effects of smoking marijuana in its natural state, we have limited data on the operations locate in repurposed industrial spaces, much like standard indoor agricultural set-ups, but the towers allow for about eight times the number of plants in a standard configuration, taking advantage of the building’s cubic (three-dimensional) space rather than just is square footage, or floor space. His business has grown, from a single location as of 2022 to three as of November 2023, with another five readying for business early this year. He says he also owns seven growing locations. Savaya now employs 300 people, each earning $20 to $50 per hour; he said he planned to add benefits to the mix early this year. He often hires employees convicted of non-violent marijuana crimes. He says this gives them a second chance and provides him with a workforce familiar with the product. Despite the prohibitive costs and regulation endemic to his industry, Savaya has found creative ways to meet his business goals. In 2022, his tower CHALDEAN STORY Edible cannabis products are often designed to appeal to minors, despite the minimum age requirements. growing arrangement allowed him to grow 12,000 plants in a physical space that historically accommodated 1,500 plants, with the attendant savings on water—90 percent of which he said constantly recycles—and electricity. Savaya also found creative ways to administer payroll and deal with the cash-only nature of the marijuana business. While many in the industry have turned to credit unions—which are not federally regulated—to do their banking, Savaya formed an employee leasing company and “leases” employees to his multiple dispensaries and grow operations. He manages the huge amount of cash his businesses generate by paying contractors who build out his facilities in cash. Risky Business As the industry adapts and matures, it continues to face issues preventing it from operating under the same rules as other industries. 280E, the tax code This report is made possible with generous support from Michigan Stories, a Michigan Humanities Grants initiative. use of edibles. Marijuana packaging is often deceiving and appeals to young people with its graphic art and bright colors. Compounds in marijuana can be extracted to make oils and concentrates that can be vaped or inhaled. Smoking oils, wax concentrates, and extracts from the marijuana plant, known as “dabbing,” is on the rise. Cannabidiol (CBD) is a compound found in marijuana that shows signs of helping with seizure disorder and is also used as a topical cream for pain relief. Scientists are still learning about how CBD affects the body, however, although we know it does not cause impairment and doesn’t get you “high.” CBD is not risk-free. The FDA has limited data on its safety. There are some known side effects of its use, including liver damage, drowsiness, and changes in mood and appetite. In addition, the risks of mixing with other medications are unknown. The Catholic Church is a powerful critic of the marijuana trade. On the Chaldean Diocese of St. Thomas the Apostle website, a statement is made about marijuana which reads in part: “The Chaldean Diocese of Saint Thomas the Apostle joins the Church at large in condemning the use of ALL drugs outside of ‘strict, therapeutic grounds.’ ” law, has become the front-and-center issue for licensees. As the businesses scale, they are forced to remain cashonly entities, not eligible to deduct their considerable business costs from their tax bill and not permitted to engage in interstate commerce—an increasingly important issue as many licensees have multi-state expansion plans waiting on the runway. Bahoura said the number of people exiting the business has accelerated as new owners discover they underestimated start-up costs. Some of them are selling their businesses at reduced rates, simply to get out. Underscoring his points about prohibitive entry costs and high risks, Bahoura said he has helped about 100 applicants prequalify for licenses, but only about a dozen have gotten to the point where they open an operating facility. He said the big question he always asks his clients is, “Do you have enough money to get over the finish line?” Despite the patchwork of sometimes conflicting local laws, cultural acceptance seems to have arrived. Bahoura pointed out that dispensaries were considered essential businesses during the most restrictive part of the COVID-19 lockdown. They remained open during the pandemic, even offering curbside service. 44 CHALDEAN NEWS APRIL 2024
3601 15 Mile Rd., Sterling Heights, MI 48310 APRIL 2024 CHALDEAN NEWS 45
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