A couple of weeks after shadowing Tripp Keber, I hop in the car with Pete O'Neil, an independent businessman looking to get into Washington state's pot game. O'Neil once ran a comedy club in Fort Lauderdale and a high-end pet-grooming salon in Manhattan. Now he's starting C & C Cannabis Company, a retail pot enterprise – the name's a nod to Cheech and Chong.
Even though the state isn't accepting license applications for another two weeks, O'Neil has already leased two storefronts outside Seattle. The state limits license holders to no more than three shops, to prevent market consolidation by a few big-money players. "They tell me I'm crazy to try for a license in the city, but I'm tempted to go for it," he says.
Even though Seattle supported more than 100 MMJ dispensaries in 2012, the liquor control board is licensing only 21 adult-use pot shops in Seattle – about the same number of state-run liquor stores that served the city prior to 2012, when the state got out of the booze business. So those licenses are looked upon as 21 golden tickets. But even Seattle City Attorney Pete Holmes has complained about the limit. "The demand is greater than 21 stores can handle," he said recently. "The idea behind legalization is to bring this into the regulated sphere. To do that we need to be able to tell consumers, 'We have a legal supply, that's where you should go.'"
To enter the license lottery, retail applicants had to show the liquor control board a commitment for a lease by December 20th. In the weeks prior, the streets of Seattle were crawling with pot entrepreneurs seeking rentable space. A storefront isn't legal unless it's at least 1,000 feet from a school or day care center. It's a gambler's roll. If you don't win a license, you could be stuck with lease payments and no store.
O'Neil has been tipped to an existing MMJ dispensary in north Seattle that was regulation-compliant. "He's asking $100,000," O'Neil tells me. "But why would a dispensary owner sell out now?"
Good question. The rest of the country may think that Washington state is relaxing its marijuana laws. In fact, it's tightening them. Washington never brought its MMJ industry under regulatory control like Colorado did. There's no registry, no security laws and no tax requirements. "The MMJ folks are having to go through the growing pains that Colorado already went through," says Alison Holcomb, criminal-justice director at the ACLU of Washington and author of Initiative 502, the ballot measure that cleared the way for legal pot in 2012. "Right now many of them have a business model that doesn't involve meeting regulatory requirements or, for some, even paying taxes. That provides a really nice profit margin. Now they're entering a system where competitors may have more business savvy, and they may not be as profitable."
Because the state views dispensary owners with some suspicion, the liquor control board isn't giving them first option on adult-use licenses. But, of course, even this is subject to uncertainty. In an interview last month, Washington State Liquor Control Board Chair Sharon Foster tells me that eight months of conversations with medical users had softened her stance. "I'm not nearly as cynical as I was" about abuses within the MMJ industry, she says. "I think research is going to prove the great importance of this little plant. We have to carve a place for that within the system." The state legislature, she says, may solve the issue later this year by passing a new law for MMJ patients. That law could allow medical users – who may need greater volumes and potency – special privileges within the adult-use industry.
There's no guarantee that existing dispensaries will survive, though, and some owners are selling out while the selling's good. At the north Seattle dispensary, the owner greets Pete O'Neil warmly.
"So you're looking for a 502, huh?" he says. O'Neil scopes the space. Upstairs is a one-room dispensary; downstairs are a handful of spindly pot plants.
"I'm asking $175,000," the owner says.
O'Neil pokers his expression. The price buys neither the building nor the land, only the right to take over a $2,800 monthly lease. "The listing said $100,000," says O'Neil.
The owner nods. "The guy down the road just sold his MMJ for $125,000. He's not even zoned 502 legal. So I figured . . ."
O'Neil passes on the deal. A few weeks later, he leases a storefront two blocks farther south, paying three times the market price to beat out two other marijuana concerns bidding on the space.
Real estate and regulations aren't the only worries for an entrepreneur like O'Neil. The price of pot will dictate profits. Top-quality weed currently retails for $250 to $300 an ounce. Over the long term, though, "that could drop by as much as 80 percent prior to taxation" if legalization takes hold, says Rob MacCoun, a professor at the Goldman School of Public Policy at UC Berkeley who studies marijuana laws and markets.
That's good for ending the black market, but low pot prices contain their own sets of worries, said marijuana-taxation expert Pat Oglesby, former chief counsel to the U.S. Senate Committee on Finance. "If it becomes producible at $20 a pound [less than $1.25 an ounce]," said Oglesby, "and you don't tax it pretty heavily, then you have to worry about the leakage rate [i.e., smuggling across state lines] and the political reaction of the soccer moms."
Cheap pot is bad for state coffers, too. Washington state's pot scheme contains the highest marijuana taxes ever submitted to the voting public. The state takes a 25 percent bite at each level of its three-tiered system, and has estimated it may rake in some $400 million a year.
The challenge state policymakers face is to facilitate what Kleiman calls "the Goldilocks price": a tax-influenced number that's low enough to starve the black market but high enough to discourage a spike in consumption. You don't have to beat the street price, just come close. "Most people want to abide by the law," says Holcomb. "If you give them a chance not to be a criminal, they won't be a criminal."
There's one other factor: Washington is capping its initial weed crop at 2 million square feet. That's 45 acres, only enough marijuana to satisfy about one-quarter of estimated statewide demand. (The idea is to avoid a surplus, which might encourage out-of-state smuggling.) Retailers can't import from out of state, so when the weed's gone, it's gone. Which means prices won't be coming down anytime soon.
The gains made in Colorado and Washington tend to obscure the dismal reality still playing out in many other states. In 2012, there were 749,825 marijuana arrests in America. We're not talking about dealers moving weight. In New York and Texas, the states with the most marijuana arrests, 97 percent of pot arrests in 2010 were for simple possession. Over the past decade, as police departments around the country adopted New York City's data-driven CompStat policing model, pot arrests based on stop-and-frisks became an easy way for precincts to pad their numbers. Queens College sociology professor Harry Levine brought the problem to light in 2009 when he discovered that during the previous year the NYPD made more pot arrests in 12 months than during 18 years under Michael Bloomberg's three mayoral predecessors. In an interview in The New Inquiry last year, Levine described the nation's arrest overreach as a scandal on the order of Love Canal and the Ford Pinto, "horrific situations, harming many people, that go on for years before being revealed."
Ezekiel Edwards, director of the ACLU Criminal Law Reform Project, spent nearly a year mining data on the racial makeup of marijuana arrests. The ACLU found that black people were 3.7 times more likely to be arrested for marijuana possession than white people. This at a time when white and black marijuana usage rates are virtually identical, about 12 to 14 percent.
That racial disparity has grown worse with time. Over the past decade, the white arrest rate for marijuana possession held steady, around 192 arrests per 100,000 white people. Meanwhile, the black arrest rate skyrocketed. In 2001, it stood at 537 arrests per 100,000 black people. By 2010, it had climbed to 716.
Going into the project, Edwards suspected the numbers might be bad. But not this bad. "We knew about racial disparities in New York," he tells me. "We didn't expect to find racial disparities everywhere, urban and rural, 49 of the 50 states." (Only Hawaii had a nearly even black-white arrest rate.) The war on marijuana, Edwards says, "has been a war on people of color."
To understand what those numbers mean on the ground, you only have to visit the American marijuana gulag that is the state of Louisiana. New Orleans, of course, famously welcomes and celebrates bacchanalian debauchery. But Louisiana lawmakers take a perverse pride in maintaining some of the harshest marijuana laws in the country. One joint can get you six months in the parish prison. Second offense: up to five years. Third: up to 20.
Bernard Noble is one of many caught in the trap. Noble, a 47-year-old truck driver, relocated his family from New Orleans to Kansas City after losing his house to Hurricane Katrina in 2005. In 2010, he returned to the Big Easy to visit his father. On October 27th, two cops spotted Noble riding a bicycle down South Miro Street. They ordered Noble to stop, and frisked him. They found a small bag containing less than three grams of marijuana.
An Orleans Parish jury convicted Noble of marijuana possession. Because he had prior felony possession convictions, Louisiana law called for a mandatory minimum sentence of 13 and a third years. "It doesn't matter how much or how little marijuana is involved," Donna Weidenhaft, Noble's public defender, tells me. "In Louisiana you can get twice as much prison time for marijuana possession as sexual battery."
But 13 years for three grams? That seemed insane. Moved by Noble's record as a providing father, the sentencing judge took pity and handed down only five years in prison. Only.
Outraged by the nickel, Orleans Parish DA Leon Cannizzaro Jr. appealed the ruling. Cannizzaro wanted the full 13 years. And after three appeals, he got it. Earlier this year the Louisiana State Supreme Court declared that a judge could waver from mandatory minimums only in exceptional cases. And Bernard Noble, the court ruled, was entirely unexceptional. "You might think this is a horror story, but not in Louisiana," says Gary Wainwright, a defense lawyer with two decades of experience in the Orleans Parish courthouse. "We've had people receive sentences of 'natural life' for marijuana here."
Louisiana imprisons more of its residents, per capita, than any other state. In many parts of the state, the parish (county) prison is the largest single employer. "You can't run a prison without inmates," says Wainwright, and the easiest way to keep the jails full is to arrest black men for pot possession.
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