Municipal Licensing Issues and LARA's new Emergency Administrative Rules - Licensing a Property and...

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Municipal Licensing Issues and LARA's new Emergency

Administrative RulesLICENSINGAPROPERTYANDTHESIGNIFICANCEOFTHE

ADMINISTRATIVERULES

CRAIG ARONOFF |CANNABISLEGALGROUP

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Who am I?

CraigAronoffBorn, raisedandstillliveinWestBloomfield,MI

GraduatedMichiganStateUniversityinDec.1993

DetroitCollegeofLaw@MichiganStateUniversityDec1997

MemberoftheRealPropertySectionandMarijuanaLawSectionoftheStateBar

AmemberofNORML,NCIA,MILegalizeandtheMarijuanaPolicyProject

Appointed byLARAtotheProcessorLicenseWorkGroup

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Michigan Medical Marihuana

CannaBusiness

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Powers of State Regulatory Agencies

DEPARTMENTOFLICENSINGANDREGULATORYAFFAIRS(LARA)

LicensingDepartment

BUREAUOFMEDICALMARIHUANAREGULATION(BMMR)

RegulationandRules

MEDICALMARIJUANALICENSINGBOARD

ReviewsLicenseApplicationsandAppeals

MEDICALMARIHUANAFACILITIESLICENSINGACT

Statutorylaw

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EMERGENCY RULES Filed with the Secretary of State on December 4, 2017 These rules take effectupon filingwith the Secretary of State and shall remain in effect for 6 months.

(By authority conferred on the department of licensing and regulatory affairs by section 206 of2016 PA 281, MCL 333.27206, enacting section 2 of Act 281 of 2016, by section 3 of 2016 PA 282,MCL 333.27903, and by section 6 of MCL 333.26426, 2008, Initiated Law1.)

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Powers of State Regulatory AgenciesFINDINGOFEMERGENCY

TheserulesarepromulgatedbythedepartmentofLicensingandRegulatoryAffairs(department)toestablishemergencyrulesforthepurposeofimplementingtheMedicalMarihuanaFacilitiesLicensingAct(act),2016PA281,MCL333.27101etseq.,whichtookeffectDecember20,2016.

Theactprovidesforastateregulatorystructuretolicenseandregulatemedicalmarihuanagrowers,processors,provisioningcenters,securetransporters,andsafetycompliancefacilitiesthatinteractswiththestatewidemonitoringsystemforcommercialmarihuanatransactions;establishesamedicalmarihuanalicensingboard(Board)createdwithinthedepartmentandappointedbythegovernor;andprescribescivilfinesandsanctionsandprovidesremedies.

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Powers of State Regulatory AgenciesSec. 301.

(1) The medical marihuana licensing board is created within the department of licensingand regulatory affairs.

(2) The board consists of 5 members who are residents of this state, not more than 3 ofwhom are members of the same political party. The governor shall appoint themembers. One of the members shall be appointed from 3 nominees submitted by thesenate majority leader and 1 from 3 nominees submitted by the speaker of the house.The governor shall designate1 of the members as chairperson.

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Theactincludesanenactingsectionspecifyingthatthelegislaturefounditnecessaryforthepromulgationofemergencyrulestopreservethepublichealth,safety,orwelfareforaccesstosafesourcesofmarihuanaformedicaluseandtheimmediateneedforgrowers,processors,securetransporters,provisioningcenters,andsafetycompliancefacilitiestooperateunderclearrequirements.

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Powers of State Regulatory Agencies• Inaddition,section206oftheactrequiresthedepartment,inconsultationwiththeBoard,topromulgateadministrativerulesandemergencyrulesasnecessarytoimplement,administer,andenforcetheact.

• Furthermore,section206specifiesthattherulesshallensurethesafety,security,andintegrityoftheoperationofmarihuanafacilities.

• TheBoardisrequiredtoreviewallapplicationsforlicensure,issueordenyissuanceofalicense,andinformeachapplicantoftheBoard’sdecision.Ifissuanceis2denied,theBoardisrequired,uponrequest,toprovideapublicinvestigativehearing.Inaddition,anypartyaggrievedbyanactionoftheBoardsuspending,revoking,restricting,orrefusingtorenewalicense,orimposingafine,shallbegivenahearingbeforetheBoarduponrequest.

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Theemergencyadministrativerulesareneeded toenablethedepartment, through itsBureauofMedicalMarihuanaRegulation, toimplementtheacttoprovideasafeenvironment forthestateoperatinglicenseesandMichigancommunities, aswellasaccesstomedicalmarihuana thathasbeentestedforsafetyforsaletoregisteredqualifying patientsandregisteredprimarycaregivers.

Thedepartment, inconsultationwiththeBoard,therefore, finds thatthepreservationofthepublichealth,safety,andwelfarerequiresthepromulgation ofemergencyrules

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Business Types Allowed333.27102Definitions

Sec.102.

(b)"Affiliate"meansanypersonthatcontrols,iscontrolledby,orisundercommoncontrolwith;isinapartnershiporjointventurerelationshipwith;orisaco-shareholderofacorporation,aco-memberofalimitedliabilitycompany,oraco-partnerinalimitedliabilitypartnershipwithalicenseeorapplicant.

(c)"Applicant"meansapersonwhoappliesforastateoperatinglicense.Withrespecttodisclosuresinanapplication,orforpurposesofineligibilityforalicenseundersection402,thetermapplicantincludesanofficer,director,andmanagerialemployeeoftheapplicantandapersonwhoholdsanydirectorindirectownershipinterestintheapplicant.

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Business Types AllowedSec.401.

(1)Beginning 360daysaftertheeffectivedateofthisact,….Theapplicationshallbemadeunderoathonaformprovided bytheboardandshallcontaininformationasprescribedbytheboard, including, butnotlimitedto,allofthefollowing:

(a)Thename,businessaddress,business telephonenumber, socialsecuritynumber, and, ifapplicable,federaltaxidentificationnumber oftheapplicant.

(b)Theidentityofeverypersonhavinganyownership interestintheapplicantwithrespecttowhichthelicenseissought.Ifthedisclosedentityisatrust,theapplicationshalldisclosethenamesandaddressesofthebeneficiaries;ifacorporation, thenamesandaddressesofallshareholders,officers,anddirectors;ifapartnershiporlimitedliabilitypartnership, thenamesandaddressesofallpartners;ifalimitedpartnershiporlimitedliabilitylimitedpartnership, thenamesofallpartners,bothgeneralandlimited;orifalimitedliabilitycompany,thenamesandaddressesofallmembersandmanagers.

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Business Types Allowed

Sec.402.

(2)Anapplicantisineligibletoreceivealicenseifanyofthefollowingcircumstancesexist:

(g)Theapplicant,ifanindividual,hasbeenaresidentofthisstateforlessthanacontinuous2-yearperiodimmediatelyprecedingthedateoffilingtheapplication.TherequirementsinthissubdivisiondonotapplyafterJune30,2018.

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Rule5.Applicationrequirements;financialandcriminalbackground.

(1)Thefirstpartoftheapplicationisafinancialbackgroundandfullcriminalhistorybackgroundcheckoftheapplicant.Forpurposesofthisruleanapplicantincludestheofficers,directors,andmanagerialemployeesoftheapplicantandanypersonswhoholdanydirectorindirectownershipinterestintheapplicant.

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Rule5.Applicationrequirements;financialandcriminalbackground.

(3)Anapplicantandanypersonswhohaveadirectorindirectinterestintheapplicant,aswellasanyofficers,directors,andmanagerialemployeesoftheapplicantshalldiscloseallthefinancialinformationrequiredintheactandtheserulesinaformatcreatedbythedepartmentincluding,butnotlimitedto,thefollowing:

(d)Forin-stateandout-stateapplicants,theapplicant’sbusinessorganizationaldocumentsfiledwiththisstate,localcounty,orforeignentity,ifapplicable,includingproofofregistrationtodobusinessinthisstateandcertificateofgoodstandingfromthisstateorforeignentity,ifapplicable.

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Individual- perstatute,mustbeaMichiganresident

ByRule,eachoftheseentitytypesmustbedomesticatedtoMichiganandingoodstanding:• LimitedLiabilityCompany• LimitedPartnership• SCorporation• CCorporation

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Choiceofentitytypeislicenseeintent.Generally,alloperatorsmaypreferthetaxstructureandeaseofoperationthatanLLCprovides.

Forgrowers,processors,safetycompliancefacilityandsecuretransporter,theLLCistheentityofchoiceandeachgenerallyelectstobetaxedasanSCorp.

ForProvisioningCenters,aCCorporationisadvisablefor280Etaximplicationsaswillbediscussedlaterintheprogram

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Marketing Restrictions

Rule42.Marketingandadvertisingrestrictions.

(1)Marihuanafacilitiesshallcomplywithallmunicipalordinances,statelaw,andtheserulesregulatingsignsandadvertising.

(2)Alicenseeshallnotadvertisemarihuanaproductwheretheadvertisementisvisibletomembersofthepublicfromanystreet,sidewalk,park,orotherpublicplace.

(3)Marihuanaproductsmustbemarketedoradvertisedas“medicalmarihuana”foruseonlybyregisteredqualifyingpatientsorregisteredprimarycaregivers.

(4)Marihuanaproductsmustnotbemarketedoradvertisedtominorsaged17yearsoryounger.Sponsorshipstargetedtomembersaged17yearsoryoungerareprohibited.

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Employment Rules and Restrictions

333.27405Backgroundcheck.

Sec.405.

Subjecttothelawsofthisstate,beforehiringaprospectiveemployee,theholderofalicenseshallconductabackgroundcheckoftheprospectiveemployee.Ifthebackgroundcheckindicatesapendingchargeorconvictionwithinthepast10yearsforacontrolledsubstance-relatedfelony,alicenseeshallnothiretheprospectiveemployeewithoutwrittenpermissionoftheboard.

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Rule43.Employees;requirements.

(1)Alicenseeshallconductacriminalhistorybackgroundcheckonanyprospectiveemployeepriortohiringthatindividualpursuanttosection405oftheact.Thelicenseeshallkeeprecordsoftheresultsofthecriminalhistorybackgroundchecks.Alicenseeshallrecordconfirmationofcriminalhistorybackgroundchecksandmaketheconfirmationofcriminalhistorybackgroundchecksavailableforinspectionuponrequestbythedepartmentorauthorizedpersons.

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(2)Toensurethesafety,security,andintegrityofmarihuanafacilityoperations,alicenseeshallcomplywithallofthefollowing:◦ (a)Alicenseeshallhaveapolicyinplacethatrequiresemployeestoreportanyneworpendingchargesorconvictions.Ifanemployeeischargedorconvictedforacontrolledsubstance-relatedfelonyoranyotherfelony,thelicenseeshallreportitimmediatelytothedepartment.

◦ (b)Alicenseeshallenteranyemployeeofthelicenseeatthetimeofhireinthestatewidemonitoringsystemforanidentificationnumberthatwillbeassignedbythedepartmentinthestatewidemonitoringsystem.Thelicenseeshallimmediatelyupdateinthestatewidemonitoringsystememployeeinformationandstatus.

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(2)◦ (c)Ifanemployeeisnolongeremployedbyalicensee,thelicenseeshallremoveaccessandpermissionstothemarihuanafacilityandthestatewidemonitoringsystem.

◦ (d)Alicenseeshalltrainemployeesandhaveanemployeetrainingmanualthatincludes,butisnotlimitedto,employeesafetyprocedures,employeeguidelines,securityprotocol,andeducationaltraining,including,butnotlimitedto,marihuanaproductinformation,dosageanddailylimits,oreducationalmaterials.

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(2)

◦ (e)Alicenseeshallestablishpointofsaleortransferproceduresforemployeesatprovisioningcentersperforminganytransfersorsalestoregisteredqualifyingpatientsandregisteredprimarycaregivers.Thequalificationsandrestrictionsmustinclude,butarenotlimitedto,trainingindosage,marihuanaproductinformation,healthoreducationalmaterials,pointofsaletraining,dailypurchasinglimits,CBDandTHCinformation,servingsize,andconsumptioninformationincludinganywarnings.

◦ (f)Alicenseeshallscreenprospectiveemployeesagainstalistofexcludedemployeesbasedonareportorinvestigationmaintainedbythedepartmentinthestatewidemonitoringsystem.

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Employment Rules and RestrictionsRule43.Employees;requirements.

(2)◦ (g)Atthetimearegisteredprimarycaregiverishiredasanemployeeofagrower,processor,orsecuretransporter,thelicenseeortheindividualshallwithdrawregistrationasaregisteredprimarycaregiverinamannerestablishedbythedepartment.

◦ (h)Ifanindividualispresentatamarihuanafacilityorinasecuretransportervehiclewhoisnotidentifiedasalicenseeoranemployeeofthelicenseeinthestatewidemonitoringsystemorisinviolationoftheactortheserules,thedepartment,throughitsinvestigators,agents,auditors,orthestatepolicemaytakeanyactionpermittedundertheactandtheserules.

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(3)Employeerecordsaresubjecttoinspectionorexaminationbythedepartment,throughitsinvestigators,agents,auditors,orthestatepolicetodeterminecompliancewiththeactortheserules.

(4)Forpurposesofthisrule“employee”includes,butisnotlimitedto,hourlyemployees,contractemployees,trainees,oranyotherpersongivenanytypeofemployeecredentialsorauthorizedaccesstothemarihuanafacility.

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Premises Security Regulation Compliance

Rule27.Securitymeasures;requiredplan;videosurveillancesystem.

(1)Anapplicantforalicensetooperateaproposedmarihuanafacilityshallsubmitasecurityplanthatdemonstrates,ataminimum,theabilitytomeettherequirementsofthisrule.

(2)Licenseesshallensurethatanypersonatthemarihuanafacility,exceptforemployeesofthelicensee,areescortedatalltimesbythelicenseeoratleast1employeeofthelicenseewheninthelimited-accessareasatthemarihuanafacility.

(3)Alicenseeshallsecurelylockthemarihuanafacility,includingallinteriorrooms,windows,andpointsofentryandexitswithcommercial-grade,nonresidentialdoorlocks.

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(4)Alicenseeshallmaintainanalarmsystematthemarihuanafacility.Uponrequest,alicenseeshallmakeavailabletothedepartmentallinformationrelatedtothealarmsystem,monitoring,andalarmactivity.

(5)Alicenseeshallhaveavideosurveillancesystemthat,ataminimum,consistsofdigitalornetworkvideorecorders,camerascapableofmeetingtherecordingrequirementsinthisrule,videomonitors,digitalarchivingdevices,andacolorprintercapableofdeliveringstillphotos.

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(6)Thelicenseeshallensurethevideosurveillancesystemdoesallthefollowing:◦ (a)Recordsataminimumthefollowingareas:

◦ (i)Anyareaswheremarihuanaproductsareweighed,packed,stored,loaded,andunloadedfortransportation,prepared,ormovedwithinthemarihuanafacility.

◦ (ii)Limited-accessareasandsecurityrooms.Transfersbetweenroomsmustberecorded.◦ (iii)Areasstoringasurveillancesystemstoragedevicewithatleast1camerarecordingtheaccesspointstothesecuredsurveillancerecordingarea.

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(6)Thelicenseeshallensurethevideosurveillancesystemdoesallthefollowing:

◦ (a)Recordsataminimumthefollowingareas:

(iv)Theentrancesandexiststothebuildingmustberecordedfrombothindoorandoutdoorvantagepoints.Theareasofentranceandexitbetweenmarihuanafacilitiesatthesamelocationifapplicable,includinganytransfersbetweenmarihuanafacilities.

(v)Pointofsaleareaswheremarihuanaproductsaresoldanddisplayedforsale.

(b)Recordsatalltimesimageseffectivelyandefficientlyoftheareaundersurveillancewithsufficientresolution.

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Rule 27. Security measures; required plan; video surveillance system.

(7) A licensee shall install each camera so that it is permanently mounted and in a fixed location.Each camera must be placed in a location that allows the camera to clearly record activityoccurring within 20 feet of all points of entry and exit on the marihuana facility, and allows forthe clear and certain identification of any person, including facial features, and activities,including sales or transfers, in all areas required to be recorded under these rules.

(8) A licensee shall have cameras that record continuously 24 hours per day and recordedimages must clearly and accurately display the time and date.

(9) A licensee must secure the physical media or storage device on which surveillance recordingsare stored in a manner to protect the recording from tamperingor theft.

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Premises Security Regulation ComplianceRule27.Securitymeasures;requiredplan;videosurveillancesystem.

(10) A licensee shall keep surveillance recordings for a minimum of 14 days, except for ininstances of investigation or inspection by the department, through its investigators, agents,auditors, or the state police, in which case the licensee shall retain the recordings until such timeas the department notifies the licensee that the recordingsmay be destroyed.

(11) Surveillance recordings of the licensee are subject to inspection by the department,through its investigators, agents, auditors, or the state police, and must be kept in a manner thatallows the department to view and obtain copies of the recordings at the marihuana facilityimmediately upon request. The licensee shall also send or otherwise provide copies of therecordings to the department upon requestwithin the time specified by the department.

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Premises Security Regulation ComplianceRule27.Securitymeasures;requiredplan;videosurveillancesystem.

(12)Alicenseeshallmaintainavideosurveillancesystemequippedwithafailurenotificationsystemthatprovidesnotificationtothelicenseeofanyinterruptionorfailureofthevideosurveillancesystemorvideosurveillancesystemstoragedevice.

(13)Alicenseeshallmaintainalogoftherecordings,whichincludesallofthefollowing:

◦ (a)Theidentitiesoftheemployeeoremployeesresponsibleformonitoringthevideosurveillancesystem.

◦ (b)Theidentityoftheemployeewhoremovedtherecordingfromthevideosurveillancesystemstoragedeviceandthetimeanddateremoved.

◦ (c)Theidentityoftheemployeewhodestroyedanyrecording.

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Medical Marijuana Facilities Licensing Act (MMFLA)PublicAct281of2016/MCL§ 333.27101etseq.

The Medical Marijuana Licensing Board has no authority toestablish any limit on the number or type of licenses that may begranted.

ThisAuthorityisReservedforMunicipalities.

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MunicipalitiesHaveanIntegral RoleinImplementingtheMMFLA

Under the Medical Marihuana Facilities Licenses Act (MMFLA) NOmarijuana facility will be licensed by the State of Michigan unless anduntil the “municipality has adopted an ordinance that authorized thattype of facility.” Section 205(1).

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MunicipalitiesCanAdoptOrdinanceAllowing:• Some• All• NoneoftheMMJFacilitiesPermittedbytheMMFLA.

NoOrdinance=NoMMJBusinessesWillbeLicensed

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Ordinance+Zoning

LicenseApplicantsMustBeLocatedinMunicipalityAuthorizingUse+

LicenseApplicantsPropertyMustbeProperlyZoned

Grower:Industrial/Agricultural/UnzonedOtherLicensees:ZoningNotSpecified.

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MMJLicenseApplicantsMustNotifyMunicipalitiesApplicants for a license to operate a MMJ facility pursuant to theMMFLA must, within 10 days of submitting an application to the State,notify the local municipality of such application by registeredmail.

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StateWillNotifyMunicipalities• Section205(1)oftheMMFLAprovidesthatwhentheStatereceivesanyapplicationforthelicensureofaMMJfacilityitrequeststhefollowingfromthelocalmunicipality:• Copyofthelocalordinancethatauthorizesthemarijuanafacility;• Copyofanyzoningregulationsapplicabletotheproposedmarijuanafacility;and• AdescriptionofanyviolationoftheauthorizingorzoningordinancebytheApplicant.

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MMFLAAuthorizes&CapsAnnualLicensingFee

“Amunicipalordinancemayestablishanannual,nonrefundablefeeofnotmorethan$5,000onalicenseetohelpdefrayadministrativeandenforcementcostsassociatedwiththeoperationofamarijuanafacilityinthemunicipality.”Section205(3).ForEachLicense.ShouldnotincludeSitePlanReviews&OtherBuilding&Zoningfees

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AnnualTotalApplicationFees 2018 2019

ForLocalMunicipality x1license $ 5,000.00 $ 5,000.00

x10licenses $ 50,000.00 $ 50,000.00

x15licenses $ 75,000.00 $ 75,000.00

x20licenses$100,000.0

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$100,000.0

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0

$125,000.0

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0

$250,000.0

0

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MedicalMarijuanaExciseTaxFund

Fundedby3%taxongrossretailsales:•30%toCountiesinWhichMMJFacilitiesLocated(Proportion)•25%toMunicipalitiesinWhichFacilitiesLocated(Proportion)•5%toCountiesExclusivelyforCountySheriffs(Proportion)•Remainder:30%toState;5%toMICommissiononLawEnforcement;5%StatePolice.

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ExciseFundProjections 2018 2019

Number ofLicensees 1000 1250Number ofLicensed Dispensaries 250 450

TotalRevenueFromSale$250,000,000.

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$750,000,000.00

TotalRevenueinExciseFund@3%ofGrossRevenue $ 7,500,000.00 $ 22,500,000.00

TotalPro-RataShareforLocalCommunities@25%ofExciseFund $ 1,875,000.00 $ 5,625,000.00

Pro-RataShareExciseFundPerLicensee x1license $ 1,875.00 $ 4,500.00

x10licenses $ 18,750.00 $ 45,000.00

x15licenses $ 28,125.00 $ 67,500.00

x20licenses $ 37,500.00 $ 90,000.00

x25licenses $ 46,875.00 $ 112,500.00

x50licenses $ 93,750.00 $ 225,000.00

Notethatin2018,theStateestimatedonlyonemonthofoperatingrevenue

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TotalMunicipalRevenueProjections 2018 2019

Pro-RataShareExciseFundPerLicensee $ 1,875.00 $ 4,500.00

Applicationfeeperlicensee $ 5,000.00 $ 5,000.00

TotalRevenue PerLicenseeforLocalMunicipality x1license $ 6,875.00 $ 9,500.00

x10licenses $ 68,750.00 $ 95,000.00

x15licenses $ 103,125.00 $ 142,500.00

x20licenses $ 137,500.00 $ 190,000.00

x25licenses $ 171,875.00 $ 237,500.00

x50licenses $ 343,750.00 $ 475,000.00

Notethatin2018,theStateestimatedonlyonemonthofoperatingrevenue

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FutureYearsRevenueProjections 2020 2021 2022

Number ofLicensees 1500 1500 1500Number ofLicensed Dispensaries 500 500 500

TotalRevenueFromSale$1,000,000,000.

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$1,250,000,

000.00

$1,500,000,

000.00

TotalRevenueinExciseFund@3%ofGrossRevenue $ 30,000,000.00$

37,500,000.00

$45,000,000

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TotalPro-RataShareforLocalCommunities@25%ofExcise Fund $ 7,500,000.00$

9,375,000.00

$11,250,000

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Pro-RataShareExciseFundPerLicensee $ 5,000.00 $ 6,250.00 $ 7,500.00ApplicationFeePerLicensee $ 5,000.00 $ 5,000.00 $ 5,000.00

TotalRevenueperlicenseeforlocalmunicipality x1license $ 10,000.00 $ 11,250.00 $ 12,500.00

x10licenses $ 100,000.00 $ 112,500.00 $ 125,000.00

x15licenses $ 150,000.00 $ 168,750.00 $ 187,500.00

x20licenses $ 200,000.00 $ 225,000.00 $ 250,000.00

x25licenses $ 250,000.00 $ 281,250.00 $ 312,500.00

x50licenses $ 500,000.00 $ 562,500.00 $ 625,000.00

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JobCreationJobCreation

FTE’sAvg.WageperHour

CultivationClassA

500-plants

CultivationClassB

1,000-plants

CultivationClassC

1,500-plants

ProcessingLab

TestingLabSecure

Transporter(Distributor)

ProvisioningCenter(Retail)

Executives $60.00+ 1.0 1.0 2.0 1.0 1.0 1.0 1.0

Management $35.00 2.0 3.0 4.0 2.0 2.0 3.0 2.0

AdministrativeSupport

$20.00 2.0 3.0 4.0 2.0 2.0 4.0 2.0

LineWorkers $15.00 10.0 20.0 30.0 8.0 4.0 6.0 10.0

Maintenance $15.00 1.0 2.0 2.0 1.0 1.0 1.0 1.0

Security $17.00 2.0 2.0 3.0 1.0 1.0 4.0 2.0

TotalFTE’s 17.0 31.0 45.0 15.0 11.0 19.0 18.0

Avg.EstimatedWages $732,160 $1,225,120 $1,811,680 $669,760 $544,960 $869,440 $767,520

Source:Strata BusinessServices

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Unregulated vs Regulated

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Unregulated

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vs Regulated

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Regulated Medicine

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Thank you!

By:CraigA.Aronoff,[email protected]

(248)541-2600 (248)910-5863cell

Municipal Licensing Issues and LARA's new Emergency Administrative Rules - Licensing a Property and...

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Transcript of Municipal Licensing Issues and LARA's new Emergency Administrative Rules - Licensing a Property and...