In a disappointing defeat, Arizona voters Nov. 8 failed to support for the legalization of adult use (aka recreational) marijuana by voting against Proposition 205 by a vote of 52.14 percent (974,499 votes) to 47.86 percent (894,407).
The citizen initiative would have legalized, for adults age 21 and older, possession of limited amounts of marijuana, private consumption of marijuana and home cultivation of up to six marijuana plants. Prop. 205, titled the Regulation and Taxation of Marijuana Act, also called for the establishment of a regulated marketplace around marijuana cultivation, processing and retail sales, similar to how the alcohol industry is regulated. Retail sales will not begin before March 1, 2018.
The Proposition also called for the creation of a Department of Marijuana Licenses and Control, consisting of The Marijuana Commission (seven members to be appointed by the governor) and the Office of Director. The Marijuana Commission would be responsible for all application reviews and approval/denial.
If Prop. 205 had passed, “The number of retail stores will be capped [until Sept. 1, 2021] at 10 percent of the number of liquor store licenses, which is currently fewer than 180,” according to the Campaign to Regulate Marijuana Like Alcohol’s “Yes on 205” web summary of the initiative. “On and after September 1, 2021, the Department may issue additional marijuana retailer licenses if the Department determines that additional licenses are desirable to minimize the illegal market for marijuana in this state, to efficiently meet the demand for marijuana or to provide for reasonable access to marijuana retailers in rural areas,” states Proposition 205’s full text.
Retail marijuana sales would incur a 5 percent excise tax.
Cultivation licenses would be available in three class tiers. The tiers had not yet been established, but would include a limit, based on the size of the cultivation area, on the amount of marijuana that cultivators in each tier would be able to produce. Those in the highest tier, however, would not be limited in the amount of marijuana they produce.
Protecting the State’s Medical Businesses
Arizona’s Prop. 205 would have protected established medical marijuana businesses--which are nonprofits licensed under the Arizona Medical Marijuana Act (AMMA) passed by voters in 2010--with several provisions. The protection makes sense, as Arizona has had one of the most successful medical marijuana programs to date, under the AMMA. The program currently serves approximately 100,000 qualifying patients, and the Arizona Department of Health Services announced in August that it would grant 31 new licenses for the sale of marijuana in the state.
Arizonans in the program purchased more than 19 tons of medical-marijuana products in 2015, for sales of approximately $215 million, according to the Phoenix New Times.
The first protection for existing businesses under the state’s medical marijuana program relates to the above-mentioned cultivation tiers: The highest-tier cultivation licenses would be issued to reorganized marijuana businesses only. (Established medical marijuana businesses are referred to as “reorganized marijuana businesses” in Prop. 205’s text.)
Other businesses would be eligible for only the smallest licensing class tier … until the licensee “demonstrates to the Department that the licensee has sold more than 85 percent of the marijuana the licensee has produced to marijuana establishments without engaging in any transaction at a price which is less than the marijuana cultivator’s cost to produce the marijuana sold in the transaction.”
Also, reorganized marijuana businesses’ applications would be given priority for licensing over other businesses.
While Prop. 205 would permit municipalities to ban marijuana businesses, municipalities would not be able to prohibit a reorganized marijuana business established by a nonprofit medical marijuana dispensary from continuing to operate “in any area that zoned to allow the operation of a nonprofit medical marijuana dispensary.”
The Department was slated to begin accepting applications from reorganized marijuana businesses first as well—on or before Sept. 1, 2017. Licenses were to be issued on or before Dec. 1, 2017.
Applications from all others would have been accepted on and after Dec. 1, 2017.
Application and Licensing Fees
Cultivation licensing fees were set to be established in tiers as well, and the “maximum fee amount for the lowest tier specified in the schedule may not be more than one-quarter of the annual licensing fee for the highest tier specified in the schedule,” Prop. 205 specifies. Initial licensing fees for cultivators would not exceed $30,000, and renewal fees would not exceed $10,000.
Retailers would be charged no more than $20,000 for an initial license and $6,600 for a renewal.
Product manufacturers and distributors would be charged no more than $15,000 for an initial license and $5,000 for a renewal, and testing facilities would be charged no more than $10,000 initially and $3,300 for renewals.
There would be a one-time application fee of $5,000 for all applicants.
Vertical integration would not be permitted (cultivators and product manufacturers would not be able to sell retail), under Prop. 205.
Prop 205 also would have legalized hemp and allowed it to be “regulated separately from the strains of cannabis with higher delta-9 tetrahydrocannabinol concentrations” — i.e., those containing higher amounts of THC, the main psychoactive compound in cannabis — according to the initiative’s text.
