What you need to know about marijuana initiative

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On a cold day in January 2014, political strategist Ian James rode the elevator with two lawyers to the 11th floor of the Scripps Center to arrive at the office of a Cincinnati wheeler-dealer. The four men sat down, made some small talk. Then James took a deep breath and made his pitch for an Ohio revolution.

"I had not met Jimmy Gould before," James recalled, "so I just asked if he were interested in the legalization of marijuana for personal use or for medical use. I didn't know how this was going to go over. But no sooner had the words come out of my mouth, Jimmy said, 'I'm in.' "

That meeting set in motion the machine that now is ResponsibleOhio, the best-financed legalization campaign the nation has seen in the nearly 20 years since the marijuana movement forced the first cracks in prohibition.

If successful, ResponsibleOhio's radical plan for the Buckeye State could revolutionize the national discussion about marijuana – and the financial, political and legal muscle of Cincinnati will be the foundation. James and the investors believe Ohio could lead the next phase of the New Green Revolution – where marijuana becomes a legitimate business that by 2020 would bring in $500 million a year in state tax revenue alone.

About 20 wealthy people, most but not all in Ohio, have pledged $20 million for the campaign to get ResponsibleOhio's plan on the Nov. 3 ballot, then to persuade voters to pass it. Longtime observers of the marijuana movement say now that Americans with serious money are paying attention, the business of marijuana has moved into a new phase.

"If a Florida or an Ohio legalize, to me, that's almost the ballgame," said Chris Walsh, managing editor of Marijuana Business Daily. "This could be the only way it gets done, with these big-money people. And that means that a lot of people are going to be upset and frustrated. What we're seeing in general is movement from the mom-and-pop operation to the corporate side, with more mainstream people coming in.

"It takes money and business savvy to really take everything to the next level, and the doors are being shut for the people who been growing for 10 years in their basements."

The door opens

In 1937, a racist hysteria prompted Congress to enact a tax law that effectively banned what the government and some newspapers called the Mexican scourge of marijuana. Actually, most Americans knew the drug as cannabis, a trusted ingredient in medicine that pharmaceutical giants such as Pfizer and Eli Lilly and Co. manufactured for years.

Well into the 20th century, scare campaigns about "reefer madness" led to laws punishing simple possession of marijuana with a prison sentence. In 1971, the government placed marijuana with heroin and cocaine on its schedule of prohibited substances with no medical value.

Still, after the rebellious 1960s, state legislatures decriminalized marijuana. In 1976, Ohio removed jail penalties for possession of up to 3 ½ ounces. Today, it's a $150 fine.

The political movement surrounding marijuana began the push against prohibition. A small group of activists, mainly on the West Coast, tried with ballot initiatives to legalize marijuana and failed repeatedly. Then they changed their strategy to make marijuana a matter of compassion, to allow the sick to use marijuana as medicine with a doctor's prescription.

In 1996, California created the first medical-marijuana program. Oregon and Washington quickly followed. Today, 23 states and the District of Columbia have medical marijuana programs.

Opponents of the relaxation of marijuana laws long claimed that medical programs merely opened the door for full legalization, and they were right. In 2012, Colorado and Washington state voters legalized marijuana, followed in November 2014 by Oregon, Alaska and the District of Columbia. The business of marijuana exploded.

In Columbus, the political strategist Ian James watched the change in attitude. He personally wasn't interested in marijuana, for he had been sober for more than two decades. But his more than 30 years in politics told him that a tide was rolling across the country, and he wanted Ohio to get out in front.

James is chief executive officer of The Strategy Network, a Columbus political consultancy. He ran the victorious 2009 campaign to write into Ohio's constitution the language to allow four casinos to operate. He has run signature-gathering campaigns for initiatives on marriage equality, the minimum wage and payday-lending reform.

"It's in my genes. I'm predisposed to work on a lot of these tough social issues," James said. "So I was literally watching state by state across the nation how voters were legalizing marijuana for medical use and then for personal use. And I'm saying to myself: This is going to happen."

Why an amendment?

In 2013, James started doing homework. The only time marijuana appeared on an Ohio ballot was in 2002, for a proposed constitutional amendment that would have provided money for drug treatment of people convicted of otherwise nonviolent possession crimes. It failed with 67 percent of the vote.

But opinion had shifted. James dug up more recent surveys showing a majority of Ohioans at least wanted medical marijuana and saw the expensive policing to combat marijuana as ineffective. "Voters are getting tired of wasting $120 million a year to fund failure."

At about that time, James got a call from Ohio Rights Group. The grassroots organization of marijuana movement activists had been pushing a proposed ballot initiative for a medical program. He volunteered to help, but, "as I looked at their amendment, I saw some significant fatal flaws that just were not going to work in Ohio politics."

The Ohio Rights Group language said the marijuana movement would choose members of a state regulatory board – a non-starter, James concluded. But more than that, given the speed at which marijuana was moving into the mainstream, James decided that the time had passed for just a medical program. Ohio had to think big.

But a simple ballot initiative to legalize would give the Ohio Legislature room to delay or create hurdles to implementation. A constitutional amendment, however, had a force all its own, James knew, that would prevent lawmakers from tampering with its provisions.

Late in 2013, James talked with Cincinnati law partners Paul DeMarco and Chris Stock. The three men had worked together on political initiatives. DeMarco was immediately on board with James's idea.

"My thought was: It's about time Ohio does this," DeMarco said. "I've never tried marijuana, so no one had ever asked me to be an activist. But for a lot of reasons, I think the issue is ripe, and Ohio shouldn't be left behind as we have been on other issues."

Stock also had never tried marijuana. But a brother had died of a heroin overdose, and for Stock, marijuana carried an "ick factor." Yet the more Stock thought about legalization, "I realized that I may have been thinking about this entirely wrong."

Money, backers, a plan

James would assemble a political operation, and DeMarco and Stock signed on to draft the constitutional amendment. But an election campaign needed more than passionate activists or an ironclad initiative. It required money, and it needed someone who could find a lot of it.

DeMarco and Stock knew James Gould, the Cincinnati financier who for more than a quarter of a century has overseen millions of dollars in private equity and a sports management company.

The lawyers arranged the January 2014 meeting for Gould and Ian James to get acquainted. Gould does not give interviews, but James, DeMarco and Stock recalled that at the meeting in the Scripps Center Gould was enthusiastic about legalization.

"He said, 'I want to help out, I want to be involved, I want to do everything I can to make this happen,' " James said. "I was taken aback." Gould took for himself the task of rounding up investors.

James recruited an Ohio team of bold-faced political names from across the spectrum: election lawyer Don McTigue, a Democrat; Neil S. Clark, a Republican who once was chief operating officer of the Ohio Senate Republican Caucus; the polling company The Kitchens Group; public-relations consultant Dennis Willard, and Mitch Stewart and Jeremy Bird of 270 Strategies, the data team that crunched the numbers for President Obama's two campaigns for the White House.

James's plan all along was to put the proposed amendment on the 2015 ballot. Marijuana initiatives in other states had been raised in even-year elections ostensibly for the higher voter turnout. The problem with those choices, as James saw it, was that even if the marijuana movement had money for TV advertising, electoral politics gobbled all the air time.

But an off-year election was wide open for advertising space as well as for time on the typical voter's mind. In 2015, little else of consequence would come before voters. They would be open to a robust debate on legalization.

The team quietly went to work around the clock. They didn't know who would be as interested as they were in legalizing marijuana. The surprise was that plenty of people wanted a piece of the action.

As marijuana legalization has accelerated across the United States into the New Green Revolution, a group of Ohio political strategists met to figure out how the Buckeye State could get ahead of the nation. They concluded that given the speed at which marijuana is moving into the mainstream, the time had passed for just a medical program. Ohio had to think differently about marijuana.

Cincinnati lawyer Chris Stock set up white boards in a conference room of his law offices to draft the proposed constitutional amendment to legalize marijuana in Ohio. With Cincinnati's financial and political clout at its heart, the proposal could lay the foundation to put the Buckeye State far out in front of the nation with a brand-new multimillion-dollar industry.

First, Stock and the amendment drafters concluded, the state would have to establish a regulatory body, like the Liquor Control Commission.

But then – how to legalize? Should Ohio let everyone grow marijuana, as in Colorado and Washington state? The drafting team concluded that the "wild west" approach would not appeal to most Ohioans.

Instead, the conversations turned to controlling the size of the crop, to better regulate it. Stock came upon a report from The RAND Corp., the California think tank, to guide legalization in Vermont. The report proposed a supply method called a "structured oligopoly," that featured a limited number of grow sites.

The method, the report said, creates "artificial scarcity that makes the licenses valuable – valuable enough that firms will have a strong incentive to cooperate with regulators rather than risk revocation ... Limiting the number of licenses also makes monitoring their behavior easier. A rogue company could more easily break the rules if it were one of 1,000 licensees than if it were one of just 10."

A 10-farm operation in Ohio would be a radical departure in marijuana legalization in America, growing a crop in quantities that could get federal authorities to sit up and take notice, and not in a good way. But the limited-grow option also would create an irresistible business opportunity for the investors putting up the large dollars necessary to run a winning legalization campaign.

Chris Walsh of Marijuana Business Daily said limiting the crop does not sit well with the movement foot soldiers who for years have been fighting the legalization battle. They believe legalization is more than the right to buy marijuana but also the right to grow it.

"The industry has been founded on the backs of activists, risk-takers, people who were willing to break the law and get the industry where it is today," he said. "But that is changing, and I don't think everyone's going to be thrilled with that idea. To get a measure passed in Ohio, though, you're going to need big money coming in. The only way to get that money is to get something in return."

The proposed windfall from the brand-new industry could be instrumental to the proposed amendment's passage. The proposal's drafters directed that the proposed tax revenues would go to Ohio cities and counties, which had been pounded through the recession. Ian James figured that putting the measure on the 2015 ballot, with the potential of cities and counties splitting $500 million by 2020, would get the attention of local elected leaders.

As the amendment took shape through 2014, Stock and DeMarco brought in a range of specialists, law enforcement, politics, public health and other realms, many from around Cincinnati, to poke holes in their work. They debated whether a 10-farm concept would be an agricultural monopoly or cartel.

Stock said the plan was not a monopoly because the 10 farms would operate independently of each other, and the Sherman Antitrust Act forbids collusion. The cartel description also was not true because there would be no vertical integration of the business, from the farm to the retail outlet.The amendment would also create 1,150 licenses for testing, production and retail facilities.

If it works here...

In June 2014, James filed the paperwork to create the formal campaign organization, called ResponsibleOhio. A small activist group called Responsible Ohioans for Cannabis complained that its name had been co-opted. James laughed: He'd never heard of that organization before.

ResponsibleOhio created 10 numbered limited liability companies with a cheeky clue: Each company name started with 768, which on a telephone dial spells P-O-T. The companies were registered with the state and the U.S. Securities and Exchange Commission– a measure that would allow the company owners to sell shares.

James hired real estate agents to find 10 properties suitable for indoor industrial agriculture, and the legal descriptions were written into the Marijuana Legalization Amendment. The heaviest concentration of the farms is in Greater Cincinnati: one each in Hamilton, Butler and Clermont counties.

Meanwhile, James Gould fished for investors among the hundreds of people he knew. Ian James made the presentations: Startup costs for a marijuana farm could run as much as $30 million, to buy the land, erect the buildings, hire the growers, hang the lights, control for insects, mold and other organic threats to the crop.

Plus, each of the 10 investment groups had to commit $2 million for the 2015 campaign, giving ResponsibleOhio a $20 million bank to hire people to gather signatures for the spring petitioning and to create an intense media campaign drive to Nov. 3.

"You start having some really interesting conversations, 'Have you ever thought of becoming a marijuana farmer?' " James said. "The upside is that it's a hugely growing business. But then, well, you could also go to federal prison."

James handed out a 50-page prospectus outlining the sophisticated campaign plan in place for Ohio and hinting that success could also mean the strategy could work in other states.

"Knowing what voters believe and are willing to believe will assist in developing messages by region to best connect with voters here and elsewhere," the prospectus said. "The latter fact is important for other states as Ohio serves an important role as America's Test Market. This gives incredible value to testing a variety of messages and campaign tactics in Ohio before taking them elsewhere. After all, everyone in politics knows the adage: 'As Ohio goes, so goes the nation.' Simply put, if it works in the Buckeye State, it works anywhere."

Many of those approached backed away, but eventually, a core group of investors coalesced. Among them was a Gould sports-management client, Frostee Rucker, once a defensive end for the Cincinnati Bengals. Another was Gould's sister, Barbara, an Indian Hill philanthropist whose husband Bill Motto had recently died of lung cancer.

Also signing up: hometown hero Oscar Robertson, a basketball player for the University of Cincinnati who had a highly successful pro career, and Frank Wood, who Mayor John Cranley named Cincinnati's "commissioner of fun"; singer-restaurateur Nick Lachey, and Paul Heldman, former general counsel of The Kroger Co.

A Dayton pain doctor, Suresh Gupta, purchased the Licking County property. A minority partner, Columbus financier Alan Mooney, said the whole production there will be devoted to medical-grade strains.

Woody Taft, a descendant of President William Howard Taft, caught wind of the legalization proposal and reached out to his friend, Frank Wood. "I had to ask my way in," Taft said. He brought along his brother, musician Dudley Taft Jr.

An equity manager and businessman, Woody Taft said he has friends with children suffering from epilepsy, "and I have never understood why kids in Ohio can't have access to a medicine that can help them."

His investment in ResponsibleOhio is "a tremendous risk to me and my family," he said. "What I have to say to people who think it's just the fat cats getting involved is: There are people in pain, with cancer, with epilepsy, and if there is something around the corner that can help them, then it's a crime not to provide it."

The Tafts have invested with Barbara Gould in the Butler County property. Woody Taft said, "I intend for Butler County to outcompete everyone else. I intend to kick their asses. We will be better, and more efficient than they are."

Not everybody happy

In January 2015, ResponsibleOhio unveiled its proposed constitutional amendment. Right away, the loudest objection came from longtime movement activists who did not like that the amendment had no provision for home growing of marijuana. In March, the drafters responded with an insert that would allow any adult in Ohio over 21 to obtain a license to grow four plants. Activists remained unhappy, complaining that legalization should not mean a rich elite controlling the production of marijuana.

John Pardee, executive director of Ohio Rights Group, applauded ResponsibleOhio's effort to open the discussion. But Pardee said the profit motive, rather than the moral imperative of bringing marijuana out of prohibition, colors every word of the proposed amendment.

"The guy who wrote it is a business attorney, not a cannabis activist," Pardee said, "so he was writing a business structure. They did reach out to some national cannabis groups who tried to give them input, some of which they took and a lot of it they didn't. They didn't have enough of a grasp of what it takes to grow quality cannabis and use that to inform their proposed ballot initiative."

At least one group in opposition, called Citizens against ResponsibleOhio, has registered with the secretary of state as a political organization. Earlier this month, two groups that wanted to qualify competing language for the ballot gave up for 2015. On social media, a host of opponents with Twitter handles such as @NOtoResponsibleOhio fire daily tweets to berate the proposal as a monopoly of the rich.

Ian James brushes off the unhappiness. "A lot of these social justice groups don't understand what really does need to happen for legalization. They don't have the capacity to ensure that they can move the needle as much as they need to."

Debate in earnest

This spring, the machinery of ResponsibleOhio that was assembled at that January 2014 meeting at Scripps Center geared up its signature-gathering campaign. If ResponsibleOhio puts its measure on the Nov. 3 ballot, the debate begins in earnest, not just whether Ohio should legalize, but how Ohio should legalize. The stakes climb with every day.

On June 11, a task force led by Hamilton County Prosecutor Joe Deters released a 188-page report examining the impact of legal marijuana on Ohio's economy, public safety and public health. The numbers were eye-popping: The report estimated that by four years after passage, the farms would be doing $1.1 billion in sales, the testing and production facilities would make nearly $727 million, and the retail stores a whopping $2.2 billion.

And that would be just the direct industry. The task force estimated that the ancillary businesses – real estate, lawyers, technical support, shelving and display casing, communications, tourism, on and on – could easily reach into the billions of dollars as well.

"Ohio legalizing would be huge for the industry as a whole," said Chris Walsh of Marijuana Business Daily. "It's a huge market. It's an area of the country where marijuana is still trying to take hold, in the Midwest. Ohio legalizing would cause a chain reaction of other states."