What Michigan needs to learn from Colorado's legalized marijuana

Kathleen Gray | Detroit Free Press

DENVER — Ashley and Ryan picked Denver as the perfect spot for their weed-infused honeymoon.

Robert, a well-to-do contractor from Houston, mixed a little R&R — reefer and recreation — with his latest business trip to Colorado. And Tyrell Towle, a chemist from Washington state, chose Denver as the spot for his home and job after getting a PhD degree in chemistry in Iowa.

The four have little in common, but there is one key thing that ties them together: marijuana.

Since Colorado became one of the first states in the nation to legalize marijuana for recreational use, 3,051 marijuana businesses have been licensed in the state and more than 40,000 people are certified to work in the industry, translating into roughly 20,000 full-time positions working directly in marijuana businesses and thousands more jobs supplying those businesses, according to figures for the end of 2017.

It’s an industry that has exploded since Coloradans approved recreational use in 2012 and sales began on Jan. 1, 2014. The market has quickly grown into an industry that had $683 million in sales in 2014 and $1.5 billion in 2017.

In Michigan, where the first licenses for medical marijuana businesses were awarded on Thursday, voters also will consider a ballot proposal on Nov. 6 to legalize marijuana in the state for recreational use, possibly becoming the 10th state in the nation and the first in the Midwest to free the weed.

With Michigan having nearly double the population of Colorado — 9.9 million to 5.6 million — and an already well-established market of 289,205 medical marijuana cardholders, both supporters and opponents of legalizing marijuana wonder (and worry) whether Michigan is on the same path as Colorado.

Trump to lift legal threat to states that permit marijuana use On Friday, the White House said President Donald Trump will lift his administration’s plans for a possible crackdown on states that have legalized marijuana after talks with a Colorado senator. On Friday Senator Cory Gardner said he received a commitment from Trump that the rescission “will not impact Colorado’s legal marijuana industry.” Gardner said Trump assured him he would support legislation “to fix this states’ rights issue once and for all.”

Bustling economy

Denver is the epicenter of the cannabis market in Colorado, home to more than 1,000 of the state’s marijuana businesses and more than a third of the state’s $1.5 billion in sales last year.

The dispensaries — 364 — are plentiful and some are instantly recognizable with green neon lights, green crosses and ubiquitous marijuana leaves. Others are more subtle with few indications of what lies behind the bulletproof glass and locked doors, where customers have to present their identification twice, once to get buzzed into the dispensary and a second time to buy a product.

“This industry is beginning to grow up. It started out a little bit wild, but it’s really progressed into an absolute industry that’s a huge economic driver,” said Kim Casey, communications manager for Native Roots, a Denver-based company that started in 2009 with one medical marijuana dispensary and has grown to 600 employees at 20 dispensaries, several grow operations and a production facility. “That’s a huge impact for the state.”

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The cannabis industry has helped to contribute to the state’s low unemployment rate, which, at 3 percent falls well below the U.S. rate of 3.9 percent and the 4.8 percent in Michigan. Construction cranes fill the skies over Denver, and rents for both housing and commercial real estate continue to increase above the national average.

“I have friends who are actively involved in commercial real estate who have said that … they've seen an increase in terms of the per square footage rental rates as well as the cost of what used to be empty vacant buildings,” said Michael Hartman, director of the state Department of Revenue. “So there probably is some validity to the increases in the prices of commercial real estate.“

And employers across the board are having a hard time finding workers to fill vacancies.

“I’ve talked with other restaurant owners and everybody has a standing ad on Craig’slist at all times trying to fill jobs,” said Oren Cohen, a partner in the restaurant There, which has locations in Denver and Telluride and is competing with the cannabis and construction industries for employees. “As far as the (marijuana) consumer in Colorado, it’s all beautiful. But on the employer side, we’re constantly climbing uphill.”

Andy Williams, founder and CEO of the family-owned Medicine Man and MedPharm, doesn’t feel too bad about poaching employees from other industries to fill the jobs at two large grow operations, three dispensaries and a research company that studies how marijuana can be used to treat a variety of diseases and ailments. The companies employ 130 people who are paid at least $15 an hour and often much more with full benefits.

“Those are high-class problems for a state to have,” he said. “It’s great for people that their wages are getting higher.”

Unlikely career path

Towle didn’t expect to end up working in the marijuana industry when he got his PhD in chemistry from the University of Iowa and began a job with a small chemical supply company in his home state of Washington.

“But I saw a need and decided to jump,” said Towle, one of several chemists who works at MedPharm. “I never thought I would get into this business.”

But now he’s the director of chemistry and extraction at the company and doing research on how marijuana might help in the treatment of various ailments, including Alzheimer’s and dementia.

He’s one of 130 employees of the larger Medicine Man and MedPharm companies, founded by siblings Andy and Pete Williams in 2009. Pete had the green thumb and used it to grow exceptional marijuana for medical customers in the basement of his Colorado home. Andy was the entrepreneur with five or six or business ventures under his belt who convinced Pete to jump into the state’s medical marijuana business.

“He’s been growing marijuana in his basement forever. He was making close to $150,000 a year out of his basement,” said Andy Williams. “So, in 2009, I went to him and said, 'let’s go big with this.' And we soon learned that growing in your basement and growing in a warehouse are two very different things.”

Now the Williams’ other two siblings, Sally and Shelley, mom Michelle and five more extended family members help run the budding business, where one of the grow operations cultivates about 11,000 plants in 18 different growing rooms, producing about 75 pounds a day of finished, cured marijuana buds that sell for between $130 and $320 an ounce.

Nancy Whiteman made the unlikely leap from vice president of marketing for a large insurance company in Massachusetts to the owner of Wana Brands, one of the leading edibles companies in the nation famous for its potent marijuana-laced gummies with flavors such as mango, exotic yuzu, strawberry-lemonade and blueberry.

The market for edibles has been consistently growing as more people look for ways to avoid smoking marijuana. In January 2017, 766,872 units of edibles were sold and by December, that number had grown to 1,028,408 units.

"There have been a lot of those moments, when I say 'Oh my God, I’m in the marijuana business,' " said the 59-year-old entrepreneur who oversees the company's 86 employees and production facilities in Boulder. "When people ask me if I thought this was going to be my path, I just laugh. Some days, it's still a real surprise."

She got into the business in 2010 when she became a partner in a marijuana-infused soda company with a neighbor. That business fell apart, but she decided to explore the edibles market with her ex-husband. After the medical marijuana market expanded to the recreational side, "we got committed on a whole different level and have seen 'hockey stick' growth. Last year alone, we grew 65%."

Now, two shifts of workers make 60,000 sugar-coated gummies a day, which are packaged in containers of 10 pieces each that sell for $20 to $25.

Both Williams and Whiteman have plans for the potential market in Michigan.

"We have clients in Michigan and we’re helping them get licenses, design and build their facilities. And we help them get up and going," Williams said. "But I have no plans for a grow operation in Michigan."

Business owners in Colorado can't ship their products across state lines, so Whiteman is meeting with Michigan producers of marijuana-infused edibles to produce Wana Brands' line of candies in the state. The brand is already also in Oregon, Nevada and Arizona and working on launching in Florida and Illinois.

"When we go to different states, we’ve got to tweak the recipe because Michigan is probably a lot more humid than Colorado and it’s a lot more flat than Colorado," she said. "So we have to make adjustments to the recipe just based on the location."

Colorado State Patrol Sgt. Madden answers questions on marijuana Detroit Free Press speaks with Colorado State Patrol about recreational marijuana.

Dealing with rules and regulations

Edibles come in especially handy in Colorado, since public consumption is illegal in the state, which has created challenges for people trying to take advantage of the lucrative tourism market that one study pegged at 60 percent of the marijuana sales in Colorado.

The public consumption ban translates into little to none of the instantly recognizable aroma of marijuana smoke on the streets of Denver. So tourists have to find other ways to consume the product they come to Colorado to enjoy. Whiteman pointed out that the edibles market provides a more discreet way to catch a buzz without the attention of patrolling police.

Robert, the 38-year-old Houston businessman who combined his business trip with a little pleasure at a Denver dispensary last month, said he was going to catch a limousine ride with his wife to smoke the Sour Tsunami buds he bought along with an Alien Super Lemon Haze nightcap.

"When you’re out on the black market back home, you take what you can get," said Robert, who didn't want to give his last name. "I can come to the budtender and say these are some of the ailments I’m dealing with and this is what I’m trying to achieve. Everyone here is extremely kind and articulate. It’s not the dirty back alley way."

At Adagio, a "Bud and Breakfast" Inn in Denver, a heavy layer of smoke hovered over the living room during the daily happy hour on a sunny Thursday last month. A group of seven people staying at the Adagio rolled and chain-smoked joints and filled bongs with buds and concentrates while enjoying the snacks — twice-baked potatoes, bacon-wrapped jalapeño poppers, chips and salsa and a bundt cake, put out by the B&B's staff.

The visitors from Texas, New York and Arizona — states where recreational marijuana use is still illegal — were thrilled with the freedom to smoke without consequences.

"It felt great, smoking on the way here and then buying it," said Daisy Cruz, of Santa Rosa, Texas, as she fumbled to roll a blunt. "It felt lovely. It’s beautiful — you know exactly what you’re buying."

Ryan, the 38-year-old truck driver from Phoenix who also didn't want to give his last name, said he asked his wife to sign off on a cannabis-friendly honeymoon.

"She put up some resistance at first, but once she looked into it and saw how chill it was, she said, 'this looks way better than a beach,' " he said.

Ashley and Ryan, who got married in March, were taking full advantage of their weed-filled vacation. They got marijuana-infused massages, took a smoke-filled limousine tour on the ride from the airport to a dispensary to the B&B, and were planning to take a sushi and joint rolling class before they left for home.

"We’ve got kids and I’d rather plan a trip with them to the beach and then another trip for just us," said Ashley, 34. "When you go on a cruise or to the beach, that’s all you do is drink and you get so hung over. Everyone is so much nicer when you’re just with a bunch of potheads."

Joel and Lisa Schneider bought the bed and breakfast in 2014 out of necessity, said Kevin Fox, director of operations for the B&B.

"There was no place to smoke. People were putting towels underneath the door to make sure they didn't get kicked out of the hotel," he said. "But this is a residential rather than hotel property. So we're allowed to smoke cannabis in the space."

Some hotels discreetly advertise that they are marijuana-friendly, but only through vaping or edibles because the state has a smoking ban in all workplaces.

So places like Adagio are thriving.

"We don’t sell cannabis, we don’t infuse anything with cannabis. We just offer the ability to use cannabis in a safe environment," Fox said. "And since we've opened, we've been at least 80 percent occupied."

Others are struggling. Two Denver tour bus companies, which offered a party-bus atmosphere with buds instead of beers and stops at dispensaries and grow operations, had to curtail their operations after getting busted by Denver City Police last month. The police cited a violation of the public consumption rules in issuing citations against 31 people on the tours.

Companies are fighting the crackdown, but don't have a friend in the office of Gov. John Hickenlooper, a Democrat who isn't running for re-election this year because of term limits and who vetoed a bill passed by the Legislature earlier this year that would have allowed café-type consumption rooms to be set up adjacent to dispensaries.

"We expect all of our licensees, whether they're producers or distributors or tourist-related, to follow all of the rules and regulations both at the state level as well as their local licensing authority," said Hartman, who acknowledged that it was the City of Denver, not the state, that put the kibosh on the tour bus companies. "From what I've read in the media reports, it sounds like Denver did the right thing by stepping into this situation."

Rules hamper banking

Challenges with accommodating tourists who want to partake isn't the only issue facing the marijuana industry.

Banking remains a problem with marijuana entrepreneurs because the federal government still considers weed an illegal substance and most banks won't risk their federal approval by taking money from cannabis businesses. As a result, owners have to pay their employees, vendors and contractors with cash.

"It’s a very hard business to be in. We have banks that we’ve established relationships with. But we can’t take loans, or use credit cards," said Williams. "It causes problems for our employees because their accounts get shut down when banks learn they’re employed by the marijuana industry. They can’t take out loans for homes or cars because their primary source of income is the marijuana industry. My kids' bank accounts were shut down just because I’m their father."

And many of the businesses complained bitterly about a section of the federal tax code — 280E — that prohibits companies from writing off normal business expenses, such as payroll, rent and utilities, if the business involves the sale of an illegal substance. The rules translate into a federal tax rate for marijuana businesses of 70 percent to 80 percent.

"One of the biggest barriers to success for us is 280E," said Casey of Native Roots. "It’s one of the largest hurdles in the industry. Especially for the newer companies who have to also come up with the money for the fees and startup costs."

"It's a big friggin' issue," added Williams. "The IRS serves as judge, jury and executioner and says you're a drug trafficker. It's stealing and it keeps this industry from growing, which I think is their ultimate intent."

Outside the industry, police saw a slight uptick in crashes and fatalities associated with drug-impaired driving after marijuana was legalized. But they're not sure how valid the numbers are because they weren't testing people for marijuana before it was legalized.

"When recreational marijuana was legalized, one of the first things we realized was that we didn't have any data for comparison purposes," said Sgt. Rob Madden, spokesman for the Colorado State Patrol. "In Colorado, there is no difference between driving under the influence of alcohol or marijuana or methamphetamine. Everything goes under one statute."

The first year of legalization showed 674 driving-while-impaired-by-marijuana citations and that number has crept up slightly with a four-year average of 706 citations. Fatal crash statistics kept by the State Patrol don't differentiate between drunken or drugged driving as the cause, but those numbers went from 67 in 2015 to 91 in 2017.

Troopers with the State Patrol train with dispensaries in the state to learn how to detect high drivers and look for things such as constricted eye pupils, forgetfulness and other telltale signs.

"I ask for their driver's license and they give me a credit card. I tell them that wasn’t their license and they hand me another credit card," Madden said. "They’re not thinking, they’re not slowing down."

When marijuana is suspected, police have to take the driver to a spot such as a hospital or fire station where their blood can be drawn, because while Breathalyzers can detect alcohol in a person's system, they can't pick up on weed. It's a costlier method for both local and state police, but the State Patrol, as well as the Michigan State Police, are also testing the accuracy of oral fluid testing.

For Madden, the glut of marijuana has tainted the state's reputation.

"I was at a conference in Florida and I introduced myself, and somebody said, 'So you brought all the snacks, right?' It’s just a continual joke," he said. "I don’t want marijuana to be the state smell or the state flower of Colorado. I want it to be the beautiful scenery, the snowcapped mountains, the columbine flower."

Some employers also have had issues with the legalization because of problems with workers. The law in Colorado still allows business owners to fire employees for violation of workplace rules, including using drugs on the job.

"We just hired a guy to be dishwasher. First day, he was on his game, and I thought, 'let’s do what we can to keep this young man around,' " said restaurant owner Cohen. " A few days passed, and his attitude is changing and the chef was looking for the dishwasher. He goes to the back door and there's this 22-year-old kid, who’s sitting there and realizes he got caught trying to hold in the smoke from his joint. He ended up burning his foot because he put the joint in his shoe.

"That young man doesn't work for us anymore."

And while studies haven't shown a link between an increase in homelessness in Denver and the legalization of marijuana, service providers can't deny they're seeing more people since weed became legal in 2014. The streets around the shelters and in the popular 16th Street pedestrian mall in downtown Denver are well-populated with homeless people.

"It has impacted shelter providers. When it was first legalized, we did see an increase," said Tom Luehrs, executive director of the St. Francis Center, which provides services to more than 700 homeless people a day. "But a lot of people wouldn’t admit that’s why they came here."

Other studies, including ones done by Colorado State University at Pueblo and the Metro Denver Homeless Initiative, point to skyrocketing rents — a two-bedroom apartment ranges from $1,340 to $1,850 per month, according to the website Apartmentlist.com — as the reason the homeless population has gone up. Luehrs said it's hard to deny a link to legalization. While the Center was serving about 600 people a day before legalization, they're now up to 700-800 clients a day.

"One of the big causes for people becoming homeless is medical issues. You can say it’s drug addicts, but it’s really people who are struggling to live with disabilities that cause them a great deal of pain," he said. "And they came to Colorado because they knew they wouldn’t be arrested."

For Annastasia Hudson, a 26-year-old homeless woman who returned to her home state of Colorado four months ago after suffering a stroke when her boyfriend in Texas choked her so violently that it ripped an artery, marijuana offers an escape.

"It’s everywhere. People in here are like super depressed and bored," she said, while hanging out at St. Francis. "You go out into the courtyard and smoke a joint and it lifts everyone up. It just makes people a little bit happier about stuff in your life that sucks."

The big payoff

With marijuana legalization, however, comes money to fix some of those problems. The state was able to allocate more than $100 million of the marijuana tax revenue to issues that related to the legalization, including $15.3 million toward providing more affordable housing in the state and $40 million for a grant to improve existing schools and build new ones. More money went back to the communities that have allowed marijuana sales and the taxes also paid for the state's Marijuana Enforcement Division, which regulates the marijuana industry and employs 104 people.

Other allocations run the gamut from mental health and substance abuse treatment services, drug prevention programs for youth, youth literacy programs, bullying prevention and a grant to the Institute of Cannabis Research at Colorado State University-Pueblo.

"We always tell people that if you're going to legalize it, don't do it for the tax revenue. The amount of effort and time that it takes and the amount of focus that it takes in order to have this in your state — it's intense," said Hartman, the revenue department director. "Having said that, every incremental dollar is beneficial for governmental programs. So last year in 2017, on the calendar year basis, we collected $250 million dollars in taxes across the entire landscape. That's a significant amount of money and ... those dollars are put to good use."

And it's hard to argue with the dollars that the industry is bringing into the state.

"The more people see these other states benefiting and bountifully benefiting, the more they'll support this," said newlywed Ryan, who voted for the first time in 2016 to legalize marijuana in Arizona, a ballot proposal that ultimately failed. "What I’ve seen here for the last week is blowing my mind. I’m seeing the amount of money I’ve dropped in five days and how many jobs it's creating. They’re creating a whole other industry."

Peter, a procurement director for a New York nonprofit agency who was also staying at the Adagio, was in Colorado for a weed-based vacation for the second time. This time it was to help celebrate a friend's 30th birthday.

"It’s sort of like a gold rush." he said. "We’ve got Massachusetts and New Jersey, neighboring states that will have all these New York residents fleeing the state to go buy marijuana. Definitely, it's going to be a game changer."

Marijuana reporter Kathleen Gray on Colorado Detroit Free Press reporter Kathleen Gray speaks about her new marijuana beat.

Kathleen Gray covers the marijuana industry for the Detroit Free Press. Contact: 313-223-4430, kgray99@freepress.com or on Twitter @michpoligal.