Potency taxes, the pace of cannabis investment, and the overall turbulence of 2023 were all themes that arose during Tuesday’s Cannabis Advisory Board meetings. The Social and Economic Equity committee and the Cannabis Industry and Market committee met, as did the full Board.
New York’s legal adult use cannabis industry hasn’t quite stabilized since it went live last year, in part because the Conditional Adult Use Retail Dispensary program stalled amid litigation that challenged state regulators’ decision to prioritize “justice-involved” individuals for retail licenses. Meanwhile, legal operators (in the dozens) have had to compete with unlicensed retailers (in the hundreds), and illegal sales have persisted despite city and state legislation that expands enforcement. As of last week, the litigation is settled and the number of legal shops is poised to more quickly rise. All of this has left some of New York’s licensees and regulators with a weary, but slightly optimistic, tone during this final advisory meeting of the year.
“We have a lot of, kind of, looking back to do. This was a really difficult but important year for New York cannabis,” Chris Alexander, executive director of the Office of Cannabis Management, said during the full Board meeting. “The market has started to, you know, get its legs.”
The role of the Board is, primarily, to decide how cannabis tax revenue should be allocated to communities, or to make sure “we’re getting this revenue out to communities that need it, to folks who are doing good work,” Alexander said. “Now that we’ve started to get some revenue, that is priority one, making sure that we have all the infrastructure in place to make grants available to train as well the folks who could benefit from the grants so that there’s no gaps in the opportunity.”
One topic that came up on Tuesday was, again, communication between regulators and license hopefuls. A lack of communication has been a recurring theme during public comment at Cannabis Control Board meetings. (The CCB, which sits within OCM, is a regulatory body; the advisory board can make recommendations to regulators, but does not craft regulations.)
Joseph Belluck, chair of the advisory board, asked if OCM is communicating relevant updates to adult use license applicants. For example, there’s a feeling that the state’s existing medical cannabis operators, known as Registered Organizations, or ROs, are having “more conversations, more access to OCM staff, more meetings.”
“People do need to understand: those are our licensees, those are medical operators for certain medical patients,” said Damian Fagon, chief equity officer for OCM. “Applicants are very different than licenses, right? So we have a mandate to meet with those folks.”
John Kagia, director of policy for OCM, added that regulators are “fielding questions” from applicants as they come in, and they’re also updating the FAQs posted to OCM’s site.
“We certainly don’t want anyone to feel like they’re being left out of the critical discussions that are happening right now,” Kagia said.
Allan Gandelman, an advisory board member and president of the Cannabis Association of New York, brought up potency taxes during the general discussion.
“One of the biggest things that we need to look at is the potency tax and the cycles of collection and implementation,” Gandelman said, adding that they’re currently set up quarterly and on an accrual basis. He’s heard from “a lot of farms and processors this week before the taxes are due next week,” he said.
“Just because of the size of the market, there are several people who have reached out that because they’re over 60 days on payment terms, they can’t actually pay their taxes,” Gandelman said. “I would hate to see some of our small businesses who are waiting on their accounts receivable to get penalized by the state.”
Kagia said that the potency tax is a topic that he’d like to “lead with” at the next meeting.
“Certainly, in most jurisdictions, this is done on an accrual basis, unfortunately, which makes the delinquent payments a major, major issue,” Kagia said. “There’s also very significant debate happening around whether the tax is the right model for the market as well. So I think taxation and timely payment can be the tip of the spear for our next board meeting.”
During the Social Economic and Equity subcommittee meeting, Jim Rogers, who focuses on small business development at OCM, covered the difficult banking hurdles that legal cannabis operators still face.
“How are we navigating the banking space?” Rogers asked, adding that he encourages as “much transparency as possible so people can shop around.”
Rogers said that “two major conversations” are needed right now. One is about the job creation engine that cannabis is, and the other is the difficult cannabis investment landscape. And those conversations need to happen with investors, and perhaps entities who do “local and small business investing but haven’t really considered cannabis,” Rogers said.
“They need to hear from us, what our perspective is of this market, and how we act as regulators to encourage success in this marketplace, and how we act as business development professionals to encourage success in this marketplace,” Rogers said.
Fagon also alluded to the ongoing stigma that cannabis faces, even after legalization, and the need to have ongoing conversations with localities.
“There is a huge need for destigmatizing the plant. It’s incredibly unfortunate, but in a lot of cases what we’ve seen is that those communities that were disproportionately targeted are now associating the plant with criminality,” Fagon said. “Chris and I experienced this a lot in Harlem, in our efforts to get the dispensary stood up over there.”
