NJ Cannabis Media -
December 10, 2018

Guest column: Why legalization makes good economic sense

Written by STEVE BORACCHIA
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Steve Boracchia is an Atlantic Highlands council member, attorney, and former chief compliance officer of Dionymed Brands, a public cannabis company based in Northern California and Oregon. He shares his insights and expectations for New Jersey when S2703, a bill to legalize the adult-use of marijuana, is enacted.

The transition from a regulated medical marijuana system to an adult and medical regulatory system brought significant economic benefits to many municipalities in California and Oregon. I believe many New Jersey towns will see the same benefits when legislation is passed and the industry begins to grow.

Economic Opportunity

There will not be an immediate impact following enactment. Shortly though, the industry will begin to boost local economies through increased construction, higher tax revenue and the creation of numerous head-of-household and entry-level jobs.

The change will be localized, and the beneficiaries will be the municipalities that have permitted this new industry to grow in their towns. For economically depressed municipalities, there could be transformational changes.  Construction in the “green zones” will move at a fast pace and construction workers will be the first beneficiaries. Vacant buildings will be cleaned up and renovated with high-tech equipment for growing and manufacturing.

For example, I was told by a building inspector in Oakland, Calif., that the rate of construction there is greater than at any time in the city’s history, including its founding. It’s likely we will see similar growth in certain select New Jersey cities as well.

After the build-out is complete, there will be a need for skilled people to manage the multi-million-dollar facilities with experience in horticulture, engineering, chemistry, warehousing, transportation and security; i.e. good jobs with good salaries. Retail locations will be developed that look like high-end Apple stores. There will also be opportunities for people who have been turned down for employment because they have a cannabis law conviction on their record – having a non-violent cannabis conviction isn’t held against you. This will also benefit the communities hardest hit by the war on drugs – providing  residents with access to steady, higher paying jobs with benefits. Legislation calling for expungements will further help them as well.

Public safety

Will our towns be safe with this new industry? I believe so. This is a highly regulated industry. Strict compliance is necessary– so much so that industry professionals say: “You are really in the compliance business, not the cannabis business.” Being good at compliance gives you the right to be in the cannabis business, being bad at it can cause one to lose their investment if any product ends up in the wrong hands. The regulatory system in New Jersey would likely have the following components:

Seed-to-sale tracking: A key component of most regulatory systems is “seed-to-sale” software, also known as “track and trace.” Seedlings are given a unique identifier in the form of a barcode. The barcode is scanned and entered into the system at the grow facility by a state certified individual. A tag with the barcode is attached to each plant. When harvested, those barcodes are logged into the next process with the respective plants that were used in that process. The barcodes and plants all move together through each stage of cultivation, distribution, manufacturing and retail. Each time the product is moved, a shipping manifest is generated, and the manifest is sent to the state for tracking. The final cannabis product can take many forms and if several plants were used to make the final product, each identifier related to that plant would be available in the seed-to-sale system. Anyone who had any control over those plants in the chain of custody would be identifiable. This helps regulators and law enforcement make sure the product is not diverted to the black market.  The plant source of each product can be traced back to the original cultivator.

Lab testing: Consumer safety is increased by using ISO certified labs. The lab records are stored with the specific identifiers to determine if a product meets the required safety specifications. Many different pesticides and harmful chemicals can be tested, and the list grows as lab technology gets better. Investigators monitor these results as well.

Regulatory oversight: State regulators make regular visits to inspect and audit facilities. They can ask for anything they wish to see. The business needs to be prepared with the required documentation or face discipline in the form of fines. Software is available to help manage compliance and perform self-audits for quality control, so things stay organized.

Manufacturing standards: Manufacturing follows CGMP (Current Good Manufacturing Processes) which are verified through third-party experts. The process for extracting concentrated oil from the plant is similar to making vitamins. There are many products that can be made from the raw plant and what is produced depends on the current state law. Besides the obvious dried flower for smoking there are vapes, inhalers, pills, tinctures, topical creams and lozenges just to name a few. Products that are designed to appeal to children are unlawful. Manufacturing is complicated and requires a high level of skill to ensure quality.

Security: All facilities that grow, process or sell cannabis will have to meet strict security standards. Security plans are aimed at promoting community safety. The plan is submitted with the application and must be approved by the regulating body. Security cameras, alarms and facility design are all engineered to discourage crime. Smart operators will also make a point to meet their local police chief, so they can share opinions on the security plan as well.

Additional safety standards: The law will require retailers to meet set-backs from schools, churches and other facilities. All visitors will need to be over 21 and age verified, similar to alcohol. Trained “bud tenders” will help consumers to make the right choice with regard to product selection, potency and characteristics. Local ordinances will also add regulations aimed at safety.

Banking: Banking for cannabis companies is generally not available due to Bank Secrecy Act (BSA) regulations, however the Treasury Department has issued guidelines that banks can follow to legally accept money from a state licensed cannabis company. The solution is to follow the FINCEN memo.

FINCEN is a division of the Treasury Department. When I addressed the State Assembly road show in April, I discussed the FINCEN memo, which is a guide from Treasury that explains how banks and financial institutions may accept money from legal cannabis businesses. The guidance explains how financial institutions can take steps to use “enhanced” due diligence that will comply with FINCEN law enforcement priorities. The memo was written in part to promote public safety and tax collection through the same electronic systems used in banking for other industries. As public officials, we need to discuss this concept with our local banks and credit unions, so they are aware that they can compliantly accept cannabis money and thereby promote safety in our towns when cannabis businesses are permitted.

Closing

As elected officials, it is our job to encourage economic growth in our communities. We are also responsible for keeping our communities safe. Smart planning and regulations will help do that. Work on the cannabis bill has been ongoing and several legislators have also visited states where cannabis is legal. They have spoken to the regulators there to learn from their successes and mistakes. Hopefully their suggestions are incorporated into the final bill. If they are, we will have a well-regulated, profitable industry that contributes to the state and local economies while maintaining community safety.

 

 

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