Legislative panels address hot pot topics

Welcome to the conversation, legislators.

Senate and House Judiciary Committees called a joint informational meeting at the Downtown Anchorage Legislative Information Office on Sept. 14 to discuss the hottest and longest running topics in the Alaska marijuana industry: namely timeline, board politics, banking, unlicensed sales, and marijuana social clubs.

The Legislature, which has been mostly absent from discussions surrounding recreational legalization, bowed under the weight of the state budget crisis.

Cannabis issues have spun into larger problems as several necessary legal fixes went unaddressed by legislators, including marijuana social clubs and removing marijuana from the state’s list of controlled substances.

During the meeting, members of the Judiciary committees expressed concern about some of industry’s complaints, mainly focused on difficulties in the licensing process and the struggle with federal laws that keeps banks out of the business.

“I am pleased to see progress in moving the initiative forward,” said Rep. Gabrielle LeDoux, R-Anchorage, chair of the House Judiciary Committee. “However, I am concerned that lack of staffing may be causing problems that may put unnecessary obstacles in the path of fledgling businesses and Alaskan entrepreneurs, thus impeding the will of the voters who passed the initiative.”

Social clubs were central to the conversation, including allegations of misconduct against Marijuana Control Board Executive Director Cynthia Franklin and broad support for the concept from legislators. Franklin and the Marijuana Control Board have struggled with how to address marijuana social clubs, which allow dues-paying members to consume personal cannabis on the club’s premises.

The board decided in December 2015 that it has no authority to either ban or allow them, and asked the Legislature to do one or the other. The Legislature didn’t, and some clubs continued to operate.

On Aug. 31, Attorney General Jahna Lindemuth issued an opinion at the urging of the Department of Community, Commerce, and Economic Development Commissioner Chris Hladick. The opinion argues that because marijuana social clubs qualify as a business, a place of amusement, and a place to which a substantial number of the public has access, they meet the definition of a public place and therefore are illegal under regulations barring public consumption.

Rep. Charisse Millett, R-Anchorage, Sen. Lesil McGuire, R-Anchorage, and LeDoux each argued largely in favor of allowing some kind of venue for marijuana consumption, not only to give Alaska’s tourists a place to consume their products but to give Alaskans a place to consume outside their own homes, where they might not want to do so around children.

Legislators’ disagreements with elements of the AG’s opinion mainly surrounded the way she interpreted the legal definition of a public place.

LeDoux argued banning marijuana consumption in public carried a different intent than the AG interprets.

“You’re outside,” she said. “You’re someplace that everybody can be, that you can just walk around in. I’m not sure these marijuana clubs meet that kind of public definition other than through the regulations. I’m troubled that the regulations are making the law rather than the Legislature making the law.”

McGuire agreed and wants the Legislature to act on the issue.

“I think this area needs to be cleared up in state statute,” she said.

Schulte alleges ‘coercion’ against executive director

Gov. Bill Walker fired Bruce Schulte as the Marijuana Control Board chair in July, but the commercial pilot said he “isn’t going anywhere.”

Among other suggestions to committee about how to clean up board policies and regulations, Schulte testified that Franklin has not been transparent about earlier attempts to take action against marijuana social clubs.

Schulte said that in late 2015 Franklin, who is also the director of the Alcohol and Marijuana Control Office, attempted to deny liquor licenses to individuals based on the owners’ involvement with marijuana social clubs.

In one case, according to Schulte, she has tried to compel the eviction of Anchorage marijuana club Pot Luck Events through the liquor license process.

Franklin only granted a liquor license to Pot Luck Event’s landlord, Robinson Garcia, for a party upstairs from Pot Luck on the condition that he and his attorney Dan Coffey planned to evict the club.

Franklin had already denied a liquor license at 440 W. 3rd Ave. in November for a concert. Garcia was told the alcohol board would not grant any liquor licenses to that address because Pot Luck Events is a tenant of the building.

When Garcia filed for another liquor license for Dec. 26, 2015, Franklin granted the license, noting at the bottom: “approved only in light of ongoing litigation to evict illegal pot club still located in same building.”

“It seemed to be denying that business owner a lack of due process,” Schulte said.

He characterized Franklin’s actions as “looking like coercion.”

“This is not the way to go about enforcing regulation,” he said.

Franklin had left the meeting by that point and did not have the opportunity to respond.

No eviction notice has ever been filed for Pot Luck Events. Neither Coffey nor Garcia have responded to email and telephone attempts by the Journal to contact them.

In a January interview about the liquor license, Franklin said it’s her job to enforce marijuana law. In the absence of municipal or state police action against the club, she had to get creative.

The state budget being what it is, she said, authorities may not have the resources to prosecute what they otherwise would. The fact that neither the municipality nor the state has taken direct legal action against Pot Luck Events does not mean the club is legal.

“I understand that saying something is illegal and letting it go on looks counterintuitive,” said Franklin. “We can’t count on criminal law for everything. There are other ways to get rid of illegal businesses.”

‘Please don’t break our backs’

Franklin has long maintained that AMCO doesn’t have enough staff to answer questions, oversee licensing and enforce regulations against unlicensed parties.

Testimony from industry representatives supported requests for more funding to help grease the skids for license applicants, but also criticized the process as expensive and red-taped.

Like industry, legislators wanted some explanation for timelines.

“Are you, as far as the initiative is concerned, is the board where it’s supposed to be as far as issuing licenses?” LeDoux asked.

“Yes,” Franklin said. “The idea of the timing…was to get a marijuana industry up and operational two years from the date. We will see a very rapid rollout of the other license types once the lab is operational.”

License applicants, however, expressed concern with some of the more expensive particulars.

Jana Weltzin, a cannabis business attorney, praised AMCO staff for their professionalism and agreed with Franklin’s call for more staff, but had a host of concerns about the complexities of the licensing process.

Many of her clients have been paying leases for nearly a year, which is problematic for an industry when sales have not yet begun. Dual licensing between municipalities presents hundreds of thousands of dollars in compliance costs, and even state fire marshals don’t know how to proceed with marijuana buildings.

“We are two years into this,” Weltzin said. “I just don’t understand how we can still not have an answer.”

Weltzin said she understands the nuances of regulations but would appreciate solutions to streamline the industry’s sticking points. “We’re willing to bend over,” she said, “but please don’t break our backs.”

In response, Franklin defended some of AMCO’s and the board’s policies, including the leasing issue, as necessary to ensure state control. “A lot of the applicants seem to be in shock that they asked for a regulated industry and now they’re getting a regulated industry,” she said.

Legislators seemed to side with Weltzin.

“Think of some ways where we could make this system of a little bit less cumbersome,” LeDoux told Franklin. “Think about that and maybe get back to me.”

DJ Summers can be reached at daniel.summers@alaskajournal.com.