Would-be Small Pot Shops Say They’re Victims of Towns’ Cash Grab

TRENTON – Rules for New Jersey’s legal marijuana industry, for which license applications are expected to be announced soon, show that the state wants equitable access to the business for smaller and minority applicants. But advocates say in some places, municipalities are undercutting that.

On top of the large number of municipalities that won’t allow the businesses, some that are opting in are doing so with what’s approaching a cash grab, said cannabis attorney Michael McQueeny of Foley Hoag LLP.

“When towns start putting onerous process and onerous fees that can only possibly be followed by those who have a tremendous amount of money and a tremendous amount of influence, that’s a recipe for disaster,” McQueeny said at a recent Stockton University forum.

Faye Coleman, chief executive officer of Pure Genesis LLC, said municipalities can priority rank applications, influencing state licensing decisions. And they can decide where businesses can go, perhaps to inconvenient locations.

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“A lot of them are limiting dispensaries to industrial locations. It’s ridiculous,” Coleman said.

State law allows municipalities to assess a 2% transfer tax on all sales – but some are adding other fees that exceed what the state will charge to some applicants, and those have become a common focus of complaints at state Cannabis Regulatory Commission meetings.

Chirali Patel, an attorney at Pashman Stein Walder Hayden, said the extra costs are tough for microbusinesses and ‘social equity’ applicants, owned by people from economically disadvantaged areas or with past marijuana convictions, and go beyond towns deciding whether to allow the industry and what types of businesses.

“To create local RFAs and application fees that are prohibitive for social equity, it’s hindering all the smaller players,” Patel said. “They can’t afford to pay $10,000 at a local level, plus the state application.”

Hasaan Austin said cities and towns shouldn’t be charging fees for support letters.

“To these municipalities: You are doing a disservice to the marketplace by creating such barriers,” said Austin, who helps applicants navigate state and local processes.

Among the municipalities that have been the subject of complaints are Jersey City and Bayonne.

Haider Rizvi, who hopes to apply for a business license, said towns “are trying to really cash in on cannabis entrepreneurs.”

“There has been a lot of municipal overreach,” Rizvi said. “They’re creating their own rules, they’re creating their own regulations and a whole new set of barriers to entry.”

Edmund DeVeaux, president of the New Jersey Cannabusiness Association, likened what is happening to financial redlining or the lack of affordable housing that led to the Mount Laurel lawsuit and said there’s potential for a lawsuit against municipalities charging extraordinary fees.

DeVeaux said towns are damaging opportunities for minorities, people with lower incomes and local residents who’ll be excluded in favor of big companies.

“When a municipality enacts an extraordinary fee, they are in essence saying we don’t want certain people and we don’t want certain businesses within our borders,” he said.