March 22 2018 10:15 AM

City struggles to fully explain what pot licensing fees pay forf

Lansing’s top two elected officials are quick to justify the $5,000 fee the city’s new ordinance is charging annually for medical marijuana facility licenses.

“The enforcement and police effort are going to cost more than what we anticipate bringing in with the fees,” Mayor Andy Schor said.

Lansing City Clerk Chris Swope said the city will at best break even on regulating the businesses paying the fees.

But press them on details and they get, well, vague.

The city has collected $725,000 from 145 applicants. It stands to keep as much as $562,500, and that’s not a one-time potential windfall. Annual renewals are $5,000 as well.

The story that expenses will justify the fees traces back to City Attorney Jim Smiertka, according to City Council President Carol Wood. She said Smiertka had been noting the likelihood of costs exceeding revenues dating back almost a year.

Wood said determining the true cost of the additional work would require sanctioning a time study, which she said she assumed would back up Smiertka’s narrative. That time study would need to demonstrate how city time will add up to $5,000 a year per marijuana business, presumably for policing and building inspections.

Smiertka did not respond to requests for comment. He could not be asked whether, for example, the fee is based not on anticipated expenses but on getting the city the maximum it could collect — which under state law is $5,000. As in, these businesses are rolling in it, so charge them the max.

Time will tell if the pot fee passes the smell test.

“The license application process is ongoing, so it is difficult to say whether the amount of revenue received will offset costs to the city,” said Valerie Marchand, communications manager for the city of Lansing. In other words, she’s not sure the licensing fees will pay the city’s full expenses.

If the fees are higher than actual costs, then they are not really fees. They’re a tax, and a tax requires public approval in Michigan. That’s the result of a Michigan Supreme Court ruling from 1999 over Lansing’s rain fee that constrained how much a municipality can charge for fees before it becomes a tax, requiring voter approval. The city attorney who lost that case? You guessed it: Smiertka.

Here’s where the city’s haul is coming from: 85 applicants for dispensary licenses; 44 from growers; 14 from processors and one from a transporter; and one more for a testing facility. Those are the five types of licenses the new state law allows.

Half of the city’s $5,000 fee will be refunded to applicants who are denied licenses. That will be the case for at least 65 of the 85 provisioning center applicants in this first round of applications, because of a ceiling the City Council put on the number of dispensaries. The city ordinance allows 25 dispensaries, but there will be a second round starting in November for the other five.

Eighteen applications — all provisioning centers — have already been denied, according to city records. These applicants may have appeals pending before the clerk or the city’s Medical Marihuana Commission, which will hold its next meeting on April 20.

Requests for comment from the Lansing Police Department for the specific costs and added responsibilities of enforcing the city’s marijuana facility licensing ordinance were forwarded to Marchand, who said LPD is working in concert with other city departments on enforcement measures related to marijuana.

The city has been able to determine one exact cost. To assist in the application review process, Swope’s office brought in ICF Inc., to the tune of up to $80,000.

ICF is responsible for reviewing application materials like business plans and financial statements, as well as providing feedback on how licenses should be distributed.

“Scoring the applications is a huge project, but there’s also all the review of the applications by various departments of the city,” Swope said. “Are the buildings up to code, is their zoning correct — all those departmental checks to make sure that they meet the requirements of the city ordinance.”

It costs even more to apply for a state license: $6,000.

And an applicant could be on the hook for additional state fees if the cost of processing the application exceeds the original $6,000, said David Harns of the Department of Licensing and Regulatory Affairs.

Harns said if an applicant was a large company with many individuals to investigate, or if they had a long legal history requiring an in-depth investigation, those additional fees might be necessary.

On top of $11,000 annually in state and city licensing fees, businesses will be required to pay a regulatory assessment fee to the state.

The fees for recipients of a Class A grower license — good for up to 500 plants — will be capped at $10,000. For all other facilities, this could run anywhere from $10,000 to as high as $57,000, depending on the number of licenses granted.

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