Don’t overlook a critical part of the cannabis business application
Now that the Department of Licensing and Regulatory Affairs (LARA) has begun accepting medical marijuana facility license applications, many applicants are rushing to submit a state application. Even though the state application is important, applicants shouldn’t forget to check with local municipalities. While state applications can be started at any time, they are limited to pre-qualification. Full license qualification requires proof that applicants have local approval.
Municipalities have incredible authority over the potential location of cannabis business facilities. A facility cannot operate within a municipality unless they have already adopted an ordinance that allows that type of facility. This allows municipalities to choose the number and type of marijuana licenses allowed, and how to zone the businesses. Some communities will allow certain licenses but not others, and other communities will allow all types of facilities but limit the amount. Regardless of whether applying as a grower, distributer, or as a testing lab, it is important applicants know the limits municipalities put on licenses in their desired community. If not unlimited, there are four ways municipalities typically award license approval:
First come first serve
Because it is a race to fill a limited number of slots, applications in this process may be thorough or unspecific. The emphasis is on speed and time-stamped applications will be places in a queue. In this process, it is important to pay attention to the community’s deadlines.
Lottery
Some communities have adopted a lottery to ensure objectivity and remove liability. Again, the specific community’s deadline is important, and after that deadline has passed the municipality will approve however many predetermined licenses by essentially choosing them out of a hat. Although objectively fair, this decision-making process’s downside is that it is expensive to complete municipal applications, and the time and effort investing in a desired location can be lost. Therefore, applicants should limit expenditures or have the ability to withdraw if not selected. For example, adding a contingency based on being selected by the municipality to the purchase agreement or lease for a facility’s location would be wise
Criteria based
In an effort to protect their communities, some municipalities choose to be very involved in the decision-making process when picking applicants. Typically, this involves an entry deadline, after which the municipality will approve licenses based on criteria that will prove which businesses are best for their particular community. Going beyond a background check, this process encourages applicants to have the best possible application and one of the most significant factors is location. A lesser application may be chosen over a better one if it’s facility is in a better part of town.
Soft-Cap
While some communities will not cap the number of licenses available, there are still other factors to consider. A municipality can enact strict zoning rules and establish buffers around sensitive areas like schools or churches. For example, if a municipality limits licenses to an industrial district, there may only be a limited number of qualifying parcels available. Similarly, if zoning restrictions only allow facilities to be 500 feet away from one another, the first applicant to obtain approval may block other potential applicants from a desirable area.
LARA does not limit the number of state licenses issued, but every municipality has the authority to define restrictions in any way they see fit. So while looking for the perfect location for their marijuana facility, applicants should pay close attention the municipality’s rules, deadlines, and decision-making process when moving forward.
Once you obtain your cannabis license be sure to reach out to our team for a FREE Cannabis business insurance quote!
