My Friends, We Have MUCH to Discuss

It’s been a couple of months. I’m sure you are wondering where we’ve been.

Truth be told, after the contentious end to this year’s legislative session we needed to take a little breather to collect our thoughts and enjoy some of the summer weather. Now that we are back to it, let’s take a little walk down memory lane and then get caught up on the current machinations of cannabis legalization in the Granite State.

A Great Bill Gets an Impolite Death

Let me start by saying this is solely opinion. But I believe we had the votes for a great free market coalition bill. That is until something happened. Not only would the bill have set the foundation for a fair market approach to the cannabis industry but it would have accomplished the three main goals of NHCann. Maximum opportunity for the residents of NH to compete on the front end, maximum harm reduction in the middle and benefits to the largest swath of NH residents on the back end.

HB639 (as submitted) contained very low barriers to entry, the lowest tax in the nation, edicts to pay down billions in unfunded liabilities and funding for education (with the ultimate goal of reducing property taxes), treatment and prevention and more. And although we believe we had the votes, unfortunately politicking(?) won the day and it was voted down in the Senate. Only to have the Governor come out shortly after and acknowledge that legalization was inevitable and propose his guidelines for legalization that included a State run monopoly on retail dispensaries.

A Commission is Born

That is when the real fun began. You see, the legislature held onto a bill and passed another constructing a Commission whose mandate it is to study and propose State run legislation. So far there has been a lot of references to HB1598 from last year that was indeed the government monopoly model that would take over one-third of the industry with the State being the only buyer and seller of cannabis.

The Commission kicked off a few weeks ago with a first meeting that was mainly organizational in nature. Monday, September 18th they held their second meeting where the NH Liquor Commission presented a framework to accomplish the State Run concept with a…twist?

Welcome to the State of NH Cannabis Franchise

Let me start by saying I am heartened and impressed with the Liquor Commission’s efforts in doing what it takes to get an understanding of the Cannabis Industry. Let me also remind you the agency does not take political stances or industry format preferences beyond what they are asked to look into and consider.

From what I can decipher the goal appears to be to find a way to accomplish a top down State run-like industry while separating themselves from the risks of the State government and its employees defying federal law.

Their proposal? To use the Franchise model, where the State would Franchise retail stores and mandate all the details of the look, feel and branding while taking total control of the marketing. It is an interesting and novel solution to the problem of State control without the State liability for sure. We are still digesting the information but can see some pros when comparing it to the HB1598 models. However…

A Different Solution Creating the Same Problems

For all the pros when compared to a State takeover of retail the conversation inevitably detoured into license limits (no more than 65 dispensaries) with very high barriers to entry (estimates to apply, pay license fees and adhere to location aesthetics alone were quoted in the $700K to $1.2MM+ during the presentation) and that doesn’t include purchasing or leasing of a physical space, inventory or operations expenses amongst the myriad of other costs of starting a business.

That then led to a discussion on the number of cultivating operations and how too little or too much cannabis supply would be bad. I suspect this may move toward more limited licensing talk in the future, both on cultivators and manufacturers.

Limited licenses sound great but invariably end with limiting industry access to wealthy, connected individuals and multi state operators. What should be the most accessible portion of the industry not requiring agriculture or engineering experience suddenly becomes inaccessible to most of us. I certainly understand we don’t want the wild west, but we believe there are plenty of statues and rules making solutions to be found to create an industry with higher standards. This definitely feels like a feature of this concept and not a bug.

There was also talk of the commission ‘consulting’ on pricing at the wholesale level through ‘cannabis pricing oversight’. Personally, I’m not sure what that actually means but it sounds like cultivators and manufacturers may not be allowed to set their price without the blessing of the NHLC. We’ll reserve judgement for now but this certainly sounds fishy upon first hearing.

The proposal also included a 15% tax on gross monthly sales (I think of only dispensaries) which is almost twice what the Coalition bill originally contained. We tied our tax to the Rooms & Meals which is currently 8.5% and would be the lowest in the nation by far.

Speaking with cannabis companies all over the country I can tell you the two big reasons States struggle are over regulation & taxation and under regulation. There will always be a ramp up and consolidation in any new industry. You can’t legislate your way out of that. But you can set a solid foundation for the industry to navigate those growing pains and for the long run once the Federal Government takes action and cross state sales become a reality.

Where Do We Go from Here?

We aren’t resting on our laurels. With the help of our board, broader coalition and supportive legislators we have submitted a free market bill for the next legislative session. It is based offHB639 from this year with some improvements from what we learned along the way. Once we have the final version ironed out we’ll be unveiling it to the public.

We’ll also be attending the upcoming Commission meetings and offering up any talented experts they need to answer the most pressing questions about a cannabis industry. These may be livestreamed at the NH House of Representatives YouTube channel as the last meeting was so keep your eyes peeled.

In addition to that, we are finishing up a survey of New Hampshire farm and agriculture professionals to see where they stand on legalization, opportunity and state control of retail. We believe their voices are important and we aren’t sure if anyone had asked them, so we did with the help of various related industry and association groups.

The Fight Continues…So Stay Tuned!

My Friends, We Have MUCH to Discuss

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