CT cannabis council members urge a state-chartered bank to finance low-income entrepreneurs
Members of the state’s Social Equity Council planning for adult-use cannabis sales in Connecticut on Tuesday stressed the need to focus on business opportunities for neighborhoods hurt by the failed war on drugs by making it easier for lower-income people to get into the business..
During an hour-long briefing from the top drug regulator in the state Department of Consumer Protection, council members pushed the option of a new bank that would be chartered by the state, as federal laws against cannabis make existing banks very hesitant to open accounts for the growing marijuana industry.
Fees alone to enter the cannabis business range from the thousands of dollars to the millions, council member Joseph Williams, a Hartford business owner associated with the Connecticut Small Business Development Center in the School of Business at UConn, told the group as he pushed for a new bank.
“Many people in the disproportionate area cannot afford [the fees] and they will have to partner with some kind of entity, whether it is private equity or some kind of investor,” Williams said, stressing that financing is the biggest challenge for Black and brown people.
“They need to source capital,” Williams said. “One of the biggest things around social equity that has eluded us is the lack of capital and I find we really need to address that as quickly as possible.”
Melissa McCaw, secretary of the state Office of Policy and Management, said provisions of th cannabis legalization law allow money received by the council to be reinvested, and there will be an opportunity to go to the bond market.
Another council member, Edwin Shirley, a financial adviser, predicted that as the retail sales program starts, “I do believe that there will be significant interest from the private sector in providing capital.”
Williams also warned that the rollout of the new industry also needs to make sure that too many producers, retail and delivery licenses do not saturate the potential market when it starts. The target date is late 2022.
Rodrick Marriott, director of drug control for the DCP, said the many different types of licenses include the current growers and other producers who will enter the market. The agency this week issued policies and procedures effective Oct. 16.
But maintaining product availability for the state’s medical marijuana patients, who numbered 53,892 this week, is paramount. The four current growers, with hundreds of thousands of square feet, will be allowed to enter the retail sales market after either paying a $3 million fee or a $1.5 million fee if they enter into at least two equity joint ventures, with co-owners that meet the definitions of the council’s income and geographic target groups for social equity.
“They will have to have a medical presentation plan,” Marriott said of the four current growers, who have been preparing over the last several years to expand production. “One of the big concerns we have is that we don’t want to get into a situation where our patients that are part of the medical market do not have an adequate supply of medicine. They will always have to supply the medical market.”
Smaller cultivators, with minimum size requirements of 15,000 square feet, will also be determined over the next few months. Entering the lottery for those licenses would require $1,000 fees from some applications and $500 for social-equity applicants.
The state expects tax revenue of about $40 million in the first year of adult-use sales. “It is a complicated process for us to kind of set these numbers” Marriott said, “to make sure we have adequate supply for the market; not over-supply the market; allow business to have businesses survive and succeed, while making sure the drug doesn’t necessarily get abused or misused in that process.”
Williams, using sales figures from the four-year-old Massachusetts cannabis program, calculated that the market in Connecticut could quickly run to half a billion dollars in yearly sales and $50 million in tax revenue.
“Like every emerging market we want to be somewhat calculated about it,” Marriott replied.
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