January 10, 2013

Colorado in the pot-growing spotlight

The state's tight regulations could be a model for the new commercial reality.

By JONATHAN MARTIN, The Seattle Times

(Continued from page 1)

medical marijuana industry
click image to enlarge

In a former bus barn near Denver, marijuana plants grow on camera, part of an intense security system that marks Colorado’s medical-marijuana industry.

Alan Berner/Seattle Times/MCT

Washington lawmakers tried to replicate the system in 2011, but Gov. Chris Gregoire vetoed the bill, citing the remote risk that state employees could be charged with violating federal law.

Colorado skipped right over that. Colorado's 2.9 percent state sales tax last year generated $5.3 million from medical marijuana sales. Cities, which can impose huge licensing fees and extra sales taxes, have reaped far more. Dispensary owners say they pay federal income tax, often at high rates because their businesses do not qualify for many deductions.

With all the marijuana and money out in the open, theories abound about why federal authorities haven't intervened. Most cite Colorado's role as a swing state in presidential elections and the fact its own regulators - not federal drug cops - are called to handle problem dispensaries.

"All of the arguments used, to do a half-assed regulatory system, are based on the fear of the feds," said Romer. "I understand that. But the greater risk here is a use by younger users because (of) a lack of controls."

Denver Relief's grow site, in a nondescript warehouse in northeast Denver, is a midsized operation by local standards, but would be the Taj Mahal by Seattle standards: 2,000 plants, 13,000 square feet, 62,000 watts of power and 2,000 gallons of filtered water a day. Build-out costs were $500,000, including the site's own transformer.

Up close, flowering marijuana plants look like Frankenflowers, genetically filtered into strains such as Romulan or Red Headed Stranger to produce plum-sized buds dangling from spindly stalks. The dispensary was one of the first amid the Colorado medical marijuana land rush of 2010. More than 1,800 budding entrepreneurs, some pushing shopping carts full of documents, lined up at Cook's office, dreaming of getting a state license to grow or sell pot.

To get one, applicants had to waive their Fourth Amendment right to limitations on search and seizure: regardless of state law, the business is illegal under federal law. They also had to disclose years of bank statements. "I think a lot of the info they required weeded out a lot of people who would have been bad for the industry," said Kayvan Khalatbari, co-owner of Denver Relief.

It is a tightly competitive market, with more than 520 dispensaries and 150 processors of cannabis-infused food statewide. The industry leases an estimated 1 million square feet in the Denver area, with some grow sites having as many as 10,000 plants.


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