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Marijuana growers: We can handle expected demand to come with legalization

McHenry County Board member Pamela Althoff speaks at a candidate forum Sept. 19, 2016, hosted by the League of Women Voters of McHenry County at McHenry County College.
McHenry County Board member Pamela Althoff speaks at a candidate forum Sept. 19, 2016, hosted by the League of Women Voters of McHenry County at McHenry County College.

SPRINGFIELD – Representatives for some medicinal marijuana growers are claiming that they have the existing capacity to provide for initial cultivation demand increases as a result of legalization of adult recreational marijuana use should it become law this spring.

According to a study commissioned by the Medical Cannabis Alliance of Illinois, the industry will be able to handle two to four years of cultivation demand after potential adult-use legalization.

“Our study indicated we could meet the demand for three years successfully, but in talking with the sponsors and the stakeholders, we have agreed that, minimally, for the first two years, the existing cultivation square footage approved by the state of Illinois can meet the demand,” Pamela Althoff, a former Republican state senator and current executive director of MCAI, said.

The study, which was conducted by the Marijuana Policy Group consulting firm, said that initial demand will be for more than 550,000 square feet of cultivation space, and cultivation space already licensed under the medicinal program exceeds 870,000 square feet. As the program grows, the demand could grow to 1.5 million square feet in about five years.

Although the study said the industry currently can meet cultivation needs, the market in Illinois has room for 463 dispensary facilities despite only 55 currently being licensed.    

Althoff, who also is a McHenry County Board member, said the MCAI believes the state should develop a methodology to determine when additional licenses should be issued for cultivation centers and dispensaries once demand increases.

“When the process gets started, and when they actually choose to grant those licenses, is going to have a lot to do with the negotiations that are going on now,” Althoff said, adding that the MCAI would like to see additional licenses be used to increase minority inclusion in the industry.

Gov. J.B. Pritzker’s proposed fiscal 2020 budget contains $170 million in projected revenue from adult-use marijuana legalization. His office has said that projection is entirely dependent on licensing fees, not tax revenue, but fee structures are subject to negotiations with lawmakers and stakeholders.

Thus far, those negotiations have taken place behind closed doors, and no bill language for an adult-use program has been filed.

But if Pritzker’s revenue projections are to be realized, fees would have to be exponentially larger than those in the medicinal program, or hundreds of new licenses would have to be granted.

Illinois’ medicinal program allows 22 cultivation center licenses – one in each Illinois State Police district, although not all of them are in use – for which a permit costs $200,000 up front, with a $100,000 annual renewal fee. There are 60 existing dispensary licenses, five of which are unused, and fees are $30,000 initially and $25,000 for a renewal.

Althoff said discussions of the legislation have included “provisional adult-use licenses,” which could be granted to existing dispensaries.

“They would get a second license to locate somewhere else at another physical site,” she said. 

Althoff said the process would be “relatively fast” and there would be fees associated with those licenses, although the price of those fees has not been decided.  

If each cultivation and dispensary facility is charged the same fee for a provisional recreational license as they are for an initial medicinal license and every license is in use, revenue would add up to only $6.2 million. With the study-recommended 463 dispensary licenses granted at the medicinal rate added to cultivation licenses, the revenue would amount to $18.3 million.

Adult-use Senate sponsor Heather Steans, a Chicago Democrat, has said the program could include additional licenses for processing and transportation of cannabis and for craft cultivation centers. But it is unclear how much those licenses would cost, how many would be granted, when they would be made available or in which fiscal year the revenue resulting from them would be realized.

There are application fees associated with the medicinal program as well, at $25,000 a cultivation center and $5,000 a dispensary, but it also is not clear how these would translate to the adult-use program and whether new groups would be allowed to apply for licenses.

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