It looks like my predictions for a new form of marijuana microbusiness licenses will come true. I made those predictions last year and in a recent interview with MIBIZ. You can feel the statewide momentum and plans in the works.
When the recreational law was passed by the voter initiative in 2018 (MRTMA) the concept of the microbusiness license with a maximum of 150 plants was thought to be economically viable. Then as prospective licensees began to look into the opportunities for a microbusiness, they soon learned the acquisition cost of property and development of it into the grow, process, and retail components, the cost of state and local mandated insurance, property taxes, and the effect of IRC 280(e) wiped out for most any potential financial opportunities—which explains why only two microbusiness licenses have been issued in Michigan thus far, despite the excitement around this opportunity.
We know now that the Marijuana Regulatory Agency (MRA) has the authority to create special licenses. They did it first with the excess grower license in order to have big marijuana grow businesses obtain more than 5 class C grower licenses and exceed 10,000 plants. Then they allowed an entity to obtain a retail enterprise license on tribal lands. That’s a sovereign entity.
Now we can see from the Racial Equity Task Force that they want to have a super marijuana microbusiness license for 250-300 plants to assist people in getting into the marijuana business and become financially feasible.
Yes, the increase in plant count will help. But let’s be candid. All of the factors listed above for reasons why one cannot be successful with 150 plants certainly does not help someone who is financially challenged to get into this industry. You have the application fee of $6,000; a high license fee; insurance requirements by the State, let alone what other coverages for property and casualty you might want to buy. Then there’s the cost of acquisition for a facility to accommodate those kinds of numbers.
If the State of Michigan and the Marijuana Regulatory Agency want to assist “financially challenged individuals” to enter the legalized, commercialized marijuana business through the Microbusiness system, why don’t they just do the following:
- Restrict the number of licenses to one per person
- Make the application fee for a single marijuana Microbusiness License $1
- Make the annual license fee for a marijuana Microbusiness License $1
- Eliminate the A.F.S. requirement
- Eliminate the need for the minimum insurance requirement which is costing about $5,000 per year
In my opinion, leaving the plant count at up to 150 plants per marijuana microbusiness license would essentially eliminate large-scale operators. By increasing the number of available plants for some type of microbusiness license, you increase the cost, and perhaps, only well-heeled individuals could financially obtain the super-sized microbusiness license.
The larger the number of plants, the larger the size of the operation and corresponding real estate needs—which is where so much of the expense is born. The larger the operation the greater the real estate taxes will be and, if you don’t own it yourself, the rental costs and property-casualty and liability insurances demanded by a landlord.
The solution for the State if it really wants to help people from moderate-income levels enter into the marijuana business is to cut upfront costs for marijuana Microbusiness Licenses.
I think the best way to encourage people with financial challenges to get into this industry is by paying less on application and license fees. Why help out those who are financially able to make it all work through increasing plant count when you could do it much easier by cutting the costs for people who only want 150 plants or less? Cut out some of their overhead expenses to make it worthwhile.
Good luck in 2021 and we’ll be bringing you more predictions and ideas for success for the marijuana industry in the State of Michigan in our next blog.