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Dazed and confused in Seattle’s medical marijuana business

Selling juice. That's Adam Bligh's backup plan if the city tells him to shut down his medical marijuana dispensary. Bligh opened the dispensary, Northwest Collective Alliance, on the southern edge of West Seattle, near White Center, about a month and a half ago.

A Seattle city ordinance that went into effect last fall banned larger-sized dispensaries and grow operations not licensed under the state's new recreational marijuana system. Since then, uncertainty about how the state will move forward with medical marijuana laws has deepened the regulatory limbo for dispensaries like Bligh's.

For now his shop seems to be in compliance with city rules based on the amount of marijuana he says he keeps on hand. Still unclear is whether new regulations might put him out of business. Last Friday he discussed alternative possibilities for the dispensary.

"I'm just going to turn it into a juice bar," he said, sitting in the shop's reception area beneath a mounted deer head and a wooden Seattle Seahawks sign. A wall of bulletproof glass separated the front of the dispensary from the space in back where Bligh meets with patients and keeps his inventory. A musician, Bligh said he would also consider turning the back area into a recording studio if his dispensary is deemed illegal.

While there is no firm count, city officials and people familiar with the industry estimate that there are currently about 200 medical dispensaries in the city. These businesses fall outside of the legal framework that governs Washington's new recreational marijuana industry. They are typically selling pot for $8 and $12 per gram, while prices in the recreational market are around $20. They are also on the U.S. Justice Department's radar.

There is broad consensus that the way medical marijuana is sold in Seattle will soon have to change.

State lawmakers, activists and lobbyists tried and failed to get legislation approved earlier this year that would have brought medical retailers and growers into the regulatory fold. They say they will renew their efforts in the next legislative session. 

"We definitely will be introducing legislation," said state Sen. Jeanne Kohl-Welles, D-Seattle, who has worked on medical marijuana policy since the mid-1990s. She sponsored a bill in the last session that was designed to align the medical and recreational marijuana systems. But it was not approved. Another bill sponsored by Sen. Ann Rivers, R-La Center, died in the House without receiving a vote.

It is unclear whether future legislation will preserve a place for dispensaries, or move medical marijuana sales into recreational shops.

"In current law there's no reference to dispensaries," Kohl-Welles said. "They're not prohibited and they're not permitted. It's a gray area."

That gray area has not gone unnoticed by the federal government. The U.S. Justice Department has offered tacit approval for Washington's recreational pot industry, as long as it remains tightly regulated. But Jenny A. Durkan, U.S. Attorney for the Western District of Washington, has said that marijuana businesses that are operating outside of the state's licensing and regulatory requirements are in violation of both state and federal law.

Philip Dawdy, media and policy director for the Washington Cannabis Association, believes state lawmakers need to move quickly to come up with new rules for medical pot. 

"It's obvious the Legislature is going to have to act next year," he said "Otherwise everyone is going to get shutdown."

Last October, in response to state regulations adopted after the passage of Initiative-502, which legalized recreational marijuana, the city of Seattle created new rules for the local marijuana industry. The city ordinance included land zoning requirements for recreational growers and retailers and also banned "major marijuana activity," including growing, processing and sales, unless it is carried out by businesses with state-issued licenses, which are currently only available through the new recreational system. Major activity was defined as more than 45 marijuana plants or 72 ounces of dried pot.

The City Council passed the ordinance about five weeks before the state's recreational pot rules went into effect on Nov. 16, 2013. Without clear guidance on medical marijuana from the state, the Council included a provision that allowed businesses that were producing or selling medical marijuana products prior to Nov. 16, 2013 to continue operating without a state license until Jan. 1, 2015.

Regulation of Seattle's medical marijuana industry could be complicated by the fact that the city continued to issue licenses to marijuana-related businesses after the Nov. 16th cut-off. While some of those businesses are also applying for state recreational licenses or providing other marijuana-related services, others are medical dispensaries. 

In an effort to give the Legislature more time to create new medical marijuana laws, Councilmember Nick Licata is now proposing that the January deadline be extended by six months, to July 1, 2015.

"By extending it to July we allow the state Legislature to take up this issue in the next session," he said. Licata added: "We need to provide some accommodation for them in the transition to becoming legitimate dispensaries for medical marijuana."

A City Council committee hearing on the extension is scheduled for Wednesday. Licata said that regardless of whether the Legislature comes up with new regulations for the medical pot industry in the next session, he would not support moving the deadline out any further.

Crosscut recently requested a list of marijuana-related business licenses issued in Seattle after last Nov. 16. The Department of Financial and Administrative Services returned a list of 57 businesses, including Bligh's dispensary in West Seattle. Julie Moore, a spokesperson for Financial and Administrative Services, cautioned that the list was not exhaustive and included not only medical dispensaries, but also other businesses known to be affiliated with the marijuana industry, such as testing labs and delivery firms.

At least 19 of the businesses on the list had applied for recreational grower, processor or retailer licenses from the state, according to Washington State Liquor Control Board records.

The city's business licensing system does not provide a way to easily track the number of marijuana dispensaries. "Our business license coding system is based on the federal coding system, which does not have a category for marijuana, as the federal government still considers it illegal," Moore explained in an email. Financial and Administrative Services uses business names and descriptions, as well internet searches, media reports and physical sightings, to classify businesses as marijuana-related, Moore said.

Visits to 14 of the 57 locations on the list revealed a variety of business activities and offered a glimpse into the shifting state of Seattle's marijuana industry.

One of the businesses was registered to a house on a residential side street in Beacon Hill. Last Friday afternoon, John Park was out in back of the house, cleaning up a powerboat that he had bought used a few years ago. He said that he obtained a city business license because he was trying to get a recreational grower's license. Liquor Control Board records show that the license application for Park's company, Seaside Holdings, Inc. is pending.

"You've got to jump through all their hoops," Park said. He added that he does not begrudge the Liquor Control Board's standards for the licenses. "I appreciate that they are doing it to weed out the riffraff."

At another location, a home-furnishing shop that sells window and floor coverings, the owner said that a marijuana testing company had been interested in renting part of the building, but the bank that holds the mortgage on the property is federally insured and did not want to be affiliated with a marijuana-related business.

On Fourth Avenue South, in the Industrial District, an empty storefront sandwiched between an auto body repair shop and a flooring store is the address that appears on the business license for Spoiled Gardens, another company that is in the running for a recreational producer's license. A sign on the awning that hangs over the plate glass windows of the storefront reads: "Hansen's Florist Since 1946."

An employee at the flooring shop, Karen Ivey, said that she sees the people who rented the space occasionally and receives their mail. "They think they're going to make a million dollars," she said, "that someone is going to buy them out."

Not far from Bligh's West Seattle dispensary, on Delridge Way Southwest, is Green Rush. Situated kitty corner to an auto repair shop, the dispensary's parking spaces are outlined with bright green paint. Inside, metal bars run along the wall facing the street. In the reception area, copies of Northwest Leaf magazine sit on a table and the aroma of marijuana hangs pungently in the air.

A call to the manager, who gave his name as D.J., revealed that the dispensary had opened in February or March and that the company that owned it had other locations and had been in business since at least 2012.

Kimberly Mills, a spokesperson for the City Attorney's Office, reiterated that any dispensary opened after last Nov. 16 would be considered illegal if it had more than 72 ounces of pot or 45 marijuana plants on site — even if it was operated by a business that existed prior to that time, like Green Rush.

Another dispensary, Rainier Alternative Medicine and Clones, is located in Columbia City. It opened its doors a month and a half ago, according to a woman working at the reception desk. Last Friday, a sign in the window advertised a free gram of marijuana for new patients.

The city is in the early stages of figuring out how to deal with shops like these. City Attorney Pete Holmes, Mills said in an email, is "engaging other City stakeholders to determine the most effective way to enforce current city law." Asked if this meant the dispensaries would definitely be shut down if they have over 72 ounces of marijuana on hand she replied: "The City stakeholders are discussing how best to deal with these businesses."

Licata took a stern view of businesses that have opened since last Nov. 16. "I have no sympathy for them," he said. "They had ample opportunity to apply for medical marijuana licenses before that date."

One big question is whether these recently opened dispensaries have enough weed on their shelves to be in violation of the city's 72-ounce threshold, which is equal to about 4.5 pounds.

Dawdy, of the Washington Cannabis Association, said it is not uncommon for a dispensary to stock 10 pounds, or 160 ounces, of marijuana. John Davis, a seasoned dispensary operator, took a similar view. Davis is CEO of the Northwest Patient Resource Center, which has two dispensary locations in Seattle. He said that while it would be possible to do business with less than 72 ounces, "it becomes an operational pain."

The city does not currently have a system in place to routinely check the quantity of marijuana dispensaries have on site. According to Mills at the City Attorney's Office, that regulatory responsibility would fall to the Department of Planning and Development.

But DPD only investigates the businesses if there is a complaint. And most of the department's investigations look into grow operations rather than dispensaries, according to compliance manager, Diane C. Davis. Since last November, the department has conducted at least 14 investigations, Davis said. Eleven resulted in notices of violation. Davis said that these numbers are imprecise because there is not a special classification for marijuana business investigations.

There have not been any situations where DPD inspectors have had to actually place pot on a scale and weigh it. "We have not yet had this situation," Davis said in an email, "and we don’t currently have equipment to weigh."

Davis said this was because usually the amounts of marijuana on site at an investigated business are obviously over the 45-plant or 72-ounce limit, or because the business does not have the proper permits and certificates for its location and should not be operating at all.

The notices of violation that DPD issues carry the threat of fines, which could be imposed if a business does not comply with city rules by a set date. The fines can only be imposed through court action or a negotiated settlement.

Davis said that the department does not have the authority to shut businesses down.

Amid all of the flux are longer-standing dispensary owners, like Northwest Patient Resource Center's Davis. Also a co-founder of Hempfest, Davis said that he has been working on marijuana-related policy for about two decades. Although his dispensary business is only about three-and-a-half years old, he describes time in the marijuana industry as being like dog years.

He believes that the medical market does need regulation and plans to advocate for new policies in the next legislative session. But he also said that the current recreational market does not have the ability to adequately serve medical marijuana customers. "I think what you're going to find is that eventually the medical and the recreational markets combine," he said. "In the future when the recreational market can supply the recreational user and also supply the medical user and give them products that are appropriate it makes sense."

"But for right now," he added, "the markets are going to have to be kept separate."

Davis is also concerned that some dispensary owners have begun playing fast and loose with the rules now that the recreational system is in place.

"I know of dispensaries that have said well screw it, no one seems to care, we'll just sell to anyone 21 and up," he said. "You might be able to get away with it for a little bit." But Davis said that these shops make the entire industry look bad. And he also notes that during his years of involvement with marijuana-related advocacy and businesses, he has seen people run crosswise of the law. "If the federal government comes in and tags you, they're going to start with a ten year minimum [sentence].

"I've seen people come to sticky, sticky ends," he said.

Bligh is trying to avoid all of that. He uses a computer system to keep track of all of the transactions that flow through the shop in order to maintain good records for the Internal Revenue Service. Though he was not aware of the city ordinance and how it affected dispensaries that have opened since last November, he said that he had less than 16 ounces of marijuana in stock. When he found out a reporter did not have a medical marijuana card he said that he would not be allowed in the back of the shop, where his inventory is kept.

On most days, he said, business is slow and he averages one to two customers, often making around $57 in profits, which is far lower than what he anticipated when he got into the business. "I put all my money into it, my whole life savings," he said. "You got to try not to think about it and serve your customers the best you can."

Despite the obstacles he faces with his new business, Bligh talks passionately about marijuana and its potential as a medicinal drug, which can help patients with ailments including cancer, cerebral palsy and multiple sclerosis. He mentions marijuana-based lotions that can be applied for hand pain, or even onto a person's chest to subdue panic attacks, without inducing a traditional high.

"We want our own culture," he said, referring to people involved with the medical marijuana business. But if he does get shut down, there's always the juice bar option. "I guess the liquor board can do the get high part," he said. "I'll do the healthy part."

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