With recreational cannabis legalized, why did Arcata’s dispensaries close their doors?

The gleaming new lobby at Heart of Humboldt awaits customers, as soon as permits are approved. Photos by KLH | Union

Note: On Tuesday afternoon, Humboldt Patient Resource Center received its Adult Use permit, allowing it to sell recreational cannabis starting Wednesday, Jan. 10. See the story update here. – Ed.

Kevin L. Hoover
Mad River Union

ARCATA – “Why in the heck are Arcata’s cannabis dispensaries not open as of Jan. 1?” asked the note slipped under the Union’s door. “Come on – we’re the marijuana epicenter of the world! Who screwed up?”

With recreational cannabis use legal under state law as of New Year’s Day, one might well have expected to be able to stroll in to  one of Arcata’s two dispensaries and make a buy, with or without a 215 permit.

The Note, Side 1.

But during the first week of legalization, you couldn’t legally buy cannabis in Arcata at all – the dispensaries’ doors were closed. Adding to the gloom, Attorney General Jeff Sessions announced the reversal of relaxed Obama-era policy toward states’ legalization of recreational cannabis.

While the note under the door cautioned, “don’t blame the state,” responsibility for the pot lockdown did seem to rest squarely with the state’s overburdened Bureau of Cannabis Control (BCC), which hadn’t issued the permits required for Arcata’s dispensaries to legally operate.

The frustrations were detailed by Mariellen Jurkovich, director of the Humboldt Patient Resource Center (HPRC), at last week’s City Council meeting.

“It hasn’t been so easy getting our permits,” Jurkovich said. “It has put a lot of stress on employees, and most of all, the patients that we take care of.”

The Note, side 2
.

HPRC serves roughly 10,000 customers, with hundreds per day showing up at the shop in hopes of making a buy.

Most wrenching was the impact on hospice and catastrophic care patients, who work with HPRC’s nurse and who depend on cannabis for relief. “We’re not blaming it on anybody,” Jurkovich said. “We just haven’t gotten a lot of information.”

HPRC had applied for both medical and adult use permits in the “microbusiness” category. That allows vertical integration, letting the business grow, manufacture, package and dispense.

“Eureka’s managed to get theirs open, but not Arcata!!??” noted the note. But that was likely because they hadn’t applied for microbusiness status.

“If we’d just applied for a dispensing permit, we would have had it right away,” Jurkovich said.

Cannabis workers made the best of the situation last week as their state permits were being processed. Humboldt Patient Resource Center (HPRC) greeters Alex Duncan and Morgan Drew offered smiles and sympathy, including hugs, to patients, but no cannabis. KLH | Union

Arcata’s dispensaries had been unable to apply for state licenses until Arcata brought its cannabis regs into conformance with state law, which was done at the Dec. 20 City Council meeting.

HPRC has been frustrated at the lack of information from the state regarding its applications, as contacts at BCC seem overwhelmed. Jurkovich said the agency is working through about 1,700 applications, and approving only 20 to 30 per day.

The state’s opacity left HPRC and its customers in high-stress limbo, with no sales and no revenue coming in. The inability to plan compounded that stress for a business used to walking into City Hall and getting timely updates about matters cannabis. “We’re not used to not getting any information,” Jurkovich said.

Nonetheless, all HPRC’s employees were on the job and on the clock. Two of them, Alex Duncan and Morgan Drew, were tasked with greeting arriving patients out front of the Sixth Street shop, giving them the bad news and offering consoling hugs. Those in desperate need were being sent to Eureka’s two dispensaries, which were open and selling.

Humboldt Patient Resource Center (HPRC) Director Mariellen Jurkovich in the dispensary's grow room. KLH | Union

“A lot of businesses are firing their employees,” Jurkovich said. Others, including some in Southern California, are playing fast and loose with the new laws, staying open and selling without all the i’s dotted and t’s crossed. HPRC isn’t risking the $10,000 per day fine and 45-day suspension that a violation could bring.

The dam broke a little bit Friday afternoon, with HPRC getting its license to dispense medical cannabis.

Around the corner at Arcata’s other dispensary, Heart of Humboldt (HOH), frustrations were also running high. Owners Danny and Marcia Brownfield were making the most of the pause in business, making improvements to the building, both inside and outside. The former Zamora’s Furniture showroom at Sixth and I streets has been transformed into an elegant cannabis store with a techno theme, its display cases and sales counters devoid of any product.

Like HPRC, the Brownfields were stressed not only at their inability to do business, but the lack of information about the status of their applications – despite complying with every requirement placed on them by the city and state.

The sign at Heart of Humboldt. KLH | Union

“Where we are in that process, we don’t know,” Danny Brownfield said. “You do the hurdle they ask for, but all this stuff takes forever. The city tries, we try, but we’re just not on a level playing field.”

The perception that cannabis is a gold mine doesn’t play out in reality. Rent, sky-high utilities from the onsite grows, taxes, expenses and the many fees charged by the city and state leave the dispensaries in desperate straits, especially with nothing coming in. “We wonder if there’s going to be anything left over,” Danny Brownfield said.

Costs are going to be an issue for customers under the new cannabis paradigm as well, as cannabis prices are sure to rise. The expense of new permits, testing, track and trace programs and compliance with many other new requirements will be passed on to consumers.

“The patients who have voted for cannabis didn’t expect to pay twice as much,” Danny Brownfield said. “It’s not because we want to charge more, but we have to pay the utilities.”

Like HPRC, HOH was stuck in a permit waiting game. “The day that comes in, we’ll be ready,” said Marcia Brownfield.

“The long lines at Eureka’s dispensary are all Arcata’s tax revenue going bye... to Eureka,” the note stated, and that’s true. The dispensaries charge 8.5 percent sales tax, 3/4 of a cent of which flows to the City of Arcata as part of the Transactions and Use Tax, which garners about $1.5 million per year for public safety and infrastructure projects.

Sean Ruys used the break in business to work on improvements to the Heart of Humboldt building. KLH | Union

Additionally complicating the situation is the problematic state requirement that dispensaries purchase from authorized distributors. Distributors charge an overhead fee of 25 to 30 percent, which smaller manufacturers may not be able to afford.

Further, small mom-and-pop businesses creating edibles, for example, may also not be able to manufacture in the volumes required for mass distribution. These factors could lock out small entrepreneurs, and give an advantage to larger, corporate entities.

It could also push dispensaries who had been acquiring product directly from farms and who  can’t afford to pay distributors’ prices to shop the black market for supplies, exposing customers to product created under unknown, unregulated and potentially insalubrious circumstances. 

Some farmers may also be locked out of the new distribution system. In July, cannabis sold through distributors will have to undergo costly  testing for a spectrum of undesirable ingredients – mold, mildew, pesticides, heavy metals, heavy metals and pesticides.

Farmers who had been selling direct to dispensaries will have to pay $900 per strain for testing, possibly driving them to the black market.

If the roiling chaos with state regs wasn’t trouble enough, still another looming uncertainty for the local dispensaries is what will happen to them when and if cannabis sales are allowed at other locations in town. Should that happen, they’d lose their exclusive franchise on cannabis.

On Dec. 20 and at the prompting of City Councilmember Brett Watson, the City Council committed to forging a retail ordinance within six months. That could allow sales at other locations in Arcata – in stores, at Amsterdam-style cannabis lounges or vape labs, even in gift shops at cannabis-related businesses in Arcata’s Cannabis Innovation Zone, where retail sales are currently prohibited.

Arcata’s Economic Development Committee has formed a subcommittee to study a retail sales ordinance and will draft a proposal. That could be sent to the Planning Commission in March, then on to the City Council for approval in June.

Potentially rendering all of this moot is the announcement by U.S. Attorney General Jeff Sessions that he was rescinding the Obama-era hands-off policy on cannabis. He cited federal statues that “reflect Congress’s determination that marijuana is a dangerous drug and that marijuana activity is a dangerous crime.”

That could lead regional federal prosuctors to go after local cannabis business, and if that happens in Arcata, it wouldn’t be the first time.

The announcement brought forceful pushback from states with established cannabis industries, including Colorado, Florida and California.

In a statement posted online, BCC Chief Lori Ajax said, ““The administration is conferring with the California Attorney General and other states in response to this action. We expect the federal government to respect the rights of states and the votes of millions of people across America and if they won’t, Congress should act. Regardless, we’ll continue to move forward with the state’s regulatory processes covering both medicinal and adult-use cannabis consistent with the will of California’s voters, while defending our state’s laws to the fullest extent.”







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