The Cannabis Conversation

Statistically speaking, odds are you have tried marijuana. According to the Marist College Institute for Public Opinion, 52% of Americans say they have at some point in their lives, which is a remarkable figure. Considering that the federal government still regards its possession as a criminal offense, it’s surprising that more than half of people polled actually admitted that they had, in fact, broken the law.

This speaks to our country’s peculiar relationship with the plant. According to the ACLU, there were 8.2 million marijuana arrests between 2001 and 2010, and yet roughly 25% of college students regularly smoke the stuff. Last January, then Attorney General Jeff Sessions announced that the Justice Department would again begin prosecuting marijuana crimes regardless of state laws; four months later, Kamala Harris—who’s now polling just behind Joe Biden and Bernie Sanders to be the 2020 Democratic presidential nominee—said, “Making marijuana legal at the federal level is the smart thing to do, and it’s the right thing to do.”

In fact, Harris handles the subject somewhat lightheartedly. Replying to an interview question this past February about whether or not she’d smoked the substance, she said, “I have. And I inhaled. I did inhale,” taking a stab at Bill Clinton’s infamous “I didn’t inhale it” campaign gaff.

The 27 years between those statements have seen more than a cultural shift in the way Americans view marijuana. There are now 33 states that have adopted medical marijuana policies, and while some places, like Alabama, still treat simple possession as a felony, 10 states have legalized recreational use for adults, and 10 others have decriminalized the carrying of certain amounts.

New Jersey is now poised to become the latest state to legalize pot for adult consumption (assuming any of seven other states currently debating the issue don’t make the move first), so now seems as good a time as any to examine what legalization would look like for this state, this county, and our town.

Where are we now?

Out on the campaign trail, and again in his State of the State address this January, Governor Phil Murphy called for the legalization of marijuana. “By legalizing adult-use marijuana—first and foremost—we can reverse the inequality and unfairness left from years of failed drug policies and shift public safety resources to where they can do the most good,” he said. A majority of lawmakers in both chambers of the state legislature also seem poised to take action on the issue.

So, what’s the holdup? According to John Hoffman, the short answer is money. “The politicians are fighting over the tax dollars they expect to receive: how soon can they get their hands on it, and what can they do with it once they’ve got it,” he says.

Hoffman might not be the first person you’d identify as an authority on marijuana in the state; he’s a CPA, and since 1997 he’s headed an accounting firm in Northfield, New Jersey. However, his interest in the cannabis industry goes all the way back to his youth. “I grew up in the 60s and had an incredible love for it back then,” he says. “I sort of grew out of it later, which went along with my professional career.” When medical marijuana came to New Jersey, Hoffman was quick to hop onboard. “About ten years ago I rediscovered that love, and I became a license holder in the state of NJ—I am able to purchase and utilize marijuana.”

Beyond his personal predilections, Hoffman has a business interest in the marijuana industry. When a large percentage of his clients started asking for his advice on the topic, he decided to pursue the subject more in depth. The resulting research, alongside coalitions he’s built, led him to found Atlantic Herbal, LLC, a consulting business intended to guide interested parties into the industry.

To hear him explain it, the holdup isn’t really whether or not to enact the law, or simple squabbles over the tax windfalls, it’s about making sure to enact regulations that preserve the state’s ability to derive consistent revenues from the product’s sale. The delay, he says, is about fears of a race to the bottom.

Luckily for New Jersey lawmakers, they have the benefit of learning from pot pioneers in states like Colorado, which Hoffman points to as a perfect example of what has politicians worried. “They started with a transfer price of something like $2,000 per pound,” Hoffman says. “But in Colorado, they quickly issued many licenses to cultivate, and they also issued a lot of licences to retail. Basically, anybody that had enough money to get into the business went for it.”

The result was an oversaturation of the market, which sent prices plummeting and immediately diminished Colorado’s revenues from their 15% tax on retail sales. Likewise, Oregon grew more than twice as much marijuana as was legally consumed in 2018.

Mike Jasien saw this process first-hand. He moved to Colorado shortly before recreational marijuana become legal in the state, and he dove in head first. “I started working on the black market, kinda like everyone I know in the industry,” he said. “But, when I had the opportunity, I quickly went legit.”

He initially worked as a grower in the state’s medical marijuana industry, and he went on to help found Colorado Harvest Company back in 2009, three years before the state legalized recreational sales. Today the company’s website boasts that they produce 700 pounds of naturally grown cannabis each month. “Prices have changed, obviously.” Jasien said. “People rushed to get as many farms and as much acreage as they could. The market is a bit oversaturated right now, as far as grows go. If you didn’t get in early, it’s too late. There are just so many people doing it now.”

With the benefit of case studies from the states who’ve paved the way in marijuana legalization, NJ lawmakers knew they were faced with finding a solution to keep those revenues consistent. “Regulators are salivating over these tax dollars,” Hoffman says. “They want to make sure that revenue keeps coming in.”

Essentially, lawmakers are holding out until they find a way to get paid based on those black market prices, even after marijuana makes its way to the open market.

When can we expect legal weed?

The good news for proponents of recreational marijuana is that some clever workarounds are on the horizon. A recent example of a potential compromise, floated by a number of legislative leaders this January, would be to tax based on weight, rather than an excise tax on sales. While the new proposal hedges against falling prices by keeping the tax the same regardless of price, only time will tell if it’s enough to break the stalemate.

Still, even after Governor Murphy puts pen to paper, Hoffman feels confident that the ability for all adults in New Jersey to purchase legal weed will still take time. “Once the governor signs it into law, it then goes back to the regulators to decide how to write the rules for it,” he says. “I think it will be about two years from the time the law is passed that you’ll be able to go into a store, show your driver’s license and buy it.”

While this is happening, the companies who have received their licenses to distribute medical marijuana will be preparing their supply chains to accommodate the influx of consumers, a clientele that is already growing by the day. “Here in New Jersey the medical market has substantially expanded under the current Murphy administration,” said George Schidlovsky, President of Curaleaf New Jersey. Curaleaf New Jersey is the local arm of a medical marijuana business that operates in 10 states, including their large cultivation facility in Bellmawr. “Keep in mind that 60-70% of the New Jersey population already qualifies for medical cannabis,” he says.

And while Schidlovsky’s estimate on the percentage of New Jersians who qualify might initially seem high, the number makes sense in light of recent developments. The law signed by Governor Christie in 2010 only made medical marijuana accessible to patients with a handful of serious conditions, like terminal cancer and multiple sclerosis. However, when ailments like anxiety were added to the list of qualifying conditions last March, marijuana is now available to the majority of sufficiently motivated parties.

Who stands to benefit?

Many people would argue that the answer to this question is “everyone.” For instance:

There are those who liken the violence perpetrated by cartels and criminals in the name of turning a profit from marijuana to the acts perpetuated by the Al Capones of the Prohibition Era. They suggest our laws against a product that most Americans are consuming anyway only leads to unnecessary violence. A study in The Economic Journal found that when states bordering Mexico legalized medical marijuana, violent crime was reduced by 13% on the southern side of the US-Mexico border.

And there are others who cite studies showing that in the midst of a nationwide opioid epidemic, states that make it easier for people to access marijuana see a significant drop in overdose deaths. An American Medical Association study found there were 1,700 fewer opiate-related deaths in states with expanded access to marijuana in the single year of their study.

Of course, for those who only see dollars and cents, it’s easy to make a case that the combined benefits of tax revenue, and income and investment opportunities, paired with savings from reduced enforcement, are a major economic benefit.  A 2013 report by the American Civil Liberties Union found that the costs of enforcing marijuana laws at the time were approximately $3.6 billion per year. Conversely, Oregon—whose population is roughly half that of New Jersey—made roughly $132 million by taxing recreational marijuana sales in 2018.

On a more local level, the upside for criminal justice reform also should be considered. According to the New Jersey ACLU, police departments with the highest arrest rates tend to operate in smaller towns. A report released by that same organization shows that, between 2000 and 2013, Cape May County had 411 arrests for marijuana possession per 100,000 residents. That’s the highest percentage in the state, although the vast majority of those arrests came from municipalities with “Wildwood” in the name.

Lawmakers are currently considering a clause providing expungement for all adults charged with crimes that the bill would make legal. “It mirrors the law in California,” says Hoffman. “Once you’ve made marijuana legal for adult use, the current laws should retroactively apply.” Hoffman also argues that, while large corporations are benefitting from the business side, expungement shows great potential for the disenfranchised. “The people who are being impacted by these laws are disproportionately minority groups,” he says. “You’ve got young minorities whose entire life is thrown away by this justice system for a thing we’re debating making legal for all adults. I think expungement is an absolute necessity for this.”

But if we examine the question more granularly, only a handful of companies and individuals are poised to profit substantially from the legalization of marijuana in New Jersey, at least in the near term. The state received an initial 146 applications by companies who sought to become the next “vertically-integrated alternative treatment centers.” These licenses cover the production and distribution of medical marijuana. Of those 146 applications, only six new licenses were granted, bringing the grand total in the state to twelve.

Those six new licenses all went to large, established businesses in the industry, businesses like Curaleaf. While many in the field are tight-lipped about the inner workings of their operations, statements received from George Schidlovsky seemed to indicate that the company is happy with the way New Jersey has handled the issue thus far. “There have been examples of medical markets being disrupted by the rush to and irresponsible deployment of adult use markets,” he said. “We support the rapid expansion of the medical program; it has a working regulatory framework that operates well.” He did, however, concede that “there is always room for improvement.”

Those on the outside looking in might consider the current situation with a more skeptical eye, since local operations have thus far been shut out completely. Cape May City Councilman Zack Mullock is one of those outsiders keeping a watch on these developments. Despite assertions that his research was limited, he has noticed a trend. “One of the things that stood out to me is that the dispensaries who are getting these licenses are multi-million dollar companies,” he said. “It’s not small businesses.”

Having formed an alliance of New Jersey-based investors and attempted to secure a license himself, Hoffman knows the implications of Mullock’s assessment first-hand. “If you look at the state legislators, their objective is to get tax dollars, so they don’t have an interest where it comes from—they just want their tax dollars,” Hoffman says. “If I put together local investors here, and we propose an alternative treatment center, including a facility with 30,000 square feet of growing space and plans to generate revenue to expand, the state has to await our growth to reap the full benefits of taxation. Juxtapose that against some large corporation that’s already well funded, and it’s an easy choice for them.”

It’s important to note that state legislators are making efforts to expand access to these licenses. The current version of the legislation stipulates a mandate that 25% of the licenses go to women, minorities and veterans. Whether a portion of those licenses will be granted to small or local businesses remains to be seen.

And so, even if the market is expanded, it’ll likely all be enclosed, industrial operations, maintained out of sight and out of mind by large corporations. Regardless of how legislation proceeds from here, you shouldn’t expect a trip down Route 47 to suddenly be lined with marijuana fields and farmers markets proffering strains of Sour Diesel and Purple Haze pot alongside their Jersey corn and tomatoes.

What does this mean for Cape May?

The first thing to consider is whether Cape May will even allow legal weed into the area. Just as Ocean City has opted out of alcohol, New Jersey municipalities will have the right to refuse marijuana dispensaries within their borders.

So far, according to Zack Mullock, while there has been some pressure from citizens of Cape May to take a stance on marijuana, support for allowing the sale of marijuana in Cape May has been… muted. “There are two camps,” Mullock said. “There’s, ‘Absolutely not in my town,’ and then there are those who simply want us to outline our stance, one way or the other. I don’t think there’s currently a side saying, ‘Yes, I want this.’”

For his part, Mullock—while quick to clarify that he wasn’t speaking on behalf of the city or council—made it clear that he thought it was too early to make a judgement one way or the other. “My understanding is that none of the laws we make now are going to matter,” he said. “When the state hands down whatever it is they come up with, it may void any stance that we take now. I don’t think it would be smart at this point to react one way or another.”

Even though legislating may be premature, Mullock is weighing both sides. “My belief is, look, I’m not a huge fan of smoking in general. As a father, I don’t like when people are smoking around my kids, and Cape May has thrived on our family tourism economy. We’ve already banned tobacco smoking in a lot of places,” he said. “Then again, Cape May has 30-something bars. People come here on vacation and want to have a little extra leisure, a little extra fun. I’m not personally against people doing it [using marijuana]—it’s just important that any of that stuff be done in moderation, in the right places, especially in a family city like ours.”

Another potential upside Mullock said the city would need to consider? Tax revenue. “It’s my understanding that the legislation they’re currently working on would mean towns that don’t allow dispensaries within their limits would not receive the tax benefits,” Mullock said. That’s a whole lot of revenue to decline. The Office of Legislative Services, a nonpartisan Statehouse bureau that helps research and develop new laws, estimates that New Jersey would reap $210 million in state taxes from an estimated $1.8 billion in annual marijuana sales.

Hoffman agrees with Mullock’s assessment. “The way the law is written right now, those municipalities that provide retail outlets share in the tax,” he said. Still, New Jersey is set to have the lowest marijuana tax in the nation, with President of the Senate Stephen M. Sweeney refusing to go higher than 12%, a number combining the state’s 6.625% sales tax and a 5.375% marijuana tax. It’s also possible there would be a local tax of 2% on the product. Whatever the exact number, Hoffman agrees that one thing is clear: “If you’re not selling it, you’re not receiving the benefits.”

Although he has his own personal opinions about how marijuana should be handled in Cape May, Mullock believes that the question of whether or not to allow a dispensary is one that should be left up to the people. “Give me the daily operations and the decisions under a million dollars, but when it comes to something that impacts everyone like this, the citizens should definitely have a say.” He believes that the subject—once the state has released its final legislation and the Joint Insurance Fund has given it a look—should come to a direct vote. “If it seems that there might be enough benefits that we should consider it, the vote would probably need to be a referendum,” he said. “It shouldn’t be, ‘Zack Mullock decides for the city.’”

How will Cape May change?

Breckenridge, Colorado is probably a good place to consider if you want to know what Cape May might look like once weed is legal. The town has a year-round population of just over 4,500, but its upscale, winter tourism means it’s bursting with upwards of 37,000 people during peak ski months. Their National Historic District is lined with art galleries, boutiques, bars and restaurants. In many ways, it’s Cape May’s winter sister.

There are plenty of places in Colorado where marijuana is an obvious part of life, towns with signs sporting glowing green crosses on every other corner. Breckenridge is not one of those places. Although you might catch a whiff of a spliff every once in a while—just as you might notice some particularly loud beach revelers hoisting conspicuous red Solo cups—the nearest dispensary is two miles up the road. For the most part, the town remains unchanged by the state’s booming bud economy. Cape May would likely be the same.

Mullock even thinks that the question of whether or not to outlaw dispensaries in Cape May might be a moot point. “New Jersey is giving out such a limited number of licenses, and they have such a high value, so I think you’re going to be seeing these businesses all open in large population centers,” he says. “I don’t know if it’s going to be a Cape May issue in general.”

Even if dispensaries did come to town, it’s unlikely you’d find them in very visible locations. While the weed economy is a tax boon for the states that have welcomed it, marijuana businesses are extremely limited in the tax benefits they themselves can claim. “You can’t deduct rent, insurance, utilities, employee compensation, or anything like that,” Hoffman says. “The only deduction you can take is the cost of goods sold.” Apparently this single deduction is thanks to Federal Code Section 280E, the result of precedent established by an IRS bust on drug dealers for not paying their taxes where a court ruled that the criminals, while guilty, had to be given credit for the purchase costs of goods sold. To limit overhead, most facilities occupy smaller, less-expensive locations. That means you’re unlikely to see dispensaries popping up along Beach Avenue or the Washington Street Mall so long as anti-marijuana sentiment still exists anywhere in Washington, D.C.

The reality is—regardless of actions taken in Trenton or grow sites popping up in Bellmawr—you might not even know anything has changed once you cross the Cape May Canal. “To be blunt, I just don’t think it’s going to be very big in Cape May,” Mullock says, “Although ‘blunt’ is probably the wrong word to use in this context.”