April 3, 2017

CT marijuana entrepreneurs, employers weigh legalization impact

PHOTO | Contributed
PHOTO | Contributed
Connecticut is vying to become the ninth state to legalize recreational pot use. The medicinal marijuana products seen here are sold by Watertown pot cultivator Theraplant.
Graphic | CNN

Even if it doesn't happen this year, legal recreational marijuana will likely be coming to Connecticut in the not-so-distant future.

"With recreational, I do think it's inevitable that at some point the state will have to figure out what sort of regulatory model we want, because it's going to be all around us," said Jonathan Harris, commissioner of the state Department of Consumer Protection, which oversees Connecticut's 19-month-old medical marijuana program.

Harris was alluding to the fact that other New England states, including Massachusetts, have already legalized recreational pot use, putting pressure on Connecticut to do the same.

If, or when, that happens there will be a lot at stake for the state's fledgling medical marijuana industry as well as Connecticut employers.

Several medical marijuana dispensary owners say that if legalization happens, whether under a bill currently being considered by the General Assembly or in the future, the increased demand for the drug could create new business opportunities. But there are also concerns about federal policy under President Donald Trump, as well as uncertainty over how much competition might flood the market.

Meantime, Connecticut employers would likely see another layer of complexity added to existing rules for how they treat employees who are authorized to possess and use medical marijuana, attorneys say. There are also concerns about increased drug use shrinking the pool of available labor, particularly in industries like construction that test before hiring and often during the course of a job.

Connecticut Senate Bill 11, currently before the Judiciary Committee, could be the furthest the state has ever come in a discussion about marijuana legalization.

One estimate says recreational pot could raise $237 million in tax revenue for the state in the first 30 months. That won't solve the state's projected two-year, $3 billion budget deficit, but it's far from chump change. However, Gov. Dannel P. Malloy didn't favor the bill coming into this legislative session and has been opposed to legalization in the past, though he hasn't specifically promised to veto the proposal if it makes it to his desk.

Some argue the legalization train has already left the station since Connecticut is surrounded by states moving forward with their own efforts.

Massachusetts is expected to start licensing recreational marijuana dispensaries next year. Maine has also approved recreational marijuana while Rhode Island, New York and New Jersey are considering legalization bills.

Dispensaries weigh in

Many have testified for and against legalization, but the state's licensed medical marijuana cultivators and sellers have been noticeably absent from the discussion.

Kris Krane, managing partner of Massachusetts-based 4Front Advisors — which helps marijuana businesses with licensing and compliance and also holds several licenses in the Bay State through a related business — said that's not surprising.

Cultivators and retailers may worry that openly advocating for legalization — something Krane believes most medical marijuana businesses favor — could upset carefully built relationships with towns that house them. In addition, they may worry that voicing their support might rub state regulators the wrong way or create headaches during annual relicensing processes.

"This is a risky enough business as it is, so why add another layer of risk there?" Krane said.

Not all subscribe to that strategy. Reached by the Hartford Business Journal, Laurie Zrenda, part owner and dispensary manager at Thames Valley Alternative Relief in Uncasville, said she's open to the idea of expanding her medical marijuana operations into the adult-use, recreational market.

"We've talked about it and I think we would certainly look into it," said Zrenda, a pharmacist, adding she wouldn't want to abandon the medical side of the business. "It's an extension of what we're already doing."

Legalization could bring additional risks though. Since Trump's election, the U.S. Department of Justice has indicated it may not be as friendly to state-sanctioned marijuana sales as Trump's predecessor Barack Obama.

"[Legalization] could bring more scrutiny from the federal government," Zrenda said. "Maybe in a way, it'd be better if we stayed medical."

Zrenda said increased competition could also be a concern for her dispensary.

Andrew Glassman, an attorney at Pullman & Comley who represents one of the state's four cultivation facilities, said he believes competition would ramp up, if legalization happens.

"You naturally increase your population of users," said Glassman, who has visited Colorado several times in recent years to study its pot industry.

It's difficult to determine how much demand would increase. The state and dispensaries don't publicly disclose sales, which aren't taxed. Under Senate Bill 11, the state would slap a nearly 24 percent tax on recreational pot purchases.

Tom Nicholas, CEO of Prime Wellness in South Windsor, said his average dispensary patient buys a half-ounce to an ounce of marijuana monthly. If his experience holds true for others, the state's nine dispensaries could be selling somewhere between 545 and 1,089 pounds per month, based on the 17,431 state-registered medical marijuana patients, though there are many forms of the drug available that could throw off that math.

Nicholas, a nurse by training who formerly ran a dialysis company, said legalization could cost his dispensary some business, but he's confident there would be an incumbent advantage for the already licensed industry participants.

"If we had the opportunity, who better to blaze that trail than the licensees who blazed the trail for medical marijuana?" he said.

Existing medical dispensaries and growers will get the first crack at adult-use licenses in Massachusetts, and some predict Connecticut might follow a similar regulatory path, though the current bill doesn't include any such provision.

Employer concerns

Don Shubert, president of the Connecticut Construction Industries Association, representing some 300 companies in the state, said those employers have a hard enough time finding qualified workers, particularly in the wake of the 2008 recession that saw the sector take a nosedive.

He said recreational pot legalization would "exacerbate our workforce challenges."

Employees of contractors, builders and various related firms often operate heavy machinery or dangerous equipment and face other safety hazards on the worksite, so many companies have zero-tolerance drug and alcohol policies.

"If you're going to survive in construction, safety is your protocol," said Shubert, who is a member of the Stop Pot CT Coalition.

While construction sites might be more dangerous than many work environments, other employers would face new uncertainties if marijuana were legalized, said Megan Carannante, another Pullman & Comley attorney.

Both the state's medical marijuana law and its proposed legalization bill contain no requirements for employers to accommodate or allow pot use in the workplace. But while the medical law forbids companies from firing or declining to hire a prospective employee based solely on his or her status as a medical marijuana patient, the legalization bill does not.

A company reviewing an employee's conduct would have to discern whether the employee had a medical card, and if so, whether they were high on the job.

That's a difficult task, since unlike a breathalyzer test for alcohol, there is no reliable test for marijuana.

"Because THC (an active chemical in marijuana) stays in the system, a drug test is not an accurate predictor of impairment," Carannante said.

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