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Updated: February 25, 2020

Legalized recreational marijuana poses opportunities and threats to various CT business interests

Photo | HBJ File Greg Schaan, Curaleaf’s senior vice president of cultivation, said the impact legalized recreational marijuana will have on the commercial real estate market will depend on how many dispensaries and growers are allowed under the law.

Gov. Ned Lamont has filed a bill to legalize recreational marijuana, creating a $1.25-per-gram tax on the drug, which would be available for purchase to customers 21 and older beginning at the earliest, July 1, 2022.

Connecticut is behind the eight ball on legalization as Massachusetts, Vermont and Maine already allow recreational use of the drug. Still, there will be plenty of business interests and opportunities at stake if and when the new industry sprouts in Connecticut.

From real estate to construction, Lamont’s proposal is drawing reactions from a variety of Connecticut industries. Here are a few of the issues surrounding legal marijuana and its potential impact on Greater Hartford’s business community.

Room for growth … and sales

When Greg Schaan, Curaleaf’s senior vice president of cultivation, was searching for a location with enough room to house his company’s growing medical marijuana operation he noticed something interesting: many of the vacant spaces he looked at used to be occupied by companies that left the state.

“They had left behind these large commercial operations, because businesses had relocated to somewhere else,” Schaan said.

Curaleaf ended up moving into a 60,000-square-foot space in Simsbury that had been a customer-service center for electric utility Eversource. But Schaan and others think that legalizing recreational marijuana in Connecticut would help fill vacant industrial and retail space.

In 2019, vacant retail space in Connecticut increased to 4.1 million square feet, according to a study published by Massachusetts-based consulting firm Keypoint Partners Inc. That puts the state’s retail vacancy rate at 10.8%, a slight increase over the prior year as traditional retailers continue to shrink or go out of business amid competition from online sellers.

Luke Massirio, Real Estate Broker, O,R&L Commercial

Luke Massirio, a real estate broker at O,R&L Commercial in Rocky Hill, said he expects Lamont’s legalization push to reinvigorate marijuana companies’ interest in retail space within the state. Last year when a legalization bill was raised he said he was getting calls from out-of-state investors and dispensary operators who were interested in setting up shop here.

“I think everybody’s just been trying to get ahead of the curve, and unfortunately it just keeps getting delayed,” Massirio said of legalization.

Of the five or so inquiries Massirio said he received monthly in 2019 from marijuana companies interested in vacant retail space, about 90 percent were from Massachusetts, he said.

More marijuana producers could also help fill vacant industrial spaces, Massirio said.

Under Connecticut’s medical marijuana program, only four companies (including Curaleaf) currently grow marijuana in the state. But a legal recreational program would likely expand that, and marijuana production can be housed in industrial spaces no longer usable by manufacturing companies, Massirio said.

“We have a lot of outdated industrial [facilities],” Massirio said.

Many of the vacant industrial buildings in the state were built in the 1960s and ‘70s, before manufacturers operated machines that require 18-foot ceilings, so they’re too small to use, Massirio said. But that’s not a problem for marijuana producers, which don’t need high ceilings.

Curaleaf’s Schaan, whose company invested more than $10 million in renovating its new Simsbury facility, said the overall impact on real estate will depend on how many growers and dispensaries would be allowed under a legalization program, and local communities’ acceptance or resistance to welcoming the industry.

“Any producers’ ability is largely going to depend on the local towns and municipalities, and their interest in having a cannabis-related business in their town,” Schaan said.

Liquor industry wants regulatory parity

The alcohol industry in some states has raised concerns about losing market share to the nascent recreational marijuana sector, but lobbyists for liquor producers and package store owners in Connecticut say they are less concerned about that threat.

Still, that doesn’t mean they are totally disinterested in the issue.

For example, the liquor industry wants to see the same types of restrictions, taxes and oversight they abide by imposed on recreational marijuana sellers and producers.

In fact, when recreational marijuana legalization was being debated in 2018 at the state Capitol, Jay Hibbard, a lobbyist for the Distilled Spirits Council of the United States, submitted testimony outlining a broad regulatory framework for the industry.

He advocated for the establishment of marijuana-induced impairment levels and a roadside impairment test, ideas Lamont said he supports.

“We think that those standards are acceptable and should be welcomed by [the marijuana] industry and policymakers alike,” Hibbard said in an interview.

Hibbard said his organization has tracked the effect marijuana legalization has had on liquor sales in California and Colorado and there doesn’t appear to have been much impact so far.

“In our particular case it appears that recreational marijuana has not impacted our sales growth,” in other states, he said.

Carroll Hughes, executive director and lobbyist for the Connecticut Package Stores Association, said his group has decided to stay out of the issue because they don’t think it will have a major impact on their businesses.

“There are people who love it, and people who hate it,” he said. “Why would we want to get involved?”

Hazy drug-testing policy

The prospect of legalized recreational marijuana has some employers worried about the effect it could have on workforce size and drug-testing efficacy.

Don Shubert, President, Connecticut Construction Industries Association

Don Shubert, president of the Connecticut Construction Industries Association, says legalization would upend construction companies’ current drug-testing regimen and could increase safety risks at already hazardous work sites.

“This would be a major change for a dangerous industry that, for very good eason, has a zero-tolerance policy,” Shubert said. “It’s a serious issue for us, safety is our No. 1 priority.”

Employer drug testing is generally subject to state-level regulation, said Sami Asaad, an attorney at Hartford employment law firm FordHarrison LLP.

Under current regulations, employers are allowed to conduct pre-employment screenings for marijuana, Asaad said, but they can only test existing if they have reasonable suspicion an employee is under the influence on the job. But if Lamont’s proposal passed, they couldn’t use a positive marijuana test as a reason to fire workers.

“You’re going from a situation in which testing positive is enough to establish being under the influence, to one in which you can no longer establish that by just testing positive,” Asaad said.

But as with medicinal marijuana, testing standards don’t apply to companies that contract with the federal government, or need federal funding, Asaad said. In those cases, companies may use drug-testing standards in line with federal law.

In addition to the construction industry, defense contractors including Electric Boat and United Technologies Corp. have raised concerns about the impact legalization could have on their employment policies.

A big worry is that recreational marijuana legalization could lead to an increase in the number of people using the drug and reduce the number of hirable job candidates in industries — like construction and manufacturing — already facing major worker shortages, Shubert said.

“Workforce is already a challenge for us, this would only exacerbate it,” Shubert said.

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February 25, 2020

Trucking companies are required by federal law to do pre-employment drug testing of every prospective driver, then conduct random drug tests thereafter. Failure to pass a drug test, which includes testing for Marijuana use, will disqualify a driver from being hired, or if already an employee, they could lose their license.

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