Can This Family Get a Stake in the Big Business of Marijuana?

A Newark family is vying for a license to sell cannabis in New Jersey. From left to right: Theresa Howard; Anthony White; Zaahir Williams; Shedorah Howard. 

NEWARK — Bessie White is 78 and determined to cash in on cannabis.

Dreaming of financial independence, Ms. White, the matriarch of a tight-knit extended family, had considered starting a bail bond business.

But after New Jersey legalized marijuana, she, her sister and five of their relatives pivoted.

The group is now among the hundreds of entrepreneurs racing to be ready to apply for a retail license to sell marijuana in New Jersey when the application window opens next month.

“You can pass it from generation to generation, so that they don’t have to work for somebody else,” Ms. White, who lives in Newark and retired from the accounting office of a school district, said of owning a business.

Laws passed in the last year legalizing cannabis in New Jersey, New York and Connecticut were designed in part to remedy wrongs within a criminal justice system that disproportionately ensnares Black and Latino people.

And acquiring generational wealth is only part of the motivation for Ms. White and her family as they begin the slow and thorny process of establishing a business from scratch in a brand-new market.

A successful retail shop would also be a way to write a new ending to a familiar war-on-drugs story: Black men like Ms. White’s son, who was charged with low-level drug possession as a teenager, are among the groups that have been given an edge in the selection process.

New Jersey also grants priority consideration to businesses run by members of other minority groups, women and disabled veterans, as well as residents from poor regions of the state and those hoping to operate with no more than 10 employees. With this comes an opportunity for families like the Whites to play a part in achieving the ambitious social justice and equity goals that lawmakers have tied to legalization.

Before New Jersey legalized marijuana, Black residents were more than three times as likely as white residents to be charged with possessing the drug, despite similar rates of usage. Prisons in the state are considered the nation’s most racially unbalanced, jailing Black residents at nearly 13 times the rate of white residents.

“For Black and brown people, it has created criminalization,” Ms. White’s niece, Theresa Howard, said of marijuana arrests.

“We just want to try to take that away.”

If approved for what is known as a retail microlicense, the three-generation family — whose members range in age from 31 to 78 — plans to open a roughly 2,500-square-foot shop stocked with an array of cannabis products.

The store has a name, Simple ReLeaf, and a focus: homeopathic remedies. But its location is not yet clear, one of a number of crucial details that are still up in the air as they try to get a toehold in the multibillion-dollar cannabis market.

In an industry dominated by deep-pocketed multistate and international cannabis corporations, the hurdles for small-business owners are high, particularly while the drug remains illegal under federal law. This makes it hard to borrow money from most banks, open checking or savings accounts linked to a cannabis business, or lease property from landlords who worry the arrangement might violate the terms of federally backed mortgages.

Ms. Howard said the owner of a storefront they considered renting in Plainfield, N.J., which was advertised for $3,500 a month, increased the price to $7,200 after learning the nature of their business. Now they are thinking about buying property instead.

“If you’re paying that kind of money,” Ms. Howard, 47, said, “we might as well own.”

Recognizing the challenges for smaller businesses, the state’s Cannabis Regulatory Commission will issue conditional licenses to groups that have not yet locked in lease or purchase agreements.

A large portion of the taxes generated by cannabis sales, as well as a so-called social equity excise fee, must also be spent on initiatives deemed by the Legislature to address racial and economic injustice in New Jersey.

“I’m super hopeful we’ll actually see some positive results,” said Tahir Johnson, who grew up in Trenton, N.J., and is the director of social equity and inclusion for the U.S. Cannabis Council in Washington, an industry coalition pressing for federal legalization of marijuana.

Eighteen states have legalized marijuana for adult use, including seven in the last two years; many are still establishing the rules that will govern the market.

On Thursday, the Minority Cannabis Business Association, a trade group that advocates for equity in the industry, released a report that evaluated states’ adult-use and medical marijuana statutes and regulations, concluding that most were not adequate to counteract the harm communities of color have suffered during the decades-long war on drugs.

“Race-based solutions in state cannabis reform are critical to remedying the race-based harm of cannabis prohibition,” the report stated.

Like many small-business applicants, Simple ReLeaf has enlisted the help of a consultant who runs a private equity fund, which has offered the family $500,000 in start-up funds. One relative, Taahir Williams, a 40-year-old father of three who works in the pharmaceutical industry, has been hunting for property to buy or lease in one of four northern New Jersey cities the family has targeted.

“We’re trying to have Plan B and C, and, if we need it, D,” Ms. Howard said.

The law that legalized marijuana a year ago set Feb. 22 as the timeline for opening the adult-use market in New Jersey — a deadline the state will not meet.

Stores that sell medical marijuana are expected to be the first places where adults will be able to legally purchase cannabis for recreational use in New Jersey.

At least eight companies that operate medical marijuana dispensaries have applied to sell products to the general public. Each claims it has stockpiled enough cannabis to satisfy patients and recreational users alike — a key benchmark for New Jersey dispensaries that want to expand into the adult-use market.

And as the Feb. 22 date nears, many of these large companies have begun to exert public pressure. Some have claimed that cannabis grown in anticipation of the start date will rot; others have said they may have to fire the workers they hired to handle the expected uptick in sales.

Jeff Brown, the executive director of the cannabis commission, has said the agency is working to “get as close to that date as possible” while ensuring that medical marijuana patients can still access cannabis in stores that are certain to be overrun in the early weeks and months of legalized sales.

“Our goal is to get this market off the ground as quickly as possible, but to do it the right way,” he said.

New Jersey allowed marijuana cultivators, manufacturers and testing labs to begin submitting applications on Dec. 15. The commission has received about 360 applications, one-third of which were from companies that self-identified as social-equity start-ups that qualify for priority consideration. Only the number of cultivation licenses is subject to a cap: Thirty-seven permits can be issued before next February.

Large companies already selling medical marijuana in New Jersey are likely to maintain a built-in competitive advantage in the burgeoning market. They are also considered crucial to providing enough of an early supply of cannabis to meet what is very likely to be an extraordinary demand, particularly in the months or years before New York’s legal marijuana market is up and running.

Sales in New Jersey, a densely populated state that is a train, tunnel or bridge away from the largest city in the country, are expected to be explosive. Cities and towns that allow cannabis businesses to operate can charge additional fees and taxes, intensifying the economic pressure on the state commission to move quickly.

In Massachusetts, where the first adult-use shops opened in November 2018, taxes generated by cannabis sales in the second half of last year were more than double the revenue from liquor sales, state tax records show. Of the roughly $139 million collected in cannabis-related taxes during that time, $21 million went to municipalities that charged an additional 3 percent tax.

Michael White, Ms. White’s son, is 57 and living comfortably on a pension he earned during a 36-year career working for airlines. But he still speaks bitterly about the day he was stopped by the police as he drove through Hillside, N.J., and charged with marijuana possession as a 17-year-old. His record, he said, was expunged long ago. But his distrust in the criminal justice system lingered.

His brother, Anthony, also said that he sold small quantities of marijuana to supplement his income when he was “young and dumb.”

He went on to work as a correction officer in the Essex County jail before retiring 10 years ago.

“I was fortunate to not get caught in the system,” Anthony White said.

He said he had no illusions that legalized marijuana was a cure-all.

“The system is always going to be the system,” Mr. White said. “But that’s one less tooth it has to get us.”

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published this page in News and Politics 2022-02-16 05:16:40 -0800