executive summary - vermont cannabis...

What Cannabis can do for Vermont

How to grow a thriving, community-based, legal cannabis economy

Executive Summary2015

Community voices

In 1969 4% of Americans admitted using marijuana. The “war on drugs” was launched in 1971 and by 1973 it was 11%. Then laws for mandatory jail time for possession were imposed in the 1980’s and use jumped again. Now we imprison 700,000 non-violent marijuana users every year. Almost 44% of Americans admit trying marijuana including 1/3 of today’s high school students. Over 20 million adults used marijuana last year and 14 million use it regality. The ‘war on drugs’ has cost almost $2 trillion and it is a failure. As with prohibition of alcohol, we need to stop the policy stupidity and legalize marijuana.

It is time to liberate this remarkable plant - cannabis - from the federal prohibition prison it has been in for almost a century, and fully research and utilize the productive powers of cannabis to catalyze Vermont’s agripreneurial economy, increase our economic independence, boost our tourism base, and provide increased quality of life options for a wide variety of cannabis users.

There are so many opportunities! Personally, as an aspiring entrepreneur living in Vermont, I want to get involved in something that is new, exciting, and applicable to my peers. Vermont is in need of a new industry for the younger generation to get involved in and Cannabis could be that industry. Not only are there amazing medicinal benefits to the Cannabis plant, there are also countless economic benefits that could be seen from legalization.

The political dynamic does matter, the voting does matter. Whatever we pass next year...because we are doing it through the legislature as apposed to referendum, we will have opportunities in the next few years to fix the law where we don’t quite get it right, whether concerns that we know about, or concerns that we don’t know about come up. So, I just want to impress upon everybody that engaging your friends and participating in the voting part of our democracy does actually still matter…

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Will RaapFounder, Gardener’s Supply Company and Intervale Center

Rob WilliamsMedia and Communications Professor, University of Vermont

David ZuckermanVermont Senator

Zach Santarsiero Student at University of Vermont


VTCC Report 2

Community voices

Cannabis has been proven not to be a dangerous drug and is safer than alcohol, which is legal. People of all ages and demographics are cannabis users, and are responsible and important members of our workforce. Arrests and jail time because of cannabis is a waste of our law enforcement’s time and our taxpayer’s money. Legalizing would create jobs and income for our government, which we could then invest in infrastructure we need to improve our society.

Vermont has the second oldest population, right behind the state of Maine. We need to be creating more opportunities for young people to settle here. A well-regulated, safe, and legalized cannabis economy would unleash Vermont’s strength for innovation in value-added agriculture, working land-scapes and social enterprise to create all kinds of jobs from growers to researchers to entrepreneurs. Because good jobs makes prosperous communities and prosperous communities can support healthy kids.

From underground to higher ground—grow locally and organically whenever and wher-ever possible, research, test, label, tax, and responsibly market cannabis—and be as transparent as we can be in nurturing this emerging industry.

Not only does it have medicinal benefits but it also has recreational benefits. Is it really the government's place to inhibit a naturally occurring substance such as cannabis? There are few harmful effects on the human body and the legalization of marijuana would mitigate the stigma and would not be such a dysfunctional issue amongst youth.

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26 year old anonymous femaleNorth Ferrisburg, VT

Hinda MillerVT. State Senator [Emeritus], Co-Founder Jogbra

Marissa LanoffUVM Sophomore

Rob WilliamsMedia and Communications Professor, University of Vermont


VTCC Report 3

Executive SummaryWhat Cannabis can do for Vermont

The Vermont Cannabis Collaborative was founded in the fall of 2014, when three Vermont entrepreneurs—Alan Newman, Will Raap, and Hinda Miller —began a conversation about how a regulated cannabis industry in Vermont might spur economic growth. Given the overwhelming evidence that prohibition has failed nationally and in Vermont, and that the benefits of cannabis are only beginning to be understood, they founded VTCC as a way to envision what a regulate and tax approach to cannabis might look like in our state. The conversation quickly grew to include Vermonters from a range of backgrounds—business, communications, technology, agriculture, politics, finance, and education—who shared a common goal: if cannabis is legalized in Vermont, we want this new industry to reflect Vermont values.

VTCC Report 4


We want the highest standards for quality and testing of anywhere else in the country. We want Vermonters from all walks of life and income levels to have a path to partic-ipate in this new economy. We think cooperatives could allow small, craft growers to enter the market and have the kind of impact on our economy that our craft brewers have created. We believe that entrepreneurs, who may not have a lot of venture capital but have great ideas nonetheless, should have the opportunity to succeed where others like them in Colorado and Washington have been unable to enter the market. We see a thriving cannabis genetics research industry emerging. And we see ways to create jobs—good, long-term jobs that will won’t go away after an initial boom.

We also share a vision of what we don’t want to see in this new industry. We are strongly opposed to an economic structure that benefits big commercial interests, one that concentrates ownership in the hands of the few and restricts opportunities for small entrepreneurs. Voters in Ohio recently rejected such a system, and so should Vermont. Our goal is to envision an economy that puts the interests of entrepreneurs, small businesses and farmers at the center of a new industry.

If cannabis is legalized in Vermont, we want this new industry to reflect Vermont values.

So, during this past year we dove into the question of how Vermont can seize this opportunity to create a thriving and responsible industry. We invited experts from other states—California, Colorado and Oregon—to tell us what they have done right and what they would do differently, and we held public forums across the state—from Bennington to Brattleboro to St. Johnsbury—to engage Vermonters in the dialogue. We created four summer study groups to explore the issue through the lens of business

development, industry structure, safety and financial services. What emerged from those conversations was a picture of Vermont as a center for cannabis excellence. We see a market open to any Vermonter who wants to participate, where home growers, craft growers and larger grow operations are integrated to meet the existing demand. We see an opportunity to become a national leader in cannabis genetics and medical research.

Cooperatives could allow small, craft growers to enter the market and have the kind of impact on our economy that our craft brewers have created.

We focused on three ways to create a system that embraces these values: First, establish a tiered structure of cultivation that balances supply and demand, with a goal of keeping prices low enough to diminish the underground market. Second, put a heavy emphasis on uniform quality and testing standards. And third, create opportunities for genetics research to unlock new medical treatments and specialized cannabis strains.

Our recommendation for a tiered system of cultivation is rooted in an economic model that we created with the help of two Denver-based experts—an economic forecasting firm and a law firm, both with deep experience Colorado’s transition to legal adult use. That interactive model—accessible on our website, vtcannabiscollaborative.org—uses demand estimates from last year’s RAND report, updated to include tourism and help predict the best way to structure the market to achieve supply goals. What the model estimates is that post-prohibition demand in Vermont will be around 50,000 pounds annually.

Executive Summary

VTCC Report 5

http://vtcannabiscollaborative.org


To meet that demand, we propose an industry structure with three categories of growers.

The first category is home growers, which we recommend be limited to six plants for personal consumption, with no sales allowed. Our model estimates that about 3,000 Vermonters will fall under the home grower category, and that they’ll collectively produce about 7,000 pounds of supply annually.

The second category is what we refer to as craft growers—entrepreneurs interested in growing and selling artisanal cannabis. They may not have the interest or financial ability to create a big grow operation, but they deserve a place in this new economy. They might help some of the hundreds of small family farms in Vermont generate enough money to actually stay in business—and maybe even encourage others to enter farming. A craft grower could choose to sell on the wholesale market to a retail store or a larger grow operation, or join a cooperative, much like Vermont dairy farmers are member/owners of cooperatives like Cabot Creamery, where the cooperative provides structure, pre-dictability, and a market for the product. Cooperatives are part of the fabric of Vermont, and we should do everything possible to encourage their growth in this new industry.

We have an opportunity to become a national leader in cannabis genetics and medical research.

The last category is the large commercial grow, which would produce enough supply to meet market demand and hold prices down. To avoid market dominance by a few big enterprises, we recommend establishing a cap of 30,000 square feet for total facility footprint on large grow operations. We also recommend limiting the number of licensees. While the market is the best regulator of supply and demand, in this new industry the risk of overproduction is real, and other states have proven many businesses would fail without restraints on licenses and therefore supply.

Taken together, these three groups—home growers, craft growers supported by a cooperative business structure, and large growers—would provide the supply needed in this new regulated economy. In addition to this question of how the industry should be organized, we also looked at how Vermont can produce the highest quality, best tested, most accurately labeled cannabis products. Testing is a critical component to a successful cannabis economy, and the state has a key role to play in establishing and overseeing uniform testing standards. The best option is a set of standards based on an accreditation established by the International Organization for Standard-ization (ISO). The standards could be overseen by the state, in partnership with Vermont’s higher education institutions, like Vermont Tech, which has planned a great new testing lab facility. Perhaps some of Vermont’s already existing, cutting edge safety testing companies like Bia Diagnostics could play a role in setting even higher standards for testing. Let’s use the talent, innovation, and knowledge that already exists in Vermont, and apply it to this growing new economy.

A third area, where we urge lawmakers to focus attention, is genetics research. Genetics research is the process of creating highly specialized strains of cannabis that can treat specific medical conditions or create new products for the adult use market. These strains—and specifically, their seeds—can be highly valuable, but they require extensive experimentation and trial and error to produce. The University of Colorado in Boulder just opened a lab dedicated to genetics research, and a reporter described it as “having the feel of a start-up.” We should be creating those types of labs in Vermont. It’s good for science, good for medicine, good for our economy and creates the kinds of innovation and entrepreneurial jobs that will keep young people in Vermont.

Following is a visual depiction of how these different businesses would operate in this economy, and the many paths that Vermont entrepreneurs could choose to navigate as they start up new businesses in a thriving new industry.

VTCC Report 6


Building, HVAC, plumbing, electrical, roofing, and paving contractors

Communications equipment providers

Shelving and display case manufacturers and installers

Computer hardware and software providers

Transportation and trucking companies

Accountants

Oils and chemicals used in the production of non-edible products

Financial services Research facilities

Marketing services, including web design and social media specialists

Testing laboratoriesTech support services

Agricultural products related to the production of edibles

Cleaning supplies

Machinery and equipment

Commercial kitchen equipment

Architects

Packaging

Attorneys

Real Estate brokers

Security services

4000N E W J O B S

Thousands of jobs can be created in a legal cannabis economy. Cannabis businesses need everything from architects and lawyers to builders and marketers.

VTCC Report 7

Craft Grow License (fee based on number of plants) 7-99 max

Cooperative license

Industrial (large grow) license

Testing License

Marijuana-Infused Products (MIPs) License

Retail License

Lounge License

Genetics License


Recommended license categories

VTCC Report 8

Craft Growers Application

Only includes the grow license. They may apply for any other license, but cannot concurrently hold a craft grower license AND a cooperative license or industrial license. 7-99 plant maximum.

Cooperative Application

With the license comes authorization to conduct all activities allowed under licenses 4-8 above: testing, MIPs, retail, lounge, and genetics.

Industrial ApplicationWith the license comes authorization to conduct all activities allowed under licenses 4-8 above: testing, MIPs, retail, lounge, and genetics.

Testing Application Only includes testing. They may apply for all other licenses.

MIPs Application Only includes creating value-added marijuana-infused products (MIPs). They may apply for all other licenses.

Retail Application Only includes retail sales. They may apply for all other licenses.

Lounge Application Only includes lounge facilities. They may apply for all other licenses.

Genetics Application Only includes genetics license. They may apply for all other licenses.


Types of license applications

VTCC Report 9

No License. No Taxation.

Home Growers

6 plant limit.


VTCC Report 10

Unlimited craft licenses.

Craft growers are free to apply for other licenses.

They would not pay tax on cannabis sold in bulk to co-ops.

They could cultivate a minimum of 7 and maximum of 99 plants.

They would pay a licensing fee for every 10 plants that they grow.

If they grow in their own facility and aren’t members of a co-op, the state would inspect the facility, and the grower would pay an inspection fee.

If they grow in their own facility and ARE members of the co-op, the co-op would be responsible for facility inspection.

Craft Growers


VTCC Report 11

Three licenses available.

Co-ops collect tax from bulk purchases from growers, and from sales to consumers.

The co-op would be a for profit business, with profits going back to member/owners.

Cooperatives

A cooperative license includes licenses to:

• Grow

• Test

• Sell tested product wholesale to other co-ops or industrial grows

• Sell tested products at their own retail store (limited to one per license) or their own lounge (also limited to one per license)

• Make MIPs

• Conduct genetic research


VTCC Report 12

Includes licenses to:

• Grow

• Test

• Sell tested product wholesale to other co-ops or industrial grows

• Sell tested products at their own retail store (limited to one per license) or their own lounge (also limited to one per license)

• Make MIPs

• Conduct genetic research

Industrial License

Four licenses available.

Industrial licensees pay production tax at the point of product testing.

For-profit business, with incentives given for benefits corporations and other social benefit criteria.


VTCC Report 13

Would be the first allowed to apply for adult use license—for either cooperative or industrial licenses.

Same tax structure applies, depending on whether the dispensary chooses cooperative or industrial.

Existing Dispensaries

Would need to create a for-profit entity. Since the dispensary will de facto receive the license, the for-profit would be required to be a benefits corporation, with minimum 51% Vermont ownership.


VTCC Report 14

Marijuana-Infused Products

(MIPs)

Allowed to purchase bulk cannabis, limited by weight, of tested product from licensed small growers, co-ops or industrial grows.

Allowed to sell on wholesale market to co-ops or industrial grows, or to retailers and lounges.

Allowed to hold other licenses.


VTCC Report 15

Limited to 30 stores, regionally distributed.

Retail License

Sales tax collected at point of sale.


VTCC Report 16

On-site Consumption

(lounge)

Allowed to sell cannabis products on premises.

Consumption of cannabis is allowed within the premises.

No alcohol sales.


VTCC Report 17

Testing License

Unlimited licenses.

Needs to meet ISO standard plus any new VT-approved protocols.


VTCC Report 18

Genetics License

Unlimited license. Allowed to grow but only for breeding purposes—plants/flower disposed of after pollination.

Limit on female plants but unlimited male plants.


VTCC Report 19


This report covers many other topics related to a regulated Vermont cannabis industry. We discuss our economic model’s forecast of 4,000 direct and indirect jobs for Vermont. We recommend eight categories of licenses, from craft grower to testing facility. We recommend that licensed companies be majority Vermont owned, and that they’re established as benefits corporations.

Vermont has an opportunity to create a thriving new economy, based on our traditions and values. Let’s expand our already successful Vermont brand. Let’s create opportunities for new entrepreneurs. Let’s embrace a cooperative industry model and build an economy the Vermont way.

Vermont can produce the highest quality, best tested, most accurately labeled cannabis products.

VTCC Report 20

What Cannabis can do for Vermontvtcannabiscollaborative.org

Executive Summary

executive summary - vermont cannabis...

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