Washington State’s Legal-Cannabis Plaza Battles Continue: Part 2

Newly Released Public Records Uncloak Lobbying Campaign to Re-Direct Marijuana Tax Revenue to Washington Cities

Washington state’s legal cannabis landscape is now dotted with cities that have banned or placed moratoriums, via zoning laws, on marijuana businesses that were authorized under a statewide referendum approved by voters in November 2012.

Some 40 percent of Washington’s 281 cities have now gone that route, preventing legal marijuana businesses from operating in their communities. A number of the cities are opposed to legal cannabis businesses on principle, some because cannabis is still deemed illegal under federal law. But just as many or more are taking the stance as a means of wresting marijuana tax revenue from the state — which currently is the sole beneficiary of those taxes. The cities argue they need that new tax revenue in order to cover the cost of regulating marijuana businesses in their communities — with bulk of the sought-after tax proceeds being eyed for law enforcement purposes.

The Association of Washington Cities, AWC, is a nonprofit special-interest group with an active lobbying arm that represents all cities in the state. It has been one of the key organizations leading the charge in pressuring legislators and regulators to open up the cannabis tax spigot for the cities.

The agency charged with establishing the rules and issuing the licenses for legal marijuana business is the Washington State Liquor Control Board, overseen by a three-member commission. It has been a primary target of AWC’s lobbying effort, recent public records released to Narco News reveal.

The AWC lobbying campaign culminated with a victory in mid-January of this year, when Washington’s Attorney General issued an opinion upholding the right of cities to ban or place moratoriums on legal cannabis businesses enabled under the statewide referendum, known as Initiative 502. The AG’s office is now representing the LCB in court cases brought against the agency by cannabis businesses affected by bans and arguing in favor of the cities’ right to institute marijuana-business prohibitions and moratoriums.

Currently, at least one bill is pending in the state Legislature that would redirect a portion of the cannabis tax revenue to the cities. If that legislation or a similar bill is enacted, it would represent the crowning achievement of the AWC lobbying effort that has its roots dating back to at least the summer of 2013, as the LCB was engaged in its I-502 rule-making process — which included a number of public hearings (and not-so-public meetings] over the course of 2013.

The role of AWC in that process, and its considerable access to both LCB officials and board members, is revealed more clearly in the public records obtained by Narco News. In a prior story, Narco News published a timeline detailing the then-known roles of the LCB, the Attorney General’s Office and the AWC in the rule-making process that now allows Washington cities to undercut legal marijuana businesses by banning them in their communities through the use of zoning rules — even those legal cannabis firms that have obtained a license from the LCB after investing tens of thousands of dollars in their ventures.

With the arrival of the recently requested public records, Narco News can now add even more clarity to the timeline. That transparency is critical to chronicling the grand experiment in marijuana legalization in Washington.

The updated timeline serves as a cautionary tale of how one special interest group has wielded great influence over the legalization process to date, but hopefully it also will be seen as a valuable resource for those seeking to better understand the trajectory of the legalization movement in the state.

The Timeline

2013

July 17: AWC lobbyist Candice Bock sends an email to various city officials in the Spokane area seeking to organize an exclusive meeting with the LCB board and agency officials in advance of an Aug. 8 public hearing in Spokane, Wash., that will focus on the I-502 rulemaking process. In the email, Bock indicates that “the LCB staff and Board members are offering to meet with area cities in advance of the public hearing to talk with you about any specific questions or concerns you might have” about the “proposed rules for licensing marijuana businesses.”

Aug. 2: Bock sends an email to LCB Rules Coordinator Karen McCall that includes an attached letter, dated July 31, 2013, penned by AWC CEO Mike McCarty. The letter contains essentially the same content as a letter posted on the AWC website in June 2013. The July 31 letter makes a clear demand on behalf of the 281 cities represented by AWC that marijuana revenue be shared with the cities and also demands that all city laws, including zoning requirements, be binding on cannabis businesses.

Also in June 2013, LCB publishes a statement on its website indicating that it has no authority to impede local zoning rules for 502 businesses. The statement is subsequently withdrawn from the website, but an administrative code is adopted quietly later that includes similar language deferring to the cities’ power to adopt exclusionary zoning regulations (moratoriums and bans) for legal marijuana businesses. The LCB rule is cited in the Attorney General's opinion issued in mid-January 2014 that supports cities’ authority to ban legal marijuana businesses via zoning regulations.

From McCarty’s July 31, 2013, letter to the LCB:

“We would still advocate for including a clear requirement that all applicants and licensees must comply with all applicable local laws and regulations including but not limited to those related to licensing, taxation, health and safety, zoning and land use, environmental regulations, and permitting. This clarification would insure that licensees are accountable not just to the state, but to the local jurisdiction and there is no excuse for flouting local laws and regulations. …Cities agree with the assessment that the legal market will only work if there are adequate controls in place and effective enforcement against the illicit market. To that end, we believe there will be a need for financial resources provided to the local jurisdictions to help with that enforcement. We will work with the [LCB] Board and the Legislature to secure that financial support.”

Aug. 7: AWC lobbyist Bock sends an email to LCB contact person Maureen Malahovsky, updating her on attendance matters for the planned Aug. 8 side meeting between LCB board members and city officials in advance of the Spokane public hearing.

Aug. 8: City officials are slated to meet with LCB staff and board members prior to the larger public hearing in Spokane. The side meeting is scheduled to include at least one law enforcer, commander Rick Campbell of the Cheney Police Department. Four other other public hearings are held in August around the state. They followed five public forums featuring LCB board members in February and March of 2013.

An October 2014 county court ruling found that the LCB and its board members, in holding the private side meetings in February and March of 2013, violated the state’s open-meeting law some 17 times — but also determined the violations did not cause enough damage to warrant throwing out the I-502 rules developed by the LCB. That court case was recently dismissed after the LCB, without admitting any liability related to the lawsuit’s claims, agreed to pay the plaintiff, Arthur West, $192,000, according to a media report and the court docket.

As part of the settlement, West was required to withdraw all public-records requests and litigation. Again, his case only dealt with public-meeting violations during the first three months of 2013, and did not cover the period in which the side meeting in Spokane [and possibly elsewhere] took place — in August of 2013. Washington’s Open Public Meetings Act, with few exceptions, requires all meetings involving governing bodies, such as the LCB board, to be open and public.

Also during the I-502 information-gathering process in 2013, LCB staff participated in several webinars sponsored by the AWC.

“We were doing a lot of information sharing with our stakeholders at that time [2013],” LCB spokesman Brian Smith told Narco News. “The Association of Washington Cities (AWC) is a key stakeholder. We held several webinars with AWC members that first year.”

Aug. 14: LCB board member Chris Marr emails AWC lobbyist Bock seeking to set up a meeting between AWC officials and the three LCB board members along with LCB Director Rick Garza.

Aug. 22: LCB Director Garza and LCB Licensing Division Director Alan Rathbun participate in an AWC-sponsored webinar. The goal of the event, according to an AWC email to the LCB was to “impress that this [legal marijuana] is happening, what are city’s options and how can they approach the implementation.”

Sept. 13: The AWC officially approves its 2014 legislative agenda, which includes a demand for a bigger slice of the tax revenue from the legal cannabis industry. That agenda is shared with the state Legislature and Governor’s office, and guides AWC’s lobbying strategy going forward.

Sept. 17: AWC lobbyist Bock and Dave Williams, AWC legislative director, meet with LCB board members and the LCB’s Garza and Rathbun at the LCB caucus meeting, a public meeting held separate from LCB board meetings and rarely attended by members of the public, as noted in LCB board member Chris Marr’s email to Bock.

From Marr’s Aug. 14 email:

“Some time ago, we discussed the possibility of your meeting with the three Liquor Control Board members during one of our regular weekly caucus meetings, to discuss implementation of I-502 from your organization’s perspective. This would provide an informal venue to exchange ideas and vet any concerns, which could provide value as we move ahead. …Note that we post these as public meetings, but rarely have a member of the public attend.

AWC lobbyist Bock, via an email to Narco News, describes her memory of that Sept. 17 meeting with the LCB board:

“I recall the meeting you are talking about, but not too many specifics. I am certain we probably talked about [marijuana-tax] revenue sharing and the state of cities’ bans and moratoriums. I seem to recall it was mostly an update about their rulemaking process."

Oct. 30: The LCB holds a public board meeting in the morning, but there is nothing on the agenda concerning marijuana bans and moratoriums. However, immediately after the board meeting, an executive management session, also a public meeting, is held and attended by two LCB board members. A measure is approved to seek an Attorney General opinion on whether the LCB has the power to overrule local cannabis-business bans and moratoriums instituted via zoning restrictions. LCB Licensing Division Director Rathbun, according to a media report, was assigned the task of preparing the formal AG opinion request to be signed by the LCB board’s chair, Sharon Foster.

Nov. 1: AWC lobbyist Bock contacts the Attorney General’s office seeking instructions on submitting comments for consideration in advance of the AG issuing an opinion on the LCB’s question about cannabis bans. Bock has already talked with LCB Director Rick Garza about the board’s executive-management session vote during which the decision was made to seek an opinion from the AG office. Bock tells Narco News she heard about that board vote from a reporter who attended the LCB management meeting.

In an email to Bock, obtained via an open-records request, Jeff Even, deputy solicitor general in the AG’s Office, and a key gatekeeper in the AG opinion-writing process, provides the following response:

"Comments regarding the questions, and even thoughts as to what our analysis and answers should be, are very welcome. We routinely solicit comments regarding formal opinions, which is what I expect this one will be. So any thoughts that you would like to share, we’d be glad to consider. The request itself is a public record, and so if you don’t already have the questions posed by the LCB you can get them from me. When we receive them, that is, since as of right now the question hasn’t arrived yet. Comments can also be sent directly to me, either through the mail or, ideally, just as an email or email attachment to me at this email address."

Nov. 5: The AG’s Office officially opens the comment periodon the LCB’s request for an opinion on whether the state has the authority to override local cannabis bans and moratoriums. The LCB submitted the following two questions for an AG analysis via a nonbinding opinion:

1. Are local governments preempted by state law from banning the location of a Washington State Liquor Control Board licensed marijuana producer, processor, or retailer within their jurisdiction?

2. May a local government establish land use regulations … or business license requirements in a fashion that makes it impractical for a licensed marijuana business to locate within their jurisdiction?

Nov. 12: AWC’s Bock emails the Washington State Attorney General's office, while it is preparing the AG opinion on marijuana-business bans, seeking to set up meeting between the Attorney General and AWC’s executive director sometime before the start of the 2014 Washington Legislative session, which began in mid-January 2014.

In a follow-up email Bock sent to the AG’s office, she outlines the topics and goals for the meeting

“We would like the opportunity to speak with the Attorney General about legislative issues, opportunities to work together on issues and education opportunities and opportunities for AWC to participate in amicus briefs [litigation]. We would also like to talk about our respective roles with legalized marijuana.

“Goal/Expected Outcome of Meeting: A better understanding of our respective issues and opportunities to work together.”

Also on this day, an AWC webinar featuring LCB’s Rathbun as a panel participant is held, and the issue of moratoriums is discussed during a Q&A period.

Nov. 13: Brittany Sill, government-relations analyst for AWC, via email thanks LCB Licensing Division Director Rathbun for his “help and coordination” in staging the Nov. 12 webinar and also asks to set up lunch appointment with him.

From that Nov. 13 email trail:

Sill — “Does next Wednesday or Friday work for us to get lunch?!”

Rathbun — “I can do either, and we can do lunch or coffee/drink after work. Your choice … my social calendar is really openJ”

Sill — “HAHA!! Well let’s do lunch Wednesday, my evenings are usually booked with workouts or volunteering, not exactly fun stuff! Any preference on a locale?”

Rathbun: “Was not trying to imply that you do not have a life, just confirming I don’t have one. Please pick a spot downtown and I will meet you there.”

Nov. 18: The LCB begins accepting legal marijuana-business license applications.

Nov. 20: AWC’s Sill and LCB’s Rathbun are scheduled to meet for lunch at the Budd Bay Café in Olympia, Wash.

Nov. 28: This is the last day for “stakeholders” and the public to inform the AG Office that they intend to provide input on the pending AG opinion. It generally takes four to six months for the AG office to issue an opinion, according to its website.

Dec. 20: The last day for marijuana businesses to submit a license application.

2014

Jan. 16: The AG issues his opinion, which supports the cities’ right to institute bans and moratoriums on legal cannabis businesses. The opinion comes a little more than two months after receiving the question from the LCB — considered a fast turnaround. The opinion’s conclusion: “Initiative 502, which establishes a licensing and regulatory system for marijuana producers, processors and retailers, does not preempt counties, cities and towns from banning such businesses within their jurisdictions.”

Feb. 24: Mayors from 100 cities sign a letter sent to legislators and the governor demanding a bigger share of the tax revenue from marijuana businesses. The letter is posted on the AWC website.

March 5: LCB issues the first marijuana producer/processor licenses under I-502.

June 9: The Attorney General meets with AWC officials, including AWC CEO Mike McCarty. By this time, the 2014 Legislative session has ended.

In an email to Narco News, LaDona Jenson, director of public records for the AG office, describes the June 9 meeting as follows:

“Attorney General Ferguson, Chief Deputy Dave Horn, Legislative Director Mike Webb and Assistant Attorney General Bruce Turcott met with Mike McCarty, Executive Director of AWC, on June 9, 2014 – there were others from AWC present at the meeting, also. Our records indicate those others were to be Candice Bock (Govt. Relations Advocate) and Sheila Gall (Legal Counsel). It is listed as a “meet and greet” on the calendar, with meeting topics to include: Ways to Partner, Open Records, Marijuana, Tort costs, Pension Suit.”

July 7: LCB issues the first licenses for legal retail marijuana businesses.

Sept. 5: LCB Director Garza’s office emails AWC lobbyist Bock asking to speak with her by phone on Sept. 12. Bock emails Garza’s office back indicating she is available to speak with Garza by phone on that date.

Oct. 13: AWC’s Bock sends an email to the LCB seeking to set up a private meeting with LCB Director Garza.

Oct. 14: Garza responds to Bock’s Oct. 13 email and asks his special assistant Gretchen Frost to also invite LCB board member Marr and LCB Legislative and Tribal Liaison James Parebello to attend the meeting.

From Garza’s email:

“Please look for a time that can work. Please invite Chris Marr and James Parebello to join us. Thanks! Doesn’t need to occur till after I’m back in November.”

Dec. 9: AWC lobbyist Bock meets with LCB Director Garza in the wake of requesting the meeting in her Oct. 13 email. It’s not clear from the public records obtained by Narco News if Marr and Parebello were in attendance as Garza had requested in his Oct. 14 email replying to Bock’s request for the meeting.

In an email to Narco News, Bock describes the meeting as follows:

“Yes, we ended up meeting on December 9 [2014]. We talked about the usual stuff … revenue sharing, the need to reconcile medical marijuana and recreational marijuana, what various cities were doing in terms of regulations. We generally shared with them [LCB] what our legislative priorities were around marijuana.”

Jan. 12, 2015: The Washington State Legislative session kicks off.

Stay tuned….

Past Stories In Series

• A Battle Has Erupted Over Washington's Legal Cannabis Plazas

• Local Opposition to Washington’s Legal Marijuana Businesses Is a Taxing Issue For the Fledgling Industry

• Labor Unions Are Supporting Washington State Legal Marijuana Dispensaries that Create "More Workers to Organize"

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