A Battle Has Erupted Over Washington’s Legal Cannabis Plazas

The Outcome Could Help Define A Path To A Peaceful End To the Drug War

A major turf war has erupted in the grand experiment to legalize marijuana in the state of Washington.

However, this battle is being waged with the tools of politics, the courts and organizing, unlike the drug war, where disputes over control of the drug plazas, or markets, normally are settled with bullets.

The stakes are high in this turf dispute in Washington, with hundreds of millions of dollars in revenue on the table and the future of a nascent cannabis industry hanging in the balance.

Some 40 percent of Washington’s 281 cities and towns have adopted bans or moratoriums preventing legal marijuana businesses from doing business in their communities. That power was enabled, in large measure, through the state’s Office of the Attorney General, which issued an opinion earlier this year supporting that local power, seemingly against the interest of the state’s marijuana regulatory authority, the Washington State Liquor Control Board [LCB] — which is overseen by a three-member commission.

In fact, the Attorney General’s office acts as legal counsel for the LCB in court cases challenging the board’s authority. Yet the AG’s office has been interceding in lawsuits and backing the cities that are facing challenges to their marijuana bans. Those bans are being effected through draconian zoning laws that do not make space for legal cannabis businesses authorized in the wake Washington’s 2012 citizen’s referendum, Initiative 502, which sanctions the creation of the legal marijuana industry in this state.

But as with most turf wars, the dynamics are complicated by other powers with interests in the territories. In this case, one of those interests is the federal government, which still deems marijuana illegal and its distribution a crime. An uneasy bargain has been struck with federal law-enforcement officials, via negotiations between Washington state officials and the Obama Administration’s Department of Justice, on that front, which is allowing the Washington experiment to play out absent  federal preemption. That bargain, though, has not been tested in the courts, and any action taken by the Washington AG’s office has to be seen in that light.

Should any of the Washington cities seeking to defend their cannabis bans successfully argue that “federal question” in the courts, as they have already attempted to do, it could lead to a judicial ruling that may well unravel the entire legalization effort. Hence, another reason the AG’s office is interceding in court cases challenging local cannabis-business bans is to assure that the question of federal preemption of state law is not taken up by the courts, to avoid a showdown between the federal laws criminalizing marijuana and the state I-502 law that legalized it and set up the framework for regulating it.

So, in this turf war in the legal cannabis market, local, state and federal powers each have divergent interests, yet they are attempting, on other levels, to work together to see Washington’s experiment through to a successful conclusion. Some within that bureaucracy of players definitely prefer to see legalization fail, yet others are working just as hard to assure it works — though clearly to their benefit both in terms of political power and tax revenue. And it is the latter jewel, money, that is at the heart of the local marijuana-business bans and moratoriums.

The primarily small, conservative communities in Washington’s rural outback that are east of the mountains walling them off from the state’s big metropolis, liberal Seattle, have determined that if the legal marijuana plazas (markets) are going to operate on their turf, then they want a bigger cut of the take, in the form of tax revenue from those operations. And they have organized to fight for it through an entity known as the Association of Washington Cities, a nonprofit entity that essentially serves as their chamber of commerce.

And though this fight is being waged nonviolently, that does not mean it’s a softball game. It is in fact very much a hardball contest in which every weakness of the opponent is exploited via the political and legal processes.

Narco News has spent the past two months investigating this turf battle, via interviews with key players, court documents and open-records requests. The plaza battles now underway in Washington, and the course of their ultimate resolution, can serve as a blueprint for how a legal cannabis market can work through bitter struggles peacefully, absent the bloodshed that marks similar battles playing out daily in the drug-war enabled black market — which has claimed more than 155,000 lives in recent years in Mexico alone, and devastated hundreds of thousands of lives in the United States.

This particular turf war in Washington pits small-city interests against the state’s regulatory authority, with federal power still on the sidelines but seen as the ultimate trump card should it be played in the courts.

There are lessons to be learned here for the future by all parties involved, but to get to those lessons, it’s important to have a look at the sausage-making process behind the local cannabis bans in Washington. It is through that process, marked by extreme political finesse, that the rules governing the state's legal cannabis market are being developed and implemented.

With that in mind, Narco News has developed a timeline laying out the highlights of Washington’s legal cannabis turf war.

The Timeline

Nov. 6, 2012: Washington voters, by a margin of 56 percent to 44 percent, approve Initiative 502, which called for setting up a legal and regulated cannabis market in the state.

Dec. 6, 2012: The date the new I-502 law became effective.

January to March 2013: The Washington State Liquor Control Board, a state regulatory agency overseen by a three-member board, is charged with developing the regulatory framework under I-502. LCB officials tour the state holding public meetings seeking input for drafting the rules for I-502’s implementation. During that period, LCB officials, including board members, participated in side meetings with local government officials, the prevention community as well as local, state and federal law enforcers.

A recent county court ruling found that the LCB, in holding the side meetings, 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 in the wake of the public information-gathering process. Also during this information-gathering process, LCB held several webinars with the Association of Washington Cities, an advocacy group that represents the interests of the state’s cities.

“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.”

May 17, 2013: The AWC releases the results of a survey of its membership, which shows the cities are not happy with the tax-revenue structure now in place under I-502. Nearly all of the revenue being generated by the legal weed industry goes directly to state coffers. The cities want a bigger cut of the revenue so they have the resources to oversee any marijuana businesses that might operate on their turf. Most of the survey respondents shared their comments with the LCB.

June 2013: AWC holds its annual conference, where the organization begins to develop its lobbying agenda for the upcoming 2014 state legislative session. Various city officials sit on a legislative committee that is charged with identifying “preliminary priorites” for AWC’s lobbying campaign. The cities’ concerns about I-502 are discussed and addressed through that committee process.

June 2103: 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.

July 15, 2013: The AWC publishes a Legislative Bulletin that is sent to its members spelling out the legal options for dealing with 502 businesses, including instituting bans and moratoriums. 

Sept. 13, 2013: 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.

Oct. 9 2013: The LCB initiates another series of public hearings to vet its proposed I-502 rules and regulations.

Oct. 30, 2013: 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. 

Nov. 1, 2013: Candice Bock, an AWC lobbyist, 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, 2013: The AG’s Office officially opens the comment period on 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. 18, 2013: The LCB begins accepting legal marijuana-business license applications.

Nov. 28, 2013: 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. 1, 2013: The mandated deadline for LCB to finalize 502 rules and regulations.

Dec. 20, 2013: The last day for marijuana businesses to submit a license application.

Jan. 16, 2014: 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, 2014: 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, 2014: LCB issues the first marijuana producer/processor licenses under I-502.

July 7, 2014: LCB issues the first licenses for legal retail marijuana businesses.

July 31, 2014: The AG intervenes in three lawsuits filed by marijuana businesses against two Washington cities that instituted local bans. The rational for the intervention, outlined in a press release issued by the AG Office, was as follows:

Evaluating the claims in the Wenatchee and Fife lawsuits will require the courts to interpret I-502 and determine whether, under the initiative and the Washington Constitution, state law preempts local authority to legislate on this subject. A formal opinion released by the AGO in January 2014 concluded that, as drafted, I-502 does not prevent cities and counties from banning marijuana businesses.

Some local governments that have banned marijuana businesses have said that, if sued by potential local marijuana businesses, they will argue that federal law preempts I-502. The AGO intends to intervene in such cases in the future, to ensure that I-502 is properly interpreted under state law and to defend against any claim of federal preemption.

Aug. 29 2014: A county court judge rules in favor of the AG’s position in the Fife lawsuit. The judge’s ruling is being appealed.

From the press release issued by the AG’s Office:

[Judge] Culpepper ruled today following the hearing that nothing in Initiative 502 overrides local governments’ preexisting authority to regulate local businesses, including marijuana businesses, through zoning or otherwise.

Because the court agreed with the AGO opinion that I-502 did not require local governments to allow marijuana businesses, the court never had to address whether federal law preempts I-502. This allows I-502 to continue to be implemented.

October 16, 2014: A news report, one among many, reveals that more than 120 cities, or 40 percent of the state’s 281 cities, have enacted cannabis-business prohibitions or moratoriums.

Dec. 1, 2014: Attorney Elizabeth Hallock files a lawsuit in Superior Court in Thurston County, Wash., against the LCB and on behalf of an LCB-licensed marijuana business, arguing that the AG office, by backing the cities’ right to institute marijuana-business bans, is failing to vigorously defend its client, the LCB, and the authority of state law. The lawsuit contends, in essence, that the AG’s office made a political decision to back the cities legal argument in relation to bans, and, therefore, has a conflict of interest in representing the LCB in court. As a consequence, the licenses issued to marijuana businesses in cities and counties with bans in place represent little more than ghost licenses, Hallock contends.

From Hallock’s pleadings:

The plaintiff [Americanna Weed LLC] contends that the LCB, due in part to a lack of effective and vigorous representation and a conflict of interest on the part of the Attorney General’s office, has failed to satisfy its statutory mandate to enact the I-502 regulatory program by half-heartedly licensing marijuana businesses, but failing to enforce its own administratively defined jurisdiction (authority) over ban localities.

Because the Office of the Attorney General has made a political decision to defend local bans, both in the court of law and the court of public opinion, and because the Board [LCB] has done nothing to defend its own administrative provisions, which carry the force of state law, the Board tacitly complies with its counsel of record’s [the AG’s] stance.

The Takeaway

Certainly there are more elements that could be added to, or expanded on, in this timeline, but it represents a pretty good snapshot of the sausage-making process underway in Washington’s unfolding legal marijuana market. Is that process nasty, spiced with special-interest power plays and encompassed in a landscape shaped by backroom deals and raw political calculations and power? Have the marijuana business owners taking the risks and investing the capital to make a play in this new legal environment been played as pawns to date in this larger turf war?

Maybe so.

And clearly this issue is not yet resolved and will continue to get worked out in the halls of power in the state of Washington, including the courts and soon the 2015 legislative session, where AWC lobbyist Bock says her organization is working to “get legislation introduced on revenue sharing.”

“There are some cities that are against legal marijuana, and other cities that are simply against the tax policy around it,” says Paul Warden, mayor of the City of Prosser, a small community of some 6,000 people in southeastern Washington. “They want to see money come back to the local community. …But there is no sinister plot here.”

Bock, in a prior interview with Narco News, indicated that the cities would be seeking a 50 percent cut of the marijuana tax revenue from the state, as a “starting point.” She has since updated that statement, indicating it is not clear yet where that starting point will be when legislation is introduced. A state representative who spoke with Narco News on background indicated that he believes the Legislature will throw some tax revenue to the cities, though he said it would “be more like 10 percent.”

So a fight looms ahead in the Legislature as the session kicks off next month. As one Washington lobbyist told Narco News: “Some cities that have not normally exercised their authority in the past have decided to step up on the marijuana issue and say, ‘Hey, we have the power to do this.’”

But cannabis businesses in Washington are learning how to play this game better as well, recently organizing a statewide coalition representing various factions of the industry that will work to adopt consistent messaging and aligned lobbying efforts for a campaign to assure the industry’s voice is heard, and it’s own political muscles exercised to the fullest extent, as this laboratory of the future unfolds in the state of Washington.

What is not happening here on the playing field of marijuana legalization, though, is equally important to note, and, in the big picture, represents a major victory over the drug-war-induced black market, where turf wars and human misery go hand in hand.

One keen observer of the drug war puts it this way:

“Nobody's husband or wife or father or mother or child went to prison, no one had their home or car seized, nobody was shot in a turf war, police, prosecutors and the taxpayers who pay for them didn't have to divert their time and resources away from stopping real crimes in order to settle this dispute."

Stay tuned….

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