Small Town In Washington Expects To Open Its Own Legal Cannabis Store By Month's End

North Bonneville’s Approach Could Become A Blueprint For Other Communities Statewide

The City of North Bonneville is only weeks away from securing a license to open Washington’s first municipally controlled and operated recreational marijuana store, which local leaders say could serve as a model to be adopted by cities across the state.

The bucolic community of some 1,000 residents is located along the Columbia River amid a host of lakes, streams, hiking trails, panoramic vistas and within an hour’s drive of Mount Hood and year-round skiing. North Bonneville, once fed by a vibrant timber industry now in steep decline, now banks on tourism as a major economic engine, local leaders say. The city also is only some 45 miles northeast of the attractions of a big city — Portland, Oregon, a state that, like Washington, recently legalized the production and sale of recreational marijuana.

But it is not tourism, at least at this point, that is the driving force behind North Bonneville’s decision to get into the legal marijuana business. The primary reason for that choice, according to North Bonneville Mayor Don Stevens, is to assure the city takes control of its own destiny in the inevitable evolution of a legal cannabis market that holds great promise but still remains marked by citizen concerns and pockets of hard-core opposition to the very idea of legal weed.

“I view [North Bonneville’s approach} as the city being welcoming to the whole idea of recreational marijuana legalization and trying to ensure it’s done as cleanly and professionally and with as much of an eye on the public health and welfare as possible,” Stevens said. “The financial aspects of it are certainly part of the equation, but they weren’t the primary factor.”

North Bonneville is stepping into the retail marijuana business by setting up a separate entity called a Public Development Authority, which will own and oversee the planned cannabis retail outlet while also shielding the city from legal and financial liabilities. However, the PDA’s board of directors has to be approved by the North Bonneville City Council and its charter, and consequently the marijuana store’s future, can be dissolved by the city at any time if local leaders deem it necessary.

“If someone else had come in and got a license and shortly after started getting busted for selling to teenagers out the back door, or doing anything in violation of the law, our only avenue of correcting that would be to contact law enforcement and have them increase patrols and try to catch people in the act…,” Stevens said. “Where as with the PDA, if we were to see something going on that we didn’t think was right, we could just put it on the agenda for the next City Council meeting and vote them out of existence, and they’re done.”

North Bonneville’s course in Washington’s emerging legal-marijuana landscape, though, goes against the grain of choices made by some 40 percent of the state’s cities and towns, mostly in rural parts of Washington. Those dissenting communities have instituted bans or moratoriums on marijuana businesses — despite the fact that legal cannabis businesses were authorized by a statewide referendum, Initiative 502, approved by a majority of Washington’s voters in November 2012.

Special-interest groups opposed to cannabis legalization in principle have helped to spark Washington’s legal-marijuana backlash. But it also is being fueled in a big way by tax issues. Under I-502, a 25 percent excise tax is assessed at the marijuana producer, processor and retail levels — with that tax revenue now directed into state coffers, leaving Washington’s cities out in the cold. City leaders argue that they need a cut of that tax revenue to help offset the increased law-enforcement and other costs incurred in overseeing local marijuana businesses.

“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.”

In the case of North Bonneville, the choice to move toward the legal marijuana market, as opposed to away from it, simply made sense from an economic and community welfare perspective, according to Mayor Stevens.

“We wanted confidence that we would have a marijuana retail establishment in here that was run by an organization that was really interested in doing the right things for the community,” Stevens said. “We felt [by setting up a PDA to operate the store] we were taking the bull by the horns instead of just crossing our fingers and hoping we would get a good, reputable business, instead of someone who might be more focused on the bottom line at all costs and might be willing to cut corners and do things that weren’t appropriate.”

John Spencer, a consultant to the city-sponsored North Bonneville PDA, says the Washington State Liquor Control Board is expected to issue a license for the PDA’s recreational cannabis store before the end of the month, assuming the property gets a thumbs up from the LCB inspectors scheduled to visit the site soon.

Brian Smith, spokesman for the LCB, confirmed that the North Bonneville cannabis store is near the end of the licensing process and “is the closest one [in the county] to getting a license.” North Bonneville is located along Washington’s southern border in Skamania County, which is authorized under I-502 rules to receive two retail marijuana licenses.

One of a Kind

Smith confirmed that North Bonneville’s approach to the marijuana market is unique, adding that once the license is issued the city would be home to the first municipally operated pot store in the state.

Both Mayor Stevens and Spencer contend the PDA approach has great potential to be adopted by other Washington cities because it addresses both the local tax revenue and community welfare concerns now prompting so many marijuana-business bans across the state.

“As far we know, we are currently the only PDA created and organized to run a recreational cannabis store,” Stevens said, “and we see lot pressure to do it right and make it be successful and start the ball rolling for everyone. I think there is really a good chance that you’re going to see more cities try and do this in the future because it just makes sense on so many different levels.”

The Association of Washington Cities, a nonprofit membership group that represents all 281 cities and towns in Washington, has played a key lobbying role in getting the state’s Legislature to consider revamping I-502’s tax structure to push more money down to the local level. Currently, legislation is pending in both the Washington State Senate and House that calls for returning more marijuana tax revenue to the cities.

Candice Bock, an AWC lobbyist, said her organization has not taken a position on North Bonneville’s approach to marijuana legalization, though she said AWC’s overall philosophy is to support “local authority and letting city councils make their own decisions.”

But Jedidiah Haney, executive director of CAUSE-M, a cannabis-business advocacy group based 150 miles southeast of Seattle in the City of Yakima — one of the Washington cities that has banned marijuana businesses — is much more vocal in his support for North Bonneville’s venture into the legal cannabis arena.

“It gives cities an avenue for control and revenue sharing and defeats the local arguments against allowing legal marijuana businesses,” he said. “As soon as you put community members on the PDA board of directors, it changes the way cities deal with the marijuana debate.”

Embracing Change

Consultant Spencer explained that revenue generated from North Bonneville PDA’s recreational cannabis shop can be channeled to the city to fund public health and safety initiatives, such as helping to offset the community’s law enforcement costs. Currently North Bonneville pays some $70,000 annually to contract with the Skamania County Sheriff’s Office for law enforcement services. Spencer added that the PDA is still working out potential funding-transfer vehicles, which would require both PDA and City Council approval, but stressed that so long as the PDA’s liabilities are covered, it has the ability to help improve the city’s budget prospects.

The city’s budget picture is austere right now, Mayor Stevens said. And it faces some big costs ahead, including the need to replace three 35-year-old sewer-system lift stations at a cost of up to $500,000 each.

So, in a way, the town faces a choice between clinging to the “reefer madness” propaganda surrounding marijuana, or using revenue generated by legal cannabis as an indirect means of helping to assure the town’s sewage system continues to work.

“When your annual city budget is only $1.2 million, it’s pretty hard to make that much room in the budget for new lift stations,” Stevens said. “… Though we can’t just comingle the PDA’s funds into the city’s general fund, it can help us in the payment of law enforcement costs, public health and prevention programs, educational programs, diversion programs, all those kind of things, which ultimately will have a positive impact on the city’s bottom line.”

The business plan for the new marijuana retail outlet, to be called The Cannabis Corner, indicates that the shop is expected to generate a surplus (revenue after expenses) of nearly $140,000 in 2015. That surplus spikes considerably after this year because most of the start-up costs, primarily loans from private parties, will be paid off. For 2016, the surplus is estimated at $470,000 and by 2018 it jumps to $543,000 — nearly half the city’s current operating budget of $1.2 million.

One of the bigger ongoing costs for the municipally operated Cannabis Corner will be the lease for the property where the business will be set up in town. Because local zoning ordinances and state-imposed buffer-zone rules greatly restrict where a retail marijuana outlet can be located, the North Bonneville PDA is paying a huge premium to rent the building that will house the cannabis shop.

Under I-502 rules, marijuana retails shops are prohibited from locating within 1,000 feet of a school, playground, recreation center, child care center, public park, library or game arcade while local zoning ordinances typically restrict retail operations to nonresidential areas.

"It’s the one horrid part of our business plan — the 1,000-foot buffer requirements limit possible spaces so much that the owners of those properties have a monopoly,” Spencer said. “There was really only one realistic location in North Bonneville and the guy (a private individual) knew it. We’re paying $72,000 a year [roughly $6,000 a month] for a 1,400-square-foot pole barn.”

Spencer confirmed that the PDA is limited under its existing charter to funding public safety, health and education projects tied to Washington’s fledgling legal cannabis market. A big reason for that restricted scope, Spencer explained, is to assure the PDA and its retail marijuana store stay in compliance with the parameters set up by the federal government that create a window for states to proceed with legalization experiments absent Department of Justice intervention — given marijuana is still deemed illegal under federal law.

But Mayor Stevens also envisions a day, some years from now, when the stigma surrounding recreational marijuana will abate, and it will be treated very much like alcohol in the context of public health and safety — potentially opening the door for a broader application of cannabis-related revenue as an economic development tool for cash-strapped cities and towns.

“The first year or two after Prohibition was repealed, the Salvation Army was marching up and down the streets with their drums and bands saying demon rum and alcohol is going to destroy our world,” Mayor Stevens said. “I think a big problem with I-502 now is it allows you to possess marijuana and smoke it in your house basically, but you’re not supposed to use it in public, which is a pretty broad term.

“So we’ve got a golf course in town, we’ve got hiking trails and beautiful places to go walk or whatever, but theoretically and legally, according to I-502, you’re not supposed to consume cannabis in any of those locales. I think what I’d like to see as the reefer-madness mentality wears off a little bit and the panic goes away is that legal marijuana will be treated more in line with alcohol, where you can have a public business that you can go into and get a beer and burger and smoke a joint in certain parts, whether it’s an outside patio or whatever it would be.”

Such a change of tone might even allow the PDA to rewrite its charter and, Spender said, “add a bullet point allowing us to fund economic development.”

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