Will Cannabusinesses Get a Green Light?
By Rikki N. Massand l May 24, 2021
Rocky Hill Borough Council weighed the potential for zoning regulations to mitigate future locations in the community for “cannabusinesses” at its April 19 meeting. Businesses could include: cultivation, manufacturing, wholesaling, distribution, and retail (selling and reselling).
The discussion comes from New Jersey’s legalization of marijuana this year, which renders all prior municipal-level “prohibition” ordinances null and void. Rocky Hill officials zeroed in on a stipulation allowing municipalities to regulate and identify the areas where cannabis consumption can occur, as well as the location, manner, number of businesses, and hours of operations.
Municipalities that choose to allow cannabis industries within its borders may enact a local sales tax of 2 percent on cultivation sales, retail sales, and manufacturing sales. For a wholesaler, local sales tax is capped at 1 percent. Borough Councilman Tom Bremner noted that one restriction they can’t consider pertains to the “GrubHub” or “Uber-WEED” services for the delivery operations into or going through Rocky Hill.
“The question is not whether we would have canabusiness in Rocky Hill; New Jersey voters resolved this and it would be illegal to keep it out, “ he said. “There is potential for at least one type of cannabis industry in Rocky Hill no matter what council does because the state makes it illegal for the municipality to prevent the business from being in the borough or from delivering cannabis into Rocky Hill.” “The goal now, using the legal resources and opinions of council, is to pull together ideas that are most likely representing what the council wants to introduce and pass. I just want a consensus to move forward,” Bremner said.
If council does not introduce local legislation for cannabusinesses by the state deadline of August 21, Bremner warned the borough would be “locked in” to adherence to state standards. In other words, deliveries and retail sales would be a conditional use in the borough’s commercial or retail-zoned area.
Councilwoman Susan Bristol was a primary voice for “opting out of everything” prohibiting all areas of businesses, with restricting delivery operations not being the actionable part. Borough Planning Consultant Tamara Lee said that if such a blanket restriction were to exist that the borough would forgo the ability to have substantial, and possibly exponential, additional revenues from the sales tax.
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Lee said the sales tax revenue would be based on gross receipts, not the cannabusiness’ net/profit. She added there is a dearth of information because most data reflects what the state of New Jersey would collect, not individual establishments. Lee researched Washington State and Colorado businesses for examples of what local-level revenues would be possible.
“The cannabis industry put out information saying the average establishment would have about 5,000 customers. If you estimate the average customer would buy an ounce of product per month, the average cost in New Jersey (though a wide range exists from recreational price and medical price) would be $400 for 5,000 customers, the gross for that business would be $24 million. Two percent of that is $480,000. Rocky Hill generally has a municipal budget of about $1 million. “So, that’s a pretty significant revenue,” Lee explained.
She referenced a Piscataway medical marijuana facility, which “just got their first revenue check for January and February 2021,” Lee said. “They thought it would be $10,000 per month but they took in $25,000 each month (from the local sales tax). In a year that multiplies to $300,000. Here we would be looking at several hundred thousand dollars the borough could take in.”
Lee also warned that opting out leaves a limited scope for the future of having any such a windfall in Rocky Hill down the road. “There’s going to be a limited number of business licenses in the state—up to 40 total. If the borough opts out it would be out for (five years) and by the time the borough would opt in then we don’t know if any business licenses would be available,” Lee said.
In this initial discussion most of council, including Jenn Walsh, Rasheeda Pretto, and Tom Bremner, said they were in favor of exploring an option displayed as 3A: permitting wholesale, retail, and distribution cannabusiness in town while prohibiting the manufacturing and cultivation processes. Lee said the smell of cannabis in processing and manufacturing operations would be pungent and inescapable throughout town. Challenges with 3A could be the determining how to enforce the ordinance, and the potential for new law enforcement and security concerns.