The state will go beyond outfitting the first brick-and-mortar recreational cannabis dispensaries and outsource everything from bookkeeping to transporting cash to warehouses for inaugural licensees to get discounted rates.
The government revealed its plans to provide “a comprehensive capacity-building suite of services” to the first 150 retail business license holders in an FAQ published Jan. 5 by the New York State Dormitory Authority. As part of the state’s social equity goals, the public construction authority is supporting these “conditional” licensees, business owners who were convicted of, or related to someone convicted of, crimes under the old marijuana laws.
DASNY has tapped a team of private investors to lend these licensees the money to insure and renovate the storefronts. In addition to assuming the obligation to cancel the loan and cover the rent, the entrepreneurs must pay for the services coordinated by a social equity fund. The FAQ describes this as a way to distribute contracts among dispensaries and “create cost savings,” but some in the industry say they’d like to be able to opt out of these services and negotiate their own deals.
“Who says I want this bookkeeper? I want a person who will investigate” and trust, said Osbert Orduna, a Suffolk County resident in the process of opening a dispensary in Jersey City and looking to open a second in NY. “It’s like someone told you: this is going to be your doctor, and now you have to go and have elective surgery.”
WHAT TO KNOW
- The first dispensaries will get loans for the installation of commercial premises and a series of business services coordinated by a social capital fund
- State-organized services include bookkeeping, a point-of-sale payment processing system, and help accessing security and a bank
- Retailers must pay for these services, but the state says it will keep costs down by contracting for them on a larger scale
DASNY only said that signing up for end-to-end services was required when asked to comment on criticisms of the setup.
Former NBA All-Star Chris Webber and other investment professionals won a contract that was expected to raise $150 million in commitments to the Social Equity Cannabis Investment Fund by Sept. 1, 2022, according to DASNY records. Since then, DASNY has repeatedly refused to share how much the fund has raised beyond the $50 million committed by the state, or how many dispensaries have been secured.
Regulators have issued seven of up to 20 conditional retail licenses available to businesses on Long Island. Fifty-nine entities listed business addresses in Nassau County and 72 business addresses used in Suffolk County on conditional license applications, according to an annual report from the Office of Cannabis Management, which oversees marijuana and hemp policy.
On behalf of the state, real estate firm CBRE has reviewed more than 10,000 potential dispensary sites, conducted appraisals of 2,300 properties and “shortlisted” 350, according to FAQs. DASNY did not respond to questions about how many, if any, of these spaces were on Long Island. The state will prioritize stores on busy streets near transit centers that are least likely to cause concern for neighbors, according to the FAQ.
Before a lease is signed, the fund will have design and construction experts verify that the space is suitable for a store and is safe and secure. The fund will then present location information to licensees who wish to operate in the surrounding area. The entrepreneurs will receive an estimate of the initial cost to renovate and furnish the store, which they must pay back with interest over 10 years. They will have seven days to accept or reject the placement.
Products on display at Housing Works Cannabis Co. in Manhattan.
Credit: Corey Sipkin
The fund will offer an interest rate “equal to or less than the market rate for a similar loan,” the FAQ said. Banking and financial experts previously told Newsday that cannabis companies would have a hard time getting loans from traditional business sources and would see interest rates in the teens. A conditional licensee told trade publication The Cannabis Insider that the fund was describing a rate of 10%.
Such terms are not appropriate for social equity businesses, and the state should have been more creative in pushing for the “low or no interest loans” that are being borrowed as it legalized recreational marijuana, according to Reginald Fluellen. , Principal Consultant. to the Cannabis Social Equity Coalition — NYS, an organization that supports those “most harmed” by marijuana prohibition.
“(Regulators) need to have these funds available early on, rather than later, to allow the social equity population to be sustainable and competitive,” Fluellen said. “We still feel there are some real issues with the amount of debt these CAURD (conditional use retail dispensary for adults) licensees are getting into.”
Interest rates have not been finalized, DASNY spokesman Jeffrey Gordon said.
In addition to loan and rent payments, licensees will be charged for services coordinated by funds, according to the FAQ. These will include: a six-week training program, bookkeeping, armed and unarmed security assistance, workers to transport cash to banks or other deposits, a point-of-sale system to process payments, help obtaining banking services from Valley National Bank, who has experience working with cannabis companies and an “enterprise resource planning” tool to manage staffing, payroll, inventory and other business operations, according to the FAQ.
Fluellen said employers would be better off if they could choose which services they subscribe to, but that education, training and mentoring are critical.
“They need to understand the urgency of providing this kind of support,” Fluellen said.
Sarina Trangle covers affordability and cost of living and other business topics. She previously worked as an editor and reporter at amNewYork.