Cannabis producers expand for growth
Connecticut’s licensed growers ready for full legalization
The state’s four licensed marijuana growers are planning for the inevitable, if not imminent, approval of cannabis sales for adult recreational use in Connecticut by expanding their footprints.
With the state’s fragile economy — all the worse in the coronavirus pandemic — 2021 could be the year state lawmakers approve full legalization, nine years after medical cannabis was ratified in the State Capitol.
The licensed growers have heard that before. And Democratic majority leaders of the General Assembly are hedging their bets for the upcoming legislative session, with a twotrack approach to what in recent years have been failed attempts to approve the politically thorny issue.
Thousands of new jobs in an emerging industry might even be a more prescient selling point than the millions of dollars in projected tax revenue, as more states including New Jersey and New York move closer to full legalization. When Massachusetts reached the second anniversary of its adult-sales program last month, gross sales had exceeded $1 billion.
As of August, Massachusetts had reaped $150 million in tax revenue in the year and nine months, including $30 million alone this June and July.
In Rocky Hill, the relocated Connecticut Pharmaceutical Solutions has 90,000 square feet for cultivation and pro
“We think we will get close to the votes, but if we don’t have the votes, I am not raising the white flag.” State Rep. Matt Ritter, D-Hartford
duction, with room to double in size on the former McKesson Corp. campus. CPS also is active in conducting research in collaboration with Yale School of Medicine into the efficacy of medical marijuana as a treatment for chronic pain.
Advanced Grow Labs, based in West Haven, began operations six years ago with 16,000 square feet and has since expanded to 41,000 square feet of cultivation and production space that can be doubled in a former warehouse near Interstate-95.
In Simsbury, Curaleaf Connecticut recently relocated to larger space, also doubling its initial capacity, while considering an additional 10,000 square-foot expansion, according to the Connecticut Medical Cannabis Council, an industry group.
Theraplant, based in Watertown, is in the midst of its fourth expansion since 2014, with 30,000 square feet and plans for possibly adding greenhouse space.
“Our four producing members have invested tens of millions of dollars in recent years in their facilities, equipment and staff in order to meet the growing demand for the product,” said Linda Kowalski, executive director of the cannabis council.
That growth includes medical marijuana products under the current system as well as future, adult-use non-medical demand.
Expanding for medical use first
Statewide, there are 18 medical-cannabis dispensaries serving the program’s 48,206 patients, at prices that are now about half of the rates charged by Massachusetts retail stores for adult-use cannabis. Tens of thousands more patients are anticipated.
“The legislature has done a phenomenal job in creating what we believe to be the best medical marijuana program in the country,” said Stamford businessman Michael Fedele, a former state lawmaker who was lieutenant governor under Gov. M. Jodi Rell and is now the chairman of the board at Connecticut Pharmaceutical Solutions.
In the year since moving to Rocky Hill from Portland, the number of employees has more than doubled to about 100.
While the company is focusing on the state’s nationally hailed medical cannabis program, the additional space gives them flexibility to expand if and when the state adopts full legalization, Fedele said.
“From my perspective, when I got involved, I was very excited about the bio-med component of it and the relief that medical marijuana brings to much of our constituency here in Connecticut, not only adults but children with epilepsy and things of that nature.”
Fedele said the company’s current growth is focused on the recent expansions of the medicalcannabis program for patients with chronic pain, but if lawmakers want to expand to adult use, his company and the existing industry are ready to become part of the conversation.
Kowalski, at the cannabis council, added, “A guiding principle of the producers is to anticipate patient demand for needed medicine, produce it under tightly controlled circumstances and rigorously test it prior to release for delivery.”
One analysis of medical cannabis sales from the German company Staista Inc., estimates that Connecticut will reach $112 million in 2020, up from $90.8 million in 2019, $71 million in 2018 and $8.7 million in 2015. The nonprofit Tax Foundation recently estimated that Connecticut could reap $41 million in its first year of
full adult-use sales.
The political picture
Every year, the General Assembly gets closer to approving full legalization. That’s the view of State Rep. Matt Ritter, D-Hartford, the current majority leader who will become the next speaker of the House when the legislature starts its next session on Jan. 6.
“It is a priority of House Democrats,” Ritter said recently, but he stressed that the kind of projected revenue from adult recreational sales, in the tens of millions of dollars, is inconsequential. “It’s not going to balance our budget by legalizing this solely.”
He said that with surrounding states already in the business, or planning on it, Connecticut legislative reticence may work against it again, but it’s here to stay.“You cannot fortify your border,” Ritter said, acknowledging Connecticut cars that head to dispensaries in southern Massachusetts. “Not only are they going across the border, they are going back to their homes and using it safely.”
Full legalization could also ease social and economic disparities caused the war on drugs. “It’s decades and decades of frustration on how drug use has been criminalized in some areas and other areas people have turned a blind eye,” said Ritter, a lawyer. “It’s about equity and social justice.”
Still, in Massachusetts, it was a grassroots ballot proposition that won full legalization there. In Connecticut there is no statewide referendum procedure short of the hard-to-approve constitutional amendment. Ritter and advocates are planning on that alternative if it fails again in the General Assembly.
“We think we will get close to the votes,” Ritter said during a recent news conference at Connecticut Pharmaceutical Solutions. “But if we don’t have the votes, and I am not raising the white flag.” A fallback position would be legislation to allow voters to consider a constitutional amendment allowing adult-use cannabis. But such a vote could not happen until 2024, because two consecutive General Assembly, elected every two years, would have to first approve the legislation.
For state Rep. Michael D’Agostino, D-Hamden, co-chairman of the legislative General Law Committee and one of the chief proponents of legalization, tax revenue, employment in the industry and incentives for communities hosting cannabis-based businesses is one side of the argument.
“On the back end, what we’re talking about is a very thoughtful structure, where the revenue from the cannabis industry goes to education and prevention of drug abuse that goes to dedicated streams to communities that have been impacted seriously by the war on drugs,” D’Agostino said. “And we use census tract data. That could be from anywhere from Hamden to Hartford.”
State Rep. Josh Elliott, D-Hamden, a leading advocate for adult sales who has been frustrated by failure of the legislation in recent years, agrees with Ritter that it will be a close vote in the House.
“I think we’re still on the razor’s edge,” Elliott said in a recent interview. Noting that Gov. Ned Lamont campaigned in 2018 on full legalization, it would be a way to give the governor a legislative victory. In Washington, the U.S. House of Representatives recently approved landmark legislation decriminalizing marijuana, although the bill is sure to die in the Senate.
‘Changing the world’
During a recent multi-day virtual convention on the marijuana industry sponsored by the Colorado-based Marijuana Business Daily, John Mackey, the CEO and co-founder of Whole Foods, said in an hour-long keynote speech that marijuana has ceased being a radical outlier in the realm of business.
“There’s little doubt in my mind that the cannabis industry is changing the world,” Mackey said, speaking on the subject of conscious capitalism. “There’s little doubt that over time we’ll probably have it, if not 50 states, we’ll have it in almost all the states, almost surely.”
A recent report by the Connecticut Center for Economic Analysis projected that under full legalization, the state could reap as much as $48 million in new tax revenue in the first year, and as much as $223 million in the fifth year, while new jobs in the industry could exceed 17,000 by the fifth year.
Those revenue projections are too rosy, say skeptics who see the numbers in Massachusetts and elsewhere, among them D’Agostino and incoming House Majority Leader Jason Rojas of East Hartford, who in recent years was co-chairman of the tax-writing legislative Finance Committee.
But during a recent panel discussion sponsored by the Marijuana Policy Project and the Connecticut Coalition to Regulate Marijuana, UConn economist Fred Carstensen, director of the Center for Economic Analysis and the author of the report, defended his projections. He also said cities such as Hartford and Bridgeport could benefit greatly from reinvestments in those communities, to new jobs growing and distributing cannabis.
The projected state budget deficit over the next four years is more than $7 billion, so any new revenue is likely to be welcome, Carstensen said. “Included among the initiatives that Connecticut could take that would improve its future — fiscal future, employment future — was legalization of marijuana for recreational use,” he said.
“It would also generate up to one billion dollars in additional revenue in aggregate over six years,” he said. “Clearly the state needs it. I’m not talking to whether it’s what we ought to do. I’m just saying if we do do it, it really is something that would be significantly beneficial to the state.”