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Legal pot shops in Michigan get mixed reception

August 9, 2010 - The Detroit News


Two months ago, Ryan Richmond and three other investors opened an unusual type of business in a modest cinderblock storefront in Ferndale, hoping to capitalize on the state's newest medical industry.


The space, which once belonged to a film industry payroll company, now receives a steady stream of customers looking to soothe their medical ailments with the state-legalized drug of marijuana.


The business's client base has grown to more than 1,000 regulars. State-certified patients can pick from among 15 to 20 varieties grown by local caregivers approved by the state to cultivate the pungent-smelling bud.


"Obviously, there is an opportunity," said Richmond, co-owner of Clinical Relief LLC, a medical marijuana consulting business.


"Many patients say they can't get a continuous supply of marijuana."


Nearly 20 months after state voters legalized marijuana for medicinal use, a small yet fast-growing service industry has taken root in Michigan to supply patients with the drug.


But, as businesses rush to gain a foothold in this budding market, state regulators and law enforcement officials are still trying to make sense of the new law.


Along Eight Mile near Southfield, up the Interstate 75 corridor in Oakland County and into the western reaches of Wayne County, billboards have cropped up advertising schools that say they can teach people how to grow medical marijuana and health clinics that specialize in getting residents certified for using it. Marijuana remains illegal for recreational use.


Dozens of garden stores have sprung up selling hydroponic gardening kits and high-intensity lamps -- equipment commonly associated with growing pot.


A marketplace for buying and selling the drug also has emerged in dispensaries, cafes and support groups, known as compassion clubs, where card-carrying medical marijuana patients can purchase an ounce for between $300 and $400.


But some cities, like Livonia and Troy, already have restricted or banned business related to the drug. Others, like Ferndale, have enacted moratoriums on marijuana-related commerce until they can create rules to better regulate its trade.


"A lot of this is going to get ironed out in court," said Michael Komorn, a Southfield-based attorney who specializes in medical marijuana cases. "There is no bottom line on this because the law is murky."


New business opportunities


Industry backers, however, say the expanding marketplace could bring new business opportunities for Michigan's ailing economy.


About 21,000 patients so far have received state-certified medical marijuana cards. Another 8,900 have registered with the state as caregivers, residents who grow and harvest marijuana for a limited group of patients.


The number of applicants grows each month. In June, the state received a record 5,909 applications.


"People are coming out of the woodwork," said Komorn, a board member of the Michigan Medical Marijuana Association, an industry advocacy group for patients and growers. "They are excited, and they see this as an opportunity to get their foot in the door."


Already, many garden stores are doing brisk business selling equipment for growing medical marijuana, and displaced workers are finding new prospects in the state's newest cash crop.


The state also is attracting out-of-state investors and national chains, such as Oaksterdam University, an Oakland, Calif.-based trade school for cannabis growers. The university opened a Michigan campus last year in Flint.


According to state law, a caregiver can have up to 60 plants at a time to supply five patients. Each patient is allotted 12 plants, and the caregiver can also be a patient.


At best, this arrangement can earn a grower up to $40,000 a year, but the real money lies in selling excess product to dispensaries and patient groups, a transaction that falls into the gray areas of the law, experts say.


While state law makes it legal for caregivers grow pot, it doesn't address what they should do if they harvest more than they need for patients.


Some industry ads for grower training courses tout salaries of up to $100,000 a year.


"Is there big business available? Yes," said Adam Brook, a former grow shop owner and organizer of the annual Ann Arbor Hash Bash. "But not by staying 100 percent legal."


Cities respond


The law's ambiguity has prompted some cities to restrict medical marijuana commerce. Troy, for instance, has banned dispensaries -- businesses that buy pot from local caregivers and sell it to patients with medical marijuana cards. Troy officials feared the facilities would invite break-ins and hurt the community, said City Attorney Lori Bluhm said. The city also questioned their legality under state and federal laws, which don't address the issue of dispensaries, Bluhm said.


"The fact that there is no explicit provision to have dispensaries in Michigan is an indication they're not allowed," she said.


Some experts, however, say the big bucks are in selling grow equipment and other supplies to marijuana growers.


One benefit is there is no question the equipment sales are legal, Brook said. And they offer a decent financial return.


"It's not a cheap hobby to get involved in," Brook said, adding that grow lamps can cost about $400 each. "That's a nice sale for a guy who was told this is a growing opportunity."


Miles Vankeersbilck, a store clerk at Hydro Heaven on Eight Mile in Detroit, said sales continue to grow as the state approves more caregiver cards.


The store sells everything from high-intensity lamps to grow tents lined with metallic material. Its selection of nutrient-rich fertilizers spans several aisles.


It opened about a year ago, one of the first in Detroit, but now it is among many that have started to "pop up everywhere," Vankeersbilck said.


For some, growing is a secondary job; for others, it's a main source of income, he said.


"We meet people who are moving in from out of state," Vankeersbilck added. "They're out of work and come here."


But after the initial rush, the industry's growth may taper off significantly, economists say.


"The notion that there is some huge pot of money to be made is a bit of an exaggeration," said Jeffrey Miron, an economist at Harvard University who studies the marijuana trade.


The market is likely to hit a saturation point quickly and some businesses will be forced to close as competition heats up, he said.


State and city governments could make some additional money if they tax the drug's sales, but it probably won't add much to their coffers, Miron added. Medicinal pot sales tend to remain smaller than other business activities.


Compassion first


Meanwhile, some medical marijuana industry advocates denounce this profit-driven mindset. They view the drug's legalization as an act of compassion first and a business second.


"We're trying to provide a safe place so people don't have to do this on the street corner or back alley," said Bill Teichman, 51, owner of the Waterford Area Compassion Club and Everybody's Cafe.


The club sells memberships for $20 a year, and state-certified patients and caregivers can participate. The cafe, which opened nine years ago, has seen business pick up slightly since it added the compassion club, and Teichman plans to expand by opening a dispensary and supply shop. The club has about 450 members.


Similarly, the owners of Clinical Relief in Ferndale have plans to expand, but say the business is rooted as a health service, supplying medicine to patients who would otherwise have trouble getting it because of the ambiguities in state law.


"The law is so goofy. It barely makes sense," Richmond, of Clinical Relief, said. "Logistically, how do you supply all this?"


"You don't make penicillin in your brother's basement if you need it," he said.


The investor group already owns dispensaries in Colorado and Nevada and has plans to open several locations in Michigan during the next couple of months, increasing its staff to 50.


Still, Richmond acknowledges that the dispensary is a for-profit business and its margins have to stay healthy, too.


"I can guarantee our margins are nowhere near the pharmaceutical industry," he added.

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"A lot of this is going to get ironed out in court," said Michael Komorn, a Southfield-based attorney who specializes in medical marijuana cases. "There is no bottom line on this because the law is murky."


How is a lawyer going to effectively counsel a defendant in court when he himself defines the law as "murky"? Gonna protect my "murky" rights? Me thinks someone should reevaluate their thinking.

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