Zoning Problems Plague Arizona’s Cannabis Social Equity Program

When she was in high school, Arianna Muñoz was charged with possession of narcotics because she was carrying a vape cartridge and a gram of wax concentrate. Despite being a medical marijuana cardholder in 2019, once Muñoz set foot outside a dispensary, she was illegally in possession of narcotics. “That’s the way the laws were written,” said Muñoz, who hired a lawyer, wore an ankle monitor, and served probation for more than two years.

Today, carrying up to 5 grams of concentrate in Arizona results in no penalty, no fine, and no jail time.

Muñoz’s story is like countless others from people who were hurt by the war on drugs. As a result, she is also one of some 1,500 applicants who qualified and filed for the last 26 social equity adult-use dispensary licenses in Arizona, due to be issued in a random drawing by the Arizona Department of Health Services on Friday.

These remaining licenses were designed to serve as reparations to those like Muñoz, the 22-year-old director of special projects at the Marijuana Industry Trade Association. Licenses are estimated to be worth anywhere from $8 million to $15 million, and Muñoz hopes to be one of the lucky 26 to cash in.

“I wake up and the first thing I do is check the AZ DHS website to see if any updates are coming out because it is honestly news that could change my life,” said Muñoz, who already is trying to plan where to establish her dispensary if she becomes a lottery winner. AZDHS has allotted a time frame of 18 months for would-be social equity licensees to apply for approval to operate a marijuana establishment.

But a major obstacle stands in the way of potential social equity license holders like Muñoz, in the form of city zoning.

Despite knowing about the upcoming social equity license lottery that was announced last year, the city of Tucson delayed the development of proper zoning for incoming social equity licensees until this March. Tucson Mayor Regina Romero and the city council met to begin the lengthy process of amending the city’s Unified Development Code (UDC).

According to Tucson’s Planning and Development Services Department, the UDC amendment process will take about six months. That will be followed by a period of 90 to 180 more days to create a new special exception process, which will determine how social equity license holders will set up shop in Tucson.

All that time eats into the 18 months allotted for social equity licensees to identify a properly zoned location and apply for approval to operate.

“Our zoning code only allows that dual-use, not standalone adult-use dispensaries,” said Koren Manning, planning administrator for the city of Tucson.

She explained that the special acceptance process involves neighborhood meetings, and at least one public hearing to deal with neighborhood compatibility, traffic congestion, and other factors like crowd control to ensure there is proper land use compatibility.

“We got that direction just a couple of weeks ago,” Manning said, referring to the mayor and council meeting in March that initiated the code amendment process. “At this point, we haven’t yet begun our stakeholder engagement.”

That is a critical part of developing a special exception land-use proposal involving discussions with potential neighbors and industry leaders such as the Marijuana Industry Trade Association and Arizona NORML.

“I think it’s unfortunate that there are so many pretenders who purport to be advocates of social equity applicants who are going out of their way to make life as difficult as they possibly can for the true bonafide social equity applicants and submitted applicants,” said Jon Udell, political director of Arizona NORML and co-chair of Rose Law Group’s cannabis department.

“Tucson is one of the more progressive cities in the state of Arizona and they seem poised to have some of the worst zoning rules out there with this special exception process that’s creating a bunch of extra hoops for social equity applicants to jump through,” Udell said.

Obtaining proper zoning is often challenging in Arizona, with many cities and towns having passed ordinances that forbid any dispensaries to set up shop within their borders.

But delaying a lengthy process that will knowingly affect incoming dispensary owners raises questions about the city’s motives.

“I can’t figure out why Tucson is so inept at best, and, at worst, are they in some way working with some of my friends in the industry to keep the competition out? If they are, I’m going to find out,” said Demitri Downing, the MITA founder and a former lobbyist.

By delaying the zoning process for social equity license holders, Tucson may be preventing many licensees from looking to Arizona’s second city to set up retail establishments, keeping competition at bay, and in turn, propping up marijuana prices where locations for purchase are few and far between.

Marijuana dispensary chain Verilife commissioned a survey in 2020 that ranked each state by the number of marijuana dispensaries per 100,000 residents. States with the highest number of dispensaries were Oregon (16.5) and Oklahoma (15.6). The lowest-ranked states at zero dispensaries per 100,000 residents were West Virginia and Texas, two states where recreational use of marijuana is still prohibited.

Arizona had 1.4 dispensaries per 100,00 residents.

The German consumer database company Statista released data last May that showed Colorado having more than 6 times the number of dispensaries compared to Arizona by the end of 2020.

“Really, it’s totally counterproductive but that’s not incredibly surprising because we all know the real motives are to cement their local monopoly on the market and their regional oligopoly on a statewide basis,” said Udell.

Downing and Udell see Tucson’s actions as damaging toward would-be social equity dispensary license owners and act as barriers to entry in a town that promotes progressive values.

It’s important to note that states like Colorado dice up dispensary licenses to serve as manufacturing, transportation, or cultivation-specific licenses, compared to Arizona, where a single license encompasses everything. Given the various tiers of dispensary licenses in Colorado, Udell said, “there are a lot more ways to get into the industry and, as a result, a lot more competition, and a lot more competition leads to a lot lower prices.”

Manning was not able to comment on delays in zoning discussions. “We’re a busy city and we’re just working on these things as we are directed to,” she said. “That aspect and the timing with the state process, I really haven’t been involved in.”

When Muñoz found out about the zoning delays in Tucson, she began to rethink her plans to set up shop there.

“When I had seen in the news that they were actually creating this special exemption process and they weren’t even allowed in the city in time, that totally killed my option of looking in that area,” Muñoz said. “They said some phrase like, ‘We’re seeing what the other cities are doing and creating it based off that.’”

Muñoz decided to do her own research, calling major cities and towns to understand their zoning ordinances in each jurisdiction. She kept a spreadsheet and began calling city planners throughout the state, leaving messages and writing down their responses.

Muñoz found that many of her inquiries were left unanswered or left her asking further questions. She found that although Chandler does not allow adult-use dispensaries, Tempe requires no special zoning process for adult-use dispensaries. She also found that Flagstaff, like Tucson, was holding off on creating a process and will be discussing the program on April 12 following Friday’s social equity license drawing.

Much like Tucson, Phoenix does not currently allow stand-alone adult-use dispensaries unless they are an accessory to a medical marijuana dispensary, according to the Phoenix Planning and Development Department.

“We’re all really focused on Tucson because they’re the ones making news right now, but there’s going to be a lot of eggs to crack across the entire state to get 26 dispensaries open,” Udell said.

“Would you risk going to Tucson?” asked Downing. “Hell no. You’re going to find a jurisdiction that has favorable zoning.” He’s astonished at the city’s poor timing and thinks the 26 new adult-use license holders should have the same — if not better — zoning than existing dual-use license holders.

Downing’s opinion is shared by others, who say that adult-use dispensaries are less of a “dispensary” than one that serves both adult and medicinal use.

“You’d think those people who favor cannabis, favor patient access, more locations, favor social equity licenses, would give them the same zoning opportunities, if not more favorable. You’d think that would happen,” Downing said.

He hopes that Tucson would consider calling a special emergency session to expedite the process but is not optimistic that the city will. Besides, depending on the outcome of the UDC amendment and special exception process, Tucson may decide on a more complex structure for social equity license holders to go up against in an 18-month time frame.

“We are experts in doing that, finding those and running those through planning and zoning meetings to get those approvals,” said Doug Cole, a spokesperson for Copperstate Farms in an interview with AZ Mirror in November.

Copperstate Farms, which operates Sol Flower brand dispensaries across the state, is backing 110 applicants for the social equity program. Even with the size and expertise that Cole’s company packs, “that is going to be a sprint to get that done in 18 months,” he said.

If a company like Copperstate Farms — one of the largest greenhouse cannabis producers in the country with more than 150 employees and an estimated $1 million in sales per year — sprints to the finish line in 18 months, imagine how individuals raising enough money for a chance to own a license will fare.

“There’s a lot of folks out there that are just ignoring all those people who spend lots of time and, some of them, lots of money to get in the lottery at a chance of improving their lives,” Udell said.

In the end, Udell remains optimistic because Tucson plans to hold a stakeholder meeting to determine the best path forward with respect to zoning. Udell will attend the stakeholder meeting representing AZ NORML as will Downing, who will represent MITA.

“Hopefully, the right arguments will persuade the right calls and arrive at a set of zoning rules that really are good for the state of Arizona,” Udell said, “not just for wealthy people that own dispensaries already.”

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