Problems with Arizona's licensing process for medical marijuana dispensaries?

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As Arizona voters consider whether to legalize recreational marijuana this fall, there are new questions about the state’s medical marijuana system.  (Source: 3TV) As Arizona voters consider whether to legalize recreational marijuana this fall, there are new questions about the state’s medical marijuana system.  (Source: 3TV)
Passed by voters in 2010, Arizona’s medical marijuana law gave the state authority to license and regulate a select number of medical marijuana dispensaries. (Source: 3TV) Passed by voters in 2010, Arizona’s medical marijuana law gave the state authority to license and regulate a select number of medical marijuana dispensaries. (Source: 3TV)
The first round of medical marijuana dispensary licenses were awarded as part of a lottery.  (Source: 3TV) The first round of medical marijuana dispensary licenses were awarded as part of a lottery. (Source: 3TV)
Earlier this month, Maricopa County Sheriff’s Office SWAT officers busted an illegal marijuana grow house and arrested Cynthia Drey, 47. (Source: 3TV) Earlier this month, Maricopa County Sheriff’s Office SWAT officers busted an illegal marijuana grow house and arrested Cynthia Drey, 47. (Source: 3TV)
By statute, any medical marijuana dispensary can convert to a recreational marijuana shop, if approved. (Source: 3TV) By statute, any medical marijuana dispensary can convert to a recreational marijuana shop, if approved. (Source: 3TV)
PHOENIX (3TV/CBS 5) -

As Arizona voters consider whether to legalize recreational marijuana this fall, there are new questions about the state’s medical marijuana system.

READ: Initiative to regulate marijuana qualifies for the November ballot

3TV has obtained documents that show problems with some of the 750 dispensary applications being considered. Former Phoenix Mayor Phil Gordon is among those who worry applications that fully comply with the law will be treated the same as those that do not.

"Oh, it's a big problem," Gordon said. "There's no certainty where these licenses are going to end up."

Medical marijuana law

Passed by voters in 2010, Arizona’s medical marijuana law gave the state authority to license and regulate a select number of medical marijuana dispensaries. Currently, there are 58 dispensaries in Arizona with permits to grow pot. Thirty-one additional licenses will be awarded in October.

"The moment that license is granted [it’s] worth $2 to $3 million cash right away," Gordon said. "Once that license is in place and the operation is really going, the license is probably worth $10 million." 

Applying for a medical marijuana license costs $5,000.

"For $5,000, you end up with a minimum $3 million asset, salable at that price every day right away," Gordon said.

How licenses will be awarded

The first round of medical marijuana dispensary licenses were awarded as part of a lottery. 

This time, licenses are being awarded based on a formula of how close they are to clusters of card-carrying medical marijuana patients. That means applications in underserved areas will have more weight.

RELATED: Hundreds apply for new Arizona pot dispensary licenses

Zoning issues

The medical marijuana law requires applicants to submit a sworn statement certifying they comply with local zoning restrictions. The state’s only requirement is that dispensaries have to be at least 500 feet from a school. Many cities and towns have stricter requirements, limiting proximity to churches and neighborhoods as well. 

The standard state-issued form has just two boxes to check. Either you meet all zoning laws, or you do not.

Many cities only send letters for applicants who currently comply with all zoning laws.

The City of Phoenix is among those taking a different approach, allowing all applications to go through to the state even if applicants are applying to operate at locations that are too close to schools, churches and neighborhoods.

For $5,000, you end up with a minimum $3 million asset, salable at that price every day right away.

"They have a right to petition," Alan Stephenson, the director of planning and development for the City of Phoenix, said. 

Stephenson says if Phoenix applicants are awarded a license, they can then petition the City for a variance, or exception, to the current rules. Those petitions are heard by the Board of Adjustment, a non-elected seven-member board appointed by the mayor and the City Council. 

"Here you have citizen groups that aren't accountable to the electorate that make these final decisions," Gordon said.   

He worries that people who are awarded licenses may attempt to influence the Board of Adjustment to approve variances.

"You’re going to hire every lobbyist you can hire," he speculated.

Stephenson does not believe it’s the City’s business to block applications. 

"That’s really up for the state to decide who meets the lottery for the state," he said.

So the City sends conditional letters, saying applicants could meet zoning laws if they received the proper variances. Stephenson says if the city required full compliance at the time of the application, some legitimate applicants might not have a fair shot.

"Maybe [an applicant is] within a mile [of a school] but it’s on the side of a mountain and there’s one road you go around," he cited as an example.

We wanted to know if the state was treating fully-compliant applicants the same as those who would require variances.

"We leave it up to the city" to ensure zoning compliance, says Colby Bower with the Arizona Department of Health Services.  However, he says there is a vetting process at the state level to make sure applicants comply with all laws. 

"Like with any application, what we do is we go through and look for deficiencies in that application."

I would guess based on what I’ve seen and reviewed, probably less than one-third are in full compliance.

Multiple applications

Earlier this month, Maricopa County Sheriff’s Office SWAT officers busted an illegal marijuana grow house and arrested Cynthia Drey, 47. Corporation Commission records obtained by 3TV show Drey is involved in nearly a dozen different medical marijuana-related companies.

A letter from the city of El Mirage to Drey indicates she received a Certificate of Zoning for four of those companies, all based out of one address in El Mirage. That address off Dysart and Thunderbird roads is less than 500 feet from a preschool, which is against state rules. 

"Clearance Letters are issued as the initial process of the application," reads a letter from the City to 3TV. "Clearance Letters are not a permit to operate. Applicants must still prove they are in full compliance with all the provisions of all laws including state and federal."

The City of Phoenix sent 236 dispensary applications to the Department of Health Services.

We asked the former mayor how many violated current city code.

"I would guess based on what I’ve seen and reviewed, probably less than one-third are in full compliance," Gordon said.  

The City tells us of the 236 applications, 76 are tied to just five addresses.

"Mobile" licenses

While applicants apply using a specific address, they aren’t bound to stay there. They can pick up and move pretty much wherever they want, as long as the City signs off on it. 

With so much money on the line, Gordon says many applicants are flooding the system with applications for addresses in underserved areas. The odds are better, given how licenses will be awarded. If they do get a license, they could set up shop there or somewhere else.

"The entity can pick it up and move a block away and start the process again and if that doesn't work, can go another block away," Gordon explained. 

For Gordon, the solution is simple -- require full compliance with zoning laws now. 

"The only remedy is for the Department of Health Services to not consider applications that don't comply and are ready to go today," he said.

The moment that license is granted [it’s] worth $2 to $3 million cash right away. Once that license is in place and the operation is really going, the license is probably worth $10 million.

Safeguards

The City of Phoenix says no dispensary will open without neighbors being looped in.

"There’s going to be a public hearing no matter what," Stephenson said.

That means if someone wants to open close to your school, church, or neighborhood, you’ll have a say. Phoenix plans to notify all neighborhood groups within 600 feet of a proposed dispensary about those public hearings.

In addition, the City of Phoenix recently made stricter rules about where marijuana dispensaries can locate in anticipation of possible recreational marijuana sales. By statute, any medical marijuana dispensary can convert to a recreational marijuana shop, if approved.

The Department of Health Services insists its employees will have the final say, and will closely regulate any approved dispensaries.

"We always go out before any dispensary is going to open," Bower assures.

Copyright 2016 KTVK (KPHO Broadcasting Corporation). All rights reserved.


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