BRATTLEBORO—The marijuana industry in Windham County appears ready to grow — if it can overcome some challenges.
That’s according to panelists who spoke at a Sept. 5 breakfast held by the Brattleboro Area Chamber of Commerce, where they cited a lack of clear state and federal regulations, a shortage of labor, a shortage of capital, and concerns about the effect of marijuana on youth.
The current legalization of marijuana and its products are caught in an odd middle ground as lawmakers continue to work on impasses that have kept Vermont from completely legalizing cannabis products at the state level.
“Right now, we have a crazy system where it’s legal to have marijuana and it’s legal to grow it, but you can’t get it anywhere, and you can’t get seed for it anywhere,” said Sen. Jeanette White, D-Windham, who has worked on, and voted for, several of the marijuana-related bills to move through the Vermont Legislature.
Despite those vulnerabilities and this legislative holding pattern, the interest in the fledgling regulated industry was palpable to the diverse audience in the banquet room at American Legion Post 5.
The growing economic strength of the legal adult-use marijuana industry was highlighted by a report released in March from the legal cannabis information website Leafly.com and Whitney Economics.
According to the report, in the United States, legal cannabis sales increased 34 percent in 2018 to $10.8 billion. The industry now supports more than 211,000 full-time jobs. In 2017, that number was approximately 120,000.
The report estimates that Vermont’s cannabis market is worth $17 million and supports 335 direct jobs.
According to Leafly, since marijuana remains illegal at the federal level, traditional statistics-gathering agencies such as the federal Bureau of Labor Statistics don’t collect cannabis-related data.
Panelists at the breakfast event included people involved with the cannabis industry or the regulation of it.
A tax-and-regulate bill for adult recreational sales of marijuana has passed the Senate five times but has died in the House, White said. This session, the Senate’s “stripped down” marijuana bill proposes only a tax-and-regulate system.
Other issues, such as substance prevention and law enforcement, were dealt with in separate bills, White explained. For example, the Legislature passed an encompassing prevention bill.
White reminded people that the recent tax-and-regulate bill includes two benefits for municipalities. One is enacting an optional 2-percent local-option tax. The second allows municipalities to opt out of any of the five licenses offered by the state. For example, towns can grant medical marijuana dispensary licenses but not issue licenses for adult-use retail.
Investing in the future with double the question marks
During its first year, Champlain Valley Dispensary (CVD), which operates the Southern Vermont Wellness medical marijuana dispensary in Brattleboro, operated from one leap of faith to the next.
“We didn’t know how much to invest in the future because we didn’t know if the market would survive,” said Bridget Conry, the company’s director of marketing, who started with the company during its application process in 2012. She has a 20-year background in food production and has studied plant-based medicine.
Champlain Valley operates four dispensaries and two processing plants in the state, as well as Ceres Natural Remedies, which sells products derived from cannabidiol, or CBD, a non-psychoactive active ingredient found in marijuana and its botanical cousin, the hemp plant.
Champlain Valley’s other three dispensary locations are Burlington, South Burlington, and Middlebury.
According to Conry, who also works as director of brand experience for Ceres, CVD was the first dispensary in the state to receive a license in 2012 after the Legislature created the structure for legal use of medical marijuana the previous year.
The company manages every piece of the supply chain from growing, to processing, to producing value-added products, to packaging, to retail.
In 2013, CVD opened a one-room dispensary in Burlington. Conry said Champlain Valley’s first dispensary didn’t even have a waiting room. After the first year, the company had 400 patients.
“Now the registry is up to about 5,300, I think,” she said.
Conry said not all those patients are active. While the dispensary can now serve up to three patients at a time, it still operates by appointment only. Patients have limits on how much product they can buy: 56.6 grams every 30 days.
Over the six years, as the industry has grown in Vermont, the stigma around it has shrunk, said Conry, whose company now employs 70 people.
Conry said that CVD strives to pay a livable wage. It also offers health, dental and vision insurance, and two weeks of vacation for new hires. The company also offers a 401K retirement plan.
Yet it struggles with finding enough workers to fill all its vacant positions. Despite the fact that CVD is expanding, Conry said finding workers is a huge challenge.
“I think that’s going to be a really big issue as we grow the cannabis industry here in Vermont,” she said. “Where are the people going to come from to staff all those businesses that we hope are going to flourish here?”
Southern Vermont Wellness started with two full-time employees and now employs eight. The Brattleboro site, originally open two days a week, is now open seven days.
Early on, the workforce challenges stemmed mostly from stigma. People refused to step into an industry that was federally illegal, according to Conry. She added that the company’s crisis response planning spent more time focused on dealing with a government raid than a burglary.
“So there was a lot of fear about working in the industry, having a cannabis job on your resume,” she said. “And if you left the cannabis industry, whether another employer would hire you after that because they were going to judge you for having that on your resume.”
In addition, “Unemployment is so low that it’s really hard to find people to fill jobs right now,” she said.
According to the Vermont Department of Labor’s August report, the state’s unemployment rate is holding steady at 2.1 percent. This rate is lower than the national rate of 3.7 percent.
“We have to court people away from jobs that they already have,” Conry said.
Last month, she said, the company had to scale back because it didn’t have enough people.
“We weren’t able to meet our production schedule, and we were not able to maintain the hours of operations at our retail locations,” she said.
Competition from other cannabis companies in neighboring states has also put pressure on the labor market.
“Especially right next door in Massachusetts, I think this town in particular is going to feel that,” she said. “You get paid a lot more to work in Massachusetts than you do in Vermont right now.”
The cannabis industry is expanding faster than regulations, she said.
On the regulatory front, what CVD and the cannabis industry as a whole want to change are our tax laws, specifically a federal law known as 280E, which prohibits tax deductions of business expenses having to do with drugs that are illegal under federal law.
This law, according to Conry, was created to ensure that drug dealers weren’t writing off aspects of their activities. But it has left marijuana businesses like CVD — which are legitimate under state law — with a huge tax bill.
“So it’s really hard to know how to invest for the future, and where to put money, and what to hire for to prepare for the future,” Conry said.
That criticism does not mean that the dispensaries are resisting oversight, she said.
“It’s really important to have a well-regulated system in order to protect consumer safety, in order for businesses to have clear guidelines on how to operate,” Conry said.
“The more organizations that are out there are coming in, inspecting our facilities, inspecting our processes to show that they are safe, the more confidence communities have to move forward with this,” she continued. “So smart regulations are really important.”
Show us the working capital
Cannabis businesses may operate with big bottom lines, yet they also operate with little access to banks.
“Banking and marijuana are kind of like oil and vinegar,” said Dan Yates, president and CEO of Brattleboro Savings & Loan.
According to Yates, no banks in Vermont offer financial services to the marijuana industry. He only knows of one credit union that offers limited services.
In March this year BS&L’s board of directors unanimously decided to have the bank create policies and procedures around serving the marijuana industry.
“So that we could become the first bank, within the state of Vermont, to provide services to this industry,” Yates said.
Yates admitted he initially opposed the state creating a tax-and-regulate adult-use marijuana bill.
But serving as a designee of the Vermont Bankers Association on the tax-and-regulate subcommittee of the Vermont Marijuana Commission changed his mind.
“If you flash back 90 years to prohibition, who made money selling bootleg liquor? Criminals,” he said. “What was the quality of the liquor that was being manufactured and sold? Why is it any different for marijuana?”
In Yates’s opinion, education, taxation, and regulation of marijuana “presents a lot of opportunities for the state.”
But banks are subject to federal regulation.
Under federal law, marijuana is a controlled substance. Which means, according to Yates, if banks work with marijuana-based businesses, they are “effectively engaged in money laundering.”
The federal government has changed its stance on marijuana a few times since Colorado legalized the substance in 2014. At this time, according to Yates, the U.S. Department of Justice has authorized the creation of guidance to help banks offer financial services to the industry as long as the bank checks a bunch of legal boxes.
The guidance says, “if you [the bank] do all of these things, we [the federal government] may choose not to prosecute your bank for engaging in these services,” Yates said.
Despite some degree of risk and uncertainty, “We think there’s a tremendous opportunity for the bank in terms of creating a niche market for ourselves, but it is also important these businesses have an outlet for financial services,” he said.
Saving rural economies and workforce concerns
Cary Giguere said hemp and marijuana are about rural economic development.
The director of public health and agricultural resource management at the Agency of Agriculture, Food, and Markets, Giguere focused mostly on hemp, now a legal crop since the federal farm bill was passed in 2014, he said.
The state has gone on to create a hemp quality-control program. Within the last month, the state hired a person in charge of lab certifications, Giguere said.
“The hemp industry is drawing people to the state,” he said.
He knows of several dairy farmers who are supplementing their income by growing hemp.
But for some employers, the legalization of adult-use marijuana has created more questions than answers.
“Legalization of cannabis has affected almost every area of the law,” said David Harlow, an attorney at the Brattleboro office of Downs, Rachlin & Martin who leads the law firm’s labor and employment practice group.
Harlow said he experienced an uptick in calls from worried employers after the state took its first steps in 2018 when it legalized small amounts of marijuana for adult use.
Employers’ questions pointed to a fear that they could no longer control their workforce, he said.
“The legalization of marijuana in Vermont on a statewide level really hasn’t changed much in the way that employers manage their workforce,” Harlow said. “Employers are still permitted to terminate employees for being impaired on the job, employers are still permitted to enact policies that prevent employees from using marijuana.”
Legalization, however, has highlighted other areas of Vermont law that might need changing, Harlow added.
For example, from an employer’s perspective, Vermont “has one of the most onerous drug-testing statutes in the country.”
According to Harlow, an employer who wants to administer a drug test to an employee must also put that person through an employee assessment program to provide counseling and support. “During that time that employee’s employment is protected,” he added.
He advises employers not to administer drug tests. Instead, he urges them to focus on the employee’s behavior and to discipline or fire them based on their actions, not on their drug use.
One arena that can prove difficult for employees are jobs governed by federal law, such as transportation jobs that require a commercial drivers’ licenses (CDLs). Under federal law, marijuana use in any amount is forbidden.
“It’s hard for employers in Vermont to find eligible employees who can pass the required test to maintain a CDL license,” he said.
‘We need you all in on this’
Senate Majority Leader Becca Balint, D-Windham, acknowledged the range of feelings the audience might experience around marijuana. Some felt excited. Some worried about the substances’ influence on young people. She asked everyone in the room to “hold a deep curiosity about what can be” and to not tune out what they don’t want to hear.
“We need you all in on this,” she said.
Balint also said the community needs to be honest with itself about teens’ access to marijuana.
“They already have access,” she said. “Let’s not stick our heads in the sand ... instead, what are we going to do moving forward to address that head on?”
“Legalization is coming — it is,” she said. “So let’s get the taxation right.”
For herself, Balint said she does not feel fear around legalizing cannabis.
“People are bringing their hearts and their minds and really hard questions to this new industry,” she said.