Marijuana companies beg for state relief money
Bill would create state loans for businesses ineligible for federal money
IT TOOK TWO YEARS from the time Angela Brown applied for a license to sell recreational marijuana to the time she got final approval to open T. Bear’s manufacturing plant in Wareham. On March 24, one day before she planned to open for sales, T. Bear – and the entire recreational marijuana industry – was deemed non-essential by Gov. Charlie Baker and shut down indefinitely due to the coronavirus outbreak.
“My co-founder and I worked for years, sacrificed everything, poured every penny we have into the company,” Brown said. Instead of opening, she furloughed her staff, locked her building and walked away. “All I can do now is wait with no income and no revenue,” she said.
Like other businesses, Brown must still pay rent, utilities and debts. Unlike other businesses, she cannot access relief loans or grants through the federal government, since marijuana sales are federally illegal. “How can we be expected to overcome these unprecedented times with no help while help is being given to other industries?” Brown asked.
Brown was among the many state-licensed marijuana entrepreneurs who testified Tuesday before the Joint Committee on Community Development and Small Businesses on a bill that would establish a state-level Paycheck Protection Program for businesses that are ineligible for the federal assistance. The bill would create a state-level emergency loan program in which the loans turn to grants when companies use them to maintain their payroll through June. That would incentivize businesses to not lay off workers or to rehire workers.
DiZoglio said state-level assistance is urgently needed to help businesses with nowhere else to turn stay afloat. “Every business that survives this pandemic will reinforce our state’s economic recovery,” DiZoglio said.
One by one, marijuana entrepreneurs participating in the hearing via Zoom told lawmakers of their financial woes. Meg Sanders, CEO and co-owner of Canna Provisions, operates a dispensary in Lee and was preparing to open one in Holyoke. “On March 24, we had to make the tough decision to furlough most employees to do the best we could to save the business,” Sanders said. In addition to furloughing 52 of 64 employees, she delayed hiring 20 people for the Holyoke store.
If a state-level PPP program becomes available, Sanders said she would rehire her employees and hold trainings to prepare for reopening, and she would reimburse her business for the two weeks of pay she gave employees after March 24.
Marijuana businesses in Massachusetts already face steep state licensing fees and taxes. They pay high rates of federal tax and cannot deduct business expenses because the industry is federally illegal.
Ellen Rosenfeld, president of CommCan, said her 90-person company last year paid $264,000 to the towns of Southborough, Millis, and Medway, plus $500,000 in federal taxes, $120,000 in state taxes, and $226,000 in state licensing fees. In five months, it collected $1.1 million in sales tax for the state.
As a small company in the marijuana industry, Rosenfeld said, “I cannot borrow money. I cannot issue more stock on the Canadian stock exchange. I cannot initiate another round of financing. I cannot get a bridge loan or an SBA loan. I cannot get a line of credit or borrow against any of my wholly-owned facilities.”
Much of the testimony centered on the financial benefits the marijuana industry gives the state.
“The industry is poised to be an incredible growth engine for the Massachusetts tax base. We need to do everything in our power to ensure its survival,” Moran said.
Even businesses that serve the marijuana industry but do not touch the plant have found themselves disqualified from federal relief.
Beth Waterfall offers marketing, business development and event planning services for law firms, technology firms, and publishing companies doing cannabis-related work. Her application for a loan from the federal PPP program was denied because her revenue comes from the marijuana industry.
Waterfall’s business is down 90 percent. She stopped using independent contractors and is no longer drawing a paycheck. Instead, she gets state unemployment insurance. A state PPP program, she said, could provide money for both her and her clients so “we could get back to work advancing this essential industry and creating more work and jobs for businesses like mine whose very existence relies on a healthy, functioning cannabis industry.”
The recreational marijuana industry has been lobbying Baker to re-classify its operations as essential and allow them to reopen, just as medical marijuana businesses and liquor stores have remained open. A group of recreational marijuana shops sued Baker over his decision, but a Superior Court judge sided with the governor.
Baker has been adamant that he does not want out-of-state customers coming into Massachusetts marijuana stores, and there are conflicting legal opinions on whether he can restrict sales to in-state residents.
Sen. Sonia Chang-Diaz, a Boston Democrat who co-chairs the Joint Committee on Cannabis Policy, called the need for the state PPP “a self-inflicted wound,” and said it would be a “damn shame” if the state has to go that route. She said rather than spending state money to bail out the industry, Baker should let the businesses reopen, with safety precautions, so they can generate revenue to help the state. “I just think it’s bananas that we are not allowing these retailers to open in a way that’s safe, that’s controlled, and that can serve the greater needs of the Commonwealth,” Chang-Diaz said.
Some advocates worry that the closures will impact less wealthy minority entrepreneurs more than the multi-state companies that are continuing sales elsewhere.
“This order may have been well-intentioned, but it will have the disastrous effect of destroying any chance at creating equity in an industry that’s already deeply inequitable,” said Segun Idowu, executive director of the Black Economic Council of Massachusetts.
While no one testified against the bill at the hearing, a few people submitted written testimony opposing it. Tom Vega of Smart Approaches to Marijuana Massachusetts, which opposes marijuana legalization, said many Massachusetts marijuana operators continue to operate in other states. The group argues that encouraging marijuana smoking during the pandemic is dangerous, since smoking can enhance COVID-19 symptoms.One anonymous person who submitted written comments said a better solution would be to let companies deliver marijuana temporarily, rather than drawing from limited relief funds. The person wrote, “Are we as Massachusetts taxpayers expected to foot the bill for Governor Baker’s backwards decision?”
Correction: This story was corrected to note that T. Bear is a product manufacturer of wholesale marijuana products, not a retail dispensary.