Retail Marijuana Update Provided to Council

Retail marijuana was the subject of a presentation at Milford City Council during a recent workshop. Marijuana Commissioner Josh Sanderlin provided details on the marijuana industry in Delaware.

“As you are aware, there are three companies currently operating in Milford,” Sanderlin said. “Two cultivations, Columbia Care and Merry Med, also known as First State Compassion and one medical, Fresh. We are looking at 148 employees on a permanent basis as well as some contractual employees. These companies are providing quality, tested products which is probably the most important thing. They are regulated. The companies are overseeing and tracking from seed to sale, then ensuring there is a safe way to actually get the product to the public.”

Sanderlin pointed out that regulated retail marijuana stores are completely different than the illegal smoke shops that are opening throughout the state. The Marijuana Task Force is working with the General Assembly to address those businesses.

“I really want to talk about what we do and focus on two real big priorities. One, how is our program different and safe? What do we do to safeguard our program, to ensure minors aren’t getting access to cannabis, that the product is safe, that there’s no crime involved in the process and that the locations are secure and safe,” Sanderlin said. “The second thing I want to do kind of stems from the conversations I’ve had with a few members of the city council and how it relates to the process of the ordinance that was passed a couple years ago regarding the retail cannabis. I don’t want to lobby for change or anything like that. What I want to do is answer questions and have a discussion.’

Having been in the medical and retail marijuana industry for 12 years, Sanderlin explained that he has worked in multiple states across multiple streams of the marijuana industry. A lawyer by trade and now the top regulator of medical and retail marijuana, Sanderlin felt it was time to have a discussion with municipalities about the industry. Sanderlin provided an organizational outline of the commission and how the industry was regulated.

“One of the most important things when you are talking about cannabis, especially in the adult use side of things, is age gating,” Sanderlin said. “That’s one thing we are really dealing with in these illicit shops, who’s going in, who’s coming out. We’re hearing horror stories from Student Resource Officers and all of those things. A lot of times, I hear “well these kids have edibles.” Those edibles did not come from my stores because to get into the store, it is not even like a liquor store. It’s not a browse situation, pick it out and go to the counter.”

According to Sanderlin, it is impossible to see inside a state-licensed cannabis store in most cases. Once inside, the customer must show identification when they walk in the door and there is a security guard there who takes the identification and medical marijuana card, if they have one, runs it through the system, ensures that it is a viable ID and then the person is allowed to enter to purchase medical or retail marijuana.

“You can’t walk in, you can’t stand on the outside and see in and before you even get through the doors, you’re getting hit with showing an ID, unlike illicit stores and also unlike alcohol,” Sanderlin said. “It is exceedingly difficult, if not impossible, for a minor to get in. Many of the stores have armed guards, usually retired cops. Every square inch of the facility is under video surveillance, from the outside all the way through the whole process. There are actually screens at OMC where we can go online and look at everything that is going on at any store at any time. We do that periodically as spot checks.”

All video recordings are kept for a certain number of days so they can be viewed at a later time if necessary. Sanderlin has only been in the position for eight months, but even prior to his arrival there were very few issues with medical or retail marijuana locations. In fact, the only problems were related to employees. There had been crime in the vicinity of the stores, but unrelated to them, and the video surveillance outside the marijuana facility helped police identify suspects.

“As everyone is aware, marijuana is still federal illegal,” Sanderlin said. “We are a Schedule One drug under the federal government. That means no products we sell in our stores can originate outside the borders of Delaware. What we use is biotrack where as soon as a seed is ready, as soon as it is received from wherever, it has to go in the system and then when it is planted, it is tracked from the time of planting all the way to the point of sale. We know exactly how much is planted, grown and sold.”

The system can also identify any discrepancies, such as seeds entered illegally or product sold outside of the system. This is helpful in deterring underage use, Sanderlin said.

“Unlike products in these illicit places, ours are tested, they all go through from the point of harvest and drying, they all go to a state lab and are certified,” Sanderlin said. “They are tested for pesticides, they are tested for heavy metals, they are tested for herbicides, they’re tested for potency and terpene counts and other cannabinoid issues. The consumer actually has way more information and security in their product at our shops.”

Councilman Dan Marabello asked Sanderlin to elaborate on the illicit shops.

“I went to Fresh before I came here and if you are standing in Fresh and look across the street, you can see one directly across the street,” Sanderlin said. “Where the Harbor Freight is, there is one right there. You have more than that and we have issued more than a dozen cease and desist orders in the City of Milford. These places are not subject to any of the zoning requirements as our guys because they are telling you they are operating as a normal business and they are selling hemp, but it really is not hemp.”

Mayor Todd Culotta asked what the opinion of Delaware’s administration on the reclassification of marijuana. Sanderlin explained that the change would mostly impact how shops file with the Internal Revenue Service. Sanderlin pointed out that even if the drug was reclassified, the state would not be able to purchase products from other states.

“I have three questions that kind of go together,” Councilwoman Lori Connor said. “The first one is if you have seen a decline in medical marijuana applicants since the recreational use has come online. My second question is if you could kind of touch on the revenue difference between a store that can sell recreationally and one that can only sell medically. My final question is if there is any discussion on cities receiving any of the funds from the tax that is received on marijuana sales.”

In answer to the first question, Sanderlin explained that they had not seen a decline in medical marijuana cardholders since retail marijuana was legalized.

“We started adult use in August of last year and there is only one store that is medical only and that is Fresh in Milford,” Sanderlin said. “There is about a 10x difference. Just looking at their stores in jurisdictions where they can do both medical and retail marijuana, there is a 10x difference. As for funding to the local governments, when the General Assembly passed SB 75 last year, the governor vetoed it and he did so on that principle alone.”

Sanderlin said that the governor felt that the government should not tell municipalities what their zoning should be, but if the state did something like that, the towns should receive some sort of incentive. Councilman Jason James stated that his objection to allowing retail marijuana was that the municipality would see none of the tax revenue.

“I may be wrong, but I think there is a 15 percent tax with eight percent going toward administration and seven percent going toward justice,” James said. “Home rule should be able guide its own destiny, because every jurisdiction is different. Milford is not Georgetown or Seaford, but I believe the fear of the municipalities is that decision-making at Dover will override any of the decisions of the municipality and that this council would not have a voice. At some point, I believe retail marijuana will be legal in every jurisdiction, but if we’re going to do this, we do want some of the tax revenue.”

Sanderlin pointed out that SB75 only dealt with the counties, but if the county changed their zoning, the county line was not far from Milford. There could be dispensaries set up right outside the city and that could impact any revenue the city would get. Marabello asked if there had been adverse effects in communities that had allowed retail marijuana compared to those like Milford who did not allow it.

“We have not had a high incidence report,” Sanderlin said. “We haven’t really had any incidents or reports since we went from August 1. We have had two incidences of crime. One was an employee pocketing a quarter or an eighth and the other was someone pulling up and trying to get into the green waste bin which is inert cannabis material.”

Councilwoman Nadia Zychal asked if the hole created by council not allowing retail marijuana sales been filled with unregulated smokeshops.

“I can only speak anecdotally because we don’t really study that and we really have to search for these situations, but we have seen a proliferation of these colloquially called smoke shops,” Sanderlin said. “They’re generally selling products from California or Oregon and calling them hemp. School Resource Officers are telling us they watch kids go into them and up north, there is one right across from a school. Again, no zoning impediments for these guys.”

Retail marijuana packaging in Delaware is strictly regulated, according to Sanderlin. It has to be in child-resistant packaging with no bright colors and no cartoon characters. Retailers are not allowed to name the product anything that is currently on the market. For example, they cannot call an edible “Skittles.”

“When you go in these places, it is the opposite,” Sanderlin said. “There are Skittles, Nerds, Doritos and bright colors with no age-gating. When some of this product is tested, it is failing. My biggest concern is the underage use of untested products. I live in Wilmington and there are about six of them near my house. I drive by and I can look right into them and see all the packaging. That does not happen at our stores.”

Zychal pointed out that the decision by council to ban retail marijuana appeared to have backfired.

“Anecdotally, we have a few of these operations going on in our town and, anecdotally, they do not adhere to our own particular zoning laws,” Zychal said. “They have blinking lights. They violate these things. It begs the question what else are they violating. But it also brings to mind the possibility of considering the result of unintended consequences when decisions come before council.”

Connor, who has a child in middle school, pointed out that the products are in schools.

“I know when we previously had this discussion and voted, a big concern with parents was that children would get it, are smelling it on the streets, etc.,” Connor said. “I’m just saying this as a point that we have not stopped it, it is still happening, but they’re not getting safe products.”

Sanderlin explained that they were trying to close some of the loopholes that allow illicit smokeshops to sell THC products.

“Right now, it is a lack of criminal code,” Sanderlin said. “So, what these stores will do when we pull their product is show a Certificate of Analysis from some unknown lab out of Oklahoma or God knows where and it will say .03% by dry weight. It will claim there is no Delta 9 which is the one you are not supposed to have. When it is tested, it will show 12 percent at Delta 9, not even close. When we go to prosecute the case, there is only one chargeable offense which requires intent. All they have to do is show the Certificate of Analysis, even if it is fabricated and it makes it nearly impossible to convict them.”

The distinction between hemp and marijuana is legal fiction, according to Sanderlin. They both come from the same plant, but it is about the compounds found in various portions of the plant. Some portions of the plant will get someone high while others do not.

“If it gets you high, then that needs to be regulated,” Sanderlin said. “And when the 2018 Farm Bill passed, no one was talking about Delta 8, it was all Delta 9, so it jumped a little ahead of the science The federal government is shutting that loophole, but they gave them a year to work on it.”

Councilman Michael Stewart asked if there was any talk of regulating liquor stores that sold alcohol with THC.

“There is this gray area right now,” Sanderlin said. “The legislature is working on trying to find ways to deal with that as well, whether they regulate it or ban it. They are running into the same problem as the illicit stores as they come in and it says .03% by dry weight but when it is tested it is much higher.”

Currently, all retail marijuana sales are banned within the city of Milford. There was no discussion whether council would consider changing that ban in the future.