Pubdate: Mon, 13 Jan 2014
Source: Seattle Times (WA)
Copyright: 2014 The Seattle Times Company
Contact:  http://seattletimes.nwsource.com/
Details: http://www.mapinc.org/media/409
Author: Bob Young

POT-SHOP APPLICANTS HOPING FOR FAIR SHAKE

With 2,035 Applications for Just 334 Retail Pot Stores, the Culling 
Includes Vetting and Then a Lottery to Pick the Winners.

With business booming in Colorado's new legal pot shops, a license 
for a retail pot store in Washington state is a coveted prize, a 
"golden ticket," said pot entrepreneur John Davis.

Look no further than the 2,035 applications, and counting, heaped 
upon state officials for just 334 proposed shops. For qualified 
applicants who make it through the state's vetting process, a lottery 
awaits to pick winners.

The culling has started. State marijuana licensing manager Becky 
Smith told Liquor Control Board members last week that many retail 
applicants were disqualified at first glance because their proposed 
locations were in residences or did not comply with the state law 
requiring a 1,000 foot buffer from venues frequented by youth.

Board spokesman Brian Smith said more than 500 applications have 
already been deemed invalid and that applicants will be notified in 
the next week.

Recent tweaks by state regulators in the vetting process should 
disqualify others, comforting some applicants who believed that 
rivals were up to shenanigans to increase their chances of securing a license.

Still, concerns about fairness remain, as the state sifts through 
more than 6,600 producer, processor and retail pot-license 
applications, an abundance that wasn't anticipated by the state's top 
consultant, Mark Kleiman, who quipped several times last year, "What 
if we threw a legalization and nobody came?"

In Seattle there are 408 applications so far for just 21 stores the 
state has allocated to the city. Many of those applicants are vying 
for the same locations, which are scarce given city zoning and the 
state's 1,000-foot buffer. For instance, five applicants have filed 
for a shot at a location in the 10500 block of Lake City Way 
Northeast that appears to comply with the law.

That's led some to complain that competitors are exploiting gaps in 
the licensing process. In a letter last week to state regulators and 
legislators, applicant Anne Martens alleged others are "trying to 
game the system."

One concern of Martens, former communications director of the state's 
Office of Financial Management, is that entrepreneurs are 
coordinating to "stack" applications at a given location. A lottery 
winner, in theory, would then strike a business deal with a cohort in 
the stack so both make out, said Hilary Bricken, an attorney who 
represents Martens and other entrepreneurs.

Licenses can't be sold outright. But businesses can be sold; then the 
new owner would have to go thorough state vetting before getting 
licensed. Applicants and investors are limited to three store 
licenses to curtail market domination by a few.

"It's almost like straw applicants," Bricken speculated. "That other 
person has agreed to sell you their license or to hire you on. The 
idea is to drown other applicants in the pool."

Davis and Ryan Kunkel, who both run medical-marijuana dispensaries in 
Seattle and are applying for recreational retail licenses, also 
believe such schemes are occurring.

Confusion over rules

Part of the problem had been what applicants saw as a lack of clear 
direction from state regulators.

The state Liquor Control Board's power-point presentation in 
licensing workshops late last year said applicants' locations did 
"not need to be finalized to apply." Applicants needed a compliant 
address but the Liquor Control Board (LCB), which is implementing the 
voter-approved legal-pot law, didn't initially require evidence that 
the applicant had a deal to use the location.

"We want to work with you," licensing manager Smith told potential 
applicants at a workshop in Ellensburg late last year.

Davis and others took that to mean that if their proposed locations 
didn't comply with rules, the state would put their application on 
hold and allow them time to find a new location.

Davis envisioned scenarios in which entrepreneurs plunked down $250 
to apply, listed a Burger King - or in one actual case, the Seattle 
Central Library - as their site and then hoped to land in the lottery 
and win a valuable store license.

When Cupcake Royale founder Jody Hall applied for a retail license 
just before the state's Dec. 20 deadline, she put down a placeholder 
address on Capitol Hill, one that she knew wasn't viable. But she 
believed she had time to find a deal at a legal location under the rules.

That is not the case. People who applied with noncompliant addresses 
are automatically being disqualified; the state is giving those with 
legal locations 14 days to show they have a commitment from the 
landlord. The rules were clear, according to regulators, and it was 
up to applicants to make sure their location met the 1,000-foot 
buffer at the time of application.

That has allayed some concerns.

Landlord requirement

When Martens wrote officials Jan. 3, she said her chief concern was 
that the state wasn't requiring proof that an applicant actually had 
a deal with a landlord.

"Our attorneys suggested that people were paying others to apply at 
the last minute, upping their number of entries into the lottery," 
Martens said. "This favors applicants with lots of money, or 
applicants who didn't do the work to get a signed lease, and puts 
people who followed the rules at a disadvantage."

However, by late that afternoon Becky Smith had assured her that 
wouldn't be the case.

"Applicants have to bring something from a landlord. They're not 
going to game the system. If they don't have a location, they're not 
getting a license," said LCB spokesman Brian Smith.

This was welcome news to Martens. "One applicant per compliant 
address is as it should be," she said. "And assuming they have a real 
claim to the property, it should cut down on any postlottery scheming."

Pete O'Neil is one of the five applicants vying for the Lake City Way 
site, where he has a signed agreement with the landlord, he said. 
Hearing that a commitment from landlords is required is "very good 
news for us," he said.

The landlord said she has made agreements with O'Neil and one other 
potential potstore owner, and has room for them both to set up shop 
in her building. The three other applicants who used her address, she 
said, did so without her knowledge and without an agreement.

Some don't see the purported tactics as shenanigans. That should be 
expected with a lottery system, said Alison Holcomb, author of the 
state's legal-pot law.

"It's not gaming the system. It's playing the system. It's a problem 
of the lottery," said Holcomb, who prefers use of merit-based scoring 
to determine qualified applicants.

State officials have maintained they cannot do so. Merit-scoring is 
allowed in contracting, but state rules for licensing require only 
that applicants meet the threshold for qualification.

Spokesman Smith said the LCB hasn't come up with details of how it 
will conduct a lottery yet.
- ---
MAP posted-by: Jay Bergstrom