Saginaw's Proposed Licensing & Zoning for Cannabis Businesses is a Blueprint for Failure

The City of Saginaw has slow-walked cannabis licensing in the city since it opted out last July, but recently held a forum on the topic where all departments, commissions, and council members were in attendance to discuss plans to move forward with cannabis business licensing.

The consensus on council seems to favor opting in and granting licenses to an unlimited number of business applicants, but to restrict the businesses to the worst business areas in the city (manufacturing zones and B-2 and B-3 business zones).

Saginaw’s Downtown Development Authority Riverfront Mixed Use (RMU) area seems like it will be zoned off-limits to cannabis businesses; and any plan that does not include the Old Town area is a plan destined to fail.

MUNICIPAL COMPETITION FOR BUSINESSES

There is stiff competition for cannabis businesses in other towns in Saginaw County; Chesaning recognized this opportunity early and opted in for Medical and Adult use ahead of the rest of the County, and Buena Vista Charter Township has already opted in for Medical businesses, with several slated to open soon. Both municipalities are well ahead of Saginaw in attracting new cannabis businesses, and Bay City has authorized dozens of retailers. Even Spaulding Township has quietly opened a grow facility. 

As the market develops between now and December 2021, then takes off after the pre-existing medical license eligibility period ends, Saginaw will need to be ready for these cannabis businesses to choose it rather than some other municipality. The government has made a wise move to allow unlimited cannabis businesses because the alternative is proving to be a disaster for some other communities and has sparked a temporary gold rush on property prices, and a legally risky process of picking winners and losers in the licensing process.

Saginaw’s choice for unlimited businesses mitigates the risk of litigation from unsuccessful applicants. Further, when the business licensing opens to the broader field of would be applicants in 2021, Saginaw will be able to absorb new applicants.

CANNABIS SHOPS AN ECONOMIC BOOM FOR THE CASH STRAPPED CITY.

After just 3 months of legal marijuana sales, the first week of March generated $4.3. million dollars in sales between the 61 licensed retail establishments, for an average sales volume of over $70,000/store. Assuming this average, weekly sales figures for each store would generate sales revenue of $3.7 million each year.

These sales will generate 10% excise tax and 6% sales tax. Every year each store would generate 10% state excise taxes of $370,000 and 6% state sales taxes of $220,000.

The state excise tax is shared with the municipality and the county. The breakdown of sharing for the excise tax is: 15% to cities, townships or villages that allow recreational business, proportioned based on the number of micro-businesses and retailers; 15% to counties, proportioned based on the number of micro-businesses and retailers; 35% to the School Aid Fund for K-12 education and 35% to the Michigan Transportation Fund for road and bridge repair.

EACH STORE WOULD GENERATE OVER $60,000 IN ANNUAL TAX REVENUE

Saginaw would receive 1.5% of all sales according to the revenue sharing of the excise tax. The bottom line for the City of Saginaw public revenues based just on the annual direct share of cannabis sales is an  estimated amount of $55,000 for each store in the City, in addition to the indirect benefits to the community that come in the form of jobs, income taxes, property taxes, and business community development, plus application fees ($5,000 each application) and annual local cannabis store license fees ($5,000/year) to the city. In addition, the county would receive a 15% share of the excise tax each year ($55,500).

With city government obsessed with overturning the citizen-imposed tax cap on local property taxes, it is important to note that just 10 stores in Saginaw would produce the same revenue to the city as doubling our property taxes.

DEAD ON ARRIVAL

Allowing unlimited retail establishments is a step in the right direction, especially since the voters overwhelmingly approved Prop 1 legalizing cannabis by a 69% - 31% margin. However, if the city relegates Saginaw’s cannabis business to “second-class citizen” status by failing to open up its RMU areas and other prime B-1 zoning areas for cannabis stores, it would be yet another lost opportunity for Saginaw to revitalize obsolete business infrastructure, and maximize tax revenue for the city.

Cannabis is not Plutonium, but you would think it was with the hyper-cautious attitude that local governments are taking toward Marijuana businesses.

The voters have decided that marijuana should be regulated like beer – kept out of the hands of kids, but not like a dangerous underground narcotic as depicted in Reefer Madness. These businesses need not be hidden away like massage parlors and adult bookstores in zone B-2 – the zoning should not force cannabis establishments into known high crime areas with dilapidated buildings in surroundings that don’t justify investment in remodeling or rebuilding.  Cannabis can be a real revenue enhancer for city government, but the city cannot achieve that if it shoots the industry in the foot from the start.  

DOES THE PROPOSED ZONING FOR CANNABIS SHOPS HAVE A DISCRIMINATORY ANIMUS?

Excluding cannabis shops from the most desirable and highest traffic business districts, such as the RMU and B-1 not only sets them up for failure, but it also relegates them to areas of the city that have the highest non-white population densities.

With a few small exceptions, the overwhelming majority of B-2 zoning is along the East Genesee corridor south of Janes. As most readers are aware, residents of this area of the city have long struggled with poverty, violent crime, and blight at a rate which far exceeds that of the rest of the City of Saginaw.

These struggles are well known to the residents of the rest of the City of Saginaw, and as such, few residents frequent these areas for legitimate business reasons other than those that live in those neighborhoods. Even then, those businesses struggle to make it. The truth can sometimes be uncomfortable, but the truth is that these neighborhoods are overwhelmingly black or African-American neighborhoods that unfortunately have a disproportionately high rate of drug trafficking.

Not only does the City know that most citizens don’t have the occasion to visit these diverse neighborhoods, they are counting on it. However, the most uncomfortable truth about the zoning decision by the City is this: it seems like the city does not want cannabis shops in the neighborhoods and business districts where white people live and shop. If they did, they would have opened up those areas.

Purchasing cannabis at a store is expensive. It is much more expensive than buying it on the street. Because of this there are certain target groups of consumers to whom shop owners around the state market. What the city is banking on with this zoning decision is that those target groups will not travel to a historically poor, disenfranchised, high crime part of the City to frequent these shops. One can expect that the shops that do open in these neighborhoods will also instantly become targets for criminal activity, further driving away potential customers and revenue.

ISSUE MAY USHER IN YOUNGER GOVERNMENT

The city likes to talk about attracting new residents and businesses, but they spend little time discussing ways to improve the business climate and quality of life for everyone – including the residents and businesses we already have.

Some of the most intelligent and talented people anywhere in the country are from Saginaw. Among the former residents of Saginaw are executives at companies like Netflix, Amazon, The Gap, and Starbucks to name a few. There are many more who became renowned athletes, actors, performers, musicians, physicians, scientists, lawyers, professors, mechanics, pipefitters, and electricians. While these people have different professions, faith traditions, and educational backgrounds, they all have two things in common: they are from Saginaw and did not choose to come back here to live, work, or raise their families.

We as a city need to create an environment that meets the social, economic, and educational needs of our best and brightest, such that they want to settle down here after collage or trade school. If we can do this, then we will simultaneously create an environment that is favorable for attracting business and industry.

The cannabis issue is just one of many that will change the economic posture of Saginaw and position it to appeal to a younger generation of residents and consumers. Despite the what the City’s approach to economic development suggests, Saginaw is not a retirement community. Let’s face it, it’s just not warm enough.

This November, there are five City Council seats up for election, and several of the incumbents have held their seats for a long time. It may be time for some new faces and ideas, ones that reflect the will of the people.

Our city will never thrive, much less survive, if our elected officials and appointed bureaucrats continue to act in the best interest of wealthy land developers and an elite group of business owners,  instead in the best interest of all the city residents and their future.

CITIZEN INVOLVEMENT IN ZONING PROCESS FOR CANNABIS BUSINESSES

Communities govern cannabis business by “police power” regulations and “zoning” ordinances The process for determining the zoning aspects of the local cannabis business takes several steps, and citizen input is vital to the decision-making process. 

Local decision makers are required to balance the interests of private property rights against the general public interest; this process will involve the zoning administrator, the planning commission, the zoning board of appeals, and the city council.

The process requires public hearings, and decision makers consider what weight to give the participants to ensure fairness for all concerned. Everyone must have the opportunity to speak and present evidence at public hearings.

Zoning officials should not exclude lawful land uses if there is a demand and an appropriate location in the community.  Licensed cannabis businesses are the future of safe and affordable access to marijuana, so the City would do well for its citizens to empower the fledgling marijuana industry.