Rim Country’s chance of winding up with a medical marijuana dispensary jumped this week with the release of new rules by the Arizona Department of Health Services (DHS).
The new rules say the state will license one dispensary in the Payson area and another one in the Globe area.
That will likely spur competition among several groups for a dispensary license serving Rim Country and perhaps between Star Valley and Payson for the potentially lucrative business.
The new rules come as rumors continue to swirl that Star Valley Mayor Bill Rappaport may invest in a local dispensary. Those speculations were boosted by his recent appearance in the audience of a Payson Town Council meeting, where he sat with one group of would-be investors.
Rappaport said, “I investigated it as an option, but decided it is not the right thing for me.” He said he could now not picture a set of circumstances that would convince him to invest in a dispensary.
“But the rumors are just rampant. I don’t know how these things get started — one of the joys of living in a small town,” he said.
Rappaport said he had several conversations with Steve Hoffman, who several weeks ago appeared before the Payson Council to discuss his plans to apply for a dispensary license.
Hoffman declined to confirm or deny any conversations with Rappaport about investing.
Rappaport said if he ever did change his now firm decision not to invest, he would first resign as mayor. He said he attended the recent Payson meeting to learn the details of the town’s new zoning rules for dispensaries, with an eye toward whether Star Valley should develop its own set of rules.
“We’re wrestling with exactly what our town is going to come up with as far as an ordinance. Payson has pretty much designated an industrial area — and we don’t have an industrial area here. So we’re waiting to see what happens.”
The latest DHS rules indicate the state will license one dispensary in each of its 126 previously established Community Health Analysis Areas — originally established to track cancer clusters. Those areas include one dominated by Payson and a second area dominated by Globe. The voter-approved initiative requires the state to license at least one dispensary in each county, but left the details to DHS.
That’s likely good news for whichever town lands a dispensary, but probably a mixed blessing for people with chronic conditions who might qualify for a medical marijuana card. The rules allow people with a doctor’s recommendation and a state card to grow their own marijuana if there’s no dispensary within 25 miles. However, if there’s a dispensary in town, people with a card will have to instead pay the $200 to $400 per ounce price the dispensaries will probably charge.
The revised draft rules also changed some other provisions that had drawn criticism from backers of the initiative, which passed with a razor-thin, 4,500-vote margin.
The new rules don’t require licensed dispensaries to grow their own pot, but stipulate that if a dispensary grows marijuana it must be enclosed and blocked from any view from outside.
The new draft rules also remove some requirements that would have made it costly to even apply for a license. That includes dropping the need for investors in a dispensary to get a bond and make sizeable upfront investments before even learning whether they’ll get one of the coveted licenses.
The new rules would also revoke previous proposals that a patient could only get a recommendation from a doctor they’d seen for their chronic or debilitation condition at least four times. The new rules require that a doctor who writes a recommendation sees the patient, gives him or her a complete examination, determines that they need medical marijuana and assumes responsibility for managing that patient’s chronic condition from that time forward.
The new rules will allow doctors who serve as the required medical director for a dispensary to work for as many dispensaries as they want, instead of just three.
The new rules also require directors of a dispensary to have lived in Arizona for three years, instead of two — and to file a business plan to demonstrate the long-term viability of the dispensary as a “not-for-profit” business. The previous rules required the dispensaries to be “non-profit” businesses.
Arizona Attorney General Tom Horne has called on the Legislature to slap a tax on the dispensaries, although prescription medications are normally exempt from sales taxes. Such a tax would generate $40 million annually, Horne estimated. Other states have also allowed towns to impose their own tax. A local 2 percent tax on $2 million in sales would yield $40,000 annually.
Bobby Mueller and his partner Mark Montague spoke at the last Payson Town Council meeting and promised to donate excess revenues to local charities. They estimated that about 200 people living in Payson would qualify for a medical marijuana card, which would give them the right to buy up to five ounces of marijuana each month.
If 200 people each bought five ounces of pot every month at a cost of $200 per ounce, that would generate revenues of $200,000 a month — or $2.4 million annually.
Mueller, a retired boilermaker who relied on medical marijuana to help him cope with the side effects of a liver transplant, said he was involved mostly to make sure people suffering from chronic pain and nausea had alternatives to conventional medicine.
Montague, an Army veteran who has spent most of his career in hotel management, said he got involved because he’s been a lifetime friend of Mueller.
He said the group will have to invest about $10,000 to apply for a license, including a non-refundable, $5,000 fee to the state. He estimated it will cost $300,000 to turn a 16,000-square-foot industrial building at the Payson airport into a dispensary.
However, he said the business will likely bring in a lot of money, which will yield tax revenue to the state and town — in addition to the sizeable donations the company will promise to make to local charities.
“I see a lot of money out there,” said Montague.
“It’s a money-maker,” agreed Mueller.
He said the dispensary could make a good chunk of its revenues from selling extra marijuana to other dispensaries, especially those in the Valley hemmed in by zoning restrictions that would make it hard for the dispensary to also operate a growing facility.
Mueller and Montague said that Hoffman, who appeared at a previous Payson council meeting, used to belong to their investment group. However, Hoffman wanted to team up with a group of California investors who operated dispensaries there and played a role in pushing for medical marijuana laws elsewhere.
“We wanted to keep it 100 percent local,” said Mueller.
Hoffman, however, said he had never joined an investment group with Mueller or Montague, although he had some conversations with them. He also emphatically denied that he had any investment or business connection with any group from California.
“I have no association with anybody in any regard with anyone from California — I don’t know where that came from.” He also said he had no business ties to Mueller or Montague. “I have no affiliation with that other group nor will I at any time ever.”
He said he remains interested in operating a dispensary in Payson or Star Valley and intended to submit a business plan soon to Payson. He estimated it would cost at least $150,000 to set up a dispensary and praised the recent changes in the proposed regulations.
Mueller and Montague said they hope to keep as much money as possible in town and to hire local people to run the facility. They said they’d been surprised by their cordial reception so far.
“I was told I was going to get tarred and feathered” in Payson, joked Mueller.
Instead, Payson Police Chief Don Engler recommended the council quickly clear the way for a dispensary to operate in town, mostly to keep those 200 potential customers from each setting up their own pot-growing operation in the basement or back yard.