Will Humble Interview: Arizona’s Plans for Dispensaries

Posted on: April 3rd, 2011 by admin No Comments

Medical Marijuana Today recently interviewed Will Humble, Director of the Arizona Department of Health Services, about the state’s plans for medical marijuana dispensaries.

Q. The application date has been postponed twice Do you for see the June 1 date changing or is that date fairly firm for accepting applications?

A. That date is set in stone. June 1 to 30 is the application period. That will not change.

Q. What number of inquires and comments did your department receive during this process? Was there anything in the inquiries or comments that surprised you? If so, what?

A. We received more than 3,000 comments online We also had four public meetings and received verbal comments during those meetings. I knew we would get good comments but I didn’t expect as many constructive ones as we received. We did get some creative comments. We used some of them verbatim in our rules.

Q. How many applicants are you projecting will apply?

A. I suspect we could get as many as 500 applications.

Q. How are you going to police the out of state investors entering into this market?

A. Two-ways. Applicants must have three years of residency with tax return documentation as proof. Dispensaries with non-resident financial investors will be at a competitive disadvantage. Let’s say we start with 20 applications for a CHAA. First we look at basic financials to make sure [investors] aren’t behind on child support, state, federal and local taxes and to make sure they haven’t defaulted on student loans. Let’s say 15 of the 20 applications pass that test. Following that we look at applications with anyone having more than a 20 percent financial stake, requiring the applicant to disclose who is on the board of directors. Any board member has to be an Arizona resident. If a 20 percent (or more) investor isn’t on the board, the application would be at a competitive disadvantage.

Q. At $5,000 per application that would mean $2.5 million to the Arizona Department of Health Services? How are those funds being used?

A. We spent $1.1 million already on a new server and other equipment. We also spent time in money in developing the rules. So that money had to be repaid. Other money will be spent on processing applications, doing background checks, etc. If we only get 120 to 150 applications, we can handle everything ourselves. If we get close to 500 applications, we will need to hire a general contractor to help us; we have only six weeks to process all of the applications. Anything left over will be paid back to the state general fund, and then it will go into the medical marijuana fund.

Q. You seem to have done an amazing job of issuing the final rules in such a short time frame.  How did you pull it off?

A. There were two main reasons. It’s an exempt law, so it doesn’t have to go through a review and it doesn’t require and economic impact statement. Other states have gone ahead of us. We learned a lot from them. We reused a lot of their information to get us started.

Q. How do you expect to handle the large amount of applications and get them turned around in time to have the lottery on August 1st?  Specifically if a dispensary application is submitted on June 30, 2011 and under Table 1.1 the overall time-frame for applying for a dispensary registration is 45 “working days.” Forty-five “working days” from June 30 takes you into September.

A. There are 45 working days to review dispensary applications, which gives us nine weeks after the June 30th deadline. However ADHS is planning to award certificates in mid-August.

Q. In other states the laws seem to be changing continually, do you expect this to happen in Arizona as well?  Do you anticipate that you will have new rules issued every year or do you have it dialed in in your opinion? For example, cities in Colorado now have the ability to not allowing these types of business to operate forcing business owners to move locations.

A. We hope that we’re pretty set, but we don’t know for sure. There could be some unforeseen major unintended consequences or loopholes that we didn’t foresee that could force us to revise the rules up. People will try to punch loopholes into it to get around the rules. If that happens, we will revise the rules.

Q. Do you have an estimate as to the percentage of dispensaries that will not cultivate and just operate a dispensary?

A. I’ve heard that a fair number of applicants are not planning to cultivate. Whether they can do that will depend on if there are enough planning to cultivate and not operate a dispensary. The inventory will have to come from somewhere.

Q. When will the Dispensary Registration Form be available on line?

A. Probably 10 days before applications start coming due. Before that we will have a Web site up for qualified care givers and their patients and we will also post a flow chart for dispensary applications.

Q. I am told that there will be a counter on line that will show the number of applications per CHAA is that true? Will it show total applications or just those that are administratively complete?

A. Yes. Everyone will be able to see where applications are coming in. So if they see that one CHAA has a lot of applications and another may have none, they may want to apply in a different CHAA. The counter will only show total applications.

Q. If someone is legally cultivating as a caregiver, and a dispensary opens within 25 miles of their location will the caregiver be notified?

A. The caregiver can still grow. The 25-mile rule refers to the distance between the dispensary and the qualified patient’s address. If a dispensary opens within 25 miles of the qualified patient, the patient’s caregiver would no longer be able to grow for that patient, but could still grow for other patients.

Q. How long will a caregiver have to cease operations and stop cultivating once a dispensary opens within 25 miles of a patient’s location?

A. Probably until license renewal time. We don’t have the manpower to issue new licenses to the caregivers every few weeks.

Q. Since all dispensary licenses expire each year, say in August, your requirement for an audit “of the previous year” must be submitted along with the financial statement 30 days before the expiration of their dispensary certificate. If it’s July 1, for an example, since an “audit” by an independent CPA will take many weeks if not months to prepare and many dispensaries will have a tax year end of 12/31, what date is the end of the “previous year for each renewal”?  Would that be 12/31/11 or maybe 5/31/12 or 6/30/12?

A. If the registration is in mid-August, they probably wouldn’t be operational until near Christmas. So their first several months would have zeros or losses as they set up operations. They can elect to have fiscal years other than calendar years. The “end of previous year for each renewal” is still one of the technical issues that needs to be worked out.

Q. Is there any one area of the rules that you feel still needs to be tweaked?

A. We will likely add a provision for documentation from the city that the dispensary be in accordance with the zoning grid. A special use permit won’t be needed. Local zoning laws will have precedence.

Q. What is the true definition of “corporate bankruptcy” in Section R9-17-304 (D)(1)(h)(x)?  If someone owns a minority interest (e.g., 30 percent) in an LLC and is not the manager or the managing member and that LLC filed for bankruptcy, does that qualify as a “corporate bankruptcy” just because of the LLC filed for bankruptcy?

A. It won’t matter if the person is not in a decision making capacity with the dispensary.

Q. Does the requirement for a dispensary in R9-17-304 (D)(1)(f) to have $150,000 available to begin operating mean that the money has to be in the name of the entity at the date of application?  Or can it be held by one of the owners/directors/applicant?

A. It doesn’t have to be in “cash.” But there has to be proof of any credit granted. The dispensary can’t simply have applied for credit. It has to be approved, even if the dispensary doesn’t have the money in hand yet.

Q. Is there a subjective side to the review of the application that is not specifically stated in the rules that will allow the DHS to disqualify applications from the lottery even though they have met the minimum standards of R9-17-302?  For example, one application has a security plan that indicated it will invest in a biometric entry system and the other did not mention such.  So in the eyes of the reviewer is the biometric plan is better so the applicant without the biometric system is eliminated from the lottery?

A. The decisions will be reviewed to ensure you meet minimum standards. If you go far above and beyond in some of those, it won’t put you at a competitive advantage.

Q. There were some late final changes to the final draft rules – letter from owners of property – $150k amount will be trackable for each applicant, could you please explain this?

A. We’re trying to make sure that all applications are done in good faith. We’re doing the best we can. Is it 100 percent foolproof? No.

Group Demands Humble Ouster

A group representing dispensary owners is calling for the resignation or removal of Will Humble, director of the Arizona Department of Health Services. Alan Sobol of the Arizona Association of Dispensary Professionals, Inc. (AZADP), which says it is the state’s largest medical marijuana trade association, sent the following to state officials in early April (message is quoted verbatim):

“Att: Governor Brewer, AZ Attorney General, All AZ State Legislators, US Justice Department:

“Please do not allow your stance on Marijuana, pro or con, to affect your position on the following complaint.  This is not about marijuana, this is about corruption.

“Mr. Humble has overtly sold uniquely qualifying licensing requirements to individuals of a private organization. This qualifying information, as you will learn here, has never been publicly promulgated.

“Mr. Humble has promised the residents of Arizona that implementation of the Arizona Medical Marijuana Act rules will be completely fair, open, honest and transparent.   Mr. Humble has stated that nobody and no organization has any influence or any inside track to a license of any kind. (See Directors Blog 12/10/2010).  As you will learn here, that is simply false.

“For months now the AZADP has been making claims of collusion between Mr. Humble and the Medical Marijuana Policy Project, (MMPP) the Arizona Medical Marijuana Association, (AZMMA) and other influential organizations.  We have previously stated on numerous occasions that AZDHS has been in back-door contact with these organizations exchanging information for the purpose of developing rules that will unfairly benefit, and to the detrimental of all other,  meet the needs of their private membership.

“We have previously produced  copies of documents submitted by AZMMA and MMPP to the health department intending to influence the AZDHS to limit access  to licensees  who are considered  ‘undesirables’ by those organizations,  (individual applicants with less than $500k cash liquidity).( see AZADP newsletter 1/4/11).

“We have previously produced pictures showing Mr. Salow (AZDHS) meeting with Jordon Rose, (Rose law Group) and Recorded statements by Andrew Meyers, AZMMA/MPP admitting that he is working with AZDHS to develop the Rules.

“To fully understand the gravity of this situation you must first understand who these organizations are. MPP is a lobbyist organization based in Washington DC. MPPS’s stated goal is a nation where marijuana is legally regulated similarly to alcohol.  Many may support that vision, but the reality is MPP is fast becoming the new American Drug Cartel.  Through their efforts in support of state medical marijuana initiatives, they develop organizations such as AZMMA to promote rules which benefit their members. The unstated goal is to influence administrative rule making agencies such as AZDHS in an attempt to capture and control the retail/wholesale marijuana.”

After seeing the communiqué, Humble’s response was: “I serve at the pleasure of the governor, not Alan Sobol, and if she asks me to go, I’ll go. I’m not going to resign because a bunch of people got together in a room and decided.”

Tags: , , , ,

Leave a Reply

PO Box 15213, Scottsdale, AZ 85267, (602) 315-8808