Legal Update: Implications of the Recently Enacted Medical Marihuana Facilities Licensing Act on Municipalities

With the recent legalization of recreational marihuana in Massachusetts, Maine, Nevada and California, the total number of states in which recreational marihuana use is legal stands at eight. Twenty states have legalized marihuana for medicinal use. While nationwide legalization is far from a foregone conclusion, with over half of the country legalizing marihuana use in some form the marihuana industry is poised to be the next big growth industry. However, in Michigan, prospective marihuana entrepreneurs are in a holding pattern as the state comes to terms with a statutory scheme plagued by gray areas.

In September 2016, in an effort aimed at resolving some of the ambiguities in the Michigan Medical Marihuana Act, Governor Rick Snyder signed three bills into law (House Bills 4209, 4827 and 4210). These bills are aimed at creating a licensing and regulatory framework for medical marihuana, which must be implemented by December 15, 2017. Currently, the Department of Licensing and Regulatory Affairs is in the beginning stages of establishing the new regulatory framework and it is no longer accepting applications or issuing licenses for marihuana facilities. In the meantime, prospective marihuana facilities must work with their local governments to procure the licenses and permits necessary to operate a marihuana facility.

Section 205 of House Bill 4209, now known as the Medical Marihuana Facilities Licensing Act, imposes a licensing mandate on municipalities (defined as a city, township or village).  Specifically, Section 205 requires municipalities to adopt an ordinance authorizing any marihuana facility. Municipalities may also, through ordinances or zoning regulations, limit the type of marihuana facilities and/or the number of facilities operating within its borders. However, municipalities are prohibited from imposing regulations regarding the purity or pricing of marihuana or conflicting with statutory regulations for licensing marihuana facilities. Municipalities may also impose on marihuana facilities an annual, nonrefundable fee of up to $5,000 to help defray administrative and enforcement costs.

Within 90 days of receipt of notification that a person or entity has applied for a license to open a marihuana facility, municipalities must provide the following information to the newly created Medical Marihuana Licensing Board:

• A copy of the local ordinance authorizing the facility;
• A copy of any zoning regulations that apply to the proposed facility; and
• A description of any violation of the local ordinance or zoning regulations committed by the application if those violations relate to activities licensed under the act.

This information is exempt from disclosure under the freedom of information act.

Licenses to operate a marihuana facility are exclusive to the licensee and may only be transferred upon approval from the municipality and the Licensing Board. Failure to obtain approval is grounds for suspension or revocation of the license.

Municipalities in which marihuana facilities operate receive 25% of the funds in the newly created Medical Marihuana Excise Fund, based on the number of facilities operating in the municipality. Counties receive a greater portion. Licensees are required to submit annual financial statements to the municipality.

Matt Cross is an attorney in our Traverse City office where he focuses his practice on insurance defense, law enforcement defense and litigation, and municipal law. He may be reached at (231) 922-1888 or mcross@cmda-law.com.