Bumpy start expected for Washington state’s legal marijuana sales

Jul 4, 2014, 9:50 PM | Updated: Jul 7, 2014, 7:56 am

Bob Leeds has a lot riding on the sale of recreational marijuana – he cashed in all of his retirement to fund his grow operation – but he’s confident he’ll make some money when his product hits store shelves this week.

Leeds, co-owner of Sea of Green Farms in Seattle, told KIRO Radio he’s one of only two operators in the state who are ready to go Monday when the Washington State Liquor Control Board grants licenses to about 20 retail locations.

“I have promises and contracts for all of the pot that we’ve grown so far,” said Leeds, who just harvested about 40 pounds of marijuana. He owns 5,000 plants and has plans to ramp up to as much as 100 pounds every three weeks.

Leeds said he was nervous at first, especially after he finally broke the news about his new gig to his family, but now he’s just excited to be one of the first to make history in Washington state.

“It’s the most fun thing I’ve ever done,” he said.

Fun, but also a lot of work. Leeds said it took over a year to get where they’re at now and they did everything the state asked them to the same date the state asked, and that included getting the license to grow.

“It took us just six months to prepare to file the application.”

Leeds said that included developing a partnership, getting the business plan and financials ready, background checks, fingerprints and everything else they might need for the day they had to file.

It didn’t end there.

“They’re still working on the rules, actually. Every day we get a new memo from the state saying this has changed, that has changed, now you have to do this,” Leeds said.

Because of that, Leeds said he’s not surprised there aren’t more growers, which means pot shortages are likely.

More than 2,600 people applied last fall to grow marijuana, but those applications are being reviewed glacially by the board’s 18 swamped licensing investigators. Only about 80 growers have been approved, and some won’t harvest by early July. Hundreds of applicants haven’t even been assigned an investigator.

There will also be no edibles available. People who want to make brownies, cookies or other pot-infused treats must have their kitchens inspected by the state. Of the two tested so far, one failed — it didn’t even have a hand-washing sink. The report on the other hasn’t been completed.

Prices could run more than $25 a gram for the heavily taxed pot — about twice what the state’s unregulated medical dispensaries charge — until more growers are licensed, said Randy Simmons, the board’s legal pot project manager.

Leeds said he’s heard accusations that retailers and growers are jacking up prices just to cover their start-up finances, but he said that’s not the case for them.

“One of the problems is people are used to paying for medical marijuana and they get that really inexpensively and they don’t have to pay taxes. Because of the expenses that we go to to produce this, and we are trying to produce the very best, safest product that we can, we’ve tried to keep the price range for our really top grade around $10 a gram to the retail store. We also have product as low at $7 a gram.”

Leeds expects it’ll take him five to 10 years to pay back what he’s already financed.

The Liquor Control Board has capped the number of retail stores statewide at 334, but dozens of jurisdictions have banned them, prompting lawsuits in two cities. Seattle was awarded 21 stores, Bellevue four.

While Leeds is confident of his success, others say they’re stuck.

Douglas Taylor spent $230,000 on land for his planned outdoor grow. The payments run $1,600 a month, and he said the board hasn’t even started reviewing his application. Meanwhile, he has missed the outdoor growing season — a revenue loss of about $500,000, he estimates.

Ed Rhinehart, 58, a retired businessman, counted on being licensed for an outdoor grow by April. He hired four workers, spent $22,000 on a required fence and dropped $10,000 on surveillance cameras. April 15, he laid everybody off. After months of back-and-forth with the board, Rhinehart expects to get his license soon. But he too will have missed the outdoor season.

“If I had to do it all over again, I wouldn’t have done it,” he said.

Pete O’Neil said he saw the legalization of marijuana in 2012 as a path to retirement, or at least to his kids’ college tuition.

He’s paid tens of thousands of dollars in rent on possible locations for a pot-shop chain, hired lawyers and picked out flooring.

O’Neil struck out in the state’s lottery for coveted retail licenses. He has unsuccessfully tried to buy companies that scored a lucky number. In frustration, he’s turning what would have been his Seattle retail store into a medical marijuana dispensary.

“Our company is bleeding money, and I haven’t sold a single joint,” O’Neil said.

Many would-be retailers allege missteps by the board. For example, they point to mixed signals about whether officials would allow multiple people to apply for retail licenses using the same address. The board did, and some groups formed numerous corporations to apply myriad times — significantly boosting their lottery odds and prompting complaints they gamed the system.

Others say they were kicked out of the lottery because inaccurate measurements placed them within 1,000 feet of a protected area, because board staff misread their criminal history, or because they supposedly failed to turn in complete applications.

Simmons said anyone who believes mistakes were made in their removal from the lottery should appeal, and 127 people have done so. But it’s unclear what the state will do for them if they succeed.

While some potential marijuana retailers and growers struggle to iron out the details with the board, there’s no stopping what’s coming Tuesday as stores are able to open their doors.

Of course, Leeds is not sure doors will actually unlock because he said the licenses will take a day to process and then he has to file his manifest. So maybe his marijuana will be ready for you on Wednesday.

Get it fast. He said growers in Colorado completely sold out within three days after legal sales began there.

The Associated Press contributed to this report.

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Bumpy start expected for Washington state’s legal marijuana sales