The New Jersey Assembly Oversight Committee held a hearing on the NJ Cannabis Regulatory Commission (NJCRC) and the NJ Economic Development Agency (NJEDA) program to provide companies in cannabis access to capital or simply cash to improve the New Jersey cannabis market.
“The cannabis journey to get here has been long, at times frustrating, at times encouraging,” Assembly Committee Chair Joe Danielson (D-Somerset/Middlesex) said.
“It is not for the faint of heart. It is complex,” NJCRC Executive Director Jeff Brown said about the New Jersey cannabis market.
He noted cannabis access to capital, real estate, banking, and town resistance, in the New Jersey cannabis industry have created significant problems.
Danielson said people call it “glacially slow, expensive, and a very complicated process.”
“There is a growing sense… that people of color … are finding themselves left out of the market,” he added.
Danielson explained he wants minorities, women, disabled veterans, and micro businesses to succeed in the New Jersey cannabis market.
Growing the Market
“The CRC has issued awards for 1,000 conditional licenses. That’s the first step for a lot of business owners. We’ve now issued 72 awards for annual licenses, about half of them converting from conditionals,” Brown said.
He said among those 72 many went to minorities women and Social Equity applicants.
“We are passing and surpassing legislative benchmarks,” Brown said. “Our licensing process was developed using lessons learned from the past.
He noted that there are very few reasons for not approving an application.
“We continue to work with our state partners to help companies that face barriers to get into the cannabis business,” Brown said.
He noted that the Social Equity Excise fee funds the NJ Business Action Center (NJBAC) training program. Brown touted it as a model that could be copied across the country. He said they want to help legacy operators.
“We want people to convert into the legal market. We want people to be licensed,” Brown explained.
He explained the EDA is going to distribute $10 million in grants.
“Can the legislature do anything more to help you push that agenda forward?” Danielson asked about helping the prioritized applicants.
“Access to capital is a huge one. Until something happens federally, there’s unfortunately not much that can be done on the state level. Traditional forms of financing just don’t exist in this industry. That’s why we’re excited to work with the EDA.”
NJEDA and Cannabis Access to Capital
NJ EDA CEO Tim Sullivan explained their $10 million grant program outlined at the last NJCRC meeting to help start-up cannabis companies.
“New Jersey is at the forefront of equitable marijuana reform,” he said.
Sullivan explained that reducing racial disparities in the New Jersey marketplace is a critical step forward.
“This program will erode considerable barriers to access for comms of color,” he declared.
“By 2025, cannabis is expected to bring in approximately $2.4 billion to New Jersey’s economy,” Sullivan added. “Our goal is to provide access to capital for cannabis businesses who do not have access to traditional funding.”
He explained the EDA conducted multiple listening which informed their program.
“It requires a large amount of start-up capital,” Sullivan said about getting into the industry.
The High Cost of Opening
Cooper said it costs between $650,000 to more than $10 million to open, depending on the license and size of the company.
“These barriers are exacerbated by the fact that these businesses cannot use most traditional banking channels,” Sullivan said.
Cooper noted that seeking to raise private capital must do so through family and friends, which is hard for many. Thus, the barriers to cannabis access to capital make many the prey of predatory lenders.
“60 percent of funding will go to Social Equity applicants,” she said.
They can get $150,000 for a range of start-up costs.
She explained Product 1 would go to conditional license holders.
“The NJEDA will waive its $1,000 application fee for Product One applicants.
Cooper explained Product 2 will launch first and will be for those closer to opening but still need help. Forty percent will go to Social Equity, while 5 percent will go to Impact Zone companies.
Impact Zones are places where there was previously a high number of marijuana-related arrests.
There will be 24 awardees in 2 rounds for Product 2 Cooper explained. The 2nd round of money is available once they win conversion from the NJCRC.
“It will be launched next month,” she announced.
Danielson noted that Product 1 comes with less money. It’s designed for companies that need money the money to secure local approval and land.
“I would think that it would be swapped,” he said.
“This came directly from the candidates we’ve been speaking with. They’ve been bleeding money literally dry. This is a reimbursement program as well as a look forward program as well,” Sullivan said.
New Jersey Cannabis Market Details
“It sounds like you will sit with people and counsel them,” Danielson said.
“We’re going to handhold you through all this,” NJEDA Chief Community Development Officer Tai Cooper said.
“We’re looking at creating a suite of products,” Sullivan said.
He said a revolving loan program is another program they will unveil in the future to improve the New Jersey cannabis market.
“These are grants,” Cooper explained about Product One and Two.
“So, you’re thinking about doing a loan?” Danielson asked.
“Probably low interest, yeah. The lack of traditional lending… is a huge challenge,” Sullivan said.
Danielson asked if the license application prioritizations would count towards money.
Sullivan said they would follow the law.
“We’re usually partnered with a bank… relying on their expertise. That dynamic is not in play in cannabis, given federal prohibition. Banks with a federal charter can’t lend,” he noted.
“Is there anything we should be doing that we’re not doing?” Danielson asked.
“We’re in the early days of this. We think we’re the boldest and biggest state-level program in America. We’re going to pilot, learn, scale it or not depending on if it goes well,” Sullivan said.
“This is really good news,” Danielson said. “You might be the saving grace for a lot of people.”
Limited Amount of Money for NJ Cannabis Grants
Danielson noted $10 million is not a great deal for the number of companies that need money.
“We expect to be oversubscribed pretty quickly, unfortunately,” Sullivan said.
Please give us more money,” Cooper jokingly asked.
“Those are low numbers. It’s not a lot of recipients,” Danielson said.
“We really want to help a small amount of people rather than kinda sorta help a big amount of people,” Sullivan said.
He said more money could come in the future.
Town Issues
“Only about a third of municipalities are opted in,” Brown said.
The local regulatory process varies widely in quality.
“That makes it a challenge for license applicants to find both real estate and a welcome host municipality,” Brown explained. “The CRC is working on creating a database to see which towns are opted in.”
He explained NJCRC Chief of Staff Justin Rodriguez and Director of Government Affairs Jesus Alcazar are working on towns. They also plan to release further town guidance in the future.
“Should we consider a change?” Danielson asked.
“We’re going to see more municipalities opt-in. Just by witnessing it,” Brown said.
Danielson said he knew a town that opted out because the CRC had issued no guidance.
“Should we do legislation to require towns to report to the Commission if they opt out?” Danielson asked.
“We’re not having issues with them reporting,” Brown said.
“There’s certainly a way to streamline those processes,” Brown said about local licensing.
New Jersy Cannabis Market Issues
“We need competition to increase revenue but also to bring down prices significantly, especially for patients,” he declared.
Brown said they’re working on cannabis lounge and edibles rules.* Medical cannabis academic research and product testing guidance are also forthcoming.
“We need help. We’re a team of 63 growing day by day,” he explained.
Brown said businesses face issues they cannot address.
He noted that medical cannabis companies are opening from the 2019-2021 medical license round.
“As they become operational… we’ll see many applying to expand to serve to adult-use sales,” Brown said.
Previously there was a one-year waiting period.
“We need more businesses operational. We need more retail sites, more diversity, and more competition,” he explained. “What’s really limiting sales is that high price and lack of locations.”
Priorities
“If you have legal sources of cannabis, that reduces the market share of illegal sources,” Brown said. “Whether municipalities opted in or opted out, there’s certainly marijuana there.
Danielson said he found a jar while cleaning he suspected was his daughter’s.
“Took me weeks to get rid of it,” Danielson joked.
“Does it have to be this complex? Can we dumb it down a little bit?” he asked about the application process.
“The hurdle is really people getting up to speed to operate in this business,” Brown said. “It’s a high-tech industry, and not everybody knows that going in.”
Danielson wanted them to be more competitive with the legacy market.
Application Issues
“Some of these applicants are leasing or buying buildings for years. Some have fallen apart because they have run out of funding. The collection of state agencies have just moved too slow. How can we better that?” Danielson asked.
“We received 1500 applications early on. There was a crush. We devoted close to 20 staff members… including me,” Brown said. “Things are moving a lot more quickly now. As we staff up, that will continue.”
“Are we going to allow food in there?” JD asked about lounges.
“That’s in the law,” Brown said, noting it’s not allowed.
“We had to get votes,” Danielson said. “I thought it was silly.”
Brown said they could have a food truck outside and food delivered.
He was unclear if the lounge owners could get a percentage of the sales.
Danielson asked if he personally preferred Sativa or Indica.
Brown said those are not good ways to define cannabis. Phenotypes and the level of THC and CBD are more accurate descriptions of the effects of a cannabis strain.
“It’s a hybrid at this point,” Brown explained regarding strains.
“I’ll mark you down for the strong stuff,” Danielson joked.
