Portland City Hall Is Poised to Admit It Wrapped Cannabis Businesses in Too Much Red Tape

Weed entrepreneurs have numerous complaints about the Office of Neighborhood Involvement.

Last year, Paul Pedreira decided to walk away from a career as assistant director for the NBC television series Grimm and sink his savings into Oregon's growing recreational cannabis industry.

He planned to open a dispensary in St. Johns. But he soon found himself tangled in a bizarre thicket of city regulation.

Portland nixed the location of his store in 2015, even though the state had approved it. When Pedreira found another commercial building, the Office of Neighborhood Involvement required him to undergo an extensive permitting process to change its use to allow marijuana inside. He had to spend $3,600 for an architect to draw floor plans, even though the only major changes to the storefront were a paint job, some new light fixtures and security cameras, he says.

Pedreira finally opened Portland Best Buds on North Lombard Street. But he remains bitter toward City Hall.

"I don't want to sound over the top," says Pedreira, "but it's very authoritarian."

It's not unusual to hear a Portland small-business owner griping about excessive red tape. And cannabis entrepreneurs, lawyers and activists have been grumbling for several months about onerous rules created and enforced by the Office of Neighborhood Involvement.

But this time, most of the City Council seems to agree: Marijuana business regulation under Commissioner Amanda Fritz has gone too far.

A majority of the council appears poised to roll back some of the city's year-old rules governing where and how dispensaries operate.

"We shouldn't perpetuate fees and regulations simply to maintain a regulatory structure if the regulatory structure is unnecessary," says Commissioner Steve Novick.

Novick and his colleagues are being urged on by U.S. Rep. Earl Blumenauer (D-Ore.), who in May complained to Mayor Charlie Hales and the rest of the City Council that Portland duplicates the state's marijuana regulations, to the detriment of small-business owners.

Critics like Blumenauer note that an entrepreneur seeking a recreational license would pay twice as much in Portland as in other cities—because Portland charges $4,975 a year per license on top of the $4,750 that goes to the state.

And they say the Office of Neighborhood Involvement—Fritz's domain since Hales dropped it in her lap in 2015—is the wrong place for fostering a burgeoning industry. (Fritz ran ONI from 2009 to 2013, when Hales took over for two years, before abruptly giving it back to Fritz.)

"The notion that there will be an expensive, duplicative program raises questions," says Blumenauer. "For Portland, it's time to get it right."

This fall, the City Council will discuss whether to trim back the rules it passed less than a year ago, on Sept. 30 and Oct. 21, 2015.

"I think it's worth taking a look at the whole structure," says Novick, who last year supported the rules.

"We need to take a fresh look," says Commissioner Nick Fish, who also voted to adopt the regulations.

They're joined by Commissioner Dan Saltzman, who last year was the lone no vote against Portland's marijuana regulations. "I see no rhyme or reason why we have a separate regulatory program," he says. "I think the regulations that the state Legislature and the [Oregon Liquor Control Commission] have spent a lot of time on are sufficient."

Frustration with city cannabis regulations had been building through the spring—especially after the Office of Neighborhood Involvement in May banned the giveaway of marijuana at any event to which tickets had been sold. (Disclosure:WW has sponsored such events in the past.) Portland has taken other restrictive measures against practices state law otherwise allows, such as banning home delivery of recreational marijuana.

Fritz defends ONI's work but says she's open to revisions, including allowing marijuana deliveries. "We are trying to make this a success for small business," she says.

Even as its decisions became more controversial, ONI's marijuana office grew: It now has nine employees.

Portland's fees on marijuana businesses spell big bucks for city government—at least $825,000 is projected in 2016-17. But the system is set up to fund itself, meaning the fees pay for the regulators and aren't supposed to be tapped to pay for other wish-list items. (That's why the city is separately seeking voter approval of a 3 percent tax on recreational marijuana sales this November.)

To a far smaller degree, the city also duplicates the state's regulation of bars—a task that also falls to ONI.

But Saltzman says it's a mistake to treat dispensaries like bars, because dispensaries have far fewer and less serious impacts on surrounding neighborhoods. People consume alcohol at bars, whereas they simply shop for pot at dispensaries. "It's an entirely different buzz, so to speak," he says.

Mayor Charlie Hales championed the city's rules. His office says he's deferring to Fritz now.

Mayor-elect Ted Wheeler, who employed a campaign fundraiser who lobbies for the marijuana industry, says "we should regularly evaluate which of Portland's regulations are unnecessarily duplicative."

Advocates for rolling back Portland's rules point 110 miles south to Eugene—where the city has no rules specific to marijuana businesses. "We treat them the same as any other business applying for a permit," says Jan Bohman, a city spokeswoman.

Eugene, of course, is far smaller than Portland, with only 28 dispensaries selling recreational and medical marijuana, compared with 156 in Portland, according to the Oregon Health Authority.

Still, the fact that Eugene has come this far with no additional regulations is striking to some commissioners.

"I want to hear from the people of Eugene whether the way they're doing it has caused any problems," says Novick. "If Eugene with no additional regulations isn't getting any complaints, then maybe we rethink the whole thing."

For Pedreira, change can't come soon enough.

"It feels like they're trying to thin out small businesses," he says, "by making it harder and more expensive to operate."

Complaint Desk: Portland entrepreneurs gripe about the city's pot regulations.

When Portland adopted rules last year to govern its growing pot industry, Mayor Charlie Hales said he preferred overregulation.

"I want us to assert our ability to be a local regulator," Hales said during a 2015 City Council meeting, "and then, over time, tune those regulations."

Dispensaries and other cannabis businesses have chafed under those rules. Here are their top five complaints. BETH SLOVIC.

1. Portland slams business owners with fees.

Retail shops applying for medical and recreational licenses from the city pay $975 in fees for each application, even though the forms are identical. They then pay $3,500 and $4,975 license fees annually. That's on top of the license fees they pay to the state. No other Portland business faces these high fees. New bars, for example, pay $100 application fees and $35 annual renewal fees.

2. Portland imposes requirements that don't apply to other businesses.

As a condition of their city licenses, pot businesses operating in commercial zones also have to obtain commercial building permits. Other businesses don't automatically face this hurdle, says Ross Caron, a spokesman for the Bureau of Development Services.

3. Portland's rules duplicate the state's.

State officials, for example, ask shops for security plans. So does the city. The state requires owners to detail how they'll keep minors from buying pot. Portland seeks similar plans, which also call for dealing with complaints from neighbors.

4. Portland's Office of Neighborhood Involvement gets things backward.

To apply for a state license to sell recreational pot, owners need what's called a land-use compatibility statement from the city. To get that, owners must pay the $975 recreational marijuana application fee and the $4,975 license fee. That means they're paying for a city license before knowing whether they'll be approved. "It's unclear what happens from there," says Meghan Walstatter of Pure Green.

5. Portland prohibits activities that the state allows.

Portland voters overwhelmingly approved legalization, but city rules are more restrictive than state regulations. For example, Portland doesn't allow pot delivery to homes even though the state does.

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