New York cannabis retail opportunities take shape after opt-out deadline passes

Although roughly half of New York’s municipal governments opted out of permitting recreational cannabis stores before a Dec. 31 deadline, those opt-outs aren’t set in stone.

That means new adult-use retail opportunities could still open up in the nation’s fourth-largest state by population, even as aspiring recreational marijuana retailers start making plans for communities that have already opted in.

The Dec. 31 opt-out deadline for retail and cannabis consumption sites followed former New York Gov. Andrew Cuomo’s signing of an adult-use bill into law last March.

Still, the exact rules surrounding recreational marijuana retail in New York remain unknown.

The “lack of clarity on what the regulations will be for (recreational) dispensaries has been a big driving point in municipalities deciding to opt out,” said Heather Trela, director of operations and a fellow at the Rockefeller Institute of Government, a public policy think tank.

Trela oversees the institute’s online tracker for municipal cannabis opt-outs in New York and studies the state’s opt-out landscape.

Cannabis businesses approaching municipalities to get the ball rolling might wish to:

• Connect with opt-in communities as a collaborative partner that will listen to local concerns.
• Be prepared to offer a positive contribution to the community, such as charitable work.
• Approach municipalities that have currently opted out with care, if at all.

Opt-outs can still opt back in

At least 48.8% of New York’s municipal governments opted out of permitting adult-use cannabis retail by the deadline, with at least 55.5% opting out of consumption sites, according to the Rockefeller Institute’s tracker as of Jan. 12.

Roughly 39.8% had definitively opted in.

The institute’s tracker is still being updated to include municipalities where the opt-in status is unknown.

The tracker excludes New York City, although all five of its boroughs have reportedly opted in.

While opt-out municipalities in New York can opt back into permitting retail or consumption sites at any time, once opted in, they can’t opt out again.

“I think being more conservative – small ‘c’ conservative – municipalities opted out, for a large part because they were just unsure of what they were opting into,” Trela said.

“With more information, they may change their minds.”

New York municipalities and recreational marijuana stores

A tally of New York municipalities and their decisions on allowing recreational marijuana stores as of Jan. 12, 2022. Data provided by the Rockefeller Institute of Government.

Unlike the retail sector, New York municipalities can’t opt out of cannabis cultivation and manufacturing by licensed businesses.

Christopher Anderson, director of research and programming for the Association of Towns of the State of New York, believes some communities will “opt back in when they see real-world examples of successful retail outlets” and business proposals are brought before them.

“If you’re in the middle of Oneida County, up in the hinterlands, there’s no pressing need to opt in – you can opt out, take your time and then only worry about the matter, or consider the matter, when you have a proposal in front of you,” Anderson said.

Municipalities might also rethink opt-outs “once participating municipalities begin seeing tax revenue,” Beacon Securities analysts Doug Cooper, Russell Stanley and Christopher Santos predicted in a Jan. 4 note to clients.

“Revenue generation is always on town officials’ concerns,” noted the Association of Towns’ Anderson.

“But I think they also have issues with public perception and fear, basically – it’s an unknown.”

Next steps in New York

The chair of New York’s Cannabis Control Board, which wasn’t fully established until late last year, recently acknowledged that recreational retailers won’t be licensed to open until 2023.

Regulations for adult-use cannabis retailers have yet to be issued.

“Now that the board is constituted, we are examining the critical elements of the timeline, including our need for meaningful public engagement, the interplay with equity goals, and the necessity of establishing a stable market,” New York Office of Cannabis Management (OCM) spokesman Freeman Klopott said in a statement to MJBizDaily.

“We expect to release adult-use regulations in the first quarter of this year.”

The Rockefeller Institute’s Trela said opt-in municipalities can pass zoning regulations to control cannabis businesses locations – a process that has “already started” – as well as approve time, place, and manner restrictions.

The 10 companies currently licensed to produce and sell medical cannabis in New York are already allowed up to four dispensaries, plus another four under the new adult-use law, noted Toronto-based Beacon Securities, with three of the dispensaries permitted to serve the adult-use market.

One of those existing medical operators, Chicago-based Cresco Labs, currently has dispensaries in Brooklyn, Huntington Station, Bardonia and New Hartford.

Bardonia and Huntington Station have opted out of recreational retail, at least for now.

Those locations will continue as medical dispensaries “for the time being,” said John Sullivan, Cresco’s executive vice president of public affairs.

“We will continue to talk to those towns about what their thoughts are,” he said.

“I don’t think any doors are shut yet. All these towns are still looking at this.

“The only way to preserve being able to opt out … with the (regulations) not out yet, was to opt out before the end of the year.”

In some other Cresco markets, added company spokesperson Jason Erkes, communities have opted out at first, then changed their minds.

“And then the next time around, they’re raising their hand, saying, ‘Hey, wait a minute, we want new firetrucks, we want new computers for the school,’ … and then they’re fighting in that second round to get stores in their community.”

Making inroads with municipalities

Some New York municipalities are creating processes to vet potential cannabis businesses, according to Rob DiPisa, co-chair of the marijuana law group at Cole Schotz and a partner in the firm’s real estate practice.

DiPisa, who represents landlords and cannabis companies in New York, offered this advice for cannabis businesses approaching opt-in towns:

“I think, first and foremost, you need to approach these towns not (with the attitude of), ‘What can the town do for us,’ but you really need to give them a presentation as to what you are going to bring to the town, what this business is going to mean for the town.”

“What kind of programs are you going to help the town with?” he continued.

“Are you going to raise money for charities? It’s just like any other business going in these municipalities.

“You want to show them that you’re going to be a partner, you’re going to be part of the community, and that you are going to listen to the concerns of the town.”

When approaching opt-out towns, Anderson of the Association of Towns advises contacting members of a town board directly to set up a conversation before making a more formal case at a board meeting.

“But certainly, talk to the town officials first – you may be the first person to talk to them about the issue,” he said.

“And what they may need is more information.

“And you also may find that they’re just not interested at all, obviously.”

Cole Schotz’s DiPisa said he advises clients against trying to launch a business in an opt-out municipality.

“If they really don’t want you there, that municipality is going to fight you every step of the way, and this business is hard enough as it is,” he said.

However, he added, opportunities might exist in opt-out municipalities that have decided to opt back in, “and you’re one of the first groups that is in discussions with them right before, or while they’re in the process of opting back in.”

Now that everyone knows which municipalities have proactively opted in, DiPisa said, applicants will be busy competing to enter those communities.

“So you’ve got to approach it like a partnership, you have to be open to change,” he said.

“You can’t just walk into these towns and think that you are going to do whatever you want, without any kind of input or collaboration, because it’s just not going to work.”

Solomon Israel can be reached at solomon.israel@mjbizdaily.com.