Highs and lows with pot bills

Legislators weed through bills amidst speculation about repeal
The Colorado Statesman

There were extreme highs and lows this week as the legislature began debating three bills aimed at regulating and taxing the budding recreational marijuana industry in Colorado, while also contemplating offering voters a crack at repealing the constitutional amendment that legalized cannabis just last November.

The most recent shocking moment occurred early Friday morning when draft legislative language emerged that would add a repeal trigger to a proposed taxation ballot question associated with the implementation of Amendment 64. If the tax question fails, then the amendment would be repealed.

Another astonishing moment occurred when lawmakers first killed an attempt to create a per se limit for driving under the influence of marijuana, but then amended one of two regulatory bills to include an almost identical proposal.

Lawmakers also reversed course on rejecting a so-called vertical integration model for retail recreational cannabis after reaching a compromise that would temporarily enact the framework.

Down the rabbit hole

The drama began Monday when the Senate Judiciary Committee voted 4-1 to kill House Bill 1114, sponsored by Sen. Steve King, R-Grand Junction, and House Minority Leader Mark Waller, R-Colorado Springs. The measure would have created a 5-nanogram limit for tetrahydrocannabinol (THC) at the time of a suspected driving offense. THC is the psychoactive ingredient in marijuana.

Observers had expected the measure to sail through the Senate after the House backed the legislation on a vote of 57-6, including a unanimous House committee vote. The legislature had also expressed urgency on the DUID bill after voters legalized recreational use of marijuana.

But lawmakers in the Senate raised concerns after an April 17 U.S. Supreme Court decision that in drunk-driving investigations, the natural dispersal of alcohol in the bloodstream does not constitute a requirement to justify a blood test without a warrant. Lawmakers are concerned that the ruling could be applied to blood tests associated with marijuana impairment during road stops.

King, a former police officer, was appalled with his committee for rejecting the proposal on Monday. He was the only one on the committee to back the legislation.

“At a time when marijuana use in Colorado is on the rise, this bill was desperately needed,” declared King.
But the House State, Veterans and Military Affairs Committee on Wednesday amended one of the regulatory bills, House Bill 1317, sponsored by Rep. Dan Pabon, D-Denver, to include the DUID proposal.

The vote on the amendment was 7-4, crossing party lines. Reps. Stephen Humphrey, R-Severance, Jovan Melton, D-Aurora, Dominick Moreno, D-Commerce City, and Joe Salazar, D-Thornton, opposed the proposal.

Salazar argued on behalf of medical marijuana patients, who use cannabis regularly for a variety of ailments. He pointed out that many of those patients may have a per se limit higher than 5 nanograms, despite not being stoned at the time. Salazar cited the U.S. Supreme Court decision.

“The court was very clear that even with an implied, or express consent… you can take that consent back, you can tell the government, ‘I’m taking my consent back…’” declared Salazar, who is an attorney. “In the context of medical marijuana patients … they’re given a constitutional right to be a medical marijuana patient… But there’s only one test that can be taken for a medical marijuana patient, and that’s a blood test…

“So, when you subject medical marijuana patients to one test only, and you tell them if you don’t take this test here — the only test you can take — we’re going to take your license from you,” he continued. “What medical marijuana patient would want to take that test?”

But Pabon, who is also an attorney, said legalization changed the game, suggesting that there could be a proliferation of drivers too stoned to drive.

“We are in a new era of use of marijuana in Colorado, and it’s absolutely incumbent upon us to have a standard for those who decide that they want to do this…” he stated. “It is not legal to get behind the wheel of a car and drive and put those friends and neighbors and children at risk of a very dangerous, potentially deadly situation.”
The committee ultimately backed the amended legislation by a vote of 6-5. Melton was the only Democrat to join Republicans in opposing the measure.

When the bill made it to the House floor late Friday afternoon — where it passed on a preliminary vote — Melton unsuccessfully attempted to amend the measure to once again strike DUID.

“In terms of putting those guardrails on, I don’t think they’re necessary given what we already have in our laws,” he told his colleagues.

Melton also cited the Supreme Court decision. But Waller pointed out that Colorado has express consent, which requires drivers to consent to a chemical test if a police officer has reasonable grounds to believe the person is driving under the influence.

“Colorado cops do not take warrantless blood draws based on probable cause… Colorado has an express consent law… that means before any person consents to having their blood drawn in a DUI case, they have to consent to it. And… when they consent to it, a cop doesn’t need a warrant,” exclaimed Waller.

Vertical integration

HB 1317 was also amended on Thursday when it made its way to the House Finance Committee to reflect a compromise on vertical integration. Vertical integration adopts the current medical marijuana code by requiring the supply chain to be under common ownership, and 70 percent of marijuana grown to come from such ownership.

The original bill had rejected the vertical integration model at the suggestion of Pabon, who chaired a legislative implementation committee for Amendment 64. But after being pressured by supporters of the vertical integration model — including those in the medical marijuana industry, law enforcement and citizens — Pabon reached a compromise.

Under the amendment, which passed Finance Thursday by a vote of 8-4, the industry would be subject to vertical integration through Sept. 30, 2014, but then it would be opened to the free market, without co-ownership requirements. Current medical marijuana businesses would still be given a nine-month head start. The timeline would breakdown like this:

• Oct. 1, medical marijuana licensees would be allowed to apply for a retail license, capped at $500;

• Jan. 1, 2014, non-medical businesses would be allowed to file intent to apply for a retail license; medical shops that applied for retail would be allowed to open if approved; and

• July 1, 2014, non-medical businesses would be allowed to apply for a retail license, capped at $5,000.

Department of Revenue officials estimate that approvals would take about 90 days.

“It is something that has been agreed to and carefully thought about and deliberated about, and that was a large part of the work, was to make sure that we had a system that was protecting the public safety, keeping this out of the hands of kids, cartels and criminals, but having the right regulated robust enforcement,” explained Pabon.

But Rep. Brian DelGrosso, R-Loveland, fears that the framework proposed by Pabon ties the hands of free market business and offers an unfair advantage. DelGrosso, who operates several Domino’s Pizza franchises, said he could not imagine if he was offered a nine-month head start to open his business.

“If I could move into a market and be the only person that could sell pizzas there for a year, that would be a huge competitive advantage…” he said. “It would make it very difficult for anyone else coming into the market to be able to play.”

HB 1317 faced other amendments during floor debate on Friday, including attempts to prohibit the sale of marijuana-related magazines and other publications to minors, and eliminating restrictions on the amount of marijuana that can be sold to non-residents. Both amendments failed.

The bill was further amended, however, to prohibit mass marketing campaigns that could reach minors and banning the sale of cannabis over the Internet.

Rep. Bob Gardner, R-Colorado Springs, offered an amendment to the Committee of the Whole report very early Saturday morning that would direct the Department of Revenue to limit the size of grows. The amendment passed by a vote of 42-18.

A recorded vote was taken because it was a Committee of the Whole report. A separate recorded vote on the entire amended HB 1317 is expected as early as Monday.

Taxation

The last of the marijuana controversy — and perhaps the most dramatic of all the commotion — surrounded how to tax the industry.

House Bill 1318, sponsored by Rep. Jonathan Singer, D-Longmont, would ask voters to approve a 15 percent excise tax, which would apply to school capital construction projects — as outlined by Amendment 64 — and a separate 15 percent special sales tax, which lawmakers intend to use for enforcement. A final 2.9 percent statewide sales tax would also apply. Local municipalities could also impose their own taxes.

After pressure from Republicans, Singer offered an amendment to HB 1318 late Friday night that would lower the special sales tax to 10 percent, while keeping the excise tax at 15 percent. The bill was laid over before the House voted on the amendment.

“This is the toughest part of this bill, we truthfully don’t know all of the results of legalization of retail marijuana. The best we can do is use our best educated guesses,” said Singer. “We need to figure out how much can we tax this without forcing diversion into the black market. But we also need to make sure that we don’t put on too low of a tax and we get stuck in the position of having to go back to the taxpayers…” But lowering the special sales tax to 10 percent was not enough for Republicans. DelGrosso offered an amendment to the amendment that would lower both rates to 10 percent.

He pointed out that a special sales tax rate of 10 percent would generate about $30 million in the first year, which he believes is far more than the $5 million requested by the Department of Revenue to conduct enforcement. He therefore believes both taxes should be capped at 10 percent.

“This is a number that is more appropriate; it is something that I feel is more palatable to the voters,” opined DelGrosso.

Critics of a high tax have also pointed to the potential for empowering the black market. If an average ounce of marijuana in Colorado costs $200, then a 33 percent tax would equate to about $66. Some fear that the intent of Amendment 64 would be lost if citizens continue to head underground to avoid the tax.

But Assistant Attorney General David Blake, who assisted in writing the tax proposal, told lawmakers that it would be unlikely for citizens to go back to the black market simply to avoid a tax.

“The legal market would have to be dramatically higher for a reasonable person to participate in the illegal market,” he testified.

The proposed tax percentages would be capped, meaning the legislature could choose to ratchet down the taxes. All new tax questions would need to be approved by Colorado voters, which is where the issue gets tricky.

Potential for repeal

Coloradans are notorious for rejecting tax questions, and without adequate revenue, the entire system would fall apart.

Enter Smart Colorado, a citizens group opposed to marijuana legalization. While the group says it did not propose a repeal — which would trigger if the tax question fails — the group acknowledges that it was part of the discussion with legislative leaders.

Only a draft of the proposal is circulating, which would take the language from Singer’s referred measure and add a repeal clause. Lawmakers are being very secretive about who is behind the proposal, but multiple sources have confirmed that Senate President John Morse, D-Colorado Springs, and Senate Minority Leader Bill Cadman, R-Colorado Springs, along with Rep. Frank McNulty, R-Highlands Ranch, are involved.

Just the idea of a repeal sent Amendment 64 proponents into frenzy. They immediately called a news conference to attack Smart Colorado as the organization orchestrating the effort.

“Ultimately what this comes down to is extortion. The proposal to repeal Amendment 64 is extortion,” suggested Mason Tvert, co-author of Amendment 64, at a morning news conference outside the Capitol Friday. “This proposal tells voters that they must agree to the tax rate being proposed by legislators, otherwise the constitutional amendment that they adopted last November will be repealed.

“This is a proposal being pushed by Smart Colorado, and we hope that our legislators are smarter,” he concluded.

Spokespeople for Smart Colorado scoffed at the idea that they proposed the idea. They held their own dueling press conference seconds after proponents finished. The result was a confrontation between proponents and opponents, who began verbally abusing each other in front of throngs of media.

“We had no financial stake in this,” said Diane Carlson, a member of Smart Colorado, who identified herself simply as a concerned mom. “Our whole incentive is to ensure that it is implemented in a way that does not compromise the safety of our kids, our communities, our schools, or the ability of our state and our businesses to prosper.”

Singer acknowledged that he is nervous about a repeal being included in a referred measure, which would require a two-thirds vote by both chambers to send to voters.

“There’s other parts of Amendment 64, like the decriminalization of marijuana,” stated Singer. “I think it’s not well put together, and it disregards the stakeholder process. So, it’s not something that I support right now.”

Other regulatory issues

While the repeal, taxation, vertical integration and DUID questions were the forefront of the debate this week, lawmakers also furthered several other more mundane regulatory issues.

Between HB 1317 and a separate piece of legislation, Senate Bill 283, sponsored by Sens. Cheri Jahn, D-Wheat Ridge, and Randy Baumgardner, R-Cowdrey, lawmakers are advancing revolutionary marijuana regulation that could be used as a model for the rest of the nation as it grapples with legalization.

Amendments 64 only permits adults 21 and older to possess up to one ounce of marijuana and have up to six plants growing in their home. The measure also legalized the cultivation of hemp. A separate hemp bill is moving through the legislature as Senate Bill 241.

But the majority of the rules and regulations are completely unknown to lawmakers, leaving the framework up to them.

The Senate Business, Labor and Technology Committee on Wednesday backed SB 283 by a unanimous vote. Along with HB 1317, the two bills makeup the regulatory framework for legalization.

A few of the proposals include:

• Empowering local governments to enact their own rules;
• Creating the crime of illegal possession of retail marijuana by an underage person to mirror the same crime for alcohol;
• Minimizing offenses related to marijuana paraphernalia;
• Creating a list of banned substances in cultivation, and establishing best practices;
• Establishing an educational oversight committee;
• Training law enforcement;
• Determining how to best destroy marijuana that cannot be legally sold;
• Prohibiting retail marijuana on school grounds;
• Adding marijuana to the statewide indoor smoking ban;
• Rules around prohibiting marijuana at child-care facilities;
• Permitting state business tax deductions for marijuana businesses;
• Creating an open container offense for cannabis;
• Converting the Medical Marijuana Enforcement Division to a single enforcement division;
• Permitting limited sales to non-residents, or tourists;
• Prohibiting combining marijuana with nicotine or alcohol;
• Requiring seed-to-sale tracking;
• Mandating that marijuana is sold in a sealed container; and
• Establishing rules around marketing and signage.

Peter@coloradostatesman.com