GAYLORD — When Gaylord City Council passed an ordinance allowing marijuana companies to operate in the city in May 2021, the council focused primarily on two goals: job creation and tax revenue.
According to most reports, the Regulation has achieved these objectives.
Gaylord began issuing licenses for the marijuana business a little over a year ago, and by the end of August, 27 licenses had been approved by the council. Of these, 22 are for retail stores, two for micro-retail businesses, one for a transport company and two for growing facilities.
A rough estimate shows that the city’s economy has generated anywhere from 70 to over 100 jobs through the cannabis companies. Next year, Gaylord and Otsego County will participate in the distribution of tax revenue for adult marijuana use. This year, more than $42 million was distributed to 163 municipalities and counties under the Michigan Regulation and Taxation of Marijuana Act.
There were other economic benefits. Six figure investments have been made in many vacant commercial properties and in some cases run down properties have been eliminated. All of this has strengthened local real estate and building materials companies and will eventually lead to additional property tax revenue.
“I think the ordinance worked well and exactly as we hoped it would,” said Gaylord City Attorney Paul Slough.
In his research into drafting the marijuana ordinance, Slough discovered that some municipalities faced litigation when they refused license applications, particularly when the ordinance required applicants to meet certain criteria, such as: B. Granting a benefit to local applicants.
Litigation can be expensive and time-consuming for local authorities. To avoid this, Slough suggested the city limit only the geographic areas in which the companies can operate and generally license those who meet state and city rules and regulations.
His philosophy was that the market will decide how many are enough.
“We had no threat of litigation and the whole process of working with the (licensing) applicants went smoothly,” said Slough. “Through the special use process of the Planning Commission and City Council, we have been able to address public concerns and work with applicants to establish appropriate restrictions on a case-by-case basis.”
Dating back to the 1960’s, Gaylord carefully created an image of a friendly community with a distinctive alpine motif. It has served the region well and helped grow the tourism business into a year-round economic engine.
So far, it doesn’t appear that the marijuana companies have tarnished the city’s image.
“They (marijuana companies) tend to fly low and under the radar,” said Gaylord City manager Kim Awrey. “The (stores) don’t say they are marijuana facilities. We have fewer marijuana facilities than those that sell alcohol.”
“We’ve had a lot of feedback from (marijuana companies) located in other parts of the state,” Awrey added. “They were eager to get to Gaylord and its intersection of M-32 and I-75.”
how many is enough
Retail licenses are by far the most popular option for investors in the city’s cannabis industry. The vast majority of licenses have been granted to businesses that sell marijuana and its by-products to consumers.
Although the city has approved over 20 licenses, only seven are currently open for operations, and two or three more could be added by the end of the year. This could give the city 10 retail stores.
“I was concerned that with the amount of licenses applied for, we would have opened 20 retail stores by now,” Awrey said. “We didn’t see that. The market will decide as a handful of licenses have been applied for and people have signed real estate sales deals and some have failed. They don’t buy them anymore and the market dictates that.”
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More:First marijuana store to open in Gaylord on Tuesday
Awrey believes the city will still benefit even if all licenses to open a store aren’t immediately sufficient.
“Even if the store openings don’t make it, they’re rehabilitating these buildings. A shop demolished an old gas station (on Main Street) that had been an eyesore for years,” she said.
Gaylord Police Chief Frank Claeys isn’t sure the sprawl of retail stores is too much for the city.
“I understand people’s concerns — we don’t want to see a million of anything in our city, whether it’s pizza shops or marijuana stores. I think the market will sort that out,” he said.
Awrey believes the market will have a hard time accommodating more than 10 retail stores.
Paul Schmitz Jr. is President and CEO of Core Investment. His company was only granted a retail license by the council at the end of August, and he’s not worried about having nine or 10 competitors when he opens his shop sometime next year.
“The beauty of capitalist society is that it’s up to the consumer, and I think nine isn’t a bad number. I know several communities that probably have similar populations given Gaylords Tourism that have businesses in the double digits and they’re all thriving,” Schmitz said.
Nick Piedmonte is CEO of Dunegrass, which opened a store on South Otsego Avenue this spring.
“Dunegrass Gaylord absolutely lives up to our expectations. The location on the south side of town near the south exit of I-75 and in close proximity to tourist lodging and RV parks near Lake Otsego was a highly strategic decision for us. We’ve had an excellent response from both locals and visitors to the Gaylord area, keeping us consistent with our branding strategy as a cannabis outfitter in northern Michigan,” he said.
Piemonte believes the market may be at its limit right now.
“The market can probably no longer serve pharmacies. In fact, the customer base has been hijacked by existing businesses and any new competitors must attract customers from existing businesses rather than enter an underserved market. Our theory that most competitors would open a store on (or) around Main Street has proven true, while our South Side location remains underserved,” he said.
Schmitz and his company’s involvement in Gaylord demonstrates how the city is benefiting from cannabis-related developments, even when the shop is actually closed. They have a vacant building on S. Otsego Ave. Acquired in 1523.
“We’re going to be redesigning quite a bit, including adding a drive-thru window for express pickup,” said Schmitz, adding that his company will be making a six-figure investment in the project. “It’s been vacant for a long time, and that’s one of the reasons we were drawn to it.”
Schmitz said his company will hire 18 employees for the store.
“You’ll get a starting salary of $16 an hour with all the perks,” he added.
Next year, the city and county will share in tax revenue from marijuana sales. In 2022, local governments earned about $56,000 for each retail operation. Assuming Gaylord has nine or 10 stores operational by the end of the year, the city and Otsego County will each receive over $500,000 if the payout stays at $56,000 per store.
“I was afraid that[the tax division]was going to be watered down, so I didn’t go to $56,000 in my city budget forecast,” Awrey said. “I was between $25,000 and $50,000. Now I see that July saw record sales (marijuana) in the state.”
Claeys said his department has adapted to the requirements of the regulation and he has not noticed any increase in crime.
“We haven’t seen any major changes in our day-to-day operations. We weren’t inundated with calls. We had an incident at a store (a burglary) that would be on par for that many buildings anyway,” Claeys said.
He also said he hadn’t noticed an increase in so-called harassment offenses such as loitering, littering and graffiti.
“I’ve had some concerns about this after speaking to other communities and I don’t think we’ve seen an increase yet,” Claeys said.
Claeys also said his department’s role in the license application process has gone well so far.
“There is a review process by the state and then a review process for us. We review their site plan and make sure their safety plan is safe for employees and the public,” he said. “The regulation has worked as intended. We now have enough businesses that the regulation at this point has given us what we wanted, which was to allow access to our market and protect our community. We had no violations or reports of violations.”
More:Michigan cannabis companies are struggling to survive in an increasingly competitive marketplace
The State Outlook
In July, the Detroit Free Press issued a report noting that the state’s marijuana industry was undergoing a restructuring. The price of cannabis flower had fallen, making it harder for growers to turn a profit, while at the same time new companies continued to open grow facilities, processing plants, and retail stores, resulting in an increasingly competitive market.
According to Piedmonte, Dunegrass is a stand-alone retail company with multiple locations.
“We don’t have a cultivation or processing facility. The biggest challenge, I think, is for mid-market, vertically integrated companies that are struggling with a declining price for cannabis flower. The price per pound will continue to drop throughout the fall and winter,” he said when asked to rate the state’s cannabis industry.
“I think (the industry) is at a tipping point now if you look at supply and quality,” said Schmitz of Core Investment. “I think now is the point where quality shows when there is oversupply. It gives customers a better choice of premium products at a more reasonable price.”