Heaps of Cash, Strong Odors and Other Challenges With Local Pot Regulation

LAS VEGAS — Processing millions of dollars in fee payments from the mostly cash-based state-regulated marijuana industry has proved difficult at times for Clark County, Nevada. 

The county upgraded money counting machines to casino grade equipment and had a security company make an armored cart for moving the cash around. Staff have devoted long hours to tallying up payments only to end up smelling like pot because of residue on the currency.

“My staff couldn’t take breaks. They stink at the end of the day,” Jacqueline Holloway, director of the county’s Department of Business License, told local officials from around the U.S. gathered here over the weekend for the National Association of Counties’ annual conference.

Clark County encompasses Las Vegas and has about 2.2 million residents. In 2016, Nevada voters approved a ballot measure paving the way for legal recreational marijuana in the state.

The prevalence of cash in the legal cannabis trade is due to the fact that most marijuana businesses lack access to standard banking services. 

Banks are reluctant to work with them because marijuana is still classified as a dangerous and illegal drug at the federal level, even though 11 states and the District of Columbia have to some degree now legalized it for adult recreational use.

Cash tax and fee payments were just one challenging area described by Holloway and other officials from states where marijuana is legal.

“We’ve been basically building this airplane as we fly it,” said Rex Bohn, a supervisor in Humboldt County, California—a mecca for U.S. marijuana production even before legal recreational cannabis sales began in California in 2018. 

“We’ve made some really good moves, we’ve made some really, really bad moves,” he added.

Humboldt County has encountered its own unique situations dealing with cash payments from marijuana businesses. “We’ve got people coming in to pay their bills,” Bohn said, “They’re walking in with two, three, four hundred thousand dollars in a cardboard box.”

Land use regulations and law enforcement were among the other areas the panel delved into. 

Several officials warned about the pungent odor that can waft from marijuana facilities and the nuisance it can cause. “This stuff stinks,” Bohn said. “You’ve gotta think about that.” This has implications for local governments as they consider zoning and other regulations.

Clark County, Holloway said, requires an “odor control plan” for businesses applying for marijuana business licenses. She noted warehouses and other buildings growers use are often not equipped with ventilation adequate for thousands of marijuana plants.

Holloway’s agency requires marijuana businesses seeking licenses to present other plans as well—for security, inventory control, transportation and other matters. The department also scrutinizes the financial backgrounds of all cannabis business owners.

Chuck Callaway, police director of the Las Vegas Metropolitan Police Department, urged those on hand to prepare for legalization even if it doesn’t seem imminent in their localities. 

“Get in front of it,” he said. “This is a train coming down the tracks and you can get ran over by it or you can get on board the train and try to steer it.”

“It’s key that you have a good relationship with industry. Industry is three steps ahead of you,” he added. “I guarantee if you’re even having talks about marijuana, they’re in your state and they’re looking at buying land, or looking at where they can set up business.”

Beyond providing officers training on new marijuana laws, police have had to adapt in other ways. Callaway’s department engaged in a campaign to educate tourists in the Las Vegas region on the local ground rules for using marijuana—for instance, don’t smoke it in public.

The department worked on getting drop boxes in place at airports where people could dump pot they cannot legally take on airplanes. For people booked into jail, they had to come up with a system to store marijuana, just like other property. Previously it would’ve been impounded.

Another issue he highlighted is ancillary marijuana businesses. Examples he offered were “puff puff” minigolf operations and marijuana-yoga offerings. 

“I’m not making this stuff up,” Callaway said. “The industry is gonna push for you to do things fast. My recommendation is: slow down,” he added. “It’s much easier to let the cat out of the bag than it is to try to put the cat back in the bag.”

Callaway said his department has actually seen an uptick in black market marijuana activity since legalization in Nevada. Illicit cannabis delivery operations are a specific problem he noted. 

There have also been instances of people raiding dumpsters where cannabis businesses dispose of waste products, he said, with the scavengers hoping to extract tetrahydrocannabinol, or THC, the substance in marijuana that makes people feel high.

For the Washington State Association of Counties, a frustration is that the state is not sharing more of the marijuana excise taxes it collects. 

Those revenues are projected to be around $432 million in the 2019-21 budget cycle, according to Eric Johnson, the association’s executive director, who was also on the panel. “They will share four percent of that revenue with cities and counties,” he said.

“Most of the impacts of what’s happening are locally driven and are being dealt with by local entities,” Johnson added.

Last year, Colorado saw about $1.5 billion in combined medical and recreational marijuana sales and $266 million of related state tax and fee revenues.

Jim Burack, director of the state’s marijuana enforcement division, noted legislation that Gov. Jared Polis signed earlier this year that will relax restrictions on publicly traded companies holding marijuana business licenses in Colorado.

Figuring out how states should regulate hemp, which Burack described as “marijuana’s cannabis cousin” is one of his latest concerns. There are questions about whether it should be viewed as a separate commodity, or under the same general umbrella as marijuana.

Federal legislation approved last year cleared the way for wider production of hemp. The plant is similar to marijuana, but under the legislation must have restricted, low levels of THC. Hemp is used in a variety of products, from textiles to food.

On a quarterly basis, Clark County is collecting roughly $2.6 million in marijuana revenues, according to Holloway. “We were smoking up our cash count machines,” she said. 

Holloway added that she had to “go through gaming organizations” to get machines that could handle higher volumes of cash. The special cart, she explained, is for moving money within county facilities. Her department also had to make new arrangements for armored car pickups.

The Financial Services Committee in the U.S. House recently passed legislation meant to clear the way for more banks and credit unions to work with state-regulated marijuana businesses, which could help to address some of the difficulties arising with widespread cash transactions.

Lawmakers in the Republican controlled Senate have yet to take similar action. Though Banking Committee Chairman Sen. Mike Crapo, an Idaho Republican, suggested to American Banker last week he is open to holding a hearing on cannabis banking legislation “relatively soon.” 

Bohn, the Humboldt County supervisor, said he has plans to be in D.C. in the weeks ahead to discuss the need for such a bill.