January 3, 2014, Wenatchee Business Journal
Leasing space in the Pangborn Industrial Park for a state-licensed marijuana production and processing facility is a possibility Port of Douglas County Commissioners are willing to consider – if it doesn’t put airport funding from the Federal Aviation Administration at risk.
The question was raised during a Dec. 10 presentation to the commission by Grant Guelich of American Farms LLC. His company is looking at options for building a marijuana production and a processing facility.
He already secured properties in Okanogan County and Spokane, he said, with the expectation of supplying quality product to retail operations west of the mountains. Leasing space or building facilities in a more central location would help streamline the process, he said.
Plus, Douglas County has good prices on power, water and land.
“That’s what we’ve been trying to tell people,” said Douglas Port Commissioner Jim Huffman.
The port completed the $2 million industrial park project in early 2013, creating 16 new shovel-ready lots in the 40-acre second phase of the 70-acre industrial park at the northeast corner of South Union Avenue and Eighth Street S.E., East Wenatchee. The port has been working since then to attract some new neighbors for existing tenants, which include Coca Cola and Accor Technologies.
The idea behind the park is to create jobs and recruit businesses to the county as well as create a revenue stream for the port.
When the project started, cannabis was not the industry the port had in mind. Times change.
State voters approved Initiative 502 in November 2012, making growing, processing and selling cannabis legal in Washington, with the goal of getting an existing and lucrative black market industry on the tax rolls. State-hired experts estimate $1.9 billion in tax revenue in five years. The Liquor Control Board was tasked with putting together rules and processes for issuing licenses, settling on a three-tier program with separate licenses for growing, processing and retailing ventures.
The licensing rules were approved in October, the application window opened Nov. 18 and closed Dec. 20 with 3,700 applications submitted.
Budding entrepreneurs face the challenge of convincing landlords to risk backlash from the federal government by allowing marijuana operations on their property since cannabis continues to be illegal under federal law.
Cities and counties expressed similar concerns, with several enacting moratoriums on the ventures until more details are available.
The state is leaving local jurisdictions to figure out zoning.
In Douglas County, growing and processing operations are effectively limited to industrial zones. That includes the outdoor grows because state rules require an 8-foot fence and the county allows that only in an industrial zone.
The port’s business park is zoned for industrial use.
American Farms LLC’s plan calls for building an indoor growing facility in the first year, which would provide more crop control and allow staggered harvests for consistent flow.
Expansion and side businesses, including quality management training and certification, are possibilities as well.
“I see different businesses that can be spurred off, if we start with a solid base. I see the opportunity for the entire market to develop,” Guelich said. “It could be a good economic engine for the local area.”
The port, in turn, would be good for the industry, providing legitimacy to the new businesses.
For the port, the opportunity to lease property is not the question.
“If this were any other business, I would be coming to you with a lease proposal,” Port of Douglas Executive Director Lisa Parks told commissioners. “It would provide an opportunity to generate revenue off the business park, to start paying back the investments made in the business park development and use some of that revenue to work on some other projects.”
The really big question for the port, Parks said, is whether leasing to a state-licensed marijuana grower and processor would put Pangborn Memorial Airport’s federal funding at risk.
The port is part-owner of the airport and the industrial park is on property the port leases from the airport.
FAA officials don’t have a firm answer, she said, but they reported receiving the same question from several other ports. She said they are waiting for guidance from the U.S. Department of Transportation. As a work-around, the FAA compliance official suggested that if the port moves ahead with lease negotiations, to include a clause that says the lease can be canceled if it is determined it is not compliant with FAA funding.
The other big question is a political one.
“This is a policy level question. There are two things you need to look at,” she told the port commissioners. “One is the issue of the federal government. The other is the value judgment that you might feel from your constituency, going from a business that was previously illegal to being legal.”
Commissioner Alan Loebsack agreed it is a balancing act.
“I suspect there is a value judgement there,” he said. “On the other hand, we voted collectively as a state that we do it.”
Loebsack suggested the political question could be eliminated if the company leased industrial space outside the port.
But Guelich said the private sector has reservations, too.
“It’s difficult to approach people since it is a taboo,” he said. “Everyone I’ve talked to about using their property, they say, ‘Get your license first and then talk to me.’ But securing the location helps you get the license, so it’s a Catch 22.”
Huffman said he has no problem with leasing industrial park space to a licensed marijuana producer and processor.
“We can’t predict what economic development opportunities will come along. But when they are at hand, I would be remiss if I turn my back on them,” he said. “I don’t care what it is. I see no difference between this and hops in the Yakima area.”
Commissioner Mark Spurgeon was not at the meeting.
Huffman and Loebsack directed Parks to write a letter of intent to negotiate a lease to American Farms LLC, with the proviso that any agreement would be canceled if the FAA ruled it would put airport funding in jeopardy.
The next step, Parks said, is to set up a meeting with American Farms representatives and the port attorneys to work out the details.
“It will definitely be an ongoing conversation,” she said.
Guelich said he also met with Port of Chelan County officials to talk about available space.