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  • Agricultural Law and Rural Practice Blog
    June 08, 2021

    Proposed Cannabis Legislation: What's in it for Rural Wisconsin?

    Alexander T. Pendleton

    Eighteen states and the District of Columbia have now legalized cannabis, and Gov. Evers has proposed that Wisconsin do likewise. Alexander (Sandie) Pendleton discusses the issue and its potential impact on rural communities in the state.
    farmer in field of marijuana plants

    Currently, Wisconsin law provides stiff (some might even say draconian) penalties for the possession, sale or use of cannabis for either recreational or medicinal purposes.

    For example, if a Wisconsin farmer grows 201 cannabis plants on a small plot of land or if the farmer were to possess a small “bail” of cannabis weighing just over 22 pounds with a plan to sell it to friends or cancer patients, current Wisconsin law provides that he or she could be prosecuted and sentenced to 15 years in prison and ordered to pay a fine of $50,000.

    This makes Wisconsin law very different from the laws in neighboring states, and the majority of other states. According to the Marijuana Policy Project:

    • Thirty-six states have legalized medicinal cannabis use (including our neighbors Illinois, Michigan, Minnesota, and Iowa, and such deeply conservative states as Utah, Alabama, North Dakota, South Dakota, and Arkansas).

    • Eighteen states and the District of Columbia have legalized adult “recreational” use (including our neighbors Illinois and Michigan).

    • North and south of the American border, Canada and Mexico have legalized adult use.

    A Call for Legalization in Wisconsin

    Gov. Evers has called for cannabis legalization and regulation, requesting that the state permit and regulate the sale of pot the same way the state permits and regulates the sale of alcohol, tobacco, and some forms of gambling.

    Alexander T. (Sandie) Pendleton Alexander T. (Sandie) Pendleton, Minnesota 1987, is a Milwaukee-based business lawyer and litigator with Pendleton Legal, S.C..

    In doing so, he highlighted the amount of revenue that would flow to state coffers from taxes on legal cannabis production and sale. The governor estimates that legalization would result in $165 million per year in new revenue to the state, and he has called for much of that new revenue to be applied to education and local development.

    Specifically, the governor’s budget proposed that $85 million of the $165 million should go to the state’s general fund, while the other $80 million would go to local investment through a new community reinvestment fund (including in that $34 million to rural school districts). The governor has also pointed to savings and other benefits that would result if police, jail, and prison resources were not focused on cannabis enforcement.

    Recent Marquette University polls show that the governor’s proposal is generally popular (60% of Wisconsin residents back full legalization, and 83% back medical cannabis legalization).

    Recent news reports indicate that the Republican leadership in the legislative branch oppose the governor’s proposal.

    Effect on Rural Communities

    While the governor’s proposal does indicate that some of the new revenue would go to rural governmental units, the governor has not addressed in any depth whether and how legalization would result in a boost to Wisconsin’s rural economy.

    That many rural areas in Wisconsin could use an economic boost is clear, if one looks at data regarding per capita income in rural counties. According to the USDA Economic Research Service , the average per capita income for Wisconsinites in 2019 was just over $53,000, with the rural per capita income lagging 12% behind that at just under $47,000.

    Overall, population numbers in rural counties have been declining, while populations in more urban counties (except Milwaukee) have been growing – and rural counties are seeing a faster growth in the portion of their residents who are elderly.

    Any attorney in Wisconsin who practices in a rural area or has connections to rural communities knows the challenges many of these areas face when it comes to economic development, not to mention the economic stresses and challenges that farmers producing commodity products often face.

    There is evidence that legalization in other states has helped rural economies, or least those rural communities that are situated so as to benefit from legalization, and are willing to act to benefit from legalization.

    Impact in Colorado

    Colorado legalized adult use of cannabis in 2012 (the first state in the U.S. to do so). Four years later, the Solutions Journalism Network looked at the effect legalization had on rural Colorado communities that had chosen to welcome cannabis businesses. One of the towns highlighted is Trinidad, a small (8,000 person) rural community in southern Colorado. For years before legal cannabis arrived, Trinidad was losing population (10% over five years), and struggling to bring new businesses to the community.

    Three years after cannabis legalization occurred, those trends were reversed. By allowing just eight businesses in Trinidad to sell cannabis resulted in $1.5 million in new annual revenue to fund local government services.

    Some of those cannabis-selling businesses are owned by existing local entrepreneurs, and some are owned by new residents who moved to Trinidad to open their new business. “We’ve stopped the hemorrhaging,” said Jonathan Taylor, the town’s economic development director. “Cannabis is providing much needed revenue,” and the population has stopped declining. Other communities in Colorado (such as Log Lane Village, with a population of 800) have been able to double their town’s annual budget.

    Main stream agriculture publications (such as Successful Farming) are hailing legalization as a once-in-a-lifetime opportunity for farmers who want to diversify their operations from being less dependent on commodity agriculture products.

    The cannabis industry has continued to grow in Colorado over the last five years. In 2015, the State of Colorado collected $135 million in revenue (taxes and fees) from cannabis sales, and that amount grew to over $380 million in 2020.

    In 2020, there were $2 billion in cannabis sales in Colorado. The online news service Leafly reports that in 2020, a total of 77,300 new full-time legal cannabis jobs were added to the U.S. economy, bringing the total size of that workforce to 321,000 full-time jobs.

    Possible Impact in Wisconsin

    In other states, commercial cannabis is being grown primarily in greenhouses. During the early “green rush” years of legalized cannabis in Wisconsin, it is likely that those businesses that gain licenses to grow cannabis in Wisconsin are going to see very high prices paid for the cannabis they produce, relative to prices paid for other products they could produce in a greenhouse.

    Studies indicate that the revenue that can be generated by a given amount of greenhouse space dedicated to cannabis is orders of magnitude higher than can be earned by the same amount of greenhouse space dedicated to more traditional high-value greenhouse crops (such as tomatoes, cucumbers, or peppers), with some studies indicating that the multiple is over 120 times more. At current prices, commercial cannabis is likely the most valuable crop ever grown in greenhouses.

    Not all rural communities in Colorado have chosen to embrace legal cannabis, and some that have, have benefited more than others. Rural communities permitting cannabis sales located near interstate highways, near borders with states (or large communities) that have not legalized cannabis sales, or near tourist areas, have in particular benefited from legalization.

    One would likely see the same in result in Wisconsin, for instance around “rural” tourist destinations such as Wisconsin Dells, Door County, Hayward, Eagle River, or in rural communities that have ski resorts or casinos.

    Colorado tax rates on cannabis sales in Colorado are about 18% currently, and Evers has proposed a 25% tax (excise and sales taxes) on Wisconsin cannabis.

    Regulation Possibilities in Wisconsin

    Although we do not know what a cannabis industry in Wisconsin would look like and how exactly it would be regulated, certain regulatory-schemes could benefit Wisconsin rural communities more than others.

    For example, if Wisconsin requires all cannabis sold in Wisconsin to be grown in Wisconsin, that is going to create demand for people who know how to grow crops (i.e., farmers and others who have experience growing plants in greenhouses).

    For instance, a rural business that might have such experience and benefit from legalization might be Superior Fresh in tiny Northfield, Wisconsin (about 30 minutes Southeast of Eau Claire). Superior Fresh already has fresh, organic greens growing hydroponically year-round under artificial lights in 13 acres of greenhouses (possibly the largest such operation in the world).

    Such large-scale growing operations require capital infusions and construction costs (Superior Fresh brought $30 million in capital improvements to Northfield when it created the first phase of its greenhouses in 2016.)

    When legalization comes to Wisconsin, these large, enclosed growing operations are likely to be constructed in rural counties, where land prices tend to be lower than in urban counties.

    Risks and Controversies

    Large legal cannabis operations – like large-scale dairy or swine operations – can bring benefits to a community, but they are not without risks or controversies as well.

    Sometimes cannabis drying or curing facilities have been unpopular with their close neighbors, as not everyone is a fan of what can be a pungent smell of curing cannabis.

    And legalized cannabis is not without other issues or costs, just as Wisconsin’s approach to regulating (but permitting) adults to consume alcohol and tobacco and to engage in some types of gambling directly results in costs both to individuals and society in general.

    Space does not permit here a discussion of the intricacies of debates on these issues, or the robust (but often shallow) debate regarding whether legalization results in more teenagers trying (or consuming more or less) cannabis. Space here does also not permit a discussion of whether legalization helps or hurts organized, illegal-drug cartels (many of whom, it is argued, greatly benefit from cannabis “prohibition” in the states that have not legalized cannabis). Basic internet searches return a wealth of articles on the above issues for those who desire to consider/research such issues further.

    Is Your Community Ready for Legalization?

    Do you live in a small Wisconsin community that is losing population, struggles to attract or keep businesses that offer good paying jobs, or is having difficulty filling gaps in the local government budget?

    Are you considering the costs and benefits to the community of other types of developments (such as mining operations, wind farms, or new CAFOs), compared to the development of a cannabis growing and processing operation?

    What if legalization comes, and your community isn’t ready for it?

    If you are a rural resident or rural community leader, and you believe legalization in Wisconsin is inevitable, you may want to ask state-elected officials some of these questions about proposed or future Wisconsin cannabis laws/regulations:

    • What percentage of the state-collected cannabis taxes go to local government units (and what strings will be attached)?

    • What percentage of the state-collective cannabis taxes go to local education (and what strings will be attached)?

    • Must the cannabis sold in Wisconsin be grown in Wisconsin?1

    • Can commercial cannabis production occur outdoors on Wisconsin farms (as hemp production can now), or may such cannabis production only occur in greenhouses or other indoor settings?

    • Will licenses to grow and/or process cannabis in Wisconsin be widely available, or go to only a very few large-scale operations?

    • Will grower and processor license requirements be so restrictive that no or very few licenses will be held by small town businesses, farmers, and entrepreneurs?

    • Will dispensary license regulations be so onerous or restrictive, that very few “mom & pop, small town businesses” (such as local bakeries, taverns or brew pubs) can afford to engage in the business?

    • When it comes to local governments deciding whether to distribute any dispensary licenses in their jurisdiction, are the state rules established in such a way that a local, vocal minority (or a minority of elected officials) can easily quash the permitting of retail operations in the local community?

    • Are the regulations designed in such a way as to eliminate the risk of corruption?

    Conclusion: When and How, Not If

    Many elected officials on both sides of the aisle now recognize or admit that it is no longer a question of if legalization is coming to Wisconsin, only a question of when and how.

    Rural community leaders should therefore give consideration to what they can do now to influence the regulatory scheme that will be put in place, so that the benefits of legalization flow not only to urban communities, but rural communities as well.

    This article was originally published on the State Bar of Wisconsin’s Agriculture Law and Rural Practice Blog of the Solo/Small Firm & General Practice Section. Visit the State Bar sections or the Solo/Small Firm & General Practice Section webpages to learn more about the benefits of section membership.

    Endnote

    1 States with legalized cannabis have heavily regulated it, including where it can be grown, whether non-residents can obtain licenses, and whether it can be exported or imported. Because cannabis is still illegal and considered a “Schedule 1” drug at the federal level, there currently remains many grey areas in the law relating to cannabis. As just one example, currently unresolved is the issue of whether the Interstate Commerce Clause of the U.S. Constitution would ban such things as state attempts to bar imports of cannabis legally grown under the laws of other states. For a law review article arguing such restrictions are unconstitutional, see Robert A. Mikos, Interstate Commerce in Cannabis (Boston University Law Review, May 2021). As both Mexico and Canada have legalized marijuana (and are substantial producers of commercial marijuana), international trade issues relating to the import and export of cannabis will also need to be resolved at some point in the future.​





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    Agriculture Law & Rural Practice Blog is published by the Solo/Small Firm & General Practice Section and the State Bar of Wisconsin; blog posts are written by section members. To contribute to this blog, contact Nancy Trueblood and review Author Submission Guidelines. Learn more about the Solo/Small Firm & General Practice Section or become a member.

    Disclaimer: Views presented in blog posts are those of the blog post authors, not necessarily those of the Section or the State Bar of Wisconsin. Due to the rapidly changing nature of law and our reliance on information provided by outside sources, the State Bar of Wisconsin makes no warranty or guarantee concerning the accuracy or completeness of this content.

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