Michigan’s Marijuana Regulatory Agency (MRA) this week announced the Medical Marihuana Facilities Licensing Act (MMFLA) regulatory assessment structure for Fiscal Year 2020.
The MMFLA requires that the MRA establish the total regulatory assessment to be paid by all licensees (except testing labs) at an amount that will “cover the actual costs and support the expenditures” for the MRA’s cost to implement, administer, and enforce the MMFLA, along with a number of other specified costs listed in the statute. The MMFLA further requires that the MRA set amounts that “reasonably reflect the licensee’s share of the total regulatory assessment,” although it caps the regulatory assessment at $10,000 for the smallest “Class A” growers.
To this point, the MRA has charged a flat rate for all license types that pay assessments, and in FY 2019 that amount was $66,000 per license. With the rates for FY 2020, the MRA has changed its approach to the regulatory assessments by setting different assessments among license types for initial assessments, and a tiered structure within each license type, based upon a licensee’s market share, for renewal assessments. Under this structure, the initial assessment varies from $10,000 for Class A growers to $56,000 for Class C growers. For renewals, the assessment ranges from $24,000 to $36,000 for Class B growers, $45,000 to $67,000 for Class C growers and processors, and $36,000 to $52,000 for provisioning centers and secure transporters. Thus, even though the number of licensees will be far greater in FY 2020 than in 2019, the assessment has actually increased for some license classes.
MRA’s new tiered structure based upon market share raises questions as to whether the MRA is following the statutory mandate to “reasonably reflect the licensee’s share of the total regulatory assessment.” Under the MRA’s new approach, a single Class B grow facility could pay $24,000 while a single grow facility operating 10 successful stacked Class C licenses would pay $670,000—28 times as much even though the inspections and enforcement costs should be similar. And 10 separate Class B facilities paying a total of $240,000 quite obviously require more inspection and enforcement effort than the hypothetical stacked Class C facility. Even among the same license class, it is questionable whether the regulatory costs are lower for a struggling business than a successful one. Whether this disparity leads to challenges remains to be seen.