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Medical marijuana facility— Cresco Labs on Yellow Springs land?

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In one fell swoop, Yellow Springs could become home to a new employer, its first business on the CBE land on the village’s western edge and one of just 24 medical marijuana grow operations in Ohio.

Village officials are in discussions with the Illinois-based medical cannabis company Cresco Labs regarding locating a medical marijuana cultivation and processing facility in Yellow Springs. The company is looking to expand to Ohio, where medical marijuana was legalized last year. After discussions with more than a dozen Ohio communities, Yellow Springs tops the list of sites, in part because of villagers’ support for medical marijuana, according to company officials who visited the village earlier this week.

“Yellow Springs is number one,” Cresco Labs CEO Charlie Bachtell said in an interview with the News on Monday.

Village leaders are responding positively to the opportunity, which could bring about 65 jobs to Yellow Springs during the project’s first phase and increase local income and property tax, among other potential economic benefits.

And feedback from villagers during Tuesday’s Village Council special meeting, at which the issue was discussed, was generally positive, with a variety of questions and concerns raised about aspects such as job types and numbers, potential pollution and who would shoulder the cost of infrastructure on the portion of the CBE land under consideration for development. About 25 villagers attended the meeting, and about a dozen spoke.

Discussions with Cresco began about two weeks ago, after the company contacted Village officials. The company’s interest was first announced publicly a few days later, at Council’s May 15 regular meeting, and further public discussion of the opportunity was added to an already scheduled special meeting on Tuesday, May 23.

As part of Council’s May 23 discussion, Council considered a resolution to authorize the Village manager to negotiate with Cresco regarding the sale of eight acres of land along the northern edge of the Village-owned CBE property. The resolution passed with a 4–0 vote, with Council member Judith Hempfling absent. The measure does not lock the Village into a sale, but rather provides the public transparency to allow any potential negotiation, according to Village Solicitor Chris Conard.

The sale price is set at $20,000 per acre, or $160,000 for the eight-acre parcel, according to a nonbinding letter of intent accompanying the resolution.

Village and Cresco officials have about a month to pursue negotiations on the potential land sale and proposed facility. Under Ohio’s new medical marijuana program, companies are required to submit applications for the first of a series of state licenses, a cultivation license, by June 30. As part of that application, a site location must be specified. Ohio only recently opened the application process and finalized guidelines for applying, so the time window is relatively narrow.

“We have time, but not that much time” to consider the opportunity, Council Vice President Brian Housh said this week. The issue will next be discussed publicly at Council’s June 5 regular meeting.

Who and what is Cresco?
Illinois legalized medical marijuana in 2013, and Cresco Labs was formed in 2014 in response to that law. Co-founded by several banking industry executives, Cresco now operates three medical marijuana facilities in the Illinois communities of Lincoln, Joliet and Kankakee. Each of those facilities has operated for just under two years, and together they employ about 60 workers and represent about 20,000 square feet of medical marijuana cultivation, Cresco CEO and co-founder Bachtell said.

The Illinois medical marijuana program, much as the Ohio program will be, is highly regulated and extremely compliance-focused, according to Bachtell, a former executive at Guaranteed Rate, a mortgage bank. From “seed to sale,” each medical marijuana plant is tracked and regulated, he said.

In addition to cultivation, two of Cresco’s Illinois facilities produce medical marijuana products, including pills, tinctures, patches, concentrates, vaporizers, traditional flowers and “adult-focused” edibles. These products are sold through licensed dispensaries around the state to qualified patients diagnosed with a medical condition recognized under Illinois’ medical cannabis law.

Patient numbers have grown more slowly than expected in Illinois, according to a Feb. 3, 2017, report in the Chicago Tribune. But despite these and other “growing pains,” Cresco currently serves over 20 percent of the 20,000 medical marijuana patients in Illinois, according to Bachtell. The company became profitable this spring, he added.

Cresco currently also holds medical marijuana licenses in Puerto Rico and is applying for one in Pennsylvania under a program similar to Ohio’s.

The company is seeking to expand to Ohio in partnership with a group of more than a dozen Ohio-based investors. Three of those investors, listed as Cresco Labs Ohio co-founders in a company PowerPoint presentation, are Ohio lobbyists and Republican political strategists Chris Schrimpf, Troy Judy and Chad Hawley.

Schrimpf said this week that he became aware of Cresco Labs last fall, and at that point began conversations with company officials about bringing the company’s medical marijuana expertise to Ohio. He was already a believer in medical marijuana, and was impressed by the precision and science of Cresco’s Illinois facilities.

“I thought we could create something similar in Ohio,” he said.

The state-run medical marijuana program in Ohio is similar to the Illinois program, according to Schrimpf, with the key difference that the Ohio program is being unfolded in phases. Ohio companies can apply in June for one of 24 state cultivation licenses. There will be a separate application process at a later date for licenses related to processing, dispensing and testing. Cresco intends to apply for a processing and dispensing license when those come available, Schrimpf said, as well as a cultivation license under the June 30 deadline.

The company scored first, second and third in the Illinois process, receiving three cultivation and processing licenses in that state, so stands a good chance in the Ohio application process, he added. In Illinois, 158 companies applied for 21 grow licenses, and a similar level of interest is expected in Ohio.

The company’s proposed Yellow Springs facility would be designed for cultivation of medical marijuana and processing into medicinal products, and would not include a dispensary. By Ohio law, medical cannabis cannot be sold or purchased at cultivation or production facilities, but only at separately located dispensaries. In other states, dispensaries are typically located in large urban areas. Given the small size of Yellow Springs, it is unlikely though not impossible that a dispensary would be located locally.

Proposed Yellow Springs site
Based on recent News interviews with Cresco officials and Bachtell’s public comments at the May 23 Council meeting, the company is proposing a three-phase build-out of a Yellow Springs facility that could, in its final phase, employ up to 125 full-time workers in a mix of positions ranging from gardener jobs starting at $14 per hour to six-figure director of cultivation and director of extraction positions requiring scientific backgrounds and expertise. Other jobs would include positions in packaging, logistics, delivery, accounting and human resources. The average salary would be about $40,000.

The timeline on the total build-out is uncertain, but could be about four years, depending on growth in Ohio patient numbers.

In Illinois, slower-than-expected patient growth has delayed hiring in at least one Cresco facility. A May 23, 2015, article in the State-Journal Register reported that Cresco planned to hire 40 employees at its Lincoln, Ill., facility, located in Logan County. But the facility, which is cultivation only, with no processing component, has fallen far short of that hiring level, with about half a dozen full-time employees currently, according to an estimate by Logan County Board Chairman Chuck Ruben last week.

Bachtell acknowledged that job growth had been slower than anticipated in Illinois. “It’s been less than hoped. We got off to a slow start, but now we’re on pace,” he said.

In Yellow Springs, Cresco has plans to initially construct a $6.3 million, 50,000 square-foot facility that would create about 30 jobs to start, according to Bachtell. The company will make an effort to hire locally, he said. Construction of the facility could create 75 to 100 construction jobs.

The proposed facility would be a “modern hybrid greenhouse” resembling a nondescript industrial warehouse with a translucent roof to allow for natural light. About 25,000 square feet, the current state limit for cultivation space, would be designed for cultivation of marijuana plants under precise protocols. The remaining half would be for pharmaceutical-grade manufacturing of a variety of medical marijuana products.

At the end of phase one, when the facility is fully operational, about 60 to 65 workers could be employed full-time at the site. Phases two and three would each add another 25,000 square feet of growing space and an equivalent amount of processing space, with 35 to 40 more full-time workers added in each phase.

At full build-out, the facility is projected to be 150,000 square feet, or about four acres, with 125 full-time workers. The other half of the proposed eight-acre parcel would be used for access and parking.

A decision from the state regarding cultivation licenses could come as early as September, according to Bachtell. The company plans to be “shovel ready” and anticipates finishing phase one construction about six months after the state’s decision, should it receive a license. That could mean starting the grow operation as early as March 2018, with the first harvest 150 days later.

Similar to the company’s Illinois facilities, the proposed Yellow Springs building would be highly secure, akin to a bank vault or a jail, Bachtell said. The perimeter would be secured by a special type of chain link fence (no barbed wire), and a gate would allow access only to key fob holders or guests authorized 24 hours in advance. It would not be a facility for public visiting.

There would be 24-hour physical security inside the facility, as well as at least 140 overlapping surveillance cameras tied into state police. The facility would have layers of security clearance, with employees granted different levels of access depending on position.

Yellow Springs Interim Police Chief Brian Carlson, who met with Bachtell this week, said he was impressed with the company’s security measures and didn’t foresee an added burden on local police.
Brian Benton, the chief of police in Joliet, Ill., where one of the Cresco facilities is located, said last week that the department has never been called out to that property for any reason over its nearly two years of operation.

Potential economic impact
At Tuesday’s meeting, Village and company leaders as well as citizens discussed the proposed facility’s economic development potential for Yellow Springs.

“This is getting us to where we wanted to be 10 years ago,” Council member Gerry Simms said, referring to longstanding efforts to attract business to the CBE property. Citizen group Community Resources, or CR, of which Simms was formerly a member, sought to develop a business park on the property, but efforts stalled and voters in a 2014 referendum rejected using nearly $1 million in public money to advance the project. CR returned the property to the Village last summer in exchange for forgiveness of a $300,000 loan used to purchase the land.

Villager Rick Donahoe, who with his wife owns 40 acres of land across Dayton-Yellow Springs Road from the CBE property, said that the proposed medical marijuana facility was a “good start” for future development activity on the CBE land. “I see the glass half full on this,” he said.

The Cresco proposal comes in the midst of a community engagement process to seek public input on the future of the CBE land, with a public forum held in March and another scheduled for June 28. That forum is too late for discussing the Cresco opportunity, given the state licensing deadline. However, about 100 villagers participated this spring in an online survey regarding the land’s use. In addition to a few specifying medical marijuana cultivation as a favored use of the property, many respondents identified affordability in the village as a key issue that could and should drive any potential development of the CBE site.

So one question at Tuesday’s meeting was: would it?

Beyond the creation of jobs, the proposed facility would increase income and property tax revenue to the Village. At the project’s phase one scope, with an estimated 65 workers, the Village could realize an additional $37,500 annually in income tax, according to Assistant Village Manager/Finance Director Melissa Dodd in an email last week.

The Village, and especially Yellow Springs schools, would also benefit from increased property tax, though that level is hard to accurately gauge, Dodd wrote in the email. Based on the company’s stated construction figure of $6.3 million for the first phase, the total new property tax could be as high as $171,694 annually, divided among more than a dozen county and local entities. More likely, however, the property tax increase would be considerably less, Dodd said, as property tax is assessed from building value only. If the amount were as high as $171,000 annually, Yellow Springs schools would receive about $99,000 more each year, while the Village would realize an additional $24,000 annually, according to Dodd’s preliminary calculations.

The company is not seeking tax abatements or other incentives to locate in Yellow Springs, according to Village leaders.

In fact, Cresco is looking to identify ways to financially benefit Yellow Springs beyond jobs and taxes, company leaders have said. Collectively known as a “community integration plan,” those ways could include financial support for local nonprofits, company-reimbursed employee volunteer service or even a “hosting agreement” in which a portion of revenue from the Yellow Springs facility could be shared with the Village.

Cresco and the city of Kankakee, Ill., have such a hosting agreement in place, according to elected official Christopher Curtis, Kankakee’s sixth ward alderman. Two percent of gross profits from the Kankakee facility are shared with the city, including a guaranteed minimum amount of $100,000 annually, he said last week.

Potential financial give-backs to Yellow Springs have yet to be decided, however. “We’re in the early stages of figuring out an additional monetary injection,” Council Vice President Housh said this week.
Another big question at Tuesday’s forum was: would Cresco pay for utility connections and a road into the potential CBE site?

“Who pays for the road in?” villager Christine Roberts asked. Bachtell responded that Cresco would pay for all infrastructure on the eight-acre site should it purchase the parcel and locate its Ohio facility there.

In another benefit to Village coffers, the company would be a major electricity user, though its proposed “modern hybrid greenhouse” cuts energy costs almost in half over an enclosed warehouse design, according to Bachtell. “Cannabis is a pretty significant carbon footprint business,” he said.

A fit for Yellow Springs?
Villagers at Tuesday’s meeting raised a variety of other questions and concerns, including potential light and odor pollution, use of pesticides and the disposal of waste at the facility.

Bachtell said the company curtails the nighttime glow from the translucent roof with light-blocking shades and uses carbon scrubbers to prevent odors outside the facility. Regarding pesticides, the company does not use any, Bachtell said, but rather uses an integrated pest management approach that combines certain pruning techniques with the use of “beneficial bugs.”

And as for waste disposal, Cresco in Illinois composts waste material onsite by combining it with 51 percent of some other compostable material. Provided Ohio law permits medical marijuana composting, the company would take a similar approach here.

Still, there are unanswered questions. Villager Bill Firestone urged Village officials to do thorough due diligence on the company, with questions about its banking and insurance relationships and any litigation.

The Village will continue vetting the opportunity, Council President Karen Wintrow said. And one or two Council members plan to visit one of Cresco’s Illinois facilities to see the operations first hand.

Twenty-nine states now have medical marijuana programs, according to the National Conference of State Legislatures. Yet marijuana at the federal level remains a Schedule 1 controlled substance, and while the federal government in recent years has not interfered with state-run medical cannabis programs, that could theoretically change with the new administration.

Asked by the News about the potential for state programs to run afoul of federal law enforcement, Bachtell said he thought it was unlikely, but acknowledged that “it’s a narrow window the [state medical marijuana] programs live in.”

Villager Joe Lewis stated his concern about marijuana’s illegality at Tuesday’s meeting. Most villagers who spoke, however, seemed to agree that the medical marijuana opportunity fit with Yellow Springs’ focus on agriculture, food and health — not to mention the village’s reputation for embracing marijuana in a variety of forms.

“It’s a good fit for our community,” villager Chrissy Cruz said. “Yellow Springs is a community of wellness.”

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