Those who want in on Illinois’ fledgling medical marijuana industry are wooing local communities to let them operate within their borders — in some cases promising donations to local organizations or a cut of the profits.
Monday is the deadline for businesses to apply for state licenses, and among the many provisions for potential operators is that they have local approval for a place to grow or sell medical cannabis and can point to “community benefits.”
Competition for approved sites has gotten so intense that some municipalities are requiring that businesses pay them a cut of their revenues if they want local support.
In Elk Grove Village, no fewer than nine competing businesses have entered into preliminary agreements with the municipality. Should any win state approval to operate, the businesses each have agreed to donate up to $75,000 to local nonprofit groups and to fork over up to 5 percent of their gross sales to the village.
Elsewhere in the Chicago area, developers are offering special contributions to get local support — inverting the more typical practice of local governments offering incentives to lure businesses to town. One suburb is even creating its own charitable foundation to collect and spend the cash infusion.
In a state with a long, often corrupt tradition of pay-to-play, the arrangements have raised some concern among business owners and watchdogs groups. The payments are not prohibited, as long as they’re not enriching elected officials directly, regulators say. But they must be disclosed for consideration when the state reviews business applications and awards licenses.
“I think it’s fair,” Elk Grove Village Mayor Craig Johnson said. “No one has balked at it, so obviously they know it’s fair, too, because of what we have to offer.”
Elk Grove Village purports to have the largest business park in the nation, with close access to highways, rail and O’Hare International Airport, as well as wealthy north and west suburbs.
Because the village straddles two counties and two state police districts, it could become home to two dispensaries and two cultivation warehouses.
And, Johnson said, it has a number of vacant buildings in its industrial district — the kind of out-of-the-way sites that many community members, namely parents, have made clear they prefer.
State regulators will ultimately dole out licenses for up to 21 cultivation centers and 60 dispensaries statewide. Patients who have a qualifying medical condition can be certified to buy marijuana, officials hope, by sometime next spring.
The communities willing to welcome the businesses stand to cash in through various means.
In the city of McHenry, which has endorsed a proposed cultivation center, officials are seeking 1.75 percent of net earnings in the first five years, then up to 3.5 percent in the following years. City officials also have requested that the business donate up to $10,000 a year for the McHenry Riverwalk and historic Petersen Farm.
In return, the city sent a letter of support for the project to the state Department of Agriculture, which will award cultivation center permits based on a scoring system that judges security, business plans and other factors. Applications also get credit for community benefits, which the local donations are meant to satisfy.
In East Dundee, officials have created a foundation to handle any money that might come from a cultivation center and dispensary proposed by Alternative Treatments LLC. Where the money would be channeled isn’t yet defined but could include drug abuse prevention and treatment.
The village is proposing that the company make an annual donation of a percentage of sales, though the amount has to be negotiated.
Following a trend in economic development, village officials had considered such a foundation before, but now they have a proposed source of revenue, Village Administrator Robert Skurla said.
“We’re not just saying you’ve got to pay a ransom. The law states you have to have a community investment,” Skurla said. “We’ll do that for you.”
Sam Borek, an attorney for Alternative Treatments, would not be specific but said the company had offered a “very generous contribution” to East Dundee. He said he felt it was a reasonable accommodation and a smart move by municipalities that can get it. Like many medical marijuana entrepreneurs, Alternative Treatments has submitted proposals to several communities in hopes of finding the most profitable locations.
“A good location is part of the price of doing business,” he said.
Such payments are not uncommon in other states with medical marijuana, where businesses sometimes donate up to 10 percent of sales to their host communities, said Michael Mayes, CEO and president of the Quantum 9 cannabis consulting company in Chicago.
“In Connecticut you see incredibly lofty community benefit plans, because municipalities were (not) accepting of the program itself,” Mayes said. “It depends on the municipality and public perception. The best plans I’ve seen say the money will help build a school or roads. They have a specific community benefit.”
While he said Chicago is seen as the “gold mine” of the industry in Illinois, the city has been slow to act publicly.
Dispensaries can set up shop in many business and commercial districts — provided they are granted a special-use permit from the city Zoning Board of Appeals, appointed by Mayor Rahm Emanuel.
So far the city has received more than a dozen requests, and the first zoning applications could be heard by the zoning panel next month, officials said.
In south suburban University Park, businesses owners said village officials have requested contributions to community groups, plus 0.5 percent of gross income. Local officials did not respond to requests for confirmation.
Tanisha Patterson, who is part of a medical marijuana investor group called The MedMen of Illinois, said its members are happy to make the contribution.
“Whatever a community is asking, we’re definitely in support of that,” Patterson said.
Investors are seeking any advantage to get their applications approved, including team members who qualify for minority and veteran ownership status. Patterson and her mother, Glenda White, who are African-American, are both part of The MedMen group, which is seeking multiple sites, including in University Park, for cultivation centers and dispensaries.
Patterson said the group also plans to partner with local schools to offer drug abuse education.
Other local governments are not seeking defined payments but are hoping to gain sales and property taxes and other income while generating jobs. Officials in Batavia, which runs its own electric utility, estimated the city could take in $300,000 annually in electricity bills from a proposed cultivation center, which would use large amounts of power to run grow lights.
“We haven’t entered anything you’d call an inducement,” City Administrator Bill McGrath said. “We don’t have many other legal businesses saying, ‘We’ll pay you.’ But we don’t want to make it conditional (on payments). The citizens need to know we’re looking at this straight up.
“I don’t want to pass judgment on other municipalities,” he added. “I don’t want to use the term ‘pay to play,’ but (the concept) weirded me out.”
He’s not the only one concerned about the appearance of payments. At a public hearing last month in Chicago, Tanya Griffin, a managing member of TGS Illinois, which is proposing marijuana businesses, raised concerns about the issue with state regulators.
Bob Morgan, coordinator of the state medical marijuana program, stressed that the applications would be judged purely on merit, with the names of applicants deleted so judges won’t know whom they are evaluating. But he suggested a hands-off approach to legal financial arrangements with local governments.
Abe Scarr, director of Illinois Public Interest Research Group, was not familiar with specifics of the proposals but sounded a general note of caution.
“It would raise some concerns anytime you have a private business giving money to an official or government body in return for what sounds like a political favor,” he said. “You would think these things should be done on merit and their value to a community.”
Tribune reporter Hal Dardick contributed.
Copyright © 2014, Chicago Tribune
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