How Many Applications Will Traverse City Get For Its Recreational Weed Licenses?

Twenty-four is the magic number – at least for all parties involved in the City of Traverse City’s long-awaited recreational marijuana licensing process. That process is officially underway this week: The City Clerk’s office officially began accepting applications for recreational weed licenses this past Monday at 8am, and will keep the application window open until tomorrow (Friday) at 5pm.

The big question is whether the number of application submissions will be over or under 24. Earlier this summer, the City Commission approved an adult-use marijuana ordinance that allows for up to 24 adult-use cannabis dispensaries within city limits. Should the city receive 24 or fewer applications, that would effectively clear the road for recreational marijuana to be made available for retail purchase in Traverse City. If the city receives more than 24 applications, though, it would trigger extra steps in the licensing process – including an in-depth application scoring procedure – which would likely delay the distribution of licenses by several months.

Deputy City Clerk Sarah Lutz tells The Ticker that, even without a submission load of 24 licenses, the city still has multiple steps to complete before it can issue licenses. All applications, she says, will be closely vetted “to ensure they are complete and clarify any issues or deficiency.” Applicants that pass this pre-vetting process are then required to submit to on-site inspections of their premises before they can be licensed.

Lutz estimates that, should the city receive 24 or fewer applications, the clerk’s office would be able to complete its review process and start issuing recreational licenses “as early as March 2023.” If the number of applicants exceeds 24, though, the city must conduct “an intensive and analytical scoring process” of all applicants. That process, Lutz says, “involves multiple public meetings where applicants are provided with an opportunity to make a presentation to the scoring committee.” The city would then hold another public meeting to score all candidates and determine the winners of the available licenses.

While the most likely trigger for the competitive scoring process is a count of 25 or more applicants, Lutz says the city may need to use that extra step should there be more applications for a specific subarea than are allowed in that part of the city. As written, the City of Traverse City recreational cannabis ordinance creates several “overlay districts” throughout the city and specifies how many dispensaries can be located in each zone.

Lutz confirms that a competitive scoring process would delay the issuing of licenses until “approximately summer 2023.”

For their part, the business owners in the hunt for TC marijuana permits are spending the week crossing their fingers and hoping the applicant pool doesn’t exceed 24.

“24 is the sweet number,” says John McLeod, co-founder of Cloud Cannabis. “It's the sweet number for us as operators, but it's also the sweet number for everyone involved. The folks at the city have got to be just as fatigued by this whole process as we are. We’re all tired, and we're ready to move on and put this all behind us. And keeping below that magic number [of 24] allows us all to do that. Because then you avoid any additional litigation or any hurt feelings. So, that's certainly what we're all hoping for.”

One of the big question marks floating over this week’s application window is whether the City of Traverse City will receive anything approaching the deluge of interest it got in 2019 when the city opened the gates for medical marijuana permitting. That process saw 72 prequalified applicants compete in a lottery draw for 13 licenses, with many of the applicants hailing from outside of the Grand Traverse area. Leading up to the lottery, the the interest in Traverse City’s licensing process was palpable – particularly in the local commercial real estate market, where license seekers bought up dozens of potential dispensary locations all over town.

According to Nick Piedmonte, the buzz has been significantly quieter this time around. Piedmonte is a Traverse City native and the CEO of Dunegrass Co, a locally-owned marijuana business with stores in Beulah, Big Rapids, Cadillac, Gaylord, Manistee, and Marquette. Dunegrass sought (and didn’t receive) a medical marijuana permit in Traverse City’s 2019 lottery, but is hoping to enter the local market with a recreational permit. The Dunegrass team has been working for months to get their application squared away – a process that involved securing a space “located in Traverse City’s DDA district” where the TC Dunegrass dispensary would be situated. Throughout that process, Piedmonte says he’s heard next to no talk in the Michigan marijuana community about Traverse City’s long-awaited entrance into the world of recreational weed.

“There were more than 70 applications last time, but that’s not really anywhere close to what I think the city should expect now,” Piedmonte says. “I don't have a crystal ball, but I think [the interest in this licensing process] is nowhere near the sort of fever that occurred in 2019. There's a lot of us that have been in the game for a few years now who understand that, at the end of the day, you're running a retail business. There's a ton of work to be done, and you don't get a rubber stamp to become a success story.”

McLeod concurs, noting that Michigan’s marijuana industry is much more “mature” now than it was in 2019. While there was talk in 2018 and 2019 of a “green rush” – a huge level of pent-up demand for marijuana products that would inevitably bring buckets of cash to dispensaries lucky enough to land a license – McLeod thinks the harsher realities of the past few years, especially for struggling medical marijuana sellers in Traverse City, have reduced the amount of interest in local permitting processes.

“The profit margin at a retail location [that sells cannabis] is very, very slim, mostly because of the way the tax laws are structured,” McLeod says. Other challenges, he adds – such as fluctuating wholesale prices – make the marijuana market especially hostile to brand-new entrants that lack “vertical integration,” or the back-end infrastructure that allows them to cultivate, grow, process, and produce all the product they sell. “Absent that ability, you’re susceptible to the highs and lows of the wholesale pricing market, and I think that lessens the amount of people that see [cannabis] as this green rush they thought it was 3-4 years ago.”

As of Wednesday morning, the city had only received a single adult-use permit application, per Lutz. That’s not necessarily a sign of low interest: McLeod says Cloud Cannabis usually waits to the latter part of an application window to submit. However, the lack of early submissions does make it difficult to predict how many applicants the city could have by the end of the week. The Ticker asked multiple marijuana companies whether they’d be applying for licenses this week, but received few responses. Examples include House of Dank, which currently operates a medical marijuana dispensary in town; and Lume, a major Michigan cannabis brand that has previously expressed interest in setting up shop in Traverse City.