Following years of delay, the Detroit City Council today approved a new recreational cannabis ordinance.
The city passed an earlier ordinance allowing recreational cannabis in November 2020, which was the subject of litigation and halted by a preliminary injunction on June 17, 2021. The new ordinance can be found at the following link: Detroit Ordinance Amending Chapter 20 of the 2019 Detroit City Code, Health.
At the request of the new ordinance’s sponsor, Detroit City Council Member James Tate, the ordinance is expected to take effect on April 20. While it remains possible that the revised ordinance may be challenged, applicants may apply beginning on April 20 for what will be classified as ‘unlimited’ licenses (growers, processors, transporters, safety compliance and temporary events). It is anticipated to take longer to set up an application process for ‘limited’ licenses for other categories, such as retail locations and consumption lounges.
Below are a few key provisions of the ordinance:
Rather than exclusively providing advantages to applicants defined as ‘Detroit Legacy’ with long-term residence in the city, as the previous ordinance did, the new ordinance contains the concept of an “Equity Applicant.” To be considered an equity applicant, an applicant must either:
i) currently reside in a disproportionately impacted community and have resided in such disproportionately impacted community for at least 5 cumulative years within the past 10 years; ii) be a certified participant in Michigan’s Social Equity Program (as described in MCL 333.27958(1)(J)); iii) be a Detroit Legacy applicant; or iv) be an entity where one or more of the aforementioned individuals owns and controls at least 51% of the applicant entity.
There is no longer a requirement that 50% of licenses must be issued to Detroit Legacy applicants; however, 50% of licenses must be issued to equity applicants.
The Michigan Marijuana Regulatory Agency maintains a list of communities that qualify as “disproportionately impacted” by cannabis prohibition and enforcement under the agency’s Social Equity Program. The agency’s list of the currently 184 qualifying communities can be found at this link: MRA Social Equity Communities .
The revised ordinance places caps on the number of licenses which may be issued, and contains certain categories as set forth below:
Temporary Marihuana Event Organizer
Temporary Marihuana Event
Medical Marijuana Provisioning Center License
Adult-Use Retailer Establishment License
Adult-Use Retailer Establishment – Equity License
Designated Consumption Lounge License
Designated Consumption Lounge – Equity License
Microbusiness – Equity License
Beginning on Jan. 1, 2027, there are no caps on Adult-Use Retailer Establishments to the extent an existing licensed medical cannabis provisioning center applies for an adult-use retailer license (i.e. – medical establishments may be ‘grandfathered’ in notwithstanding caps on number of licenses, but must apply after Jan. 1, 2027 and be awarded an adult-use license through the city of Detroit’s application process).
Applicant Scoring Process
Applications will be scored on a 100 point scoring system detailed in a table based on the following categories and criteria: 1) Business Plan; 2) Site Control; 3) Due Diligence; 4) Community Investment; and 5) an opportunity to score additional points through Social Equity Scoring Criteria [27 points maximum].
Notably, an applicant may score up to 27 points beyond the standard 100 points in the general application categories in the social equity category. An applicant will be awarded 25 points if 41-50% of the applicant is owned and controlled by an equity applicant. The applicant would be awarded 15 points if 31-40% of the applicant is owned and controlled by an equity applicant, and five points if 20-30% of the applicant is owned and controlled by an equity applicant. This means it would be advantageous for any applicant to include an equity applicant in its ownership in some form.
Licenses are granted in order of applicant scores, with tiebreaker lotteries used for applicants who 1) have received the same score; and 2) have earned a minimum of 100 points of the general scoring criteria and a minimum of five points of the social equity scoring criteria.
The Licensing Process
The city of Detroit will establish three 30-day periods for accepting applications for limited licenses other than medical cannabis provisioning center licenses. Each of the 30-day periods will be separated by a period of at least 120 days. The Detroit Civil Rights, Inclusion, and Opportunity Department (CRIO) will make its recommendation on the timing of such 30-day periods to the City Council, which will approve the application periods. The following are the number of licenses to be issued related to each 30-day period:
- 12 adult-use retailer licenses following the first application period
- 12 adult-use retailer licenses following the second application period
- 14 adult-use retailer licenses following the third application period
- 12 adult-use retailer equity licenses following the first application period
- 12 adult-use retailer equity licenses following the second application period
- 14 adult-use retailer equity licenses following the third application period
- 5 microbusiness licenses in each application period
- 5 microbusiness equity licenses in each application period
- 5 designated consumption establishment licenses in each application period
- 5 designated consumption establishment equity licenses in each application period
Newly-established under the ordinance, the Marijuana License Review Committee (MLRC) will be responsible for reviewing applications and making recommendations. The MLRC will consist of an appointed staff member from each of the following city of Detroit departments: i) Office of the Chief Financial Officer, Assessor; ii) Buildings, Safety Engineering, and Environmental Department; iii) Office of the Chief Financial Officer, Treasury; iv) Health Department; v) Law Department; vi) Police Department; vii) Civil Rights, Inclusion, and Opportunity Department; and viii) “such other departments agencies, or individuals as deemed appropriate by the chairperson, on a case by case basis.”
MLRC has 90 days to review a completed application, and on the expiration of such 90-day period, the application will be forwarded to Detroit’s Buildings, Safety Engineering, and Environmental Department (BSEED) without recommendation.
Applications for limited licenses require a statement detailing the applicant’s current and past community leadership roles, volunteer activities, and business operation history in the city of Detroit in the past five years.
Applications require home addresses and business addresses for all applicants, including direct and indirect owners of an entity.
Certain provisions prohibit overlapping categories of applications (i.e. – a license may not be awarded to an application if such applicant or any direct or indirect owner of such applicant is also a direct or indirect owner of any other applicant applying for a license of the same type or a holder of a license of the same type). Also, a non-equity license may not be awarded to an applicant if such applicant or any direct or indirect owner of such applicant is also a direct or indirect owner of any other applicant applying for an equity license or any licensee that is the holder of an equity license.
Glenn C. Ross is the Co-leader of Plunkett Cooney's Business Transactions & Planning Practice Group. He represents clients in the areas of business law and transactions involving real estate and complex financing. Mr. Ross also ...
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