The City of Detroit Considers a Revised Proposed Adult Use Marijuana Ordinance

Last month, the City of Detroit began the process of considering a revised adult use marijuana ordinance. Application processing for recreational marijuana licenses under the City’s prior ordinance was previously enjoined on June 17, 2021, after the U.S. District Court for the Eastern District of Michigan found, inter alia, that the plaintiff demonstrated a likelihood of success on the merits of her constitutional claims challenging the City’s grant of preferential treatment to “Detroit Legacy” applicants (i.e., those who have lived in Detroit for at least ten years, subject to additional criteria) for certain licenses.

The City is now in the final process of revising the ordinance to eliminate the concept of a Detroit Legacy applicant or licensee while still providing for Detroit Legacy status, which instead of prioritized licensing treatment would provide eligibility for mentoring, business education, and networking opportunities under a “Homegrown Detroit” program to be established by the Civil Rights, Inclusion, and Opportunity Department (“CRIO”). The revised ordinance also introduces the concepts of a “disproportionately impacted community” (meaning any community where marijuana-related convictions are greater than the state of Michigan median, and where 20% or more of the population is living below the federal poverty level) and an “equity applicant” (meaning  an individual residing in a disproportionately impacted community, including individuals with certified Detroit Legacy status and certified participants in Michigan’s Social Equity Program, or an entity where one or more of the aforementioned individuals owns and controls at  least 51% of the applicant entity).

The revised ordinance also provides for numerical caps on certain limited licenses for medical marijuana provisioning centers (75), adult-use retailer establishments (38 non-equity/38 equity), designated consumption lounges (15 non-equity/15 equity), and microbusinesses (15 non-equity/15 equity). Under the ordinance the City would accept license applications for retailers, designated consumption establishments, and microbusinesses during three 30-day periods, the timing of which would be recommended by CRIO and determined by the City Council. Such applications would be assessed based on a 100-point scoring system using the following general criteria: business plan, site control, due diligence, community investment, and social equity.

Of particular note, adult-use applications must include, inter alia, a “Good Neighbor Plan” indicating the applicant’s annual commitment to the community in which the adult-use marijuana establishment will be located, including a community outreach report (meaning a report of the efforts taken by an applicant to inform and engage the community that surrounds the applicant’s proposed business location of the applicant’s proposed business operation, and any employment or social equity opportunities that the applicant intends to offer) and a community outreach plan (meaning a plan for ongoing efforts by a licensee to continually undertake these actions) to ensure awareness of the application and potential employment opportunities in the neighborhoods surrounding the proposed business, as well as completing one or more of the following during the term of the license:

1. Hiring at least 50% of full-time employees who are Detroit residents for jobs paying at least $15 an hour; or
2. Hiring at least 30% of full-time employees who have a prior controlled substance record for jobs paying at least $15 an hour; or
3. Purchasing at least 50% of necessary goods and services from businesses located in the City of Detroit; or
4. If a grower or processor, selling at least 25% of available harvest or products to equity licensees at the current market rate in Detroit, or less; or
5. Donating annually a minimum of .25% of the applicant’s gross revenue to a duly organized Detroit-based tax-exempt charitable organization that operates within the community where the applicant’s facility or establishment is located, or to the fund established by the City of Detroit for the purpose of funding social equity initiatives, and substance use prevention programs.

While the City Council’s Public Health and Safety Standing Committee sent the revised ordinance to the City Council’s formal session for consideration, at its March 1, 2022 formal session the City Council submitted a report back to that Committee regarding a suggested amendment to the revised ordinance. Specifically, the amendment would alter the social equity scoring criteria to consider the sale of licensable habitable space to a licensed equity applicant at varying reduced values compared to going market rates.

Clark Hill continues to track the ongoing development and adoption of the proposed ordinance. For further information or assistance regarding legal or regulatory cannabis issues contact Stephen A. Campbell or Michael J. Pattwell.