New Applications Have Poured in for Arizona Medical-Pot Store Licenses

The medical-marijuana industry is exploding in Arizona, restrained only by limitations that state and city officials have imposed on it.

Nothing exemplifies the potential of this lucrative trade like the numbers the Arizona Department of Health Services reported today on the flood of applications the agency received in July for a chance of obtaining one of 31 new licenses to operate a medical-marijuana dispensary.

The DHS confirms for New Times that 747 applications were submitted during the official submission period, July 18-29. At $5,000 per application, the DHS took in $3.7 million in fees. The money will be added to the state's medical-marijuana fund, which stood at about $12 million before this latest influx. Applicants who fail to obtain one of the 31 new licenses will receive a refund of $1,000 — leaving the state with a $3 million windfall.

Officials expect a few more applications to trickle in by mail, DHS spokeswoman Holly Ward says. They'll count as long as they were postmarked by the July 29 deadline.

As of April, according to a blog post written by DHS director Cara Christ, there were 99 nonprofit dispensaries licensed in Arizona, with 92 open and operating.

Roughly 100,000 patients are now registered under the program, 70 percent of whom list "chronic pain" as their sole qualifying ailment. Patients aren't allowed to grow their marijuana if they live within 25 miles of an operating dispensary.

It will take weeks for the DHS to sort through the applications and designate the new licensees. Winners are assured a dynamite business opportunity, albeit in a field that will see a rush of new fellow competitors.

Applications had to be accompanied by a signed letter from a property owner certifying that a suitable location is available for the proposed dispensary.

Via a convoluted scoring process that utilizes Community Health Analysis Areas (CHAA), the DHS will analyze those proposed locations in order to calculate which applicants stand to serve the most customers within a 10-mile radius.

Only DHS knows where all the patients are, and they aren't saying. (Not surprisingly, most eligible CHAAs are located in metro Phoenix and Tucson, with a few in slightly less-populated but patient-rich areas such as Lake Havasu City and northeast Yavapai County.)

It's safe to assume hard feelings might arise among the 700-plus losers, and that some of those left outside looking in might blame the selection process.

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In the event of tie scores, the DHS will break deadlocks by choosing randomly.

Ryan Hurley, a Valley attorney who provides legal assistance to dispensaries (and to the pending ballot measure to legalize recreational marijuana use), says he expects to see a few ties.

For one thing, the volume of competition makes it likely that some property owners have promised the same site to more than one applicant. A property owner doesn't necessarily care who wins, but an applicant certainly does.

Furthermore, a letter of intent isn't a signed lease. In theory, at least, an applicant could win a license, only to find out that the designated location won't work. In that case, the licensee could put the dispensary at another address within the same CHAA. So it's possible that an applicant could game the system by listing an address that would provide an edge in the selection process, while having no intention of actually putting a dispensary at that location. (In any case, the regulations permit dispensaries to move anywhere in the state — subject to local controls — after they've been operating for three years.)

It's safe to assume hard feelings might arise among the 700-plus losers, and that some of those left outside looking in might blame the DHS selection process.

In other words, the DHS might not come out of the process without contending with a lawsuit or two.

The DHS expects to announce the winners in October — which means patients could be shopping at new stores by next summer.
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Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.