More than one-quarter of the applicants seeking a municipal permit to sell cannabis in Portland are facing disqualification for failing to satisfy basic eligibility requirements, such as failing to pay local taxes or fees on time or wanting to operate their shop too close to a school or in a land-use zone that doesn’t allow it.

Portland received 43 retail cannabis license applications, and a preliminary staff review suggests 12 of those will be disqualified before the city even considers how, or if, it will use its legally embattled scoring matrix to decide which applicants will land one of its 20 coveted retail marijuana licenses.

Reasons for disqualification include failure to have a conditional state marijuana license, being more than 30 days late on a local tax or fee in the last five years, having unresolved land-use violations and wanting to operate a shop too close to a school or in the wrong zoning district, Associate Corporation Counsel Anne Torregrossa said.

Another three applicants could be tossed depending on the result of city inquiries into the status of their state licenses, she said.

The city issued 12 pre-denial letters to ineligible retail applicants on Friday, but all of those businesses will get 10 days to challenge the city’s initial disqualification, Torregrossa said. If the city’s initial finding stands, the total number of retail applicants would drop to 31. If the three needing clarification are culled, too, the number of retail applicants would drop to 28. 

The information came out Monday at a City Council workshop organized to discuss how Portland should proceed with cannabis licensing in the wake of a court ruling challenging the constitutionality of the resident preferences in the city’s retail cannabis scoring matrix. The retail scoring matrix also awards points for other criteria, like having $150,000 in liquid assets.

Another four or five applicants ruled eligible to apply would be ruled out of the running by the city’s requirement that no store can be closer than 250 feet to another retail marijuana operation. The matrix could come into play when the city has to decide which of the eligible stores in a crowded area should get a license.

The councilors reached no consensus on the future of the city’s retail license scoring matrix at the workshop. They considered removing the court-challenged resident preferences from the matrix and using the remaining criteria to rank applications on merit, using a lottery system to divvy up the 20 licenses and giving all eligible applicants a license.

Councilor Jill Duson urged her colleagues to keep the resident preferences in the scoring matrix, despite the court challenge. The lower court judge ruled against the city’s motion to dismiss the legal challenge to the matrix, but didn’t actually strike down the matrix. Torregrossa noted, however, that the judge did say the city case was unlikely to succeed.

Councilor Belinda Ray suggested increasing the 20-license cap, but that found little support among her fellow councilors. She worried about disqualifying applicants who fell behind on their taxes this year when so many businesses were closing and people were losing their jobs due to the COVID-19 pandemic.

“It’s the COVID stuff that mostly concerns me,” Ray said. “If there was ever a year to be understanding, this would be it.”

Councilor Tae Chong argued that people who can’t play by the rules don’t belong in a highly regulated industry such as cannabis.

“It should be used as a disqualifier because you’re taking your eyes off the prize when you’re at the finish line,” Chong said. “I’d like to help people, but we have to draw the line.”

Torregrossa said most of the half-dozen applicants likely to be disqualified for failing to pay their taxes on time have a history of being late, not just this year, when there is a pandemic happening. And City Manager Jon Jennings reminded councilors that the city had offered an extension to those struggling to pay their taxes this year due to COVID-19.

With three council members absent, those in attendance decided to push the decision off until the full council meeting on Oct. 19, which is 10 days after licensed retail stores can begin operating in the state. Councilors insisted, however, that they wanted to move as quickly as possible to get licenses awarded so those who have so much invested in their business plans can either start making money soon or start looking for another home.

In its lawsuit filed earlier this year, Wellness Connection argued that a residency requirement violates its constitutional right to interstate commerce by explicitly favoring Mainers over non-residents. Wellness, whose flagship store is on Congress Street in Portland, is controlled by an out-of-state investor that is owned by multinational Acreage Holdings.

The courts have struck down residency requirements on constitutional grounds before, but not in the cannabis industry, which still violates federal law. Other legal states such as Colorado and Oregon have abandoned resident-only licensing mandates for policy reasons, not legal ones.

The scoring matrix discussion could be deemed irrelevant if local voters decide to eliminate the 20-store cap and shrink the 250-foot buffer to 100 feet at a citywide referendum in November. A group of marijuana advocates collected 2,482 signatures on petitions to force the issue to a referendum vote.

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