Medical Marijuana Where Will The Dispensaries Go

Arizona’s Medical Marijuana Proposition Passes, But Where Will The Dispensaries Go?

Arizona voters made history again this month, narrowly approving Proposition 203, the ballot initiative allowing one medical marijuana dispensary for every 10 pharmacies in the state (which translates to about 120 statewide). Under Prop. 203, patients suffering from a wide range of painful medical conditions will be able to buy small amounts of marijuana from state-approved dispensaries with a doctor’s prescription. Those living more than 25 miles from an outlet will be allowed to grow their own.

Needless to say, residents, cities and landlords are facing some interesting dilemmas before the first outlets potentially open in March 2011 … in a neighborhood near you.

Under the approved Prop. 203, the Arizona Department of Health Services must issue licenses to the so-called “medical marijuana clinics,” but it’s the local municipalities that must adopt zoning restrictions that regulate the size and location of such clinics. Cities are expressly forbidden under Prop. 203 from prohibiting them outright.

So who will ultimately win the “Not In My Back Yard” tug-of-war? Cities such as Phoenix, Tucson and Mesa, are grappling with commercial landlords, their constituents and zoning restrictions to keep the centers away from schools, churches and residential areas.

On the commercial real estate front, with the marketplace hard hit by the recession and Phoenix retail vacancy rates at 13 percent, many landlords are looking to fill empty space. But tenants such as medical marijuana clinics would cause some considerable controversy with residential neighbors and fellow commercial tenants.

“There are some landlords that will definitely have an issue with it,” said Pete Bolton, executive vice president and managing director of the commercial real estate brokerage firm Grubb & Ellis in Phoenix.

He expects dispensary operators to seek retail center locations with public exposure and easy parking. But, he added that some commercial landlords are hesitant to sign a marijuana outlet, especially if they have other tenants that cater to families or conservative customers.

Prior to the ballot passing, a number of nonprofit groups already were eying Phoenix-area shopping centers as possible dispensary locations. Even before the election earlier this month, more than 14 medical marijuana groups had reserved business names with the Arizona Corporation Commission. Some others were incorporating and looking for investors, dispensary locations and even growing sites.

Marketing manager for Medical Marijuana Dispensaries of Arizona Inc., Allan Sobol, says that like any other business, location is key.

“I want to be at a high-exposure location. I envision them just being like a CVS or Walgreens,” Sobol said.

He expects most marijuana outlets will be located in strip malls and other high-traffic locations near hospitals and medical centers. But with the dispensaries intermingled with other more conservative businesses, there could be some concerns.

So landlords will have some choices to make, and for Arizona cities facing these same dilemmas, the clock is ticking. Mesa, like Phoenix, will likely vote on where to locate the dispensaries by the end of the year.

This is likely the first time in history that a Mesa mayor has ever joked about collecting sales taxes on bongs or marijuana paraphernalia. But then, it’s probably also the first time in history that Mesa has come face-to-face with the prospect of stores legally selling marijuana. Given its size, Mesa could land between eight and 10 of the 120 dispensaries.

“This is not something we can prohibit,” Mesa Mayor Scott Smith said during a city council study session last month.

Under its proposed zoning regulations, Mesa would limit the dispensaries from residential, industrial and employment areas. Also, they could not locate within 2,400 feet of other medicinal marijuana shops and drug/alcohol rehab facilities. They would have to stay 1,200 feet away from churches, parks, open spaces in homeowner associations and libraries. They could be no closer than 500 feet from schools or group homes for the handicapped.

Arizona Department of Health Services Director Will Humble says cities need to act fast.

“Cities can’t wait,” he said. “If they don’t get it done in time, I’ve got no choice but to approve a dispensary if they don’t have a zoning restriction in place.”

In other words, the state bureaucrats will act if the mayors and councils haven’t.

So, while a razor thin majority celebrates the approval of Prop. 203, mayors and city councils around the state not only must act fast, but also wrestle with moral, political and economic issues before the first medical marijuana clinic opens on a corner — possibly in your neighborhood.