At least two Maryland state universities are jumping at the chance to work with marijuana growers to research the medicinal application and cultivation of cannabis. A tiny Western Maryland town says it would happily accept a 5 percent share of profits from a company that hopes to operate there.
As competition to join Maryland’s burgeoning medical-
marijuana industry intensifies, some out-of-state entrepreneurs are forging partnerships with local institutions even before securing a license to operate.
The entrepreneurs say it is better to be a pillar of the community than a pariah. And while Maryland’s top cannabis regulator says community engagement efforts will not give applicants an edge in landing one of the 15 highly coveted growing licenses, she also says that such partnerships can’t hurt.
“It’s not an element that’s formally weighted in the application, but it helps them in their communities and local governments,” said Hannah Byron, executive director of the Maryland Medical Cannabis Commission. “It makes good business sense.”
State regulators plan to start distributing licenses to marijuana growers and processors in the summer, with medical cannabis probably becoming available by early 2017.
Peak Harvest Health, which has secured a 152,000-square-foot warehouse in Western Maryland, has announced a research arrangement with Frostburg State University. Ethan Ruby, the company’s chief executive, who operates a growing plant in Connecticut, says working with the local university is part of being a good neighbor.
“Unfortunately, there’s a stigma attached to this industry and people who are operating in it that does need to be changed,” Ruby said. “You want to have a host community that is understanding what you are doing and welcoming of the idea.”
Maryland universities would be among the first in the nation to partner with marijuana businesses for research purposes, industry veterans say.
Universities have been wary of joining such efforts, concerned about running afoul of federal prohibitions on using marijuana and losing funding.
Schools in Colorado and Oregon, states where recreational use of marijuana is legal, have prohibited cannabis research. There are cannabis research programs run by state health departments, while a program at the University of California relies on marijuana provided by the federal government.
“We obviously have examples of universities being very uncomfortable with those sort of relationships, largely out of self-preservation,” said John Hudak, a governance studies fellow at the Brookings Institution who has tracked the issue.
Any research conducted at Frostburg would be contingent on Peak Harvest getting a license to grow and would have strings attached. Cannabis wouldn’t be allowed on campus grounds, nor could the university bring specialized equipment to Peak Harvest facilities. Students would not be allowed to do internships for academic credit.
“We are trying to navigate some very muddy water,” said Joseph Hoffman, dean of Frostburg’s College of Liberal Arts and Sciences.
On the other side of the state, the University of Maryland Eastern Shore has signed an agreement with grower Wellness Farms to research topics of mutual interest, from developing new strains of cannabis to preventing youth use. Dominick Murray, a university administrator who oversees business partnerships, says the legal questions will be sorted out down the line, if Wellness Farms is granted a license.
Jason Walsh, an Illinois-based consultant, is chief executive of Wellness Farms, which has eight marijuana business licenses in other states. He says the university partnership is part of a broader strategy to positively impact the struggling Somerset County region.
“Our philosophy was to pick one of the most impoverished communities, where we felt like we could make the biggest difference,” Walsh said. “Make no mistake, there’s a lot of money at stake, but we are in it for right reasons.”
Wellness Farms is also partnering with McCready Health, which operates the region’s only hospital, to expand health-care access. Walsh has floated the idea of helping the health company operate a van that goes to rural stretches of the county to offer preventive disease screenings. The van would not offer medical cannabis.
Most marijuana growers boast about the jobs and tax revenue their business would bring to a community. Arizona-based Harvest Inc. is going a step further by actually offering a share of its potential profits to the town where it hopes to set up shop.
Hancock, Md., (population 1,500) would have a 5 percent stake in any growing, producing or dispensary facility that ends up licensed by the state. Steve White, the company’s chief executive, said the arrangement was crafted so the town would not have a voting share in a company engaged in activity that the federal government still considers illegal, but would receive 5 percent of future annual profits and proceeds if the company is sold.
“We wanted to forever put to bed fears that people had about our commitment to the town, so we permanently tied ourselves to the town,” White said.
Hancock officials say they were already happy to welcome the company and its jobs without the stake, which ended up more as a sweetener. The offer initially raised eyebrows but passed legal vetting.
“It could be significant dollars down the road for our little community,” Hancock Mayor Dan Murphy said. “It’s the same as Bayer moving to make aspirin tablets in Hancock.”
Cannabis advocates and business insiders say partnering with community institutions are an important way of legitimizing their industry. Casinos also have forged profit-sharing arrangements with the jurisdictions where they locate, for some of the same reasons.
“When you have a controversial business, it changes the way people think about it,” said Tinglong Dai, an assistant professor at Johns Hopkins Carey Business School.
That’s part of the case made by Kevin Merillat, a Calvert County swimming pool contractor who is hoping to grow marijuana but faces opposition from some county commissioners.
His business plan calls for using solar panels on his farm that would generate more energy than his growing operation would need. The rest would be converted to utility rebates, which Merillat would donate to the local school district.
Calvert County Public Schools Superintendent Dan Curry says the money’s not a game-changer, but he welcomes the gesture.
“We will already be collecting tax dollars from them,” Curry said. “I don’t see any risk.”