New Jersey Requesting Applications For 24 ATC Endorsements – What Applicants Need To Know

MJLegal

By: Rosemarie Moyeno Matos, Esq.

NEW JERSEY: Hot on the heels of Governor Phil Murphy’s May 2019 announcement that his administration would be moving forward with expansion of New Jersey’s Medicinal Marijuana Program (the “MMP”), the Department of Health (the “DOH”) published a new Request for Applications (the “RFA”) for new alternative treatment center (“ATC”) permits and endorsements on July 1, 2019. It’s important to note that this RFA process still falls under the purview of the New Jersey Compassionate Use Medical Marijuana Act (“CUMMA”),[1] despite Governor Murphy signing the “Jake Honig Compassionate Use Medical Cannabis Act” (the “Act”) into law on July 2, 2019. The Act will eventually turn oversight of the MMP from the DOH to a Regulatory Cannabis Commission upon its creation.

Pursuant to the RFA, the DOH will award up to 24 permits and endorsements for cultivation, manufacturing and dispensary operations throughout the northern, central and southern regions of the state. This article will summarize the RFA requirements and any significant differences from prior application requirements.

NUMBER OF ENDORSEMENTS BY REGION & OPERATION:

For the first time since the inception of the MMP, the state will be issuing separate “permit endorsements” for cultivation and dispensing operations, presenting an opportunity for small businesses and minorities to enter the industry on a smaller, more affordable scale. The RFA is looking to award:

Total Permit/Endorsements Type of Permit/Endorsement
4 Vertically Integrated Permits (“VIPs”)[2]
15 Dispensary Endorsements
5 Cultivation Endorsements[3]

The 24 ATC permits and endorsements awarded under the RFA are to be distributed regionally and by operation in the following manner:

Region Number and Type
Northern (Warren, Morris, Essex Counties and up):2       Cultivation Endorsements5       Dispensary Endorsements1-2    VIPs*
Central (Hunterdon, Somerset, and Union through Mercer and Ocean Counties):2       Cultivation Endorsements5       Dispensary Endorsements1-2    VIPs*
Southern (Burlington and Atlantic Counties all the way down):1       Cultivation Endorsements5       Dispensary Endorsements1-2    VIPs*

*One VIP will be awarded in each region. The region of the 4th VIP will be determined at the time of award based on the applicant’s overall score and patient need.

Except for VIP permits, each individual endorsement requires a separate application. Applicants should note:

  • you are limited to a maximum of three (3) applications, one (1) per region;
  • you may not submit for a VIP and for individual endorsements;
  • you may only submit for one (1) cultivation endorsement; and
  • you will only be awarded one (1) VIP or one (1) individual endorsement.

APPLICATION COSTS:

Two checks totaling $20,000 must accompany each application submitted. The checks represent a $2,000 non-refundable application processing fee and the $18,000 permit endorsement fee if awarded. The DOH will destroy the $18,000 checks submitted by applicants not awarded an endorsement.

In addition to application fees (up to $24,000 depending on the number of applications submitted and whether a permit/endorsement is awarded), applicants will need typically need budget for real estate, professional services and contractors, and construction costs. Property and construction costs vary depending largely factors such as location and form of interest (lease vs ownership). Professional or contractor’s costs largely depend on the fees of each professional or contractors and the specific needs of the applicant, but an applicant can realistically expect to pay well over $100,000 for professional and contractor services leading up to and during the application process.[4]

APPLICATION REQUIREMENTS:

Similar to last year’s permit applications, current applications will consist of Part A Mandatory Information, Part B Scored Criteria and Personal History Disclosure Forms for each owner with 5% or more ownership interest in the ATC, as well as each principal, director, board member, and employee.

Part A Mandatory Information largely seeks entity and property information including listing of all individuals and entities having greater that 5% ownership interest in the ATC, all creditors and all individuals and entities having managerial/operational control over the ATC. Applicants will also need to include all formation documentation, all contracts related to management, intellectual property, real estate, equity in, or funding of applicant, Letters of Support and evidence of zoning compliance, site plans and a list of its medical advisory board members with a copy of the board’s by-laws.

Part B Scored Criteria (300 points) includes:

1.   Submission of security, environmental impact and quality control and quality assurance plans (30 pts);

2.   ATC’s compliance history in government-regulated marijuana programs or other highly regulated industry (20 pts);

3.   Financial plan/proof of funding evidencing applicant’s ability to meet supply demand (20 pts);

4.   Evidence of community support and participation (20 pts);

5.   Ability to provide appropriate research data through evidence of past contributions (10 pts);

6.   Compliance experience in cultivating, manufacturing, or dispensing marijuana, as applicable, in government-regulated marijuana programs (100 pts); and

7.   Submission of labor peace agreement, labor compliance plan and a workforce and job creation plan with evidence of WBE, MBE or VOB certifications (100 pts).[5]

IMPORTANT DATES:

Action Date
Application Opening Period on or before July 15, 2019
RFA Question Submission Deadline July 26, 2019
Pre-Application Webinar August 2, 2019
Dispensary Apps Submission Deadline 3:00 pm EST on August 21, 2019
Cultivation & VIP Apps Submission Deadline 3:00 pm EST on August 21, 2019
Final Agency Decision None Provided

CONCLUSION: While the number of endorsements to be issued from the June 3rd RFA (108) versus this RFA (24) dropped significantly, there is reason to believe that additional RFAs will be published soon after the Regulatory Cannabis Commission is established and operational, as the medicinal marijuana  patient population continues to grow in leaps and bounds. The question we frequently receive from interested applicants is whether they should be preparing for this application round or future rounds. The answer depends largely on where the applicant stands with its business plan, site control, capital and team (including owners, managers, and employees, as well as outside professionals and contractors). However, if you are not application ready for this round, you should actively continue to work toward it for the next. If history has taught us anything, an applicant truly vested in this space should be preparing themselves to be application ready at a moment’s notice since RFAs tend to drop with little to no advance warning!

The law firm of Moyeno Gonzalez & Associates PC has represented previous applicants in this space and is ready to assist in answering any questions you may have regarding the RFA, the application process and post-licensing compliance. Please feel free to reach out to us via our website.

In her current role as Partner at Moyeno Gonzalez, Rosemarie Moyeno Matos represents both for-profit and non-profit organizations, rendering a wide range of legal services from entity selection and formation to regulatory compliance advice and commercial transaction representation. In August 2018, she represented a client who submitted two applications for vertically integrated Alternative Treatment Center licenses through New Jersey’s Medicinal Marijuana Program. Currently, she represents several entrepreneurs and start-ups in the medical and recreational cannabis space. Through her corporate and regulatory background, Rosemarie has a keen awareness of the issues faced by those participating in the cannabis industry and successfully helps her clients navigate them.
[1]N.J.S.A. 24:6I-1 et seq.
[2] VIPs include one (1) each of a cultivation endorsement, a manufacturing endorsement and a dispensary endorsement.
[3]Cultivation Endorsements are further broken down by tiers based on canopy size. Of the 5 individual Cultivation Endorsements awarded under this RFA, endorsements will be awarded based upon canopy size in the following manner:
1       for a Canopy up to 5,000 ft2
2       for Canopies between 5,001 ft2 and 20,000 ft2; and
2       for Canopies between 20,001 ft2 and 30,000 ft2.
VIP applicants are not restricted to canopy tiers and may choose any canopy size up to 30,000 ft2.
[4]Additional capital needed to evidence financial suitability and to commence operations are not factored into these application costs.
[5] Applicants who fail to submit a signed labor peace agreement will lose 30 points. Additionally, applicants who submit proof of WBE/MBE/VOB certifications will receive full credit of 30 points, while those who submit evidence of meeting the criteria in the future may receive partial credit.
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