Cannabis shops take root in Galena, East Dubuque | Tri-state News

GALENA, Ill. — Divina Capellupo says some of the most surprised customers at the Galena shop she manages are visitors from Chicago.

“They’ll come in and say, ‘We shop at your store in the city, and it’s great to see you have one here,’” Capellupo said.

While the shop that Capellupo manages is one of the newest in Galena, it’s also relatively unobtrusive.

It’s not a flashy place, according to City Administrator Mark Moran.

“The business operates relatively discretely,” he said. “There’s no outward marketing or signage that would indicate cannabis sales.”

Capellupo manages the Illinois locations of a cannabis dispensary chain called Verilife, which is operated by a company called PharmaCann.

The Galena dispensary opened on March 6 — 430 days after adult recreational use of cannabis and regulated sales of marijuana were legalized in Illinois.

“I was born and raised in Chicago and I’ve been a tourist in Galena in the past, so I was familiar with Galena’s welcoming attitude,” Capellupo said. “I’m not surprised that everybody in Galena has been so supportive.”

‘LEARN AS YOU GO’

Jo Daviess County Sheriff Kevin Turner’s concerns as marijuana legalization approached were practical in nature.

“My concerns were more just about enforcement,” he said recently. “There wasn’t a lot of guidance about things, such as if you could have it in a vehicle.”

On that matter, Illinois law states that cannabis is only allowed in the passenger area of a vehicle if it’s kept in a sealed, odor-proof, child-resistant container.

Turner described the year-plus of legalized marijuana as “learn as you go” from a law enforcement perspective.

Turner said his department has not had any issues with legal cannabis.

“But we are still seeing issues with illegal cannabis,” he said.

Illinois law only allows cannabis sales by licensed dispensaries. An individual is prohibited from selling marijuana.

Despite legal options available for cannabis users, Turner said he expects illegal marijuana to remain an issue.

“I think people will try to go around and buy it off the street because the taxes are so high,” he said.

Illinois law allows people age 21 and older to use cannabis in their own homes and on-site in some cannabis businesses. It is illegal to use cannabis in any public place, in a vehicle or on school grounds.

A second Jo Daviess County dispensary, known as The Dispensary, is set to open as early as this week in East Dubuque.

Loras Herrig, East Dubuque’s city manager, said municipal officials have met with the business owners to examine potential problems.

“Obviously, you always have concerns of impaired driving — that’s the biggest thing we worry about,” Herrig said. “We just don’t want any problems. We want to make sure that negatives that might come up, don’t come up.”

Illinois law also states that drivers with a blood concentration of THC, which is the psychoactive ingredient in cannabis, of 5 nanograms or more per milliliter are guilty of driving under the influence.

Turner said impaired driving incidents seem about the same since cannabis use was legalized.

Herrig said the East Dubuque dispensary could include a consumption lounge at some point, and dispensary ownership and the city have discussed ways to reduce the risk of impaired driving.

“They have talked about arranging rides for people and monitoring people (in the lounge),” he said. “We just don’t want anybody to get hurt.”

Officials with Illinois’ nascent cannabis industry have made it a priority to work with the state’s local law enforcement agencies.

Jeremy Unruh served as an assistant state’s attorney for six years. Now, he is senior vice president for public and regulatory affairs at PharmaCann, the parent company of Verilife.

“One of the first things we do before opening our dispensaries is we meet with village or city staff and law enforcement,” he said. “We explain how everything works.”

Unruh said that after a dispensary is constructed but before it opens to the public, PharmaCann holds an internal open house and invites municipal officials and local law enforcement.

“We walk them through and show them our cameras and where our vaults are,” he said.

Across the Mississippi River, Dubuque police said they have not experienced any issues related to Illinois’ legalizing cannabis use.

“We really haven’t seen any impact since it went into effect,” Lt. Ted McClimon said. “I don’t think we really anticipated a huge increase in our arrests, either. It could be people are just going over there and using it over there.”

McClimon said people using marijuana illegally in Dubuque might not have the need to cross the bridge.

“People who habitually use might already have (an illegal) source, and they have no need to go over there to obtain it,” he said.

It is a felony to cross into Iowa or Wisconsin with cannabis, even if it is purchased legally. Non-Illinois residents can purchase up to 15 grams of cannabis flower or 250 milligrams of edibles. Illinois residents can purchase up to 30 grams of cannabis in flower form or 500 milligrams of edibles.

‘GREATER THAN PROPERTY TAXES’

Moran likened the Verilife dispensary’s arrival in Galena to that of any other new business, saying that Verilife even pledged to help out around town.

“They have committed a team of employees to our annual roadside cleanup program,” Moran said.

The business is eventually expected to help boost city coffers, too. Galena City Council members voted to have a 3% excise tax on cannabis products, in addition to the 2% sales tax.

“We do not have an estimate of projected revenues,” Moran said. “Because the business sales and related tax revenue is such an unknown at this time, we are choosing not to include any revenue from the business in our budget for the fiscal year beginning May 1.”

As the East Dubuque dispensary’s opening nears, Herrig said the city appreciates the business being in town.

“We also appreciate the revenue,” he said.

East Dubuque officials expect to see initial annual revenue of $250,000 to $300,000 from the dispensary. The city also has a 3% excise tax on cannabis products.

“It has the potential for more,” Herrig said. “It has the potential for generating more revenue for the city than property taxes.”

East Dubuque receives a little more than $400,000 annually from property taxes.

“A city having a revenue source greater than property taxes? Most cities would take that,” Herrig said.

Statewide, Illinois surpassed $1 billion in revenue during its first year of recreational marijuana sales. The $1.03 billion total included $669 million in recreational cannabis sales and more than $366 million in medical sales, according to the Illinois Department of Financial and Professional Regulation.

“I would characterize the industry generally as being robust in some regards and undeveloped in others,” Unruh said. “It is underdeveloped in that we don’t have as many doors (of dispensaries) open as we should. I don’t think the state has done a very good job of scoring and processing the awarding of new, adult-use licenses. It’s robust because the tax revenues that are being generated are setting records every single month. There is a tremendous amount of market activity and a tremendous amount of consumer demand.”

Illinois set a sales record last month, with $109 million in March receipts, a 35% increase from February sales.

California remains the top state for legal cannabis sales, with $4.1 billion in receipts in 2020. Colorado follows, with $2.2 billion

Herrig said East Dubuque officials are already considering ways to use cannabis revenues most effectively.

“We want to utilize those funds to improve the community,” he said. “We would like to see some of that going toward some improvements. We need a new police station and a new fire station.”

TENSION BETWEEN STATE AND FEDERAL LAW

Although recreational cannabis use is legal in Illinois and certain other states, it remains illegal on a national level — a status that Unruh said creates tension.

“The tension between state and federal law is what makes cannabis challenging,” he said.

Dispensary operators experience the tension in two realms most other businesses take for granted — banking and interstate commerce.

“Banking in the cannabis industry is not unlawful — it’s just very complicated,” Unruh said.

According to the American Bankers Association website, the “possession, distribution or sale of marijuana remains illegal under federal law, which means any contact with money that can be traced back to state marijuana operations could be considered money laundering and expose a bank to significant legal, operational and regulatory risk.”

Unruh said that as a result, banks “must adhere to detailed guidelines if they choose to do business with the cannabis industry.”

PharmaCann has a bank in every one of the six states in which it operates.

“We use the bank for payroll and to pay our contractors,” Unruh said.

However, some aspects of commercial banking are unavailable to PharmaCann or other cannabis businesses.

“There is no line of credit, and there are no real estate loans,” Unruh said. “There are some bills pending in the (federal) House and Senate. One would create a ‘safe harbor’ for banks and ancillary companies to allow them to do business with us, including credit-card companies.”

With additional states legalizing recreational cannabis use, such as New York, Unruh said he hopes that fixing the banking process for his industry will become a near-term priority in Washington.

Pamela Althoff, a former Illinois state senator who has served as the executive director of Cannabis Business Association of Illinois since 2019, said federal banking restrictions hinder cannabis operations in the state, in part because the lack of access poses a challenge to one of the aims of Illinois’ legislation legalizing cannabis use — making the industry more diverse.

“It’s difficult to open a new business without access to standard financial services,” she said.

Illinois legislation included a “social equity” component designed to give residents who had been most impacted when cannabis use was illegal an opportunity to participate in the industry once marijuana was legalized.

Another source of federal and state tension, as Unruh describes it, is the prohibition of cannabis crossing state lines.

“Interstate commerce is not a thing in the cannabis industry,” Unruh said. “We can’t send products from our facility in Scranton, Pa., to another PharmaCann facility in Orange County, N.Y., even though the facilities are 40 minutes away.”

Unruh said that as a result of interstate commerce restrictions, PharmaCann’s facilities are unable to specialize.

“We have to duplicate efforts (at facilities) in each state,” he said.

The restrictions also mean that states that have experienced gluts of cannabis, including Oregon, cannot supply other states with their excess marijuana.

‘DO YOU WANT ANOTHER BIG TOBACCO IN YOUR STATE?’

Despite its legal status in Illinois, cannabis use remains a contentious topic, with legalization opponents such as Luke Niforatos pointing to troubling issues ranging from lung health to impaired driving and echoes of another industry with a legacy of undue influence.

“Do you really want another ‘Big Tobacco’ in your state?” asked Niforatos, the executive vice president of Smart Approaches to Marijuana, a national advocacy group. “When you legalize marijuana, you allow in an industry whose only incentive is to get people addicted. It’s one thing if that (product) is iPhones or raspberries in the grocery store, but it’s another when it’s a drug that can harm physical and mental health. It’s not even the same drug anymore. We’re seeing potency levels of 99%, and the high-potency stuff is much more addictive.”

Niforatos said that while legalization proponents tout the promises of revenue windfalls and social-justice benefits of a commercialized industry, the truth is murkier.

“We hear a lot about the revenue, but nobody is quantifying the costs — of car crashes, treatment and addiction costs and the money states have to spend eradicating illegal pot grows and cartel activity,” he said.

Niforatos said while cannabis industry proponents present legalization as a way to repair some of the past harm done to certain demographic groups by past drug-control policy, the reality in states such as Illinois doesn’t match social-justice aims.

“Today in Illinois, there are zero minority owners of any of their commercial licenses, and nationally, there is less than 4% Black ownership of licenses,” he said. “Instead, it’s overwhelmingly White.”

In Illinois, Althoff expects lawmakers to clear some misunderstandings surrounding the social equity requirements that helped stall the state’s issuance of new cannabis business licenses to minority owners.

Niforatos points to the issue of impaired driving as another hazard of legalizing marijuana.

“It’s a total nightmare on the impaired-driving front,” he said. “The scientific community hasn’t been able to come up with a standard .08 limit like you see for alcohol, and there is no validated roadside test either, so we have to rely on toxicology results, which take a long time and are expensive.”

Unruh said legalized cannabis faces an unwarranted stigma.

“That stigma comes from decades and decades of conditioning,” he said.

Althoff said people were conditioned to believe that cannabis was a gateway to more harmful drug substances.

Althoff believes one way to change the attitudes and lessen the stigma around cannabis use will be by demonstrating model behavior.

“People can educate by being responsible users,” she said.

INTO THE FUTUREThe future of legalized cannabis use remains uncertain in Iowa and Wisconsin, where the possession, sale and cultivation of marijuana remain illegal.

Wisconsin Gov. Tony Evers, a Democrat, proposed legalizing recreational marijuana in his 2021-2023 budget. However, that proposal was dead with the GOP-controlled Legislature before the ink dried on Evers’ budget.

A recent Des Moines Register/Mediacom Iowa Poll showed that 54% of the adults polled supported legalizing recreational marijuana, though state lawmakers have not moved to join the states allowing possession of small amounts of marijuana for recreational use.

Although it wouldn’t have legalized marijuana, a bill in the Iowa Senate would have reduced penalties for possessing small amounts of cannabis.

“That bill didn’t make the funnel,” said State Sen. Pam Jochum, D-Dubuque, referring to the series of legislative deadlines developed to facilitate the passage of laws in Iowa’s short session of lawmaking. “The bill is dead, at least for this session.”

Jochum said the bill could be revived at the next legislative session.

Thirty-six states have medical marijuana programs, while 16 states have legalized recreational marijuana in recent years.

Unruh said COVID-19 is the root of one aspect of Illinois’ cannabis industry that has introduced futuristic elements into the present business model.

“Because of COVID-19, now, when you walk into a restaurant, instead of picking up a menu, you pick up your phone,” he said. “At a dispensary, we have developed a technological platform so that instead of standing in line, you can pre-order your product and have it waiting for you. That’s something that has been developed over the past six to 10 months because of COVID-19.”

Technological advances also changed the wholesale level of PharmaCann’s business.

“Processing cannabis once meant employees sitting around a conference table with syringes filling vaping devices with oil,” Unruh said. “Now, we have machines that can fill those things by the thousands. It allows our employees to become more highly skilled.”