Nearly 100 Colorado medical-marijuana businesses are operating without a finalized state license, the remnants of a bureaucratic backlog now stretching back more than three years.
In the language of the state Marijuana Enforcement Division, these businesses are “operational pending.” What it means is the businesses are allowed to remain open — growing and selling marijuana — while the state conducts its investigation and decides whether to approve or deny the applications the businesses submitted in 2010.
The state has made tremendous progress in clearing its backlog of pending applications — there were more than 900 of them one year ago — and hopes to eliminate the backlog this month.
But the issue has gained new attention after major Drug Enforcement Administration raids last month on medical-marijuana businesses in Colorado, including several operating under pending applications. Of the 96 pending applications for medical-marijuana stores, products-makers and cultivation facilities listed in state records, at least a dozen are tied to addresses raided or people targeted in the raids.
Any number of issues could be holding up the application process for the businesses, said Julie Postlethwait, spokeswoman for the Marijuana Enforcement Division. Investigators could need to run a background check on a new owner or owners could be delinquent in paying taxes. A dispensary could have been caught staying open past state-mandated hours or could be under investigation for more significant non-compliance with state rules.
Postlethwait said she could not confirm how many of the pending applications are being scrutinized for serious problems, nor could she confirm whether any businesses connected to the raids are among that group.
“I would guess, if it’s been this long since they have been licensed, there is probably some issue that needs to be resolved,” she said. “What that issue was, I can’t speak to.”
Mike Elliott, the executive director of the Medical Marijuana Industry Group, said “operational pending” businesses still must obey the same rules and submit to the same checks as fully licensed stores.
But the raid on several such businesses is a concern for law enforcement officials, one of whom said state officials aren’t doing a good enough job of clearing the backlog.
“The state has never been able to deal with this in an effective way,” said Thornton police Sgt. Jim Gerhardt, of the North Metro Task Force. “I think it’s just another example of some of the flaws in the infrastructure around this issue.”
Marijuana industry advocates and others say the state has worked hard to eliminate the backlog, which was a point of criticism in a scathing audit of the division released earlier this year.
“It’s clear to me that the Department of Revenue is working diligently,” said state Rep. Angela Williams, a Denver Democrat who chairs the legislature’s audit committee. “They have made progress.”
The issue dates back to 2009, when hundreds of medical-marijuana businesses opened under uncertain legal authority. Lawmakers in 2010 passed regulations legitimizing the medical-marijuana businesses but also requiring them to be licensed. Businesses that were already open were allowed to stay open while their applications were pending.
In March, a state auditor knocked the division for failing to process applications in a timely manner. At the time auditors examined the issue, in October 2012, 40 percent of the business license applications filed by an Aug. 1, 2010, deadline were still pending.
Of those 960 pending applications, regulators categorized nearly 120 of them as “problem applications.”
Postlethwait said a change in how licenses are processed is the biggest reason the division was able to whittle down the backlog. The state previously had to wait until it had received verification of local governmental approval of a license before passing final judgment on a license. Lawmakers this year approved a change in state law eliminating that hurdle, though businesses still must obtain a local license.
The result has been a quick drop-off in pending applications. From 960 last October, the numbers dropped to 759 in February and 496 in May, according to Denver Post tallies.
There are currently 517 medical-marijuana dispensaries in Colorado, plus another 140 marijuana-infused products makers and 745 cultivation facilities. The state has denied 226 license applications since regulation of medical pot began, and another 965 licenses have been withdrawn, Postlethwait said.
Dispensaries operating with pending applications are eligible to apply for recreational pot shop licenses as long as they are “in good standing,” or their applications have not been flagged as problems, Postlethwait said.
That concerns Kevin Merrill, the assistant special agent in charge of the Drug Enforcement Administration’s Denver field division.
“How do you know if someone is in good standing if you haven’t given them a license and done frequent audits to determine whether they are in good standing?” he said.
Elliott said a number of his group’s members have received their licenses in recent months and credited increased resources at the Marijuana Enforcement Division with making the licensing process run much smoother. Those still stuck in the backlog, Elliott said, are likely there for a reason.
“Those outstanding licenses, I imagine, are outstanding because some issue has come up,” he said.
John Ingold: 303-954-1068, email@example.com or twitter.com/john_ingold