May 13, 2024 —ALBANY, NY — The state Office of Cannabis Management has failed to effectively spark the state's legal marijuana market, plagued by leadership failings, slow growth and inconsistent communication.
These revelations were highlighted in a report released Friday by the state Office of General Services. Its leader, Commissioner Jeanette M. Moy, was tasked with undertaking an intensive review of the bureaucratic office, which has been plagued with criticism over its general failure to effectively license cannabis dispensaries or engage with the industry it is meant to create and guide.
"There are deep-seated issues at OCM," said Governor Kathleen C. Hochul in a news conference Friday. "Issues that have limited its ability to fulfill its licensing role."
According to Moy's report, the office has been running in "startup" mode and failed to properly adjust to a fully functioning regulatory agency. Oftentimes, the office chose to create a new, novel approach to its job that did not reference or use existing state systems to their fullest.
For example, rather than using existing systems at the State Liquor Authority to map available, legally compliant spaces to open storefronts, OCM spent months and significant amounts of money trying to build its own system before finally choosing to clone the SLA service.
Applicants Left in the Lerch
The report states that OCM has built and abandoned "several technology applications," largely because officials within and without OCM perceive its work to be particularly unique, even though its basic operations are not dissimilar to, and in fact are partially modeled on, other regulatory agencies like the SLA.
Moy's report states that the office structure is not conducive to effective leadership in its current form. The office's executive director is only in charge of eight directly reporting individuals, most of whom are not in charge of the office's day-to-day operations.
For the people who were hired, Moy's report says there was high turnover and a failure to hire people who had worked in regulatory offices of any kind before.
"OCM's leadership prioritized hiring policy and programmatic staff over focusing on and staffing the core of its regulatory operations and mandated agency mission," the report states.
The office overspent its budget by $26 million last year, which is rare in state government and almost never occurs in a new office still establishing itself.
Moy's report said those resources went untapped while the agency faced a growing backlog of applications for a license to grow, refine or sell cannabis products. For over a year now, cannabis farmers have been complaining that there are not enough storefronts to sell their products in and have recently warned that many growers are within months of commercial failure because they have no significant revenue for the third growing season for the New York market.
Moy's report states that the office also failed to centralize its operations. Licensing is handled by four separate departments, each with a different leader and operational approach. Some are even located in different office spaces entirely.
Information provided to people seeking licenses was sparse and often contradictory, and OCM failed to establish an accessible customer service system for applicants to engage with for information on the application process and the progress of their submissions.
The office also failed to track important process metrics, adequately establish an estimated processing time for applications, and maintain separate information technology teams for its various, sometimes abandoned technological platforms.
To address these many problems, Moy and her team from OGS recommended that OCM undertake a wide range of actions, including hiring extra staff, recreating the licensing processing systems in a way that streamlines the process and assigning a single staff member to handle an application from start to finish, integrate the various departments operating under its purview, create better internal data tracking systems, look to use the information and computer systems already available from other state departments and create a customer service department.
The agency will also undergo a leadership change. Current OCM executive director Christopher Alexander will leave his position at the end of his term at the start of September, and a new executive director will take his place.
Dispensary Applicants Not Surprised
One north country man who has hoped to be a part of the blossoming cannabis market in New York, Brandon Blount, said he wasn't surprised by the report's findings, and said he doesn't have much faith in the office to start fixing the identified problems.
Blount has been working to open a cannabis dispensary in West Carthage since October of last year. His company, Black River Supply Co., submitted an application to open as a cannabis dispensary in October, part of the November group of licenses to be reviewed. Now, nearly eight months later, Blount is still not able to sell marijuana products. His company remains open as a "head shop," selling smoking accessories as well as hemp and CBD products. The shop temporarily offered marijuana products late last year under the "growers showcase," model, but those showcases were only allowed to operate until the end of 2023, so he had to stop selling those products again after only a few months.
"There are zero profits right now," he said in an interview on Monday. "I have worked every day the shop has been open, since opening in October, and there's been no profit. I closed my doors last week for a month because I am not making any money."
Under the OCM's regulations, an applicant seeking to open a dispensary in New York has to show proof they have a commercial space ready to go. Blount said he's been lucky to work with a business partner who owns the building and has waived rent payments since October, but many people still waiting to open a dispensary in New York have been paying rent for months on properties they can't open or can only do limited business from.
After Blount submitted his application to run Black River Supply Co. as a dispensary in November's group of applicants, OCM changed the rules and decided to review applications in a "lottery system," where applicants were given randomly assigned numbers that changed the order they would be reviewed in, if they would be reviewed at all.
"When they announced they'd be doing a lottery, my heart sank," he said. "We have invested substantial money into our business, and that lottery nonsense... I don't know how to put it into words that aren't foul language."
Blount's application was shifted from number 217 in the lineup to be reviewed to number 1,328. It still has not been reviewed, and Blount said he has not heard any guidance or what he should expect from OCM staff.
The office also adjusted its expectations for that group of applicants—it would no longer seek to approve around 1,000 applications from that group before moving on to the next group of applicants. Instead, officials said they would only review 250 licenses.
"The task force found that OCM did not intend to review all applications, nor did OCM contemplate the staffing that would be needed to do so," the report reads.
As of April 13, only 110 state-licensed dispensaries are open across the entire state, and according to Moy's report, in March OCM completely stopped its reviews of the November group of applicants.
Blount said he doesn't have faith that OCM will be able to fix the structural issues identified by Moy's report. He was disappointed to see Alexander remain on as executive director for the next few months rather than being immediately replaced, and he thinks there are deep-seated issues within the organization.
"I think there needs to be a complete overhaul, from the bottom up," he said.
When asked what his outlook on the future is, Blount said he isn't confident his business will get up and running as a full dispensary any time soon, but he said there are a lot of customers who visit his shop regularly hoping to see the dispensary side up and running.
"The community wants us to open because they see how we operate, we run a clean business, a clean shop, and we are focused on educating our customers," he said.
Blount said his business continues to suffer from a nearby illegal shop that sells marijuana products without a license. He said the shop opened shortly after his own did, and with the ongoing lack of a dispensary license for his own shop, he sees customers who would have bought their marijuana legally from him instead go across the street to the illegal shop.
"We have told OCM about this, we have told the Governor's office about this, the mayor has had a meeting with the Governor's office about this, and they still will not send anybody up here to do anything about that shop," he said.
Governor Cracks Down on Illegal Shops
Alongside the report's release on Friday, Hochul announced that a new state police agency dedicated to cracking down on the illegal marijuana shops and their suppliers was going into effect on Monday — but police have long tried to crack down on the illegal shops with mixed results.
Moy's report recommends that OCM commit to processing the entire queue of applicants from the November group and develop a program to help those in the November queue either seek a refund or obtain a provisional license if their location is deemed non-compliant. A few November applicants are expected to have either lost their commercial leases after months of inactivity, or to have inadvertently applied to open in an ineligible location because OCM failed to tell applicants which locations were ineligible before the applications were due.
Overall, Blount said he suspects that the people in similar situations to his own, awaiting guidance from OCM and months into commercial leases for space they're unable to use, have collectively lost millions of dollars in this failed launch process.
He said that between purchasing the building, renovating the space to fit security and privacy standards set by OCM, inventory, and the man-hours he has spent on the business, he's invested over $500,000 so far, with no real profits to show. And he said he expects to lose even more before the situation is resolved.
"I don't expect to hear anything from the state until probably October or November if they can get their act together," he said.
Dispensary or not, Blount said he'll reopen the Black River Supply Co. on June 13.
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