December referendum on cannabis project

The tribal membership will decide on December 17 whether to pursue the economic opportunity of cannabis commercialization.

The referendum will ask the members whether Tribal Council shall be authorized to “allow, regulate and operate an on-reservation, tribally owned cannabis cultivation and extraction facility, with retail sales allowed only off the reservation.”

The referendum would not change the tribal criminal code regarding personal possession or sale of cannabis on the reservation.

The legalization of cannabis off-reservation in the state of Oregon created this economic opportunity for the tribes. And the opportunity is a big one, according to research and analysis by the Warm Springs Ventures team.

Revenue from the cannabis enterprise in the first year would be more than $11.7 million net, according to the financial study.

In the second year, the first full year of operation, revenue is estimated at $26.1 million. Over the first seven years of operation, the cannabis enterprise would generate more than $173 million net, according to the study.

For comparison, the 2016 total enterprise revenue—from Indian Head Casino, Power and Water, Composite Products, Kah-Nee-Ta, Credit and Ventures—is estimated at $8.75 million.

Repairing the tribal budget, and creating new jobs for the members are the reasons why Tribal Council and Ventures have been studying the cannabis commercialization project.

The new enterprise would create a minimum of 82 jobs, according to the Ventures report.


The enterprise
In brief, if the referendum passes, the tribes would create a tribally-owned enterprise that would work with an experienced partner to establish the cannabis growing operation.

This would be housed in a 36,000-square-foot cultivation facility. The enterprise would also operate three retail outlets in the Portland and Bend market areas.

Eventually, after the employees gain experience and training in the industry, the tribal enterprise would run on its own without an outside partner.

The initial partnership would be with Sentinel-Strainwise.

Sentinel is a private equity fund, with $700 million under management. The group, based in Florida, has worked with other tribes on economic development projects.

Strainwise is one of the largest cannabis cultivation, retailer and extraction management companies in the U.S. Strainwise has nine retail stores, and manages five grow operations with 130 employees.

Strainwise and Sentinel this year began working together to help advance responsible economic development on Native American land through the cannabis industry.

Chris Hardiman, Sentinel associate director, was on hand this week for the Tribal Council meeting on the resolution approving the referendum.

Hardiman said the idea is to work with the tribes in developing a successful and profitable growing operation. Then eventually the tribes will be the sole operators of the project, Hardiman said.

Meanwhile the enterprise would be wholly tribally owned, with the partnership necessary to get the project started, and to gain the expertise.


A highly regulated business
The Ventures team and Tribal Council have been studying the cannabis commercialization project for about 10 months. Council established an exploratory team, which has looked at the legal, economic, health and other aspects of the proposal.

During the Council presentation on the referendum, the Ventures team emphasized they have been working openly and cooperatively with state and federal officials.

The state would have to amend a law that currently precludes tribal participation in the state cannabis market; and state officials are willing to make the change, said Pi-Ta Pitt, Ventures board member.

The tribes have met with federal law enforcement officials—from the U.S. Attorney and U.S. Marshal’s offices—and they are aware of the tribal proposal.

The U.S. Attorney’s Office has a policy regarding federal enforcement in states that have legalized cannabis. The policy lists instances—promotion of organized crime, sale to minors and inter-state sale, for instance—when federal cannabis prosecution would apply.

Otherwise, the federal approach is to defer to the state law regarding cannabis.

The most important aspect of a Warm Springs tribal cannabis project would be to implement a highly regulated and secure program, said Don Sampson, Ventures chief executive officer. Under these conditions, the tribes would be given the same consideration as other commercial growers in the state.

At the meeting approving the December 17 referendum, Councilman Reuben Henry said the question for him is an easy one. “We have needs here that are not being met,” he said.

A new community center is an example, Councilman Henry said. In coming years, “What if Power and Water has no dividend? We need something done, and we need it done now.”

Councilman Scott Moses said that in the 1990s there was some hesitation about Warm Springs opening a casino, until other tribes showed that gaming can be profitable. In this case, he said, “Our job is not to follow other tribes, but to do what is right for this tribe.”

Councilman Carlos Smith said he is not an advocate of cannabis, nor of gambling, alcohol and tobacco. But the tribes allow casino gambling, and alcohol and cigarette sales on the reservation for economic reasons. The same reasoning applies to the cannabis project, he said.

Councilman Orvie Danzuka said the tribes should also look into the still-unsettled revenue management aspect of the cannabis industry, as this may be another new source of revenue.

Councilwoman Evaline Patt said she was impressed with the progress that the Ventures team has made over the past 10 months in evaluating the cannabis project. The presentation was very thorough and professional, she said.

Councilman Kahseuss Jackson, Wasco Chief J.R. Smith, Warm Springs Chief Delvis and Paiute Chief Joe Moses joined the above Council members in approving the resolution setting the December 17 referendum.