Missouri is in the process of creating a brand new industry that has epic potential for profitability. In November of 2018, Missouri became the latest state to legalize medical marijuana. On January 5th, the Department of Health and Senior Services (DHSS) began taking applications for dispensaries, cultivation facilities and manufacturing facilities for edibles. As of last count, there were 434 pre-applications filed, 237 for dispensary facilities. The law specifically requires a minimum number of dispensaries be licensed by DHSS per congressional district. This prevents an artificial shortage of licenses and the domination of just a few players in the business. While pre-applications have already begun to be filed, DHSS have yet to release the all of the forms for the application process. Licenses will be given out on a competitive basis, and the scoring criteria is generally laid out in the amendment that was passed by voters. So, serious inquires only - the nonrefundable license fee for a dispensary or manufacturing facility is $6,000, and for a cultivation facility it is $10,000. Part of the scoring criteria involves submitting a business plan to make sure that licensees are financially sound ventures. Since these facilities will be, almost by definition, "start ups", the initial capital investment for these ventures will be an important part of the business - impacting their balance sheet and cash flow. There is, however, a program available to businesses in Missouri that can provide capital for development costs and improve cash flow. This program is call Property Assessed Clean Energy, or PACE.
PACE was passed into law in Missouri in 2010 and there are currently 4 PACE districts in the state; Set the PACE St. Louis, Missouri Energy Savings Program, Missouri Clean Energy District, and Show Me PACE. The way it works is that energy efficiency and renewable energy upgrades to buildings can be financed through a special property tax assessment that is levied through the PACE district on that property. A Clean Energy Development Board oversees the program as a political subdivision with the taxing authority to operate the program. So, a building owner can finance things such as solar panels, high efficiency HVAC, or any other system that will make the building more efficient with capital provided by the program. There are several key advantages for this type of financing. First, the term can be up to 20 years and, since it is secured through a property tax assessment, the rates are extremely competitive to most forms of financing. Also, the underwriting requirements are generally less burdensome and can be streamlined. For a business, one key advantage is that, as a tax assessment, the PACE "loan" is not seen as debt - it is a payment obligation. And it is a payment obligation that is offset through savings in energy and reduced maintenance. So, PACE financing is an addition capital source that won't show up on your balance sheet and can actually improve cash flow, while saving energy. This financing can be used on existing buildings, build outs or new construction.
As many entrepreneurs begin to build their case for entering into the medical marijuana market, creating a solid financial footing is one of the keys. PACE financing may be able to provide up to 20% of initial capital and help make this new business a sustainable and financially sound venture. There may even be tax benefits to it. Taking advantage of PACE financing when available will not only bolster your business plan, but will demonstrate a commitment to sustainability and your position as a community partner.
Thomas D. Appelbaum is an attorney that helped launch and administer 7 PACE programs in Missouri and Arkansas and currently is the principal for Sustainable Solutions Funding, LLC. For more information about what programs are available and how to participate, feel free to contact him at email@example.com.