Vermont Legislature SmartTranscripts:

[Senator Alison Clarkson (Chair)]: Digital lottery in front of us, but we don't I we have your report. Can you

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: have a

[Senator Alison Clarkson (Chair)]: We're always live, but just for the public, we're now live. Welcome, everybody, to Fed and Economic Development Housing and General Affairs. It is Friday, January 9. It's astonishing to me how fast the years will get going, and we are here today following up on a report that we asked for last year on a report that on a subject that has long engaged many people in the state and which we are hoping we may make some progress on one way or the other. So we welcome Nick Gorman who's the New Deputy Commissioner. The new Deputy Commissioner of the Department of economic development and peace. And also the co chair of the convention center and performance based task force that we created last session. So and I believe we have online Jeff Lawson was your chair. Is that correct? So we say, I love Jeff. I love him. I love him.

[Senator Randy Brock (Vice Chair)]: We put in.

[Senator Alison Clarkson (Chair)]: So let's we have the report on our website, I believe, we and I I'm sorry.

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: I know a few of you, but it would be great to, you know,

[James Pepper (Chair, Vermont Cannabis Control Board)]: ask Alison Clarkson, Randy Brock, David Weeks, yeah. And

[Senator Alison Clarkson (Chair)]: Tom who served with you Yeah. Isn't able to be here this week, and I I apologize to Tom because I should have saved this, but I was really trying to get things we needed to potentially want to include in an economic development committee bill Mhmm. Which the deadline is January 29, so we're having to really move fast on some of these big pieces. And Tom had the benefit of having served with you and sort of knows what's going on in case you're on things down, like, has walking pneumonia, and I don't know what she's throwing out. But because

[Julie Hulburd (Commissioner, Vermont Cannabis Control Board)]: you blame her

[Senator Alison Clarkson (Chair)]: on Okay. Great. I'm here. Excellent.

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: It's yours. Well, good morning, madam chair, members of the committee. For the record, my name is Nick Grimley, Deputy Commissioner of the Department of Economic Development. As part of my role, I serve as the co chair for the Vermont Convention Center and Performing Arts Venue Task Force, along with Jess Bintner from the agency. We provide the administrative lead for the task force coordinating meetings, compiling materials, documenting discussions and outputs of the task force. A little bit of background, task force was created last year by the legislature through act 65. The charge was to study the feasibility of a convention center and a performing arts venue in the state of Vermont. We have produced an interim report which was delivered in November and drafting chaired by the committee provides the progress update and reflects the themes and insights and areas for further inquiry by the task force. Just a housekeeping issue before we really get into the substance. The enabling statute limited the task force to six meetings. Sorry about that. So, yeah, and it runs through November.

[James Pepper (Chair, Vermont Cannabis Control Board)]: So one of

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: the things that we're asking for is a technical correction to allow the task force to continue meeting until the November final report deadline. And I believe that Jess Pitner has provided some proposed technical correction language to House Commerce and I'm sure she'd be willing to send that along to this committee as well.

[Senator Alison Clarkson (Chair)]: That would be great. So you you were limited to six meetings? Yes. I hate limiting things. Yeah. Particularly, which you only have you had two legislators on. Wasn't a huge burden on our

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: January will be

[James Pepper (Chair, Vermont Cannabis Control Board)]: our sixth

[Senator Alison Clarkson (Chair)]: meeting. Right. So we'd like to lift the cap altogether or do you have a notion of how many more meetings do

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: you think you want? I think that once a month cadence has worked out well for the for the the task force so far, and we would look to continue that through November.

[Senator Alison Clarkson (Chair)]: Okay. Great. Sure.

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: Great. So from a high level summary, the interim report summarizes the work that we've conducted since July 2025 And I'll highlight some key focus areas and then those are defer to the actual report for the written

[Senator Alison Clarkson (Chair)]: detail of that. And Nick, as we launch into this, this has got a huge tail. I mean, this has got a background that's, you know, a year, maybe decades old, Vermont looking at a convention center and where it might be located and all our capacity issues, which is what you looked at. Can you just give us a notion as to the beginning of when we actually started to have a conversation about the convention center?

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: Oh, don't know that I mean You didn't ask us the history of the I think I should say that I came into the co chair role probably two or three meetings into the task force. Deputy Commissioner Brett Long was originally assigned to this. And then once there were some changes within the department, we rearranged a few things. So that possibly could have been covered. I know that from just my, you know, general knowledge, having been in the state and working in commercial real estate and development and other areas for a long time, that this is something that has been talked about for quite a long time around the state. So one of the earliest and most important points of consensus by the task force was that convention centers and performing arts venues really should be treated separately. And there are some reasons for that. We reached out to a number of national experts and they keyed us in that these are they have really distinct market dynamics. The infrastructure needs for these two types of venues are different. The audience behavior is different. For instance, convention center attendees, they wanna be very close to the airport, close to a walkable downtown, performance arts venues, people are more willing to drive longer.

[Senator Alison Clarkson (Chair)]: Those are different audiences. Exactly.

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: That Jeff Lawson, who is the co chair and joining virtually, can speak further including on the work that his group, Hello Burlington, is doing with the Huntington Group and their feasibility study that's currently underway. So why the separation matters? Convention centers really depend on heavy proximity to a large amount of hotel capacity. They require ease of access to logistics, you know, transportation to and from airports.

[Senator Alison Clarkson (Chair)]: Or transportation. Not only necessarily an airport. Cognizant of our problem. Sure. And then

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: the performance art venues, as I mentioned, audiences are much more tolerant of travel and the different demands, different scheduling that they see. But both certainly can be economic and cultural assets, but they function very differently. In terms of market and competitive context, you know, some

[Senator Alison Clarkson (Chair)]: of the things

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: that Vermont currently lacks, a modern flexible venue for large conventions, which

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: is one of the things

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: that we're exploring, a year round scalable cultural performance facility. Some of the strengths that have been identified, Vermont's authenticity and our brand appeal are really a strong asset for both, you know, convention center and performing arts venue constraints that have been noted, certainly limited hotel capacity and then limited direct air access compared to some of the regional competitors.

[Senator Randy Brock (Vice Chair)]: And limited rail access I would say. Climate also considered?

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: I'm sorry.

[Senator Randy Brock (Vice Chair)]: Climate also considered. For example, when you try to schedule a large event in wintertime, snowstorms and the like impede transportation, impede the ability to get around and start coming. So do you find that a convention center compared to other places has limited utility in terms of just the number of days per year.

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: I could certainly see that as, you know, a potential limiting factor. It was not one that was really brought up by some of the experts that we, you know Well, for example, how

[Senator Randy Brock (Vice Chair)]: many people would plan an event in Vermont in January, February, or early March, for example? Yeah.

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: I think that's certainly a topic that we should explore as we continue our work.

[Senator Randy Brock (Vice Chair)]: Particularly as you start projecting potential revenues and use, I think

[James Pepper (Chair, Vermont Cannabis Control Board)]: that would be something that have to

[Senator Randy Brock (Vice Chair)]: take into account. Yeah. In

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: terms of infrastructure and other economic considerations that we've initially explored, but we feel that there's more work ahead for us. Some of the early themes, capacity, transportation access, downtown amenities, potential benefits that we've discussed year round tourism. We do think that, you know, even though we do have seasonality in this state that there is potential for year round tourism. I think it would certainly just depend on the types of of events that you're bringing in. Downtown vitality, know, looking at different areas with strong downtowns. And then, you know, are there is there enough capacity and workforce wise in the hospitality and cultural sectors to feed the need. Governance and operating models is one of the future focuses for the task force. We've touched on it a little bit, but we see it as a major phase the work going forward. Is that

[Senator Alison Clarkson (Chair)]: also, sorry, is governance also ownership? Because convention centers are often owned by municipalities, not by the state. It's covered, so we're considering governance as a part of that.

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: Yeah. Certainly. Right. So, you know, Vermont faces a unique challenge in that, you know, we don't have a county level governance structure. That doesn't mean to say that that is the only way that you could possibly do something like this. We are looking to explore all models, whether it be public, public private partnership, economic development oriented entities, but we feel that deeper exploration is really needed here. We also recognize that there is another task force that is looking at from a a broader standpoint, the county level governance. Yes.

[Senator Alison Clarkson (Chair)]: Although, sadly, it did not meet I don't believe that we met this summer. I don't think it has new chairs.

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: I'm not sure. I'm not

[Senator Alison Clarkson (Chair)]: pretty sure. But we can double check because that whole regional conversation and county conversation was begun by one seventh chairs and passed, obviously, by the legislature, but neither can return, it doesn't matter, it just hasn't been meeting and so I think that's a good reminder to them to light a fire under that maybe for this summer and convene that conversation.

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: Yeah, and then certainly because it seems to be something that, you know, it's it affects much more than just a convention center.

[Senator Alison Clarkson (Chair)]: Oh, yeah.

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: Looking ahead over the next eleven months, the task force can continue to meet, evaluate site and scale options, examine funding and governance structures, and then coordinate with external feasibility studies and consultants. So all of this work will go to inform the final report which is due in November '26. And then the findings and recommendations will we will provide findings and recommendations for legislative consideration through that final report.

[James Pepper (Chair, Vermont Cannabis Control Board)]: I would just say

[Nick Grimley (Deputy Commissioner, Department of Economic Development; Co-Chair, Task Force)]: in closing that the interim report that we've produced reflects the progress and information gathering that we've done framing the core questions. Yeah. Was very helpful. And identifying areas of deeper analysis.

[Senator Alison Clarkson (Chair)]: Any questions of Nick before we move to Jeff? No, don't. Okay, then Jeff, we would turn to you to add anything you would like to. Welcome to Stephanie. Stay right there and we will have a unless you'd like to turn your chair so you can see Jeff. Okay. Jeff, welcome. And if you'd be kind enough if you heard our introductions earlier

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: Yes. I I did.

[Senator Alison Clarkson (Chair)]: Oh, great. Well, thank you so much for co chairing this. Thank you for your work for Hello Burlington, and we would welcome any additional thoughts you had because I think this initial interim report is very helpful in terms of framing out some of the challenges, of the limiting capacity issues that we have separating out the two questions of performance space and convention space convention center. And anything else you'd like to add, we'd appreciate.

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: Great. Well, thank you. Thank you so much for having me. Apologies. I couldn't be there in person this morning, but thanks for having me here virtually. Yeah, the convention center conversation, as you had indicated, has percolated up several times over the last couple of few decades. The first study we have a record of at the Lake Champlain Chamber is 1997 with Ernst and Young doing a study for the chamber followed by 2000

[Senator Alison Clarkson (Chair)]: Hold on. Was that 1997 was our first conversation about this?

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: First one first first found one we found a record of anyway. Yeah. Yeah. Thousand two thousand five there was

[Senator Alison Clarkson (Chair)]: progress we made.

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: I'm sorry, ma'am?

[Senator Alison Clarkson (Chair)]: Look how much progress we've made.

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: Yeah. Well, it's a big it's a big question and a big project. I don't think it's unusual that these things take time and there's multiple iterations of comprehensive studies. I think the tipping point in this case for us in the Greater Burlington area was the fact that we've seen our hotel room inventory increase significantly between '25 27 Downtown Burlington's hotel room inventory will actually increase by 50%, putting that up over the 1,000 room hotel inventory threshold, which is kind of a key number to suggest we might be ready to support a piece of infrastructure like this. Some of the other pieces that were a big factor in initiating this are the process that Hello Burlington undertook to contract with a consulting firm out of Chicago was also being connected with the Vermont Captive Insurance Association who hosts their annual meeting in South Burlington and has really struggled over the last few years to keep that meeting going as it's just growing and growing and they want to continue to grow, but they're outgrowing all the facilities that we have in our neck of the woods to accommodate them. Obviously, that's a pretty pretty important piece of tax revenue generation in that industry, so we wanna be helpful there.

[Senator Alison Clarkson (Chair)]: Right. Critically important. What is the capacity? What do you what did your committee guess was the current capacity of a smaller convention? Because we do host convention. They're just much smaller than a

[James Pepper (Chair, Vermont Cannabis Control Board)]: big convention. Yeah.

[Senator Alison Clarkson (Chair)]: So what is our current capacity, both in terms of size that we can currently host? Well, I. E. Captive insurance is a good example. And what is our what is our hotel capacity at the moment?

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: Yeah. So the largest meeting facility in the state is the Doubletree by Hilton in South Burlington. Has 300, I believe it's three eleven hotel rooms. And I can actually get you the square footage specs on And so, my point though is that's one of the problems, complexities with convention centers is attendees typically are fairly lazy. They don't want to have to travel too far from their lodging to the actual conference center. So when we're limited in scale of the largest property there alone, it can become really challenging. We'll typically look at our sweet spot is around two fifty to 300. VCIA is a tremendous outlier. That's as I understand it about 11 or 1,200 attendees for three days. So there's a tremendous amount of overflow into the market to other nearby and adjacent lodging properties. But again, that's a real outlier and one that takes a lot of collaborative effort amongst the various lodgings opportunities downtown. The other piece as to why we actually decided to take a move on this is that our tourism industry has actually been seeing some downward trends over the last couple of years. Couple of years coming out of the pandemic, we were one of those secondary tertiary cities with just proximity to the outdoors. We saw a lot of white hot demand as revenge travel kind of uncorked itself. And over '24 and '25, we've actually seen a decline pretty significant in '25 of leisure travel demand. So we started to look at this as an opportunity to drive business, not just on the weekends, which traditionally are strong, but are starting to drop a bit, but to drive business in our region between Sunday night and Thursday night. Obviously, these are quieter points of time, but also, know, when you book hotel rooms during midweek, they generate the same amount of tax revenue as one on the weekend. So we're just looking at this as a way to push back against the drops in leisure demand that we're seeing right now.

[Senator Alison Clarkson (Chair)]: The second biggest capacity is the Sheraton or what was the Sheraton and staff also meals?

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: That that is the same same property. It used to be the Sheraton.

[Senator Alison Clarkson (Chair)]: Right. Right. And the hotel downtown, is that a Hyatt or a Hilton?

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: That is a hotel Champlain is a is a Hilton property.

[Senator Alison Clarkson (Chair)]: And how what's that, Kesha?

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: I think they're two fifty seven rooms in terms of the square footage of I ballroom I can get you that info. I don't think they're the second biggest. I think that might go to Stowe, Killington or JPeak actually, but I think they're third largest in the state. Any

[Senator Alison Clarkson (Chair)]: questions? Great. So I'm I'm so glad we're having this conversation because it is a it's potentially a huge economic development driver for us as you indicated. It looks given this initial interim report, it does, at least initially, look as if we're focusing on Burlington area for for this just because of the hotel capacity and the transportation, both rail and and air. We would love to have a secondary convention center in Rutland, and that may be possible at some point, but it does look like we're you're focusing around that. Is have you begun to talk to developers at all or the Champlain Fairground in terms of looking at some of those buildings and that could be further developed to accommodate either a performance venue of significance even if we did redevelop the downtown auditorium tomorrow. It's not a capacity, I don't think, anymore that is significant is enough for what we're looking at. Did you set a sort of target at the performance venue and what it would need to be able to accommodate a number of people?

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: Just to be clear before I get into the answer on the task force side, no, we haven't really gotten into anything approaching site selection. On the Hello Burlington's convention center study, we've started to look at a couple of places that might be viable candidates, but really haven't done the deep dive to assess what's going to be the best potential site for, say, a performing arts center or for a convention center. There are a couple that really jump out as obvious contenders. The Macy's building downtown, for example, is quite literally surrounded by those 1,000 hotel rooms in the downtown core. We'll be vacant this summer after Burlington High School concludes its current academic year. That's all, you know, obvious, that makes it an obvious candidate for us in our neck of the woods. The L. L. Bean Building is there. University Mall parcel in South Burlington is there. Any of those seems like something that could be developed either into Convention Center or Performing Arts Center. But we haven't really done the deep digging to say this is the spot. We have had some interest from private real estate developers in this conversation. But that level of interest is really about doing a couple more phases of this study work to just sort of dial in a little bit deeper rather than commit right off.

[Senator Alison Clarkson (Chair)]: Madam Kesha. Oh, welcome. Senator Ram Hinsdale has joined us. Yes.

[Senator Kesha Ram Hinsdale (Member)]: Well, yeah. I mean, and I, you know, I I jumped in a little bit late, but I also wanna make sure we don't forget the rest of Chittenden County, you know, as we have this conversation. I first of all, I'd be happy to invite the committee to a reception at the Pizzigalli Center at Shelburne Museum coming up that is for Experience Shelburne. Know, we can't forget that a lot of our communities outside of Burlington also have a lot of infrastructure and capacity and wanna be part of this conversation too. Just like I would see Killington as a more suitable location for, you know, some of what we're talking about maybe than Downtown Rutland for in some ways. And I say that as somebody who goes to Downtown Rutland all the time with my kids. But, you know, we we're gonna have to make sure the conversation doesn't sound like it's centering on just a couple places. So I wanted to say that first and foremost, and then, you know, just recognize that I don't think there's gonna be one silver bullet, like, one location. Keep in mind, there was going to be a performing arts venue in the South End Of Burlington where Burton's location had been, and that was fought to the point of the Supreme Court by some of those neighbors. Downtown Burlington, I have raised in committee before, faces some of the same threats, including from a former state employee who is suing over the 200 units of housing next to the mall for, I think, the sixth time now and getting the city involved. So I just wanna make sure when we talk about this, we bring it back to our permit conversations because that's going to be our job in all of this is not to pick favorites, I think, but to make sure that we are helping the state and our regulations get out of the way of this progress.

[Senator Alison Clarkson (Chair)]: I really appreciate that, Kesha. And I think, particularly because, as we've seen with many of our study health and I would say there's more than just during the jail that is substantial. But there are retreats and gatherings that are a 100 or fewer that are that are that are very appropriate for for places that have smaller have have less capacity. But you're absolutely right. Rutland, Colleton. So we have great opportunities currently for for conventions of smaller scale businesses, and I think we would all appreciate the task force sort of taking on and looking at scale so that we that as the state could market different size conventions or galleries and market accordingly.

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: Yeah. If if if if I may, I'd just jump in and say that there really are several different avenues in the meeting and conference industry and we can start to appeal to all of them to Senator Ram Hinsdale's point. Yes, smaller meetings like corporate board retreats, incentive travel, that kind of thing is really well suited to smaller venues, especially resort towns, whether those are lakeside resorts or mountain resort. Makes a lot of sense for those. For the scale of what we were looking at with our convention center study, it's association and corporate business. These are events that are up over 500, 600 people attending. It's a much larger piece of infrastructure that in almost every single case we've seen inquire requires municipal involvement, if not the municipal ownership.

[Senator Alison Clarkson (Chair)]: Right. Right. Thank you.

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: I would say too just very quickly, senator Ram Hinsdale, you you missed the part in the beginning where Nick was able to underscore the kind of the difference between the performing arts center and the convention question. Yeah. I think a place like a place like Shelburne, I think, would be dynamite for a performing arts center. I've I've been a Shelburne for twenty five years, and I love going to those concerts.

[Senator Kesha Ram Hinsdale (Member)]: Well and municipal involvement is really different than municipal alignment. You know, that is a stumbling block in Newport. That's a stumbling block in Burlington. The state has to, I think, be very clear in projects like Hula. We have to start naming names and saying we can't put time, energy, money, attention into something and then have our own regulatory system sabotage its ability to happen.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Right.

[Jeff Lawson (Co-Chair, Convention Center & Performing Arts Venue Task Force; Executive Director, Hello Burlington)]: Agreed.

[Senator Alison Clarkson (Chair)]: Thank you. I I think the ask out here is for the in our e com bill bill to have extension for the task forces work and so that they have enough time to complete it by November 26. Thank you both very much. We'll look forward to any additions from Tom when he returns. Thank you both and continue and we we really appreciate your work. Thank you very much. Right. So we are going to pivot to cannabis and we welcome to the table to the conversation Pepper and whoever else Pepper did. Might have

[James Pepper (Chair, Vermont Cannabis Control Board)]: been hearing that. Read the award is here.

[Senator Alison Clarkson (Chair)]: Wow. The entire cannabis control board. How exciting. You might have been. Yeah. And Tom's chair is available too because Tom is is is in front of us. Yes. I am. It is wonderful to have you. We have much to discuss and much. So we have not only your current needs, we also have additional needs that are coming possibly down the pipe from the federal government, and we have your guidelines that we need to be okay. You've got quite a bit of work off session. Well, I think we are poised to need an update. We need a a full update, and and, obviously, this is just the beginning. Right. And we were hoping to have our legislature, Tucker, with us also who has, I know, some input on some of the federal anything additionally that you aren't able to provide. Why don't we I think you remember all of us, Alan and Alison Clarkson, Randy Brock, David Weeks and Kesha Ram Hinsdale on the line.

[Senator Kesha Ram Hinsdale (Member)]: They know me.

[Senator Alison Clarkson (Chair)]: Yeah, I know they know you. If you introduce yourself and take it away.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Great, I'm James Pepper, Chair of the Canvas Control Board.

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: Kyle Harris, one of Commissioners of the Canvas Control Board.

[Senator Alison Clarkson (Chair)]: It's great to have

[James Pepper (Chair, Vermont Cannabis Control Board)]: you. Thanks. Thank you. Yeah, it's really great to be here, especially so early in the session. You guys have an enormous amount of work and of course, you know, the time at the house to do it. So it means a lot that you would invite us here and you know, sounds to me like you might be starting a cannabis bill this year in the first half of this session as opposed to waiting for the House to send you something from crossover? No, timing is unclear.

[Senator Alison Clarkson (Chair)]: I'm not sure Matt and I are scheduled to chat about that.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Okay, sorry. I didn't mean to jump the gun on that.

[Senator Alison Clarkson (Chair)]: Just Yeah, it's a possibility.

[James Pepper (Chair, Vermont Cannabis Control Board)]: You guys have a very different perspective than the committee of jurisdiction in the house, is government operations. So, you know, having an economic development lens is important for this market. So, I did prepare a PowerPoint. Is it worth sharing it or I think you have it here with us. Yeah, I'm happy to just Which one? Have two beautiful So one was the So the report is a few little talking points in the PowerPoint because this is a report that was requested specifically by this committee, the Act 56 report. So I'll have a little bit of information in the slide deck about the report that we'll talk about. Okay. The plus of

[Senator Alison Clarkson (Chair)]: sharing the slides is that Kesha can see them because she doesn't have it.

[James Pepper (Chair, Vermont Cannabis Control Board)]: So I joined the meeting.

[Senator Alison Clarkson (Chair)]: Hear me.

[James Pepper (Chair, Vermont Cannabis Control Board)]: We have been exchanging emails. She's been accommodating my tardiness already. Okay, so there are quite a few slides here, but I'm going just move quickly because a lot of it is background stuff you guys already know. This is just the basic timeline of the kind of evolution of cannabis policy in Vermont leading up to 2022 where the first sales of cannabis were first sales of regulated cannabis were occurring. This is the board and our job, we're an independent executive branch agency and our job at a very high level is to safely, equitably, and effectively implement the laws that administer cannabis medical and adult use programs. Every state, because this is illegal federally, kind of choose their own adventure as to what the market is going to look like, what they want to prioritize, and you all did some very unique things, I think, which have had dramatic impacts about where we've ended up three years in versus other states. So these are three of the some notable pieces but there are certainly plenty others. One, instead of trying to stamp out the illicit market, you actually wanted to invite them into the regulated market. You wanted their genetics in, you wanted to, you know, lot of states just say we're going let big business kind of compete with the illicit market. We said, illicit market, you come in and form the backbone of this industry. And then that wouldn't have been possible if you, you know, did what most other states say, which is if you have a felony conviction, you can't get a cannabis license. Especially for kind of, you know, drug convictions. Because a lot of the legacy market, know, it's part of what goes with being a legacy operator is, you know, having involvement in the criminal justice system around cannabis issues particularly. So you gave us some flexibility on the kind of criminal history records and who's eligible to get a cannabis license. And then one kind of hallmark of the legislation is the first in the country, as you said, no stacking of licenses, you can't franchise, you can't have five cultivation licenses, you can't have five retail licenses, you only get one of each and that's different than every other state. So you can see just the number of licenses historically from July 2023 to December 2025. There's this peak that you might see around, you know, it starts in January, February, March 2025. That's when we voted as a board to close the retail application window and the cultivation window. So we're not currently issuing new cultivation or retail licenses. And we wrote in our rules that we would always give the industry at least thirty days notice before we actually stop accepting for the people that might be partially through a build, build out of their operation, or something along those lines. And we saw predictably, but it wasn't terrible, kind of a rush through the door. Know, when the industry, kind of all the prospective licensees heard that we were not going to be issuing new licenses. A lot

[Senator Randy Brock (Vice Chair)]: of people jumped in

[Senator Alison Clarkson (Chair)]: and down.

[James Pepper (Chair, Vermont Cannabis Control Board)]: So that's why there's that kind of peak interval.

[Senator Alison Clarkson (Chair)]: And just remind me, licenses are renewed every two years or one year? Annual.

[James Pepper (Chair, Vermont Cannabis Control Board)]: We're kind of, you know, yes, that's kind of the normal level. I mean, we're not those are our most popular license types as you can see from this side, retail and cultivation. So now when people exit the market with one of those licenses they're not being replaced by new licenses. So this is just a breakdown also by priority status. Know one thing that Chew asked us to do was prioritize for licensure folks that have been disproportionately harmed by cannabis prohibition in the past. And so that's the kind of social equity business terminology that we use for those types of applicants. That's represented by the blue on this graph. Know, the board and the legislature recognize there's certain other kind of marginalized groups that probably deserve some amount of priority as well. So we call this economic environment, those are veteran owned businesses, First American owned businesses, women owned businesses, and those are represented by green on this graph and the standard applicants are large. This is the retail locations by county. You know, think one issue that you all heard of a few times is that there's intense retail clustering in certain areas, Rutland City being one of them, Burlington. Really that isn't predictable outgrowth of another portion of the law, which was that a town cannot sell cannabis. It can't have a retail location unless they affirmably opt in with a vote and quota citizens. And so I think we have around 80 or 90 towns that have opted in and those become the kind of hubs for cannabis retail. That's where people have to go. So Burlington has 14, South Burlington and Wilson both have zero retail locations, because neither of them have opted into retail. I should say a town can opt out with a subsequent vote, but we've also paused issuing of retail licenses so that density problem, at least in the short run, is not going to be exacerbated by new retailers. This is, you know, we have a huge amount of ingenuity in our market and expertise. This somewhat represents that. As you can see, we have to register products before they ever hit the market to make sure that they're compliant on packaging, that we've looked through their certificates of analysis and testing results, make sure they're not appealing to you, you know, all the kind of bells and whistles of the regulatory system. We have over 5,000 registered unique products in Vermont and it's incredible diversity of products. The vast majority of them are kind of individual strains of cannabis, unique strains, but

[Senator Alison Clarkson (Chair)]: So each strain is considered a different product? Yeah. All

[James Pepper (Chair, Vermont Cannabis Control Board)]: every product that needs to get tested separately has its own registration. But you can see on the kind of far right side that the kind of flower the categories of products that we have, vape cartridges, concentrates, edibles, infused pre rolls, tinctures, palms, topicals. So we also oversee the medical program. As you may recall, the medical program, once the adult use program opened up, really saw a drop off in patients and as a result a lot of the medical dispensaries started to close, leaving a lot of the patients that required medical services, kind of unique services that are only available in the medical program, out of luck essentially. What the legislature did in 2024 was merge adult use and medical. They said that the adult use retailers could serve medical patients, including their kind of medical products, if they subjected themselves to enhanced regulation, including increased education for the people that are interacting with patients, maintaining confidentiality of patients, and just having product segregation and procedures to make sure that we're collecting taxes for the recreational sales, not for the medical sales, and that we're not you know having emerging adult use because the consumers purchasing medical products.

[Senator Alison Clarkson (Chair)]: And was there an alignment, I mean I probably remember this but was there an alignment in communities that had hosted medical dispensaries with their acceptance and choosing to opt in for cannabis sales?

[James Pepper (Chair, Vermont Cannabis Control Board)]: That was early on, yes. All the early medical dispensaries received an integrated license and that was part of the valid question was, are you gonna allow the integrated licensees, you know, that's part of the opt in vote.

[Senator Alison Clarkson (Chair)]: Yeah, so one assumes that there's more acceptance once they post their medical decisions. Right.

[James Pepper (Chair, Vermont Cannabis Control Board)]: So we're seeing for the first time since 2017 a slight uptick in the number of medical patients and medical patients are having unprecedented access to their products. Essentially there are six medical dispensaries around the state at the kind of height of the medical program and now we have 22 of these kind of merged programs, merged retailers. Compliance data of course a big part of our work is regulating the market and keeping people in compliance with regulations. This is just a snapshot of our compliance work in 2025. Number of inspections, inspections lead to investigations and compliance actions. We received four forty two complaints in 2025, those complaints you know of those 162 were investigated and then LOW means a letter of warning and NOV means a notice of violation. And we had a few court cases as well. Sorry, what is LLW again? It's letter of warning letter. That's really, know, we truck for the somewhat unintentional violations or, you know, this is a new industry and it's comprised by many people that have never been subjected to regulation before, so we try to take an education first approach for general unintentional violations, you know, unintentional advertising violations, things like that. So that's why the letters of warning is usually our first step when we see kind of a first time offender. This just gives you a nature of what some of these complaints were, advertising violations, business operations, illegal products. It's nice that diversion isn't a huge number, huge driver of the complaints. List diversion It's selling legally grown cannabis in illegal markets. And then the opposite of that is inversion, which we also have to keep an eye out for, which is trying to bring in illegally grown cannabis into

[Senator Alison Clarkson (Chair)]: the regular market. Sorry, Forgive me, but how do you see that

[James Pepper (Chair, Vermont Cannabis Control Board)]: here? You maybe you feel small, I can't

[Senator Alison Clarkson (Chair)]: see it.

[James Pepper (Chair, Vermont Cannabis Control Board)]: It's very possible. Yeah. Are you One thing that I noticed, and I need to just fix this with Kiara, is that I had I was pulling slides from a different presentation that I gave and some of the slides were hidden.

[Senator Alison Clarkson (Chair)]: You may not have this slide but if you do, if you don't have it. Will. Will. Y axis chart. We have that. Yes, the

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: diversion is on the x axis. Right there.

[Senator Alison Clarkson (Chair)]: So diversion is diverted legally grown but illegally sold. Right, if you were taking, if you were

[James Pepper (Chair, Vermont Cannabis Control Board)]: a cannabis cultivator and you were kind of selling half your product to a retailer or wholesaler and the other half was coming going out the back door to, you know, November. This just kind of gives you a sense of what our administrative penalties would look like in 2025. I think this represents an increase. I say we take an education first approach. At some point we have to start taking a kind of more hard line approach for, especially for people that have received letters of warning in the past for the

[Senator Alison Clarkson (Chair)]: same behavior.

[James Pepper (Chair, Vermont Cannabis Control Board)]: So we do have the authority to issue administrative penalties or violations of regulations.

[Senator Alison Clarkson (Chair)]: And is that in rules or is that statute of how many? I mean I wouldn't assume we would not have that statute of amending it.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Yeah, you just gave us the authority to administer or you know to issue administrative penalties.

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: We have a rule dedicated to it and there's different categories of violations so depending on the violation we've got some kind of pre slotted thoughts on penalties and what penalties should be associated with various different violations.

[James Pepper (Chair, Vermont Cannabis Control Board)]: So some trends one trend is that our revenue is exceeding all the early projections pretty significantly. This is the joint fiscal forecast from January 2023. The market has been open since 10/01/2022. And these are the projections that they thought that the cannabis excise tax would bring in. And then these are the actuals. This is the July 2025. So 2023, we exceeded the projections by 43%, '24 FY '24 by 76%, FY '25 by 40%. We are seeing, as you can see from the from this forecast, and I'm sure I don't know if it's been updated for January yet, the consensus revenue forecast, so this is a July 1 from 2025. They have something projected out through FY30. And you see a leveling off and that's to be expected, of course. I mean one thing that's happened is New York has finally issued retail licenses so we have a long string of retailers right on the border of Vermont on the western border that are kind of all those consumers that used to be driving to Vermont or to Rutland's for now just staying at home. So I keep picking on Rutland. But, you know, that's you know, it's kinda

[Senator Alison Clarkson (Chair)]: white balls now. I haven't actually noticed a white ball being awash with.

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: Yeah. There is one right by the outlets. You know, there'd be the outlets right before you get on the porch. Yeah. Sorry. Before you get on There it seven.

[Senator Alison Clarkson (Chair)]: And subtract, but that's not right on that. That's right on

[James Pepper (Chair, Vermont Cannabis Control Board)]: the corner. Yeah. So this is just another way of showing the revenue.

[Senator Alison Clarkson (Chair)]: Before we leave, so revenue, would you just be kind enough to remind the committee and the public where the revenue goes? Of course.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Yes. So there's a 14% cannabis excise tax. 30% of that, whatever that brings in, is put into a special fund that is used for prevention strategies that's usually dictated by the Department of Health through its Substance Misuse Advisory Council. The other 70% of the excise tax goes directly to the general fund. And then there's a 6% sales tax that goes to another special fund that's dedicated exclusively to supporting after school programs, so it's administered by the Agency of Education. Then the towns, they have a local option tax, just keep that 1%.

[Senator Alison Clarkson (Chair)]: And you are paid your administration comes out of the 70%? That's right. Well, yes, I mean You pay your administrative costs first and then the rest goes

[James Pepper (Chair, Vermont Cannabis Control Board)]: No, That's historically how it happened and then it changed last year. Unfortunately. Yeah. So no. Licensing fees and administrative penalties pay for our budget and whatever whatever the delta is between our operating expenses and what those bring in is paid from the general fund directly. So

[Senator Alison Clarkson (Chair)]: sorry. It's it's helpful, I think, for the public and for us to just be reminded. Oddly, it is one of the biggest questions we get. I mean, at least I get is, where does that cannabis

[James Pepper (Chair, Vermont Cannabis Control Board)]: wrap go? Yes. Yes. Well it goes The actual prevention and The judgmental file. That's right. This is just from the Department of Tax and they have a cannabis excise tax tracker. This just kind of shows FY twenty three or calendar year '23, '24, and '25. And you just see the only thing that's interesting here to me is that we are continuing to grow every year and that there are these seasonalities to our sales, know, ski season and leaf peeping season being, you know, drivers of cannabis sales are just kind of times when cannabis sales are at a height and well season, stick season, they kind of go down a little bit.

[Senator Alison Clarkson (Chair)]: You think with wet season come up.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Yeah. Well, people stuck in their houses. Yeah. Exactly.

[Senator Alison Clarkson (Chair)]: Yeah. Yeah. Not. But there is an alignment with your spikes in signals with, I think, with sports betting. Would be interesting to do an alignment study on that because I believe that there is a big alignment in terms of

[James Pepper (Chair, Vermont Cannabis Control Board)]: the species. You're kind of in an inverse relationship with alcohol nationally in

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: a lot

[James Pepper (Chair, Vermont Cannabis Control Board)]: of ways as cannabis revenue goes up, alcohol revenue generally goes down. Alcohol is up, cannabis is sometimes down too. Market dynamics and oversupply, I mean I wanted to just kind of pull out some of the trends that we're seeing. There is, we have a tremendous amount of outdoor cultivators compared to most states and that is great for the environment, it's great for people's ability to enter the market, but it does lead to seasonal oversupply around harvest time where we have everyone kind of harvesting their cannabis at the same time, which leads to kind of price compression following the harvest, smaller margins that disproportionately impacts outdoor cultivators. There is this demand volatility which we've kind of described with the tenth. Have a good amount of tourists that come and purchase cannabis here. Mean we have homegrown so it's not like anyone didn't have a place to purchase cannabis before we had a regulated market. But we do so, we do our people that are shopping in our stores made up of Vermonters, tourists, and then these border consumers in New Hampshire, New York, people that are coming here, that work here but live elsewhere. So our demand for cannabis kind of fluctuates with tourists and as other states come online we see decreases in demand for Vermont cannabis. Did you see a dip when New York retail came on lock? It's hard to notice, we did see a slowing of the growth especially compared to the FY, the consensus revenue for most recent, so they thought the market was going grow about 9% in FY '26. Right now, the trends continue, it'll be a little bit less than 9%. It's probably a lot I mean, it's certainly influenced by that. And I

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: think qualitatively, you can start to see how some of those businesses are trying to attract Vermont residents that comes to your unit purchase product there, whether it's way that they're able to advertise, you know, how they're able to sell their product and pull it out to the public,

[James Pepper (Chair, Vermont Cannabis Control Board)]: so on and so forth.

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: But especially in the the border community, you know, they care about somebody giving away a car as they get if you go and enter a lottery, you know, at a New York campus establishment. If you get a lottery ticket and purchase any or something like that and then it gets a car, like, getting stuff like that again.

[Senator Alison Clarkson (Chair)]: So they do different marketing and and and when we get to it, advertising is a challenge for us that they advertise. So we've heard users that they're competing in

[Julie Hulburd (Commissioner, Vermont Cannabis Control Board)]: advertising with border towns. Right? So if you can have a a billboard, let's say, just on the other side of the Vermont border, so everybody passes by it and you're

[Senator Alison Clarkson (Chair)]: in New York. Oh, no. You're not in the party.

[James Pepper (Chair, Vermont Cannabis Control Board)]: One oddity of just the fact that this is state by state is there's actually New York cannabis companies that can advertise in Vermont in ways that Vermont companies cannot advertise. Know, sometimes we get complaints about a seven days article or something like that and it's because it's a New York company we don't Is

[Senator Alison Clarkson (Chair)]: that something we should be asking for a reciprocity with me?

[James Pepper (Chair, Vermont Cannabis Control Board)]: Advertising is a it's an issue that gets brought up year after year. Yes and there's a lawsuit about it that's now been settled. Right. I think you know we're we don't necessarily take policy positions on whether there should be more advertising, be less advertising, whether it should be the same as New York, but this is something that's been asked, changes the advertising laws, something that's been requested every year.

[Senator Alison Clarkson (Chair)]: We understand, understand it's just lawsuit. That's a lot settled. It is settled.

[James Pepper (Chair, Vermont Cannabis Control Board)]: We didn't get a court ruling which would have potentially changed the laws more significantly, but it was a settlement agreement with the plaintiffs. Right. But

[Senator Alison Clarkson (Chair)]: advertising is an issue with The United States, it might be think about whether it would be beneficial or not maybe those policies, I mean that we'd love to have you obviously weigh in on that if it was an appropriate thing to be. And Massachusetts too, so those were states that If we're looking at reciprocity if we would have it with, because it would certainly help our Vermont growers and dispensaries, if we had reciprocity. So it's something for us to consider, maybe we'd ask you to weigh in on that?

[James Pepper (Chair, Vermont Cannabis Control Board)]: Yeah, yeah, I mean I think where we would like to weigh in is how any change to the advertising might change our internal processes and maybe create more work or less work. But I think you know having reciprocity with our neighboring states and Maine potentially as well makes a lot of sense. I have a monthly coordination call with the regulators from those three states, four states in Connecticut, and we are always trying to prepare for the possibility of maybe one day having interstate commerce and having similarity in our regulations.

[Senator Alison Clarkson (Chair)]: It would be great if there was like a New England pact.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Exactly.

[Senator Alison Clarkson (Chair)]: Given that we now everybody bought New Hampshire. Everybody bought New Hampshire. So the New Hampshire's an island of sobriety. Exactly. Well, they have a medical preference,

[Julie Hulburd (Commissioner, Vermont Cannabis Control Board)]: so they were robust enough.

[Senator Alison Clarkson (Chair)]: They have a robust medical bank. But maybe it's time for a a New England pack and or Northern Yeah. Northern cannabis as opposed to the Northern Forest, which is the interstate to me. Anyway it might make some sense because reciprocity and a bunch of things might make some sense right and

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: there's some cases that the federal circuit that may or may not get big difference in court over the Dormant House Clause and cannabis' impact through the Dormant House Clause and how you

[James Pepper (Chair, Vermont Cannabis Control Board)]: do interstate commerce. So more

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: of a I didn't mean to be brave of flow.

[Senator Alison Clarkson (Chair)]: So that Kyle, it's a big issue for the federal action, which we may be anticipating that has a big impact on our interstate commerce. Mhmm.

[James Pepper (Chair, Vermont Cannabis Control Board)]: I don't

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: know if everyone's just lies in mirror about

[James Pepper (Chair, Vermont Cannabis Control Board)]: that. Yes. We do.

[Senator Alison Clarkson (Chair)]: But I think Tucker we would ask that you and Tucker look at that.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Yes. Because

[Senator Alison Clarkson (Chair)]: I I know Tucker's been doing a dive in that. Yes. And Tucker Anderson being our legislative counsel and is wisely beginning to look at exactly that challenge.

[James Pepper (Chair, Vermont Cannabis Control Board)]: And then honestly, would make enforcement of these kind of cross border issues easier because then we can coordinate, we don't have to learn each other's laws, we're all the same. Correct. Okay, you know I always just like to mention that this is not really like alcohol in that there are robust hemp dry market, which I'll talk a little bit about, and then there's also you know the illicit market operating right alongside in parallel markets to this one. So anytime a product is prohibited here or you're paying 20% for regulated products, see people shift their preferences and go to these alternative markets. So know, I just like to point out that there is still very much illicit market competition with the regulated market.

[Senator Alison Clarkson (Chair)]: So what does the, if you had to guess or if there's maybe something measuring it, what percent of sales are done in the illicit market now compared to what they were? Well we Why has our impact of regulation and legalization had on reducing the illicit market because that was clearly one of the intents?

[James Pepper (Chair, Vermont Cannabis Control Board)]: Right, so we're actually doing a study on that currently. It should be out later this month. There's national reports that say, you know, the regulated market captures, you know, it's somewhat hard to measure. I will say that the fact that we brought in a lot of the market operators and we have kind of an exciting market took a big bite out of the illicit market. I'm not saying we got full capture of the illicit market. And, you know, the fact that our revenue is greater than what was anticipated just shows that there is interest in the regulated market. So but we actually are we did kind of we're we're doing a market updating our market analysis and that's one of the components of it which we can share

[Senator Randy Brock (Vice Chair)]: with you. What's your best guess right now?

[James Pepper (Chair, Vermont Cannabis Control Board)]: How many people stay on the illicit market? Well, do you consider the people that home grow and then kind of trade with their neighbors illicit market? Cause there's black market, there's gray market, and that would be gray market. You know amongst Vermonters, I don't know, fiftyfifty maybe. I mean

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: It's a tough thing to quantify. I think people behind this will will mention studies at some point or at least a study at some point that's been conducted over the course of session about only 30% of the national market has been captured by regulated cannabis operators like going to dispensary versus participating in the illicit market, whether or not we include loan growth or not. Think, you know, if you parse that number from the national average into state specific programs and what states like Vermont have done to try and encourage illicit market operators versus other states that just look to supplant illicit market operators with big business. The numbers, the more you look at it on that kind of state by state basis kind of fluctuate a little bit, but there's work to be done, don't think. At least from my perspective, I never anticipated capturing the entire illicit market. Was, you know, I like to say like, okay, 15% of folks would come with us no matter what the regulations were, 15% of folks would never come with us no matter what the regulations were. But how can we work to make a program that benefits that middle 70% and gets them interested in participating in the legal market?

[James Pepper (Chair, Vermont Cannabis Control Board)]: Well, if I heard correctly, your estimate right

[Senator Randy Brock (Vice Chair)]: now is that you're capturing 30% of

[James Pepper (Chair, Vermont Cannabis Control Board)]: the total market, is that correct?

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: I think Pepper said more closer to fiftyfifty. I think that there's a study that's been conducted considering the model for purchasing cannabis is very retail focused at the national level to be a little lower than

[Senator Alison Clarkson (Chair)]: that. Okay.

[Senator Randy Brock (Vice Chair)]: And is there anything done, being done actively to counter the illicit market? From a

[James Pepper (Chair, Vermont Cannabis Control Board)]: law enforcement perspective, would say not the kind of the low level deals. Mean the Joint Drug Task Force does the trafficking, but I think the way to actually capture more of the illicit market sales is to offer the same products and services in the regulated market that the illicit market has. I mean the reason you know, the cap on concentrate, the potency cap on solid concentrates just gives an exclusive exclusivity lane to the illicit markets to buy those products. So anyone who wants a higher potency concentrate, their only option is the illicit market. That's, you know, some of the market expansion ideas that have been brought to us in this presentation are all areas to capture more of that illicit market sales in the regular space.

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: And we don't necessarily have the authority to go after illicit market operators unless it's a legal cannabis business that's engaging in illicit market activity like metaversion.

[Senator Randy Brock (Vice Chair)]: Part of that In terms of of law enforcement interest in the illicit market, has that changed since there's a litigation of the non illicit market?

[Senator Kesha Ram Hinsdale (Member)]: Right. That was going to be my question.

[James Pepper (Chair, Vermont Cannabis Control Board)]: I think, you know, the state's attorneys, I feel like are just not gonna enter, given the court backlogs and the kind of serious they're not, they're just not going to prioritize. Yeah.

[Senator Randy Brock (Vice Chair)]: Well, I'm I'm thinking of it from a revenue perspective. Right. That every dollar that goes in the illicit market is a dollar less that's going into that percentage that goes to tax revenue. Right.

[Senator Alison Clarkson (Chair)]: We all know that consumers are creatures of habit. Right? So we if we

[Julie Hulburd (Commissioner, Vermont Cannabis Control Board)]: bring in illicit market operators, we have a retail location, the next thing we have to do is change the consumer behavior. So one of the things we've talked about is doing a Buy Bilingual campaign to change consumer behavior from to the the regulated market. To your point exactly, putting more dollars into the regulated

[Senator Alison Clarkson (Chair)]: market versus the illicit purchases.

[Senator Randy Brock (Vice Chair)]: And in the illicit market right now in Vermont, can you buy the same products or substantially less than you can in the living market?

[James Pepper (Chair, Vermont Cannabis Control Board)]: The same products, I would say no. Because ours, you know, are tested. They're tracked from seed to sale, they, you they've got you can buy different products, but they're unregulated. So, you know, people are paying 20% premium on their regulated products. They're doing that for peace of mind and it's adding a buck or transaction. But there's these whole categories of products that are not available on the regulated side and then of course the price is always gonna be less than the list and market because they aren't subject to regulation. They don't pay licensing fees. They don't have to do city sale tracking. You know, all those costs get baked into the regular price of Canvas.

[Senator Alison Clarkson (Chair)]: It's about Madam chair? Yeah. Kesha.

[Senator Kesha Ram Hinsdale (Member)]: No. No. I I didn't I can't really tell if if I'm interrupting and senator Brock had another

[Senator Alison Clarkson (Chair)]: I don't think I just couldn't see your hand, so I would have called on you notice so I apologize. Kesha?

[Senator Kesha Ram Hinsdale (Member)]: Do you want me to raise my hand? I wasn't sure.

[Senator Alison Clarkson (Chair)]: No. No. I'm happy to have you just jump in.

[Senator Kesha Ram Hinsdale (Member)]: Okay. Well, I I kind of interjected before, but I may I do wanna clarify my perspective on this, which is not just illicit market and regulated market, but that the federal landscape is changing around this being considered illicit. And just like our committee has looked at trying to give our local craft producers of beer, wine, and spirits a leg up because that's our job is to choose winners among our in our state economy. I believe we have to start doing the same thing in looking at Kraft cannabis and the strong brand that Vermont has for, you know, healthy, unique quality cannabis versus what we're seeing from the Trump administration, which is a lot of collaboration and board involvement with groups out of Ohio and Canada where they stand to financially benefit. This has to be something our committee looks at, and once the federal landscape changes, you're talking about THC beverages, you know, other markets that will shift. So I just wanna make sure we're not ignoring that potential reality that is being discussed at the national level.

[Senator Alison Clarkson (Chair)]: Thank you. I appreciate that. I I think we I hope we do, and, hopefully, we'll continue to take that under serious consideration. I'm gonna continue to move you along. I'm if it's okay with you, what, you go to 10:30, and we're gonna start liquor lottery at 10:45. That's okay with you. Yes. Yeah.

[James Pepper (Chair, Vermont Cannabis Control Board)]: You know, I know this is like it's hard to

[Senator Alison Clarkson (Chair)]: Well, there's a lot here and and I would I think on the federal piece because that's a big thing and I know top Right. Of line Yeah.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Yeah. I I mean, these are some structural challenges that cannabis businesses face that no other small business in the state faces, but you know, you just look at this and you're on time. And this is part of my report.

[Senator Alison Clarkson (Chair)]: Yeah and I and I okay great because I think this would be helpful to have as a as a as for us to be thinking about as we then ask for a deeper dive into Right. And we will learn more. Do we have any sense of the timing on a final I mean, I know we have an executive order that's been Right. But I don't know if we have what what's the follow-up to that?

[James Pepper (Chair, Vermont Cannabis Control Board)]: So this is the executive order. It did two things, but as far as rescheduling goes, this is the language that was in it. Attorney general will take all necessary steps with all due speed to restart the rescheduling program that was started under Biden, the Biden administration. That was held up in court cases, know, and so really there is no idea of when the timeline is. Know, generally speaking, the Attorney General, Department of Justice is independent from the president, so it's also kind of odd that he's directing his Attorney General to do this, but I think I think it's a good I mean, I think that this will happen. It seems to me like if a Republican is supporting it, the Republican administration is supporting it, know, I think rescheduling to schedule three, not deschedule, will happen. There's a lot of conjecture about what schedule three might mean for the cannabis industry. We're part of our regulators association. We put together a one pager as to what we think that it will mean. And so this, I have just kind of the bullet points, the two big things that it will almost certainly do. It was moved to schedule three, is it will allow marijuana businesses to deduct their standard business expenses, obviously on the federal tax returns, which they currently cannot do. And it will also very likely open up a whole new kind of armored research. Know, research institutions that take any sort of federal money cannot really possess cannabis right now. Mean, there's a very narrow pathway to do it, but this will open up a lot of research potential.

[Senator Alison Clarkson (Chair)]: And what would it do for banking?

[James Pepper (Chair, Vermont Cannabis Control Board)]: So I got that on the next slide. What it will not do, moving to schedule three, is do anything with banking. The kind of prohibition on federally insured banks from touching cannabis funds does not change because these products Schedule three applies to FDA approved drugs. Tylenol and codeine is Schedule three, certain steroids are Schedule three. These cannabis products will not be FDA approved drugs so there's not going be interstate commerce, there's not going to be changing to the banking laws, there's probably going to be very little disruption to the state regulatory frameworks if this were to move to schedule three. I linked to it in this presentation, just the one pager that I discussed from our Cannabis Regulars Association, which goes into much deeper detail on all of these points. Like, you're not going to need a prescription in order to access adult use cannabis. We're not going to have to change retailers into pharmacies. So given we have no

[Senator Alison Clarkson (Chair)]: time frame yet about when this might be inactive or It's

[James Pepper (Chair, Vermont Cannabis Control Board)]: a rule change, yeah. The DEA but the DOJ will promulgate.

[Senator Alison Clarkson (Chair)]: So our timeframe on promulgation,

[James Pepper (Chair, Vermont Cannabis Control Board)]: what is unclear? It's unclear and Rules can take

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: nine to twelve months if not longer. Imagine there's a lot of public comment and challenges that are gonna

[Senator Alison Clarkson (Chair)]: I guess the question I have for us is you are already beginning to prepare for this, nimble do we have to be to pivot to this if it I I guess we would appreciate from you and from Tucker how how do we prepare for this, and how can we help you prepare for this? Or is there anything we need to do to enable this?

[Julie Hulburd (Commissioner, Vermont Cannabis Control Board)]: We really need

[Senator Kesha Ram Hinsdale (Member)]: to Can I just say I mean, I do think there's a political element to this question, madam chair, that we should discuss separately, just because, you know, that's like asking how to boil the ocean with this administration? I think we might wanna hear from some national people following the politics and the market, because we do have to follow the money in some ways. The president has been a huge beneficiary of contributions from big marijuana, Curaleaf, etcetera. And there's just as much politics in this question. And as you know, I am working on introducing a bill that I welcome anyone to co sponsor, that in the absence of any certainty about the federal government would just help us bolster our state, the strength of our state businesses and our state market.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Thank you. Anything that we can do to prepare for interstate commerce when there is going to be just kind of THC gets commoditized across the country and our cultivators manufacturers are competing with the kind of the equivalent of Budweiser and whatever else, know, the kind of really mass produced products and anything we can do to prepare our market for interstate commerce is important

[Senator Alison Clarkson (Chair)]: to do while we have the time. Okay, so anything we need to do in conjunction with that work, assume you would begin looking at that yourselves. I think we need to be looking at that retirement.

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: Some of that has been sprinkled throughout the report that we filed in November.

[James Pepper (Chair, Vermont Cannabis Control Board)]: I, you know, I think you guys this the kind of hemp market that has, you know, turned into kind of a phantom cannabis market is really complicated. We're working on some hemp legislation with your neighbors over And I think it's really an important piece of the conversation but it's also really complicated and not worth diving into too much other than 2018 Farm Bill created a legal fiction between marijuana and hemp even though they're the same plants. One plant, two names, and it's all depending on how much THC is in the plant. And people have been kind of manipulating loopholes in the way that the hemp definition was drafted to create intoxicating high THC intoxicating products, shipping them across state lines, not subject to excise tax, not subject to age gating. These are the three main loopholes. I won't go through them all, essentially you're gonna have more THC and some hemp products than would even be allowed in adult use cannabis based on these loopholes. I think

[Senator Alison Clarkson (Chair)]: somewhat interesting about this is

[James Pepper (Chair, Vermont Cannabis Control Board)]: the federal government actually in the bill to reopen the government included a rider that tried to close these controls but delayed implementation by a year and then the other half of the Trump executive order on rescheduling was directing his administration to work with Congress to create an acceptable minimum THC level or maximum THC level of import hemp products. So we'll see

[Senator Alison Clarkson (Chair)]: what happens there. And this you're dealing primarily with the Ag Committee?

[James Pepper (Chair, Vermont Cannabis Control Board)]: Yes. Okay. Yep. So just keep us Yes. We'll keep you in the loop of what's going on So, you know, I mentioned that we need it would be better for us to compete with the illicit market. The goal is to compete with the illicit market to offer some of the same products and services that the illicit market enjoys. These are all the market expansion ideas that the three of us have heard or have talked about from the outset, from 2021 when we were first appointed. These are the ideas that come up over and over and over again. About licensing for sales, farmers markets, you guys did a lot of work on a pilot program on farmers markets last year. Yes. It didn't cross the finish line in the house. There's on-site consumption, you know, this

[Senator Alison Clarkson (Chair)]: is That one person, however, is gone.

[James Pepper (Chair, Vermont Cannabis Control Board)]: That's right. You know, people talk a lot about having on-site consumption event licensing. This would be, you know, you have a cash bar at a wedding, you could have a cash bar for alcohol or wedding, you could very easily have

[Senator Randy Brock (Vice Chair)]: a cash

[James Pepper (Chair, Vermont Cannabis Control Board)]: bar for candidates at a wedding or concert something on those lines. There are four potency caps that were in the original legislation, these are in statute. One on kind of an edible serving size, a per package limit of THC. There's a 30% THC cap on cannabis flower, and there's a 60% on soft concentrates. None of those exist in the illicit market, so if people want to buy a one hundred milligram edible in the illicit market, they can do that. I'm not saying that that's what you should do in the law, but I'm just saying these are the differences between the regulated and the

[Senator Alison Clarkson (Chair)]: illicit market.

[James Pepper (Chair, Vermont Cannabis Control Board)]: Delivery, there's no delivery license currently. Consumption cafe gets talked about flipping that retail opt in opt out presumption so a town would presumably allow cannabis retail until their citizens voted to not allow it. And then that's been discussed in the past. Changing advertising laws, you know, adding more parity with either alcohol or, you know, as you suggested, potentially our neighboring states. Yeah. And then one issue that came up last year, so I included it here, is having a two year product registration and a two year employee ID card option. And then, yeah, I mean, that's discussed in this report as well, the Act 56 report. And then the other part that you asked us to look at in this Act 56 report was whether a portion of the cannabis excise tax should be dedicated to purely economic development within the cannabis industry. Julie and Kyle kind took the lead on that notion of the report. So I'd love to give them an opportunity So to talk about

[Senator Alison Clarkson (Chair)]: just a recap of what the

[Julie Hulburd (Commissioner, Vermont Cannabis Control Board)]: cannabis business development fund is. It was a fund set up to provide low interest loans, grants, technical assistance, things like that. That fund was placed with ACCD for operation and then sort of the companion language for the CCP was to decide who or create the criteria for who is eligible for that fund. And so we've been working together with ACCD for the last four, five years, whatever it's been, to create sort of a collaborative approach. So if you look at, from the sort of user standpoint, social equity applicant, program that they have access to includes those low interest loans, grants, and a great deal of technical assistance, and then also graduated fees. So they start at zero and it steps up by 25% every year till they get

[Senator Alison Clarkson (Chair)]: to 100% and

[Julie Hulburd (Commissioner, Vermont Cannabis Control Board)]: even five. Early on before the market started, we did some peer networking events where we talked about how to communicate with the municipality, how to set up a business plan, how to talk to investors, things like that. Now all of that's going to a consultant that does the technical assistance. So those are the things that we've been oh, and then recently ACCD and BTSU partnered on a series of a weekend series of workshops with their Canvas Business Certification Program. I do either of those professors and an articulation agreement with Vermont Law to provide a weekend series of workshops for folks. So that's how the fund has been used thus far and we can

[Senator Alison Clarkson (Chair)]: the next to year. The

[Julie Hulburd (Commissioner, Vermont Cannabis Control Board)]: There is some money the left. I would say year. That that is probably because the appropriation happened before we started having licenses, but it's it's almost used up. So we're at a point where we're we're not sure where to put energy and resources because we're not sure if there will be continued funding. Again, some direction from the legislature on how you view the future of that program in terms of how we view

[Senator Alison Clarkson (Chair)]: the future of the market would really help.

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: Yeah. And again, we would love to come back with ACCD and really sink into the cannabis business development fund and these issues. But I think that as Julie just referenced, one of the challenges has been multiple times has been one time funding for this fund, which makes it really hard to programmatically think, you know, future cast, how the fund should be best utilized. So if there's an opportunity for, you know, annual funding, revolving funding, whatever you wanna call it, it really helps understand the impacts both now and in the future, as Senator Ram Hinsdale hinted at, you know, the federal landscape is changing underneath our feet. Folks are, you know, big businesses are starting because they'd be able to write off federal taxes. They're gonna have new money injected into their businesses. They're gonna start preparing for Wall Street interests into their businesses. Folks in Vermont need some type of standing to kind of really start reinvesting both knowledge and money and, you know, structural support into their businesses to to be competitive, equal on craft level as things start to commodify. So one of the things we've really done and we're this session you're gonna hear a lot of really awesome wants and needs on how to expand the market from a new license type perspective, to control the product from the farm field to a consumer perspective, you know, cannabis cafe, so on and so forth, switching the opt out provision. But I really focus how to best utilize this fund from a structural support perspective over the last six months through the conversations with ACCD, surveying licensees and trying to better understand the landscape of support that other commercial and agricultural businesses around the state get to enjoy from a state dollar level perspective. So there are a number of different things that we've thought of on how this fund can be utilized. Who can we open it up to beyond social equity applicants? Is it our smallest, most vulnerable cultivators who really need that support to be competitive? If the federal landscape does change. Economic empowerment opportunities for folks that have that license type, veteran owned businesses, know, women owned businesses, so on and so forth. And so, you know, some of these ideas are how can we help alleviate the cost of testing? It's very costly to test your products, to put a product that's safer consumer consumption into the legal market. You know, how can we do how can we switch narratives around outdoor sunroom cannabis? But I think a lot of it really important and what makes sense for this committee to really consider is how do we get structural support from a business planning perspective, from a legal health perspective, and to kind of understanding how to position your business the best way moving forward. You know, I think in my time at the University of Agriculture, of the working land subs, stuff like that, you know, they provide grant opportunities to buy a new piece of machinery or equipment for your business. If you've got a good business plan, you can show how you can match funding, so on and so forth. Using some of the support networks kind of move you from an incubated business to accelerated business. You can keep on bigger grander scales. So a lot of that's in this report. I know time to tell you today, but would be happy to come back and talk about think

[Senator Alison Clarkson (Chair)]: you coming back would be great. We will be looking actually at stages of business development for all businesses that are known what it is, and what we offer as a state, what they need, and how we can support the things that are really helpful and productive.

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: I have a lot of empathy because they don't have, this industry doesn't have access to so many support opportunities.

[Senator Alison Clarkson (Chair)]: So is that the case? I mean does it not have access to the Vermont Law School small business legal clinic advice? I

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: don't know about that specifically. They are teaching a class on campus at Vermont Law School. I think that there's been some conversations. I believe Senator Hinsdale has some conversations with Vermont Law School. Know we're You and

[Julie Hulburd (Commissioner, Vermont Cannabis Control Board)]: I have a meeting with Vermont

[Senator Randy Brock (Vice Chair)]: Law School. Right.

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: But nobody is jumping ahead first into supporting this market from that kind of business legal support perspective, and a lot of that's the federal entanglement and how dollars flow to these businesses. But I think there's some opportunities to consider, you know, through state level funding and how, you know, some of them are gonna

[Senator Alison Clarkson (Chair)]: get Exactly. Technical assistance. Not all of them are able or

[Julie Hulburd (Commissioner, Vermont Cannabis Control Board)]: willing. Right. Yes.

[Senator Alison Clarkson (Chair)]: I don't wanna speak

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: for them. It's hard to kind of separate out streams of funding whether or not you're receiving federal funding or not, your risk tolerance for helping federally illegal business challenges organization to organization. But I've had a lot of conversations with folks like the agency of agriculture and working lands programs, farm reports viability at the HCV, those kind of off like the Vermont Sustainable Jobs Fund. There are a lot of networks that are interested, but you know, it at their existing capacity is challenging. So how

[Senator Alison Clarkson (Chair)]: So work the working lands are the are cannabis businesses not working lands?

[Kyle Harris (Commissioner, Vermont Cannabis Control Board)]: They're not eligible from a producer perspective. I think they'll they'll open it to, like a trade association that's working in this space. They I was was helping with the working lands from an agency of agriculture perspective in 2019, 2020 and getting hemp into that conversation was lukewarm at best. We've had some conversations that that shows interest, not not a want or desire necessarily to jump headfirst into it right now, but the conversations seem to be moving in a general direction where I think there's there could be an appetite depending on the amount of funding that they would be receiving to help. So I hate to do this because

[Senator Alison Clarkson (Chair)]: this is such a good conversation. We haven't even gotten half of it. So we will be back to look at the report. We have the report for that. I think we need to take a peek at it. There's a lot more follow-up here, not only a bill that we may be having, but in this conversation. So let's book another time coming up with ACCD for school and much more to follow. This is and think we need to relook at some of the opportunities and the work that we did last year

[James Pepper (Chair, Vermont Cannabis Control Board)]: because, I mean, it was

[Senator Alison Clarkson (Chair)]: very frustrating to have that. The potential is huge, Senator. The potential is huge. Absolutely. And it's an important point for us to continue to own in a way that supports the incredible market we've grown so far and we need to protect and continue to have it flourish. So So thank you very much. Let's just chat about what the next testimony