$1B in municipal marijuana bonds could fund New York equity goals, expert says

Women, minority execs show few gains in U.S. cannabis industry, according to the latest data from the MJBiz Diversity, Inclusion and Equity Report. Get your copy here.

A municipal marijuana bond offering of up to $1 billion is among the recommendations to New York regulators on how they can leverage resources to help equity entrepreneurs start and build recreational cannabis businesses.

Gov. Kathy Hochul’s office announced plans in January to create a $200 million public-private fund to support the state’s ambitious goal to award 50% of all licenses to social equity applicants.

The goal is to build a diverse marijuana industry that includes individuals impacted by the war on drugs.

The state’s finance authority, the Dormitory Authority of the state of New York, would administer the program and has been soliciting recommendations on various approaches, according to Bloomberg News.

Ari Hoffnung, CEO of New York-based Bridge West Consulting, recently blogged that the state could leverage the money by issuing the world’s first cannabis-based municipal bonds.

He noted in a more lengthy op-ed published by Marijuana Moment that the idea would be to use proceeds from 10-year bonds to provide startup grants and loans to equity entrepreneurs.

The money also could be used to fund incubators that provide technical support.

Hoffnung estimated New York would need to raise as much as $1 billion to support several hundred retailers and roughly 100 cultivation and processing operators.

This isn’t the first time cannabis municipal bonds have been discussed as a financing approach.

Hoffnung noted that Denver-based MPG Consulting, formerly the Marijuana Policy Group, wrote a paper about the cannabis bond concept in April 2020.

Get the MJBizDaily Extraction Buyers Guide, now available.

This free resource offers practical business tips and valuable insights from cannabis extraction professionals to help plan or scale your extraction or processing operation with confidence.

Inside the MJBizDaily Extraction Buyers Guide:
  • In-depth guidance for planning a CBD extraction business
  • Best practices in sourcing solvents + solventless materials
  • Lessons in shopping for extraction/processing equipment
  • Tips for outfitting a facility for psilocybin mushroom extraction
  • And more!

According to Bloomberg, Michael Auerbach, founder of the private equity firm Subversive Capital, recommended an alternative approach of forming a business-development company that would invest in and help manage equity businesses.

Auerbach also estimated that the fund should be about $1 billion.