Big Weed Is Taking Over This Abandoned Prison in New York

Chicago-based Green Thumb is getting massive tax breaks to build a $155 million, 450,000-square-foot cultivation and production hub.
April 20, 2021, 1:35pm
Chicago-based Green Thumb is getting massive tax breaks to build a weed "campus" in New York.
Chicago-based Green Thumb is getting massive tax breaks to build a weed "campus" in New York.

A prison town for most of the 20th century, rural Warwick, New York, is trying to become the cannabis capital of the northeastern United States. At the former Mid-Orange Correctional Facility, a medium-security prison that closed in 2011, Green Thumb Industries—a major national cannabis firm worth $6.4 billion—plans to build a massive cannabis “campus”: a $155 million, 450,000-square-foot cultivation and production hub.

Advertisement

An operation that size could be one of the biggest weed complexes in the country. It could supply the bulk of the $4.2 billion worth of cannabis expected to be sold annually in New York State by 2027. And it would help fill the prison-sized hole in the local economy.

Warwick lost 450 jobs when the prison closed. Once the pot factory gets going, Green Thumb promises to hire 175 people, with the lowest-paid starting at $50,000 a year.

“To get this kind of national employment opportunity is huge for us,” said Michael P. Sweeton, Warwick’s elected town supervisor. “By enticing Green Thumb to come here, we’re gonna fill that gap and bring us back, at least in employment, to where we were.”

Converting an American prison into an enormous legal cannabis hub has a certain poetry. That would be true even if Mid-Orange hadn’t been filled to capacity mostly with drug-war inmates in the 1980s.

But Warwick’s welcome to Green Thumb also represents a significant advance for the cannabis industry in the U.S. Not long ago, weed businesses had to patiently explain to skeptical or outright hostile city councils what pot was and why it was legal. Compare that to what's happening in Warwick. Chicago-based Green Thumb is coming because local government welcomed the publicly traded company with public subsidies in the form of tax breaks and friendly financing.

A benefits package approved in February by the Orange County Industrial Development Agency, or IDA—a government entity tasked with luring business to the area—includes $27 million worth of tax breaks over 15 years as well as a government-assisted revenue bond to finance the campus’s construction.

That would make it one of the most generous incentive packages ever offered to a weed company in the United States by a local government.

Advertisement

Ben Kovler, Green Thumb’s founder and CEO, called his company’s New York factory “an economic stimulus package” to the town willing to host it.

Green Thumb considered other locations around the state that Kovler did not mention by name, but they all lost out because of Warwick's proximity to New York City, as well as the incentives. In fact, Green Thumb chose Warwick because of the incentive package. On its application, Green Thumb explicitly stated they would not consider coming to town without them.  

But according to Kovler, the big winner here isn't Green Thumb: It's Warwick.

“It’s economic velocity and an economic stimulus package in the form of an industry that’s now allowed to exist,” he said.

Green Thumb’s benefits package is relatively modest compared to some of the giveaways enjoyed by other big businesses in the U.S. Twitter very famously sited its headquarters in San Francisco after that city gave tech companies a tax break in 2011; other cities all over the country, including New York City, tripped over each other to prostrate to Amazon, offering Jeff Bezos’ companies direct cash grants in their efforts to win the company’s HQ2.

Advertisement

But the difference is that unlike Big Tech, Big Weed became legal on proclamations of social justice. Half of the cannabis business licenses to be issued in New York are supposed to be reserved for “equity” applicants, defined as people from low-income or overpoliced communities or with weed arrests on their records. In this way, New York’s Marijuana Regulation and Taxation Act is supposed to uplift communities of color hurt by the drug war.

Green Thumb is one of the country's biggest cannabis companies. It's publicly traded and has locations in 10 states. And it's flush: With weed declared an essential business during the COVID pandemic, the company sold more than $550 million worth of product in 2020—more than doubling from 2019, according to SEC filings—and saw the value of its stock triple. 

Handing benefits to rich and successful Big Weed feels like neoliberal crony capitalism, not a boon for social justice. Seeing yet another state fall to Big Weed is exactly what some legalization advocates feared would happen, but even some cannabis business lobbying organizations think what Green Thumb is doing is a bad look.

On the one hand, seeing Big Weed getting the same kind of welcome from government as tech or Tesla is a sign of how far legal cannabis has come. But Big Weed should not eat first, said Morgan Fox, a spokesman for the National Cannabis Industry Association (one of the oldest lobbies for weed business in the country). “Incentives should first go to businesses with less access to capital and those owned by people disproportionately impacted by prohibition," he said.

Advertisement

Keep in mind that under New York State’s legalization law, existing medical-marijuana operators—of which there are 10—will almost certainly be first in line to start selling adult-use cannabis.

Green Thumb entered that market with its purchase of Fiorello Pharmaceuticals, one of the state’s 10 “registered operators,” for $60 million in cash and stock in 2019. Included with the purchase are three existing dispensaries, including a location in Midtown Manhattan. There’s a limit on how many retail locations vertically integrated companies like Green Thumb will be allowed; however, very notably, there’s no limit on how large any one of those locations can be. Green Thumb’s location in Manhattan could become one of the busiest weed stores in the world.

Boosters like Sweeton, the Warwick town supervisor, point out that the town is poised to receive much more than it gives up—much more, in any case, than the prison ever gave. The prison, he notes, paid no taxes at all. And given that because of federal cannabis prohibition, which still stands, cannabis businesses still can’t bank, deduct normal business expenses, or attract investors via the New York Stock Exchange, tax incentives merely level an unequal playing field a little bit, according to Green Thumb’s Kovler. 

However, legalization’s architects acknowledge that what Green Thumb is doing is problematic at best. But they point the finger at Warwick and the business boosters in government, for handing over gifts to a firm that’s already flush. 

Advertisement

Green Thumb should be doing favors for New York to enter its market, rather than the other way around, state Assembly Majority Leader Crystal Peoples-Stokes, one of legalization’s architects, said in a telephone interview on Friday.

“These folks have enough money to fund whatever they like to do,” she said. 

Peoples-Stokes called for a community benefits package to be added to the tax incentives—and for Orange County and Warwick to tell Green Thumb to find somewhere else if they don’t get it. “If it doesn't come with some commitment to workforce training and jobs for communities of color, not just at the lower level but at the administrative levels, [they] the IDA should be rejecting it,” she said.

State Sen. Liz Krueger (D-Manhattan), who sponsored the Marijuana Regulation and Taxation Act in the state Senate, acknowledged the systemic problems with New York State’s development strategy “which frequently involves giving away tax money to big players so they'll move to a site they were going to move to anyway,” she said. But at least for now, with reserving half of weed licenses for Black and brown entrepreneurs, she believes legalization’s architects have given the state a “fighting chance” to thwart  Big Weed takeovers. 

According to its application, Green Thumb said it expects to break ground on the Warwick campus by May 1 and have it in operation by June 1, 2022. That’s just in time to start selling adult-use weed as soon as licenses are issued—no one knows yet exactly when that will happen, but the guess is sometime in the first half of 2022.

Advertisement

The fear is that the big initial players in New York’s weed biz will bury small competitors like Nhi Kha before they have a chance to start.

A first-generation immigrant born in a refugee camp in Thailand, Kha and her family relocated in 1998 to Buffalo, where they settled and she went to school. Kha is now the founder and owner of Buffalo-area Sativa Remedy, which sells tinctures and cannabis flower containing CBD, the less-psychoactive cannabinoid that the 2018 Farm Bill made legal in all 50 states.

Kha absolutely wants to start selling THC cannabis once she’s able to. She would also love to enjoy the kind of financing and incentives that Green Thumb is pursuing. “We’ve never had these opportunities,” she said.

Like Green Thumb, a legal cannabis business run by Kha can’t access the same investments, banking services, or tax deductions as normal businesses. But Kha also can’t get bond financing or tax breaks from places like Warwick.

“For me, it’s just a slap in the face,” she said. “It really seems so backwards.”

“We’re a small business—we’re bootstrapping, we’re saving all our pennies and dimes,” she added. “It’s frustrating to see a big business get a stab at this first, before any of us mom-and-pop shops get a chance to enter.”