‘It becomes a business risk’ | Delays in special session driving up costs for medical marijuana growers

Southern Sky is planning a state-of-the-art facility to grow medical marijuana in Madison County.
Southern Sky is planning a state-of-the-art facility to grow medical marijuana in Madison County.(WLBT)
Published: Oct. 18, 2021 at 2:28 PM CDT
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MADISON CO., Miss. (WLBT) - $48 million in new construction and 250 high-paying jobs are on tap for Madison County, contingent on the passage of legislation legalizing medical marijuana.

In November, voters overwhelmingly approved Initiative 65, a measure that legalized clinical cannabis. However, the results were struck down by the state’s high court, and many growers hoping to move forward on constructing facilities were put in a holding pattern, waiting for the legislature to pass a bill authorizing the drug’s use.

At least a couple of growers in Madison County had to hit the brakes following the Mississippi Supreme Court’s decision, including Southern Sky Brands, which is planning to open a growing facility south of Nissan Parkway in Canton.

They say the delay has run up construction costs, to the tune of $10 million. “We’ve been sitting on the sideline for 10 months. In that 10-month timeline, with just the delay and now the increase in construction costs, our facility costs $10 million more than it did 10 months ago,” said Justin Mahfouz, founder of Southern Sky. “Things we sourced and procured a year ago that would have taken a million dollars and eight weeks (to get) now costs $4 million and you can get it in eight months if you’re lucky.”

In September, lawmakers requested a special session to take up the issue. However, as of October 18, Gov. Tate Reeves has not called a session. As governor, Reeves is the only state leader with the power to call a special session and has full control over what lawmakers can take up at the Capitol.

“At some point, it becomes a business risk,” Mahfouz said. “You have the capital expense. A lot of the things needed... are function-specific. You can’t buy them and send them back, you have to pre-pay for them.”

Medical Marijuana growers discuss rising costs

Nationally, building prices have skyrocketed in the last year. According to the National Association of Homebuilders, building material prices had gone up nearly 20 percent in the last year, with steel prices increasing nearly 11 percent from June to July alone.

Mahfouz and Steve Merritt, the chief operating officer of Southern Sky, discussed their frustrations sitting outside their construction site just south of Nissan Parkway in Canton.

“We’re coming up on almost a year from the time everyone had planned a project and (was) ready to go,” Mahfouz said. “It really makes projects cost a whole lot more money and take longer to put together.”

Southern Sky is one of at least three growers planning to build in Madison County. Another is Kudzu Cannabis, which is constructing a 30,000-square-foot facility along Commercial Parkway West.

Once completed, Southern Sky will employ between 100 and 150 people at its Canton plant and at its dispensaries across the state. Kudzu will employ around 30.

“There are going to be some very high-profile, high-dollar lab technicians we’re going to need,” Merritt said. “We’re going to have some growers who are learning to be cultivators that understand the plant. The training for that is easily six months.”

Plans are for Southern to hire local people, train them and have them move up in the company.

Madison County Economic Development Authority Executive Director Joey Deason said the jobs in the clinical cannabis industry will pay around $50,000 a year, “which, together is above Madison County’s average wages of $43,900,” he said.

Construction on both facilities will take at least a year.

Jared Kobs, the founder of Kudzu Cannabis, said he’d like to get the growing structure finished next year, so it will be ready to use if the legislature takes up legislation.

“We’re going to start our structure and at least get the shell built and everything ready,” Kobs said previously. “Hopefully, by then, there will be a law. If not, we’re going to hold until we have a law. Then, we’re going to spend money on the equipment and other things required for cannabis cultivation. We’re trying to reduce the risk as much as possible.”

As for Southern Sky, crews have already done dirt and some foundation work. “We’ll have the walls and ceilings up hopefully by the end of December. Then the buildout from all the rest of it will take all of next year, if not part of 2023,” Merritt said.

Merritt says his company could begin providing medical marijuana in early 2023, depending on when its use is legalized. “It depends on what the final version of the law is. If we can put some temporary units out here, we’ll go ahead and get some of the mothers we’ll cut clones from,” he said. “If we can get seeds in the ground by October of next year, we think we can be delivering product (by) the first of January 2023. That’s probably the earliest we’ll have product in here.”

Meanwhile, Madison County and the state are poised to become leaders in the clinical cannabis industry.

Mississippi Secretary of State records show 92 companies were formed with “cannabis” or “marijuana” in their titles in 2020 and 2021. Of those, 10 filed to reserve the company names, while five have submitted notices of intent to dissolve.

If medical marijuana legislation is passed Deason believes Madison County could be a hotspot for growth in the state. He says south Madison County, in particular, is poised to lead the state, in part, because of its growing population, quality of life, and available infrastructure.

“I believe, as (the legislation) is written, all the growing has to take place in buildings that are less than 100,000 square feet,” he said. “If you’re growing inside an enclosed facility, it’s going to require an electrical capacity, so it will have to be where there are electrical utility lines,” he said. “If things proceed as we’ve seen, I do see that (Madison County) has a future as a cannabis hotspot.”

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