Thanks for having me you can jump right in the hotseats miss a moment of our time with you Deputy tax commissioner you want anything? Nope. I'm good. Thanks for having me. I understand the central question of What I was looking to talk about here is what what reaction I may have if Medical dispensaries were to start selling recreational marijuana Wide retail sales correct. That's that's what we're contemplating. Okay so from the tax department's perspective I would always ask for 12 months Between when something was legalized to actually set up the infrastructure with an art department both the policy infrastructure and the IT Infrastructure to start collecting that tax So I'd be looking for about that time frame from from when something passed before it ever Before we had to actually start taking money in the door Again, that's that's contingent on us being able to mandate Electronic payment and if we couldn't do that, it's a bigger discussion of how to How to outfit our building to be capable of taking cash in terms of Revenue certainly that would provide some faster revenue with fees that those dispensaries may Pay as well as potentially having earlier tax revenue in terms of numbers though, I really want to work as part of the Governor's Marijuana Advisory Commission the tax department analysts worked with joint fiscal office To come up with a sense assessment. I really love to go back and work with them I think there's a few questions that we would need to know To figure out what that would do from the revenue perspective Certainly what what the rate is going to be and what the Effective date of retail sales would be but I think the bigger sort of Questions that we would have to answer is what share of the market that was originally envisioned for legalized cannabis market could be met by The medical dispensaries until wider Retail sales were allowed, which is a question we can't answer but just we need some time to do that Questions Sorry, that's for sure. Yes, Jim Yeah, certainly I can understand the challenge. I'm not an expert in that area my understanding which could be Well not in terms of the banking regulatory structure that exists But my understanding is so so I spoke with Senate finance on that very topic I had encouraged them to speak with both Department of Financial Regulation and Just banks and credit unions After those discussions it was in the bill that we were able to do that So I was assuming that those were fruitful discussions for them It can be a challenge But my understanding is that the medical dispensaries are currently serviced by a credit union here for depository accounts And in Massachusetts I have heard but again I'm no expert and don't have my own facts that they have all been able to acquire depository accounts So we were talking about giving the option to pay cash Yeah, they'd be very difficult for us. We don't have the security infrastructure to take large sums of cash We don't take large sums of cash from the dispensaries now They're paying payroll or holding No, and it would be it would be expensive and take a lot of time to set up And we'd have to hire additional staff to you know count it guard it So we really just don't want to be in the business of that at all Would you accept? headquarters Yeah Country to take their cash to the bank and certified check Yeah, I'm not harm a doctor. I feel like that I don't know what logistical challenges that would present for the business But I feel like that may be more difficult to bring it to us because the bank is gonna I think they have their own requirements if you were to come in with Cash deposits over Which I think is what leads them to a lot of their the banking problems Whether or not the bank is willing to take that money or or that might present problems Cash something you can form out It's possible we explored it a little bit as part of the The Commission but I did not have a lot of success on that It exists in some areas I didn't find like ideally we just would not have to be involved at all Right someone could set up what would essentially be a mobile bank or something like that Which was not a service that I found readily available. There are certain things like we could set up You know vaults in the lobby or something like that But you still need additional security in our building to be able to guards for transport a Lot of infrastructure so ultimately I think it's some combination of having to you know contract with somebody to do a Large share of this Dude cash transportation Follows people today Provide any of that They provide some of it for sure or into counting. Yeah, I would assume they have to Again, I haven't looked deeply into this yet, but what I was hoping for was to basically have You know an armored car service be willing to take the money directly Is there any any other I guess They have relationship with any other Company or whatever that there's an excise tax That's collected as opposed to you know straight-up sales tax or rooms and meals Because when I fill out my tax form there's the you know sales and use and then Local option, but is there anything else that we would collect a tax on that's considered an excise tax No, I really this is sort of an interesting Naming issue as well. It's you know excise tax is often based on weight But this is really it's really a sales tax, right? And we didn't call it a sales tax dude. We didn't want to confuse it with the other sales tax, but Yeah, I would look at it more as like a sales tax Would you anticipate it being collected roughly the same way in other words being done online based off of raw sales I think that depends on what the the ultimate law becomes but if it's based on gross sales Yeah, we would probably structure very similarly to how we do the sales tax. Okay. Thank you You're made a lot to ask related questions to the commission No, no, no the cannabis Commission The study the governor's console.  So there were a lot of factors that went into that one was trying to be Competitive with any remaining underground market one was trying to be competitive with other states and jurisdictions and the third was to Make sure that there would be enough money generated by the revenue estimates to cover The health and safety requirements that the other two Subcommittees It's all over the map Washington I think is the highest at like 37% maybe and there are some states that are down in the 10% range It's all it's in that we have a comparative chart. Maybe I brought it with me. Yeah, so there's a comparative chart in the report That lays out some of them are like Massachusetts. I think there's like three different taxes So I don't know what the ultimate rate is it's pretty close But it's based on you know Some of them have combo of weight and sales some of them have just sales Alaska has just weight and does anyone do In between tax There was a suggestion brought out yesterday about a local option wholesaler tax, I think some do but I don't know I think that's Some do I think So there are five Dispensaries, okay in your Assessment that you would need 12 months. I assume that in order to collect from just these five you would go ahead and build the whole System yeah, I mean unless you were saying that those five would only ever be the only ones to sell but It would be a year of sales With only five Entities who would need to submit yeah, I mean for us It's not necessarily a linear relationship with the volume that we're going to get it's a relationship with how complicated the infrastructure is right And make sure that we set it up so that it would be scalable When we're going to do It would be a challenge for us to try to set up maybe a skeleton or a shell of it To expand on it later. I'd rather just do it the first time and be all set Have a good weekend Everybody to get a diverse asleep So we have Floor in a few minutes and Then we will come back right after the floor and continue working through any of the remaining Decision points that we want to give direction to Legislative Council to draft over the weekend. So has everybody Had a chance to think about what they'd like to To see Jim you were working on the side project to be able to Rulemaking With a couple of people this morning. I've talked to Ledge console I'm not sure Ready for prime time work might complicate things, but I need to have another conversation to see if we could make some simpler apples on the Education issue that you asked us to give some thought about Haven't fleshed it all off. This was a 2 a.m. Wake up, you know thinking about it to am So it may need some other you know people can take it forward for it, but My concern is That we start from zero for this fund for education and prevention And it's like you got a weighty year to know you what you have in there based on the tax receipts Because it's tied to that and I guess I would throw out I don't think we'd be taking too much of a gamble. What if we set a floor? And I know this is an appropriation for the future, but floor I would say a million and a half dollars So that you knew you could do a certain basic amount concurrently with if not before the commercial market Started and tie it to the 30% up until a certain amount And I don't know where that six million seven million. I do worry about going too far You know, there's arguably the bigger the market is the more you need for education and prevention, but I I don't want This fund to become addicted to the money either And have sort of a perverse relationship with great keep selling because we get more money Rally questions with what we do with our lottery revenue as well I don't think anybody suggests that we're Belting people but the lottery so the lottery is such a small part of the overall That was my 2 a.m. So a floor All right Mike and then Bob sure We're not starting from zero here. There are up and running prevention coalitions all around the state What we're trying to do is enhance it what they're doing already. Yeah, so Waiting till the coffers are populated for the augmented fun. I Don't see a problem with them. We have a good read, but you know, I hope if we need more information I can Get that information the systems are out there already. We're not trying to start from scratch When I said he could go that I didn't think we should let the bill out of here without our signature on Prevention and education. I thought the response that I got from you was And I want to thank you for Coming back with such an assertive and no work Good job, so this is not related to it should go into the bill, but it's related to the bill I was at breakfast this morning, but to esteem members from our committee And we were talking But it occurred to us we're having all this conversation and assumptions about the illicit market and we haven't heard from So what would that look like to get some Whether it's through a proxy or however, but just to get a better sense of Testing our assumptions But I think that's important to discuss the way in terms of how we structure this thing, you know What's what's the appetite for? For the peas and so forth So my my sense of that just and you know, I probably have about this much experience but my sense of that is that There's a lot of theoretical conversations around whether what the direction we're going is valuable or useful there's a lot of blustering because Honestly the status quo works for a great number of people who are out. They're growing right now So we have a weekend coming up I would welcome you to Put the feelers out and see if you can have a conversation with I'm sure each and every one of us has illicit growers in our communities. They may not appreciate their state representative seeking them out you know ask ask around and Maybe there are folks in this room who can help send you in the direction where you could have a cup of coffee with Someone and have a conversation Kind of along the line of what I was Maybe trying to talk to John about yesterday last night. I Kind of wonder When I've been involved in activities completely and totally legal in the past I've always known that there were people that operated on the fringe, whether it's Lot of reason or other things. I wonder if there's any Information that the people that are actually engaged in growing and dispensing now might have on what they believe is the potential market of small growers that they might bring in if they were afforded an opportunity to put an umbrella over them with their license in the future for a plausible step up Could you elaborate a little bit more about your experience because I just want to understand more where you're coming from So circling back to prevention money, you know, I think that you know, welcome the conversation Maxwell and And I think that I think it's valuable for us to set a direction and set You know set an objective make a clear statement that that we want there to be Revenues that that are in a dedicated fund I Don't think we should spend a ton of time on it because we could get it all wrapped up with a pretty bow on top and Appropriations could decide. Oh That's not going to work. We're going to do it a different way I mean, I think they will I think they will follow our lead in terms of the value of Setting aside revenue for the prevention Programs, but but the way they do it might look totally different than what we you know floor ceiling percentage, you know All of that sort of thing. So Let's let's figure out what we want at the statement of this policy committee to be and we'll let the money folks Do get out on what that actually looks like Does that make sense? All right, what else JP? Did you have something you were working on for? Well, I prepared the just a rough Very rough Proposal They actually changed the name from wholesale to Produce for retail say whatever to play on words, but it was more appropriate. This is Just something that was used based on the local options tax already proposed by them the Senate bill for the retail sale Marijuana this is Craig still in here. Excuse me. It's Craig still in here So this one is just designed to put a local options tax on the cannabis that is specifically cultivated for retail sales can nothing to do with any any current Product being produced for medical reasons right now So in this construct if my town had both the gross grow facility or A dozen small cultivators and we had a retail then you would anticipate Local option revenue coming from both well the local option revenue the intent behind this is for the local auction local option revenue to come from the cultivators of marijuana being grown for retail sale now I think they're In number of double taxations, I think I think in the case of a Cultivation facility that also has a retail store in their own by the same people I think that could be something that maybe the local options tax May not or maybe shouldn't apply to that cultivator if that Marijuana they're grown for retail is going right from their facility to their store You see I'm saying Because there's going to be there's going to be some some will I'm assuming there's going to be some locations that a cultivator may Have a retail store set up at some point somewhere in that same Municipality and there may be others that won't So the effect of that on the consumer end would be a Cheaper product from an int from a vertically integrated Well if you're putting a 2% tax when it leaves the cultivator And you're putting a 2% tax when it leaves the retail and goes into the consumer's hand, then that's for 4% right, but if you're suggesting that If the grower also has a retail license that they're not be Right, yeah, I'm sure that's not if that's a case that that could be a Modification a modification to this I didn't put that in there because I didn't really know how to approach it I wanted to ask you about that but but again It's you know if say XYZ corporation Has a retail sale in that same locate that same municipality this the local option on Cultivation maybe could be way either or You could be exempted from that because he's gonna he or she eat that corporation or whatever. It's gonna pay the 2% local option anyway Again to the state and goes back to the misspally every every quarter and things like that This would be regulated the same way and of course the gentleman that was sitting at the end of the table the deputy tax commissioner You know he's already got issues with with the with the general stuff. This is just you know another Having just looked at this quickly one of the issues that I see with doing it this way is How would a medical dispensary that's also doing adult sales? Tax at the grow level because they'd be growing for both the medical patient as well as the adult user And their tax exempt currently so how do we get around that? They would basically have to have to separate grow facilities almost or they would have to Separate their their products To in order to put this tax in place and that I think would be a big challenge for the dispensaries That's just Especially for like no, how about you do it? I mean, I thought it was saying it's the same issue So I don't have an answer to that because I'm not a dispensary But I don't know how they would do that and a lot of it a lot of this business is doing the taxes and everything The first year I think is a lot of it's Not an honor system. I think it's it's not this from what I saw with the tour their Their product and their inventory and everything was Was highly highly regulated and highly I guess the one I'm looking for our county for I Mean every plant was accounted for Which which literally impressed me So having said that I would take that somehow that facility would be able to Somehow do the same thing with that with the retail. I don't know how they do it. I'm not in that business Rob and Mike Well, I see a couple things going on here one is Is if you have a facility that's that's sort of doing both As far as revenues go You're better off just to collect the two percent at the retail and because you're going to be dealing with a higher number in that regard When we had talked yesterday, my impression was you were trying to get at that if you have just a growth facility and that's it Then there'd be some discussion around right and this is what I Excuse me. This is what I said this morning with with the facility if they have our retails Facility and the same as the pally they would pay their two percent local options tax based on the sale of the product not on the cultivation, but if they didn't Yeah, let's let's pick on the morning melting, right? It's a very good facility in fact we've heard that somewhere That facility there does not currently have a retail establishment in the town of Milton I have no idea whether the town would allow that or not. So that's a relevant at this point in time They don't have a retail so that facility Would pay the local options tax on the additional cultivation Of marijuana Intended for retail sale not on the current cultivation for medical reasons and again how they how they break that down But using your scenario there if the the medical marijuana facility that's there got into the retail Cannabis end of it, right? They're going to pay the excise tax and the local options tax Based on those retail sales. So you're going to capture Money in that regard but if you If you don't say you have Status quo now where you just get the medical Marijuana facility, but let's say they started their own row operation retail That that's a different discussion well The town would capture the money either way If we allow this exemptions the cultivator who has a retail establishment actually saves 2% There's not going to be paying taxes because the taxes on the retail is going to come from the consumer And they're going to be paying that 2% so so the facility again picking on one in Milton Share playing value in this century If they don't have a retail they would pay the 2% they do have a retailing wouldn't but the but the cultivator is going to pay 2% If they don't have the store if they do have the store that I'm going to pay it or if I don't say they're not I'm just saying it's a possible exemption. I Personally think every every cultivator should pay it It may be decided that it's too much tax to pay and again We don't want to have the tax to I because we want to try to Get people to buy the as I said before the good the good stuff versus the illicit crap That's what you're going to do right take it might be very patient. Thank you Madam chair, I appreciate the work that's gone into us. This is not our domain. It's not our domain to take on human services transportation ways and means and all the time we're putting into this is not our domain and At some point I'm going to call the question and say this is I'm going to vote not to continue putting time into taxes in this committee discussion on that concept I Know that you talked about that on Friday after When I wasn't here last week, so Right. I can explain what we talked about on Friday afternoon is I mean we talked about Dispensaries obtaining a temporary license and still remaining under the Department of Public Safety you know Approximately a year which would allow them under that temporary license to Dults who are not medical marijuana patients and then they would And they would have to pay a seventy five thousand dollar Licensing fee to do that which would go to the cannabis control board to help fund that and that's basically Concepts and then after the temporary license thing and they would move over as S-54 Currently is drafted to the cannabis control board. Yeah, so they'd be a transfer some of the questions I know some of the Dispensaries are raised is you know, okay, they're gonna you know pay this licensing fee They're gonna have to ramp up production. There are capital investments. They have to make but there's no guarantee of a permanent license And that's still, you know, how we prioritize their licensing under the cannabis control board is still Something that hasn't been fully Thought out, okay Any other considerations on dispensaries first The other DPS may not know what the hell Feel like it makes sense to have something ready to go and Would appear that they would be the best position so I would I would agree but it's the way to open the gates They should just add, you know, Michelle took us through the language and I'm standing on this house bill which Kind of plated doing this early sales. And so that's what we worked. We worked through that language. Great That's why you only got to page 10 All right So we have we have the opportunity to hear from DPS this morning on their Perspective on this so why don't we take a few minutes to do that now? Voila I The other Maxwell was smart Okay, so you've heard the construct Dialogue so for the record I'm Christopher Herrick the deputy commissioner of the Department of Public Safety I have heard the construct and the Department of Public Safety is very concerned and opposed to I Want to be clear it's not that we're opposed to dispensaries being able to enter the retail market It's that that portion of it would be under the Department of Public Safety And it's because the commissioner and I sign off on the permits now And are not interested in violating federal law going forward and I'm going to read from a memo sent to this committee from representative Tom Stevens with respect to DLC in the long term and doing the governance of this Facts and regulations and we understand that as long as the product is illegal on a federal level and Distribution remains a felony that we would be putting room on is at risk of conspiracy to distribute from the commissioner on down to the truck driver and That would apply to the commissioner and deputy commissioner of public safety as well as anybody else And so we're very very concerned about That's our biggest concern So help me out whether it's you signing off on the license or this new cannabis board signing off on the license in both cases your state officially We are the Department of Public Safety We would be enforcing Distributing any trafficking violation, but wouldn't you have some responsibility In any case don't you have some responsibility for medical dispensaries that are So I'm a federal law currently is a it's highly regulated and I'm sure that the folks from the dispensaries would tell you that as well um They one of the things that they follow Is a a strict regiment of regulation We you know, we have registration for patients. We have inspections of the sites We do fingerprint background checks on every employee and I know you discussed not doing that for folks Oh, I'm you know You're absolutely right. Um, but it took a while to develop the regulations For the medical marijuana program, which we enforce currently and so this temporary Fast track that would be put in place before the cannabis board exists I'm not the rulemaking you're you're going rulemaking till march I heard last night because you understand the amount of time it takes to get rules through So we would be very concerned about being put in the position of signing off on these without strong regulation, which clearly won't come to effect until well after march rob Very clear the department public safety's p.s like some others We did discuss about the background checks And there was some robust discussion around whether it be just the license holder or everybody that works in that capacity Yep We believe that um, anybody working in this we're concerned about diversion we're and I will say the finger fingerprint background supportive background check works with the medical marijuana program there's very little shrinkage or diversion if you will and in part because of that I think going forward it makes sense. We want to make sure that The big concern is that we're going to be putting that Making it more accessible to the people who shouldn't have it Younger children whatsoever Whatever and so that's concerning to us as an apartment Do you um Do you have any latitude as in, you know, somebody has a background check done and there is something there You know pick something a dwi one or two or whatever Do you have some latitude as to whether or not that They as its pass I would recommend And that going forward especially in the retail and this may be where your leeway would be in the room Is deciding what would be a prohibitor? That's that's where I think that's where the question really is Is okay, so somebody has a petty larson Can be do we care? I think that needs to be Fleshed out and role-making especially in terms of retail We're talking a huge potentially huge volumes versus a medical marijuana which is small and well controlled The dispensaries do a good job They can they track we they know where Everything is and so and I think it was a good point somebody made yesterday with respect to the delay Um, if somebody if three people end up leaving We didn't work with the dispensaries last session and wow for temporary issuance of They can work temporarily until the back on track comes back Yes, sir Maybe it's more for the committee, but it could be For the deputy commissioner. Is there a path forward where from your perspective that the The dispensaries start selling and they immediately become for that part of their business part of the new cannabis board, which will be My So The issue that I Would point out is Cannabis board was up and running And they were issuing the permits That would be one aspect that public safety was concerned about But in the general sense I'm not sure that you have established the rules and regulations that would oversee the program That that would be in place by october. I think that's the timeframe that I saw in 196 and so This oversight board What standard would they be enforcing too? And without that in place I'm not sure You can enforce watch Didn't answer your question. Well, I mean I we could add a provision on emergency rule for that Um x but I got to have that in place Just whatever things just We had a question Well, I appreciate the opportunity Thank you Michelle if you can join us That would be helpful I had asked john I think probably before you walked in to sort of set the stage since this was a conversation that evolved Last week when I wasn't here in the afternoon So if there's anything else that you can do for context to Help move this along and uh, and if you have any recommendations on sure So for the record michelle child's office of legislative council and So yes, I think the the concept is is taken from h196 The idea that you would take the existing dispensaries that are currently regulated under dps And you would allow them the opportunity to Pay a substantial fee for a temporary license to do adult sales and that during that Period where they would be doing early adult sales They would continue to be regulated by the department of public saving not the board They would continue to operate the medical program that they that they do now and they would also Do the early sales and that they would essentially be following the current rules as they apply For the medical program with certain exceptions So there are a few that are in the language for h196 saying Things like they're exempted from the the current plant counts because as we talked about last night Remember, it's two and seven times the number of patients there is that for purposes of adult sales those plants Apply there's a lot of other things that would be that you'd want to tweak one of the other things We talked about last week was they would need to be able to have the ability to have a second growth Growth facility so right now and statute there They're only allowed to have Like the dispensary is allowed to have two points of service where they see clients And they're allowed to have a separate facility if they want where they can cultivate So you'd want to make sure that they had a separate, you know location for being able to cultivate So there's there's little things that you would do and say generally they continue to operate under the medical programs rules with regard to tracking and And security that you know, it's the same thing with regard to background checks for all the the employees They'd still have to have their cards all of those kinds of things would operate So they'd operate under the current regulatory system, but just there would be adjustments Under that to allow for the for the temporary early sales Yeah, so who makes those adjustments You guys would specify in the language and say they follow You know the there are for the purposes of the temporary license They are exempted from these provisions and you go down and say plant counts, you know, then they may have an additional facility They may do adult sales out of A different location. You know something that you guys were talking about was well, would you restrict them to The the locations where they currently serve patients or maybe maybe those communities are okay with the medical But they're not okay with the retail So you would give them the ability to have a separate location, but I think you guys were talking about you only wanted one Retail location per light per dispensary So you would you would specify that long list and I as I've been listening to folks through the discussions I've been keeping a list of things where you would make the adjustments to make it work So for lack of a how far down that would have a hole do we go? I mean that sounds like a lot of rulemaking to me for instance I think we had a discussion you wouldn't you wouldn't do rulemaking because there's not time What I'm saying is you would they would operate under the current rules that they operate under now As a medical dispensary as a medical dispensary and you would in session law and the bill say for purposes of that temporary permit You are exempted from these statutory provisions and these things in the rules For purpose of those sales and so you would so all the other things around background checks for an employees and security and all those other things that That they that they regulate now They would still operate under for Sort of but You know you're talking about another whole Business model sort of speaking say something for instance like I think we'll get talking about the transportation of product If I remember correctly If the dispensary is having some product moved into them that there's a formula that they go through as far as having a number of patients And what they get on hand, right? How would that work and what would look like For the commercial side if I'm a medical dispensary and I've got to have an additional product moved in What basis would I use to use for that? Like I had mentioned they would have an exemption from the plant counts You could decide to put a cap on the amount that they could cultivate for the adult use market But it's a little hard to know. I think right now, you know, I think we would are Imagining that if you only had five retail sources, they're probably going to be places They're going to have continuous lines seven days a week and the issue is You know, how much do you want to allow them to grow during that one year period? Do you want to put a cap on how much they can grow? Or do you just want it to be based on what they have the Ability to raise revenue and be able to do a build out and be able to grow and sell Because it's only going to be five In terms of transportation and things like that There's you know, there's no reason why that can't all still work under the existing regulatory system Because you're not because they're vertically integrated and that wouldn't change at all You know the only you know the benefit to having the dispensaries Be able to go first and do early sales is because they're already really well regulated And they already have a system for doing everything and so the question is is can you make little tweaks to it? And like what other states have done whereas they've said they're already up and running Let's adjust it a little bit. Let them have the first go while we're developing everything else We can learn from that and then continue to move forward and then what would happen is that They would if they want to continue selling You know past that that temporary permit, you know, they would be applying just like everybody else And once the rules are adopted by the board for the new system If they wanted to have to be able to do all five things They would apply for one of each of the new licenses And then that would be something that would pick up and they would operate under after the temporary license expires Something I just wanted to mention on With the with House of Generals memo to you is and they're concerned around the control substances act Is that I just want to be clear about the distinction here is what they were talking about was in response to DLL came into House of General and was advocating a control model Like they do for liquor So the idea that the state would Actually warehouse and distribute campus And my recommendation to House General is I I advise them against that because of the control substances act and and and the DLL I think deputy commissioner, you know said You know, he respectfully disagreed with my assessment But my my advice to House General was that I I saw a distinction I think there's a distinction between being the regulator Of the market and actually possessing the state possessing the cannabis and distributing the cannabis and to me I think that there is a Distinction there and that If you became if the state was actually in possession and having employees, you know Truck around cannabis and distribute cannabis that that Takes us from probably a low on the totem pole in terms of if we were a t and r state in terms of Do you know federal doj's? enforcement Priorities and you put us if we're actually the ones being the distributors of cannabis I think you put us up there at the top But DLL disagreed with me on that and so that's why general was saying was bringing up the issue around Concern around commonality or exposing state employees to potentially very Stiff penalties at the federal level Right now, you know, as you know, we've been operating a medical cannabis registry since 2004 So we've had that for a long time. There's I think what 33 states that have medical registries there has been Something called a warbacker Rider on the omnibus spending bill in congress for the last several years that has basically Prevented doj from using any of its of its money to enforce To do any kind of enforcement actions against the state to That would interfere with their medical cannabis programs. And so congress is basically saying, you know, you can't take any enforcement that doesn't mean That, you know DOJ couldn't come down on any of the states right now Who have legal, you know tnr regulated markets. That's always a possibility. You know, we haven't Really really seen that but I think there is a distinction between being a regulator and actually kind of participating in the market And what can we learn from the other states as we Have been doing this research other states have gone with their dispensaries first. Yes And under what regulatory regime did the dispensaries Expand to adult sales. I think it's varied. I need to take a look of a little more at that Or maybe I can see if I can get a witness who's got more of a broader scope of What's gone on in the other jurisdictions with that but um, but that is The majority of other jurisdictions have had the the medical programs Again go go first because they're up and running and because they're regulated under current and then what they'll do is still tend to shift over Well, I think that The memo we received from john holler at dr goes through California, massachusetts, orga in colorado, washington, nabata. Oh and the enacting legislation explains how They got priority. I haven't read all those bills Of course you have Well, it was easy you could click on the link. I know All right there for you. Thank you john holler. Yeah, so there's definitely they've all had some type of pride or You know, um, the issue is more like How how they've done the roll out before the whole new system that is is up and running Yeah, I I guess I keep hearing us talk about what might be accepted and so forth I think we need to talk about is what is the difference really? You know, you talk about distribution You're talking about the the person purchaser Yeah, how many things are really different that we have to deal with when we look at what needs to be changed In the current format versus going in going down every one of the things that's there currently What is the really that we have to deal with and I think it's really supply It's the person that's going to purchase it and what site you want to sell it at by the sound right? And I started the list and I'm sorry. I didn't I was uh down in human traffic Right came up here, so I didn't have time to go for an awesome new stuff, but um, you've had a lovely morning Oh So So but I have you know been keeping kind of a running list of things So like some of the things that were in 196 are like, you know for purposes of adult cells You can only sell x amount so you determine that right which would be separate apart from what Dispensaries can do for patients. They can sell up to two ounces to a patient And so you would just make the distinctions there and I I I agree with you is I think You know It's possible to quantify a list there of of what you would do and say for purpose of adult sales Here's how it's different other than that in terms of the regulatory structure A lot of it is going to be able to be just the same Yeah, I'm just trying to think of a quicker way to get through that versus doing every single Item on the list just if we had a list like you're talking about working at Then we could look at those make a judgment call and and move on to the next right the questions So I feel like we're zeroing in on the basic structure that we That we want to see in so you would like to see a proposal for early sales I believe that is the will or committee. Okay And then I'll include as part of that the list of what I would what I would think would be Natural kind of exemptions and I would encourage Dispensaries and and pps to Send me any suggestions for what you think would be tweaks that would need to be addressed With regard to to the applicable statutory provisions and rules That were adopted for some of the chapter 86 So that that could No limit on the secondary growing facility We can we can certainly talk about that I mean, I would think and I don't know but I think you know, that's one of those Those things that you know, or even people who work really, you know Like the board is going to have to try to figure out how many tiers based on canopy size How much do we want people to grow and that's such a Everybody it's kind of a shot You know, everybody's just trying for a target to figure out what's the right amount from a supply You know in demand side you heard from a lot of businesses, you know Lots of times jurisdictions start out and there's a lack of supply and then there's an oversupply and they're always trying to go back and forth They think with regard if you only have five selling early You know, they're going to probably gear up as best they can to meet demand They're not going to they're going to be careful about Over growing because they're not going to be one of left with stuff that they can't sell I don't know necessarily that you have to Come up with some type of cap That when you've only got four let me buy places that might possibly be doing it But that's just my sense of it About You don't want to or you don't want to start Now Yeah, I think we have to keep coming back to the fact that this is a temporary license And then the rulemaking will be made and stuff. So we don't need to overthink Some of the things that we know that's going to have to be made in rulemaking, you know caps and spires You just I think the suspension, you know, one of my business is I only have a lot more room to grow and uh, I think they're going to ramp up and Like any business I want a customer So one of the things that y'all had talked about was trying to figure out whether or not uh any Any anybody in the new system might be able to participate in the early sales and It's tricky because again, you know, we we know how long it takes to get the rules up and everything and the reason why it would work For dispensaries is because we're already regulated, right? And so once I build out the timeline based on what you guys decided last night and look at it and how the permits would run and when you'd have see the first non dispensary early sales and stuff It's possible. Uh, I won't make any promises here But I will keep in mind that that's something that people have an interest in is looking at Under the Board when they start to issue licenses for small cultivators Because they're the first ones out of the gate, right? So the way that you do the rolling applications is whether or not you could if you want me to see whether or not once they've got product whether you would let them start selling to Dispensaries that are doing early sales prior to The newly licensed retail stores up and running does that make sense? So they wouldn't have so that if there's a lifetime, right? So they wouldn't have a ton of time, right? But they might be able to get a few extra more months in there or whatever depending on how the It all worked out But I'd have to look at that and and that's really I I feel like the best I can do in terms of trying to figure out how to bring in small cultivators because I You know you heard from O'Grady I just think it's I just don't think you should go down the route of trying to combine the health program with the with the cannabis cultivator I think you have to regulate them You know you're going to run into all sorts of problems if you don't have proper regulation even for small cultivators you want to make sure that You know that the product is safe You want to make sure there's appropriate security measures and you want to have some traceability Those are those are key things that I think you jeopardize the the legitimacy of any Regulated program if you if you don't if you don't regulate them properly And so I think you would just have to have bring them in Have them be first out of the gate and then they and then see if you can have them You know you don't require the dispensaries, you know, but you'd say that they can then be You know because maybe the dispensaries can't keep up with the demand frankly, right? And so small cultivators that are starting to grow under the new system could sell to dispensaries until the new retailers are up and licensed Well, let's see how that fits in the new timeline and you know Take a better look at that on tuesday and you may see a fresh A fresh draft There any other issues that you need our feedback or decision points on? Jim has decided that he's going to step back from his request on On a language change, uh, we have already talked about a prevention fund and dedicating Fun so that we can tweak that some what are you guys going to do that because I I had spoken with kady mclean and then also Nolan Lama at jfo is the is the physical person on this and so what I would suggest I told them kind of what you were interested that we took a look at the language that came out of health and welfare because And I think that that language in 146 that it originated is too narrow for what you're talking about because it's only Like prescription drugs and opiates and and things and you guys are talking about more of like a broader approach to funds Going for prevention of substance misuse And so I just let them know that and that that I that you have the concept of you'd like to do some dedicated funds But you're not really sure where to put them and how that you know the scope of it And so I would suggest that maybe you have the two of them in And um and that could be a discussion that you have With them to kind of focus on what you would do and then they can just let me know and I can You know work in the language and then drop it in Kelly can you send an email to kady and Nolan and See if they can join us before noon On the off chance Crammed in committee It'll be a fun opportunity because I used to spend a lot of time with those two in my health care days But I haven't seen that much this year So also just I was wondering about what you're thinking in terms of pacing for next week because I I can see that You know like tuesday, you're going to want me to come back with the back and go through all day House human services book to me at one, you know at like one on tuesday to start walking them through their so I just want to you know I want to certainly prioritize you guys get in your work done But it's also I know you need other committees to be able to get back to you on that So if you can just let me know how you want me to handle some of that and And juggle it and I think it would be really helpful if you could spend that time with the human services committee because that's a Okay pretty critical You know, we need a stamp of approval on the dispensary Changes, right and they may want to make some tweaks and suggestions So let's work with you in the morning Starting to go through the draft as soon as we get done with flooring caucuses If we get done with flooring caucuses Um Oh tobacco, okay, so floor might be long Not a problem then just just a few questions Um Okay, well that's going to be a Tough time schedule for us to to get any time to walk through the bill we do We will have a memo back from commerce So we can spend some time going through that maybe ask The chair to come up and spend some time with us if we have questions I doubt if we will hear from judiciary before midday on tuesday. Do you Yeah, I don't I don't think so that one's going to be a little more challenging Question No, I last night we Do I mentioned co-ops and I wanted to throw out at a table where I've been thinking about in terms of transition from dispensary to private commercial In that maybe we could consider under the same regulations and the whole scheme Allowing the existing dispensaries to contract with two or three small growers under their license umbrella as a means to reach the transition from Not for discussion necessarily just to be out on the table ahead who's going elsewhere in black You're looking at me I'm more looking at you So the the co-op model I will admit I don't I'm I don't know much about that So in terms of how that's I don't know the co-op model is what I was necessarily considered. It's more like a sub I'm sorry sub employment sort of thing Contracting independent contractor. Well, I'm telling under the under the Umbrella of their existing license. I think what I Heard Michelle say before and she'll correct me if I didn't get this correctly But I think what Michelle was suggesting before is that She's going to look at the timeline for how quickly that sort of an arrangement could be made But that it is problematic to Contemplate those small cultivators coming into The supply chain Before the board has had a chance to to do their their roles I agree and that's sort of why I say come under the umbrella of the existing structure of The license that the five people hold are less Concerned about it now that we have probably the option of an uncontrolled second facility For an unlimited second facility, but that could almost change And I also saw it as a means to drag Small producers from the second part of there to be a lot of benefit to try to figure out a way to get The small growers in but I'm not sure that we have I'm not sure we've found the magic recipe on that that or timeline Jim did you I know there's some pushback from some of my colleagues, but I still would like to before we Kick the bill out like to consider Going up a little bit on the excise tax Um, and then let ways in me to do what they do. Um, we're already dealing with the appropriations issue on So I am appropriationally have a different viewpoint. So I just I have to say my piece so you you're you're bumping the excise as opposed to the Hybrid Yeah, I just I unless someone can show me some what other states are doing on that. I think that does complicate things a little bit I am concerned About if there's no skin in the game no benefit for a locality. They might take a dim view But until we actually see that, you know, maybe something we have to come back and visit later on but I am talking about the general excise tax to 16 But maybe bumping at 18 I want to make sure we have enough money for the education and prevention efforts that we've talked about And I also want to make sure we have enough money for enforcement and also the regulatory structure Um, and I I know that's going to be under market school that to go through the other committees, but I want to start Just a tad higher than where we are right now. That's just me Well, that's an easy change. It's not that doesn't change the general architecture of the bill. So we can certainly mull that over as we're Searching for Easter eggs Other discussion Marcia I was wondering if anyone has had a chance to look at the rights of The individual retail establishments to advertise Do we know what Is in law or if anything that allows them Currently dispensaries are prohibited from right from advertising, but I think they let you know So it would be suspect because Because I think that there's Have some first amendment rights There with regard to well, that's what I was wondering. I said, so I think so I check the street up and the suspect so You know, I think it's more around The types of regular regulatory kind of offers on it like you guys have discussed and the prior approved Like what john and compoters will include in the next draft, which is having a process for prior approval of advertising Having the provisions that are in there now around can be false deceptive, you know focused on You know, particularly appealing to the under 21 set Um, one of the things you talked about was whether or not You should restrict it to point of sale only. Yes, I think Um, I think you get pretty far along towards that by having the language that you have in there now Which is that they can't do any like flyers or outdoor advertising or anything unless they can prove that uh, no more than 30 percent of people who may be viewing it are um Are under 21, so I think you yeah, that's gonna really kind of prohibit most outdoor advertising things like that So um, and then you also have provisions in there for the board to be adopting rules on advertising marketing and signage as well So I think you'll see an evolution of that, you know, you can kind of see what some other states have um I think I was one of the things in looking at Some states and some language that john has sent me and other medical programs I think I would add it in some language around that you can't be offering prizes or awards, you know Can you tell me How we would measure whether or not 30 of the audience is expected to be under 21 Um, I cannot I think you would have to it would you have to um They would be probably rulemaking looking at what criteria they would use to ascertain That and then it would be up to the probably Up to the applicant to show that Somehow whatever their proposal where they're going to be showing it and you're like I talked about like if it you know if you're doing an advertisement in a In a bar or something like that where you have to be carded to even go into the facility then you know It would be fine, but if you're you know, if you're doing outdoor advertising, it's probably unlikely you can need that environment At least california colorado user percentage Like we do as far as viewer viewership I don't know how that works fact that at least I'll say I didn't make it up. I got it from somewhere So somebody's doing it. He's proposed it or somebody's figured it out besides All right, so I have word that Katie with Lynn will be able to come momentarily I'm hoping that we can still track down Nolan So that we can give them whatever information they need to To help draft something for us to look at any other Points that you need some feedback from us on Um, so I think I just got a lot to do Great, so, um, if it's okay with you, I'm gonna actually You're gonna start your homework. I am. Yeah, good idea, right? Yes here and then we can just coordinate and And I don't think you actually need to know much about all of this other than the fact that what they're you know What I had sent you last night, which is that they're considering Whether or not they want to right now the revenue that would be coming from the the tax of the 16% excise right retail tax Cannabis cannabis products that would probably be part seeing in like f y 22 Is that um, whether or not right now it's all going to the general fund and whether or not they want to dedicate a certain percentage Or a certain amount of money from that revenue going into some type of existing fund or a new special fund That would be dedicated not to just like what the one was originally in 148 But something a broader around substance about misuse prevention Joe If you want to talk about it now if you want to talk about it Please say but um, I don't know if we reach out the board Make-up issue. Um, I had suggested in trying to find a middle ground with the Administration, maybe we have three regulatory appointees. Uh, there was some pushback on that The representative from putney throughout two I just didn't know if that was something we needed to conclude and give to michelle or if that's something you want to talk about next week I think we can talk about that next week. It's not a huge Threatening lift. Okay. Um, that's what we can talk about that and and uh, thank you All right, thank you, michelle sure and I'll just be down here. So if you guys need me you're a question So hey, thanks for coming again Try to find an excuse to see everybody in legislative council at least once during the year So just to just to get you up to speed kind of where we are we um Had the commissioner fouled in And in the context of that conversation we understand that what the commissioner envisions is kind of this Iceland model of you know, uh a broad set of prevention investments Uh, and So what we are concerned with is Is sending a clear statement in this bill even though we know that revenue is not going to be coming for A couple of years, but sending a clear statement in this bill That we would like to see a portion of the revenue from Cannabis retail sales be dedicated to those prevention activities and he's talking about setting up You know robust regional Coalitions that that um can fund a different type of prevention effort in different parts of the state and so What we needed to talk to you about is where Would that money logically go are we going to need to set up a special fund? Is there already a fund that exists and If you can give us some guidance on that Sure, uh, Katie has been office of legislative council for the record and I know that Nolan was also Notified that you're taking testimony on that. So he's kind of my counterpart on the money piece here So what I can tell you is that the senate has been looking at s 146 and the version that left Senate health and welfare did Have intent language and it specifically around the use of taxes to fund To fund prevention efforts and that specific language was It is the intent of the general Assembly to explore revenue generated by the taxation of substances such as Cannabis tobacco tobacco substitutes and alcohol for the purpose of funding substance misuse prevention initiatives throughout the state So that was the language as past and health and welfare That did not make it out of senate approach. So it's not in the bill that came over from the senate Similarly, there was a 400,000 that was dedicated for prevention From the evidence-based education and advertising fund and that's specifically limited to the prevention of prescription Drug misuse efforts and that also is taken out of the bill and senate appropriations. So the bill that you receive from the senate Doesn't have any money or any intent language attached to it in terms of A special fund that was something that was considered downstairs in senate health and welfare I did draft versions creating a special fund Ultimately that committee decided not to move forward with a special fund and the bill that you've received doesn't have Any type of dedicated funding stream for prevention Well, happy news. So you've drafted something before I have And and it Fairly closely tracks to what we're talking about in concept here Yeah, um, so in terms of setting up a special fund, I would probably organize it by Putting it in title 18 in a chapter that we're creating that's specifically related to prevention It's not just focused on prevention of cannabis use, but the misuse of all substances So I could I could similarly set up that and you Need to dedicate a certain amount of funds or percentage of funds from a certain funding stream That would go into that fund. So I'm Trying to think um, there are conversations, you know, the first You know x amount or the x percentage that's generated from a specific Tax would go into the fund something like that. Um, so you would set the parameters and I just add it as a section Into that that new Chapter in terms of drafting now that I'm kind of thinking this through as I'm talking to you But because the chapter in s 146 Hasn't passed and won't pass by the time this bill is moving um, we can't Cross-reference a bill that hasn't passed yet. So it might make more sense To recommend your language that um to be added next door in s 146. So it's all part of um one chapter um I don't know how that works from your end. So I think I talked about that more offline how we want to um Do that, but we just should be aware that when there are two bills moving at the same time Um, it's very tricky to cross-reference one bill that hasn't passed yet in another bill, right? um, and because that bill didn't seem to be moving in The timeline that matches what we're doing. That's why we had contemplated creating the fund in this bill um and Allowing them to do some of the more detailed work around what What how the funds are distributed and where the you know Where the priorities are and how you how you create a prevention program and Maybe semantics, but we seem to all of a sudden be talking about This in a context only of prevention and education is something that I think is a completely different word and concept And I'd like to make sure that the two are melded when we talk about money Reference bill across They finished the work on it, but I know they haven't been I don't want to come to identifying a fund Any other questions for Katie? So we need you and Nolan to help with Michelle over the weekend and try to Figure out how to create us a fund even okay even in the absence of s146 Okay, sure. Um And to the extent you can provide some specific parameters around what you're looking for Um, that would be helpful in setting it up who would manage the fund The amount that's dedicated to the funding stream That type of information. Yep, but yes, we can do that Excellent. Okay. Thank you. You're welcome committee discussion Well after all that hard work last night it looks like we're cruising into to an earlier day Thumbs up anybody else that we need to hear from I don't think so That was a good discussion. I'm sitting at the fun We've already talked about the amount of money Yes So are we talking a floor a percentage and a ceiling? That's how we're going to get that that refined with it My preference would be Make sure I'm sending a clear message that there is some funding and it's going to be a kind of the excise tax but it starts with Money not wait in the end of the year and see if we tell anything So I That's where I'm coming from. I want to clear message whether it's a I just think we ought to make it clear that we do something I like the Percentage that you met online yesterday 30 percent spine with me Under cap personally I'm afraid of Setting up an incentive for us to Raise but I am You know raise money Hope to be sell more because we're going to get more but I also understand the dynamic that if we're selling more Maybe we need more I am I will leave that for others. That's that's all Not a point of advocacy just a kind of a question Is there anybody that has done this that has Set the ceiling for attacks and then allowed the board to adjust it based on market demand or Anything about that What they know I don't think that works That's why I'm asking but you can always come back to the legislature just because we set a percentage in a cap In this bill doesn't mean that a couple years or even next year We can't change that. I don't think you can have an agency Right change that That needs to be a Excellent jump right in the seat Nolan Oh, you were hoping you'd get off scot-free without this. Okay, so we've talked to katie She says you are you are the special funds guru So welcome to our committee. It's nice to see you again. I haven't seen you across the table Since we were down the hall of health care together. I have never tested fine for this committee Never it's our loss You will leave impressed Real worried we haven't chewed up anybody and spit them out yet today. That's because you haven't met me yet I'm tasty Let's try it. So as long as you tell it as long as you don't tell us that you can't create a special fund We can dedicate canvas revenues too for the purposes of Prevention programs You won't be chewed up. That's good. Okay. Well for the record and I want to join fiscal office You could create any fund you want Just keep in mind that there's been a Cognizant push or to sort of Reduce the number of special funds that there are because we have A lot of special funds and so I mean part of the whole reason by You probably saw a member of budget adjustment There's this thing called the state health resources fund, which is probably our biggest special fund. That's where all the tobacco money Claims assessment etc. Goes into this fund. It's probably two of the player of the employer assessment provider taxes it probably had $350 million in it. That was a fund that we used to draw a Medicaid match along with general fund And there was that push to move that into the general fund to make the general fund look bigger etc. So you probably remember this argument so um But then you know all the different agencies use the special funds DFR has Three special funds just for insurance. I learned this the other day. So I think the answer is You could create any funds you want That just be mindful that We are very mindful that we could We could make it look really good and beautiful and then send it down the hall and it could Come back looking very different. What what we are trying to do here Though is to send a very clear message that in the context of creating um an adult use cannabis Market that we want a certain portion of those revenues to go In a dedicated place to fund prevention activities so We would like to create a fund that That has that purpose Our hope was that the committee across the hall would be moving s146, which does Does some of the work to set up that infrastructure? Since they may not get to it until next year, which is fine We would like to at least now Create the fund and let them do the detail work. Is that fair? Yes, right. Um Why would we not We'd be able to use that existing fund and that Well one I guess on the other end a lot of that money was earmarked and used for prevention and education And backing up into it. Um, it was kind of a special source So that that fund actually was more Medicaid specific health department has We've got the evidence based in education I don't know what it's called, but basically it's the It's a tax on Pharmacy, what is it the claims? I remember. Anyway, it's claims tax on pharmaceuticals What it is half a percent people are some percent a little yeah, and that raises a certain amount of money But so at one point we thought about in my head. I was like, oh, we could put it in that fund But then I realized we shouldn't because That money is specifically for Like things that are related to pharmacy prevention. So like opioid or addiction so or I'm trying to remember specifically what that fund does. So it's like maybe I wouldn't want to commingle those to because We start commingling them then the farmers The manufacturer seat that's what it's sorry the manufacturer fee The manufacturers might balk because oh, then we'd be using the money for something that's not related to specific to pharmaceuticals. So You could maybe find another fund. We get talked to the health department. See if they've got what was the fund that's tobacco settlement money went into Backless settlement money went That was one I was talking about. So It was I don't know where that went. I can find out that that was one I was alluding to that if you could put the money in that fund It seems like that you've got most of the infrastructure Already in place I could find out where that goes that might just go into the health department. I'm not sure but I'll find out Uh, that's a good question. It's a very good question. Do you remember I should know this but I didn't do the bill how much was the Manufacturer fee, how much was the with the cannabis? Oh 16 percent is what we're looking at right now. Is there not something on that? Yes And my friend John here has the fiscal note Did I didn't work on it? So that's like wasn't the mid-range In year one the excise revenue with the global estimates High estimate is 7.4. Okay. Um, and how much are you dedicating to convention versus So there's going to need to be some refinement of this. I think because when we When we go through the bill and look at all the pieces put together We're going to recognize that some portion of the first year revenues need to go to backfill the Expense of standing up the board the board's going to exist for two years before we have revenue So some of that's going to have to be backfilled there but then the suggestion was that we put a minimum of One point What would you say Jim minimum of 1.4? I threw out 1.5. Okay. Minimum of 1.5 And up to six million dollars so What I say that is that We have lots of reasonable special funds that have a lot less than that So if you were creating a special fund that's over a million dollars, it wouldn't be Inconceivable um You could also create the special fund and then let the money committees decide like is that more appropriate or Yeah, or or even the administration to help the partner might have some suggestions about problems with a similar But you can just create Among tv's which is You could create a special fund with the intent Or have some kind of intent about special funding They would understand what is you're trying to do Yeah, and I don't think we need to get it perfect because we know that it's going to be changed in the money So what we want to do is Is make a clear statement that we're dedicating these sources So you could do a tent language where you just deal it tell you what to do Let's create a fund Okay, I gotta give it a cool name though With an acronym. Oh, yeah, okay. That's your homework this weekend people Email it to no one until we create the fund over the weekend Jim's writing down his homework assignment I think he said something the best one I just don't like saying You know, since I got the camera on me, I don't want to go back to my office. You told me to create another special fund You're fired I think we told you we wanted to create another special fund What we do that's what I heard Boy, I missed testifying in front of the new committees. This is fun What else you want to know how else can I help you anything else you want to ask The healthcare and human services jfo All right, happy friday. Happy friday. Thank you. Thank you. Thank you, Nolan Next time I'll knock first No, I can see your profile. I knew that was you. Yeah I can see Thank you, Nolan Uh, so committee, let's uh, let's break now. Um drive safely tomorrow's going to be a rainy day So maybe remember your umbrella Remember turn around don't drown before we go. Yeah I think I should make no Oh, and what was that?


This study examined a method to classify seven tropical rainforest tree species from full range 400 to 2500 nanometers, hyperspectral data collected at leaf, bark, and crown levels. The researchers developed metrics based on narrow band indices, derivative and absorption based techniques, and spectral mixture analysis. These metrics were then used to train a random forest classifier which achieved high accuracy rates when applied to both tissue and crown spectra. The study found that variation in tissue metrics was best explained by an axis of red absorption related to photosynthesis and another axis distinguishing bark water and other chemical absorptions. Additionally, the study noted that tree structure and phenology at the time of imaging affected the ability to distinguish between species. This article was authored by Dar A. Roberts and Matthew L. Clark.


From Las Vegas, it's theCUBE. Covering VMworld 2018. Brought to you by VMware and its ecosystem partners. Welcome back to theCUBE here in Las Vegas. I'm Stu Miniman joined by my co-host John Troyer and happy to welcome back to theCUBE, returning guest John Bolia, who's a general manager with IBM Cloud. Great to see you. Thanks, thanks for having me. All right, so, multi-cloud is a big discussion of the show here, but cloud discussions aren't new. I think back to the first VMworld that we did with theCUBE was 2010. We actually brought a lot of our San Francisco friends that were doing cloud and people were like, why are you talking about cloud? And we're like, well, because that's the way it's going. Two years ago, VMware had kind of, you know, extracted themselves from vCloud Air and re-put things together for what is now called VMC. And the big partner up on stage was, of course, another IBM. So, help connect the dots from us. Since two years ago, I know we've seen a lot of change from VMware. We've been tracking a lot of change from IBM. So, help try to bring us up to speed. Yeah, well, I mean, I think at the end of the day, it's a really natural partnership. I mean, we've partnered for a long time with VMware. We have our mutual clients in the enterprise. They're pretty much, you know, overlapping heavily. And we run a lot of people's data centers for them. So, VMware was almost a big presence for us. It was kind of natural to move to the cloud. So, what we've seen since then is really a set of requirements from enterprises. How do they, you know, get to the cloud? And what are the use cases behind that? So, you know, in early days, we saw backup and DR, kind of big use cases that people used as low-hanging fruit. But now we're seeing more with capacity expansion. And what comes with that is, you know, as they move and move workloads to the IBM cloud, they're wanting to access new features and new capabilities. So, we have American Airlines as a good example of that. They started off looking at, you know, digitizing what they were doing with the kind of modern applications and realized, you know, they really needed to move some of those existing workloads out to the cloud as well. And so they used VMware to do that and then connected to some of the cloud native services. Yeah, I wonder if you can help level set our audience a little bit, because I know a challenge that many of us have is, IBM does a lot of things. So, you know, when I think of cloud and IBM, it's like, well, I interviewed Walmart a couple of years ago doing global ZOS. It's like, well, that's not the same as the stuff that was SoftLayer and Bluemix and I talked to the Kubernetes people at IBM. So, maybe just help the landscape as to where your piece fits into it, into the overall portfolio. Yeah, well, my job at the end of the day is really to move workloads to the cloud. And so they come from sort of two angles. One is what we would call kind of enterprise out. So, VMware fits into that category. They're existing footprints that people are looking to, you know, gain leverage as they move to the cloud. But we also have a fair number of cloud in use cases, the, you know, net new cloud native. We see Kubernetes and containers being a base for a lot of that as people put in CICD and Agile as a kind of way to build out those next generation. So, the world's come together and, you know, I get a lot of questions about, you know, does containers replace VMs or VMs, you know, back and forth, at the end of the day, these things both have a role to play and we look to integrate the two of them together in a lot of these use cases. Yeah, just the thing, if my previous question, you know, connects to the new one, IT is always additive and nothing ever dies. That is correct. That is correct. So, Bob, you talked about taking advantage of services in the cloud. So, I know at the fundamental level, you've got to be kind of the business out and be saying, you know, what do our customers need? How do we need to transform? How can we go faster? Time to value? All that sort of good stuff. Then you get one layer down and okay, okay, now what are the toolboxes I have to work with? My assumption is IBM has a big toolbox, like we said. So, what are some of the services that, you know, are attracting people to IBM cloud and that are really kind of the forefront of innovation? Yeah, well, we see a lot of what I think the VMware team calls the 4.0 technologies, which would be things like AI, things like blockchain, IoT as big examples. And those are kind of the use case drivers. So, people say, I want to do that. And then as you said, you get one level deeper and you're like, ooh, I'm going to have to do that by actually integrating all the stuff I've got. Because most of the interesting data is already there, right? It's not like most of these things are islands. So, that's when that next conversation comes in. So, we have a lot of technologies and the VMware partnership is a great example where we're trying to leverage as much of what you already have, get value out of it as you move to the cloud and then easily connect it to some of these new systems. So, it's a very common use case. It might be interesting to drill in a little more to the VMware, IBM connection and VMware cloud and the VMware tool set there. Yeah, absolutely. So, you know, as Stu said a couple of years ago, we made the announcement with VMware and IBM. And since then, we now have 1,700 mutual customers that have adopted IBM cloud and VMware on IBM cloud.  And so, we were also one of the early adopters of HCX when that came out. And that has really, really streamlined what it takes to get a workload out to a cloud environment from an on-premise data center. And to date, we've done about 100,000 cloud migration. So, you know, we have some pretty good traction. We've been available in our 60 data centers worldwide. So, we can also put a footprint in place that is across, you know, a bunch of geographies, which is also very helpful. And then this week, we actually announced VMware cloud availability. So, we have a DR solution in our cloud based on VMware's offering that gives people the ability to do DR, you know, right from that environment. Yeah, boy, Donnie, you think about migrations are, you know, challenging to do even when, you know, we have a good tool set. One thing that IBM does quite well is has really expertise and practices in the verticals and understand industries.  So, what data are you learning about industries? What are leading? Any, you know, patterns that you can help share with us about the cloud? You know, cloud, fundamentally, it's cross-industry.  We don't see an industry that isn't changed by that. And some of these technologies like AI, blockchain, I mean, these are the things that people are looking at as differentiators, right? They feel like they have to get there in order to be relevant in that next wave. For VMware and IBM specifically, you know, we've seen a lot of interest with FSS. So, you know, we have clients like TD Bank and Westpac. In Westpac's case, they're very aggressive of moving out into, you know, a cloud data center. And as a bank, you know, that was a pretty interesting thing for them to ponder and do and we have them hosted in a couple of data centers in Australia and it's been a great partnership there as well. It just, you know, kind of underscores the value of VMware for these clients and it's a, you know, key part of their franchise and a key part of what they want to look at doing as they move forward into cloud. Yeah, the financial industry is very nuanced because some be like, oh wait, well they have to keep it in their environment. And it's like, well, when you talk to global banks, there's some places where they just don't have the footprint, so certain geographies that you can help. I've done some case studies with them. It's, as you said, it's a complex and nuanced world. So, yeah, how does IBM help? You know, you've got to imagine services, you know, play a large role here too. It is, yeah. There's a lot of consulting, there's a lot of services. You know, fundamentally people trust us from an enterprise perspective to do things in a way that, you know, makes sense for enterprises. In fact, a lot of what we've done over the last two years partnering with VMware is really, you know, trying to figure out what are those things that are key for people to be able to move out into these kind of environments.  If you can't deliver on that day one, then it's not really going to be an implementation that works for most people. So it is nuanced and it is complex. I'm kind of curious about how executives are looking at movement to the cloud these days.  There's only so much even with, you know, superpowers that one can do, right? But on the other hand, even in the Fortune 100, you know, projects don't need to be five years long. So how are executives looking at that? How should people be thinking about time to value? Do you start small and go? Are there, you know, proof points along the way? Yeah, it's a really good question. So in cloud in general, what we've done is developed a methodology we call the garage, which we started off with cloud, but we've actually now expanded out into things like blockchain.  We have a big tool set, as you mentioned, within IBM, but people need to have the skills to be able to use that. And so this is a way for them to apply that. We time box it to your point. It's something that becomes, you know, very quick wins, you know, MVPs, those kinds of things, an agile practice. We use our design thinking as part of sketching that out. And so we tend to get the business and the technical teams together for that. That's typically the most effective. And we come out the other side with, you know, something that actually works. And that's something that they can then take to the business and say, hey, this doesn't have to take, you know, five years. This can be something that takes, you know, a few months. And in general, you know, once people get started on this thing, it's something that sort of takes over as a wave, especially as they gain the skills. All right, yeah. The natural follow on for that is, can you give us the update on how developers fit into this and what IBM's helping in the cloud space? Developers, DevOps. Developers are king, right? As everybody keeps saying, and it is true. You know, never before have the tools been so easily available. And that's really the key is you got to have the latest and greatest, you know, tech out there for people to be able to use and play with and ultimately build applications and services with. So whether that's a microservices based on containers or functions as a service, you know, DevOps, as you mentioned, sort of a key part of that. And then what we see from clients is, you know, at some level, that's the fun part, right? But then comes the reality of that's got to all connect back to all the existing franchise that you have. And so integration, you know, secure connectivity, how do you get data back and forth? And ultimately, you know, how do you leverage as much of what they have, you know, with that kind of new world? So we have both sides of the equation. And again, as part of my role to get workloads onto the cloud, it comes from both directions. Yeah, the follow up to that, you know, at this show, I haven't heard a little bit of discussion if you say, you know, serverless, okay, they've kind of heard of it. You know, if I went around and said, okay, how many people know OpenWisk? It's the open source project that, you know, IBM's heavily involved in. It's like, well, we're not talking a lot about that. Little bit of Kubernetes here and there, but how do you bridge between kind of the virtualization world and the cloud world when you span both?  So, you know, VMs and containers aren't really competitive from that perspective, at least in my mind, and all the existing stuff is in VMs. Let's face it, right? Everything that you have today is probably a, you know, a thing that's in a virtual machine. But as people go forward, it really comes down to the abstraction level, right? Can I get farther and farther away from having to deal with the details of the hardware of the various things underneath and really focus on just the thing I want to do. So, you know, functions I think is the extreme of that, right?  I don't care how you do it, I don't care anything underneath it. All the way back to, you know, bare metal, which we also support in our cloud, which is, you know, the other extreme where I want full control of everything that I do. And we marry those technologies together. So, our container service, which is based on Kubernetes, you know, we have kind of a dial you can twist, which starts at, you know, full-shared multi-tenant all the way to bare metal. And, you know, we have our own Watson team, for example, with their machine learning tools that need bare metal because they need access to the GPUs. And so, as we started, you know, making that available to them internally, we said, you know, this is something that we see enterprises eventually needing as well as they start to do those kinds of workloads. Just expands the number of workloads that you can actually support on the cloud. Yeah. Don, I want to give you the final word is takeaways. We got to geek out on a lot of technologies here. Customers you're talking to, key things that they're coming to IBM and VMware for. Yeah, again, it's that know-how when it comes to enterprise workloads and what it takes to move those. And then the right set of tools once you get there, right? And that starts with some of the fundamentals around things like disaster recovery and backup. But then, you know, immediately starts to move towards the, how do I modernize this application? How do I extend it into blockchain, IoT, Watson AI? And ultimately, you know, I think that partnership gives us the ability to both bring people from where they are and obviously put them in the next generation as well. Okay, and I didn't get to see Tony Hawk. Did you get to check him out? I did. I got a picture with him last night. I sent a photo to my kids who informed me that I was on the West Coast and they were already asleep. So, but you know, it's funny generationally. I know him from, you know, skateboarding times. All my kids know him from the video games. And it's interesting how he's really reinvented himself from that perspective. Yeah, absolutely. Bridging between the physical and the digital world just like we're doing in TechNet. All right, Don, thank you for all the updates here. For John Troyer, I'm Stu Miniman. Getting close to the end of three days wall-to-wall coverage here at VMworld 2018. Thanks for watching theCUBE.