An administrative law judge is poised to decide whether a $1.33 million license-renewal fee is too pricey for medical-marijuana operators doing business in Florida.

Gov. Ron DeSantis' administration in December hiked the fee, which had been $60,000 since the inception of the state's medical-marijuana program six years ago. The increase came after the governor complained that marijuana companies, whose licenses have sold for upward of $50 million until recently, weren't paying enough.

Sanctuary Cannabis, one of 24 medical-marijuana operators in the state, in September filed an administrative challenge arguing that the $1.33 million biennial fee is "wholly without logic or reason" because it does not take into account tens of millions of dollars from patients who pay $75 a year for identification cards to participate in the program.

Lawyers for the Department of Health, however, maintain that the formula reflects decisions by state lawmakers.

Florida law says the department must adopt rules "establishing a procedure for the issuance and biennial renewal of licenses, including initial application and biennial renewal fees sufficient to cover the costs of implementing and administering" the medical-marijuana program.

The disputed rule adopted in December created a formula basing the renewal fee on the number of operators, known as medical marijuana treatment centers, and the cost to regulate the program.

Sanctuary Cannabis and the health department laid out their final arguments in the dispute in documents filed Tuesday at the state Division of Administrative Hearings.

Along with being able to set the renewal fee and charge patients for identification cards, state law allows the health department to levy fines against medical-marijuana operators. Sanctuary attorneys wrote the money is "intermingled" in a trust fund.

The law doesn't require operators to "bear the brunt" of the cost of regulating the industry, lawyers Will Hall and Daniel Russell of the Dean Mead firm argued.

Interpreting the law "as requiring the department to ignore identification card fees and MMTC (medical marijuana treatment center) fines in determining a sufficient license renewal fee amount does not reasonably comport with the totality of the statute," they wrote.

The law "as a whole makes clear that the department should use and consider all of those funds for its administrative purposes, then set MMTC license application and renewal fees at amounts that would make up for any potential revenue shortfall," the Sanctuary lawyers argued in a proposed final order.

But attorneys for the health department said the fee-setting rule carries out an "unambiguous statutory directive."

Sanctuary's challenge "is premised on assumptions and suppositions that have no legal basis," Ed Lombard, an attorney who represents the agency, said in a proposed final order.

"Sanctuary assumes that the Legislature intended for the implementation and administration" of the law "to be a 'net zero' operation for the state, meaning that the revenue and costs associated with the program are equal," Lombard wrote.

"Whether the Legislature intended a 'net zero' program or not, the statute authorizing the renewal fee is silent on that issue and could not be any clearer. The statute simply does not give the department authority to reduce the renewal fees by crediting fines imposed on MMTCs and fees collected for patient/caregiver identification cards," he argued.

Decreasing the renewal fee by taking into account all other sources of revenue "could reduce the renewal fee below zero," which would be contrary to the law, Lombard wrote.

"Thus, under Sanctuary's proffered statutory framework, there would be no basis for the department to impose any renewal fee at all. Sanctuary cannot advocate a statutory interpretation only to abandon it when the interpretation proves too much," he added.

The "plain language" of the law requires health officials "to set application fees at an amount sufficient to cover the costs of implementing and administering" the medical marijuana program, the department's proposed order said.

"This is a legislative policy decision that cannot be disregarded," Lombard wrote.

Sanctuary's petition for an administrative hearing relied heavily on a budget request the department submitted to the Legislature for the 2024-2025 fiscal year, which will begin in July.

The agency collected $14.9 million in application and renewal fees for licenses and nearly $65 million from patients and caregivers during the 2022-2023 fiscal year, which ended in June. More than 854,000 patients are qualified for the program.

The agency, which also gets money from testing labs and fines, collected roughly $84 million that year, anticipates collecting the same amount this year and projects receiving $114 million in 2024-2025, according to the budget request.

The agency also reported having a $16.3 million surplus during the 2022-2023 fiscal year and projected surpluses of nearly $4 million this year and $61 million in 2024-2025.

The fee increase came after DeSantis said medical-marijuana operators need to spend more for the opportunity to do business in Florida.

The state "should charge these people more," DeSantis told reporters in August 2022.

"I mean, these are very valuable licenses," the governor told reporters. "I would charge them an arm and a leg. I mean, everybody wants these licenses."

Many operators in Florida and the rest of the country, however, have struggled with finances because marijuana remains illegal under federal law, which creates banking hurdles and forces companies to pay higher corporate-income taxes.

Administrative Law Judge William Horgan is handling the Sanctuary challenge.

Dara Kam reports for the News Service of Florida.

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