Jimi DevineThe Minority Cannabis Business Association recently announced the city of Los Angeles had fallen short in achieving the goals of its cannabis equity program.
The program, like its equivalents around the state and country, was meant to give the communities hit hardest by the War on Drugs a fighting chance in the modern cannabis industry that was built on the back of a black market where certain areas felt enforcement the hardest.
Back in April, we gave a full rundown of the program specifics with input from the community leaders pushing for reform and got some questions answered by the L.A. Department of Cannabis Regulation. Now a couple months later, the review of the program commissioned by the MCBA has dropped and we’re taking a look at the findings.
The point of the study was to score the policies around the program in L.A. so MCBA can figure out if they’re actually working. In a statement following the release, MCBA said while the programs are meant to increase industry diversity and local reinvestment, the policies “have at times proven to be less than effective when reassessed after implementation. Preliminary studies had outcomes for Sacramento, San Francisco and even the much-lauded Oakland program that didn’t fully meet the intent of those policies.”
Chris Nani, a recent Ohio State University Law graduate who conducted the studies of the other programs, also conducted the review in L.A. Some of the highlights of his findings backed what we’ve heard locally.
First off, Nani gave the program high marks in accessibility due to its expansive eligibility criteria. But local advocate Jazmin Aguilar told us in April that level of access may discourage would-be local entrepreneurs from entering the market since there will be a flood of people entering the market from around the state since any California conviction will get them into the program.
MCBA noted the DCR answered most of their questions, but they “weren’t able to find out what percentage of the applications that qualify based on a conviction were due to an arrest that happened in L.A., or the biggest challenges DCR has faced as regulators in getting the program off the ground. Another concern again highlighted by the report is the predatory business practices we heard DCR chief Cat Packer comment on at Meadowlands.
Marisa Rodriguez from SF, Nicole Elliot, Cat Packer, David Hua (Simon Biswas, courtesy of Meadowlands)
We were able to get in touch with Nani to talk about those concerns and the report as a whole in comparing the L.A. program to others. He started with Packer’s concerns on the kinds of unsavory business practices equity operators are up against. He noted packer was one of the people he interviewed for the study.
“I think one thing we both noticed is that a lot of these business businesses that did want to partner with equity applicants did have good intentions, but you also had a few bad actors,” Nani told L.A. Weekly in a phone interview.
He said he didn’t know the quantified number for it, but there were definitely people coming into partner with social equity applicants to get the permit and licensing perks. They’d wait in line with the idea once got the license they could cut out the social equity applicant.
“I’ve seen that with a couple of people I interviewed,” Nani said, “With one individual, it’s been a little bit, but I think she told me she was going to get paid $100,000 a year. Just had to give her equity away, they would give her the money, it would be passive income. She just had to show up when the regulators came by.”
Obviously, that equity could be worth millions, Nani agreed, and said he asked her why she would give it up. She just needed the money now. She told him $100,000 was more than she could ever use and was way happy with it.
“I think she was OK with it because she knew she could provide for her family right then and there, she didn’t have to wait for anything. So a little bit of necessity, but also a business taking advantage of a dire situation,” Nani said.
Nani next spoke on the topic of access levels possibly deterring locals who would have to deal with the wave of out of towners. “I don’t think that’s a big deal. I don’t think it’s a concern at all. I’m more than happy to have more people get into the industry than less,” Nani said, “it’s not like more people are coming at the exclusion of others.” Nani noted even if a social equity applicant were to come from out of town, they’re still bound by all the aspects of the program directly benefiting L.A. and the further benefits to its labor force.
Nani said what he would like to see more programs doing is implementing delivery licenses as part of the program as was recently seen in Massachusetts. He said the lower bar for entry to delivery as opposed to opening a retail storefront is going to impact a lot more people.
“That’s what I think Los Angeles should be pivoting on. They should be pivoting more to delivery services to allow more people to benefit from it,” Nani said.
One of the things about equity programs is implementation tends to take years. We asked Nani what kind of impact these extended timelines have on the success of programs. He said the first thing to look at around that issue was whether they allow vertical integration, and then whether it’s a city or state program.
In L.A. you can be vertically integrated, but don’t have to be, and it’s a city program. “So you’re seeing a lot fewer resources being put to it,” Nani said. Pointing to the smaller number of officials to work on the issue and smaller tax base to pool funds from.
“Generally, it’s easier to corrupt the system when there are less pieces to play with,” Nani said.
Nani said as he conducted the series of interviews there were some strong allegations around certain City Council members prioritizing friends in the licensing process “We don’t have any data to prove that one way or another, but it’s just one of those concerns about the less people involves meaning less transparency,” Nani said.
We asked Nani what the biggest difference was in the L.A.’s program compared to the other reviews he conducted. “I hate to say it, but it’s the politics for me,” he replied, “Just how political the city was. I interviewed a lot of people. Schedules interviews in advance. Then one social equity group, in particular, I don’t know how it happened, but they were disagreeing with one of my findings. They were also very influential, so they shut down a lot of my interviews.”
Nani says they told one government official to wipe their calendar when they heard Nani was coming to ask about the program. He says a lot of groups are in favor of pushing reform “but it’s my way or the highway.”
We asked the DCR for a statement on anything they took away from the report.
“The city of Los Angeles is one of the few jurisdictions in the United States attempting to address the impacts of past cannabis policies and their inequities by developing and implementing cannabis policies that seek to center equity in cannabis policy reform,” the DCR replied.
“Further, the City of L.A. has the largest number of licensed dispensaries in the nation and it is also the municipality with the largest number of available licenses for Social Equity applicants in the nation. With Social Equity as a priority in the City’s ordinances, the Department of Cannabis Regulation (DCR)’s action and decision-making are primarily centered around how to assist the social equity applicant.”
The statement went on to note with the Fiscal 2019-20 budget the department will be equipped with the necessary resources to provide adequate programming to social equity applicants entering into the next phase of licensing. With the funding on the way the city is now working to find vendors who will provide business, licensing, and compliance assistance to Tier 1 and Tier 2 Social Equity Applicants.
While never addressing the report directly, the city noted on all the workshops that have taken place to support equity applicants and the information made available. “Our website is consistently updated to reflect easy to understand information about the social equity program, it’s benefits and how to navigate through the eligibility verification process allowing potential applicants to apply in Phase 3,” the statement read.
Finally, the city noted a big part of this process was increasing staffing levels at the DCR. In the past year, they’ve gone from six to 21 employees, which can be expected to help accelerate timelines.
“Further, with funding in hand, DCR is excited to execute robust social equity programming for marginalized members of the community. The city’s decision makers and DCR remain dedicated to the mission of the social equity program and look forward to rolling out this program with steadfast determination over the months ahead,” the statement closed.
The MCBA’s leadership also weighed in on the report’s findings.
“Our concerns have once again come to fruition with another municipality failing to fully implement meaningful social equity programming,” says Kayvan Khalatbari, MCBA Board Member. “Politics and well-funded special interests have dogged Los Angeles’ implementation to the point that its intended outcomes are not being met and communities long harmed by the War on Drugs remain on the sidelines. I’m curious to know what, if anything, will officials in Los Angeles do to correct course here?”
We reached out to the National Cannabis Industry Association to get their take on the predatory practices being targeted at equity applicants. One thing that puts these small businesses at risk is their lack of access to the services provided by the Small Business Administration at much better rates.
So would access to the SBA give these small equity businesses a shot?
“Yes, absolutely,” NCIA executive director Aaron Smith told L.A. Weekly. He thinks both access to the SBA and the passage of The SAFE Banking Act would go a long way in helping people avoid the services being offered by charlatans.
“This is a situation where we have entrepreneurs who have no access to traditional lending and financing. There are a lot of predatory practices that have emerged in the cannabis industry as they would have in any other to fill that void,” Smith said.
Smith makes a good claim that the plight of the cannabis small business and equity licensee share a lot of the same path to finding solutions.“It’s imperative of us to end prohibition at the federal level, but while we do that keep in mind those communities that were most impacted by the war on drugs have an ability to access that industry,” he said, “Part of that is putting the SBA and SAFE Banking bills out front”
Many of cannabis’s congressional champions now say that equity is part of the mandate for what legal cannabis in America will look like. We asked Smith about making that idea palatable to politicians who think the drug war was a success.
“There are some old school drug warriors in Congress still buying into the reefer madness era of misinformation but they’re a dying breed,” Smith replied, “More and more members of congress are seeing prohibition isn’t working, we’re talking about how we’re regulating marijuana, and members of Congress are increasingly becoming more aware of the social justice components and we will continue to always fight to include social justice and equity provisions in federal legislation whenever possible.” But he warns it won’t happen overnight.
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