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After months of drama and a dash of speculation here and there, the performance audit and review of the Department of Cannabis Regulation’s Phase III Round 1 licensing process has essentially vindicated the DCR’s steps to remedy advantages any applicants gained from accessing the city’s online licensing portal early.

But not all are satisfied with the results. 

Sacramento-based Sjoberg Evashenk Consulting led the audit for the city and summarized their findings following a review that started in January. Marijuana Business Daily was the first to get the report out to the masses via their California-based reporter John Schroyer. 

The first thing noted was the lack of evidence anyone gained any kind of advantage accessing the portal before the official start time following the DCR remedying the situation. 

A total of 14 applicants were able to access the portal early. Most of them as a result of manually having their password reset. Then 222 applicants signed-on following the re-enabling of all accounts around 9:59:46. Twelve were able to access the licensing application a few seconds prior to the official 10 a.m. advertised start time.

Auditors believed the main two things that led to all this was the method of activating accounts being prone to human error and the messaging from DCR contributing to a “misperception by some applicants that they had to wait until 10 a.m. to sign-on to the Accela platform rather than sign-on as early as possible to be able to access the application at 10 a.m.”

When the DCR normalized those early entries, auditors found the actions taken during that process reasonable. Auditors noted alternative methods to normalize all the applications would have impacted 11 applicants and been no more reasonable than what the DCR already did. The process was always going to have 700 applicants that wouldn’t be successful in the round in addition to the hundred winners.

We reached out to the city to get the DCR’s take on whether they had any concerns about the process being challenged again.

“Since the establishment of the City’s cannabis licensing process, the Department has encouraged stakeholders to share their feedback with the Department, the City’s Cannabis Regulation Commission and more importantly with the City’s policymakers,

Based on feedback received to date, the Department is preparing a series of recommendations regarding legislative amendments to the Phase 3 Retail and Delivery application processing procedures to provide a more equitable path forward for all applicants. These recommendations seek to afford reasonable and practical reforms to our local law based on insights gathered from the audit, the Department’s experiences thus far in leading local cannabis licensing and social equity program and policy implementation, and most importantly the feedback received from the local community and stakeholders involved in and impacted by the process.

The Department looks forward to engaging with stakeholders and policymakers on these recommendations to address ongoing opportunities and challenges related to our licensing and social equity programs,” The DCR told L.A. Weekly in an email.

We also asked the city how functional the licensing process is in this moment given the ongoing COVID-19 Pandemic. They reaffirmed their commitment to protecting staff and said services are still available by phone and online. “The Department is currently assessing how to restore and improve services modified as a result of COVID-19. In the interim, the department has prepared a “Resources for Business Owners’ page on the cannabis.lacity.org website that includes information for business owners during the COVID-19 pandemic,” the reply noted.

Finally, the question everyone is wondering, when will Los Angeles issue permanent annual permits to the cannabis industry?

“Like many other business permitting processes, the City’s annual commercial cannabis license application process involves many components, each which have their own applicable procedures and timelines,” the DCR replied, “As such, the city has created a process for many applicants to receive Temporary Approval, allowing them to operate while their annual license application is considered. We encourage applicants to sign up for our listserv at cannabis.lacity.org for additional information about our licensing process and other commercial cannabis related information and updates.”

The applicants who passed the licensing round and were waiting on the audit organized last month into the Cannabis Equity Retail Association. CERA provided L.A. Weekly with its take on the current situation. 

“CERA is appreciative for the transparency the city provided of the Phase 3 Round 1 Licensing process via a 3rd party audit. We are grateful to know the audit stated “, the statement noted. “The DCR’s “normalization process” was a reasonable way to address the errors and specifically was NOT making a recommendation that DCR use a different “normalization process.” ….found that that the DCR conducted the Phase III Round 1 licensing process in good faith, and that there was no evidence of bias or unfairness.” 

Hansel Urbina is among those winning retailers waiting to push forward.  He’s been working on the process in District 5 since the zoning maps first dropped in 2016. Urbina found the overall environment around the situation in recent months, especially at DCR committee hearings, fairly hostile.

“I didn’t realize what all the fuss and commotion was about. Then I later found out myself after I attended the DCR committee meeting why everyone was in such an uproar,” Urbina told L.A. Weekly. When he found out that some of his competitors had been able to access the licensing portal early, “that caught me off guard.”

Urbina had everything riding on his lone application, as opposed to some entities who filed several. “If I hadn’t gotten it, that would have been it,” he said. He’s been trying to get his hands on a permit for more than a decade after originally entering the industry in 2007. When congratulated on finally getting this far in the process, Urbina laughed and gave his thanks, but called it a lottery ticket with no winnings at the moment while laughing.

We asked if he thought the process would take tall these years. “No and I never would have thought Oklahoma would figure it out first,” he replied. 

In regards to the normalization process, like the auditors, Urbina believes the instructions should have been a little more clear in the first place. 

We asked Urbina if he thought that people found their way in clicking around early or, more nefariously, if they knew it was going to be open. “That’s not even the million-dollar question, that’s the billion-dollar question,” he replied, “I don’t know.”

Urbina said each day the process is delayed, the more predator the situation gets in regards to landlords trying to take advantage of applicants already caught up in over million dollars in rent a month with no sales. 

Michelle Mabugat of Manzuri Law in West Hollywood has been helping her clients navigate the licensing process, more than half of them survived the licensing process and were caught in limbo with the other hundred success stories. She believes the biggest question is where the process heads following the audit. 

“I say that as not a tech wiz who has to take the report as the truth, but I know tons of people are pissed off about it,” Mabugat told L.A. Weekly. She said some have complained the scope was too limited, “but I do agree with the audit in the sense that the DCR published misleading information about the start time. I’ll definitely agree with that.”

But Mabugat found the process flawed from the start and believes that to be the root of most of the anger amongst the wider pool of permit stakeholders. She said if the city could go back in time she is sure they wouldn’t mandate social equity applicants having to hold on to empty real estate while they are supposed to be getting a nudge towards success in a hyper-competitive industry. 

As for the licensing process as a whole, “everyone was screaming for this audit. They wanted to see a third party come in and access what happened, but now the third party came in and people are claiming corruption and etc. So there is no way everyone is going to be happy in the situation.”

Mabugat is glad to move on, “but the moving on part is a big question mark.”

 

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