The Los Angeles Department of Cannabis Regulations issued a series of new reports to the city council with recommendations that would reorganize and revise the way the city handles pot permits.
The reports’ main objectives include a plan to get temporary approval for all applicants, allowing relocations and clarifying the process around requests involving Public Convenience or Necessity.
The other main objectives are geared toward the nuts and bolts of the social equity program. They would allow individuals to participate based on the original criteria or new criteria as supported by the Expanded Cannabis Social Equity Analysis. That new analysis is among the reports transmitted to the city council. It also includes recommendations like using police reporting districts as geographical markers for the program, as opposed to zip code,s to make it more inclusive to a wider geographic area hit disproportionately by the drug war.
The recommendations also called for a lottery process rather than an online, first-come, first-serve process. This would protect the city from legal challenges, but applicants with the least merit could score a permit. Another recommendation was to limit retail application processing to Social Equity Individual Applicants until January 1, 2025, unless an applicant received priority processing under certain exemptions written in the code.
The recommendations expand the definition of an equity share and establish related requirements to prevent shady business folks from getting social equity applicants into predatory relationships. This includes full reviews of corporate paperwork for every applicant. In addition to other licensing streamlining aspects, the DCR also notes the report recommendations address the feedback received from both general licensing and Social Equity Program stakeholders.
The United Cannabis Business Association weighed in on the reports to us, and since their earliest formation. UCBA President Jerred Kiloh told L.A. Weekly the trade association has been in touch with DCR through the entire process.
“We were aware of some of it, and some of it was a surprise,” Kiloh said, “I think to a lot of stakeholders there were some surprises in here, including some city council members.”
Kiloh notes regardless of the reports, there still isn’t a clear pathway for the Social Equity Program due to a forthcoming injunction hearing, part of the latest of many legal challenge the program has faced.
“You could definitely see it was timed to get something done. So it’s appreciated because social equity is a difficult conversation and policy to implement. We haven’t really seen good systems to emulate anywhere in the county, that show really firm success without a lot of opposition,” Kiloh said.
Kiloh said this makes the work the DCR did narrowing in on who gets the licenses and who doesn’t that much more important. However, he was surprised those folks would be the only ones issued permits for the next five years.
“But I think it was warranted because most of the growth that was allowed previously under Measure M pretty much did the same thing,” Kiloh said. He doesn’t see the reasoning in putting a specific date like 2025 on things when there are already dispensary concentration limits. “I thought we’d already built that system out. I think what they maybe did was give themselves a timeline to have these all done in five years. We were hoping it would be done before that.”
We asked Kiloh if he was surprised at what the overall timeline of the social equity program’s launch was now starting to get into the better part of a decade range. He said yes, but the thing is trying to find equity is not a quick and easy thing given California’s ban on affirmative action.
“It’s been difficult to navigate social equity and not violate constitutional amendments on affirmative action. It’s not an easy process, and you can see the lawsuits at every level,” Kiloh said. “Sometimes you just have to trudge forward and suffer the slings and arrows as they come just to do what’s right. We feel like this is the right move.”
Kiloh says another big goal of the recommendations is to get another 100 additional social equity applicants from the original 800 applicants operational. “There is some back and forth now trying to give the people that took a risk in the original rounds some kind of benefit in the future.”
But does the new plan just set up the next lawsuit from the person in the #201 spot?
“It does, but I mean you could say that about every single thing social equity attempts to do to give back to communities that were disproportionately impacted in the drug war, so it’s difficult,” he replied.
Kiloh went on to applaud the expansion of the social equity program’s geographic limits from the zip codes the DCR used in the previous licensing rounds, noting “before, there wasn’t a single district inside of the Valley allowed, you kind of disenfranchised District 4, District 10.”
Kiloh said a lot of the northern districts of Los Angeles were surprised they didn’t have any areas that qualified for the program. They were backed by the Social Equity Report Analysis findings that many of the northern districts were in fact seeing cannabis arrests in disproportionate numbers above the L.A. average.
“Something that was shocking to all the existing dispensaries, even if you’re a social equity applicant, was if you’re the owner of a dispensary in Los Angeles you can’t apply for another retail license in the city,” Kiloh said, “I’d have to say that’s a little harsh in some way, shape, or form.”
UCBA was disappointed that even if existing owners could have applied under the social equity program, the recommendations would see them lose a shot at expanding their footprint while out of town operators coming in would see no such hurdles. Kiloh doesn’t think DCR took into account people’s professionalism or the 12 years some have under their belt.
Kilioh believes those operators’ experience would have helped the industry progress, while they helped to expand the industry inside the city they live and work in.
“It’s a little sad. Cause now existing dispensary owners in L.A. are going to have to look to other markets outside Los Angeles,” Kiloh said.
Kiloh is not sure if it was just an oversight since UCBA raised this specific concern to DCR, but admits nobody was going to be happy with whatever the final compromise looked like. “This is the middle ground we thought we could forge together. Here we are at the middle ground, but that is one of the things I think was overly restrictive.”
Kiloh went on to speak about the steps DCR wants to take to prevent predatory business relationships in the social equity program. He believes the corporate paperwork should be subject to review after seeing some of the deals made locally and across the state. We asked if those relationships defeat the purpose of the whole program?
“If you’re just making people a figurehead and they don’t get to actually help run the business, make decisions for the business and profit from its growth? Then yeah, it totally defeats the purpose of the program,” Kiloh replied.
Kiloh believes the recommendations are a step in the right direction of trying to rid the equity program of bad actors, but admits where there is big money and contract law, someone will always be attempting to skirt the system. At least now they know they are on notice for some kind of theoretical forthcoming accountability, or at least public shaming is a real possibility.
As for the number of those less moral business folk attempting to take part in the local cannabis industry, “honestly I’ve seen quite a few,” Kiloh said.
Jazmin Aguiar, The Minority Cannabis Business Association’s L.A-based chairwoman and president of The Working Group, gave us her thoughts on the reports. She said DCR intends on streamlining the application process to align with the state process. “This means we are getting closer to annual licensing.”
“I am extremely happy they are allowing relocation, this opens up the conversation for realistic timelines, and a way to loop in Phase 2 social equity applicants that have been left behind,” Aguiar said. “DCR also mentions not requiring a property going forward. In the original ordinance, social equity applicants were not required to have properties, making these motions redundant.”
Aguiar further quipped we were already “there” and the city chose to “move forward” and require properties in the doomed Phase 3 opening round.
Like others, Aguiar remains worried about the advantages out of town operators will have over Angelenos. “I am concerned that social equity qualifications continue to prioritize cannabis convictions without a residency requirement,” she said. “It is important that the city of L.A. prioritize and provide resources for Angelenos affected by the War on Drugs.”
Finally, Aguiar spoke on the DCR recommendation of vetting all applications to help avoid predatory agreements. “To me this sounds like a merit based application process, and should start that way. Ensuring the process protects and empowers social equity applicants from its initiation,” she replied.
Aguiar closed by noting the reports have great recommendations; she hopes city council recognizes that these recommendations can benefit existing social equity applicants in Phase 2 in addition to the road ahead.
Are Social Equity Program Issues Obscuring Other Concerns?
Ilya E. Ross, a longtime cannabis attorney who has practiced corporate contract law in L.A. and Boston, thinks the reports’ recommendations fall short.
“The bottom line is what was an attempt at social justice is in fact just a miscarriage of social justice,” Ross told L.A. Weekly. “The 800-pound gorilla in the room is the disaster that was the Phase 3 Round 1 application process.”
He believes the recommendations from DCR are just an attempt to exonerate themselves from everything that happened.
“I applaud the effort of the Social Equity Owners and Workers Association, and their counsel, who earlier this week filed a writ of mandate to compel justice from the city, the DCR, for effectively this whole disastrous licensing process,” Ross said.
Ross noted he would go further than the Social Equity Owners and Workers Association in the sense he believes the only real way to clean up everything that’s led up to this moment is to issue a license to every social equity applicant that qualified for Phase 3 Round 1.
“The city’s failure to do that, and compounding it with these revisions, to me comes off as a way to obfuscate the cloud of corruption. And frankly as a way to kind of use the social equity program as cover and distraction for less visible and more problematic revisions,” Ross said.
Obviously, we asked Ross what those revisions he was most concerned about are?
“I have been concerned for some time the city has been in talks with the big chain dispensaries to backdoor their licensing through the Public Convenience and Necessity process. And frankly, I think these concerns are validated by the proposed changes to the PCN process,” he replied.
Ross believes the process presented has a pathway not only around the social equity process but really the DCR entirely. Ross said It appears based on the revisions the PCN applications would be processed by the city clerk, reviewed by the city council, and effectively that makes the council the sole arbiter of who may be permitted in the PCN process.
“This is a fast track for those with the means and resources to hire lawyers and lobbyists,” Ross said. Also, these would be the only people permitted outside the equity process over the next five years.
We asked Ross his take on the idea that the recommendations are being presented as part of the remedy for the holes in the equity program that have allowed the bad actors to take advantage of it.
“I think minimal ineffective steps have been taken in the equity share definition to protect against circumventing the social equity applicants ownership, but I don’t think they’ve gone far enough. For example, there is nothing in the proposed revisions that would prohibit these entities from entering into predatory loan agreements,” Ross said.
With business startup capital being at a premium in the neighborhoods hit the hardest by the War on Drugs, the idea of predatory lenders can be especially concerning for folks.
Ross closed reiterating without addressing the Phase 3 Round 1 mistakes, “which were negligent at best and corrupt at worst,” the effort here doesn’t do anything to further social justice and “really just continues the city council’s fraud approach to licensing in Los Angeles.”