Equity in the cannabis industry for communities impacted the hardest by the drug war is a major topic across the country, while locally qualified Los Angeles equity applicants work their way into the conversation and a rollout that has faced similar challenges to other model programs in California.
The idea of equity programs started in Oakland and has since percolated alongside the cannabis industry as a whole in recent years. These days, most advocates coming from the social justice side of things point to equity programs as a must in any plan to regulate and legalize cannabis as a means of giving back to the neighborhoods where the enforcement of marijuana laws hit hardest. Many in the industry are backing the progressive idea as well, but as with everything in life, there are still some haters. Nevertheless, the actual funding for these well-intentioned programs to give the people who need the most help the best shot to make it is hard to come by, not just in L.A.
L.A.’s Social Equity Program started out of the recommendations attached to Measure M in 2017. It would end up breaking down into three tiers. Tier 1 applicants must be low-income and have an arrest in California from before Election Night 2016 or have lived in one of the Disproportionately Impacted Areas. The applicant also must own at least 51% of the business. The perks of being a Tier 1 applicant include expedited application and renewal processing, compliance and licensing assistance, fee deferrals, and access to an Industry Investment Fund, if and when that fund is created.
Tier 2 must be low-income and have lived in the impacted area for five years. Higher income levels can still qualify; they just must have lived in the impacted areas for 10 years. No matter the income level, an applicant must own at least 33% of the business to qualify for Tier 2. Tier 2 perks include the express licensing and compliance support.
The final tier of the program is for the businesses that will do the aforementioned supporting and incubate equity permittees from Tiers 1 and 2 of the program. That includes free licensing and compliance support, and also a Tier 3 applicant must provide a Tier 1 applicant access to property. The perk of being a Tier 3 applicant is expedited application and renewal process permitting.
But the process has been slow. The city announced it’s hiring a new director for the program as applicants already in the queue wait for the process of annual permitting to begin. Some are operating on temporary permits, while others are waiting for their final permits to be in order.
Jazmin Aguiar is one of the L.A. equity program applicants waiting for the city and leading the discussion of what L.A.'s program should look like. We asked Aguiar her opinion on some of the biggest challenges facing the program.
“I think it’s definitely a lack of education from our elected officials at all levels,” Aguiar told L.A. Weekly. “They don’t understand the market, they don’t understand the scope of the trauma that was caused by the war on drugs, and how to flourish into a regulated market.”
Aguiar has spent the last eight years doing business development in the cannabis industry. Her work has taken her from Greater L.A. to places such as Mexico and Colorado, where she spent six years. Aguiar thinks first and foremost, the struggles of compliance go top to bottom in the industry. The small equity business will have to learn the same lessons as the big dogs without a major bankroll to back its mistakes. We asked Aguiar if that means the lack of capital for people to fall back on is a bigger issue than the problems surrounding compliance.
“That’s difficult to answer,” she replied. “It really depends on the person on the other side. I think that capital is needed, and accessibility to the capital. However, being strategic and knowledgeable about how to use those funds is also very important.”
Aguiar said one of the luxuries bigger players have is the ability to clean up failure after failure with money. She sees this as detrimental to the social equity players who don’t have the same leniency in the actions they take.
“There are going to be a lot of mistakes made along the way. However, I think we’re in a very powerful position, especially in the city of L.A. right now. We’re talking about reparations, right? I grew up in South Central, I was born and raised there.”
Aguiar says she has thought about the term reparations deeply, especially when she runs through the layers and layers of trauma resulting from the gang and police violence, “but where do you even start?” She generally believes the process will just have to be taken step by step in repairing that trauma. But if the equity program was even meant to help a little in that taller wider socioeconomic order, did the city miss any steps?
“Absolutely. I feel like because of certain interests at play that the city of L.A. didn’t take into consideration the necessary steps to really figure the Social Equity Program out,” she said.
She feels that the city said it was going to roll out the program to look like it was mission accomplished, without taking in any further public consideration. “The city of L.A. overpromised and underdelivered,” she said. “It’s been two years since we approved the Social Equity Program and there is still no funding.”
Filter reported on further rumblings about money marked for the equity program ending up in the LAPD overtime fund, as reported by journalist Amanda Chicago Lewis. The City Administrative Office told Filter the move was due to the amount it costs to enforce the law against the underground cannabis industry. Half of the $10 million the Social Equity Program could have had access to had been moved to law enforcement, but Filter couldn’t substantiate whether all of the money being taken for LAPD overtime would have gone to the program.
Aguiar says when the money is finally ready, Tier 1 applicants will be able to access low- to no-interest loans through the program. But that money won’t be exclusively distributed to victims of the drug war in Los Angeles. Per Tier 1, anyone with a California conviction could have access to that pool of funds, when it eventually exists.
“Anyone in California can come in and take priority, resources and income from an Angeleno through the Social Equity Program. To me, that’s a huge barrier of entry for an Angeleno,” Aguiar said. She believes this will be detrimental to maximizing the local impact of the program.
While representatives of the L.A. Department of Cannabis Regulation were unavailable for interview, they did offer to answer some questions by email. The first question they responded to was about the actual licensing timelines in the near future,
“Annual licensing for Phase 1 began a few weeks ago and it will take some time for the department to go through these applications. Processing Phase 2 annual licenses will begin after we've finished Phase 1. All Phase 2 applicants are considered social equity applicants,” the DCR said.
Next it discussed the reception the program has received,
“When Social Equity Program was included the city's ordinance in late 2017, there was a lot of excitement and relief that one of the largest cities in the nation was going to prioritize individuals impacted by the war on drugs,” the DCR said. “So far, the main feature of the program has been priority processing and that has manifested itself during the Phase 2 temporary licensing process and will soon take a central role in Phase 3. The process and structure for Phase 3 will be considered by the City Council soon. The department is looking forward to the release of the Mayor's FY 19-20 budget next week, which will determine the programmatic next steps.”
As for Social Equity applicants in Tier 1 getting access to capital, “In the next few months, we hope to work with vendors via an RFQ process to provide a variety of services to potential social equity applicants, and that may include programming to connect applicants to capital,” the DCR said.
While the DCR answered most of our questions, we 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.
Hours after the DCR replied to our questions, the L.A. City Council voted in favor of providing it $3 million annually for the next three years to fund the city’s Cannabis Social Equity Program, in addition to $1.5 million to be allocated immediately for the program.
“As a council, it’s our job to do right for the people in our city whose lives have been adversely affected by the war on drugs,” said council president Herb Wesson in a statement following the vote. “The city’s Social Equity Program is at the crux of our efforts to right these wrongs. This vote today makes clear that we are committed in our pursuit of justice for the marginalized communities that have been most negatively impacted.”
The measure passed unanimously in front of the full council following success in past months in the Budget & Finance and Rules, Elections and Intergovernmental Relations Committees.
We should get an idea for the DCR’s plan for the money in the weeks and months ahead, but $1.5 million was immediately placed in its cofferd, so the resources for action are there.
As for Aguiar, she’s very much a part of the national dialogue as well. Earlier this month she took part in the Minority Cannabis Business Association lobby day to push for equity in the industry at the federal level as numerous marijuana reform bills make their way through Congress.
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In late March, the MCBA announced its plans to study the implementation of social equity policies by the city of Los Angeles meant to bring more diversity to the L.A. industry. The organization will be joined by Chris Nani, an Ohio State Law student who recently released a similar study on social equity programs in three other California cities. In his past research, Nani found the San Francisco, Sacramento, and Oakland programs were not meeting their intended goals.
The MCBA wants L.A. to get it right so minorities can have access to the biggest legal cannabis market on earth and diversify it, all while proving a model for other cities that have some catching up to do in communities left ravaged by the drug war.
“We are excited to see municipalities across the country starting to implement social equity programs as a way to reinvest in communities that for decades have been disproportionately harmed by the war on drugs,” says Kayvan Khalatbari, MCBA’s board chair. “Now we need to ensure their intended outcomes are being met. If they’re not, we need to re-examine those policies and work on them until we get it right. We must develop an effective and repeatable model.”
The MCBA also recently released a model municipal ordinance. It outlines language to help local governments provide robust Social Equity Programs.