Business

L.A. Focuses on Equity With New Licensing Push

By Willis Jacobson Oct 16, 2020
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Willis Jacobson is an award-winning journalist whose career has spanned both coasts. Now based on the Central Coast of California, he has covered cannabis news and issues since 2015.
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Willis Jacobson is an award-winning journalist whose career has spanned both coasts. Now based on the Central Coast of California, he has covered cannabis news and issues since 2015.
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When Mariah Dodson began to apply for a cannabis retail license through the Los Angeles social equity program, she already had experience in the industry.

In 2017, Dodson co-founded Dust to Diamonds, a company that promotes wellness through the use of CBD products. Despite serving as COO of that business, Dodson acknowledged she was still overwhelmed navigating the Los Angeles licensing regulations.

“Oh my god – I had to make it my full-time job,” Dodson told WeedWeek on Friday. “For people who are new to the cannabis business, I can only imagine how stressful and challenging it was navigating this entire process.”

After a tumultuous year in which the city has faced multiple lawsuits accusing it of bumbling its social equity program, Los Angeles cannabis regulators and would-be operators are ready for a re-start.

The widespread criticism and litigation led to an overhaul this summer of the city’s licensing framework, particularly as it relates to the social equity program. Following those changes, the city announced this month that it would begin accepting some applications again on Oct. 20. Both regulators and applicants are hopeful the policy revisions – mostly aimed at helping social equity applicants – and new support services being planned by the city will lead to an improved and fairer system. 

Both groups, though, also acknowledge challenges ahead.

Cat Packer, executive director of the Los Angeles Department of Cannabis Regulation (DCR), the city’s licensing and regulatory agency, acknowledged missteps in the early stages, but expressed confidence in the licensing program’s future. 

“There’s a lot that we’ve done recently that’s going to make this process much different than it’s looked in the past, and that really just starts with the policy itself,” she said.

“It’s a work in progress,” she added. “We’re open to input and feedback from folks who are participating in the program – that’s how we continue to make improvements along the way.”

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‘Righting some of the wrongs’

Among the changes to the social equity program instituted this summer: Applicants no longer need to acquire property before applying, applicants are no longer barred from relocating, and the city switched from a much criticized first-come, first-served computer system for applicants to a lottery.

Those changes were all recommended by stakeholders, Packer said.

Litigation spurred another change: The city agreed to double the number of social equity retail licenses issued in the current round from 100 to 200 as part of a lawsuit settlement. A group of applicants sued the city and DCR after an independent audit revealed that some applicants were able to access the online filing system – which at the time was first come, first served – ahead of others.

Luis Rivera, executive director of Social Equity LA, which offers support for social equity applicants, said he was encouraged by some of the moves made by the city, but stressed that there are remaining issues that need to be addressed.

“I think the city took great strides to try to make amends for what they did, righting some of the wrongs they did with the process,” he said. “However, there’s still a long way to go.”

Rivera said he would like to see the city do more to protect social equity applicants from predatory business deals.

‘People’s champs’

As in several jurisdictions, the social equity program was established to help people from communities adversely impacted by the War on Drugs to open a business in the legal cannabis marketplace. To qualify, L.A. requires applicants to meet two of the following criteria: Be low-income, have a California cannabis arrest or conviction, or have 10 years of residency in a disproportionately impacted area.

Because social equity applicants typically don’t have extensive business experience, Rivera said they have become targets for predatory investors who simply want to use them for their social equity qualifications and have no interest in developing a fair business relationship. 

In addition to helping applicants avoid such situations, Rivera noted that Social Equity LA works with applicants to keep them informed of policy changes and connect them with services, like legal assistance or finding potential partners.

“We’re like the people’s champs,” he said. “We’re there for the people, for the community.”

That’s been especially important throughout the delays, he said, as some social equity applicants have dealt with significant financial losses as a result of maintaining properties while waiting on licensure.

“Most of their investors and landlords and people like that gave up on them,” he said.

Dodson, who is seeking a retail license, said she was thankful for organizations like Social Equity LA and the United Cannabis Business Association, which also offers resources.

She said those organizations can be a great help, even if they can’t necessarily hold an applicant’s hand and guide them through the process. 

It’s worth it, she said, “even if [they’re] just holding a pinky.”

Staying ‘tuned-in’

Packer, the head of the DCR, was particularly bullish on the future of the social equity program.

After the public outcry, she and her team began rewriting the policy from scratch. They ultimately altered about a dozen sections of the initial ordinance.

Packer said she was particularly proud of the change that will limit retail and delivery licenses to only social equity applicants through Jan. 1, 2025.

The 184 dispensaries currently licensed by the city were grandfathered in as established MED stores prior to REC legalization in 2016.

“That’s huge,” Packer said of the social-equity exclusivity window. “There are only a few other jurisdictions across the country that have this type of provision in place where, at least for a period of time, social equity applicants are getting exclusive rights to licensure.”

Packer said the DCR also made it a priority to expand support for social equity applicants. 

She pointed to a financial grant program that the DCR is building with about $5M in state funding. The DCR is also in conversations with the Los Angeles County Bar Association to establish a pro-bono panel of attorneys to assist social equity applicants, she said.

Packer encouraged stakeholders to stay informed by monitoring the DCR’s recently redesigned website and by attending the city’s virtual Cannabis Regulation Commission meetings, which are held twice monthly.

“There are challenges along the way and everyone’s not going to be supportive of those efforts all the time,” she said. “But I think that when you have enough folks coalescing and working toward the same goal, you make progress. And that’s what we’ve been able to do here.”

Dodson, who is still navigating the application process, said her faith in the system has been tested, but she remains confident it can function as advertised – if applicants put in the time and effort.

“I think it’s going to be a matter of how tuned-in to the process you stay,” she said.

“So I still have faith in the process,” she added, “I just want to make it really clear that I do also believe that’s exactly what it is – it will still be a very intricate, challenging process moving forward because this has never been done before. We can’t look at any other industry and be like, ‘Oh, that’s how we do it.’ So I think it’s important for applicants to hold their faith, but to also hold the DCR accountable and to hold their community leaders accountable.”

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