Los Angeles Licensing Delays Hit Minority Applicants Hard

Los Angeles cannabis businesses owned by minorities and other victims of the drug war are in the midst of a very expensive waiting game.

More than five months after town officials started licensing some cannabis businesses, applicants who applied through the LA’s social equity program, designed mostly in an effort to counteract the racist consequences of the drug war, will finally get their shot at joining the commercial cannabis industry.

“Basically (we are ) just waiting and hoping they do not change anything drastically that would alter the building’s eligibility”

Esteban Araya, potential licensee

At the first meeting of the Los Angeles Cannabis Regulation Commission earlier this month, Cat Packer, executive director of the city’s Department of Cannabis Regulation, announced Phase 2 of Los Angeles’ licensing process will begin on August 1. This phase–the second of three licensing rounds for the city’s newly legal industry–is open to non-retail businesses, such as manufacturers, distributors, and other portions of the supply chain, that have been working in the city since before January 2016 and intend to participate in some capacity in the social equity program. The stage was slated to have wrapped up months ago, but delays due to staffing shortages and other factors have slowed the plan’s rollout.

The delays have made for financial and logistical headaches for equity applicants seeking to obtain a city permit, which is required to enter the state-regulated industry.

“It’s only having to sit on something, pay interest on buildings, do build-out and construction, without actually understanding what’s going to happen,” said Esteban Araya, whom Leafly first talked with in November of this past year, as he was beginning the application process to open a retail store in northeast Los Angeles. “Basically [we’re] just waiting and hoping they don’t change anything drastically that would alter the building’s qualification. ”

The town ’s social equity program was put in place at precisely the same time LA officials adopted a new set of cannabis regulations for the city. By providing licensing priority to applicants affected by the war on drugs–for example those who have been detained for a cannabis-related offense or who live in a neighborhood with high cannabis arrest rates–it aims to address the decades of disproportionate impacts that the war on drugs has had on minority communities,

But since the rest of the town ’s cannabis plans went forward, the equity program has floundered. City officials claim the long delay was not possible to predict, but critics call it an avoidable flub caused by foreseeable funding issues.

The slow rollout has had the perverse effect of disadvantaging the very people it was designed to assist: communities hit hardest by the war on drugs, including people of color and people convicted of nonviolent drug offenses. As opposed to giving these groups a leg LA’s social equity program has effectively given a head start to the contest.

Betting Big on Social Equity

Since Araya first heard of LA’s equity program, he’s been working with accountants and attorneys, working diligently to build an above-board business. He even purchased a property that he’s begun to transform into a retail store. He’so eager to capitalize on the equity program, which he qualifies for because his mother has been arrested on a felony drug charge for transporting cannabis when Araya was in the third grade. She went to jail because of this, and Araya and his sister were sent to foster care for almost a year and a half.

Araya bought the area in El Sereno, a neighborhood in northeast LA, in early 2017, with plans to transform the space into a dispensary. Since that time, he’s shelled out more than $20,000 in interest alone, he said. He recouped some of those prices by temporarily renting the space, but he asked the tenant to leave as 2018 approached, as city officials had indicated that the social-equity licensing phase could begin in March or April.

It’s been nerve-wracking, said Araya, crossing his fingers while watching applications roll in from the existing medical marijuana dispensaries, which got first dibs on licenses. He’s been waiting to see if these shops might move into his neighborhood or compromise his buffer zone, the 700-foot distance town requires between commercial cannabis facilities. If that were to happen, it would mean he’d need to find a new location. The resulting costs could induce him to abandon his business altogether.

“All my money is essentially invested in this,” he said.

As opposed to giving these groups a leg LA’s social equity program has effectively given a head start to the contest.

Araya decided to hedge his bets by purchasing two buildings (the other is in South LA) to be able to have a better chance of at least one application crossing the finish line. Success at one place, he said, should be able to cover the expenses of the other. Further delays by town, however, risk draining his resources even quicker.

While Araya and his staff have been intent on doing things lawfully, waiting for the city to begin licensing, they’ve also watched unlicensed shops pop up in and around the neighborhood. While police have taken some actions to close down unlicensed stores, many across the town still function.

He isn’t the only one who’s hung his hopes on the success of this social equity program.

Gabriel Guzman is the creator of Latinos for Cannabis, a nonprofit aimed at educating and incorporating more Latinos into the cannabis industry. While many Latinos already work in the industry as employees at dispensaries, gardens, and production facilities, very few hold ownership roles, Guzman said.

“We [Latinos] represent 51 percent of Los Angeles, yet unfortunately it doesn’t signify in the proportion of [cannabis business] possession,” said Guzman.

Guzman himself qualifies for the social equity program under the town ’s residency and income requirements, and he plans to put in an application for a manufacturing license whenever the method opens up. Although city officials have done an effective job at determining who should qualify for the social equity program, Guzman said major barriers to entry remain. For one, the program requires applicants secure a property before getting a permit –a steep requirement for many Latinos, said Guzman. “Some of our white counterparts, they have so much more capital than we do. We don’t have access to property,” he said.

The Program’s Future–and Funding

Officials attribute some of the licensing delays to a significant understaffing problem at the city’s Department of Cannabis Regulation, which has been conducted by a total of three individuals since its inception, and the general unprecedented nature of this regulatory process.

Leafly achieved to Packer and the office of Los Angeles Mayor Eric Garcetti with queries about the ongoing delays. While specific questions related to funding mechanisms and staffing shortfalls went unaddressed, Alex Comisar, a spokesperson for both the mayor and Packer, said that officials overall have been “very delighted with how things have gone so far” and that they have been focused on “doing this right and doing this with all of the information available. ”

City Council President Herb Wesson also declined to respond to a lot of Leafly’s questions about what caused the delays. Through an email from a spokesperson, Vanessa Rodriguez, he pointed into hiccups with computer software and the need to keep up with “technical adjustments with state legislation. ”

Asked to elaborate on these factors, Rodriguez replied: “Unfortunately, yes, there were unexpected delays, but the Council President is confident that the city is on track and moving forward as expeditiously as possible. ”

Critics counter that many of the flaws could have been expected –and avoided. Lynne Lyman, a former California director for the Drug Policy Alliance who helped draft California’s legalization law and now works as a consultant, said part of the problem was that the town ’s funding mechanism.

“I believe LA might be the only city who is trying to have its cake and eat it, too.”

Lynne Lyman, former California director, Drug Policy Alliance

A provision in the city’s cannabis law dictates that all earnings from cannabis would flow into the city’s general fund, where it could be spent on all kinds of things. By comparison, the state of California and a number of municipalities, such as Oakland, Santa Ana, and West Hollywood, structured their systems to steer revenue first to cover the expense of regulation and enforcement, said Lyman. Because of this, she said, LA failed to adequately bankroll its Department of Cannabis Regulation.

“Over the last six months I think it’s becoming clearer and clearer that that office was never funded,” she said. “Licensing itself has been 100% stalled for months now. ”

If passed by LA voters, the measure would levy additional taxes and surcharges on local businesses. The strategy, dubbed the Cannabis Reinvestment Act, includes a 1% tax on gross receipts, of which 25% goes into a trust fund, where it would then be spent on public education, equity-related programs, and expungement clinics. Proceeds from other designated surcharges, such as fees imposed against tickets for cannabis events, may also be utilized in part for these health and community reinvestment efforts. The money could not be used for license processing or authorities, according to the ordinance.

Lyman said she doubted that the revenue from the additional fees will be enough to fund the social equity plan and argued the city shouldn’t need to roll out new taxes, as it’s already raking in cannabis revenue that goes to its general fund. City officials estimate between $30 million and $40 million in total cannabis earnings during the first year of authorized sales, according to budget projections.

“I believe LA might be the only city who’so trying to have its cake and eat it, too,” said Lyman.

To pass, the measure will need two-thirds majority support from voters. Los Angeles has essentially “abdicated its duty to regulate cannabis,” she said, questioning whether city officials are really serious about “reasonable, comprehensive licensing and social equity. ”

Released at Mon, 23 Jul 2018 22:03:56 +0000

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