The City of Los Angeles wants to make sure that people whose communities were negatively affected by the war on drugs are the first to profit from the legal cannabis industry. Their plan: give these people an early chance to apply for dispensary licenses in the city.
But the plan has hit a few snags. Hopeful entrepreneurs have lost a lot of time and money while waiting for their licenses.
Proposition 64 legalized cannabis in the state in 2016, leaving the distribution of licenses up to cities and counties. LA ended up limiting the total number of dispensary licenses in the city to 400.
The city’s Department of Cannabis Regulation (DCR) distributed approximately 189 dispensary licenses to businesses that were already operating under Proposition 215, California’s medical marijuana initiative, passed in 1997.
In September 2019, DCR launched the Social Equity Program (SEP) and opened an application process to give out 100 licenses to social equity candidates, victims of the war on drugs.
People were able to apply online starting September 3, 2019. The system was immediately flooded with hundreds of applications. The system was intended to approve the first 100, a first-come-first-serve basis.
Then in December, DCR revealed that 12 applicants had an unfair advantage. That was because they somehow accessed the system six seconds before everyone else.
Applicants with faster internet had a greater chance of getting their applications in first.
Applicants complained that the process was unfair, and City Council President Herb Wesson called on DCR to shut down the program until they could work out the kinks. Currently, the application process is under review by an independent third-party auditor.
DCR admitted that the process was flawed. The department’s director Cat Packer told KCRW, “Maybe the first-come-first-serve process online isn't the most efficient. … Governments can have a very difficult job in figuring out what's most fair. … But when we're also trying to do the work of repairing decades of harm through a similar process, we almost need to double or triple or quadruple down on how we're defining fairness.”
But those efforts can’t come soon enough for applicants who are already financially in the hole waiting for their licenses. One of the requirements of the SEP program is that applicants have to pay rent on commercial spaces before they know if or when they will receive their license.
KCRW spoke to a hopeful SEP applicant who asked not to be identified for fear of jeopardizing his license application. He said, “We're paying rent on this gorgeous space, and nothing's in it. And we're just waiting and waiting and waiting for licensure. … Money is just flying out the door, and we still don't even know if we're gonna get this at all.”
Applicants are also responsible for the costs of lawyers and business consultants to help them navigate the process of proving eligibility and applying.
For hundreds of applicants, this means making a significant investment in a potential business that might never legally operate. Though the SEP managed to award 100 new licenses, its problematic process has ended up costing other applicants significant sums of money. The anonymous applicant we spoke to said he’s spending $8000-$10,000 per month on his storefront.
The applicant said he’d like to see a few things from DCR: “I would like them to vet people a little bit quicker. I would like them to make more decisions on how they're going to do this process. They keep going back and forth. … There's a lot of groups that are complaining that the social equity people are not being represented correctly and that's holding everything up.”
DCR agreed that there have been problems. But they also claimed that even if this process had proceeded without a hitch, it still wouldn’t be enough to achieve the goals the SEP set out to achieve in the first place.
Packer said, “We're at a watershed moment, not only in the city of Los Angeles, but in the greater scheme of cannabis legalization, where we have to just come up with fundamental strategies around how we're going to make this industry more equitable. … And the reality is that 100, even a couple hundred people getting licenses in the city is not going to create the type of societal repair that these communities need.”
The department hopes to ease the concerns of SEP applicants by introducing educational resources, providing fee waivers, and appointing a dedicated director to the program.
DCR plans to issue 100 additional SEP licenses this year without requiring that applicants have an actively rented storefront.
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