More changes likely to L.A. marijuana licensing as topic becomes political hot potato

Los Angeles’ marijuana licensing and social equity program might be in for another round of major changes, spurred by a stream of complaints to the City Council and regulators by license applicants who have yet to open their businesses.

Also, political finger-pointing over the program’s shortfalls has erupted in recent months, with a city councilman and the chief of the Department of Cannabis Regulation (DCR) trading barbs in formal city documents.

The situation reflects how mired in red tape, bureaucracy and delays the city’s licensing process has been for years, industry insiders said, despite major overhauls to the program.

But a few industry officials also indicated they are now hopeful a boiling point might have been reached and that proposed changes could make the process work easier for the 100-some social equity retailers that have yet to receive their city licenses.

Some of the possible changes – which are likely to be a mashup of suggestions from Council members and city regulators – include:

• Extending the timelines for social equity applicants to file paperwork or even refile their entire applications.
• Changing definitions, including “owner,” in city statutes to conform with state law.
• Allowing social equity applicants to change locations while retaining their chance for licensure.
• Creating an “expedited” licensing process for applicants who can afford to pay higher fees.
• Tweaking the definition of “undue concentration” for retailers to allow more businesses in certain city neighborhoods.
• Allowing multiple social equity applicants to aggregate their “shares” in the majority ownership of a single business.

The first of 200 social equity retail marijuana shops opened earlier this year, but the vast majority have yet to obtain their permits.

The latest brouhaha

In September, City Councilman Marqueece Harris-Dawson introduced a formal motion to update the ordinance that governs cannabis business permitting in L.A. as well as the social equity program.

Though Harris-Dawson’s office did not respond to multiple requests for comment from MJBizDaily, the motion:

• Is an indictment of the DCR’s performance to date.
• Asserts that the city has fielded “dozens” of complaints over “licensing delays.”
• Slams the DCR for failing to issue a single annual license to date.
• Criticizes the agency for a “lack of understanding” of the barriers faced by social equity applicants.

“Stakeholders report waiting months to receive basic licensing responses from DCR,” the motion notes.

“Most concerning, Social Equity Applicants have repeatedly shared that they believe DCR is actually the greatest impediment to their success. We need to implement common sense changes to DCR’s licensing practices.”

The motion proposes eight specific changes to the city ordinance governing marijuana licensing, but several of the suggestions have already been made, DCR Executive Director Cat Packer said during a hearing last week.

In an Oct. 29 report, Packer shot back that the overall situation – and the unhappiness among all stakeholders – is largely the City Council’s fault, not the DCR’s.

Packer wrote that the DCR has been underfunded and understaffed since its inception in 2017 and that the department faced an overwhelming task that was nearly impossible to achieve.

“Despite steady and increasing support from the city, DCR continues to lack sufficient resources,” she wrote.

Packer noted that her department had only three staffers “when (the DCR) began accepting applications for commercial cannabis activity” and that the number increased to 12 only in 2019. She said the DCR is currently at 30 staff members, including 11 who are devoted full time to licensing.

“Critical vacancies remain and existing personnel challenges have only worsened by the COVID-19 pandemic,” Packer wrote.

In addition, Packer wrote that many of the proposals contained in Harris-Dawson’s motion would “cause more harm than good” and referred to some of the suggestions as “alarming” because they would undo portions of city law that are intended to protect social equity applicants.

If Harris-Dawson’s motion were adopted as is, then more than 250 social equity business applications “would be at risk of being deemed abandoned immediately” because it would establish a new timeline for license approvals that would be simply unworkable, Packer wrote.

Packer suggested tweaks to the ordinance in her 37-page response, and after she presented it to the city’s Cannabis Regulation Commission last week, the commissioners decided to put it on the Nov. 18 meeting agenda so they could vote in formal support of the suggestions.

Possible changes

Packer told the commission she hopes the City Council will agree to the following tweaks, among others:

• Allow all social equity applicants to resubmit their business license applications within one year if their application was deemed “abandoned.”
• Establish new fees and timelines for applicants to accelerate the licensing process.
• Allow both applicants and existing licensees to relocate within select parts of the city.
• Give social equity applicants additional time to review their “equity share documents outside of the temporary approval process.”

Those are only a few of the changes on the table, excluding what’s in Harris-Dawson’s motion.

One of the city’s Cannabis Regulation Commission members, Thryeris Mason, said in a written statement to MJBizDaily she hopes the City Council moves with “a sense of urgency” to adopt a combination of Packer and Harris-Dawson’s proposals.

The motion and the DCR’s response “collectively provide the city a pivotal opportunity to improve the administration of cannabis business licensing,” Mason wrote. “It is now up to city officials to make the difficult but necessary policy and fiscal decisions” to adopt and fund them.

Many of Packer’s proposals garnered a letter of support from the Social Equity Owners and Workers Association (SEOWA).

The organization thanked Harris-Dawson for pushing its issues to the fore.

But the group, agreeing with Packer that the motion would have “unintentional negative impacts” for license applicants if it were enacted, requested a brand-new motion altogether.

One of the requests – from both the DCR and SEOWA – is a new policy to finally give real cover to social equity applicants from “predatory” investors and operating agreements, many of which have sparked complex litigation among business partners.

Whether or not Harris-Dawson and his fellow Council members heed Packer’s suggestions, his motion is pending in four committees. If the motion is amended in the proper way, it could give L.A. social equity licensees the help they truly need to help the participants succeed.

‘A hopeful time’

A SEOWA spokesman said the group’s members see the situation as “a hopeful time.”

“The word ‘poised’ is the perfect word for where we’re at,” said Madison Shockley III, treasurer of SEOWA and a social equity licensee.

Shockley said there’s plenty of blame to go around for all the woes of the L.A. social equity program over the past four years – for both the City Council and the DCR.

But setting aside the blame game, the new proposed changes could be really what the program needs.

“Right now, there’s about 30 social equity (stores) out of the 200 that have opened,” Shockley said. “I think these nine recommendations could help open the floodgates to the other 170 to get open.

“It feels like we’re at a point where we can have a breakthrough.”

John Schroyer can be reached at john.schroyer@mjbizdaily.com.