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Licensing Weed

NEIGHBORHOOD POLITICS-The Los Angeles Department of Cannabis Regulation (DCR) is responsible for administering the rules and regulations adopted by the LA City Council for licensed commercial cannabis businesses within the City. 

The administration, auditing, inspection, and regulation of regulatory compliance of licensed cannabis-related businesses are done in partnership with the Cannabis Regulation Commission and with support services from a number of other City departments. 

Licensing 

The primary mission of this DCR is licensing. 

Initially there was to be one commercial license per 10,000 residents, limiting total licenses to 400 to 450 citywide, with a soft cap on each of 35 City zones based on population. Six were already above the soft cap at the start of the program. With 187 of the City’s existing cannabis stores wanting to continue selling, theoretically between 213 and 263 additional licenses were available. 

To incorporate the social equity aspect, there were to be two social equity licenses issued for each regular commercial license. With 187 existing commercial licenses, that meant that 374 social equity licenses would need to be allotted before any other regular commercial licenses were issued. 

As things stand now, only social equity license applications are being considered and, since the tentative total of 561 (187 plus 374) significantly exceeds the proposed limit, no further regular commercial licenses can be contemplated. 

In addition to retail establishments, the DCR licenses all aspects of the cannabis supply chain – growers and other businesses supplying these stores to ensure that they operate pursuant to applicable regulations and their product is safe for consumers. 

The Social Equity Program 

Cannabis criminalization and its enforcement have had long-term, adverse impact on the City of Los Angeles, particularly for its low-income and minority community members. 

Los Angeles is one of a few jurisdictions in the United States attempting to address the impacts of past cannabis policies and their inequities by developing and implementing cannabis policies that focus on including benefits to those communities which had suffered the most from previous drug policies. 

The goal of the Social Equity Program is “to promote equitable ownership and employment opportunities in the cannabis industry in order to decrease disparities in life outcomes for marginalized communities, and to address the disproportionate impacts of the War on Drugs in those communities.” 

The Director of the DCR’s Social Equity Program works to provide business, licensing, compliance, and technical assistance to verified applicants with this goal. 

There is a three-phased checklist to assess the qualifications of a potential social equity licensee: if they have had a cannabis arrest/conviction, experienced personal poverty, and/or lived in a designated area that was unusually affected by prior cannabis enforcement. 

The DCR and the LAPD 

The department grew from five employees when it started in 2017 to 32 during the past fiscal year. Furloughs and cuts due to union settlements last year and the current pandemic-induced economic crunch will impact staffing and what the DCR can accomplish this coming year. 

While there may be little need for more licensing, there is the growing need for more effective enforcement. The DCR still lacks their own enforcement unit and has to depend on the LAPD and LAFD, whose resources are spread thin and whose priorities are elsewhere. 

Since only licensed retailers can purchase legally tested product, there is a huge public health danger due to illegal operators being able to cut product with unknown chemicals and filler which can be carcinogenic and/or toxic. 

Shutting down these unlicensed operations can be resource-intensive and require specialized experience. These sites can too often be fronts for other illegal activities from gun running to methamphetamine distribution. The weaponry and danger involved can require SWAT team levels of sophistication, so it would behoove the City to assign the DCR a dedicated LAPD unit with the necessary skills and experience.  

Last year, the City budgeted $10 million in LAPD overtime for enforcement but, since police overtime has become a victim of the current budget-slashing, the DCR and the City of Los Angeles now face a serious problem. 

Other partnerships 

The DCR depends on a number of other departments for assistance in executing its mission, including the LADWP, the LAFD, and Building and Safety. 

These departments handle building inspections, and deal with the water and power issues as well as addressing potentially toxic emissions including biogenic volatile organic compounds associated with growing, and butane which is used in extraction of the plants’ oil. 

To effectively administer the Los Angeles cannabis industry without exponential expansion leading to the omnipresent problems of siloization and bloat, the City must allocate cannabis-specific funding to these other departments. 

Moving forward

Now that the neighborhoods have had time to experience the impact of a legal cannabis industry, the DCR must solicit their suggestions and address their concerns. 

While the intent of the social equity program is positive, as it stands now the restrictions lock out too many residents from being able to open and run a commercial cannabis business. 

The City must reconsider the limit on the number of total licenses. This limitation, the need to fill customer demand, is one of the primary reasons too many unlicensed cannabis businesses are still flourishing. And any operation outside the law tends to fuel other criminal activities. 

As well as empowering the black market, restricting the number of legally licensed facilities also limits the amount of taxes that the City can bring in. 

If all cannabis retail outlets were legal, flourishing without the competition of illegal “trap” shops, their taxes could exceed $100,000 per month per store. Almost half a billion dollars.  

Enough to cover not only the cost of enhanced enforcement but some or all of the City’s current structural deficit, potentially $400 million, with a little left over for needed infrastructure improvements. 

The foregoing was drawn in part from a meeting of the Budget Advocates with key members of the Department of Cannabis Regulation on October 28, 2019.

 

(Liz Amsden is a member of the Budget Advocates, an elected, all volunteer, independent advisory body charged with making constructive recommendations to the Mayor and the City Council regarding the Budget, and to City Departments on ways to improve their operations, and with obtaining input, updating and educating all Angelenos on the City’s fiscal management.) Photo: Eric Engman / AP. Prepped for CityWatch by Linda Abrams.