Yesterday, I attended the first public meeting of the Los Angeles Cannabis Commission held in 2019 and I’m reporting back on the content of the meeting, my “takeaways” from it and how that might impact cannabis licensing in Los Angeles. The meeting was at Los Angeles City Hall in the City Council Chambers. The crowd easily filled the expansive (and beautiful) space, and it was standing room only at one point.

As commission meetings are normally scheduled to be held every other Thursday, and there hadn’t been a meeting since November 29, 2018, there was clearly some pent up demand to communicate with the commissioners and the Executive Director of the Department of Cannabis Regulation, Cat Packer.

Amazingly, not a single member of the public said anything negative about the cannabis industry. No one said “I don’t want this business in my neighborhood” or “cannabis businesses bring the wrong crowd” or “what about the children” or any of the tired NIMBY tropes that come up around cannabis. It was refreshing to see a crowd so united in support of a new industry.

That being said, not everyone was happy with the progress of the DCR in implementing the programs required by the Cannabis Procedures ordinance, particularly the Social Equity Program (§104.20). In fact, most of the public comments had something to do with the implementation (or lack of implementation) of that program. More on Social Equity below.

The Commission’s meeting agenda focused on three main areas: 1) reporting on the status of phase 1 proposition M (existing medical marijuana dispensary) and phase 2 licensing efforts; 2) reporting on the Social Equity program; and 3) enforcement efforts against unlicensed cannabis businesses.

The DCR reported that it has temporarily approved 178 phase 1 applicants. These are existing medical marijuana dispensaries (EMMD) that have priority application under proposition M. Additionally, they have granted temporary approval for 55 phase 2 applications. Phase 2 applicants are effectively the suppliers to EMMDs. Executive Director Packer also described in great detail the efforts the DCR undertook to get to this point, with very little staffing and infrastructure. Some other interesting facts, only 8 out of 88 cities in LA county allow commercial cannabis activity, and only 89 of 402 California cities allow it.

Many of the public comments and much of Executive Director Packer’s discussion centered around the Social Equity program. Simply put, the Social Equity program is supposed to put those in communities disproportionately impacted by the “war on drugs” next in line for cannabis business licenses. The ordinance outlines programs the DCR is to offer to assist Social Equity applicants.

There are two main issues with the Social Equity program currently: 1) the city has not set aside funding for the DCR programs outlined in the ordinance and 2) there are a very small number of available licenses (the estimate is about 200) for a very large group of qualified people, the DCR must decide how to award these licenses.

In its report to the commission, the DCR recommended a two phase solution with different award methodologies (first come/first served, lottery and merit based), and asks the mayor’s office for funding. The commission passed a motion to implement the DCR’s recommendations and to write to Mayor Garcetti to demand funding.

Understandably, those eligible for Social Equity licenses are eager to understand the process and to get licensed, as they have been waiting for more than year for guidance. Some have leased or purchased property, others have business plans that are held up while these details are settled. Hopefully, adoption of these recommendations will be the first step forward in getting the program moving.

Los Angeles has a significant number of unlicensed cannabis businesses that are causing problems such as impacting revenue for legal businesses, reduced local and state tax revenue and safety problems such as untested products. How to close these businesses is a hot topic and one that was the subject of much discussion and public comment. The DCR itself does not have an adequate enforcement mechanism to close unlicensed shops, so it’s working with all the relevant city agencies to form a task force to address these businesses. Based on the discussion, there appears to be a genuine desire to strike the right balance between enforcement with criminal penalties and enforcement that removes the incentive/ability to stay in business through civil means. Time will tell what is effective, but with a large unlicensed market, it will be difficult for the legal market to thrive.

I’ll continue to bring you updates as they are available.

With California’s dual state and local licensing structure, understanding the process and players at the local level is potentially much more important than knowing the state rules. Regardless of the stage of your business, competent legal counsel is critical to guide you through the licensing and compliance process.

As always, nothing in this post constitutes legal advice or representation. Please contact me directly to discuss how the above impacts your specific business situation.

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