Los Angeles Finishes Audit of Phase 3 Round 1 Processing (Cannabis Retail)

Posted by Jenna Rompel on April 1, 2020

LA Finishes Audit of Phase 3 Round 1 Processing

April 1, 2020: Los Angeles, CA

The City of Los Angeles has completed its audit of Phase 3 Round 1 Storefront Retail Licensing. The city employed a third party to conduct the audit following concerns and accusations the Accela portal was accessed by some before the application period officially opened at 10am on September 3rd in 2019, giving them an unfair advantage in the “first come, first served” process. All applicants were instructed that the application period was to begin at 10:00 AM on September 3, and before September 3, anyone trying to access the online application portal received a message stating “An error has occurred. The Accela System is currently down for scheduled maintenance. Phase 3 Round 1 is scheduled to go live on September 3rd, 2019 at 10 AM Pacific Daylight Time (PDT).”

DCR_process_chartThe audit revealed that a total of 226 applicants signed on to the Accela portal prior to 10 am on September 3, the intended time for the portal to “go live.” These applicants were able to get a crucial head start as compared to others who waited until after 10 am to log in, as instructed. Notably, the audit revealed that logging into the Accela system before 10 am provided applicants with a very substantial advantage. Out of the 100 applicants who were selected to receive an invoice and move onto the next stage of licensing, 69 signed on to the Accela portal before 10 AM. Thus, out of the group of 226 applicants who signed on to the Accela portal before 10 AM, 31% (69/226) were selected to receive invoices, while out of the 576 applicants who waited to log on until after 10 AM, only 5% (31/576) were selected to receive invoices. Thus, those logging into the system before 10 AM – contrary to the DCR’s instructions – were over six times more likely to receive one of the 100 invoices than those who followed the DCR’s instructions, and scooped up the majority of the available licenses, leaving few for those who followed the instructions.

The auditor’s report purported to find that, although there were issues with the Accela platform, the DCR’s “normalization process” created a fair and unbiased procurement process. The auditor further concluded that the DCR acted in good faith recommending the city finish wrapping up Phase 3 Round 1 processing and move onto Round 2. The results, however, indicate that those who logged into the system before 10 AM in violation of the application rules, were still much more likely to receive invoices than those who followed the rules. This makes sense, as such applicants were able to navigate through various screens full of text they were required to read, before anyone else, in a system where tenths of a second made a difference.

Now that the audit is complete, the City Council and its committees will be debating and discussing how to move forward with licensing in light of the audit results and public comments. Our law office will be urging the City to issue enough additional licenses to qualified applicants who played by the rules to at least make up for the number of licenses awarded to those who logged in before the designated start time. We are also calling for the City to immediately issue cannabis delivery licenses to qualified applicants with properties who are ready to begin business, so that they can begin recouping some of the significant losses they have incurred in reliance on the City’s licensing program as they await storefront licenses, and so the public may have a safe and reliable way to access cannabis during the coronavirus epidemic.

In addition, in preparation for Phase 3, Round 2 of storefront retail licensing commencing sometime later this year, Margolin & Lawrence will be offering our clients training tutorials on the Accela system for applicants to feel confident and ready for the next submission window.

Storefront retail applications are still open to submit for a Public Convenience or Necessity (PCN) finding for businesses in community plan areas that have met the soft caps of undue concentration. See our blogs here for information on the PCN process and contact Margolin & Lawrence to find out how we can help you obtain a Phase 3 Retail License under the PCN process.

 

Author: Jenna Rompel

For more information about this post, contact Margolin & Lawrence.

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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.