Tensions Boil Over at Los Angeles City Cannabis Regulation Commission Meeting

Posted by Margolin & Lawrence on December 11, 2019

Tension

The LA Cannabis Regulation Commission faced a tough crowd at its meeting on December 5.  The Commission does not have the power to change the cannabis licensing laws or increase the number of authorized licenses itself (only the City Council can do so), but it may make recommendations to the City Council and appears to have substantial influence in the process.  For hours during the December 5 meeting, many from the packed audience gave public commentary sharply critical of the DCR’s rollout of the first phase of licensing for new dispensaries.  Many also shouted out questions and frustrations from the audience throughout the meeting, with some being ejected by law enforcement at the request of the Commission members.    

 

With all the uncertainty and delays currently surrounding LA’s dispensary licensing, and an audit of the process that is planned, new applicants may want to focus now on applying for dispensary licenses in areas of “undue concentration.” Licenses in these regions of the City – including downtown LA, Venice, areas near the Harbor, and parts of the Valley – will be issued under a separate process that apparently will move forward as planned while the rest of the application process is stalled. During the December 5 meeting, the public comments consistently urged the DCR to process all 802 license applications submitted in Round 1 and award licenses to everyone eligible to move forward based on their zoning and paperwork.  Many also asked the DCR to eliminate the 700-foot buffer requirement between dispensaries, which has knocked many applicants out of contention through no fault of their own based on other nearby applicants submitting applications at the same time.  A constant theme in the commentary was the vast amount of money each applicant has spent on the process in reliance on the City’s promotion of its Social Equity Program, including leasing properties for months or even years in anticipation of becoming licensed, with most applicants left disappointed with nothing to show other than piles of debt.  With many more social equity applicants losing out than receiving licenses, some alleged that the program was an overall harm to the social equity community. After the public comments, which were unanimously negative, Cat Packer, Executive Director of the Department of Cannabis Regulation, gave a report on the status of the City’s licensing and regulatory program.  She started with some numbers.  188 Phase 1 “Pre-ICO” dispensaries have temporary licenses to operate, 90 of which have so far paid renewal fees, and the DCR is working on final inspections and annual license approval for this group.  There are 457 active Phase 2 non-retail (cultivation, distribution, and/or manufacturing) license applications pending, 146 of which have received temporary approval to operate.  As for Phase 3, Round 1 – the first licenses issued to new dispensaries, the City received 802 applications, and has issued over 90 invoices so far, out of a planned 100 in this Round.  The City expects to finish invoicing all 100 by December 31.  Several of the applications are on hold for further review, which generally takes two weeks. Cat Packer also discussed the planned audit of the Phase 3 process.  She stated that Mayor Eric Garcetti’s office, on November 6, told the DCR to finish issuing the 100 invoices for Round 1, and to then put the licensing on hold pending an audit of the licensing process, as previously requested by outgoing City Council President Herb Wesson, following various allegations of irregularities in the process.  Packer stated that the audit would be run through the City Administrative Office, which will oversee the audit, but that there has been no information issued yet regarding who will conduct the audit, or what its scope and parameters will be.  She stated that he DCR will help to recommend policy and law changes to the City Council as part of the audit process, and noted that anyone in the public can submit recommendations to cannabis@lacity.org. Packer discussed the frustrations many had expressed regarding having to lease properties for many months while waiting for the licensing to move forward.  She stated she was disappointed the process has taken this long and at where the DCR was at this point, noting that she had spent her first year trying to staff the DCR and secure resources.  She acknowledged that the City had created “unnecessary harm” for the 700 Phase 1 applicants who would not receive an invoice in this Round by setting up the licensing process as it had done.  She noted that applicants are allowed to operate other businesses out of the locations until any request for inspection is made for a cannabis license.  Packer also noted that the City is not allowed by law to consider applicants’ racial identity during any part of the application process. Regarding the requests to process all 802 applications, Packer noted that this would not be allowed under existing City law due the license cap of 1 per 10,000 residents.  She added that under the existing license caps, awarding licenses to all eligible Round 1 applicants would hurt potential future applicants without property who are waiting for Round 2, and potential applicants from the Valley and Boyle Heights who hope to apply after the City possibly adds people from those regions to be eligible the social equity program. On a positive note, Packer noted that the cannabis policies in LA are subject to change, and that there is space for more licenses to be issued, although increasing the license numbers may result in pushback from Neighborhood Councils.  Parker also stated she believed there was room for a conversation about lowering the 700-foot distance requirement between licensed dispensaries. Packer also stated that the DCR intends to recommend a new policy to go into effect early next year where licensed businesses are allowed to relocate, but only within their own Community Plan Area. Following Cat Packer’s report, there was some discussion among the Cannabis Regulation Commission members.  President Robert Ahn stated he will recommend that the audit include an audit of the Accela program itself (used by all applicants to submit their applications), and an understanding of all applications that were submitted early and whether the remedy implemented restored integrity to the process.  He also stated that he understands that all the Round 3 applicants are waiting to see whether the application process will start over or expand, and whether they should hold onto their existing real estate in the mean time.  He stated that he realizes people’s confidence in the City has been shaken by how the licensing process has played out, and that the audit is the first step to rectify that. Vice President Rita Villa appeared to be very supportive of the public commenters and their concerns.  She stated that the audit should include consideration of all comments that have been made by the public, and that it should respond to all the concerns raised.  She stated that she believed the Commission has a responsibility to hear the stakeholders and to “do something” about the problems.  She requested that the Commission prepare a letter to the Mayor’s office summarizing the people’s concerns that had been expressed at the meeting so that they can be included in the audit.  The Commission appeared to agree that it had been bad policy for the City to make people pay rent on locations for proposed dispensaries for months or years while they are waiting to receive licenses from the City.   Commissioner Victor Narro stated that the City had created “unnecessary harm” for many social equity applicants by the way it designed the application process, and that it should thus consider expanding the number of available licenses and reducing distance requirements. At the end of the meeting, it appeared the Commission understood the frustrations voiced by applicants, and was dedicated to helping to find a solution to mitigating the harm the City has inflicted on applicants by its application policies.  At the very least, the City wants to avoid lawsuits from the many unsuccessful applicants, and the easiest way to do this would be to award more licenses to more people.  For now, there is reason to remain hopeful, for everyone who submitted an application, that the City will make appropriate changes to its policies.  There is no clear timeline, however, and we expect to learn more over the next few weeks.

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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.