DCR Accepting Applications for Undue Concentration in Los Angeles

Posted by Margolin & Lawrence on September 17, 2019


 

Don't panic. Although the first application cycle for cannabis retail licensing in the City of Los Angeles closed this morning, the real fun is only beginning. After today, the City’s Department of Cannabis Regulation (DCR) will begin to process and review applications submitted in Round 1. Over 800 applications were submitted in the first round, but only 100 applicants will be issued a license through this electronic process. Applicants who are unable to obtain a license in Round 1 of Phase 3 will be eligible to apply for one of the 150 licenses to be issued in Round 2, although it is anticipated that the final round will yield an even larger applicant turnout. However, applicants can apply for a license in an area of undue concentration, and there is no limit on the number of licenses that can be issued through the undue concentration process. Under Los Angeles Municipal Code (LAMC) SEC. 104.20 (Part a.), the number of Social Equity licenses to non-Social Equity licenses is 2:1, which means that if 190 licenses were issues through Measure M Priority Round 1, 380 should be issued through a combination of Round 1 and Round 2 Phase 3 processing, and the "Public Convenience or Necessity (PCN)" process (for areas of undue concentration) described below. If the city abides by its own ratio, 130 retail storefront licenses will be authorized in addition to the 250 through the electronic process. 

WHAT IS "UNDUE CONCENTRATION?"

Phase 3 applicants are subject to the “undue concentration rule” passed into LAMC which restricts business location eligibility based on data from the 2016 American Community Survey, not on any state law requirements. The rule sets a limit on the maximum number of licenses that can be issued in each Los Angeles Community Plan Area. The implementation of undue concentration in Los Angeles further complicates what is already a difficult task for many hopeful cannabis entrepreneurs who have been verified for the City’s Social Equity program, which aims to provide priority licensing and accessibility to individuals who have been disproportionately impacted by the war on drugs. Phase 3 Social Equity applicants must find properties that meet not only the plethora of other local requirements (e.g., correct zoning, 700 feet distance from any other dispensary or “sensitive use” areas) but also within specific communities that has not reached their license cap -- unless the candidate is able to successfully lobby City Council to approve them through the PCN process.

THE PUBLIC CONVENIENCE OR NECESSITY (PCN) PROCESS

The "Public Convenience or Necessity (PCN)" process.  process was established by the City Council and passed into LAMC to provide applicants who wish to apply for a license in an area that has already met undue concentration a chance to appeal their ineligibility based on the undue concentration rule. Applicants must submit an online application and pay a $1,499 PCN request fee to be routed to the City Council. Then, applicants must lobby the City Council to receive their approval and become eligible to apply for a license in an area that is undue.

Six of the 36 Community Plan Areas in Los Angeles have already met undue concentration. These areas were deemed unduly concentrated (with zero licenses available) prior to the Round 1 application cycle which began on September 3rd. At that time, several other Community Plan Areas had as few as two or three licenses remaining. These numbers can be viewed for each Community Plan Area on the DCR’s interactive map. The DCR will only issue the number of licenses indicated as “available” on the map in each Community Plan Area during Round 1, and licenses will be distributed on a first-come-first-serve basis. Therefore, even individuals who applied for a Round 1 license in an area outside of the six that have already reached undue concentration are subject to the consequences of the regulation and may be routed to the PCN process. In its review of applications submitted during Round 1, the DCR will issue licenses to eligible applicants on a first-come-first-serve basis (i.e., applicants with an earlier application timestamp will be processed first).Once an area becomes unduly concentrated, Round 1 applicants with later submission timestamps will automatically be routed to the PCN process unless their location is within 700 feet of a sensitive use property or another dispensary. Although the application window for the 100 Round 1 licenses closed this morning, the online PCN application will remain open for applicants that did not apply during Round 1 and wish to apply for a license in an area of undue concentration.


Other cities and municipalities in California who have not enforced additional location requirements like the undue concentration rule -- including Oakland, the very city Los Angeles modeled its Social Equity program after -- attest to the rule’s redundant and excessive nature. The 187 businesses currently holding retail licenses in Los Angeles who applied in Phase 1 as Existing Medical Marijuana Businesses (EMMDs) were also not subject to this rule. In addition, places like the  Oaksterdam cannabis dispensary district in downtown Oakland have been havens of community, not crime. Moreover, the unfairness that can result from a system like the PCN process -- which has essentially no guidelines and is subject to the very sticky nature of local politics -- would be eliminated if the City simply allowed everyone who applied to run a dispensary, so long as they respected the sensitive use requirements other than the intradispensary buffer. Our firm will continue to advocate for the eradication of the undue concentration restriction but is helping applicants navigate the requirement and its consequences since the situation does exist presently. 

WHY YOU WANT US TO LOBBY FOR YOU

Over 800 applications were submitted in Round 1. It is likely that several more Community Plan Areas in addition to the existing six will become unduly concentrated and applicants in these Areas will be required to undergo the PCN process - regardless of whether or not their Area was one of the original six. Given the high degree of uncertainty regarding who will be subject to the PCN process, our team is proactively preparing to take the first steps of a PCN appeal for each and every one of our clients who applied during Round 1.

Margolin & Lawrence has obtained over 200 state and local cannabis licenses throughout California and one in Massachusetts. Our founding partners, Allison and Raza, have litigated cannabis and other drug cases throughout their careers ( 17 and 16 years, respectively ) across the state and federal courts of our country, and have appeared in Hawaii, Utah, Nebraska, and Nevada, just to name a few. Our years of experience trying marijuana cases in front of juries has trained us for the battleground that is city politics.

Their experience fighting the war on drugs and fighting for drug and marijuana defendants, specifically, gives them the credibility to discuss the Social Equity program and their clients' willingness to re-enfranchise those who have been systematically excluded. Our firm was founded on the same core values as those of the Los Angeles Social Equity program. Allison and Raza have demonstrated a passion for drug legalization and criminal justice reform throughout (and even before) their careers.

Allison began her drug law reform efforts at age 12 when she discovered the insanity of the drug war while writing her sixth grade DARE essay on the Medellín Cartel. Her parents' careers as criminal defense attorneys and advocacy for drug law reform gave her an early and rare insight into the traumas inflicted on people, by the criminal justice system. During her time as a Harvard law student, she published her thesis On the Right to Get High where she argues for the decriminalization of all drugs and states that current state and federal laws are unconstitutional.

Before working with Allison in 2009, Raza worked at the CATO Institute, the ACLU, and the Center for Individual Rights fighting on behalf of individuals who have been disproportionately impacted by the war on drugs. He was also a federal clerk for the 9th Circuit Court of Appeals. Together, Allison and Raza founded their 501c4-registered lobbying firm, Advocates for Healing America, in order to advocate for drug policy reform and provide support to political candidates with a like-minded agenda.

Margolin & Lawrence remains committed to our founding values and will continue to do everything in our power to ensure we help individuals who have been who have been disproportionately impacted by the war on drugs. Our current efforts are aimed towards ensuring that victims of this war have the access they deserve to reparative government programs such as the Los Angeles Phase 3 Social Equity licensing process. 

If you have applied for a Round 1 retail license or if you are seeking to apply for a license via PCN or Round 2, we invite you to contact a member of our team immediately to discuss how we may be able to advocate on your behalf. We cannot take clients with retail properties that are within 700 feet of our current clients and are accepting new clients on a first-come-first-serve basis. Therefore, we recommend contacting a member of our team sooner than later to minimize the chances of conflict.

ALL YOU NEED TO KNOW ABOUT THE DCR PHASE 3 ROUND 1 LICENSING AND SOCIAL EQUITY WORKSHOP HELD ON AUGUST 6, 2019

Posted by Margolin & Lawrence on August 8, 2019

(Picture of DCR building in Los Angeles)

On August 6, 2019, M&L partner J. Raza Lawrence attended the Phase 3 Round 1 Licensing and Social Equity Workshop hosted by the Department of Cannabis Regulation (DCR). The DCR provided an update on Phase 2 applications, the Social Equity Program, and the application process for Phase 3.

Everything You Need to Know About Los Angeles Phase 3 Licensing

Posted by Margolin & Lawrence on July 28, 2019

 

Undue Concentration

Posted by Raza Lawrence on June 25, 2019

     

Take Our Quiz to Find Out if You May Qualify for Social Equity

Posted by Zachary Tucker on June 13, 2019
 

Opportunity for Potential Investors to Join Pending Phase II Licenses

Posted by Raza Lawrence on May 17, 2019

 

Governor Releases Revised State Budget, Statutory Changes Affecting Cannabis in California

Posted by CA NORML Guest Blog on May 13, 2019

 

Cracking Down on Compliance

Posted by Margolin & Lawrence on April 30, 2019

     

     Operational compliance has become paramount to the success of many cannabis businesses following new state regulations that went into effect earlier this year.  For others, non-compliance has been a great downfall. Following the legalization of commercial cannabis, the state of California hastily drafted and passed emergency regulations which outlined licensing and operational requirements for cannabis businesses under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). These emergency regulations went into effect in December of 2017 to provide a temporary solution for the lack of cannabis legislation until more thorough regulations could be drafted and adopted by state agencies. Just three months ago, the Office of Administrative Law (OAL) approved new regulations which were immediately adopted by all three state licensing agencies. The new regulations include many significant changes from the previous emergency regulations and introduce more restrictive guidelines for cannabis businesses. Further, the new regulations define serious implications for businesses who violate the new guidelines – from fines up to $250,000 to loss of licensure. In recent months, a rapid number of compliance enforcement agencies have emerged at both the local and state level. Licensed cannabis businesses in California have experienced a peak in random compliance inspection visits, raids from local and state law enforcement, and seizure of cannabis products. With the commercial cannabis industry now in full effect, local and state agencies are beginning to focus less on setting the framework for the industry and more on enforcement of regulations.

A majority of licensed cannabis businesses are in some way in violation of current regulations despite their intentional efforts to comply. This is largely due to the cumbersome location-dependent nature of cannabis regulations. Although cannabis is legal in the state of California, commercial cannabis businesses are still federally illegal, and there is no federal legislation governing the licensing and operational compliance of cannabis businesses. As a result, cannabis regulations vary between states. Further convoluting the concept of cannabis compliance, regulations also vary within-state and are dependent on legislation issued by local authorities. All California cannabis businesses must adhere to statewide regulations enforced by the three state agencies – the Bureau of Cannabis Control (BCC), the California Department of Public Health (CDPH), and the California Department of Food and Agriculture (CDFA)  – in addition to guidelines enforced by local agencies. For instance, outdoor cultivation is legal at the state level per the CDFA, but it is prohibited within the City of Los Angeles per the local Department of Cannabis Regulation (DCR). Cannabis businesses must also comply with local Fire Department safety codes which also vary by jurisdiction.

With compliance enforcement on the rise, it is crucial for all cannabis businesses to stay informed about both state and local regulations in order to avoid high penalties or business closure.  Our firm offers full-coverage compliance counseling to licensed cannabis businesses. Our team is in regular attendance of local city hall and county government meetings pertaining to commercial cannabis in all areas of California and maintains current knowledge of the ever-changing regulations. We provide counsel in all areas of business compliance for cannabis retailers, distributors, cultivators, and microbusinesses. Our attorneys have a combined 20+ years of experience in the commercial cannabis industry and are active in compliance consulting throughout the state. We are able to provide our clients with expert contractors in building safety code pre-inspection, packaging and labeling compliance, product inventory and storage, advertisement restrictions, etc. We would love to help ensure that your cannabis business is successful and in compliance with all local and state regulations, giving you one less thing to worry about. If you have any questions or would like to speak with our attorneys to further discuss our compliance services, please feel free to reach us via email (info@margolinlawrence.com) or phone (323-253-9700). 

L.A. Retail Cannabis Legislation Moves Forward: What Happens Now

Posted by Margolin & Lawrence on April 22, 2019

 

 

Wednesday, April 17 - The City of Los Angeles Rules, Elections, and Intergovernmental Relations Committee discussed and approved an April 12, 2019 report and proposed ordinance from the LA City Attorney regarding cannabis licensing, with recommendations to make some amendments.

All recommendations were approved and will be redrafted for Council consideration and presented on Tuesday, April 30.

Today’s meeting moves the City closer to the opening of the highly anticipated Phase 3, which is the first chance that will allow the general public to receive dispensary licenses. The City Attorney was directed to make requested changes to the proposed new ordinance, to present for City Council consideration on April 30.

 

Notable Takeaways from Wednesday’s Meeting

The City of Los Angeles and the DCR have been hard at work in recent months, particularly as they sort through the specifics of Phase 3. While Phases 1 and 2 focused on existing cannabis dispensaries, non-retailers (i.e. growers and manufacturers), and social equity applicants, Phase 3 has been the main attraction for many entrepreneurs and would-be business owners looking to break into the industry.

In an earlier April meeting, the fate of Phase 3 was largely unknown due to funding. The DCR claimed that licensing was on hold as they awaited the Fee Deferral Program, which would allow Phase 3 to commence.

While a date has not been announced for the opening of Phase 3 applications, Wednesday’s meeting shed some light as to the direction the City and DCR are taking to solidify the process.

 

Among the notable new details that are coming out through these recent meetings and reports are:

● Changes to the Los Angeles Municipal Code establishing a first come, first served application process for retailer commercial cannabis activity licenses, with details regarding what is required for an application to be considered complete

● A proposal to allow applications for retail storefront dispensaries beginning January 1, 2020, in neighborhoods that have already exceeded Undue Concentration caps, with City Council approval

● Modifications to the process for issuing non-storefront retail licenses

● Allowing the Department of Cannabis Regulation (DCR) to grant Temporary Approval to Phase 3 storefront retail applicants

● Exempting Phase 2 applicants from the Undue Concentration requirements

● Setting deadlines for Phase 2 applicants to finalize their business location (May 15) and obtain Temporary Approval (substantial progress by July 1)

● Revising various requirements to qualify as a Tier 3 Social Equity Applicant and revising various benefits provided to Tier 1 and Tier 2 Social Equity Applicants

● Adding an additional reason to deny a license application — if the City has taken enforcement action against unlicensed cannabis activity at the same address since January 2018

● Clarifying the definition of license ownership relative to management companies

 

In addition, one of the recommendations to the draft ordinance that was approved on Wednesday was to instruct the DCR to finalize a timeline for all Phase 3 and Type 9 Pilot activities and post the information on the Department’s website. This indicates that an exact date for Phase 3 licensing could be established by April 30, if not sooner.

 

City Council Action Unanimously Passed Today

Posted by Margolin & Lawrence on April 11, 2019

The LA City Council held a meeting today to follow up on the April 1 meeting of the Budget Committee and approve the recommendations made on April 1.  After a good deal of discussion about the enforcement efforts against unlicensed dispensaries, the City Council approved all the recommendations with only minor revisions.  This means the licensing process can now move forward. 

The funding approved today by the City Council will allow the Social Equity Program to move forward, which is an integral part of the upcoming Phase 3 licensing process awarding cannabis licenses to new businesses in the City of LA.  So far, the licensing has been delayed while the City has worked through issues surrounding the Social Equity Program.  We are still waiting for the City to announce details of the timing of the next phase of LA cannabis licensing.  This phase will start with the issuance of 200 retail storefront and 40 retail delivery licenses, issued largely to Social Equity applicants.  

Now that the City Council has approved the Social Equity funding, we expect the licensing to open up soon, and now is the time for anyone interested in applying to find a property and get all the elements of their applications in order.
Before the ruling on the Social Equity funding, there was an update on enforcement efforts against unlicensed cannabis businesses, including utilities disconnects, cease and desist letters, and search warrants.

So far, the City has been shutting down the illegal businesses bureau by bureau.  The City started the crackdown in the Valley, where it has gone to 22 locations, with 10 more scheduled for next week when it will be finished with the Valley.  Then, it will move to the South bureau, where it will start with 10 locations in the Harbor area, and then move to the Southeast.  The City has also been disconnecting utilities from unlicensed businesses in the past month.  $2.3 million has been set aside by the police department for cannabis enforcement. 

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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.