Disgruntled equity applicants poured into the Los Angeles Cannabis Regulation Commission meeting on December 5, which took place to discuss the status of the licensing process for commercial cannabis retailers and, particularly, the Department of Cannabis Regulation (DCR) Social Equity Program.
Social Equity applicants and advocates came armed with complaints about the first round of the Phase 3 retail licensing process, which kicked off in early September. Whereas Phases 1 and 2 gave licenses to existing legal medical cannabis businesses seeking adult use business licenses, Phase 3 will provide licenses to new business owners with priority given to Social Equity applicants on a 2:1 ratio.
For an hour and a half, people came forward and spoke about what they called the failure of the Social Equity Program and the financial hardship they’ve experienced as a result.
They also spoke about the need for a seat at the table during any further discussions to ensure that the right questions are asked and answered with regard to their concerns around fairness in the licensing process.
Attendees were asked to quiet down several times and at least three people were escorted out by officers following angry outbursts about the way DCR has handled applications.
At the Commission’s October 24 hearing, DCR executive director Cat Packer acknowledged that two applicants gained access to the online application prior to the September 3 launch because they reset their passwords moments before the 10 a.m. start time.
On November 18, following a call for an independent investigation by Mayor Eric Garcetti, Packer announced that this latest round of the application process would be audited by a third party and that the process would be put on hold until the audit was completed.
Packer addressed concerns in a November DCR update. “DCR recognizes the imperfect nature of this process, but we are confident that the integrity and fairness of the process has not been compromised. Nevertheless, the imperfect nature of policy implementation has fueled mass speculation and contention,” Packer wrote.
Packer reiterated this sentiment in Thursday’s meeting, asserting that DCR took reasonable and appropriate actions to ensure that applicants were not unfairly advantaged or disadvantaged by these two early applications. This was done by “normalizing” the early applications to a 10 a.m. start time by giving them an order number based on the amount of time it took them to complete their applications. Members of the audience and the Commission had questions about whether this approach was reasonable. It is unclear whether different internet speeds and the program used to implement the application process could have impacted the time that these applications were submitted.
Packer spoke about implementation of the Social Equity Program and the harm applicants feel it has caused them.
“I agree with many of the folks in this room who are frustrated by the hope that was presented by this department and by this Program. I didn’t think that it would take us this long to get to this point and I am disappointed with where we are at,” Packer said.
Packer addressed those upset that DCR allowed 802 applicants, who say they took financial risk to participate in the Phase 3 process, when only 100 would be selected.
“For the 700 people who aren’t successful, we created unnecessary harm,” Packer told the audience.
Packer pinned the problems in the process on the length of time it is taking to staff and resource DCR to ensure that proper structures and programs are in place to support applicants, especially with respect to the business compliance assistance program. Packer outlined plans for the hiring of six new consultants to assist in this program moving forward. Packer also expressed a need for “proper leadership” from affected communities and elected officials to improve the process, however, no specific details were given on the role these leaders should play.
Members of the audience voiced concerns about a lack of accountability and communication from DCR and the Commission, and that they did not feel they were being heard or responded to effectively. Packer agreed that DCR had not been communicating efficiently and said that this was a result of not having a public information director or designated public information campaign. Packer said that communication would be a top priority in the new year to better facilitate conversations between stakeholders, the community, and the DCR.
Near the end of the three-hour meeting, the Commission had a chance to respond to comments made by Packer and the attendees and expressed regret over the hardship to applicants who have been paying for rent on properties that may not receive licenses. Several audience members described that their life’s savings had been spent on these properties as they continued to pay thousands of dollars in monthly rental fees without being able to operate a business. Some applicants had investors, but say they were encouraged to sign unfavorable contracts with them, and others had investors pull-out.
“People from south Los Angeles who represent the people who have been disenfranchised by this country,” said Commissioner Philip Mercado, “have had hope dangled in front of them only to have it taken away over and over again. To have the city play into that one more time is unjustified.”
Assistant City Attorney Heather Aubry briefly paused the discussion to warn the Commission that they could not address anything that was not included in the agenda, which included the Phase 3 audit. It was then agreed upon that because Packer spoke about the audit in her report, it could be discussed by the Commissioners during the meeting, but no motions could be made on the subject.
Rita Villa, vice president of the Commission, responded with frustration that the Commission “took so long” to get the Social Equity Program up and running and about the “inability of this Commission to make a recommendation with respect to the audit.” Villa added, “We aren’t really doing what I came here to do, which is to hear stakeholders and see things get implemented.”
The Commission outlined items they would like to see. Since these recommendations could not be made in the form of a motion it is not clear what level of formality they will have:
• That there must be transparency in the audit process whereby everything that has been raised by stakeholders at the Thursday meeting and by Commissioners is responded to;
• That the community’s request to have a seat at the table for the audit be agreed to;
• That a full review of what happened on September 3, 2019 be completed and be placed into a database that displays how many applicants got in early, what was the remedy for each, and did the remedy adequately restore the integrity of the process;
• A full review of how the applicants got in early, how the passwords were unlocked and what ensued thereafter;
• That the application process not be paused during the audit process and that guidelines be provided on how applicants should proceed in the process with respect to the property they’ve been holding on to while they are waiting to have their applications processed for licensing;
• A different forum for community members to express their concerns as the Department has not been responding adequately or at all.
The meeting concluded with statements from Commission President Robert Ahn regarding the patience needed in developing a new industry.
“You think that LA is the only industry in trouble? Jurisdictions all over the country are having trouble,” Ahn said, mentioning that he traveled to Canada to see “what a fully legal market looks like.”
“You think they’re not having problems?” Ahn asked. “We are not alone in these issues. Can we improve? Yes. Must we improve? Yes. And we will improve,” but, Ahn added, “it’s going to take time.”
Corrections: Heather Aubry, Assistant City Attorney, not City Attorney Mike Feuer, addressed the Commission; Rita Villa is vice president of the Commission, not the Commission and DCR; recommendations listed by the Commission will not be put into a letter to the mayor.
