Denver’s Marijuana Licensing Work Group met for the final time last week, virtually, to discuss how to develop an equity program, who would qualify as an equity applicant, and which services or benefits might be available to those applicants.
The previous three meetings focused on equity in the context of new licenses. These meetings have brought together regulators, city council members, and representatives from Governor Jared Polis’ office, the city attorney’s office, the Mayor’s Office of Social Equity and Innovation, and Denver Public Schools. The group will make recommendations to Denver Mayor Michael Hancock and the City Council for approval.
(Cannabis Wire covered the other three working group meetings, which covered lengthy discussions about what the future of Denver’s cannabis hospitality and delivery industries could look like, through the lens of equity, and a broader discussion on statewide equity efforts.)
The group has compared cannabis social equity programs around the country, and how Denver’s existing licensing framework could change. As Cannabis Wire has reported, while Colorado was the first jurisdiction in the world to launch an adult use cannabis program, in hindsight, the state has fallen short when it comes to equity.
For example, a recent study found that 75 percent of Denver’s cannabis business owners are white.
“This study sadly confirmed what was widely suspected,” Ashley Kilroy, the executive director of Denver’s Department of Excise and Licenses, said in a statement when the findings were released. “Just like what has been seen across the state and in other legalized markets across the US, Denver does not have a diverse marijuana industry.”
Meanwhile, states that have more recently legalized adult use, like Illinois, or with active debates, are increasingly incorporating equity from the very beginning. Another example is New York, where lawmakers aren’t budging on any legalization proposal that doesn’t put equity front and center.
It’s against this national backdrop that, at last Thursday’s meeting in Denver, the group broke down the different elements of equity programs in other jurisdictions. Some examples: financial assistance for equity applicants, like reduced fees or a loan program; technical assistance and education to develop business skills and to help navigate regulatory requirements; incubator or accelerator programs; priority application processing and scoring of new or renewal applications, or additional points for fulfilling equity criteria; and priority and exclusive access to licenses in which specific licenses are reserved just for equity applicants.
“The conversations we’ve had have been really nuanced,” said Abbey Borchers, a policy analyst for the City and County of Denver. “We’ve spoken to partners in Los Angeles and Massachusetts and they have acknowledged some of their successes and some of their challenges and have had some really good advice about what kind of things to think about when we’re creating an equity program. But I don’t know if anyone’s prepared to say that they’re a success.”
Borchers pointed to problem areas and hurdles in implementing equity policies, noting the importance of “really open and transparent and frequent communication with your equity applicants.” Borchers said there have also been “some operational challenges for some places in terms of just rolling it out,” for example in Massachusetts, which had “some trouble with their local jurisdictions cooperating with creating their own equity programs.”
Jaci Flug, general counsel for Drizly, a national alcohol delivery platform with a cannabis arm called Lantern, raised the question of whether it’s been a benefit or detriment that Denver isn’t always in alignment with state law on cannabis.
“It’s not so easy to be first. And there might have been some mistakes made. Colorado has this patchwork of different municipalities and different laws,” Flug said. “Has it benefited Denver to have things different than the state rules, or does it benefit Denver more to be in line with the state laws?”
Jessica Scardina, chair of Vicente Sederberg’s Colorado regulatory law practice, said it’s easier to “see compliance” from cannabis licensees when state and local regulations are in alignment. She also pointed out that because Denver is the epicenter of the state’s cannabis industry, other smaller jurisdictions often look to Denver for guidance on how to draft their local rules.
“This results a lot of times in those other jurisdictions changing the regulations a little bit to tailor them to their jurisdiction, which leads to discrepancies across the state and municipalities. So I think for ease of use for a lot of licensees and regulators, alignment with the state first and foremost is pretty important,” Scardina said.
Michelle Garcia from the Mayor’s Office of Social Equity and Innovation asked how a “disproportionately impacted area” was determined. Councilwoman Candi CdeBaca responded that, in Denver, “we can be very specific about disproportionately impacted areas because it directly coincides or aligns with historic redlining. And so the ‘inverted L’ is the well known area of disproportionate impact. And in Denver, we can be explicit and call that out because everybody’s familiar with the tracks that includes.”
Truman Bradley of the Marijuana Industry Group encouraged Denver to focus on the aspects of equity that the jurisdiction can be successful in implementing.
“I would suggest that the city look at what its core capabilities are here, and I think really what that comes down to is, you know, prioritized license distribution or processing of some kind and financial assistance. I don’t think the city is the best partner when it comes to technical assistance in the cannabis space,” Bradley said. “I am hopeful, even in the time of COVID, that the city can put its money where its mouth is when it comes to social equity.”
Flug emphasized the importance of access to capital, especially during the COVID-19 pandemic. “We’re sort of talking about this in a vacuum. And when you talk about the access to capital and the financial assistance, I don’t think that can be overstressed at this time,” Flug said. “Access to capital definitely has to be top priority, if you want to see a successful program.”
Councilwoman CdeBaca and Sarah Woodson, of the Color of Cannabis, debated just how many social equity licenses should be allocated, and how, specifically, they should be rolled out.
“I don’t feel like there should be any openings for non-equity licenses at this point,” Councilwoman CdeBaca said. “When you have in Denver almost a thousand licenses and less than ten of them, maybe five, belong to people of color, why would we open up any non-social equity licenses at this point at all?”
The conversation turned several times toward the cannabis industry creating a fund to be used by equity applicants. Clarissa Krieck, National Cannabis Industry Association’s director of business development, highlighted that while the cannabis industry has been deemed “essential” during the COVID-19 pandemic, the industry faces other high hurdles to financial success, including the 280E tax provision that prevents cannabis businesses from writing off many business expenses.
“It’s a false sense that we’re swimming in money. Now, that is not to say that we cannot contribute, and we will,” Krieck said, noting that many financial issues for the industry can simply be traced back to federal prohibition.
John Bailey, of the Black Cannabis Equity Initiative, said that talking about the “tax scenario” through the lens of equity “smells of the same conversation we had when we talked about why we didn’t deal with social equity in the first place, it’s because we didn’t think about it, and there were the other things on the agenda,” Bailey said.
Bailey added, “I, for one, really don’t want to hear about their trials and tribulations because I’ve got eight years and eight billion dollars worth of waste and 400 years of bondage here that suggests that there’s some things that we can do now without taking those things into consideration.”
Regulators returned to the funding issue, especially in light of budget shortfalls due in part to COVID, and solicited feedback from the working group about how to fund the social equity program. CdeBaca suggested the potential to add a fee to the sale of a business, or that the funds come from current licensees.
“The thing we could change the quickest is a fee so that you don’t have to go through the voter process for a tax. So why not allocate a portion of their annual fee?” she asked.
Woodson suggested that the police budget needs “reallocating,” and that could fund Denver’s social equity program.
“We know that there’s a huge criminal justice budget that Denver has. Yes, there’s COVID. But if this is a priority, then there needs to be funding from the city that can come directly from the criminal justice budget to help to repair and restore people that have been negatively impacted by the war on drugs,” Woodson said.