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Cannabis Equity Programs: Updates from Oakland and San Francisco

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As most everyone now knows California’s statewide licensing and regulatory regime for medical and adult-use cannabis businesses took effect on January 1st of this year. However what readers of our Canna Law Blog know is that every jurisdiction is free to decide whether to regulate or prohibit cannabis businesses within their border. It’s the state’s deference to cities and counties that make our California Cannabis Countdown series so popular. Not only are local jurisdictions regulating what types of cannabis businesses they’ll allow, but also WHO is eligible for a cannabis license.

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Oakland and San Francisco are trying to even the balance.

In many of California’s major metropolises local legislators have made it a priority to enact social equity programs. The goal behind many of these social equity programs is clear: the war on drugs disproportionally affected communities of color and as a just society we need to right that wrong. In the Bay Area both Oakland and San Francisco have enacted legislation that stresses the importance of social equity programs.

We previously covered Oakland’s regulatory regime here but as a quick refresher Oakland’s ordinance requires that half of all cannabis businesses permits are issued to equity applicants. Oakland defines an equity applicant as an individual that:

  • Is an Oakland resident; and
  • Has an annual income at or less than 80% of Oakland’s average median income;
  • and either
  • Was arrested after November 05, 1996 and has a cannabis conviction in Oakland, or;
  • Has lived for 10 of the last 20 years in a number of police beats

After equity applicants, Oakland’s licensing regime gives priority to general applicants that are equity incubators. In order to serve as an equity incubator a general applicant must provide the following:

  • Providing free rent for a minimum of three years;
  • Provide a minimum of 1,000 square feet to the equity applicant; and
  • Provide the equity applicant with all required security measures.

Oakland has also realized that just providing priority processing to equity applicants alone is not enough to combat a history of disproportionate targeting of communities of color for criminal law enforcement. Oakland will also be hosting cannabis summits, orientations, and bootcamps for equity applicants. They’ve also created an online portal for equity applicants to connect with incubation partners.

San Francisco, like Oakland, has also created an equity program but has also taken the extra step by placing restrictions on who can apply for a cannabis business license. In 2018, San Francisco’s Office of Cannabis (“Office”) will only issue cannabis licenses to applicants that meet one of following criteria:

  • Qualify as an equity applicant or equity incubator;
  • Previously possess a valid medical dispensary permit under Article 33 of the Health Code;
  • Were issued a temporary cannabis business permit by the Office of Cannabis (which required you to register with the Office and show proof of operation prior to September 26, 2017);
  • Demonstrate compliance with the Compassion Use Act of 1996 (a/k/a Prop 215) and were shut down by federal prosecution or threat of federal prosecution;
  • Applied and received approval for a medical cannabis dispensary from the Planning Commission; or
  • Registered with the Office as pre-existing non-conforming operator.

On top of restricting the individuals that can obtain a license in 2018, San Francisco is placing an emphasis on social equity by granting equity applicants and equity incubators with priority processing in the permitting process. San Francisco’s equity applicant definition and incubator requirements differ from Oakland’s. In San Francisco an equity applicant is defined as someone that meets at least three of the following six conditions:

  • Meet certain household income limits (income limit varies depending on the number of people in your household);
  • Have been arrested from 1971 to 2016 for a cannabis offense;
  • Had a parent, sibling, or child arrested from 1971 to 2016 for a cannabis offense;
  • Lost housing in San Francisco after 1995 through eviction, foreclosure, or subsidy cancellation;
  • Attended school in the San Francisco Unified School District for a total of five years from 1971 to 2016; or
  • For a total of 5 years from 1971 to 2016, have lived in San Francisco census tracts where at least 17% of the households had incomes at or below the federal poverty level.

On top of those requirements there are also certain ownership interests and corporate positions that an equity applicant must hold in the cannabis business. If you want to operate a cannabis business in San Francisco in 2018 and don’t meet any of the criteria previously mentioned (prior operator or equity applicant) you’ll have to act as an equity incubator, which requires ALL of the following for three years:

  • Have local residents perform 30% of all work hours;
  • Have half your employees meet three of the six conditions for equity applicants; and
  • Provide a community investment plan with businesses and residents within 500 feet of your location.

And at least one of the following conditions:

  • Submit a plan to the Office of Cannabis for providing guidance to equity applicants running a new cannabis business; or
  • Provide an equity applicant with rent-free commercial space and use of security services for three years. The rent-free space has to equal or exceed 800 square feet or be at least 10% of the incubator’s space.

Both Oakland and San Francisco will be issuing progress reports on the status of their respective social equity programs and it will be interesting to see how many cannabis permits end up being issued. These are noble and necessary programs and we hope that they succeed. We’ll be sure to keep you posted.