Months of dithering about issuing licenses to growers and manufacturers in Los Angeles could force a large chunk of the marijuana industry underground.
The irony of the present situation is that pot dealers who want to join the ranks of the legally-recognized marijuana trade are being sidelined by seemingly endless bureaucratic red-tape that is causing unreasonable delays in this new era of decriminalization.
In preparation for the legalization of recreational marijuana in California at the beginning of 2018, LA approved a complicated set of regulations that has now seemingly left the industry in a Catch-22 situation.
Who qualifies for a pot license?
First in line for license allocations were more than 130 retail outlets.
Second in line were the suppliers – the growers and manufacturers. They were supposed to be issued with licenses sometime in April but to date this has not materialized.
Retail outlets cannot open if they have no product to stock their shelves. Suppliers cannot provide the stock because they have not been licensed.
Adding fuel to this rapidly spreading fire is the set of complicated rules and regulations surrounding the marijuana industry. California cannot issue state licenses unless the vendor has obtained permission to operate by the local authority. And in terms of State law, it is illegal for retail outlets to buy marijuana products from unrecognized growers and manufacturers!
This situation could drive businesses underground, according to an attorney who specializes in real estate and cannabis licensing. His sentiments are echoed by a cannabis industry spokesman, Adam Spiker, who says businesses are being taken to the cleaners because they are being forced to hang onto costly leases on premises while awaiting the go-ahead to begin operating in LA. The cost of real estate has sky-rocketed since legalization and entrepreneurs are hard-pressed to find available space from which to operate their business ventures.The situation is so tenuous that one cultivation company has been forced to cut-back dozens of jobs in recent months.
Now let’s take a look at the third in line qualifiers.
These are new businesses, including retailers, growers and manufacturers who want a share of the LA marijuana pie. How long they will have to wait is anyone’s guess because firstly the city wants to address its “social equity” program which is aimed at helping people and communities previously disadvantaged by the drug war.
Who qualifies for the social equity program?
Marijuana entrepreneurs eligible for the social equity program include:
- Financially underprivileged applicants – they must either have been convicted of some form of pot crime or have lived in an area disproportionately affected by marijuana arrests
- Companies which provide shelter or some other form of assistance to disadvantaged applicants
But the social equity program doesn’t stop there. LA council members have asked to re-examine additional areas of the city for inclusion into the program. These include Boyle Heights, sections of downtown LA and the San Fernando Valley. It is believed that these communities could have been disproportionately affected by the drugs war.
Another setback is that LA is supposed to fund and create outreach and assistance programs that form part-and-parcel of the social equity program. According to city officials, only LA council members can reverse the current situation by voting to go-ahead with licensing social equity applicants before the city offers outreach and assistance programs.
Now here comes another hook! Growers and manufacturers must qualify for the social equity program to be eligible for a license in the second phase. If not, they go to the back of the line, even if historically they have been long-time suppliers, together with the rest of the third phase applicants.
Staff shortages blamed for delays
In the meantime, LA officials lay some of the blame for the delays on short staffing. Apparently there are only four people manning the city’s newly-created Department of Cannabis Regulation, despite the fact that the Council gave the go-ahead in February to appoint more staff.
But “getting it right will take time”, says Cat Packer, head of LA’s Department of Cannabis Regulation. She points out that the move from prohibition to legality is complicated and involves stakeholders from a wide range of investments in the cannabis market.
Licensing delays have cost LA dearly
So as frustrated cannabis entrepreneurs wait in the sidelines to begin operating legally, LA Mayor, Eric Garcetti, has announced that the city is expecting a $30 million tax windfall from the pot industry in the next financial year. This money will make a major contribution to the provision of services in the city.
But licensing delays have already cost the city dearly. Its expected $16 million cannabis tax income for the current budget year has already been whittled down to a mere R4.4 million. Enough impetus, one would think, to get officialdom off the couch and into top gear.