AGENDA
ECONOMIC DEVELOPMENT AND TECHNOLOGY COMMITTEE
MEETING NOTICE
AUGUST 16, 2022
PUBLIC MEETING 5:30 P.M.
MEMBERS
Tyron Hampton, Chair District 1
Steve Madison, District 6
Andy Wilson, District 7
Jessica Rivas, District 5
STAFF
David A. Klug, Economic Development Director
Dion O’Connell, Deputy City Attorney
Garrett Stevenson, Recording Secretary
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ECONOMIC DEVELOPMENT DIVISION
Off ice of th e Ctty Man age r
CITY OF PASADENA
NOTICE OF MEETING
OF THE ECONOMIC DEVELOPMENT AND TECHNOLOGY COMMITTEE
AUGUST 16,2022
PUBLIC MEETING: 5:30 P.M.
Note to the Public: City Hall is closed to the public until further notice.
NOTICE IS HEREBY GIVEN that the meeting of the Economic Development and Technology Committee will be held by video conference on Tuesday, August 16, 2022 at 5:30 p.m., to discuss matters on the attached agenda. This virtual meeting is held pursuant to Executive Order N-29-20 issued by Governor Gavin Newsom.
Tyron Hampton, Chair
Economic Development and Technology Committee
I HEREBY CERTIFY that this agenda in its entirety, was posted on the Internet at www.cityofpasadena.net/commissions/city-council-economic-development-technology/ and on the Council Chamber Bulletin Board, Room S249, and the Bulletin Board in the rotunda area; City Hall, 100 North Garfield Avenue, this 11tl1 day of August 2022 by 4 p.m. and that copies hereof were faxed, emailed or delivered to each member of the City Council and to each local newspaper of general circulation, radio or television station requesting notice in writing, all of which recipients are identified on the distribution herein below.
DISTRIBUTION:
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Economic Development and Technology Committee
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MEETING AGENDA
ECONOMIC DEVELOPMENT AND TECHNOLOGY COMMITTEE
AUGUST 16, 2022
Public Meeting: 5:30 P.M.
Council Chamber, Pasadena City Hall
100 North Garfield Avenue, Room S249
PUBLIC MEETING – 5:30 P.M.
ROLL CALL
PUBLIC COMMENT – LIMITED TO ITEMS ON THIS MEETING AGENDA AND WILL
BE HEARD AT THE TIME THE ITEM IS CONSIDERED
APPROVAL OF MINUTES
NEW BUSINESS
INFORMATION ONLY
1. “TINY VILLAGES” AS A STRATEGY TO ADDRESS HOMELESSNESS*
2. POTENTIAL CHANGES TO CANNABIS REGULATIONS MEMO*
3. AN ASSESSMENT OF SOCIAL EQUITY IN THE CANNABIS INDUSTRY FOR THE CITY OF PASADENA*
4. CONSIDERATION OF AN INITIATION OF A ZONING TEXT AMENDMENT
RELATED TO THE PROHIBITION OF OVERNIGHT PARKING PERMITS FOR PROPERTIES WITH ADUs MEMO*
5. ECONOMIC DEVELOPMENT UPDATE*
ADJOURN
*Attachment
June 1, 2022
TO: Economic Development and Technology Committee
FROM: Department of Housing
SUBJECT: “TINY VILLAGES” AS A STRATEGY TO ADDRESS HOMELESSNESS
RECOMMENDATION:
This item is for information only; no action is required.
BACKG
ROUND:
The City of Pasadena continues to experience a homelessness crisis among its population. The results from the City’s last Point-In-Time Count indicates that 512 people were experiencing homelessness in February 2022, and 55% percent of those people were unsheltered (280). As the principal planning entity for the Pasadena Continuum of Care (“CoC”), the Pasadena Partnership to End Homelessness (Pasadena Partnership), led by the Department of Housing, coordinates and funds housing and services for people experiencing homelessness. For the past two years, the CoC’s investments in emergency shelter have focused on the provision of motel vouchers in response to the COVID-19 pandemic and the decompression of congregate shelter sites in order to quickly increase bed availability.
The COVID-19 pandemic has exacerbated many of the issues already plaguing the City’s unhoused population. Social distancing guidelines have forced the City’s congregate shelters to reduce their capacities by up to 75%. Thus, the need for new, non–congregate interim or “bridge” housing has grown more urgent. The “tiny home villages” model (“tiny villages”) as it is commonly known, offers one potential option to address this issue. The model has become popular nationwide and locally, and regulations for tiny villages have been adopted by several jurisdictions in California.
The spaces in which clients reside are generally considered in the industry to be detached dwellings of less than 100 square feet in floor area, providing separate, independent living quarters, and include basic functional areas for sleeping, restroom/shower and laundry facilities. The dwellings may be on a foundation and/or on Agenda Report
MEETING OF _ ___ _ AGENDA ITEM NO. _ __ _
"Tiny Villages"
June 1, 2022
wheels, subject to local zoning standards. Typical tiny village projects consist of one- or two-bed dwellings with air conditioning, heating, standalone laundry, restroom and shower facilities, outdoor eating areas, and onsite security and supportive services. The average length of stay is targeted between three and twelve months.
State Law -- Planning and Zoning Considerations
There are multiple land use categories that may accommodate tiny village projects.
Tiny villages meet the State's definition of "Low-barrier Navigation Centers," which are places for housing or shelter in which a resident who is homeless or at-risk of homelessness may live temporarily while waiting to move into permanent housing.
Government Code 65662 requires that Low Barrier Navigation Centers that meet the standards in that code section are allowed by-right in all mixed-use zones. This supersedes local zoning regulations. The City has a number of mixed-use zones throughout the City which are primarily within the Specific Plan areas.
Another alternative that has been used in other tiny village shelters is the Shelter Crisis section of State law (GC Section 8698 - 8698.4) which would require local governments to declare a "shelter crisis" and allows jurisdictions to adopt by ordinance reasonable local standards and procedures for the design, site development, and operation of homeless shelters and the structures and facilities therein, to the extent that it is determined at the time of adoption that strict compliance with state and local standards or laws in existence at the time of that adoption would in any way prevent, hinder, or delay the mitigation of the effects of the shelter crisis. This approach would be an alternative to compliance with the Zoning Code, General Plan, and certain Building Code requirements.
CASE STUDIES - TINY VILLAGES IN LOS ANGELES COUNTY:
Staff analyzed five (5) tiny village projects located in Los Angeles County that are currently in operation. The table below summarizes key characteristics of each project.
Additional details on these projects are provided in Attachment A "Case Studies".
Baldwin Eagle Highland North Montebello
Park Rock Park Hollywood
Number of units 25 48 117 39 30
Site cost City-donated City- City-donated City-donated City-donated donated*
Capital cost $0.6M $3.8M $4.9M $5.5 M $0.8M
Ooeratinq cost/yr $0.9M $1.9M $2.?M $0.9M $0.9M
Length of stay 90 days 4-12 mos. 4-12 mos. 4-12 mos. Projected avq. avq. avq. 6 mos. max.
Bathroom/shower Trailers Trailers Trailers Trailers Trailers Laundry Laundry shed Laundry Trailers Trailers Trailers shed
Food/meals Delivered Delivered Delivered Delivered Delivered *Portions of Eagle Rock site are also donated by the County and Southern California Edison "Tiny Villages"
June 1, 2022
Baldwin Park
Placed in service in November 2021, Esperanza Village is the first tiny village of its kind in the San Gabriel Valley. Each of the 25 units are heated and air-conditioned, with a bed, desk and electrical outlet. The 64-square-foot units are intended to provide bridge housing for up to three months before residents are placed in permanent housing, allowing up to 100 people a year to be served. Volunteers of America operates the project which includes providing on-site supportive services including case management, three daily delivered meals, and connections to health and mental health services. Additional site amenities include restrooms, laundry and shower facilities, and a dog run. The site has secured access and 24-hour security.
Eagle Rock
The Eagle Rock Tiny Village is located in an under-used parking lot between the east and west on-ramps for the 134 freeway and was opened in March 2022. The site has 48 units, including 3 ADA accessible units, equipped with two beds, electricity, and air conditioning, and is operated by Union Station Homeless Services which provides comprehensive wrap-around supportive services including case management and housing location services. The site is pet friendly and includes a pair of mobile hygiene trailers, laundry facilities and an outdoor seating area with shade. Residents are not required to submit to a curfew or drug testing, and neighbors in the surrounding area are able to contact the 24-hour on-site security with any concerns or issues.
Highland Park (Arroyo Seco site)
The Arroyo Seco tiny village, funded and built by the City of Los Angeles with 117 units, is the largest tiny village in California. The site opened in November 2021 and is the sixth tiny village site operated by Hope of the Valley Rescue Mission. The tiny village is situated on a sliver of the 6.8-acre Arroyo Seco Park on the north side of 11 0 freeway near Avenue 60. It was built at the edge of the park on existing asphalt to prevent the destruction of any trees and a nine-foot-tall barrier was installed on the freeway side to mitigate sound. The site also has three hygiene trailers, on-site laundry, water bottle filling stations, designated seating for food distribution and dining, as well as lighting and 24-hour security. Each resident living in the tiny village has full access to an array of social services including case management, housing navigation, mental health services, substance abuse counseling, as well as job training and placement.
North Hollywood (Chandler site)
Chandler Blvd is the first of a series of villages operated by Hope of the Valley Rescue Mission. The site officially opened its doors in North Hollywood in February 2021 and sits in a half-acre plot near the north end of North Hollywood Recreation Center. The first village of its kind in Los Angeles, Chandler Blvd has 39 units manufactured by Pallet Shelter that are 64 square feet in size, have two beds, heat, air-conditioning, windows, a small desk and a front door. The site was designed and funded by the City of Los Angeles and city-owned land was utilized to keep capital costs down. The site is also equipped with offices and laundry facilities, a dog run, hygiene trailers, and outdoor congregate space (including shaded tables for dining).
"Tiny Villages"
June 1, 2022
Montebello
The Montebello tiny village, Operation Stay Safe, is a joint project between the San Gabriel Valley Regional Housing Trust (SGVRHT) and the San Gabriel Valley Council of Governments (SGVCOG). The site recently opened in May 2022 and is operated by Volunteers of America. There are 30 units in total, and each unit has a bed, shelves, overhead light, A/C and heat, an outlet, and a door that locks. The site also has shared restrooms, showers, and laundry facilities, as well as a communal meal space. The site has 24-hour security, privacy fencing , and a secured entry for the benefit of participants and neighbors. No illegal items or substances, nor visitors are allowed on site.
Participants also have the option to move in with their pets. Residents have access to three meals a day which are prepared off-site and delivered ready to eat.
Staff interviewed contacts for each project and solicited "lessons learned" regarding the development and operation of their tiny villages. Responses included the following:
1. Neighborhood buy-in is critical. Work with constituents once site location has been identified.
2. Economies of scale is important (some indicated a minimum of 50 units).
3. The biggest part of the capital budget is not the installation of the units but infrastructure (sewer, power, water hookups).
4. The design of the project should blend in with the neighborhood.
5. Plan for receipt and storage/refrigeration of food.
These case studies do not necessarily represent the full range of tiny village models.
For example, project sites may be private land as well as publicly-owned land. The Department will evaluate potential tiny village opportunities as they may arise and bring such projects to City Council for consideration as appropriate.
Prepared by:
~ ~fl--;J
James Wong
Senior Project Manager
Attachment A - Case Studies
Respectfully submitted,
for WILLIAM K. HUANG
Director of Housing
Approved by:
Attachment A - Case Studies
BALDWIN PARK
1. Name and Site Location Esperanza Village; 14173 Garvey Avenue, Baldwin Park, CA
2. Vendor Boss Cubez
3. Site Operator Volunteers of America Los Angeles (VOA)
4. Units and Other Facilities There are 25 units, an office for the on-site Case Manager (24/7 presence), showers, restroom, individual storage bins, dog run, communal outdoor dining space, communa·J laundry, 24/7 security
5. Total People Served Estimated that up to 100 people will be served each year.
6. Average Length of Stay Target length of stay is 90 days.
7. Staffing On-site case manager from VOA (24/7 presence) and 24/7 security
8. On-Site Services Case management, housing location and navigation, referrals for services within the community to address any barriers to housing stability.
9. Food VOA prepares meals offsite and delivers all meals to each site.
10. Resident Selection Process The site is located in an area identified as a "hotspot" for individuals experiencing homelessness per the 2020 Point in Time Count. The location enables outreach workers to directly target unsheltered individuals in the area.
11. Land Cost/Funding Source City-owned land, no cost incurred
12. Annual Operations Cost $800,000 and one-year of committed funding with option to extend the program
13. Capital Cost $500,000 for construction from San Gabriel Valley Regional Housing Trust (SGVRHT) $800,000 for first year operating costs from San Gabriel Valley Regional Housing Trust In-kind staff time from the following City Departments: Recreation and Community Services, Public Works, Planning, and Building and Safety
1 Attachment A - Case Studies
EAGLE ROCK
14. Name and Site Location Eagle Rock Tiny Home Village; 7570 N Figueroa St. LA 90041
15. Vendor Pallet Shelter
16. Site Operator Union Station Homeless Services
17. Units and Other Facilities 45 Regular units and 3 ADA single units. 3 Food Storage spaces with separate administrative, care coordinator, and security offices, laundry shed with 5 washers and 5 dryers, 2 trailers for bathrooms and showers. 1 ADA and 10 regular bathroom and showers for clients with 1 ADA and 1 regular for staff.
18. Total People Served 50 participants to date since opening in March 2022. Maximum capacity is 93 people.
19. Average Length of Stay 4-12 months
20. Staffing 2 Care Coordinators, 1 Program Manager, and 3 RA/Security.
21. On-Site Services Care coordination and housing navigation/location services.
22. Food Food is brought in from Every Table on Monday, Wednesday, and Friday. It is prepackaged. Snacks are brought in by Union Station prepackaged chips, cookies, etc.
23. Resident Selection Process Pre- selection was done in the beginning from the nearby encampments. Clients were pre-registered and appointment times were set up and outreach workers bought in their clients along with current homeless verification. LAHSA now assigns new clients when clients move on to permanent housing.
24. Land Cost/Funding Source Owned by the City & County of LA, and Southern California Edison.
25. Annual Operations Cost $1.9 million
26. Capital Cost $3.8 million
2 Attachment A - Case Studies
HIGHLAND PARK
27. Name and Site Location Arroyo Sec □ Tiny Village; 401 S. Arroyo Sec □ Parkway; Los Angeles, CA
28. Vendor Pallet Shelter
29. Site Operator Hope of the Valley Rescue Mission
30. Units and Other Facilities 117 units (largest site in California) and other facilities including offices and laundry facilities, dog runs, hygiene trailers, outdoor congregate space for dining, amnesty lockers and checkpoints, video surveillance, 9 foot privacy fences that with ivy on it to blend in. Additional storage bins (55 gallons) in a separate designated area.
31. Total People Served Able to serve 230 people at maximum capacity.
32. Average Length of Stay Anywhere between 4-12 months.
33. Staffing Case managers, housing locators, 24/7 security
34. On-Site Services Case management, housing location and navigation, referrals for services such as mental health treatment, legal aid, and assistance with job searches, etc.
35. Food Hope of the Valley prepares meals offsite and delivers all meals to each site.
36. Resident Selection Process Outreach teams submit referrals and matches are made through CES.
37. Land Cost/Funding Source City-donated land, no cost incurred
38. Annual Operations Cost $2.69M - $63/bed each day for a full year
39. Capital Cost $4.9M- Estimated $42,000/unit for a total of 117 units 3 Attachment A - Case Studies
NORTH HOLLYWOOD
40. Name and Site Location Chandler Blvd; 11471 West Chandler Blvd.; North Hollywood, CA
41. Vendor Pallet Shelter
42. Site Operator Hope of the Valley Rescue Mission
43. Units and Other Facilities 39 units and other facilities including offices and laundry facilities, dog runs, hygiene trailers, outdoor congregate space for dining, amnesty lockers and checkpoints, video surveillance, 9 foot privacy fences.
Additional storage bins (55 gallons) in a separate designated area.
44. Total People Served Able to serve 75 people at maximum capacity with 2 people/unit.
45. Average Length of Stay Anywhere between 4-12 months.
46. Staffing Case managers, housing locators, 24/7 security
47. On-Site Services Case management, housing location and navigation, referrals for services such as mental health treatment, legal aid, and assistance with job searches, etc.
48. Food Hope of the Valley prepares meals offsite and delivers all meals to each site.
49. Resident Selection Process Outreach teams submit referrals and matches are made through CES.
SO. Land Cost/Funding Source City-donated land (parks/rec site), no cost incurred
51. Annual Operations Cost $0.9M - $63/bed each day for a full year
52. Capital Cost $5.46 million - Estimated $140,000/unit for a total of 39 units 4 Attachment A - Case Studies
MONTEBELLO
53. Name and Site Location Operation Stay Safe; 2000 Flotilla Street Montebello, CA
54. Vendor Pallet Shelter
55. Site Operator Volunteers of America
56. Units and Other Facilities 30 units and other facilities including pet and eating areas, laundry units (washer/dryer) and shower trailers, office/case management space, landscaping and inviting colors.
57. Total People Served Projected to serve 100 people annually.
58. Average Length of Stay Target length of stay is 90 days-6 months. Outcome data will not be available for at least another year.
59. Staffing The site will have 2 case managers, housing locators, 1 supervisor, 2 monitors and 24/7 security. Case managers are staggered to ensure weekday and weekend coverages.
60. On-Site Services Volunteers of America will provide all supportive services as the site operator, including housing navigation and location services, such as making sure people get theirs IDs and other required documents to support the transition to permanent housing.
61. Food Volunteers of America will contract with a caterer to provide the food.
62. Resident Selection Process Participants will be selected through local street outreach teams
63. Land Cost/Funding Source City-donated land (parking lot), no cost incurred
64. Annual Operations Cost Estimated $0.9 million
65. Capital Cost $0.8 million
5 Department of Housing
“Tiny Villages” as a Strategy
to Address Homelessness
Economic Development and Technology Committee
August 16, 2022
Department of Housing
TINY VILLAGES – INDUSTRY STANDARDS
• Typical tiny village projects utilize detached one- or two- bed dwellings of less than 100 sf floor area
• Dwellings provide independent living quarters with A/C and heating
• Dwellings may be on a foundation or on wheels
• Standalone restroom, shower and laundry facilities
• Provision of outdoor eating areas, supportive services and onsite security
• Average length of stay is targeted at 3 to 12 months
3 Department of Housing
CASE STUDIES
Staff analyzed 5 tiny village projects in LA County:
3 NORTH
HOLLYWOOD
BALDWIN
PARK
HIGHLAND
PARK
EAGLE
ROCK MONTEBELLO
Number of
units 39 25 115 47 30
Site cost City-donated City-donated City-donated City-donated City-donated Capital cost $5.5 M $0.6M $4.9M $3.8M $0.8M
Operating
cost/year $0.9M $0.9M $2.7M $1.9M $0.9M
Length of
stay
4-12 mos.
avg. 90 days 4-12 mos.
avg. 4-12 mos. avg. Projected
6 mos. max.
Bathroom/sh
ower Trailers Trailers Trailers Trailers Trailers
Laundry Trailers Laundry shed Trailers Laundry shed Trailers Food/meals Delivered Delivered Delivered Delivered Delivered Department of Housing
BALDWIN PARK
4 Department of Housing
BALDWIN PARK
5 Department of Housing
EAGLE ROCK
6 Department of Housing
EAGLE ROCK
7 Department of Housing
EAGLE ROCK
8 Department of Housing
HIGHLAND PARK
9 Department of Housing
HIGHLAND PARK
10 Department of Housing
NO. HOLLYWOOD
11 Department of Housing
MONTEBELLO
12 Department of Housing
CASE STUDIES – LESSONS LEARNED
1) Neighborhood buy-in is critical – work with constituents once site selection has been identified
2) Economies of scale is important (some indicated a
minimum of 50 units is ideal)
3) The biggest part of the capital budget is not the
installation of the units, but infrastructure (sewer, water, power hookups)
4) The design of the project should blend in with the
neighborhood
5) Plan for the delivery and storage/refrigeration of food 28 Department of Housing
UTILIZATION THROUGH 6/30/22
NORTH
HOLLYWOOD
BALDWIN
PARK
HIGHLAND
PARK
EAGLE
ROCK
Opening Date February 2021 November 2021 November 2021 March 2022 Number of Units 39 25 115 47
Total Served 150 46 167 58
Average Occupancy
Rate 76% 90% 66% 85%
Average Length of Stay
(exited clients) 84 days 77 days 50 days 26 days
Average Length of Stay
(current clients) 111 days 143 days 132 days 72 days
14 Department of Housing
OUTCOMES THROUGH 6/30/22
15 NORTH
HOLLYWOOD
BALDWIN
PARK
HIGHLAND
PARK
EAGLE
ROCK
Opening Date February 2021 November 2021 November 2021 March 2022 Total Number of Exits
through 6/30/22 105 22 88 12
Exits to Permanent
Destinations
(i.e. permanent housing)
16 (15%) 6 (26%) 2 (2%) 1 (8.33%)
Exits to Temporary
Destinations
(i.e. shelter, transitional
housing)
12 (11%) 4 (17%) 13 (15%) 1 (25%)
Exits to Institutional
Destinations
(i.e. hospital, nursing
home, jail)
7 (7%) 0 6 (7%) 1 (8.33%)
Exits to Place Not Meant
for Human Habitation
(i.e. streets, vehicle)
6 (6%) 2 (9%) 20 (23%) 4 (33.33%)
Exits to Other Destinations
(i.e. unknown, deceased)
64 (61%) 10 (46%) 47 (53%) 3 (25%)
Department of Housing
ADDITIONAL CONSIDERATIONS
• The City acts as the administrative entity for the Pasadena Continuum of Care, the primary planning entity for homeless services as designated by HUD
• The City is working with Citywise, Inc. to develop of an updated Homelessness Plan
> Community engagement (survey, focus groups, interviews) is underway
> Plan is expected to be completed in December 2022
• The Homelessness Plan will serve as a guiding document for the City/CoC for the planning, funding, and coordination of homeless services
16 CITY OF PASADENA
M E M O R A N D U M
TO: Economic Development and Technology Committee
FROM: David Reyes, Acting Assistant City Manager
DATE: August 16, 2022
RE: Potential Changes to Cannabis Regulations
This memorandum provides an update on potential amendments to existing cannabis regulations and policies and transmits a report from BOTEC Analysis.
EXECUTIVE SUMMARY
This memorandum identifies potential amendments to existing regulations and policies to further the goal of social equity in cannabis, which is to ensure that people from communities disproportionately harmed by cannabis prohibition and discriminatory law enforcement benefit from cannabis legalization. The following changes are discussed in further detail below:
1. Expungement. Develop or contribute to a program to help individuals expunge eligible prior drug related offenses from their record.
2. Community Reinvestment. Establish parity amongst dispensaries with respect to: 1) financial contributions to community organizations; 2) local and minority hiring practices; 3) local and minority contracting opportunities; 4) local and/or minority owned products sold through the store.
3. Social Equity License. Reserve the remaining 6
th permit as an “Equity Permit.”
OTHER CODE CHANGES
In addition to the above issues surrounding social equity, staff has identified other potential changes to regulations regarding cannabis businesses as further discussed below, to enhance the viability of these businesses:
1. Allowance for THC infused beverages;
2. Allow dispensaries to advertise consistent with other businesses, subject to local regulations;
3. Allow a 10% deviation in distance separation requirements to assist potential operators in securing a viable and code compliant location;
4. Eliminate requirement for annual audit but preserve the right to require one.
SOCIAL EQUITY IN CANNABIS
EDTECH COMMITTEE
AUGUST 16, 2022
2 BACKGROUND
At its July 15, 2021 meeting the EDTECH Committee , in conjunction with a review proposed changes to distance separation requirements, recommended to the City Council to consider potential future changes to cannabis regulations to incorporate social equity components. On August 9, 2021, the City Council approved changes to the distance separation requirements for cannabis businesses. In its motion, the Council directed staff to return to the City Council with a recommendation on a social equity program.
SOCIAL EQUITY REPORT
The City engaged BOTEC Analysis to prepare an assessment of social equity in the cannabis industry in Pasadena (See Attachment A, An Assessment of Social Equity in the Cannabis Industry for the City of Pasadena, “Report”). The Report is divided into five sections. Section I provides an overview of the existing cannabis laws in the State of California and the City of Pasadena. Section II discusses social equity options that directly affect people in the community and those that affect participants in the cannabis industry. In Section III, the Report describes the cannabis licensing process as it took place in Pasadena and the social equity plans currently approved by the City of Pasadena. Section IV provides feedback received from meetings with members of the community. Section V identifies potential changes that could be made to existing regulations.
POTENTIAL CHANGES REGARDING SOCIAL EQUITY
As indicated in the Report, four policy solutions have dominated discussions of social equity: 1) addressing previous cannabis offenses; 2) redistributing cannabis revenues; 3) ensuring diversity in the cannabis workforce; and 4) providing a preferential licensing process for diverse applicants. Staff is recommending changes to existing regulations that address each of these areas.
1. ADDRESSING PREVIOUS CANNABIS OFFENSES
The City does not currently have any rules or regulations regarding this issue.
Goal: Require each dispensary to provide a financial contribution to a bona fide organization or group that provides expungement services for up to five years, or some other set period of time recognizing that, over time, it is hoped that need for these services would diminish.
2. REDISTRIBUTING CANNABIS REVENUES
Currently, each dispensary is bound to a community benefits plan that they developed.
As a result, every dispensary has a different model for financial support and contribution to organizations that they choose.
Goal: Require each cannabis dispensary to provide a percentage of gross sales towards community reinvestment. Staff is developing an appropriate percentage
SOCIAL EQUITY IN CANNABIS
EDTECH COMMITTEE
AUGUST 16, 2022
3 number for consideration at a future EDTECH meeting. In addition, to create improved transparency, explore opportunities for the proceeds to be directed towards a foundation that would distribute to community non-profits.
3. ENSURING DIVERSITY IN THE CANNABIS WORKFORCE
Similar to the redistribution of cannabis revenues above, existing policy is to rely on each individual community benefit plan in terms of local/minority hiring.
Goal: Local Hire – establish uniform goals and methods to ensure that each dispensary is striving to achieve the hiring a percentage of local and minority employees at ALL levels of the organization. Contracting Opportunities – establish uniform goals and methods to ensure that each dispensary is striving to achieve contracting for all aspects of its operation a percentage of local and minority businesses. In addition, seek to ensure that all dispensaries provide a percentage of shelf-space for minority and possibly locally owned cannabis products.
4. PREFERENTIAL LICENSING PROCESS FOR DIVERSE APPLICANTS The voters of Pasadena have approved up to 6 dispensary licenses in the City. Five of the six have been awarded, leaving one available.
Goal: Reserve the 6
th license for an equity applicant. This would involve developing the criteria for qualifications, the process for selection and consideration of the need for an equity/business partner while ensuring that the selected candidate remained a majority owner of the business. Staff further believes that it would be appropriate to EDTECH for an update and potential consideration of additional equity licenses 1 year after the equity applicant has opened its business.
OTHER CODE CHANGES
As indicated above, staff has identified other potential changes to regulations regarding cannabis businesses. It is important that these legal and permitted businesses remain viable, or they will be displaced by illegal operators in areas adjoining the City:
• THC infused beverage are currently banned, in consultation with the Health Department study the possibility of allowing them subject to appropriate rules. • Modify existing regulations to allow advertising of Pasadena based cannabis businesses provided that any advertising otherwise complies with local and state regulations (do not treat cannabis businesses different from other businesses with respect to advertising).
• Allow a 10% deviation in distance separation requirements to assist potential operators in securing a viable and code compliant location. • Consider changing the requirement for an annual audit to preserving the ability to require an annual audit at the City Manager’s discretion. Continue to require each business to maintain a point-of-sale inventory tracking system and add a new requirement to provide the City with the annual financial information submitted to the State.
SOCIAL EQUITY IN CANNABIS
EDTECH COMMITTEE
AUGUST 16, 2022
4 NEXT STEPS
Staff will conduct additional analysis and return to the Committee seeking a formal recommendation to be provided to the City Council for its consideration.
Attachment:
Attachment A: BOTEC ANALYSIS REPORT ENTITLED, “AN ASSMENT OF SOCIAL EQUITY IN THE CANNABIS INDUSTRY FOR THE CITY OF PASADENA”, AUGUST 2022
An Assessment of Social Equity in the Cannabis
Industry for the City of Pasadena
Clarissa Iliff
Jessica Neuwirth
Richard Hahn
PREPARED BY BOTEC ANALYSIS FOR THE CITY OF PASADENA, AUGUST 2022
I
Table of Contents
Introduction ................................................................................................................................................................ 1 I. Cannabis Regulation: Past and Present ....................................................................................................... 2 II. Options for Cannabis Social Equity ............................................................................................................. 3 Criminal Record Expungement ..................................................................................................................... 3 Redistribution of Cannabis Revenues ......................................................................................................... 5 Workforce Diversity ........................................................................................................................................... 6 Preferential Licensing ........................................................................................................................................ 8 III. Cannabis Licensing in Pasadena ................................................................................................................. 9 Licensing Process ................................................................................................................................................ 9 Community Benefits Plans ............................................................................................................................ 10 IV. Community Feedback ................................................................................................................................... 11 Licensee Meeting .............................................................................................................................................. 12 Focus Group Meetings .................................................................................................................................... 12 Community Meetings ...................................................................................................................................... 14 V. Recommendations ........................................................................................................................................... 15 Expungement ..................................................................................................................................................... 15 Community Reinvestment: Community Benefit Plan Accountability ........................................ 16 Community Benefit Plan Accountability – Workforce Development .................................... 17 Community Benefit Plan Accountability – Community Reinvestment Fund ..................... 18 Community Benefit Plan Accountability – Working with Local Pasadena Businesses . 19 Cannabis Business Social Equity Licensing Program ........................................................................ 19 Option One: A Measured Approach to Cannabis Business Social Equity ............................ 19 Social Equity Program: Licensing ......................................................................................................... 19 Social Equity Program: Eligibility ......................................................................................................... 20 Option Two: A Community Responsive Approach to Cannabis Business Social Equity 21 Social Equity Program: Licensing ......................................................................................................... 21 Social Equity Program: Funding ............................................................................................................ 21 Social Equity Program: Eligibility ......................................................................................................... 22 Social Equity Program: Financial Assistance ................................................................................... 22 Social Equity Program: Cannabis Business Technical Assistance .......................................... 23 References ................................................................................................................................................................ 25 Appendix A ............................................................................................................................................................... 27
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Introduction
Cannabis prohibition created harms, and these have disproportionately fallen on Black, Indigenous, and People of Color (BIPOC) . They include criminal justice sanctions and the subsequent social and economic consequences to the individual, but also collateral harms to communities that experienced disproportionate policing and arrests, and marginalization.
People who experienced criminal consequences for actions related to cannabis and the communities in which enforcement of cannabis prohibition was most concentrated are worse off today socially and economically than they might have been had cannabis never been criminalized. Legalization of cannabis has presented several opportunities to correct the harms of prohibition and disproportionate p olicing, and many people have argued that benefits should accrue among people and communities who have been most harmed. Such benefits are broadly termed “social equity.”
Before policymakers determine a set of policies to promote social equity, they must identify the population they wish to benefit and the outcomes they wish to achieve. Equitable policymaking begins with the acknowledgement that cannabis prohibition hindered the social and economic development of specific people and communities and attempts to find solutions to address unjust policies and prioritize the health and wellbeing of those populations. Cannabis legalization is not a panacea for the harms of prohibition, which accrued over decades. But sound social equity policies will maximize the benefits and minimize the costs that disadvantaged populations will derive in the future.
To date, four policy solutions have dominated discussions of social equity: addressing previous cannabis offenses, redistributing cannabis revenues, ensuring diversity in the cannabis workforce, and providing a preferential licensing process for diverse applicants .
These policy options are not mutually inclusive, but each has intendent costs and benefits.
Governments must balance careful analysis of these costs and benefits with attention to the desires of residents who, after five years of legal adult cannabis use in California, undoubtedly have strong opinions about the meaning of social equity cannabis policies.
In this r eport, we define the range of alternat ives for each option and provide recommendations based on community feedback, current research, and the experiences of other jurisdictions. We also outline the feedback received in a series of community meetings and focus groups conducted over a period of several months. From these sources we outline a set of options for the city and highlight the ones that seem likely to net the most benefit to the residents of Pasadena, accounting for the expressed desires of those people.
In Section I, we provide an overview of the existing cannabis laws in the State of California and the City of Pasadena. In Section II, we discuss social equity options that directly affect people in the community and those that affect participants in the cannabis industry . In Section III, we describe the cannabis licensing process as it took place in Pasadena and the social equity plans currently approved by the City of Pasadena. In Section I V, we relay feedback received from meetings with members of the community. And in Section V we synthesize the evidence and opinions of the community in a set of findings and policy options.
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I. Cannabis Regulation: Past and Present
California was an early adopter of anti-cannabis legislation, first criminalizing the substance in 1913 by amending the Poison and Pharmacy Act of 1907 to include it in the list of prohibited drugs. California was also the first state to legalize it for medical use by referendum, in 1996 via Proposition 215. A major problem of Proposition 215 was its lack of a regulatory str ucture for the medical cannabis market, which caused many cities and counties to struggle to regulate an expanding market. In 2003, the California legislature passed Senate Bill 420, creating an identification card program for qualified patients. This program was not without its flaws though. The requirements to become a qualified patient to use medical cannabis were lax, and as a result, legal access to cannabis grew.
California’s efforts to regulate cannabis use and decrease the severity of punishments associated with drug use and possession progressed gradually . In 1999, the legislature allowed a law that mandated driver’s license revocation for any individual found guilty of possession of drugs to expire. In 2000, California passed the Substance Abuse and Crime Prevention Act, meant to allow individuals convicted of drug use or possession to enter treatment in lieu of prison or jail time. Ten years later, Senate Bill 1449 was passed, making the possession of one ounce or less of cannabis a civil infraction, rather than a misdemeanor.
In 2010, California residents rejected Proposition 19, which would have legalized cannabis- related activities, including allowing for local regulation of adult- use cannabis markets. The margin was narrow, with 53.6% of voters voting against it. However, in 2016 the voters passed Proposition 64, legalizing the adult-use cannabis market. Nearly 60% of voters across Los Angeles County voted in favor of the proposition. In the City of Pasadena, that figure was slightly higher, with 62.3% voting in favor of the proposition. When cannabis became legal for adult -use across California, the state legislature left the decision to permit cannabis businesses and the manner in which those businesses, if permitted, would be regulated up to each city and county.
Today, adult-use cannabis is legal throughout the state, although some cities and counties have opted to ban the production, processing, and retail sale of cannabis within their jurisdictions. Pasadena initially chose to ban cannabis business operation within its borders.
In the pursuing years, the city struggled with the existence of unlicensed operators conducting cannabis -related business throughout the city. Estimates suggest that at one point Pasadena had up to 28 unlicensed cannabis operators. In response to this activity, the City Council adopted Ordinance 7313, which took effect on December 13, 2017. This ordinance prohibited commercial cannabis businesses, prohibited outdoor cannabis cultivation, and limited personal indoor cannabis cultivation.
In June 2018, Pasadena voters lifted the commercial cannabis business ban. Measure CC allowed for up to six cannabis retail outlets, four cultivation sites, and four testing labs. At the time, cannabis retail outlets were limited to no more than one per city council district, although this has since been amended to allow for up to three retail outlets per council district. Additional limitations restricted the zoning districts in which retail outlets could be placed. Within those zon ing districts, retail outlets were required to be at least 1,000 feet from other retail outlets and cultivation sites, and at least 600 feet from any “sensitive use”
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location. "Sensitive use” locations are typically places where youth may congregate, including schools and churches, substance abuse centers, and residential areas. Finally, Measure CC disqualified any individual who had conducted commercial cannabis activity in the city as of December 14, 2017 from obtaining a license.
In order for Measure CC to go into effect, voters also had to adopt a companion tax measure, known as Measure DD. This measure levied a business license tax on cannabis businesses for cultivation and retail sales. Currently, a tax of 4% of gross receipts from cannabis retailers and microbusinesses is levied. This tax, collected on a quarterly basis, is among the lowest tax rates throughout LA County. The current law allows for the city council to increase this tax rate up to 6%.
License holders are required to renew their license annually. Today there are three cannabis retail outlets in city limits, all located along Colorado Boulevard.
II. Options for Cannabis Social Equity
The goal of social equity is to ensure that people from communities disproportionately harmed by cannabis prohibition and discriminatory law enforcement benefit from cannabis legalization. This can be achieved in a variety of ways, including business licensing, workforce development, expungement, and redistribution of tax dollars and business donations to the local community. Each of these options are discussed below.
Criminal Record Expungement
The public and policymakers have recognized that cannabis prohibition was a misguided policy and that criminal sanctions related to cannabis prior to legalization were unnecessary and often unfair. Criminal sanctions entail not just punishments but also lo ng-term impediments that negatively affect the job prospects and civil rights of people with a cannabis conviction in their past. Governments can retroactively correct some of the harms associated with a cannabis related criminal record through several means including expungement, pardons, and sealing of records. Each has different implications for labor market prospects and civil rights. Expungement can be accomplished at the local level within existing laws on the part of either the individual who has a p ast conviction or the court that adjudicated the case. It thus represents the most apt way for the city to address the collateral consequences of past cannabis convictions.
Governments interested in improving the labor and civil rights prospects of people convicted of cannabis crimes must first decide who should be eligible. Cannabis crimes before legalization ranged in seriousness from felonies to administrative violations. California has already provided some guidance on this issue through Proposition 64, which legalized adult cannabis use in 2016. Under that law, the state allows people who were convicted of felonies for selling, producing, or transporting cannabis before legalization to have their convictions downgraded to misdemeanors. Those people convicted of misdemeanors for possessing or using cannabis can have records of their convictions expunged. However, the law doesn’t provide an automatic path towards downgrading or expungements. This reflects a major obstacle of the mechanics of the judiciary . Because court record management systems are disaggregated and obscure, changing records must be done on an individual basis by each
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court administrator. In most municipalities, people are responsible for changes that affect their own cases. To change the status of a conviction they must petition the court that originally heard the case. Between 2016-2018, fewer than 5,000 Californians submitted such petitions.
In response to this low rate of participation, some agencies in large jurisdictions worked to identify people eligible for downgrading or expungement. For example, in San Francisco, where only about 250 people filed petitions after legalization, the district attorney identified about 5,000 eligible felonies and 3,000 eligible misdemeanors. These figures represent cases, not individuals, so the number of people affected was likely smaller. The Los Angeles district attorney cast a wider net, applying an algorithm designed by Code for America to identify roughly 60,000 eligible cases in Los Angeles County courts dating back to 1947. Of these, 250 originated in Pasadena. Given the size of Pasadena’s population in proportion to that of Greater Los Angeles, the true number of eligible cases might be larger by an order of magnitude. Because locally administered courts handled most cannabis cases in Los Angeles County, finding and processing eligible low-level cases is particularly challenging.
The city cannot order Pasadena courts to review all local misdemeanor or felony cannabis crimes since 1947. But it c an provide people with the resources to apply for expungement, which comes with certain benefits. It can also help them pursue other, perhaps more comprehensive solutions, such as sealing or pardons, which are also resource intensive and difficult for individuals to manage without legal representation.
Expungement, sealing, and pardons may generate some side effects that increase inequities.
Recent research has found that Ban the Box, Clean Slate, and other initiatives that remove criminal records from hiring decisions may widen the gap in employment outcomes between whites and minorities. Employers, faced with this blind spot, sometimes substitute race as a proxy for criminal records. Evidence suggests that positive credentialing such as certificates of re habilitation or employment readiness, either in tandem with policies that remove official criminal records from the slate of factors employers can consider when faced with hiring decisions or as an alternative, may produce better labor market outcomes for BIPOC, particularly those with criminal records (for further discussion, see e.g., Agan & Starr, 2018 and Doleac & Hansen, 2016).
If the city wishes to pursue expungements or other judicial remedies for the harms of a past cannabis conviction, it can emplo y several strategies. Several existing non- profit organizations, including Legal Aid and the Last Prisoner Project partner with jurisdictions to process expungements in California. Some states, such as Illinois, have funded new organizations to specificall y deal with the issue. Other jurisdictions encourage cannabis businesses to devote revenue or resources to sponsor expungement clinics. Unions, such as the United Food and Commercial Workers, have partnered with cannabis businesses to host clinics and offer free legal assistance in other parts of Los Angeles County. The city can directly encourage these types of partnerships.
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Redistribution of Cannabis Revenues
Public revenues generated from cannabis taxes and license fees can be repurposed by the city in ways that improve social equity. This can be accomplished either directly through city budget mechanisms or indirectly through licensure requirements that designate a fund administered as an entity separate from city government. The former option gives the city government greater oversight at the expense of direct control by affected individuals and communities, while the latter option gives direct control of funds to the community at the expense of oversight and administrative efficiency.
Before the city decides how to administer cannabis revenues, they should estimate the size of the revenues. This estimation is not straightforward because current cannabis revenues are likely not predictive of future revenues. Cannabis has generated large tax windfalls fo r states that have legalized adult use, but as cannabis markets mature, revenues are likely to stabilize or fall. Most states levy ad valorem taxes, so high tax revenues are a function of high cannabis prices. Those high prices, in turn, are a function of the costs associated with operating businesses in new regulatory environments with undeveloped supply chains and heavy startup costs. Yet the product itself is not inherently expensive to produce, and the costs of production and sale should diminish as the market for raw materials becomes more competitive and the regulatory environment becomes less expensive to operate within.
Cannabis prices have fallen consistently in states that have legalized adult use (Shover & Humphreys, 2019; Kilmer & Neel, 2020) . St ill, federal prohibition makes cannabis production and sale more expensive than it would otherwise be, as businesses have difficulty attaining credit or claiming a tax deduction for a business expense. Federal legalization, which is likely to occur in the coming years, would allow prices to drop even lower, dragging tax revenues down with them.
Local governments may benefit via licensure fees from more businesses entering the market, but the potential of this stream of revenue is limited. Burdening cannabis businesses with higher fees or taxes will inevitably make them less competitive with similar businesses in other jurisdictions or the illicit market, hurting revenues. Such policies would likely fall hardest on locally owned and undercap italized businesses. Cities must also weigh the benefits to equity that might be gained through promoting revenues among cannabis businesses against the costs they might incur in the form of diminished public health and safety. In sum, the potential revenue derived from cannabis businesses will likely fall as the market matures, and cities should weigh the benefits of maximizing these revenues against potential long-term costs to public health and safety.
Despite the probability that future cannabis revenu es will be lower than what current revenues suggest, the money made by cannabis businesses could do a great deal of good in the community. Most jurisdictions where adult use is legal have put tax and fee revenues directly into general funds for existing city and state expenses. In Pasadena, revenues derived from the legal cannabis market are currently directed to the General Fund. This arrangement benefits equity, as local and state governments spend disproportionately on social services for disadvantaged c ommunities. Most states have funded public healthcare providers using cannabis revenues, while public safety campaigns against excessive or dangerous use are also popular. These last options seem to be less effective at improving
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public health and safety than simply raising the price and lowering the availability of cannabis.
A better, more equitable means of redistribution might be funding community -based organizations (CBOs) that directly meet the health and safety needs of disadvantaged groups by addressing other sources of disparity that run along racial and socioeconomic lines, such as the harms of COVID-19, heart disease, mental illness, unemployment, and homelessness.
Education, environmental, and restorative justice programs are also initiatives und ertaken by other jurisdictions with cannabis revenues that would likely improve equity. For instance, cannabis revenues might be used to fund the judicial remedies for cannabis-related criminal records discussed earlier, a solution employed successfully in Illinois.
The revitalization of geographic areas that are historically disadvantaged is another popular idea. However, some jurisdictions have struggled with the question of who gets to determine what revitalization entails. Seattle and New York City hav e formed successful community - city partnerships by which groups of members of pre- chosen disadvantaged communities and city advisors regularly meet to discuss and implement changes to physical spaces in neighborhoods, though some advocates have criticized the CBOs that foster these partnerships of advancing their own interests at the expense of communities. Pasadena’s smaller population and closer connections between government and communities should mitigate this threat. The chance that increased city funding for CBOs will disincentive private charitable giving also exists. Some CBOs may be disinclined to risk federal funding or tax privileges by taking cannabis revenues, though the actual danger they face is small. Finally, given the limited scope of cannabis revenues, funding CBOs to promote equity might engender ill-will among CBOs competing for grants. Despite these threats, directly funding CBOs to promote equity is the option that allows BIPOC and other disadvantaged communities the most control over c annabis equity funds while allowing city supervision over the use of the funds, a mechanism not available to cities that have attempted strategies such as direct cash transfers of cannabis revenues to individuals who meet equity qualifications.
Workforce Diversity
The cannabis workforce presents an opportunity to foster equity, though the extent of this opportunity depends on the size of the workforce and the status afforded to cannabis workers. Given the slow progress of legalization in many states, the c ontinued demand for illicit cannabis in states that allow adult use, and the inchoate nature of the legal market in California, the total workforce needed to satisfy the demands of cannabis consumers is still unclear. The people who continue to patronize illicit sellers are likely to be high demand customers, so if they can be transferred to the licit market, the volume of cannabis sold per customer may rise. Conversely, with legalization and a turn to the licit market, the amount of labor needed to produce a unit of cannabis may fall as processes become more efficient and benefit from economies of scale. Regardless, the current national workforce in the licit cannabis market is estimated to be about 250,000 full-time equivalent employees, of whom somewhere between a quarter and a third are thought to live in California. Though criminal records mitigation and revenue distribution are dominant policy options, improving the diversity and status of this relatively large workforce could make a big impact on equity,
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especially given the barriers to entering other industries people with cannabis convictions face.
The racial composition of the current cannabis workforce is unclear, though in states such as Massachusetts for which data are available, the workforce makeup is roughly equivalent to the population or slightly disproportionately white. Several options exist to correct this.
The bluntest tool is a blanket hiring quota, by which cities require cannabis businesses to hire a certain proportion of BIPOC or othe rwise disadvantaged people (some California jurisdictions, for instance, preference people from geographic areas with average incomes below certain thresholds or those with past cannabis convictions, rather than along racial lines). Affirmative action based on race or ethnicity is illegal among governments and other public employers in California, but hiring quotas enforced among private businesses as a condition of licensing or other benefits may withstand legal challenge. Incentives to cannabis employers who hire diverse workforces are a more subtle option. The state operates an equity program that provides municipal grants to foster diversity in the cannabis industry, and one of the encouraged uses of grant funds is to incentivize diverse hiring. San Francisco has such an equity incentive, though the city government does not specify standards for hiring or distinguish between incentives for diverse ownership and those for recruitment of diverse staff. The cities of Sacramento, Long Beach, Palm Springs, San Jose, Santa Cruz, Clearlake, Coachella, and Stockton have similar mixed programs. Oakland goes a step further, providing up to $50,000 to cannabis business that specifically present a diverse hiring plan.
However, hiring quotas or incentives may not provide much benefit, especially given the current labor market conditions, if they are not accompanied by policies that improve the wages and living conditions of diverse employees.
Cannabis manufacture and sales employees are generally treated as unskilled l aborers. An option to correct this is to set equity-based quotas and also set minimum wage requirements for the industry. This option has the disadvantage of making Pasadena cannabis businesses less competitive compared to businesses in other nearby jurisd ictions. The C ity should choose a policy that improves wages and status of equity employees while providing more value to customers.
One such option is to set qualification requirements, designate a city certification for qualification, and create certification programs that preference people in target populations.
This generates the same price vulnerability as minimum wage requirements but compensates the customer in the form of better products and services. This option also has the benefit of credentialing and thus increasing the labor market value of the target populations and creating a workforce to sell a complicated psychoactive chemical that is more informed and better compensated than employees in other jurisdictions or in the illicit market. An equ ity-based credentialing process also has the potential to generate more upward mobility in the industry for affected people. Los Angeles uses a portion of its state equity grant to fund non- profit partners, such as Social Equity LA, which trains diverse potential operators and staff. Pasadena should consider creating or partnering with CBOs to create a training and certification program that preferences equity employees and gives participants portable skills that can improve their long -term job prospects an d earning potential.
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Preferential Licensing
Preferential licensing for equity cannabis operators is the option most talked about by advocates, but it has the potential to benefit very few people. However, for the few people it would benefit, preferential licensing could create generational wealth. Some evidence suggests that businesses owned by equity applicants hire more people from equity populations, which might mitigate the need for hiring policies specified in the last subsection.
However, cannabis is a difficult industry in which to succeed. According to previous research conducted by BOTEC Analysis in Washington State, as many as a third of cannabis retailers do not survive the first year of operations. Challenges include inability to wr ite off costs of doing business, inefficiencies inherent in a cash business, high financing costs, zoning restrictions, and volatile competition. In this type of market, multistate operators, who bring economies of scale, ample capital, and relatively long experience, are much more likely to succeed than startups, particularly those run by individuals or groups with fewer resources to lose.
If Pasadena was isolated, policies that benefitted equity licensees might be sustainable, but that is not the case. W ith nearby jurisdictions also having legalized commercial cannabis businesses, customers can go to adjacent jurisdictions to make purchases or go to the still - robust illicit market. The threat of a burgeoning illicit market is especially concerning.
Policies that make legal cannabis expensive relative to the illicit market will help keep the illicit market strong. As of 2019, the illicit cannabis market in California had sales of $8.7 billion, compared to revenues of $3.1 billion in the legal market. The il licit market may employ a significant number of people, but participation exposes them to elevated risk of sanctions and harm. Policies could be crafted to protect legal equity businesses while allowing them to keep prices low by subsidizing their operations for several years, but these could amplify the negative effects of future market changes, as the businesses that benefit will not be incentivized to operate efficiently.
As with the creation of a diverse workforce, policies that incentivize diverse business ownership should be designed not simply to let more members of disadvantaged communities participate in a risky and sometimes unprofitable industry. Rather, they should be designed to also set equity applicants up to succeed in the long -term and under unpredictable future legal and economic conditions. Many California cities have used state funds and local cannabis tax and fee revenues to incentivize diverse operator par ticipation in the industry. These programs generally reduce or eliminate license application fees. Given that Pasadena contracts with an external consultant to review license applications, the cost of the review process for equity applicants would have to be defrayed, either directly through the city budget or indirectly through compulsory fees drawn from existing licensees.
Some cities, such as Oakland and Los Angeles, not only defray application costs but also provide training to equity applicants to help them through the licensure process. The effectiveness of these programs has not been evaluated, but they appear to be relatively inexpensive to operate. Training applicants in the application process might have the ancillary benefit of providing them skil ls necessary to maintain compliance with city regulations and operate efficiently in the existing market, or to apply successfully for unrelated city licenses.
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Beyond direct support for equity operators, some cities have partnered with CBOs and academic institutions to provide supportive environments where equity operators can grow their businesses. These take the forms of incubators and investment assistance. Incubators, such as the non-profit Pasadena City College’s Small Business Development Center Venture Launch or the for-profit Pasadena Incubator, LLC., which both prioritize equity applicants as defined by common criteria, might be particularly suited to help equity operators thrive in the local market. Such initiatives develop broad business skills among applicants, which might be useful if operators choose to expand beyond the cannabis market. Credit and financing are major challenges for many start-up cannabis operators. The Pasadena Service Federal Credit Union and StandardC, a cannabis -focused pay ment clearinghouse, have partnered to identify and provide financing to local equity applicants. The city could foster these public and private partnerships to improve not only the initial diversity of the local cannabis market but also improve the long-term chances of equity applicant success.
It has been suggested that Pasadena should lift or relax the outlet zoning and distancing requirements to allow for additional cannabis retail operator licenses. Research suggests that strong distancing and density requirements can prevent negative impacts of legalization on children and youth by limiting the cannabis advertising and branding exposure. There are decades of evidence of the negative impact of advertising and branding exposure on youth use. Cross-sectional and systematic reviews of research from tobacco and alcohol markets have long suggested that advertising exposure is associated with lower perceptions of risk and substance use initiation among adolescents. Emerging evidence in cannabis is demonstrating the correlation as well. Analytic samples from six legal cannabis states found that youth who saw billboards or advertisements even rarely had five (5) times the odds of a cannabis use disorder diagnosis later in life. Early research in Southern California found that adolescents who were exposed to medical marijuana advertising had twice the odds of marijuana use and intention to use marijuana 1 year later compared with those who were never exposed to advertising. A CDC study in Oregon found that, “About three- quarters of 8th (72.2%) and 11th graders (78.1%) in Oregon reported seeing marijuana advertising in the past month. Youths most frequently reported seeing advertising on storefronts and online, and odds of exposure were significantly higher for...you ths in school districts with a closer average proximity to retail marijuana stores” (Fiala, 2020; D’Amico, 2015). A Washington study found that advertising exposure, number of retailers, distance to retailers and perceived norms influenced adolescent’s int ention to use cannabis. Of note, this study found that, “Distances to retailers moderated the relationships between exposure to advertising and intentions, as well as between positive outcome beliefs and intentions” (Hust, 2020).
To protect youth and preve nt an increase in underage use, strong distancing and zoning requirements are needed.
III. Cannabis Licensing in Pasadena
Licensing Process
The City of Pasadena opened its first application window for cannabis business licenses on January 1, 2019. The app lication window closed later that month on January 31, 2019 with a total of 128 applications submitted. Nearly all of the applications submitted were for retail licenses, however, three applications were submitted for testing laboratory licenses and three applications were submitted for cultivator licenses.
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Hinderliter, de Llamas and Associates (HdL) reviewed all applications for cannabis retailer licenses, assigning points to each of the four application sections, totaling those points, and ordering the applicants from the most to least points awarded. The city was permitted to issue up to six licenses with the final license being decided by one point. Licenses for retail outlets were awarded on June 5, 2019 and were issued to Integral Associates Dena, LLC; Tony Fong; The Atrium Group, LLC; Harvest of Pasadena, LLC; SweetFlower Pasadena, LLC; and MME Pasadena Retail, LLC. On August 27, 2020, the City Manager removed MME Pasadena Retail, LLC from the list of successful applicants, citing a change of control of the company.
Once licensees were provided notification of their award, they were expected to secure a valid location and obtain a Conditional Use Permit (CUP). Since all successful applicants were notified at once, this effectively set in motion a race to secure a CUP as quickly as possible so as not to lose out on a location if another licensee secured their CUP in that council district first. Although regulations pertaining to the number of retail outlets that may exist in each council district have been loosened, not all successful applicants have obtained a CUP to date.
The following retail outlets have since opened in Pasadena:
• Harvest House of Cannabis
• Varda Dispensary
• Essence Cannabis Dispensary
Community Benefits Plans
The goal of social equity is to ensure that people from communities disproportionately harmed by cannabis prohibition and discriminatory law enforcement benefit from cannabis legalization. This can be through direct licensing, but also through delegating funds to support those communities, equitable workforce development for BIPOC communities, and supporting existing BIPOC-owned Pasadena businesses.
The City of Pasadena have key components of a successful social equity program embedded in their existing cannabis licensure program. Unlike many cities in the US, the city of Pasadena required a Community Benefit Plan (CBP) as part of the application process for cannabis business licensees. The CBP required detailed narratives about how the licensee will “furth er the City Council’s goal to support and promote the quality of life and local economy through a community engagement plan that demonstrates an understanding of the community, its values and unique aspects, and how the business will integrate into the community.”
Workforce Development . The c ity calls for licensed cannabis businesses to commit to providing high quality, well -paying jobs to those most harmed by cannabis criminalization and poverty. Each cannabis business licensee has committed to employ BIPOC Pasadena residents and provide above minimum wage pay for part time employees and ongoing training and professional development. Two of the cannabis business licensees also offer medical benefits and/or a paid time off policy for all employees. Another o ffers to pay for
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employees to attend the African American Professionals Conference, the Hispanic Women’s Corporation Professional Leadership Institute, and the Multicultural Business Conference.
Community Reinvestment . The city calls for licensed cannabis businesses to commit to invest in affected communities in Pasadena. Contributions include volunteering, making donations, and sponsoring non- profit events. Each existing cannabis business has pledged funds to Pasadena communities; one claimed donation of 5% of annual profits, while others claimed donations of $15,000 to $250,000 per year to Pasadena nonprofits. Most cannabis business licensees offered to coordinate events to donate items to Pasadenans in need including food, clothing, toy s, or contributed hours of volunteer service. One cannabis business licensee offered to participate in city-led public outreach and education programs for youths to outline the risks of substance use and addiction. Another licensee plans to offer free forums for community members to educate consumers and clinicians about responsible cannabis use.
Business Partnerships. The city calls for licensed cannabis businesses to work with local businesses as much as possible. In the process of launching new retail stores and keeping them running, contractors build, landscape, market, and advertise cannabis businesses.
Other business partners not directly involved in the cultivation or sale of cannabis include delivery services, local manufacturers, security services, training providers, and purveyors of accessories such as paraphernalia, storage lock boxes, and trays. Add itionally, Pasadena cannabis growers and local manufacturers can sell their products in licensed dispensaries.
Few cannabis business licensees provided a detailed plan to source cannabis and related products from local businesses to meet their varied needs . One licensee has verbally committed to sourcing a share of the products they sell from businesses that received social equity licenses in California and to source a small percentage of cannabis products from licensed Pasadena cannabis cultivators.
The CBP and commitments made by cannabis business licensees align with best practices for a robust social equity program. Equity in cannabis does not lie solely in license ownership, but in broader community investment to decrease poverty and violence while incr easing social connection and access to high quality education and healthcare. This entails acknowledgment and deconstruction of racialized barriers to opportunities in the workforce, and an improved economy that prioritizes participants from marginalized communities. The CBP provides fertile ground for a strong social equity approach in Pasadena.
IV. Community Feedback
Over the course of this study, BOTEC Analysis hosted one cannabis licensee meeting, two community meetings (one virtual and one in person), and two targeted focus group meetings. At each community meeting, approximately twenty individuals were in attendance and lively conversation took place regarding the state of cannabis social equity in the City of Pasadena. Our targeted foc us group meetings were comprised of local members from the communities identified by the Pasadena Community Coalition as relevant and important stakeholders in the conversation on cannabis social equity. Finally, our licensee meeting took
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place with repres entatives from all current Pasadena cannabis business license holders in attendance. Information gleaned from each of these meetings is discussed below.
Licensee Meeting
Our first meeting, held on March 3, 2022 from 9:30am to 11am, included the current cannabis licensees in Pasadena and a representative from the Pasadena Community Coalition in attendance. This meeting was primarily intended to discuss the Community Benefits Plan (CBP) each licensee has developed and submitted to The City, focusing on the perceptions among current operators about how they believe their community benefit efforts have fared and what hurdles, if any, they have experienced. The discussion further centered on the feasibility of both standardizing the plans and enforcing reinvestm ent requirements, with participants generally agreeing that an enforcement mechanism would be of use. Overall, the licensees expressed support for their CBPs, noting that it has allowed them to build trusting, genuine, and authentic relationships with the community through direct engagement with those most in need. Further discussion concerned the disjointed nature of the community benefit plans as a whole. Participants suggesting that a focused, collective effort to give back to the community might be more efficient than the current, individualized model.
Operators identified hurdles in meeting some of the goals stated in their CBPs, particularly with respect to charitable giving to non-profit organizations. Operators within the city have provided funds to the Pasadena Chamber of Commerce and the Boys and Girls Club.
However, operators noted that some local organizations are unable to take money from cannabis businesses (either due to legal or ethical constraints). Participants discussed their experiences attempting to provide funding for non- profit organizations, with some finding success with local, as opposed to national, organizations, particularly those that are not reliant on federal funding. In addition to providing funding for local organizations, participants cited their work with advocacy organizations that address historic inequalities in cannabis legislation and policy.
As expected, the COVID -19 pandemic was cited as a major barrier for community engagement efforts over the last two years due to limited opportunity for in -person events.
However, some licensees have participated in local volunteer opportunities and offered job fairs with the goal of hiring residents, particularly those who have been previously arrested or incarcerated for cannabis -related offenses. In addition to efforts to hire residents, operators supported providing a living wage and promoting pathways for career advancement. Finally, operators discussed the importance of contracting with local ancillary businesses, especially those that are minority -owned. The extent to which this has actually occurred was not apparent.
Focus Group Meetings
BOTEC Analysis hosted two in-person focus group meetings, the first of which took place on April 13, 2022 from 11am to 2pm. During this meeting, stakeholders were first provided an overview of the pillars of cannabis social equity, laws regulating cannabis in the City of Pasadena, and a high -level summary of current cannabis business operators’ CBPs. This focus group then discussed community sentiments with respect to cannabis business
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regulation. Overall, the group identified a concern around community understanding of the cannabis business licensing process, as well as the opportunities within the city to be involved in this emerging market. Additional concerns centered on feelings of resentment toward the existing legal market, supported by feelings that licensing opportunit ies are largely unattainable to average citizens.
The focus of the meeting then shifted to the current CBPs, including what can be done to strengthen them. Participants agreed that the CBPs are a great place to start and that more can be done to provide meaningful reinvestment in the community. Focus group participants agreed that an enfo rceable funding model built into existing and future CBPs should exist.
However, consensus was not reached regarding what the model should look like, nor what form enforcement should take. The group agreed that funding derived from enforceable requirements under the CBPs should be redirected to community reinvestment priorities, such as funding expungement clinics and providing financial support to local organizations serving BIPOC communities.
As a potential model for this, participants cited the Community Development Block Grant Program offered by the U.S. Department of Housing and Urban Development. In particular, the flexibility of these grants to tailor funding to the needs of the local community was praised. The process of this grant-funding opportunity is generally well-understood by non- profit organizations, large and small alike. The group further recommended a tiered structure built into a grant opportunity model, such that micro -grants could be accessed by smaller organizations while substantially larger grants (whose application processes tend to involve more administrative overhead) can still be made available to larger organizations.
Finally, the group discussed various options for how that funding would be overseen. S ome participants supported an additional office reporting to the City Manager , while others supported an external, community-represented office.
The meeting concluded with participants wishing to come together at a future date to discuss the issues further. That next meeting occurred on April 29, 2022 from 11:30am to 2pm and involved all participants from the first focus group meeting. The first item of discussion considered the time, place, and format of a future planned community meeting.
The focus group then turned to the question of licensing, with a particular focus on potential models for social equity licenses being made available. One option discussed was to offer the final available license (which had been revoked from the previous holder) to a social equity applicant. The focus group members also discussed the potential to offer additional licenses only to social equity applicants. The total number of licenses varied, but participants on average favored making six additional licenses available. A concern raised was the transferability of potential future social equity licenses. Although city law does not permit the transfer of licenses, avenues still exist by which new individuals may take ownership, raising the concern that a license awarded to a social equity applicant mig ht be purchased by individuals not eligible as a social equity applicant. In consideration of this possibility, focus group members discussed setting timeframes during which licenses could not be sold, or limiting the sale of social equity licenses to only those individuals eligible to receive such a license.
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Finally, the focus group members discussed ongoing expungement efforts in the city, noting work done by the Pasadena Community Coalition and others to support individuals in the expungement process. M embers agreed that funding expungement clinics was a high priority but also recognized that expungement is just the first step to full societal reintegration.
The meeting concluded with closing thoughts from the various individuals in attendance.
Many questions remained, particularly regarding the legal possibilities and limitations for Pasadena developing a full-scale cannabis social equity program.
Community Meetings
Two community meetings took place during this project. At the first community meeting, held virtually on March 31, 2022 from 6pm to 7:30pm, participants discussed major themes under the umbrella of social equity , including workforce development, community reinvestment, and support for local businesses. The purpose of this meeting was to discu ss how current and future cannabis operators can give back to the community. Participants expressed concern that the current operators have not made themselves widely known within the community and highlighted the importance of cannabis operators hiring residents. Participants encouraged ongoing community engagement in the form of workshops on a variety of topics.
Participants were asked to comment on how they believe cannabis businesses can best support local entrepreneurs. Awareness of the opportunities cannabis business owners have to give back to the community was a major theme in this discussion, with participa nts suggesting more effort could be put into developing partnerships with locally owned businesses and cannabis operators . Participants also offered feedback regarding what they believed the City of Pasadena can be doing to support the local community in the development of cannabis businesses. Among the ideas discussed were the development of a robust social equity program that prioritized community members affected by cannabis laws prior to statewide legalization. Participants discussed incentives that mig ht be offered through such a program, including tax breaks, license application fee reductions, partnerships that promote cannabis business acumen, or micro-loans or grants to ease start- up costs of cannabis businesses.
The second community meeting, hosted at the Jackie Robinson Community Center on May 11, 2022 from 6pm – 7:30pm drew participants from Pasadena and the surrounding communities. A large- group discussion commenced, covering broad issues pertaining to cannabis social equity and the present and future opportunities for cannabis business development in the City of Pasadena. Following this large -group discussion, participants were invited to break out into focus groups to discuss topics related to licensing, workforce development, and community reinvestment. Surprisingly, very few participants engaged in the discussion on licensing in this meeting, and instead were more active in the other two groups.
Participants discussed the need for community reinvestment, reiterating the need for funding that could be used to support local non-profit organizations working with youth and
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families. Additional suggestions centered on the creation of a community board that would provide oversight and accountability in the process of distributing potential funds. Within this discussion, again participants reiterated the need to support expungement efforts but that funding for additional support services, including mental health and housing services, is critical to meet the needs of individuals with prior cannabis-related convictions.
In addition to funding for local organizations and support services, participants discussed the need for workforce development, citing as an example funding for vocational training, particularly that geared toward cannabis businesses . Accountability played a large role in this discussion, with participants citing the need to hold cannabis operators accountable to commitments made in their CBPs.
Overall, discussions at these five meetings helped identify needs within the community and potential opportunities for the c ity to enact change to better ensure current and future cannabis operators provide meaningful reinvestment in the local community.
V. Recommendations
The role of government is to serve, protect, and ensure healthy futures for its citizens. To do so, governments must understand the current climate surrounding cannabis, its legalization, and the role of equity in this work. The ambiguity surrounding cannabis business ownership and the lack of awareness of existing social equity measures, particularly for those that have been victimized by the enforcement of laws, must be addressed through transparent engagement, communication, and partnership.
Expungement
In 2018, Assembly Bill 1793 was signed into law to facilitate the automatic review and expungement of hundreds of thousands of past cannabis -related convictions. The law requires “the Department of Justice, before July 1, 2019, to review the records in the state summary criminal history information database and to identify past convictions that are potentially eligible for recall or dismissal of sentence, dismissal and sealing, or re - designation pursuant to AUMA (the Adult Use Marijuana Act).” To date, thousands of eligible Californians have yet to benefit from this process . Perhaps the biggest barrier to expungement is that many people with cannabis records remain unaware of the process and their rights.
To meet this need, BOTEC Analysis recommends that th e city take a proactive stance on expungement of cannabis -related convictions to ensure that the residents of Pasadena are aware of the process and their rights. BOTEC Analysis recommends prioritizing expungement services as part of the Community Reinvestm ent Fund, noted later in this report. Additionally, research suggests that better labor market outcomes for people of color can be achieved with positive credentialing such as certificates of rehabilitation or employment readiness. BOTEC Analysis recommends creating a phased program to fund expungement services, then transitioning to re-entry workforce readiness programs.
RECOMMENDATION: Prioritize expungement services.
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The city should consider a partnership with the District Attorney, the courts, and California- based expungement programs to assist residents with expungement of past marijuana- related convictions. This can include hosting expungement clinics with the District Attorney, contracting with an expungement service, and encouraging local cannabis business es to increase access to expungement services and provide free legal counsel to members of the community. Logistically, this can be led by t he City or contracted to a third -party, utilizing funds from the Community Reinvestment Fund, detail ed in the “Community Benefit Plan Accountability” section.
BOTEC Analysis recommends mirroring the City and County of Denver’s model program, “Turn Over a New Leaf” , a program to mitigate the negative effects of low -level cannabis convictions obtained before legalization. An application, screening for eligibility, and court process is designed in partnership with the City employees, the local District Attorney, and a number of local community partner sponsors and hosts , including churches, non- profits, and cannabis businesses. When this need is met, the city should shift focus and funding to re-integration services for formerly arrested or incarcerated people to ensure that those disproportionately affected by cannabis prohibition are able to re-enter the community with access to housing, job placement, and mental health services.
This recommendation is feasible with no changes to existing ordinances, but major changes to existing funds distribution.
Community Reinvestment: Community Benefit Plan Accountability Communities that have been disproportionately impacted by cannabis prohibition and over- policing bear long term impacts including neighborhood disorganization, low neighborhood attachment, decreased prevalence of generational wealth, decreased lifetime earnings, discrimination in the workforce, and many other individual, family, and community disadvantages. Decades of disadvantages result in a dearth of community and personal resources to support healthy environments and families. Community reinvestment programs from cannabis revenue provide targeted funding to address this disparity and support thriving communities. The following recommendations are feasible, with both minor and major changes to existing rules.
RECOMMENDATION: Community Benefit Plan Accountability.
Pasadena should consider shifting the CBP commitments of the existing cannabis business applicants to become requirements for licensing renewal. These requirements would then include measurable goals that are reported in annual cannabis business reports to the city.
These requirements would also entail penalties if not met. Examples include temporary suspension of license or $2,500 civil penalty. This recommendation is feasible with minor changes to existing license requirements.
The annual CBP report should include:
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• Ownership status of business,
• Demographic data on program recipients, including staff • Progress update on individual applicant CBP goals including workforce development, Pasadena community business contracts, and community reinvestment funds dispersed.
Community Benefit Plan Accountability – Workforce Development A common barrier to success in any legal cannabis industry is a lack of training for high - quality, well-paying jobs within the cannabis industry and other connected industries. For a Pasadena cannabis business to achieve equitable goals, they need workforce- ready employees who a re skilled on specific techniques, best practices, and compliance efforts.
Dedicated workforce development efforts are needed to provide current and future businesses with skilled and local employees.
RECOMMENDATION: Require Cannabis Businesses to Provide Equitable Employment.
All cannabis operators should be required to offer local, equitable employment opportunities. These opportunities should include hiring formerly incarcerated individuals, hiring racial minorities, and paying a living wage.
Workforce Development Requirements:
• Identify underemployed members of the community who are qualified to work by committing to at least one of the following:
o Sponsor or participate in, at minimum, one annual event for women to advance their professional careers and learn about jobs in cannabis. o Host or attend, at minimum, one annual networking event to introduce potential job candidates to the cannabis industry.
o Host or attend at minimum one annual job fair targeting BIPOC individuals. • Employ up to 30% of its workforce with:
o Residents living within a 10 miles radius of their retail store, and/or o Residents living in Pasadena.
• Employ up to 30% of its workforce with:
o Individuals (with/without families) living under the poverty line, and/or o Individuals disproportionately impacted by cannabis criminalization. • Encourage license holder to offer compensation to include:
o Entry-level employees to earn, at minimum, 25% above the state’s minimum wage.
o Management positions will earn, at minimum, double the state’s minimum wage.
o Health Insurance or telehealth medicine
o Retirement contribution
o Tuition support
o Paid vacation and/or sick leave
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Community Benefit Plan Accountability – Community Reinvestment Fund There are many successful models for community grantmaking, including direct funding from the City Planning and Community Development Department, direct funding from the City of Pasadena Public Health department, and partnerships between government and local non-profits. Investigation into a suitable funding model produced a clear community preference for a partnership between local government and a local non- profit. Focus group participants consistently recommended a model similar to the Community Development Block Grant Program offered by the U.S. Department of Housing and Urban Development. IA tiered structure built into a grant opportunity model like this, such that micro -grants could be accessed by smaller organizations while substantially larger grants (whose application processes tend to involve more administrative overhead) can still be made available to larger organizations.
RECOMMENDATION: Create Formal Relationships.
Creating relationships built on trust between government and BIPOC communities remains essential. Increased communication with stakeholders can build trust in government, strengthen policy that reflects consumer, business, and community needs, and ensure effective regulation of a legal market.
To meet this need, BOTEC Analysis recommends creating an MOU with pass-through funding between the appropriate city agency (depending on state funding eligibility) and an external non-profit to include a Community Reinvestment Fund Advisory Board composed of external individuals representative of their communities to oversee grant- making. The volunteer Community Reinvestment Fund Advisory Board should be formed to make recommendations to City staff concerning social equity program priorities, but the main task will be to direct grant funding to eligible Pasadena organizations and non-profits. This Board would allow for individual citizens to share their opinions and perspectives, study issues, and develop recommendations to reinvest in Pasadena in a focused structure.
RECOMMENDATION: Create a Community Reinvestment Fund for grants to Pasadena community organizations that address priority social equity concerns.
During the community leader focus group, it was recommended for the Community Reinvestment Fund grant making priorities to be re- evaluated every three years. Examples of Pasadena fund recipients could include, but are not limited to:
• Organizations that support re-entry programs for incarcerated individuals, including workforce development.
• Organizations that support workforce development for BIPOC individuals. • Organizations that increase legal, medical, education, or financial access to low - income individuals.
• Organizations that address root causes of systemic racism, poverty, and stigma. • Organizations that increase positive community norms, neighborhood attachment, and school achievement success.
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• Organizations that increase positive youth development or substance abuse disorder prevention.
This recommendation is feasible with major changes to current ordinance and regulatory language. Community Reinvestment Fund sources could include:
• Cannabis sales tax dollars currently contributed to the General Fund could be earmarked for this fund.
• Licensed stores could directly contribute dollars already committed through their Community Benefit Plans with additional licensing language. CBP requirements:
o License holders to commit at minimum 5% of annual net profits to the Community Reinvestment Fund
• Annual license fees collected by The City could be earmarked for this fund.
Community Benefit Plan Accountability – Working with Local Pasadena Businesses There are limited career opportunities within cannabis retail businesses themselves, but a number of ancillary businesses can benefit from this new business type. Often these are smaller, family run, or niche businesses that are able to be successful with a small budget.
Local Business Partnership Requirements:
• Source, at minimum, five percent (5%) of its inventory from businesses that received social equity licenses in California.
• Source, at minimum, five percent (5%) of its cannabis products from licensed Pasadena cannabis cultivators.
• Source, at minimum, twenty percent (20%) of its ancillary services from Pasadena BIPOC owned businesses.
Cannabis Business Social Equity Licensing Program
Launching a successful cannabis business social equity program in Pasadena may enable the city to provide meaningful support to local community members and address past harms related to the previous illegality of cannabis. Doing so is no small feat and will require a coordinated effort between the Mayor, City Council, and City Manager’s office to determine the policies and practices best suited to meet the specifics needs of Pasadena community members. What follows is a discussion about those policy decisions and recommendations.
Two potential strategies are discussed here. The first strategy builds on the success of the existing cannabis program with a controlled approach. The second strategy expands the existing cannabis program significantly with a responsive, but costly approach.
Option One: A Measured Approach to Cannabis Business Social Equity Social Equity Program: Licensing
Licensing is a critical component of social equity in the cannabis market. Conversations surrounding this issue are contentious, with significant debate surrounding the total number of licenses any one jurisdiction can support. That conversation applies to the City of Pasadena as well. Advocates suggest the city may be able support many more licenses than
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are currently available, though the current zoning restrictions limit the places where a cannabis retail outlet can be located, thereby placing downward p ressure on the number of licenses that the city can truly support.
The city has authorized up to six cannabis retail licenses. To date, only five of those licenses are currently allocated. The current ordinances do not specify if a new round of applications must be collected in order to award the currently unallocated license to a new person or business. As such, the city could simply award that license to the next highest- scoring applicant from the original round of applications, enact a lottery system, or reopen a second round of licensing with equity program eligibility criteria.
RECOMMENDATION: Make the remaining available license available specifically for a social equity applicant.
Social Equity Program: Eligibility
California has awarded $40 million in grant funding to conduct cannabis equity assessments, develop local equity programs, and directly help equity applicants and licensees to many cities and counties throughout the state. Most social equity program eligibility requirements in California include a local residency status, have an annual income below the annual medium income for the area, and meet one of two statuses: have a prior cannabis -related conviction or live in a specified census tract or police beat. The eligibility requirements range from highly restrictive (must meet all or multiple criteria) to less restrictive (must meet two or fewer criteria).
Given the desire of Pasadena residents to ease the path of social equity applicants, as well as emerging research into the lack of succes s of existing stringent social equity programs in other California cities, BOTEC Analysis recommends a lower threshold for social equity program eligibility.
RECOMMENDATION: BOTEC Analysis recommends using the eligibility models similar to the City of Long Beach and the City of Palm Springs, adapted for the City of Pasadena:
“To qualify as a Social Equity Program applicant for the Cannabis Social Equity Program (“Equity Program”), you must meet the following eligibility criteria:
• You are applying as a person, not a company.
• In the last year, your annual family income was at or below 80% Pasadena City Area Median Income (AMI). Your annual family income is adjusted based on the size of your family. Please visit the United States Census Bureau website to check your AMI. • Have a net worth below $250,000.
• Meet at least 1 of the following criteria:
o Have lived in a Pasadena census tract for a minimum of 4 years where at least 51% of current residents have a household income at or below 80% of the Pasadena City Area Median Income (AMI).
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o Was arrested or convicted for a crime relating to the sale, possession, use, or cultivation of cannabis in California prior to November 8, 2016 that could have been prosecuted as a misdemeanor or citation under California law.
You must submit all required documents and be verified as a Social Equity Program applicant before applying for an adult-use cannabis business license to receive Equity Program benefits.” RECOMMENDATION: Institute Fee Waivers for First Year of Operation.
The city should consider waiving application, permit, and related inspection fees for eligible Social Equity Program applicants to lower financial barriers to entry. Many cities offer this benefit to social equity program applicants including Palm Springs, Long Beach, and Los Angeles. Doing so will require an amendment to existing ordinances regulating fees for cannabis businesses.
Option Two: A Community Responsive Approach to Cannabis Business Social Equity Individuals convicted of a cannabis offense, their families, and the broader BIPOC community suffer long -term consequences of cannabis prohibition and overpolicing. Due to a lack of access to capital, technical support, and regulatory compliance assistance, these individuals have a more difficult time entering the cannabis industry. A robust social equity program may be an effective way of addressing these inequities.
Social Equity Program: Licensing
Expanding access to business opportunities in the legal cannabis market specifically to social equity applicants is an important facet of a potential society equity program. In Pasadena, five of the available six licenses have already been allocated , leaving only one license to potentially be allocated to a social equity applicant . Conversations with the BIPOC community in Pasadena suggest that a single social equity license may be insufficient and that additional licenses should be created and then allocated to designated social equity applicants. It was overwhelmingly apparent through community engagement and outreach that BIPOC residents of Pasadena desired a robust social equity program with a minimum of six additional equity licenses.
RECOMMENDATION: Consult with the City Attorney’s office to determine the feasibility of creating new licenses under the current ordinances that may be allocated specifically to social equity applicants. Open a new social equity licensing application process for at least six new licenses.
Social Equity Program: Funding
In a highly competitive environment in which multiple c ity-funded programs need investment, instituting a resource heavy program such as a cannabis business social equity program will likely require outside funding. The Governor’s Office of Business and Economic Development offers annual grant s to local public health departments and non- profits to “advance health, wellness, and economic justice for populations and communities harmed by the War on Drugs.” The grant program is highly competitive, as evidenced by the recent update from The Governor’s Office of Business and Economic Development, which received
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331 applications in 2021, and the “amount of grant funds available for award is $38.4 million, and the total amount of funding requested from the 331 applications submitted is over $147 million.”
RECOMMENDATION: Seek funding from the Governor’s Office of Business and Economic Development community reinvestment grants program, but prepare to fund a s ocial equity program through local tax dollars, cannabis li cense fees, and cannabis business CBP contributions.
Social Equity Program: Eligibility
Also included in Option One, BOTEC Analysis recommends using the eligibility models of the City of Long Beach and the City of Palm Springs, adapted for the City of Pasadena (see above).
Social Equity Program: Financial Assistance
Lack of capital or financial assistance is an oft cited barrier to entry for many BIPOC individuals. Compounding this issue is the lack of banking available to cannabis industry, and with it a dearth of small business loans for otherwise eligible applicants. Indeed, the most common focus of any social equity program is to include financial assistance to applicants to ensure equitable access to cannabis business ownership. Creating fee, permit, or other remuneration waivers can also significantly reduce barriers to business ownership.
RECOMMENDATION: The city should consider creation of a fund to provide low - or no- interest loans or investment matching to Social Equity Program applicants. It should seek funding from the Governor’s Office of Business and Economic Development Community Reinvestment Grants Program to provide loans or investment matching opportunities.
Multiple models exist to address financial barriers for BIPOC applicants. • Incubator Programs: This model grants cannabis permits to non- Social Equity Program applicants in return for those applicants aiding Social Equity Program applicants.
• Investment Assistance: This model increases the incentive for investors or supports Social Equity Program applicants to attract investors.
• Direct Funding: This model uses funds drawn from non- equity permit fees, cannabis taxes, and State grant programs to directly loan or give outright funds to cover start- up costs to Social Equity Program applicants.
Given the high financial and administrative cost of incubator models and the low certainty of success for a fledging business in a competitive city, we do not recommend an incubator model. Additionally, given the competing market in nearby Los Angeles County which possesses an abundance of regional investors and few limitations on land use, we do not recommend an investment assistance model.
After evaluating multiple studies on financial assistance models, we recommend creating a loan or investment matching opportunity through direct funding. Though the initial costs for this model are high, an application for State grant dollars can be sought. This model is highly effective in achieving social equity as it directs funds into the hands of those that were
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directly affected by inequitable laws and enforcement. The City of Oakland offers a similar direct loan program, setting aside $3,000,000 for zero -interest four -year loans to Social Equity Program applicants. Using a tiered structure, the loan siz e is dependent on the stage in which the business is operating.
RECOMMENDATION: Institute Fee Waivers for First Year of Operation.
Also included in Option One, the city should consider waiving application, permit, and related inspection fees for eligible Social Equity Program applicants to lower financial barriers to entry. Many cities offer this benefit to social equity program applicants including Palm Springs, Long Beach, and Los Angeles. Doing so will require an amendment to existing ordinances regulating fees for cannabis businesses.
RECOMMENDATION: Create a list of existing financial facilities.
The city should consider creating a list of existing financial facilities in California that offer banking services through local credit unions so that they may serve as a resource to local operators. For instance, in March of 2022, the Pasadena Service Federal Credit Union launched a social equity program to provide banking for cannabis businesses. Other credit unions that serve cannabis businesses include: HigherGrowth LLC out of Santa Rosa’s North Bay Credit Union, Vocality Community Credit Union in Northern California, O Bee Credit Union and Numerica Credit Union in Washington.
Social Equity Program: Cannabis Business Technical Assistance Multiple barriers to cannabis business ownership for Social Equity Program applicants exist, including business planning, operations, funding constraints, and awareness of available resources.
RECOMMENDATION: Leverage Existing Resources.
The learning curve to starting a new business is steep, no matter the venture. Though many locales offer business classes, personalized coaching, and contracting specialized work, the target audience for the city likely cannot afford paying for these services and leave potential applicants at a disadvantage.
Cannabis businesses have additional layers of technical expertise needed, including closely held industry practices, techniques, and networks of support. Additionally, compliance with local and state regulation is a complex process that requires specialized expertise.
Therefore, the city should consider creating a partnership with Pasadena City College’s Small Business Development Center Venture Launch Program in order to steer equity program participants in need of business technical assistance and mentorship to services currently available. The c ity can create a pipeline of social equity licensee applicants to the Venture Launch Program that offers services at no cost in the Northern San Gabriel Valley.
Pasadena City College’s Venture Launch offers the following no cost consultation services:
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• Funding, including financial projections, loan packaging assistance, bank plan preparation, and connection to a network of funding institutions. • Management, including accounting, financial strategy development, creating operations benchmark goals, cash flow management, and technology optimization. • Business Planning, including business concept, validation, lease negotiation, market identification, business plan development, and permit guidance.
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References
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Appendix A
CALIFORNIA CITY & COUNTY EQUITY PROGRAMS: APPLICANT CRITERIA CITY
RESIDENT OF
CITY/
COUNTY
INCOME
RESTRICTIONS
APPLICANT
LIVES/LIVED
IN A LOW-
INCOME
CENSUS
TRACT
CANNABIS
RELATED
CRIMINAL
CONVICTION
OWNERSHIP
BY SPECIFIED
POPULATION
BUSINESS IN
LOW INCOME
AREA
ENFORCEMENT
HISTORY –
ASSET SEIZURE
HUMAN
TRAFFICKING
SURVIVOR
ENFORCEMENT
HISTORY-
HOUSING
SIZE OF
OPERATION
Oakland Y 80% AMI Y Y
San
Francisco 80% AMI Y
Includes
parent,
sibling or
child
Attended
San
Francisco
Unified
School
District
Y
Mendocino
County
"very low
income" or
"extremely
low income"
Within 5-
mile radius
of CAMP
raids
Includes
parent,
sibling or
child
Y Y Y
Sacramento Y Y Y
Includes
immediate
family
members
51% BIPOC
ownership
Humboldt
County Y
“Moderate
income
level”
Y 20% BIPOC
ownership Y Y Y
Long Beach
80% AMI
Y Y
Apply as a
person, not
a company
AND
Have a net
worth below
$250,000
Palm
Springs Y
80% AMI
Have a net
worth below
$250,000
Includes
immediate
family
members
Apply as a
person, not
a company
Lake
County Y
“Below
median
income”
Includes
parent,
sibling or
child
Y OR
51% BIPOC,
LGBTQ, or
Woman
ownership
Y Y Y Y Y
Page | 28
Coachella Y
“low
income” or
80% AMI
and net
worth below
$250,000
Includes
immediate
family
members
CITY OF PASADENA
M E M O R A N D U M
TO: Economic Development and Technology Committee
FROM: David Reyes, Acting Assistant City Manager
DATE: August 16, 2022
RE: CONSIDERATION OF AN INITIATION OF A ZONING TEXT AMENDMENT
RELATED TO THE PROHIBITION OF OVERNIGHT PARKING PERMITS FOR PROPERTIES WITH ADUs
RECOMMENDATION:
It is recommended that EDTECH recommend to the City Council to:
Direct staff to initiate a Zoning Text Amendment related to the prohibition of overnight parking permits for properties with an accessory dwelling unit (ADU)[PMC Section
17.50.275E(3)] as part of holistic update to the City’s ADU regulations.
BACKGROUND AND ANALYSIS:
Over the last five years, and in response to the California’s housing crisis, an increasing number of state sponsored bills has been proposed to increase or streamline the production of multi-family units. Concurrently, laws surrounding ADUs have changed dramatically since 2017. While it is acknowledged that increasing the production of both affordable and market rate homes and apartments is needed to ease rent increases and displacement pressures, the construction of ADUs can increase the supply of housing in built-out areas and in areas zoned single-family.
Under existing law, ADUs are permitted by right, and only require a building permit.
State regulations do allow local jurisdictions some latitude in establishing limited development standards. More recently, the Planning and Community Development Department (P&CD) has received a grant aimed at streamlining the ADU process and providing some standardized plans from which homeowners could use as a base to submit for a building permit. P&CD has presented several updates to the Economic Development and Technology Committee and received positive feedback regarding its goals and approach to streamlining the permitting process.
OVERNIGHT PARKING FOR ADUs
EDTECH COMMITTEE
AUGUST 16, 2022
2 PARKING
State ADU regulations generally seek to reduce or eliminate parking requirements:
• Replacement parking is not required when ADUs are created through the conversion of a garage or carport;
• A maximum of one parking space may be required and that parking space may be provided as tandem parking on a driveway or in a setback; • No parking shall be required when:
o The property is within one-half mile of a public transit; o The property is located within and historic district; o Overnight parking permits are required but not available to the occupant of an ADU (this is the case in Pasadena).
Moreover, Government Code Section 65852.150(a) 8 says that, “Accessory dwelling units are, therefore, an essential component of California’s housing supply.” Further, subsection (b) of the same section provides that:
It is the intent of the Legislature that an accessory dwelling unit ordinance adopted by a local agency has the effect of providing for the creation of accessory dwelling units and that provisions in this ordinance relating to matters including unit size, parking, fees, and other requirements, are not so arbitrary, excessive, or burdensome so as to unreasonably restrict the ability of homeowners to create accessory dwelling units in zones in which they are authorized by local ordinance.
OVERNIGHT PARKING
Section 10.44.010 of the Pasadena Municipal Code (PMC) generally prohibits overnight parking in the City and sets forth procedures for obtaining an overnight parking permit.
PMC section 17.50.275E(3) prohibits the granting of overnight (on-street) parking permits for properties with ADUs. Specifically, this section states, “Overnight parking permit. No overnight parking permits shall be issued for a property with an accessory dwelling unit approved under these provisions.” While we do not have data from property owners that have not elected not to build an ADU because of this prohibition, for properties where there is limited space to provide and ADU and parking on-site, this provision may discourage the construction of an ADU. Regardless, there are a few other issues that have been identified that are associated with this prohibition:
1. Because of State Law, this prohibition essentially means that we cannot require parking for any ADU permit issued in the City.
2. Contrary to the prohibition, the City does in fact issue overnight permits – anyone in the City can purchase an overnight permit, either daily or up to 30 days. Permits can be purchased online or through the Passport Parking app as shown below.
OVERNIGHT PARKING FOR ADUs
EDTECH COMMITTEE
AUGUST 16, 2022
3 https://www.cityofpasadena.net/transportation/parking-info/buy-parking-permit/house-front/#temporary-parking-exemptions
Through the website or app, a resident of an ADU can purchase an overnight permit every day without limitation but at a higher rate than if they paid for an annual overnight permit. It is our understanding that residents who live in ADUs and need street parking are already parking on the streets with these overnight permits so changing the code would only possibly only change how much they paid for the permit, not whether or not they could park on the street or not.
The City’s existing regulations and procedures are in need of review: 1) our existing code limits our ability to require on-site parking for any ADU in the City; 2) existing processes ignore this code section; and 3) it may be important to consider treating residents that live in ADUs equal to other residents with regard to their ability to park on city streets.
RECOMMENDED ACTION AND NEXT STEPS:
The recommended action is for the City council to initiate a Zoning Text Amendment, and not to change the code or the rules. This will allow staff time to analyze the issue, present a staff report to the Planning Commission and return to the City Council as part of the larger ADU update.
OVERNIGHT PARKING FOR ADUs
EDTECH COMMITTEE
AUGUST 16, 2022
4 Should the Council initiate a text amendment, future analysis will consider:
• Availability of on-street parking supply;
• Potential impacts related to services such as street cleaning and refuse collection; and
• Potential impacts to emergency service access and other service related issues.
Memorandum
Date: August 16, 2022
To: Economic Development Technology Committee
From: David Klug, Economic Development Director
Subject: Economic Development Update
The Economic Development Division is committed to an on-going effort to retain Pasadena’s existing businesses and recruiting new ones. This purpose of this memo is to provide an update on those efforts for the month of May, June and July.
BUSINESS OUTREACH MAY JUNE JULY
Broker Outreach - Calls and/or meetings with brokers offering insights on market conditions
47* 11 19
Business Assistance - Permit assistance, site assistance, general information (demographics, psychographics, traffic info) 10 6 22
Business Outreach - Phone calls and visits to various businesses 9 12
Business Visit - Prescheduled visits with CEO, CFO of local businesses
12 3 2
Investment - Developers/Fund Managers looking at Pasadena 11 2 2 Major Property Owner - Call and/or visits to major commercial property owners
2 1 2
Marketing - Ad placement, retail recruitment, outreach to potential relocation
1 1
Sales Tax - Calls and/or visits to large sales tax producers 2 1 2 New Business Welcome Letters – letters are sent to every new business
38 58 46
Totals 122 92 108
*These totals included a Mayor/City Manager-hosted meeting with commercial office brokers. 26 brokers were in attendance.
Quarterly Sales Tax Update
In comparison to same period last year, Pasadena saw a 28% increase in collected sales tax.
Historically, the first quarter is the smallest quarter of the year from a taxable retail spending perspective since it follows the holidays. The year-over-year comparison should continue to be taken in context similar to the last few quarterly updates, since the January to March 2021 period was still a time where some business were closed entirely or operating at a reduced capacity due to COVID-19. The results show that all business type categories, except for New Motor Dealers/Auto Lease, showed strong growth from the prior year. Some of the upward change is due to inflation, especially in the Service Stations category, where cost is driving the increase rather than consumption. Lastly, some slowing has been seen in taxes generated from online retailers as some shift back to local brick and mortar locations is realized such as All Birds, Rothy’s and Aesop and others located in Old Pasadena.
Quarterly Office Update
Investment/Reinvestment
• Two H.N. & Francis C. Berger Foundation properties sold at 50 N. Hill Avenue and 1300 E. Green Street. The 50 N. Hill Avenue, 3-story office building was sold for $9,010,000 ($381.00/SF) while 1300 E. Green Street sold for $7,000,000 ($738.31/SF). • A retail investment sale closed escrow in May at 64-68 W. Colorado Boulevard. The 28,421 SF retail property, including Tiffany & Co., Crate & Barrel and Foot Locker, sold for $52,250,000 ($1,838.43/SF) to Blatteis & Schnur, Inc. • Graymark Capital completed the renovation of the 2-building, 219,000 SF, Pasadena Technology Center in Northeast Pasadena. The renovation included activating exterior plazas, promoting an indoor/outdoor working environment, with modernized lobbies, exterior building upgrades, new landscaping and solar panels throughout the parking field. The brokers are hoping to attract life science tenants. • Atlas Capital Group completed its major renovation of 101 S. Marengo Avenue, totaling approximately $25M. The 310,000 SF office building was transformed with a new exterior curtain wall, light well on the building interior, expansive exterior plaza, and future fitness center on the lower level. The office property was originally purchased in April 2020 for $72,000,000 ($232.26/SF) from Somar Associates LLC. Staff has been working with the new ownership group in searching for tenants.
Leasing Activity
• Innova Medical Group is currently under construction for an additional 24,000 square feet at 800 E Colorado Blvd. Innova Medcal Group, leads in the manufacture and distribution of rapid antigen and antibody test kits for COVID-19 disease detection.
They are a wholly owned subsidiary of Pasaca Capital and are headquartered in Pasadena.
• The law firm Lagerlof is wrapping up construction and will soon occupy an additional 18,000 square feet at 155 N Lake Avenue.
• Narrative Ads recently signed a lease for 22,000 square feet at the Pasadena Technology Center in Northeast Pasadena.
• Reliance Steel & Aluminum just signed a lease for 16,000 at Pasadena Towers relocating from DTLA.
• Iconic Hawaiian apparel manufacturer and retailer Reyn Spooner signed a lease for 3,700 square feet at 117 E Colorado Blvd. The space will be used as their corporate headquarters, design studio and retail store.
• Premier Workspaces is moving into 16,000 square feet at 301 N Lake Avenue. Premier Workspaces provides flexible workspaces to growing businesses.
New Construction
• Construction has begun on a 4-story, 100,000 square-foot medical office building at 590 S Fair Oaks. The new medical office will be occupied by USC.
Retail Update
After a citywide walking survey, staff has determined that there are approximately 79 vacancies out of 988 storefronts (per business license).
Here is an update on the vacant store fronts reported in Pasadena Now.
A) 214 S. Lake Avenue (Google Street View June 2022) - Former ‘Dupar’s is currently in plan check for a medical spa/retail store. Plans were submitted in July 2021 and version 4 was complete in February 2022. Design review for signage and façade renovation are under review
B) 345 S. Lake Avenue (Google Street View February 2021) – Former ‘Jos. A Bank”. No plans under review.
C) 844 E Green Street (Google Street View(December 2020) - Currently a nail salon (‘Maison De Beauté’)
D) 400 S. Lake Avenue (Google Street View February 2021) - Design Review for façade improvement submitted 6/15/22