City Council
Adult-Use Cannabis Social Equity Study Session
March 19, 2024
Presentation Overview
1. Refresher on Council Direction for Adult-Use Cannabis
2. What is cannabis social equity?
3. Equity programs from other cities
4. Options for cannabis social equity framework
5. Options for location restrictions
Prior Council Direction - June 13, 2023
• Allow adult-use cannabis retail and non-retail uses including consumption lounges
• No cap on number of uses/licenses but explore zoning restrictions to limit the number of businesses
• Allow two medicinal cannabis retailers to sell adult-use cannabis products
• Allow adult-use cannabis uses in non-residential zones and apply State buffers for distance from sensitive uses
• Conduct a cannabis equity assessment and create a cannabis equity program
Purpose
• Since Council's direction in June 2023...
Adopted IZO to allow two medicinal cannabis retailers to sell adultuse cannabis Researched peer cities' cannabis equity programs
Worked with DEI team to secure Cannabis Equity Grants Program for Local Jurisdictions Type 1 Grant
• Tonight
• Seek additional Council direction on social equity framework and zoning locational restrictions
• Not yet creating specific components of an equity program What is Cannabis Social Equity?
• Recognize the long-term impact of
the criminalization of cannabis
upon minority communities
• Promote equitable ownership and
employment opportunities in the
cannabis industry
• Decrease disparities and improve
outcome among identified groups
that have been most affected by
the war on drugs
Development of Cannabis Equity Program
Determines
most
impacted
groups
Equity Study
Informed by
findings of
Equity Study
Eligibility
Criteria Priority application +
licensing
Employment
opportunities
Community
reinvestment by
cannabis businesses
Investment of
cannabis tax revenues
Example
Program
Components
Equity Program Challenges
• Predatory/manipulative behavior by non-qualifying applicants taking advantage
• Sunk costs for applicants ultimately unable to obtain a license • Limited staff resources to develop/implement a comprehensive program
• Excessive startup costs and need for capital
• Intense competition for finite number of licenses
• Limited availability of eligible real estate
Peer Cities Summary
Equity
Program
Developed at
Outset or Later
Time to Develop
Ordinance
Time to Develop
Equity Program
Dedicated
Staff/Office
for Program
Type of
Selection
Process
Culver City N/A ~ 1 Year N/A N/A N/A
Long Beach Later ~ 1 Year ~ 2 Years RFP
Los Angeles Later -- -- Lottery
Oakland Later ~ 2 Years 3 Months
Non-dispensary
on rolling basis;
dispensary
through lottery
Palm Springs Later ~ 1 Year 9 Months
Began with first
come first served
but will likely move
to lottery
San Diego Later ~ 1 Year In Process TBD
San Francisco Later ~ 1 Year ~ 1 Year First come first served
West Hollywood N/A ~ 1 Year N/A N/A N/A
Lessons Learned
Regulatory
1. Establish a limit to number of retail licenses
Council directed no cap on number of licenses
Most other jurisdictions with no cap struggled to scale back after overconcentration Process
2. Establish minimum criteria to qualify equity applicants followed by random selection Council directed exploration of non-discretionary process Selection process options to be provided with draft ordinance pending Council direction
3. Set aside percentage of permits for equity applicants and prioritize their processing Ensures share of licenses are available for equity applicants
4. Keep the process simple
Require background checks and ownership structure transparency Equity applicant eligibility criteria should not be too broad
5. Develop informational business assistance tools
Interactive GIS cannabis map to identify existing locations
6. Prohibited or restrict sale of permits
Ensures continuation of equity program
Lessons Learned
Staffing
7. Establish cannabis department
Provides oversight, enforcement and educational, technical and business assistance to equity applicants
Requires additional staff and/or consultant support
Permitting
8. Opposition from non-equity operators of equity applicants Less restrictive locational requirements for equity applicants may result in more desirable areas
9. Consider not providing a vested right to run with the land for cannabis uses Would not allow future adjustments and limit flexibility of cannabis program implementation
10. Understand nuances of different cannabis operations for each permit type.
Cannabis Equity Program Considerations
1. No caps on number of permits
• Benefits more capitalized businesses
• Forces equity businesses to partner with more established businesses Hard to know if equity partner has control
2. High start-up costs for businesses
• Hard to provide adequate direct funding for equity applicants
3. Requires a lot of hands-on assistance
• Staffing/resource intensive
May require additional staff, consultants, and/or contract services
4. Program funding relies largely on State grants
• State legislation mandates grant funding appropriation (80% for direct applicants, 10% for staff and 10% for technical assistance
May conflict with equity applicant needs
Program may cease if alternative funding is not identified
5. Set aside program revenue to supplant cannabis equity program Options for Cannabis Social Equity Framework
Source: www.veriheal.com
Options for Cannabis Equity Approach
ORDINANCE ONLY STANDARD EQUITY ENHANCED EQUITY
EQUITY
PROGRAM
Adult-use cannabis
ordinance only
No equity program
Adult-use cannabis ordinance
Equity program derived from best
general practices and examples from
other cities informed by Santa Monica
equity assessment
Adult-use cannabis ordinance
Equity program with tailored components
created from comprehensive Santa
Monica-specific equity assessment
findings
TIMELINE Approx. 12 months
By December 2024
Approx. 12-18 months
By June 2025
Approx. 24 months / ongoing
By December 2025 for initial components
but will require ongoing support due to
likelihood of direct and technical
assistance
EQUITY
ASSESSMENT
Conducted Conducted Conducted
Options for Cannabis Equity Approach
ORDINANCE ONLY STANDARD EQUITY ENHANCED EQUITY
COST / FUNDING
(Can vary further
depending on number
of businesses and level
of oversight needed)
Approx. $40K for
assessment
Funded by State Go-Biz
Grant – Type 1
Approx. $40K for assessment
Funded by State Go-Biz Grant –
Type 1
Approx. $40K for assessment
Funded by State Go-Biz Grant – Type 1
• Additional cost for consultant to
develop enhanced equity program
• Apply for ongoing State Go-Biz Type 2
grant and future budget actions by
Council to continue to support equity
program as necessary
ANTICIPATED
STAFFING
NEEDED
Existing Planning staff Existing staff development of equity program
Additional interdepartmental staff
and/or contract staff for ongoing
management of cannabis program
1 to 2 Full-time staff dedicated to cannabis
program oversight and equity applicants
Depends on number of cannabis
businesses and desired level of regulatory
oversight
Options for Cannabis Equity Approach
ORDINANCE ONLY STANDARD EQUITY ENHANCED EQUITY
PROCESS Based on zoning regulations
(First come first served)
Administrative non-selection process
(lottery, first come first served, etc.)
Discretionary selection process
(RFP, etc.)
POTENTIAL
PROGRAM
ELEMENTS
(Illustrative purposes
only)
None • Application criteria specific to
equity applications
• Fee waivers
• Expedited application review
• Reduced or eliminated buffer
requirements
• Business development
assistance/mentorship
• Workforce training
• Assistance with accessing startup
capital
• Assistance with expunging cannabisrelated criminal records • Utilizing cannabis tax revenues to fund
community reinvestment
PEER CITIES
STUDIED
• West Hollywood
• Culver City
• Palm Springs • Long Beach
• San Francisco
• Oakland
• Los Angeles
Equity Framework Options
STANDARD EQUITY
+ Prioritizes timing,
cost/resources,
and revenue
-
Doesn't consider
cannabis equity
+ Balances timing,
cost/resources,
revenue, and
cannabis equity
+ Prioritizes cannabis
equity and is based
on Santa Monicaspecific findings
-
Cost/resource
intensive (ongoing)
and takes longer to
develop
Recommended Option
-
Cannabis equity
program is not
based on SantaMonica specific
findings
ORDINANCE ONLY STANDARD EQUITY ENHANCED EQUITY
Options for Locational Requirements
Locational Restrictions – Eligible Parcels
• Assumes Statedesignated sensitive uses
(school, youth center, day
care center) for buffers
Locational Restrictions – Prior Council Direction
• Council concern with oversaturation of cannabis
businesses
• Buffers around sensitive uses
• Can be increased or decreased
• Mechanisms to control number of businesses
• Minimum distance between cannabis businesses
• Limits per block or geographical area
Application of Buffers Between Cannabis Uses – 300’
• Assumes State recommended 600’
buffer from sensitive uses (school,
youth center, day care center) for
eligible parcels
• Hypothetical business locations
based on eligible parcels
Small
(300’
Buffer)
Medium
(600’
Buffer)
Large
(900’
Buffer)
Potential
Maximum
Number of
Cannabis
Businesses
62 38 29
Application of Buffers Between Cannabis Uses – 600’
Small
(300’
Buffer)
Medium
(600’
Buffer)
Large
(900’
Buffer)
Potential
Maximum
Number of
Cannabis
Businesses
62 38 29
• Assumes State recommended 600’
buffer from sensitive uses (school,
youth center, day care center) for
eligible parcels
• Hypothetical business locations
based on eligible parcels
Application of Buffers Between Cannabis Uses – 900’
Small
(300’
Buffer)
Medium
(600’
Buffer)
Large
(900’
Buffer)
Potential
Maximum
Number of
Cannabis
Businesses
62 38 29
• Assumes State recommended 600’
buffer from sensitive uses (school,
youth center, day care center) for
eligible parcels
• Hypothetical business locations
based on eligible parcels
Next Steps
Next Steps
May – December 2024
Develop
cannabis
equity
program
Hire
consultant
and conduct
equity
assessment
By December 2024
Develop
cannabis
ordinance
and admin
guidelines
Apply for additional
Cannabis Equity
Grant (Type 1)
funding to assist in
development of
cannabis equity
program
2025
Apply for next
round of
Cannabis Equity
Grants Program
(Type 2) for
implementation
of equity
program
Timeline will depend
on Council direction
Key Policy Questions
Equity Framework:
1. Determine expansiveness of cannabis equity program – standard or enhanced equity option?
Locational Restrictions:
2. Should there be an additional buffer around particular uses in the City?
3. For distances between operators, would Council prefer small (300’), medium (600’), or large (900’) buffer?
4. In addition to a distance between operators, should there be an additional restriction that states that in no case should there be more than 1 cannabis business per block? Appendix
Selection Process Options
Merit Based:
Applicant are ranked according to their score. Top-ranked applicants are selecting to move forward to the permitting process, consistent with the number of permits available.
Equity:
Priority is given to individuals who qualify for the cannabis equity program, as defined by the equity assessment.
Lottery:
All applications scoring above a minimum baseline are entered into a drawing from which applications will be selected at random, consistent with the number of permits available. Those applications selected will be allowed to move forward to the permitting process.
First Come / First Served:
Applications are reviewed and scored in the order they are received. All applications scoring above a minimum baseline will be allowed to move forward to the permitting process, until the max. number of permits available has been reached.
LONG BEACH
Equity Program
• Prepared by City staff in the Office of Equity
• Timeline: Approx. 2 years
• Components
• Fee Waivers
• Reduction of location requirements (i.e. buffers between businesses) • Expedited application and facility plan check review
• Direct technical assistance Business development support ($350K grant/equity applicant)
• Access to application workshops
LONG BEACH
Adult-Use Ordinance
• Timeline: Approx. 1 year
• Staffing & Resources
• City employees – overseen by Office of Cannabis
Oversight (includes 10 staff) housed in the City
Manager’s Department
• Outreach
• Met with community stakeholder organizations
and groups
• Process
• Applications accepted during application
window, chosen by lottery
• No cap on number of licenses except for
dispensaries
• Dispensaries are capped based on population (32
– all converted from medical) and later added
additional permits for equity applicants (8)
awarded through RFP process.
Equity Assessment
• Prepared by City staff
• Timeline: completed before ordinance was
adopted and took approx. 1 year
• Assessment Components
• Eligibility criteria
CITY OF LOS ANGELES
Equity Program
• Lottery selection process for verified social equity applicants through eligibility criteria (lottery administered by third party firm)
• City online assistance/learning portal with online courses, digital resources, educational events
• Direct financial assistance through grants and fee waivers/deferrals • Pro/low bono legal services for social equity applicants who have passed a pre-application stage
• Outside vendors provide targeted programming to social equity entrepreneurs (licensing requirements, commercial regulations, business/workforce development, technology education)
CITY OF LOS ANGELES
Adult-Use Ordinance
• Allows for retail, delivery, cultivation,
manufacturing, testing, and distribution
uses
• License caps on certain uses, including
retail, by Community Plan Area based on
population
• New applications for retail uses currently
only being accepted for social equity
applicants until January 1, 2025
• Retail uses must be a minimum 700’ from
sensitive uses and other retailers
• Cultivation, manufacturing, testing, and
distribution uses must be a minimum 600’
from schools
Equity Assessment
• Prepared by consultant in 2017
• Timeline: Approx. 4 months
• Components
• Cannabis use and arrest data
• Study of penalties and disadvantages of nonviolent
drug convictions
• Public workshop
• Recommended program components including
workforce requirement, technical assistance
program, investment program/fund,
waived/deferred fees, expungement of past
cannabis criminal records, streamlined permitting,
provisional licensing, social equity program
coordinator, education/outreach
OAKLAND
Equity Program
• Developed by city staff
• Timeline: 3 Months. Developed concurrently with Equity Analysis • Outreach
• Hold ongoing monthly meetings in collaboration with a local equity group for equity applicants • Components
• Phased licensing - At least 4 of the 8 dispensary permits are reserved each year for equity applicants per calendar year
• Equity Incubators – General applicants that provide free rent or real estate to equity applicants are prioritized for next round of permits.
• Operators may apply for a permit and receive conditional approval prior to leasing or purchasing a space.
• Drug offenses excluded from background checks
• Reduced licensing fees
OAKLAND
Adult-Use Ordinance
• Timeline: Approx. 2 years
• Staffing & Resources
• City employees – overseen by Economic &
Workforce Development Department, Special
Activity Permits Division
• Outreach
• Stakeholder community meetings and online
survey
• Process
• Business permit and dispensary permit
• Dispensaries require a public hearing
• Onsite consumption permit may be granted to
dispensaries in good standing following a public
hearing and evaluative point system
Equity Assessment
• Prepared by City staff
• Timeline: Approx. 3 months
• Assessment Components
• Enforcement history
• Identification of disproportionately affected
communities
• Disparities within cannabis industry
• Revisions to medical cannabis ordinance
• Challenges
• Have a history of large illicit market
PALM SPRINGS
Equity Program
• Prepared by City Staff with assistance from consultant • Timeline: Started with 3-month pilot program based on other cities, went back and spent 6 months redeveloping/expanding
• Components:
• Tax cuts (50%)
• Technical assistance ($350K grant/equity applicant)
• Fee Waivers (i.e. application review and plan check fees) • Expedited processing
• Application workshops
• Location waivers (i.e. buffers between businesses)
PALM SPRINGS
Adult-Use Ordinance
• Timeline: Approx. 1 year
• Staffing & Resources
• City employee – overseen by Department of
Special Program Compliance
• Outreach
• Several stakeholder meetings
• Process
• Licenses offered first-come, first-served with no
caps on number
Equity Assessment
• Prepared by Consultants ($40K – grant funded)
• Timeline: Approx. 6 months
• Assessment Components
• Enforcement history
• Identification of disproportionately affected
communities
• Identification, understanding and addressing of
key barriers
• Local cannabis legislative history
• Findings and equity program recommendations
• Challenges
• Determining cap on # of permits due to
fluctuation in population due to tourism
• Classifications of crimes changed over time,
which made data collection difficult
SAN DIEGO
Equity Program
• Prepared by City Staff with assistance from consultant • Timeline: Still being developed
• Components
• Waiver of location requirements (i.e. buffers between businesses) • Expedited processing
SAN DIEGO
Adult-Use Ordinance
• Timeline: Approx. 1 year
• Staffing & Resources
• City employee – overseen by Cannabis Business
Division
• Outreach
• Several listening sessions with Council members
observing advertised through print/media,
website updates, direct calling to stakeholders
and community organizations, and social
outreach posts
• Process
• Discretionary, Licenses offered first-come, firstserved with a cap of 36 citywide and 4 per Council district
Equity Assessment
• Prepared by Consultants and City staff ($75K –
grant funded)
• Timeline: Approx. 20 months
• Assessment Components
• Cannabis market analysis
• Identification of economically and socially
disadvantaged neighborhoods and populations
• Community feedback analysis
• Best practices from other California jurisdictions
• Identification of primary barriers to equity
• Preliminary equity program recommendations
• Challenges
• Interdepartmental review and agreement of
program recommendations resulting from the
assessment
SAN FRANCISCO
Equity Program
• City developed
• Timeline: Approx. 1 year
• Incorporated into the Adult-Use Ordinance
• Components
• Equity applicants with 100% ownership are prioritized over non-equity applications • No cost to apply for initial permit
• Opportunity to partner with an Equity Incubator business • Legal assistance from Cannabis Law Committee of the Bar Association of San Francisco
SAN FRANCISCO
Adult-Use Ordinance
• Timeline: Approx. 1 year
• Staffing & Resources
• City employee – Office of Cannabis under the City Administrator Department, includes 11 employees • Outreach
• Held public meetings and sent public notices through Cannabis Legalization Task Force. Now have a more permanent task force that advises on legislation.
• Cost
• Approx. $600,000 to fund the staff positions to do the initial work (3 staff members) and create the Office of Cannabis
• Process
• Application window with first-come first-serve based on minimum qualifications with equity applicants prioritized
• Have 6 equity criteria and must meet 3 of the 6 and pass an asset test to be considered an equity applicant
• Equity applicants who own 100% of the business are prioritized most • Once all equity applicants eligible receive permit, then start reviewing general applicants • No cap on permits.
• Medical permitted to convert to adult-use but must make equity commitments with revokable license if fall through on commitments.
SAN FRANCISCO
Equity Assessment
• Prepared by City staff and community groups
• Timeline: Approx. 6 months
• Assessment Components
• Identification of economically and socially disadvantaged neighborhoods and populations • Historical & legislative context of cannabis policies • Arrest rates and low-income populations
• Identification of primary barriers to enter
• Findings and equity program recommendations
• Challenges
• Challenging and slow to coordinate with local departments to secure necessary data (arrest dates, low-income populations, disadvantaged communities)
CULVER CITY
Equity Program
• None developed
Equity Assessment
• None conducted
Adult-Use Ordinance
• Timeline: Approx. 1 year
• Staffing & Resources
• Task force comprised of City staff and
boards/commission members and contracted
with consultant on ordinance development
($50K) – overseen by Finance Department
• Outreach
• Task force comprised of City staff and
boards/commission members
• Process
• Competitive selection process and CUP required.
• Extra points awarded to minority-, women-, or
veteran-owned businesses during selection
process
WEST HOLLYWOOD
Equity Program
• None developed
Equity Assessment
• None conducted
Adult-Use Ordinance
• Timeline: Approx. 1 year
• Staffing & Resources
• Contracted consultants, program overseen by
Community Safety Dept and Neighborhood
Business Safety Division
• Outreach
• Stakeholder meetings and surveys
• Process
• Application window with screening process to
review applications with third party reviewer
based on criteria with top 8 candidates selected
• All cannabis business licenses require a hearing
before the Cannabis Commission
• Medical retailers allowed to convert to adult-use
through "legacy" permit but very restrictive (can't
change more than 50% of ownership within first 4
years, can't rebrand, and can't move locations
unless lease is terminated, or else legacy permit is
terminated)