In an effort to bring racial equity to the cannabis industry, lawmakers in Oakland, California, have have instituted a new requirement that anyone who owns and operates a marijuana business must live within the city. A number of licenses will also be reserved for low-income residents of certain neighborhoods and those who have been jailed for marijuana law violations.
This is great news for people of color, who have been left out of the legal cannabis industry and disproportionately targeted by the Drug War. Over 35 percent of Oakland’s population is African American — a demographic almost four times more likely than whites to be arrested for weed violations, despite comparable rates of use. Nationally, African Americans operate about one percent of all cannabis dispensaries — that’s less than three dozen black-owned dispensaries out of thousands nationwide.
“Black folks built this city and we demand ownership in the industry,” says local organizer Carroll Fife. African Americans need to secure an economic base in the cannabis industry not as workers, but as owners, she adds.
For non-residents, however, the new regulations are bleak. Businesses like Dark Heart Nursery, an Oakland-based cultivation facility operated by a resident of neighboring city San Leandro, will have to shutter — after its operators already invested millions in the company, paid millions in taxes to the city, and hired 60 local employees.
“They made it impossible for companies like us to receive a permit. That’s been a huge shock to us and we’re all processing it right now,” nursery operator Dan Grace tells Jane Street. He fears Oakland’s new policy, including the limited-eligibility equity program, could thwart its entire cannabis industry. “It’s a case of putting your best intentions ahead of good policy,” he says. “It feels good and makes a political point for {City} Council, but it’s an unworkable system.”
Workable or not, it’s legal. “Each city is taxed with the ability of promulgating its own licensure laws. If they want to narrow the licenses down to city residence, they can do that,” says attorney Craig Brand, founder of the international firm Ganja Law.
One thing this kind of law helps with is the growing business of flipping licenses, Brand says. “There are people running around the state of California, going from city to city selling licenses,” he tells Jane Street. People with no intentions of operating an actual dispensary will pay the attorney fees to obtain state and local licenses, and then sell them for profit. Oakland’s model now makes that nearly impossible.
Anyone looking to operate a cannabis business must have both city and state licenses. Under Oakland’s new program, a number of permits will be reserved for qualifying equity applicants, who are low income, live in certain neighborhoods, or have served jail time for marijuana convictions. They’ll receive assistance from a program funded by cannabis business tax revenue, which provides zero-interest business loans and technical help.
Still, it takes a lot of capital to open a business and maintain legal compliance, even with financial assistance from the equity program. “It’s offering something as a good gesture knowing not everyone will be able to take it, doesn’t matter if you qualify as a resident or not,” says Brand. “The truth is not everyone can afford the business anyways. And for people who just got out of jail, the last thing on their mind is getting into the same business right away that landed them in jail to begin with.”
To address the lapse between awarding cannabis permits and ensuring that the applicant has the skills to be successful in the industry, the organization CannaBizWatch developed the Hood Incubator, a program for low income residents of color looking to work in legal cannabis. “They have a class of about a dozen entrepreneurs who are going through business training and development with the opportunity to pitch their businesses to investors,” says Amanda Reiman, a lecturer in the School of Social Welfare at UC Berkeley and former marijuana law and policy manager for the Drug Policy Alliance. “If the city can replicate programs like this coupled with the reduction of financial barriers, I am hopeful it can be successful.”
A greater threat to Oakland’s cannabis industry was the last minute addition of a three-year residency requirement for all applicants, equity and nonequity alike, Reiman adds. “There are a great number of cornerstone cannabis businesses that have been located in and paying taxes to Oakland for nearly a decade, but their owners live in neighboring cities like San Leandro and Richmond. Sometimes by choice and sometimes due to financial necessity, but to run these businesses out of town because of a hastily introduced residency requirement is a bigger threat to Oakland’s cannabis economy than the equity program could ever be.”
Nonetheless, Reiman says that every municipal and state regulatory system should recognize the harms of prohibition and the barriers to entry in the cannabis industry. Oakland also included a requirement that half of all cannabis business staff be from the city and that a quarter of them from high unemployment areas. Businesses that hire formerly incarcerated people will also receive financial breaks from the city. “These are all important steps in creating the kind of industry that will best serve our local communities,” says Reiman.
