The Social Equity Program in Los Angeles Distilled Under The Department of Cannabis Regulation Ordinances

- This information is not being provided to anyone for the purpose of contravention of state or local regulations. Nothing in this article may be construed as legal advise, and it is merely being written from personal observation and opinion based on my own experiences in dealing with various regulatory bodies.

What is the Social Equity Program?

The Social Equity Program (SEP) is Phase 2 of the City of Los Angeles, Department of Cannabis Regulation's cannabis license application process, and a vehicle modeled by a similar program put in place by the City of Oakland, with the goal of righting past wrongs suffered by communities disparately impacted by the failed federal and state policies perpetuated by the War on Drugs.  Citizens having past cannabis related offenses, who were directly affected by those flawed policies, and are from those adversely affected communities (within specific zip codes), will be given priority in the cannabis license application process.  Those SEP applicants will be given the advantage of a one-to-one (1:1) ration for non-storefront operation applications (Manufacturing, Distribution, Lab Testing, Cultivation), and the advantage of a two-to-one (2:1) ratio on storefront operations (retail or medical dispensaries). 

The SEP applicants must meet the following requirements at the time of license application.  These applicants are divided into three tiers:

Tier 1: 

  1. Qualifications:  Low-Income and Prior Cannabis Conviction; OR Low-Income and five years of cumulative residency in a Disproportionately Impacted Area.
  2. Requirements:  SEP applicant must own at least 51% equity share of the entity, which owns the license.
  3. Future Benefits:  Business, licensing and compliance assistance; Expedited renewal processing; Program site specific conditions; Potential fee deferrals if adopted by the City; Access to an Industry Investment Fund if established.

Tier 2:

  1. Qualifications:  Low-Income and five years of cumulative residency in a Disproportionately Impacted Area; OR Ten years cumulative residency in a Disproportionately Impacted Area.
  2. Requirements:  SEP applicant must own at least 33 and 1/3% equity share of the entity, which owns the license; SEP applicant shall enter into a SEP agreement with the City to provide business, licensing, and compliance assistance to Tier 1 SEP applicants
  3. Future Benefits:  Business, licensing and compliance assistance; Expedited renewal processing; Program site specific conditions.

Tier 3: 

  1. Requirements:  SEP applicant must enter into a SEP agreement with the City to provide capital, business, licensing, and compliance assistance to Tier 1 or Tier 2 SEP applicants.
  2. Tier 1 SEP applicant assistance consists of:  Provide Tier 1 SEP applicants access to property with no rent and prorated utilities for a minimum of two years - Minimum requirements of property provided to the Tier 1 SEP applicant:  1) Cultivation (Minimum 500 sqft or 10% of Tier 3 SEP's business premises, whichever is greater); 2) Manufacturing (Minimum 800 sqft or 10% of Tier 3 SEP's business premises, whichever is greater); 3) Testing (Minimum 1000 sqft or 10% of Tier 3 SEP's business premises, whichever is greater); 4) Distributor (Minimum 1000 sqft or 10% of Tier 3 SEP's business premises); 5) Non-Storefront Retail (Minimum 1000 sqft or 10% of Tier 3 SEP's business premises); 6) Storefront Retail (Minimum 1000 sqft or 10% of Tier 3 SEP's business premises, whichever is greater); 7) Microbusiness (Minimum 800 sqft or 10% of Tier 3 SEP's business premises, whichever is greater).
  3. Future Benefits:  Expedited renewal processing; and program site specific conditions.

Definitions:

"Low Income" means at 80% or below of the medium income for the City of Los Angeles based on the 2016 American Community Survey and updated with each decennial census. 

"California Cannabis Conviction" means the applicant committed a cannabis-related crime, which occurred prior to November 8, 2016 and could have been prosecuted as a misdemeanor or citation under current California law.

"Disproportionately Impacted Area" means eligible zip codes (90001-90003; 90008; 90011; 90013; 90014; 90016; 90021; 90027; 90033; 90037; 90043-90044; 90057-90059; 90061; 90062)

My Take on the Social Equity Program...

Championed by Cat Packer, LA's Cannabis Czar, the Social Equity Program is a strong concerted effort to ensure that those communities previously ravaged by bad drug policies, are able to participate in the future success of the cannabis industry within Southern California.  Whether there are better ways to effect positive change within those disparately impacted communities is a different conversation.  Although Los Angeles is the epicenter of the cannabis industry, it has historically been a community, which has been slightly unpredictable and there are a number of influences, which may threaten to undermine the SEP's overarching goals.  Insulating the SEP will be the DCR's main objective, and its success will be carefully watched by other jurisdictions considering implementation of similar programs.

- Daniel Weis

Daniel Weis is a corporate transactional attorney and cannabis industry specialist.  Currently, he is a partner at Nola Weis LLP dba Vice Legal based in Downtown Los Angeles.

*For more information on the Los Angeles Department of Cannabis Regulation's Social Equity Program, please visit:  www.cannabis.lacity.org/resources