The number of cannabis dispensaries in Long Beach could grow if the City Council votes to approve eight additional licenses Tuesday that will be set aside for less-wealthy business owners trying to break into the industry.
New business licenses for storefronts would be reserved for “equity applicants,” which are people with lower net worths, who live in underserved areas of the city or have a past criminal offense tied to the war on drugs.
The creation of eight additional licenses would increase the number of dispensaries allowed in Long Beach to 40.
The City Council asked city staffers last year to look into the feasibility of creating new licenses to allow more people to enter the retail sales business, which is the more lucrative part of the industry. Councilmembers will vote on the resulting proposal at their May 10 meeting, something Councilmember Al Austin, who drafted the original item, said he was pleased to finally see.
“This is about extending opportunities to those who have been left out of the market; this is about social equity,” Austin said. “I don’t think we can get there soon enough.”
The city is also looking to create additional licenses for delivery-only businesses for equity owners, but that plan won’t be presented to the City Council until later this year.
Next week’s item would not only create new business licenses to operate dispensaries but could redefine who qualifies as an equity owner, how long they must maintain a majority stake in a business and where they can operate in the city.
The proposed ordinance would expand the “Green Zone” areas where cannabis dispensaries are allowed to open. Shops are limited to green zones because of buffer areas the city imposes around schools, parks, daycares and other locations.
Reducing the buffers to expand the green zone was an emphasis for equity applicants, who told the council that the lack of available locations has driven up the cost of acquiring a storefront because of the limited supply of viable parcels.
A total of 3.1 square miles could be added to the zone by aligning the city’s buffers with the state’s. Changes could include reducing the buffers around schools from 1,000 feet to 600 feet and adding 600-foot buffers to playgrounds and community centers.
Buffers around beaches and parks would go away entirely.
There could also be changes to qualifications for equity applicants.
Currently, a person would have to personally have a past conviction tied to cannabis in order to qualify as an equity applicant, but a change would expand that to anyone who has an immediate family member who has been criminally convicted or jailed on cannabis charges.
It would also allow multiple equity applicants to pool their resources together to apply for one of the new dispensary licenses as long as one of the equity owners has a majority stake in the ownership and maintains that majority for at least five years from the application date.
Those protections were added after months of testimony from cannabis industry operators and city staff who said that opening up more dispensary applications to equity applicants could lead to predatory investors using them to acquire locations in Long Beach that they’re currently locked out of.
Another change could increase the amount of time an equity applicant must live in the city before applying from three to five years.
Equity applicants could start applying by July if the City Council approves the ordinance. Eight final applicants would be selected by a panel of business, industry and social equity experts, none of whom would be connected to the existing industry in the city, according to the draft plan.
It’s projected the first equity dispensary could open as soon as the 2024 fiscal year, which begins in October 2023.
A separate item for the May 10 meeting could ask the city to analyze the budget implications of lowering the excise tax rate for recreational cannabis sales. An additional 8% tax is charged for recreational cannabis while medicinal cannabis is taxed at 6% on top of California excise taxes (27%) and the city’s 10.25% sales tax. Business owners have lobbied for lower taxes to allow them to compete with the black market.
Long Beach reduced the excise taxes on cannabis cultivation, testing, manufacturing and testing from 6% to 1% earlier this year, but retail cannabis sales rates have remained at the higher 8% rate since the tax structure was created in 2018.
Cannabis taxes have helped buoy the city’s budget over the past few years, bringing in over $10 million during the pandemic’s first year. It was projected to generate another $9.2 million during this fiscal year that runs through September.
The tax issue could be sent to the council’s Budget Oversight Committee for consideration in this year’s budget, where the city must reconcile the $9 million loss triggered by a court decision that it was unconstitutional for the city to continue transferring excess money from its water department to the general fund. The city must pay back the full $30.8 million settlement to the water department by September.