Long Beach is looking into offering eight additional licenses for cannabis dispensaries in hopes of diversifying those who own and run them.
A unanimous vote by the City Council on Tuesday initiates an analysis by the city to determine what a permitting process would like if the council officially creates more licenses for dispensaries. A voter-approved ordinance in 2016 capped the number of dispensaries at 32, all of which have opened or are in the permitting process.
The city hopes to attract more “equity” owners—those who have lower incomes, live in underserved parts of town or have prior criminal records tied to cannabis—who qualify for assistance under the city’s cannabis equity program to attain ownership in the city’s burgeoning industry.
The city has a process that offers up to $235,000 in grants to qualifying applicants. However, out of hundreds of applications, only one equity owner has advanced to the final round of permitting and the city has yet to approve a retail license for a Black-owned dispensary, according to the city.
It can cost upward of $1 million to open a dispensary in Long Beach, according to city officials.
That’s why Councilman Al Austin requested the item Tuesday that could lead to eight new licenses set aside specifically for equity owners who have at least a 51% stake in the business.
“If not now, when?” Austin said. “Equity delayed is equity denied.”
An amendment to Austin’s request could also tie all future cannabis business tax revenue from new businesses to be invested into youth and communities most affected by the war on drugs and create a pipeline for city residents to get involved in equity ownership.
“I just want to make sure that what we do is sincere and we get it right and we create some real opportunities for people,” said Councilman Rex Richardson, who suggested the changes. “Because what I don’t want to see is for the program to fail.”
The city had previously looked into helping equity owners get into parts of the industry that require less capital investments, like shared-use manufacturing opportunities, where equity owners could share facilities with other businesses, or delivery-only services.
Members of the public and some members of the council rebuffed that idea because it would continue to lock out equity owners from dispensaries, the most lucrative part of the cannabis industry.
Brandon Bolton, a member of the Cannabis Commerce Council Long Beach, said the new licenses would be a step forward to bringing economic prosperity to communities of color and those who have been negatively affected by the war on drugs in Long Beach.
“There are currently zero Black-owned retail storefronts, even though this industry was really built on the sacrifices of these Black and Brown communities, and they’re not really reflected in the legal cannabis market in Long Beach,” Bolton said.
Deputy City Manager Kevin Jackson said it could take until mid-September for the city to determine how new licenses would be created and distributed, and if it was feasible to do so.
Jackson said that the city wants to avoid the mistakes that other cities have made with equity applicants, namely trying to protect them from investors who might try to force them out of the business partnership after the license is granted.
“There are multiple instances in multiple cities where investors have employed predatory practices and taken advantage of equity applicants,” Jackson said. “We do believe it’s a viable option, but we recognize it’s very complex and we would want to do some analysis to make sure that equity applicants are not taken advantage of when we do put a process in place.”
Creating additional licenses would create an opportunity for equity owners, but how realistic the opportunity is remains to be seen. One of the biggest obstacles in the city’s cannabis equity program is that an applicant can only have up to $250,000 in net worth.
Under the current restrictions, opening a dispensary could require an equity applicant to leverage their entire net worth while qualifying for all available city grants just to get to the halfway point of opening a million dollar dispensary.
In an interview Monday, Emily Armstrong, the city’s new cannabis program manager, said that the city currently has no plans to expand the definition of an equity owner, including raising the ceiling of their allowed net worth, but said that policy can always be amended by the City Council on any given week.
The amount of grant funding could be increased on a case-by-case basis but it would depend on the amount of grant funding the city receives for equity cannabis programs in a given year. The city was just granted $1.26 million this week from the Gov. Gavin Newsom’s Office of Business and Economic Development.
If the council does ultimately create new licenses for equity owners, the licenses would also be constrained to adult-use sales only, according to the city attorney’s office. Because voters approved the city’s medical cannabis ordinance, which created the 32 dispensary cap in the city, any amendments relating to medical cannabis licenses would likely have to go before the voters again.
The final obstacle would be finding enough space in the city to accommodate new storefronts. A lot of the areas where cannabis dispensaries are allowed has been developed by existing retailers, but Armstrong said she believes there is still room for more.
However, she said the number of licenses that could be created by the council would be constrained by geography. Adult-use cannabis sales are subject to most of the buffers put in place by state and local agencies that require medical dispensaries to be hundreds or thousands of feet from schools, beaches, parks, libraries and daycare centers.
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