Details on Proposed Revisions to Oakland's Licensing Program

Oakland's City Council will once again take up cannabis licensing and its controversial equity program on Monday, November 14.  

On November 9, a set of new written material was made public.  One major set of proposed amendments to Oakland's liccensing ordinances was announced, as well as one minor set, and a report from Oakland's Department of Race and Equity.  

Proposed Amendments to Section 5.80 and 5.81 from Council Members Kalb, Guillen, and Campbell Washington

First, the City Attorney's office has signed off on a set of proposed revisions to both Oakland Municipal Code Section 5.80 (for dispensaries and delivery services) and Section 5.81  (for cultivation, manufacturing, distribution, etc.).   The revisions appears to be based on the prior suggestions of the Cannabis Commission and those put forward by Council Members Kalb, Guillen, and Campbell Washington.   If adopted, they would significantly alter the equity program.

Equity Eligibility.  Applicants could fit into the equity program in two basic ways.

1.  Ownership by an equity-eligible individual.

Any business owned by an equity-eligible individual could apply for an equity license.  For most business entities, that means at least 20% ownership by that equity-eligible person (down from 50% in the current ordinance).  For non-profits, "ownership" means the equity-eligible person being the executive director or a member of the board of directors .  The applicant business can't have more then $250,000 in gross receipts per year in the last two years.  

To be equity-eligible, a person must be an Oakland resident, have an income of less than 80% of the Average Median Income for the past two years (which means around $40,000 per year for an individual), and meet one of the following criteria:

(a) resided for 5 years in an expanded list of police beats (2X 2Y 6X 7X 19X 20X 21Y 23X 26Y 27X 27Y 29X 30X 30Y 31Y 31Z 32X 32Y 33X 34X and 35X);

(b) has a California conviction for a marijuana offense in the last 10 years (no incarceration required);

(c) has a parent or spouse incarcerated for a marijuana offense in California in the last 10 years; or 

(d) is a veteran.

2.  Pre-existing small businesses that meet, or promise to meet, employment goals.

Alternatively, a small business that operating in Oakland for two consecutive years, and had gross receipts less than $250,000 per year, can be equity eligible if they employ or commit to employing 25% of their workforce who are residents of specified police beats (2X 2Y 6X 7X 19X 20X 21Y 23X 26Y 27X 27Y 29X 30X 30Y 31Y 31Z 32X 32Y 33X 34X and 35X) or formerly-incarcerated Oakland residents.  

Equity Program Benefits.

Under the proposed amendments, equity applicants would have a range of benefits, including access to a loan fund for start-up costs and other expenses, expedited permit applications and  renewals, deferment of regulatory fees, annual tax incentive payments, and access to job and training programs. 

For dispensaries (but not for other categories of applicants), the equity applicants also get priority consideration in "Phase 1" of the application process.  What that means in practice is that all the equity applications for dispensary licenses will be considered first, before any non-dispensary applications.  That would likely mean a smaller and  less competitive application pool than the non-equity applicants.  Equity applicants could achieve all 8 dispensary licenses  awarded the first year, and that would leave no licenses left for non-equity applicants.

Licenses for Non-Equity Applicants.

For license categories other than dispensaries, the equity program would not place any limit on an applicants ability to get a license.  The amendments would eliminate the 1:1 requirement for equity and non-equity applicants from the current ordinances.  Because there is no numerical limit on the number of licenses other than for dispensaries, as a practical matter than the equity program would not pose any obstacle to non-equity businesses (other than dispensaries) to get a license.

That said, equity applicants get priority treatment.  That could create a back-log as city staff sorts through applications, but that should be only temporary.

For dispensaries, as discussed above, it is entirely possible that equity applicants will take all of the available licenses in the first year or even multiple years, which would make it harder if not impossible for an non-equity applicant to obtain a dispensary license in the near term.

Amendments from Council Member Kaplan

Council member Kaplan also submitted proposed revisions to the ordinances, based on her prior proposals.  The Kaplan amendments on the equity program are quite limited, but would allow non-profits to be eligible for an equity application if a member of the board or the executive director is an equity-eligible individual.   Kaplan has also proposed financial incentives for equity licensees, similar to the Kalb proposal discussed above.

Department of Race and Equity Report

Finally, Darlene Flynn, the director of Oakland's Department of Race and Equity, submitted a memorandum.  Council Member Brooks requested a report at the last City Council meeting.

The Flynn Memo recommends that the City Council adopt a "Racial Equity Outcome Goal," which "could include" the following:  "Promoting Equitable Ownership and Employment Opportunities in the Cannabis Industry in Order to Decrease Disparities in Life Outcomes for Marginalized Communities of Color and to Address the Disparate Impacts of the War on Drugs on Those Communities."  Once the Council has adopted such a goal, Director Flynn recommends a detailed analysis of the various proposals for equity against that goal.  The analysis would ultimately aim to "maximize benefits and minimize burdens for marginalized racial groups related to achieve identified racial equity outcome."   How long such an analysis would take is not clear, but presumably would take significant time.

Next Steps

A key question for the City Council will be whether the proposal from Kalb, Guillen, and Campbell Washington can find enough supporting votes to pass.  Members Brooks, Gallo, and Reid are unlikely to be supportive.    If both of Council Member Kaplan and Council President Gibson McElhaney support the proposal, it would have a majority (5-4).  If either of Kaplan our Gibson McElhaney supports it, that would lead to a 4-4 tie that could be broken by the Mayor.  

Notably, Council Member Brooks and her supports have not (at this point) released any proposed ordinance amendments that would implement her prior proposals to, among other things, unconstitutionally take 25% ownership of certain license applicants.   That may suggest they will not pursue those amendments, it may mean that they are awaiting the results of the equity analysis Council Member Brooks requested.  

While no final vote is likely at the next meeting, we likely will have more information about where council members stand.  

Update:  Oakland's final licensing program was adopted on March 28, 2017, and we've got the details.