Oakland Continues to Debate Cannabis Licensing and Equity - Updated

UPDATE: October 5, 2016

Last night, the full Oakland City Council met. Council Member Rebecca Kaplan said she planned to move to bring the cannabis licensing out of Public Safety Committee to the full Council, but then said it was being addressed in a different way. The Clerk clarified that three members of the Council had called for a special City Council meeting on Novenber 14 to address cannabis licensing. This would bypass the Public Safety Committee (which Council Member Brooks chairs), and where amendments the cannabis licensing ordinances and its equity program have been stalled. Look for a big showdown on November 14.

ORIGINAL POST

Last night, the Public Safety Committee of the Oakland City Council held a meeting and heard testimony on potential amendments to Oakland's cannabis licensing ordinances.

By way of background, Oakland passed cannabis licensing ordinances in May. California Legalized provided a summary of its key terms. The most controversial aspect of the licensing ordinance was the equity program. This program requires that 50% of new licensees to owned at least 50% by either (a) a resident of specified police beats in certain parts of East Oakland; or (b) individuals incarcerated for a marijuana-related offense as a result of a conviction arising out of Oakland in the last ten years. The stated goal of the program is to address damage done by the war on drugs. As a practical matter, the equity program as drafted would limit the grant of licenses to non-equity applicants because each non-equity applicant could only receive a license after matching equity applicant received a license, on 1:1 ratio. Many existing businesses feared they would not be able to obtain a license as a result.

Various amendments have been proposed to the ordinances, and the city officials responsible for the licensing program announced that the City "will not begin issuing applications for medical cannabis permits" pending resolution of those proposed amendments.

THE FOUR SETS OF PROPOSED AMENDMENTS TO OAKLAND'S CANNABIS LICENSING

A number of amendments to Oakland's licensing program have been put forward. Many of them are not controversial, and there is some common ground among them. Below are the key areas of controversy, which largely concern the equity program and residency requirements.

First, the Oakland Cannabis Regulatory Commission recommended changes to the ordinance, including expanding the equity program eligibility to additional people and demonstrating a path to a license for cannabis businesses already in good standing with the City of Oakland.

Second, Council Member Desley Brooks, the primary advocate for the equity program, also proposed other changes to the cannabis licensing. Joined by Council Members Gallo and Reid, Brooks proposed requiring licensees to give 25% ownership of their business to the City of Oakland. After that was harshly criticized as illegal and unconstitutional, Brooks, Gallo, and Reid proposed instead requiring licensees who were in operation before July 2016 to agree to give the City 25% of their profits in perpetuity, as well as allow the City to control a seat on the business's board of directors. Money raised in this way would be put into an equity fund for specified purposes, including training programs, a loan fund for equity applicants, an activities fund, and city clean-up/beautification. These Council Members also proposed a five-year residency requirement for any Oakland cannabis license.

Third, Council Members Kalb, Guillen, and Campbell Washington also released recommendations for changes to the licensing ordinance. Their preferred approach is to eliminate restrictions on licensing, and instead to create a fund to support equity-eligible individuals and businesses, as well as measures to make it easier for equity-eligible individuals to get a cannabis business licensed and operating in Oakland. They also proposed clarifying that existing businesses in Oakland would have a path to licensure.

Fourth, Council Member Kaplan put forward another set of proposed amendments. Kaplan suggested cannabis businesses in operation before 2016 should be allowed a license without a matching equity applicant, but only if they pay double the amount of any back fees and taxes, and agree to pay the City 10% of gross receipts in perpetuity. These funds, as well as 20% of all cannabis taxes received by the City, would go into an equity fund to be used in ways similar to Council Member Brooks' proposal. Kaplan also recommended expanding equity program eligibility, and suggested she might support a residency requirement.

THE SEPTEMBER 26, 2016 PUBLIC SAFETY COMMITTEE MEETING

The Public Safety Committee is chaired by Council Member Books and also includes Council Members Gallo, Guillen, and Kalb. As demonstrated by their proposed amendments, Brooks and Gallo, on one hand, and Kalb and Guillen, on the other, are sharply divided on the equity program.

The Committee took testimony from many members of the public, including many from the cannabis industry. Council Member Kaplan also attended and spoke in support of her proposed amendments.

After those comments, the members of the Committee debated the amendments and next steps. Those comments were largely in line with their written discussions, but two comments stand out. First, Council Member Brooks stated that her proposed requirement of pre-existing business to pay 25% of profits to the City was "obviously too high." Second, Council Member Guillen voices support for adding veterans to the equity program.

California Legalized live-tweeted the hearing, and additional details and commentary can be found at @Calilegalized. Video is also available from the City.

Ultimately, the members of the Committee were deadlocked on next steps. Council Member Brooks moved that the Public Safety Committee take up the matter further at a future meeting. Brooks and Gallo voted in favor, Guillen and Kalb against.

Council Member Guillen moved to send the matter to the full City Council. Guillen and Kalb voted in favor; Brooks and Gallo voted against.

At the conclusion of this portion of the meeting, Council Member Brooks stated that the Committee would consider the matter again.

WHAT HAPPENS NEXT

All that is clear at this point is that no resolution of proposed amendments to the licensing ordinance is going to happen any time soon. The next Public Safety Committee meeting is not until October 25, and that will not be the end of the process.

Seven of the eight members of the Council have supported written amendments. Council Members Brooks, Gallo, and Reid are on one side of the debate, with an equity program that limits licensing and seeks extraordinary payments from existing businesses to obtain a license. Council Members Kalb, Guillen, and Washington are on the other side of the debate, seeking open licensing with financial support to equity eligible candidates. Council Member Kaplan's proposal is somewhere in the middle. Only Council President Gibson McElhaney has not issued a written statement, as of yet.

Moreover, the City staff has not yet announced whether it will reconsider the decision to put licensing on hold until the amendments are resolved.