Oakland Cannabis Licensing -- Finally
Updated: On March 28, 2017, Oakland City Council unanimously approved the final (for now) cannabis licensing program. The City Administrator's office has also published an FAQ based on the new law. The text of the final ordinances, as approved, are now available for Oakland Municipal Code Section 5.80 (for dispensaries and delivery services) and for Oakland Municipal Code Section 5.81 (for other cannabis businesses). With that new information, here is an overall summary of the program.
Oakland offers licensing for all major categories of commercial activity covered by state medical cannabis licensing under the Medical Cannabis Regulation and Safety Act: dispensaries, delivery services, cultivation, distribution, testing, transportation, manufacturing, and testing. Dispensaries can also apply for on-site consumption licenses. The ordinance authorizes 8 additional dispensary licenses per year, and do not place a limit on the number of any other license type.
Oakland places zoning limits on each type of license, and Oakland has published a map showing zoning for each license type. The Oakland "Green Zone" map is available from Oakland's city web site. Since the publication of that map, the relevant zoning has changed in a few ways. First, all licensed locations must be at least 600 feet away from a K-12 school, but the distance is measured by path-of travel rather than the shortest-distance method used by California Health and Safety Code Section 11362.768. In addition, dispensaries must be 600 feet away from youth centers and other dispensaries. All of these distance limits are subject to a waiver by the City Manager. Second, the Oakland ordinance now allows manufacturing for edibles and topical in any commercial zone where a commercial kitchen is allowed.
Under the Oakland ordinances, the City Manager is empowered to create operating and performance standards, which have not yet been announced. Other than that, the Oakland ordinances impose few restrictions on the operations of licensees over and above what is required by the MCRSA. There are only four requirements:
- no detectable cannabis odors outside the facility;
- security cameras as required by the Oakland Police Department;
- implementation of a community beautification plan; and
- employees must be paid a living wage.
While a three-year Oakland residency requirement was part of the ordinance for a time, it was removed at the March 21, 2017 City Council meeting. General (non-equity) applicants are not required to reside in Oakland.
The equity program
The most controversial and debated aspect of the licensing program has been its equity program. The final program, in sum, identifies a limited pool of equity-eligible applicants, gives them certain benefits and opportunities, and limits the number of licenses that non-equity applicants during the initial phase of the program.
Individuals are equity eligible in one of two ways. First, an eligible person may have resided for 10 out of the last 20 years in a specific list of qualified Oakland police beats: 2X, 2Y, 5X, 6X, 7X, 8X, 19X, 21X, 21Y, 23X, 26Y, 27X, 27Y, 29X, 30X, 30Y, 31Y, 32X, 33X, 34X, or 35X. A map of those beats, searchable by address, is available on the Oakland city website. Proof of residency requires two of the following items: (1) California drivers license; (2) California identification card records; (3) property tax billing and statements; (4) state or federal tax returns; and (5) utility billing and payment.
Second, alternatively, an eligible persons may have been arrested after November 5, 1996 and convicted of a cannabis crime committed in Oakland.
Whether qualifying by residency or by a cannanbis conviction, in order to be equity-eligible, a person's annual income must be at or below 80% of the average median income in Oakland, adjusted for household size. That is about $52,560 for a single-person household, and $75,150 for a family of four.
To qualify as an equity applicant, a business must be owned at least 50% by one or more equity-eligible individuals. For non-profits, equity-eligible individuals must constitute the majority of the board of directors.
Equity-eligible business applicants have a number of opportunities and advantages. Equity applicants will pay no application fee and will be eligible for permit fee waivers. In addition, they are eligible for no-interest startup loans and technical assistance, provided through one or more City consultants.
In addition, equity applicants have advantages in obtaining limited licenses. They also have the opportunity to participate and receive free rent from a general applicant as part of the equity incubator program. These licensing timeline advantages are discussed below
LICENSE TIMELINE AND PROCESS
The City Administrator office's FAQ states that licensing other than dispensaries will start in May of 2017, and that dispensary licensing will being "later" in 2017.
Non-Dispensary Licenses Phase I: The Equity Preference Period.
For all licenses other than dispensaries, during initial phase of the license application process, at least 50% of the licenses must be granted to equity applicants. That limits the number of general (non-equity) licenses granted to the number of equity licenses granted. As a result, many general applicants will very likely need to wait for a license during this time.
There are two ways for a business that is not equity eligible to avoid this delay. First, the general applicant could partner with an equity-eligible individual and submit an equity application. So long as the equity-eligible partner owns 50% of the business, or otherwise meets the equity criteria for non-profits or collectives, such an application would not only avoid the waiting time for general applicants, but will also enable the applicant to achieve fee waivers and apply for the no-interest loans and technical assistance that are part of the equity program.
Second, a general applicant could "incubate" an equity applicant. If a general applicant agrees to give 1,000 square feet of free space to an equity applicant for three years, then the general applicant is automatically entitled to the "next available" license. This would not entitle the general applicant to the other benefits of the equity program, but would allow the general applicant to move up the queue and obtain a license faster.
Non-Dispensary Licenses Phase II: Unlimited Licenses.
The requirement that 50% of licenses be granted to equity applicants ends as soon as the equity program is established, funded, and implemented. The equity program has been allocated $3.4 million out of the cannabis tax funds, excluding the existing 8 dispensaries. As a result, after $3.4 million in cannabis tax is collected from those sources, the licensing will be fully opened, and there will be no limits on the number of general applicants granted (except for dispensaries). Of course, everyone wants to know when that day will come. No one knows for sure, but since the Oakland business taxes are collected annually and due on March 1, it stands to reason that the second phase of licensing is unlikely to start until at least March 2018.
Unlike the other license types, the ordinance only authorizes 8 additional dispensary licenses per year, and at least half of them are required to be granted to equity applicants at all times; there is no unlimited license phase. As a result, the competition for dispensary licenses, especially among those that are not equity applicants, will be fierce. It is possible, if not likely, that 8 licenses for 2017 will be granted to equity applicants and general applicants who participate in the equity incubation program, leaving no licenses left for any general applicant who does not meet one of those criteria.