San Diego Exploring ‘Cannabis Equity’ To Boost Low-Income Participation In Emerging Industry

By David Garrick The San Diego Union-Tribune

WWR Article Summary (tl;dr) In addition to helping level the playing field, one San Diego councilman says he plans to propose using revenue from the city's cannabis tax for youth programs in neighborhoods that were disproportionately affected by the previous criminalization of marijuana.

The San Diego Union-Tribune

San Diego Councilman Chris Ward plans to propose a "cannabis equity" program this spring that would aim to give low-income residents in neighborhoods affected by the war on drugs a leg up in opening marijuana businesses in the city.

Ward said last week he will introduce the proposal at the council's economic development committee, which he chairs. It will be modeled after similar programs launched in Los Angeles, San Francisco, Oakland and Sacramento.

"Individuals most likely to gain from this burgeoning industry are those who already have money to invest," Ward said. "A cannabis equity program would provide small business support, mentoring and technical assistance to individuals in disadvantaged neighborhoods to allow them to participate and prosper."

In addition to helping level the playing field, Ward said he plans to propose using revenue from the city's cannabis tax for youth programs in neighborhoods that were disproportionately affected by the previous criminalization of marijuana.

"Their lives were impacted by family members getting arrested and going to jail, and we have to ask ourselves how we can make up for that injustice," he said.

Councilwoman Barbara Bry said last week that she supports the concept but is exploring a different approach, based on concerns that cannabis equity programs in other California cities have so far yielded disappointing results.

Bry said she'd like to see the city encourage marijuana businesses to be at least partly employee-owned, possibly by giving workers stock options, similar to high-tech companies.

"If you give somebody a permit to open a marijuana facility, you've made them a millionaire -- you really have," Bry said. "But you've only made one person a millionaire. You haven't really helped a whole community improve their economic well-being."

Bry, who was a high-tech entrepreneur herself before joining the council in 201,6 said she's researching how the city could legally encourage marijuana entrepreneurs to use the high-tech model when launching their businesses. "It's not fully baked," she said. "I'm at the beginning of exploring it."

In addition to typical compensation, employees would receive stock options that would eventually become valuable when the company is either sold or becomes publicly traded.

"It worked in the tech and biotech world really well for a long time," Bry said. "I don't know what we're allowed to legislate and what we're not."

Because the marijuana industry is expected to become unionized across the state, Bry said, the stock options could be negotiated through collective bargaining by labor unions.

San Diego has limited immediate opportunities to help low-income residents participate in the cannabis industry because the city already awarded nearly all the permits available to operate dispensaries and marijuana production facilities.

But those permits expire after five years, creating opportunities in coming years.

It would be illegal to have a cannabis equity program based on race or ethnicity, but programs based on income are legal under state law.

For example, low-income people are eligible for the Los Angeles cannabis equity program if they were convicted of a marijuana crime in California, an immediate family member was convicted, or they live in an area where there were many marijuana arrests before the drug was legalized by voters in November 2016.

Los Angeles provides fee waivers, application help and the use of vacant city properties to eligible people. The program has been criticized for moving too slowly, as city officials refine details and hire staff.

Critics say Los Angeles is trying too hard to make the program perfect, at the expense of low-income entrepreneurs who can least afford the delays. Los Angeles city officials say they are trying to avoid allowing predatory entrepreneurs to take advantage of marijuana investors with less money.

Critics of Oakland's cannabis equity program say that has been a significant problem there. Low-income marijuana entrepreneurs have had to partner with wealthier counterparts because they lack access to bank loans and venture capital.

Ward said he remains optimistic San Diego can create a successful program. To launch its efforts, he said the city should fund a "cannabis opportunity study" to review existing disparities in the ability of disadvantaged community members to participate and invest in the industry.

The likely funding source for that study and a cannabis equity program would be the city's marijuana tax, which city voters approved in 2016. The 5 percent tax, which will increase to 8 percent on July 1, is expected to generate more than $6 million in revenue for the city during the ongoing budget year.

San Diego also is trying to boost tax revenue from the city's dozen legal marijuana dispensaries by auditing them and tightening restrictions on sales to medical cannabis patients. Those sales are tax-exempt.

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