CA: Can Legal Marijuana Benefit Entrepreneurs Of Color

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Photo Credit: Miami Herald

The Green Rush is on in the Golden State. On January 1st, thousands of people waited in long lines outside the doors of many marijuana dispensaries around California.

With the 2016 passage of Proposition 64, the state became the sixth in the nation to legalize the recreational use of cannabis. While the change in the law allows local governments in California to ban or regulate the sale of recreational marijuana activity, many cities, such as Sacramento, Berkeley, and Los Angeles are eager to cultivate more revenue from existing and new cannabis businesses starting in 2018.

Although Attorney General Jeff Sessions recently announced that the Trump administration intends to revoke the Obama-era rules that allowed for state-level legalization, one thing is clear: There’s a lot of money on the table for now. California cannabis businesses are expected to generate an estimated $3 to $5 billion dollars in 2018 alone with state and local governments collecting at least $1 billion in taxes and fees. With big money comes big questions about who will benefit from this green explosion and why.

Some advocates feel that Prop. 64 does not do enough to address the decades of disparate surveillance, policing, incarceration, and other side effects of the Drug War, in working-class Black communities, which led to broken families and economic stagnation. Moreover, they feel that the legislation does very little to compel the state and local municipalities to address this trauma. Now, these communities are looking for reparations.

That’s where entrepreneurs of color in the cannabis industry enter the picture, and a series of city-level equity programs that seek to provide support—financial and otherwise—for those entrepreneurs who might otherwise be excluded from the industry. To date, four California cities—Sacramento, Oakland, San Francisco, and Los Angeles—have launched or committed to launching equity programs and more may be in the works.

New Industry, Same Equity Gap

Malaki Seku-Amen is the founder and president of the California Urban Partnership, a state-level organization that aims to build economic security in communities of color through technology, joint ventures, and collaborative policy solutions that tackle generations of poverty. Seku-Amen believes a number of important efforts toward restorative justice were skipped in the drafting and campaigning for Prop. 64.

“When the lobbyists and lawyers were formulating Prop. 64, no one made sure that local cities and counties would have a prescription for how equity would be laid out,” says Seku-Amen. Aside from the piece of the law that ensures those with non-violent felonies would be able to participate in the industry, which he views as laudable, Seku-Amen says the bulk of the work to bring equity to the table has been primarily driven by local activists, advocates, and cannabis growers and entrepreneurs. “The assisted participation, [targeted] tax dollars, and all of the community engagement work around equity—cities and counties have had no responsibility to do any of that.”

Seku-Amen is among many people of color across the state who have been calling for equity programs in tandem with local regulations on cannabis. The hope for these programs is that they would remedy the lost opportunities and generational poverty in communities that bore the brunt of misguided, and often racist, drug policies and enforcement. They could also be a means to diversify an increasingly affluent, white, and male legal cannabis market.

According to analysis from Marijuana Business Daily, in California, only 3.2 percent of marijuana businesses are owned and operated by Asian Americans, 4.8 percent are owned by Black Americans, and 8.1 percent are owned by Latinx Americans, with the majority of these businesses being ancillary, i.e., the business owners never come into contact with the cannabis plants. Nationally, Black farmers make up only 2.7 percent of cannabis business owners.

As the report notes, “In an increasing number of states, it can cost hundreds of thousands if not millions of dollars to start a plant-touching business. Regardless of race, most people simply do not have these kinds of resources. Factor in the additional hurdles faced by a higher proportion of people of color—including lack of access to investors and business connections—and it’s easy to see why minority business owners have gravitated toward the ancillary side of the cannabis industry.”

Sumaria “Sam” Love, who uses cannabis medicinally and has worked for three years as a wellness consultant hosting cannabis education and accessories parties, knows all about the barriers to entering the cannabis industry as a Black woman.

“Sexism. Racism. I had to create my own place in the industry because I couldn’t even get a job as a budtender,” says Love. She now works for The Hood Incubator, a nonprofit seeking to increase the participation of Black and Brown communities in the legal cannabis industry, and describes herself as a “cannactivist.” Love is hoping to show more people of color the economic benefits of legal weed, but she’s under no illusions about the challenges.

“For a lot of us Black growers and distributors, one of the reasons we have been staying in the black market despite making the product is that we don’t get the opportunity or support [to enter the legal market],” says Love, noting that cultivation is highly lucrative. Already small in number and size due to discrimination (and criminalization when considering cannabis), Black growers in particular must contend with a legal market shaping up to favor large-scale farms with more access to money and resources.

Charting Pathways to Cannabis Equity

Joe Devlin, the chief of cannabis policy and enforcement for the city of Sacramento, believes that equity programs like the one in his city are an important start. “It’s a very challenging issue. What we’re talking about in terms of the negative effects of the Drug War, that’s not small stuff,” says Devlin, who has been dubbed the city’s “cannabis czar.” “Any program that is put forward ultimately, in my opinion, doesn’t even come near to addressing [the Drug War]. We’re scratching the surface, but it’s better than nothing. It’s definitely a recognition of what happened and at least an attempt to try,” according to Devlin.

In Sacramento, Devlin worked with Seku-Amen and the California Urban Partnership as well as other local organizations, such as Youth Forward, the local NAACP, Greater Sacramento Urban League, Roberts Family Development Center, Sacramento ACT, and Yisrael Family Farm to craft an initial plan for the city’s cannabis equity program, called the Cannabis Opportunity Reinvestment and Equity (CORE) program. Devlin hopes that CORE will help more people of color, women, and veterans, and other “cash poor” people enter the legal market.

Although it’s not operational yet, the city has announced key components of the CORE program. Framed as a “small business support center,” CORE will begin as a two-year program ran by a to-be-determined third-party entity with an initial budget of $1 million dollars. Individuals can participate in the program if they reside in priority zip codes, earn less than 200 percent Federal Poverty Level (or around $32,000 a year for two people), or are launching a women- or veteran-owned business.

Participants will receive mentorship, accounting and legal assistance, and permit fee “scholarships” and deferrals to cover or delay the onset of some start-up costs. Citing Proposition 209, Devlin says he’s unable to target potential cannabis entrepreneurs by race, but believes the city will reach qualified applicants through community education and outreach.

Existing growers and other businesses will also be incentivized to participate in the CORE program with priority processing of their recreational permits in exchange for serving as “equity incubators” for the populations mentioned above or by employing 51 percent or more transitional workers, such as single parents, people without high school diplomas, those who receive public assistance, have a prior arrest and conviction, or who are homeless.

Devlin also says he and his office have put a lot of thought into designing regulations that would reduce barriers to entry into the legal market for those who have previously operated illegally or who are new to the industry. For example, he says, permits for manufacturers were reworked and tiered to help small-scale business owners making cannabis-derived topicals, edibles, or oils in their homes participate in the industry by paying just a few thousand dollars as opposed to tens of thousands of dollars.

The CORE program could potentially save new and existing cannabis businesses between $25,000 and $65,000 in permitting fees, but it’s not without its pitfalls.

For example, applicants like Sam Love may get their fees waived or deferred, but they’ll still need to cover state permit costs. And, unlike Oakland’s Equity Permit Program, there is no local loan or grant fund to help cover start-up costs, such as retail space and equipment, which can cost hundreds of thousands of dollars.

Sacramento hasn’t set targets for the number of equity permits they will issue either. And the question of how revenue from commercial cannabis taxes and fees will be spent in the city has yet to be answered. Love says she is particularly concerned that racially disparate enforcement of new cannabis regulations could perpetuate the effects of the War on Drugs. She notes Sacramento’s restrictive rules on personal cannabis use, the hiring of more police specifically for cannabis enforcement, and an increase in crackdowns on owners with too many plants.

Seku-Amen, who has taken a visible lead on cannabis equity in Sacramento and around the state, plans on continue working with Devlin’s office to address these concerns. He hopes the city will select a qualified organization with demonstrated ethnic and cultural competence to run the CORE program, and he is pushing them to use cannabis revenue for a “revolving loan fund” to cover start-up costs for Black and Brown entrepreneurs as well as to provide much needed investment in housing and public infrastructure in neighborhoods of color.

The California Urban Partnership also plans on joining with other organizations and advocates to demand that the California Legislature write comprehensive cannabis equity into state law.

If all this goes as planned, Seku-Amen has hope that more people of color may begin growing and selling legal cannabis. “The challenge is going to be making sure that our community doesn’t fall asleep on [the development of the industry]. This is the time to be present,” says Seku-Amen.

Meanwhile, many cannabis users and enthusiasts of color are enjoying this long overdue change in culture and policy. “As a cannabis user, I’m happy,” says Love. “I’m out of that ‘green closet’. That stigma is gone, and so that’s a relief for me.”

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