CA: Rush For Cannabis Business Permits Overwhelms Oakland

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The number of entrepreneurs trying to start a cannabis business in Oakland has overwhelmed the city staffers who are in charge of evaluating and doling out permits, according to a recent city report. To accommodate the industry’s dramatic growth, Oakland is now planning to spend an additional $307,000 to hire more staff members in order to process the flood of business applications.

The growing pains are good news for Oakland, which is hoping to remain a hub in California’s multibillion-dollar cannabis industry. One report prepared last year for the city by the Marijuana Policy Group found that statewide cannabis cultivation and manufacturing could turn into a $4.2 billion economic engine employing as many as 36,000 workers, not including retail workers selling pot. The same report estimated that Oakland’s share of the overall market could generate as much as $16 million in tax revenue annually and employ about 12,400 people in the city’s legalized dispensaries, grow warehouses, bakeries, delivery services, and testing labs.

Oakland’s formal marijuana economy isn’t there yet, but it’s growing rapidly thanks mainly to Proposition 64, which legalized the adult recreational use of marijuana as of Jan. 1. Industry sources say many existing businesses are trying to come out of the shadows. Others are starting from scratch with investor funding.

Since May of last year, more than 800 companies have applied for permits to grow, manufacture, distribute, deliver, and test cannabis products in Oakland, according to city staff. An additional 116 businesses applied for eight marijuana dispensary permits the city granted earlier this year. Competition has been fierce as companies jockey for market share and seek limited commercial and industrial space in Oakland. New state rules requiring a company to gain a local business license before applying for state operating permits also means that numerous businesses are relying on fast approvals from Oakland.

Alan Steiner of the Oakland-based Green Rush Consulting firm said he’s not surprised by the surge in applications for cannabis business permits locally. He said it’s a combination of new marijuana startups and existing companies transitioning into the regulated market.

“Cannabis has been legal in some form in California for the past 20 years, so there’s a lot of folks trying to convert their Prop 215 business to the legal market,” he said. “That’s a difficult thing to do, but Oakland is one of the few cities that has opened up their program enough to allow their businesses to make that conversion.”

The result, city staff reported last week, is a “surge” in activity.

Oakland’s equity program, which provides assistance and fee waivers to cannabis entrepreneurs based on their income level and residential location or a past cannabis conviction, has also greatly increased city staff’s workload. More than 392 businesses have applied for permits so far under the equity program, which requires applicants to provide additional financial documents, court records, and other information to qualify. And all that paperwork has to be thoroughly evaluated by city staff.

“Staff has been inundated with daily phone, email, and drop-in inquiries regarding the cannabis permit process and the equity permit program,” wrote Oakland Assistant City Administrator Gregory Minor in a report presented to the city council last week. Minor oversees Oakland’s cannabis permitting program.

Currently, there are only two city employees in charge of processing cannabis business applications for all of Oakland. They’ve been working overtime, and the city has been forced to hire a temporary clerical worker to keep up.

Approving cannabis permits is a complicated task, depending on the type of business. Some kinds of activities require not only city approval, but coordination with county officials.

“For example, edible manufacturers need to be approved by county health, and cultivators need to be approved by county agriculture,” explained Minor in an email to the Express. “Similarly, it’s typically easier for the building department to approve a delivery service, which may consist of a simple open office space, than a cultivator that’s done numerous improvements to a building.”

Some manufacturers of products like butane hash oil need to be inspected by the fire department.

The additional $307,000 allocated last week by the Oakland City Council will fund two additional full-time staffers to review permit applications. Overall, Oakland has already received about $1 million in additional cannabis permit revenue since May of last year.

But not every company applying for a permit to operate in Oakland will survive. Firms have to find real estate within Oakland’s green zones where various types of cannabis activities are allowed — from growing pot to making candy out of it, or stockpiling buds for distribution and delivery. Space is limited and rents are rising.

Companies also have to juggle the volatile prices of marijuana, which has declined significantly in recent years with medical legalization and now adult use. On top of this, local and state taxes are taking a large bite out of industry profits.

As a result, of the 800-plus companies applying for permits in Oakland, probably only a small fraction will remain in business over the next several years. Nevertheless, the city’s numbers represent a positive sign.

“Oakland’s doing as good as any town,” said Steiner.