Months after California legalized the marijuana business, pot growers and manufacturers lament that they are still locked out of the legal industry in Los Angeles.
More than 100 shops have already gotten city approval in Los Angeles, but not the companies that have historically furnished them with cannabis, which were supposed to be second in line under a complex set of city regulations passed in December.
L.A. had originally planned to finish processing their applications by April but has not even started accepting that paperwork. As 4/20 rolled around Friday — the informal holiday for pot enthusiasts — there was no official word on when that would happen.
That has aggravated marijuana growers, manufacturers and other cannabis companies seeking to do business legally in Los Angeles. Under California law, they cannot get state licenses if they do not have local authorization. And if they don’t have a state license, it is illegal for newly licensed shops to buy their products.
“If people don’t get their licenses in the very near future, their businesses are tenuous,” said Aaron Herzberg, founding partner of Puzzle Group, a law firm specializing in cannabis licensing and real estate. “Maybe those businesses are driven into the black market entirely.”
Marijuana companies that had lined up business locations are being “bled dry” as they hang on to costly leases, said Adam Spiker, executive director of the Southern California Coalition, a cannabis industry group. Ryan Jennemann, manager of the cannabis cultivation company THC Design, said his firm has cut dozens of employees in recent months.
“It’s an unsettling feeling,” Jennemann said. “We’re in a state where cannabis is legal. The 4/20 holiday used to be an underground thing — now they’re talking about it on MSNBC. And we don’t have permits.”
The delay has also prevented any new operators, including shops, growers and other marijuana enterprises, from getting into the legal industry in L.A.
Under the regulations, they would get a shot at city approval in a third phase of applications, after L.A. grants approval to marijuana growers and manufacturers that had been supplying existing shops.
City officials have chalked up some of the delay to short staffing as the newly formed Department of Cannabis Regulation started poring over business applications. The department currently has only four staffers and has relied on workers loaned to it from other city agencies. Council members voted to hire more employees in February, but those positions have yet to be filled.
As of Friday, the department had granted approval to 139 pot shops that had been operating in line with an earlier set of city rules — the group of businesses that were first in line for approval. But before other marijuana businesses can apply, the city has been trying to work out remaining details for its “social equity” program, which is intended to help people and communities hit hardest by the war on drugs.
To be eligible for the second phase of licensing, longtime growers and manufacturers that supplied the existing shops must also qualify for that program. If not, they would have to seek licenses in the third phase along with all other kinds of applicants.
Eligible social equity entrepreneurs include poor applicants who either have been convicted of some marijuana crimes or have lived in areas disproportionately affected by pot arrests, as well as firms providing space or other assistance to disadvantaged applicants.
But city officials say they are still figuring out how to proceed.
This year, council members asked to reexamine whether additional communities in the San Fernando Valley, Boyle Heights and parts of downtown might have been disproportionately affected by the war on drugs, potentially allowing people who had lived in those areas to qualify for the program.
L.A. also needs to fund and set up the outreach and assistance programs that are supposed to be provided under the program — or decide whether to press ahead with licensing social equity applicants before the city can offer such benefits, city officials said. That decision would be made by council members.
A spokeswoman for City Council President Herb Wesson did not provide comment Friday.
“The shift from cannabis prohibition to regulation — in the largest cannabis market in the world — is complex, and involves a broad range of stakeholders,” Cat Packer, who heads L.A.’s Department of Cannabis Regulation, said in a written statement Friday. “Getting it right will take time.”
California Minority Alliance Chairman Donnie Anderson, whose group advocated for the social equity program, said that “we definitely wanted the city to be farther along, but I understand that the city has to make sure things are right.” He added that the city needs to ensure businesses don’t find ways to “scam the system” meant to benefit poor and marginalized applicants.
The proposed budget released last week by Mayor Eric Garcetti includes $3.7 million for the cannabis department next budget year, more than four times as much as this year, and provides for 28 staffers.
In his budget, Garcetti also estimated that the city would get $30 million from taxing the marijuana industry, a crucial infusion that will help bankroll city services. The delay in marijuana licensing has already cost the city this year: It had been anticipating $16 million from taxing cannabis businesses this budget year, but is now expecting to pull in only $4.4 million, according to the mayor’s office.