Long Beach accepts $914,000 to promote equity in cannabis industry

A map from the City of Long Beach’s DataLB showing the city’s cannabis dispensary, cultivation, distribution, manufacturing and testing locations.

The Long Beach City Council voted Tuesday, Feb. 18 to accept a $913,991 grant from the California Bureau of Cannabis Control (BCC) to support the city’s Cannabis Social Equity Program (CSEP).

Councilmember Al Austin expressed support for accepting the grant, noting that any time the State offers close to a million dollars, it’s wise to accept.

“Social equity is extremely important, particularly as we look at new, emerging markets,” Austin said.

The council had approved the CSEP in July 2018, as part of an ordinance on adult-use cannabis businesses, to promote equal opportunity in that industry. Specifically, the CSEP intends to make business-ownership and employment opportunities accessible to low-income individuals and communities negatively impacted by the prior criminalization of cannabis.

The grant stems from the California Equity Act of 2018 allocating $10 million to jurisdictions that have adopted a cannabis-equity program. Tom Modica, acting city manager, stated in a report to the council that the entire grant must be used by Feb. 28, 2021 or the remainder returned to the BCC.

“This grant will allow staff to continue developing the program to provide equal opportunity in the cannabis industry,” Manager of the city’s Office of Cannabis Oversight (OCO) Ajay Kolluri said during Tuesday’s meeting.

The OCO will use $393,991 of the funds to help equity applicants offset cannabis business-license costs by offering fee waivers and grants, according to the staff report. The OCO waives approximately $5,900 in application fees and up to $5,000 in facility plan-check fees, Modica stated in a Feb. 14 memo to the council.

The Economic Development Department (EDD) will use the remaining $530,000 of the grant in its Business Assistance Fund to hire temporary consultants to offer technical help and business-incubation services to local equity-owned businesses, according to the staff report.

The EDD will provide technical help through individual consulting, workshops and entrepreneur-education programs that support preparing business plans, finding locations and negotiating leases, creating business entities, securing capital and developing marketing, per its original proposal.

The CSEP requires all adult-use cannabis businesses to hire equity employees for at least 40% of work-hours performed at the business annually, according to the OCO.

The OCO defines equity applicants as having an annual family income at or below 80% of LA County’s median income and a net worth of less than $250,000. Equity applicants must also have lived in a low-income part of the city for at least three years, or have been arrested for a cannabis-related crime before Nov. 8, 2016 that would now be considered a misdemeanor, or be receiving unemployment benefits.

The City has held 30 workshops for prospective equity applicants since August 2018, with 50 applicants approved so far, according to Modica’s memo. However, it has received only four business-license requests from equity business-owners and granted only one.

“In speaking with prospective applicants, the primary reason for the discrepancy between interest in the program and actual business-license applications received is the substantial amount of capital necessary to start a cannabis business,” Modica stated in the memo. “By some estimates, cannabis businesses require a minimum of $500,000 in start-up funding to complete the licensing process.”

Modica noted that the problem is made worse by the City no longer granting licenses for cannabis dispensaries, which require the least amount of start-up capital relative to other cannabis activities such as cultivation, manufacturing and laboratory testing.

Those non-retail cannabis-business costs include construction, heavy equipment–– such as high-intensity lighting–– architectural and legal services, insurance and real estate, Modica said.

But Modica cautioned in his memo that even the $914,000 grant may not be enough to increase the number of equity-owned businesses given these costs and suggested that the council reduce the minimum equity-ownership percentage to less than the current 51% and allow manufacturers to share facilities. He said that staff will release a feasibility study on shared-use manufacturing by this summer.

The City hosted two cannabis job-fairs in 2019 with 245 job-seekers and 16 employers attending each event, Modica stated. The City also hosts a website, registry, weekly information sessions for residents and bi-weekly employer sessions to encourage equity hiring.

During the council’s deliberation Tuesday, resident Larry Goodhew expressed disdain for using the grant to promote cannabis.

“I would use every single dollar that we could get to discourage the use of cannabis in this city,” Goodhew told the council. “Cannabis is dangerous to this city. If you don’t understand that, perhaps you’re using it.”

A 21-year-old resident named Precious told the council she has been approved for the equity program but needs help finding a location. She pointed out that in the city of Oakland, equity applicants can share non-equity facilities and enjoy up to three years of free rent.

“Being a minority and a woman, having no support, makes this harder for me but it is my dream to run my own facility,” she said. “It’s not just about the cannabis for me. It’s about the growth and knowledge, business-education networking and more that comes with it.”

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