WA SECTF - Work Group - Licensing - Public Meeting
(April 21, 2022)

Here are some observations from the Thursday April 21st Washington State Legislative Task Force on Social Equity in Cannabis Licensing Work Group (WA SECTF - Work Group - Licensing) Public Meeting.

My top 6 takeaways:

• Work Group Co-Lead Micah Sherman, Raven Co-Owner, introduced the draft recommendations starting with a 2029 goal for getting half of licenses into the hands of those qualifying as social equity applicants (SEA).
  • Sherman communicated his intention “to get these recommendations into writing and be able to be put into a report” due by December. He said work group leaders and staff wanted to hear the group’s final impressions of the concepts before presentation to the full task force. In particular, “underlying information” backing up recommendations or that “sort of explains them” would be useful, he indicated. Moreover, Sherman and Co-Lead Monica Martinez, Owner of The Calyx Co., were hoping for a final confirmation that work group members supported the recommendations before they were sent to WA SECTF (audio - 2m). 
    • The work group first met in April 2021.
  • The first recommendation covered general license ownership, which Sherman explained covered a previously agreed goal of “50% of licenses [held by SEAs] that we’ve been talking about in this work group for a while.” Sherman stated that the “legislature should establish a policy goal that 50% of the total licenses should be owned by social equity licensees by 2029.” He shared the wording of the recommendation rationale (audio - 2m):
    • “A clear, definitive goal with an actionable timeline will create a metric to evaluate the effectiveness of Washington’s social equity program. Urgency is required by the legislature to get licenses into the hands of social equity applicants ahead of changes to cannabis law at the national level. Federal legalization will cause significant disruption to our state market. An established business will fare better in a changing market.”
    • Martinez mentioned the recommendations were what members had previously indicated they wanted to suggest, and that the conversation was more about “format” or supplemental information.
  • Several work group and citizen attendees had thoughts on the proposal (audio - 16m):
    • Work group member Crystal Oliver, a Washington Sun and Craft Growers Association (WSCA) board member and former licensed producer, encouraged pointing out that the state had been “slow” in joining an “equity in cannabis effort” to emphasize urgency.
    • Senator Curtis King, a WA SECTF appointee, inquired as to how a 50% goal was decided. Sherman’s understanding of the attitude of the group was that half of licenses being held by SEAs was about “striving for equitable outcomes” and that focusing on getting more existing and new license types to equity businesses “felt like a, sort of, fair approach" to reach parity with “the ones that were allocated previously.”
    • Ollie Garrett, a WA SECTF appointee representing the Washington State Liquor and Cannabis Board (WSLCB), mentioned challenges “we experienced during last session” in getting WA SECTF recommendations into law, and wondered if this idea would fare better "without anything to back it up." Sherman viewed the number as “more of an aspirational goal" without a specific datapoint justifying it. Garrett found that King’s inquiry begged the question whether there was a better rationale “or argument for this.”
    • David Mendoza, Progreso Board President and task force appointee, offered that “we are asking for greater than the proportion of people of color” in Washington’s population specifically because of “the historic disproportionate impact on communities of color.” He suggested that enhanced opportunities for equity licensure was a way to “course correct” the economic outcomes of unequal cannabis policing. Sherman responded that applicants hadn’t been “limited to racial minorities” and a 50% goal gave the licenses “positionality in the economy as those that were distributed absent that equity lens.” Garrett reiterated a call for "stronger language," later offering a change from “50% of total license” to then say “of all types.”
    • Mendoza indicated that 2029 was referenced repeatedly, but he was concerned “if it takes longer” since previous recommendations hadn’t even become law. He advised considering wording of “a minimum of seven years.” Martinez noted that the full task force had already approved recommendation language from the work group with that year specified. Sherman added that the date appeared in statute for the equity program as well, and was when the equity program “expires in law.”
    • Angel Swanson, a retail title certificate holder, remembered conversations “centered around the War on Drugs” and how communities of color had been “at the brunt of that almost in its entirety.”
    • Jim Buchanan, Washington State African American Cannabis Association (WSAACA) President, shared his recollection that the 2029 deadline led to them recommending annual issuance of licenses between 2022 and 2029, and that it was believed to be more practical to favor equity applicants in new license types rather than aim for parity in the established ones. However, he argued “we’ve already lost” a year because lawmakers failed to enact equity legislation in 2022. He promised that advocates “will be back” before the legislature in 2023 with a new bill.
    • Paul Brice, Happy Trees Owner and WA SECTF “community advisory member,” compared this recommendation to asking to “create 900” new licenses “to make this equality of 50%,” a number he believed wasn’t “going to pass at all.” He liked the idea of equality in license ownership “in a fantasy world,” but cautioned that their recommendations should reflect what the group believed elected officials would “realistically pass.”
    • WA SECTF Manager Anzhane Slaughter observed that 50% was a benchmark identified in New York’s cannabis licensing program and there’d been an impression the state could “at least match” the ambitions of authorities in the Empire State.
  • Sherman called for any more comments on the proposal to be submitted to task force staff before they were presented to the full task force. 

• The group then reviewed a recommendation on additional retail licenses, including suggestions on wording for business buffer distances.
  • Sherman read the recommendation for Washington legislators to “create additional retail licenses available across the state exclusive to social equity applicants until 2029. The Social Equity Task Force recommends at least twice as many stores be added between now and 2029” (audio - 1m). The proposal’s rationale and supporting materials were then opened up for discussion, though Sherman asked that any “specific” sources of data be submitted in writing in the interest of time (audio - 11m). 
  • Garrett said the recommendation indicated that buffer distances for cannabis businesses should “be updated to more closely align with restrictions in place for alcohol licenses,” and asked for clarification as to what that would entail as schools could object and exercise “automatic denial” of an alcohol license. Sherman responded that he knew there was a belief distances should match alcohol, but there wasn’t a call to “add more restrictions” like a school exercising a veto prerogative. Oliver knew the matter had been discussed at earlier meetings by the work group and they’d added more specific language in the initial task force recommendations from 2021 that showed ways they wanted to “emulate” alcohol rules without matching them entirely. 
  • Mendoza reported having submitted some suggested edits, like linking their data when possible to “be ready to defend it" to lawmakers and to frame the existing difficulties of siting cannabis stores, including “unscrupulous behavior from landlords” looking to “gouge” licensees.
  • King agreed they should “be very careful" when adding qualifications to a call for equivalence to alcohol restrictions. He understood business owners would favor fewer regulations, but said “there were reasons why those restrictions were put there” for alcohol and it could be difficult to “convince others...that cannabis isn't similar, in some respects, to alcohol."
  • Philip Petty, WSAACA Vice President, commented that the previous legislation with WA SECTF recommendations would be reintroduced with “the data behind it.” He claimed to have heard from former task force member Cherie MacLeod, who had represented the Association of Washington Cities (AWC), that King County was ready to “absorb 115 licenses.”
  • Sherman assured the group they’d “redraft” the recommendation rationale to reflect the new feedback.

• Next, they discussed a recommendation on additional producer licenses, but commenters repeated a familiar refrain about how “saturated” the cannabis supply chain in Washington already was.
  • The draft recommendations encouraged elected leaders to “create additional producer licenses available across the state exclusive to social equity applicants until 2029” given an understanding of how the licenses could “come into the marketplace and be successful.” Sherman communicated his concern that "there's more productive capacity out there than we really need" (audio - 2m) and invited members to talk through the proposed recommendation (audio - 16m).
  • Brice encouraged reduced buffers for businesses and to allow producer direct sales to the public, something allowed for alcohol spirit distillers and breweries. He argued that without a retail sales “interaction,” buffer distances for producers served little purpose.
  • Buchanan commented that the language about alleged market saturation struck him as “gray and vague” as he urged more direct action to address inequity in producer/processor license ownership. He noted, “Black people had to watch it be saturated, and not have the opportunity” so he wanted to avoid having the issue tabled because “that’s not good enough." Martinez stated there were “many” producer and processor licenses being offered for sale for less than the startup costs of “a new license.” Buchanan preferred more be done to address the sector’s equity than tell equity applicants they might be able to buy a license elsewhere. Sherman saw his point and wanted language to convey a desire for equity in producer licenses balanced with an indication such licensing “wouldn’t be successful absent some other changes.” Once market conditions allowed equity producer licenses to be more successful, he believed “we should make those licenses available.”
  • Oliver noted that a market study could build out the report. Mendoza agreed, saying a study should review the possibility of allowing direct sales to consumers.
  • King’s perspective was that if producer licenses were available for sale at a price point less than completing the equity licensing process, “why aren’t [prospective equity applicants] buying these?” He decided to deduce more producer licenses weren’t viable in the cannabis sector.
  • Buchanan saw the lack of people buying available producer licenses to be a sign of “economic racism” that sapped wealth creation out of neighborhoods with majority-minority citizenry. He concluded that “the whole thing needs to be reworked, basically” in order to have assurances there’d be equity in the production aspect of Washington cannabis. Brice brought up a possible “first right option” for SEAs to buy producer licenses potentially backed with equity grant money. “It’s really hard to wanna jump in and spend all that money” just to get into an established industry, he said.
  • In a subsequent discussion, Darlene Conley, Co-Owner of Social and Economic Equity and Diversity (SEEDS) for African Americans in the Legal Cannabis Industry, brought up how the “location goes with the license” and people weren’t buying available producer licenses because they “need to relocate immediately” which was frequently difficult. She said some licenses were in “counties that are not friendly to [Black, Indigenous, and People of Color]...and specifically African American people.”
  • Sherman was uncertain there was unanimity on the recommendation’s details. Martinez seconded calls for more study of the topic, feeling it was one way to compile data about why “minorities” lacked the capital to buy existing licenses.

• A recommendation on a new delivery license type was discussed next, which would reserve “licenses across the state exclusive to social equity applicants until 2029.”
  • Sherman reported that the license type had been advised by the group (audio - 1m) and invited conversation on the idea (audio - 11m). 
  • Brice was supportive of delivery options for areas with bans and moratoria, asking that if a jurisdiction ended such a restriction, the delivery licensee should be “first in line” to convert their business into a “brick and mortar” retail shop.
  • King suggested allowing retail stores the privilege to deliver cannabis through existing rideshare companies and cashless payment options. He didn’t see the need for a competing business to bring cannabis to people.
    • Sherman said the work group’s previous dialogue on delivery had concluded that “fulfillment for an existing retail system would not produce equitable outcomes for” those the program intended to help. He commented that the “app-based platform delivery model is inherently not an equity-focused business model” and was seen as “the opposite of that.”
    • Mendoza spoke up to say the reason the model wasn’t equitable was a “misclassification of drivers as independent contractors” making them entirely liable for their work. He hoped for a requirement that delivery licensees have employee drivers to avoid inequitable outcomes.
    • King said a bill had been passed to address “a lot of the issues that had to do with drivers and all of those things.” Mendoza replied that legislation maintained a contractor model though it improved “services and opportunities for them.”
  • Another issue Mendoza raised was driver safety and the potential for robberies. Though he hadn’t seen delivery-specific data, if available it could underscore the recommendation. Oliver believed a list of states with cannabis delivery policies would be useful for the recommendation’s rationale.
  • Swanson was opposed to jurisdictions with bans or moratoriums sharing in tax revenue from delivery businesses, saying the point of sale should be considered to have occurred at the location of the delivery company. This kept cannabis revenue further from “folks that just didn’t want to participate,” she reasoned. Sherman mentioned there could be “legal ramifications” to suggesting this approach.
  • Garrett warned against conflating possible cannabis delivery training with mandatory alcohol server training, saying their recommendation should focus training on “just this.” Sherman interjected to say their materials included bullet points to inform on other states’ policies but that this wasn’t an endorsement of all of them.

• A final recommendation dealt with a new social consumption license type that would also be exclusively for SEAs through 2029.
  • Sherman explained that they’d found “a lot of ideas about all of the different ways” for social consumption to “be a useful licensing tool,” whether it was in fixed locations or at temporary events. He conveyed that “we should be pretty willing to see some experimentation there” (audio - 1m). Several people had ideas or questions about the recommendation (audio - 20m). 
  • Conley was all in favor of safe consumption venues but wanted to know the “political mechanics of getting this done” particularly if legislators weren’t “friendly” to the idea in 2023. Sherman said it “absolutely” would need legislative approval, and it was a topic lawmakers had mandated WA SECTF members report on. Conley felt that defending this recommendation would require an answer to concerns in communities about “people smoking in public spaces, or using vapes” which she predicted would continue “as long as we don’t have those kinds of licenses.”
  • Oliver encouraged them to list states already having such policies here as well, showcasing “how far behind Washington is when it comes to providing these opportunities.”
  • Petty found the lounge policies for Colorado “didn’t sound like they were very profitable” which left him uncertain there needed to be a specific allowance for businesses to permit consumption. Sherman stressed that businesses allowing consumption was explicitly prohibited under state law. 
  • Garrett was amenable to special event licensing “similar to alcohol,” something that had been available from WSLCB. But she once more cautioned against too casually conflating the two substances in event licensing, noting some special permits from the agency were specific to business types like nonprofits. Sherman and Martinez agreed the exact terminology of licenses versus permitting could be specified to a greater extent in their final report.
  • Brice felt a retailer like his was well positioned “to show what a very successful cannabis consumption site would look like” if there was a pilot program focusing on “minority retailers.” Sherman stated that the top barrier was the state indoor smoking laws which would only permit smoking in a “private facility, which is like a club.” Brice felt vapor shops were allowed onsite consumption if they had “filtration systems” and that this could be expanded for cannabis vapor.
  • King observed that there were “a lot of restrictions” in alcohol event permitting such as allowing wine sales but not on-site consumption. Sherman agreed that details mattered, but the conclusion of work group members was that, overall, consumption licenses were “a good license type to add.”
  • Garrett found the recommendations were “really a lot,” and questioned whether the intention was to have a single bill of WA SECTF recommendations in 2023. Sherman said this was “just about writing the report” but he imagined their recommendations could be incorporated in “a whole bunch of different bills…over a couple of years.”
  • Buchanan noted that legislators on WA SECTF hadn’t sponsored task force recommendations in 2022. He further felt the 2022 legislation on their recommendations “didn’t pay the task force recommendations any attention at all….matter of fact, they disrespected the recommendations.”
    • During the 2022 legislative session, WA SECTF member Senator Rebecca Saldaña sponsored ​​SB 5796, "Restructuring cannabis revenue appropriations." The task force chair, Representative Melanie Morgan, indicated during a public hearing on the social equity recommendations that she “had missed the cutoff date to sign on” as co-sponsor. The democrat legislators also sponsored companion bills HB 1827 and SB 5706 aimed at “Creating the community reinvestment account and community reinvestment program.”
    • However, task force members Senator Curtis King and Representative Kelly Chambers, both Republicans, were not the prime sponsors of any cannabis legislation in 2022. 
  • Conley pushed for research on how other jurisdictions were handling “driving while intoxicated” and issues like serving limits. Sherman noted that some restrictions and practices around consumption in other states was part of this draft of recommendations and would be in any final report.
  • King thanked Sherman and Martinez for their time and effort running the group.

• Task Force Manager Anzhane Slaughter went over what lay ahead for the task force as the work group wrapped up its charge (audio - 1m).
  • She told attendees that WA SECTF members would meet on Tuesday April 26th to review the work group’s recommendations as well as those from the Community Reinvestment Work Group. Slaughter also encouraged interested parties to join the WA SECTF distribution list for updates on task force work.
  • Martinez shared her gratitude for the chance to be a part of the work group as their work came “to a close” (audio - 1m).