WSLCB - Board Caucus
(July 9, 2019)

Here are some observations from the Tuesday July 9th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• Policy and Rules Coordinator Kathy Hoffman provided new information on cannabis rulemaking projects and a planned special board meeting on July 17th (audio – 12m).
  • Hoffman’s last rulemaking update was at the June 25th Board Caucus.
  • Quality Assurance (QA) Testing and Product Requirements (WSR 18-17-041). Due to a last minute cancellation of the second QA listen and learn session, Hoffman described this rulemaking project as “essentially a month behind our schedule.” Organizing a new listening session with necessary staff and stakeholders would take time. Hoffman anticipated rescheduling for mid- to late-August “to ensure that engagement happens.”
    • At the request of one of Cannabis Observer’s sponsors, we acquired the final preliminary Small Business Economic Impact Statement (SBEIS) associated with this rulemaking project created by Cambridge, Massachusetts-based Industrial Economics, Incorporated.
  • Cannabis Penalties (WSR 18-22-099). Hoffman described the cannabis penalties rulemaking project as “on schedule” and said she’d be talking to industry partners on Thursday for a final review of collaboratively drafted rules. Calling the revisions “extensive,” she predicted more than one listen and learn session could be warranted to ensure adequate review of the compliance-focused penalties. Board Member Russ Hauge asked to be informed so he could attend listening sessions in person.
  • True Party of Interest (TPI, WSR 18-22-054). Hoffman next noted that because TPI rules were “closely related” to the updated cannabis penalties, listen and learn sessions the agency hosted would likely focus on both rulemaking projects.
  • Consultation Program. Hoffman then said she “really hopes” she can introduce a CR-101 for a consultation program aimed at promoting rule compliance by July 17th, provided there’s a special board meeting.
  • Packaging and Labeling (PAL, WSR 19-12-029). Lastly, Hoffman described “significant internal discussion” about extending the January 1, 2020 PAL deadline for an additional six months along with five PAL Board Interim Policies (BIP) adopted by the Board in January – an extension requested by the Washington CannaBusinesss Association (WACA) and discussed at the June 25th Board Caucus. The move would “allow the appropriate discussion” and evaluation of stakeholder input on the new PAL rulemaking project. Hoffman also mentioned “interacting with Oregon[‘s]” manager of PAL regulations, most likely Oregon Liquor Control Commission (OLCC) Marijuana Compliance Specialist Anthony Geltosky, and suggested they may be invited to speak at a PAL listen and learn session. Hoffman speculated there could be a need to “bifurcate” the current PAL rulemaking project into multiple efforts given increasing scope. “We’ve not succeeded in making the process simpler and more straightforward,” Hauge lamented. Rushford noted a deliberate approach would “make some of the subjectivity go away” when judging whether or not a packaging design appeals to children. Hoffman said that she’d been in discussions about moving away from statutory phrasing about “especially appealing to children” to “replace that with something like ‘reducing exposure to children.’” She added that “from a legal perspective, it’s much more direct.” Director Rick Garza suggested it would be better to expand the definition rather than change it. He later explained that recent letters from The Cannabis Alliance and the Washington CannaBusiness Association (WACA) impressed upon him the need for slowing down the process and creating a workgroup to “look at what we’re going to do with the [PAL review] program.” Garza was encouraged by early research into Oregon’s PAL approval process which looked “easier” and “more efficient.” He suggested an important implementation step may be to allow retailers to sell existing inventory longer, a step OLCC took earlier this year. All the board members expressed an interest in learning from other states to improve WSLCB’s PAL vetting process (audio – 11m).
    • Learn more about Oregon’s PAL definitions and pre-approval rules.
  • Hoffman mentioned two petitions for rulemaking, the first from a retailer wanting “to revise retail license wording to track sale of useable marijuana that doesn’t contribute to the prevention or diversion of product and promotes public safety.” The second petition claimed it would make “farms more efficient and save work” for the agency by allowing producers with multiple licenses to combine them. Hoffman indicated the latter petition offered no rule revision language to consider.
  • A proposed special board meeting on July 17th was discussed earlier in the meeting. Hoffman noted that her presence at the Regulators Roundtable in Alaska on July 24th would preclude her participation in the regularly scheduled board meeting that day. Due to delays in the build out of WSLCB’s new offices in Union Tower and the closing of their former space on Pacific Avenue, the agency may seek an alternate venue for the special board meeting on the 17th such as a public space at the legislature. Logistical delays will likely impact the Cannabis Advisory Council (CAC) meeting scheduled for the same day. While no alternate location was agreed to, the meetings remain on the Board’s July schedule (audio – 3m).
  • Hoffman concluded by saying she planned to attend the Washington SunGrowers Industry Association (WSIA) annual meeting in Omak the following week and had been invited to speak in Colorado on October 7th at the George Mason University Law and Economics Center on a symposium panel titled “Consumer Protection in a Quasi Legal Market.”
• Board Member Russ Hauge shared an update on WSLCB’s craft cannabis project including discussions about the definition of small cannabis businesses and intersections with other Board projects (audio – 9m).
  • Hauge most recently addressed the craft cannabis project during the June 18th Board Caucus.
  • Hauge said he’d met with key staff to look at “special protection” for smaller licensees, particularly tier 1 growers, in the face of potential “corporate investment” in Washington’s cannabis industry.
  • Hoffman elaborated that she and Cannabis Examiner Manager Kendra Hodgson were attempting to define “what does ‘small business’ mean in this context?” They found Washington’s Regulatory Fairness Act definition of ‘small business’ and a separate Procurement of Good and Services statutory definition of ‘microbusiness’ to be insufficient for the agency’s purposes, making a new definition of craft cannabis more likely.
  • Hoffman indicated Garrett’s focus on equity in the industry and Rushford’s interest in improving medical cannabis options for patients may intersect with the craft cannabis project. Hoffman was considering what the agency could do to advance all three projects simultaneously. She said staff were evaluating three questions:
    • “Is there a market for craft cannabis?”
    • Could craft cannabis also further equity in the wider industry?
    • Could WSLCB incentivise production of medically compliant products by craft producers?
  • Hoffman reported completion of initial “issue mapping” with Licensing Management Analyst Kaitlin Leeberg and Matt Harper from the Cannabis Examiner team. The group found “intersections and crossovers” between the projects which could help identify priorities for agency action or “legislative revision.”
  • Garza was unsure if combining efforts was feasible, but Hauge countered the agency should “identify overlap” between projects to “organize thinking” and ensure they weren’t duplicating effort unnecessarily.
• The agency hosted a conference call with Prosper Portland to discuss equity and small business development programs in the cannabis sector (audio – 34m).
  • Board Member Ollie Garrett arranged the call with “the economic and urban development agency for the city of Portland” after first publicly discussing the opportunity at the June 18th Board Caucus.
  • The call was with Tory Campbell, Manager of Entrepreneurship and Community Economic Development Teams for Prosper Portland, who oversaw distribution of the city’s cannabis social equity grants. The Board, Hoffman, Garza and Executive Assistant Dustin Dickson joined in on the call.
  • After introductions, Garrett asked Campbell to share the discussion she’d already had with him about how Portland’s program had been set up and what “worked, didn’t work, could work, would work.” Campbell referenced information he sent in advance to provide the WSLCB an overview of the “ecosystem for supporting small businesses” in Portland.
  • The support Campbell organized was not limited to cannabis businesses and included sectors which hadn’t historically offered opportunity to diverse entrepreneurs of color or women. He explained Prosper Portland combined disparate efforts by the city to help businesses throughout their life cycle. Campbell said the city found the former diffuse system failed to help foster “a healthy environment for any and all businesses to succeed” and particularly missed the “camaraderie and collaboration” of strong support networks.
  • A consolidation of programs and providers changed this. Currently, 16 local providers with a “diversity of both expertise and focus” on small business technical support were funded by Campbell’s group and convened on a monthly basis to network solutions and share concerns. These 16 providers have served “over about 750” Portland businesses in fiscal year 2019. “We can do more together than we can apart,” he asserted.
  • The cannabis business development component of the program had been underway for roughly two years. A portion of the city’s cannabis tax revenue was set aside for small business development in addition to record expungement and workforce development. In a “robust” Request for Proposals (RFP) process, the group tasked the NuLeaf Project to design and implement small business technical supports for those who are “entering into or are in” the cannabis market.
  • As business support was explicitly for “those who have historically been harmed by the war on drugs and the criminalization of marijuana” Campbell’s team found that African-American and other communities of color in Portland had been the most affected.
  • Aside from technical support for several cannabis businesses, the city’s equity program included a “grant component” as access to capital in the industry remained exceedingly difficult. In the cannabis program’s second year, two African-American owned businesses were grant recipients, leading to their growth and improved ability to implement business plans.
  • Campbell said that after receiving another $210,000 from the city, the cannabis business development program was “doubling down” to expand their existing efforts. NuLeaf was also working on a video-based employee vetting course for cannabis start-ups 
  • Hauge wanted to know more about cannabis “mini-grants” the group offered. Campbell replied that these were stipends of around $2,000 for business services. The stipends were tied to documenting outcomes, limits on their use, and “an ongoing level of engagement” with NuLeaf staff by the recipient. 
  • Rushford inquired about NuLeaf’s larger “NuFuel” grants. Campbell said these grants would soon be expanding thanks to the help of groups like the Micro Enterprise Services of Oregon (MESO). The current grants were awarded to Green Box, a subscription box delivery service, and Green Hop Dispensary.
    • Green Box increased monthly sales 143%, lowered cost margins by 58%, improved search engine optimization (SEO) rankings, and hired their first staff. 
    • Green Hop Dispensary saw an additional 5.5 customers per day, paid banking fees, and shifted from consignment to wholesale purchases.
  • Garza noted Portland’s Office of Civic and Community Life was the government office administering the tax fund, and that Seattle’s Office of Economic Development (OED) would be a comparable municipal entity. He then asked if there was any statewide effort for cannabis business development in Oregon. Campbell was unsure, but knew the existing program was only funded by the City of Portland. He added that a new audit of city cannabis taxes was also available.
  • Hoffman asked for his team’s definition of ‘micro-business.’ Campbell responded they were typically sole proprietorships with ten or fewer employees, revenue between $20-30K a year, and may not be an entrepreneur’s primary employment. Hoffman felt those criteria were similar to federal small business guidelines.
  • Garrett and Campbell agreed to introduce their respective teams to one another. After the call concluded, the Board and staff shared reactions. Garza and Hoffman especially appreciated Campbell’s description of micro-businesses and felt it could be adapted to define Washington craft cannabis businesses.