WSLCB - Board Caucus
(August 27, 2019)

Here are some observations from the Tuesday August 27th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• The Board engaged in more discussion about how to assist smaller operators while agency staff emailed conceptual legislation to stakeholders (audio – 13m).
  • Board Member Russ Hauge spoke about his continuing efforts to define and support “craft cannabis” businesses at the June 18th Board Caucus and agency leadership hosted a long discussion on small business opportunities during the July 10th Executive Management Team (EMT) meeting. Director of Legislative Relations Chris Thompson recently spoke about the timeline for agency request legislation at the August 7th EMT.
  • Board Member Ollie Garrett obliquely asked, “What conversations, and is there a work group going on around what to do, as far as Tier 1s and helping the Tier 1s?”
  • Board Member Russ Hauge felt other issues may have led the Board to “subsume that particular concern.” Following his participation at the Washington SunGrowers Industry Association (WSIA) annual meeting, Hauge was convinced the agency would “miss the mark” by only endeavoring to help Tier 1 producers or producer/processors. “A Tier 1 indoor grow, they can harvest a number of times over the year, and an outdoor grow—Tier 1, 2, or 3—they have to do a lot of hard work to get two harvests.” WSIA Executive Director Crystal Oliver advised Hauge that a definition of “seasonal” production might be a way to distinguish indoor and outdoor producers.
  • During the August 12th True Party of Interest (TPI) work group meeting, which the Board subsequently discussed at the August 13th Board Caucus, Hauge claimed a representative of the Washington CannaBusiness Association (WACA) telegraphed pursuit of legislation to “authorize out-of-state and/or corporate investment” during the 2020 session. Furthermore, he added, “there were remarks made that the Board should not concern itself with the economics of the market” which Hauge interpreted as opposition to any “protectionist move” by the agency to support smaller producers. He suggested the Board had to decide if the agency would support “smallholder opportunities” or “take what comes, through more or less unrestricted investment.” Board Member Ollie Garrett agreed action was preferable.
  • Meanwhile, elsewhere at the agency during the caucus, Chris Thompson sent an email to cannabis stakeholders which included descriptions of two potential agency request bills:
    • A “Social Equity Program” for new retailers including a “Technical assistance competitive grant program” and greater local control of retail licensure limits
    • A “Medical Cannabis Market/Small Producer Sustainability” initiative including home delivery of medical cannabis products plus on-site and shared retail privileges for the sale of medical cannabis products by “Small producers and small producer-processors meeting requirements established in current law and this bill”
  • Garrett continued her line of questioning, indicating she had received an email which “made it sound like that there’s some discussions going on, and some rumors are out, that we were going to allow Tier 1s to sell their product?” Cannabis Policy and Rules Coordinator Kathy Hoffman confirmed she had heard the rumors, too.
    • On Monday August 26th, the day before the Board Caucus, WACA staff also claimed to “have been hearing rumors” in an email broadcast to its membership “to give you the scoop before anything comes out.” The trade association expected the WSLCB would soon announce plans to:
      • “Allow tier ones to increase the square footage of their licensed canopy (we do not know by how much)”
      • “Allow tier ones to do direct to consumer sales”
      • “Allow tier ones to deliver product to medical patients”
      • “In response to the social equity concerns the WSLCB will create their own social equity grant program through the Department of Commerce. The grant program will have a total of $100k for the entire state per year.”
    • We thank the WACA member who is also a Cannabis Observer sponsor for sharing the association’s messaging with us. At the time of publication, WACA was not a sponsor of Cannabis Observer’s work.
  • Hauge confirmed, “Rick mentioned some thinking about allowing Tier 1s to grow out of the [canopy] limit that’s on their production now” but indicated the recurring concept had not been further developed by the agency.
  • Hauge said, “we do have a legislative package that Chris is shepherding through that will have a provision for farmers markets.” Hoffman acknowledged the potential legislation included some “carve outs” to “support smaller producers and processors.”
  • Hoffman added, “there’s also some provisions for social equity in there as well.” Garrett, a consistent champion for the agency to develop some form of social equity program, conveyed her awareness of that facet of the agency’s legislative ambitions. She later reported that Director of Licensing Becky Smith had compiled retail licensee demographics and completed a survey which confirmed owners of the state’s production licenses were “85% white.”
  • Hauge reminded the group that over 95% of licensees were small businesses under the state’s Regulatory Fairness Act definition, with most qualifying as “microbusinesses.” Garrett noted that Governor Jay Inslee frequently touted his support for small businesses as “his passion.” Hauge said he’d seen small wineries do “really good” and “there’s a way to be small and be successful.”
    • Inslee signed a 2017 law hailed as the Small Business Bill of Rights Inventory by its backers.
  • Director Rick Garza signaled an upcoming Cannabis 2.0 meeting with leadership at the Department of Commerce (DOC) would provide an opportunity to recruit support from their existing small business programs. Hauge again called for economic “horsepower” to improve WSLCB decision making. Garza concluded, “we should be able to rely upon those agencies that are out there to help us.”

• The Board discussed high-profile coverage associating a rash of cannabis robberies with information gleaned via state open records laws which could result in legislative changes (audio – 8m).
  • On Friday August 23rd, Politico Magazine published “The Great Seattle Pot Heist” which profiled Washington state cannabis licensees targeted in several dozen successful and sometimes elaborate burglaries dating back to 2016.
    • The article stated growers “came to suspect that the criminals had found another way of getting the information they needed to target vulnerable businesses offering big payoffs: The government was giving it to them.”
    • WSLCB Director of Communications Brian Smith, quoted throughout the article, was reported to have said: “People in communities want to know if there’s a grow operation near them. Cities want to know where they are. To go forward under a federally illegal product, Washington has to demonstrate that it’s carrying out a system that is responsible to the needs of the state, not just to the businesses involved.” He was reported to have claimed burglary “doesn’t happen very often” and “I just don’t think there’s much there.”
    • The article claimed some jurisdictions were better at organizing and tracking cannabis crime data, particularly the City of Denver, and despite the WSLCB’s and “Seattle Police’s lack of interest or capacity for tracking cannabis diversion, one agency seems to be paying attention. The Washington State Patrol recently established two specialized Marijuana Enforcement Teams with 10 officers between them for the stated purpose ‘of controlling the potential diversion and illicit production or distribution of marijuana and marijuana-related products.’”
  • Hauge brought the story up, saying he’d seen the article and also heard about it on National Public Radio (NPR) that morning.
  • Garza said he had “staff working on it right now” as he’d been contacted by a state legislator prior to the article’s release asking about burglaries and thefts of legal cannabis. He claimed a similar spike had occurred around the time liquor became privatized in Washington in 2011. Thefts were reported to the agency but Garza believed “that’s typically a local law enforcement issue.”
  • Beyond the requirement that thefts of cannabis within the regulated supply chain be documented in the state’s troubled traceability system, Garza noted there wasn’t a requirement to report thefts to WSLCB. However, he’d asked Enforcement Chief Justin Nordhorn and Becky Smith to “do some brainstorming around ‘is there something that we need to do’” to compile that information from local law enforcement agencies. Currently, “we can’t tell how big of a problem it is out there unless we require something.” Hauge expressed his preference that the Washington State Patrol (WSP) be responsible for compiling cannabis crime data.
  • Reporting requirements could be complicated by the state’s open government laws which could make victims hesitate to share information about a crime for fear of public disclosure. Garza brought up a flurry of requests for licensee addresses during WSLCB’s initial licensing processes, information which Hoffman said the agency was required to disclose under the Public Records Act.
    • The WSLCB’s Marijuana Dashboard was setup in part to provide information on business locations to help mitigate expenses incurred fielding public records requests.
  • Hauge added that the state’s open record laws were “if not the broadest in the country, it’s close to it.” He didn’t believe the agency could “mask” that data “without an act of the legislature. And that’s not out of the question.” Garza said there was already an appetite for change from at least one lawmaker which could include exempting certain information from disclosure.

• Director Rick Garza discussed an additional upcoming review of the Regulators Roundtable and the Board commisserated on the Board Meeting in Bothell.
  • The recent Regulators Roundtable was initially reviewed by Hoffman, Nordhorn, and Assistant Attorney General Bruce Turcott during the August 7th EMT. Agency leadership planned to formally discuss their findings during the August 28th EMT.
  • Garza said the discussion on hemp and cannabidiol (CBD) at the Roundtable was particularly relevant to the agency’s ongoing work with Washington State Department of Agriculture (WSDA). Agency staff responsible for the independently regulated marijuana and hemp supply chains were sorting out how to “co-exist” given their respective authorities over “those who have [WSDA] cultivator permits and those that have licenses with [the WSLCB].” He said the agency was preparing to communicate with the handful of cannabis producers licensed to grow hemp as well as marijuana cultivars and working with WSDA to “reach out to those licensees soon” (audio – 2m).
  • Garrett reflected on the August 21st Board Meeting in Bothell saying she it had been a “little disheartening” to see tepid attendance (3 people) at the Board’s second on-the-road meeting of the year after strong engagement at the January 9th Board Meeting in Spokane. Hauge agreed, but felt it was “a really good idea, at least we’re making the effort.” Garrett shared a joke attributed to Garza that “maybe people aren’t mad at us anymore” (audio – 4m).