WSLCB - Board Meeting
(January 4, 2023)

Here are some observations from the Wednesday January 4th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

• Director Rick Garza publicly announced his planned retirement after 40 years in Washington State government, including a quarter century at WSLCB.
  • Board Chair David Postman introduced Garza who said, “After 40 years of state service, and 25 years at the liquor control board, I announced yesterday that I would be retiring in July.” He and the board had spent “time talking about how that transition will occur,” and he’d already heard warm replies from staff to an internal email informing them of his retirement. Acknowledging he had more time left at WSLCB, Garza thanked staff and appreciated “the support that I've gotten from the board.” During public comments, Garza “listened to some of the criticism that we hear…I recognize the transparency that you all three provide…and the grace that it takes to hear some of this.” Following a decade as the director, he remarked that he remained someone who was “always believing that…we can create a better path for those that we regulate, and those that we license” (audio - 3m, WSLCB video, TVW video).
    • Garza previously mentioned his start in government was “working in the Washington State Senate in 1983.”
    • An online announcement released after the meeting included the staff email from Garza explaining that “the Board appoints the director to run the day-to-day operations of the agency” and “asked me to help lead the search for my replacement and work closely with the new director to ensure a smooth transition. We are committed to transparency throughout the process. And you deserve a seamless transition to ensure the important work of our agency is not interrupted.”
    • Throughout 2022, there had been significant turnover in the upper echelons of WSLCB:
      • Cannabis Examiner Manager Kendra Hodgson accepted a position with the Washington State Public Disclosure Commission (WA PDC) as the new Customer Service and Outreach Director in June 2022.
      • Chief Financial Officer Jim Morgan and Director of Legislative Relations Chris Thompson both concluded their careers with the agency in December 2022.
      • Board Member Ollie Garrett’s term ends on January 15th, 2023. At publication time, she had not publicly indicated if she would seek appointment to another term on the board.
  • Board Member Jim Vollendroff congratulated Garza, commenting “I'm excited for your future; I'm excited for the transition.” Open to change, Vollendroff hoped “this might turn out to be a great thing all around for everybody.” He was grateful for Garza’s mentorship and the opportunity for a “historic transition, and to be a part of selecting the next director of the LCB” (audio - 1m, WSLCB video, TVW video).
  • Garrett “had the pleasure of working with you for, what, six years, going on seven years now” during which they had “been through a lot.” When he’d told the board the previous day, Garrett judged him to be “happy with your decision and you're ready” to leave the agency. She was glad he’d continue on for 6 months and she’d get the chance to “talk about this some more” (audio - 1m, WSLCB video, TVW video).
  • Joking with Garza about being sure of his choice, Postman stated, “I don't think there's anybody that's played a bigger role in the success of this agency, for a longer period of time, through the greatest change, than you, Rick” (audio - 5m, WSLCB video, TVW video).
    • Postman observed that in Garza’s time at the agency he’d seen the institution change “from this massive organization that was in the liquor business to having the voters say ‘no, we want that privatized’” requiring staffing changes “from a thousand people down to a couple hundred people.” The following year, voters legalized adult-use cannabis, explained Postman, “and then [WSLCB] started to grow” once again. During implementation, Garza was “right there working with [Governor Jay Inslee] and the White House and the Department of Justice and everything else” helping to convince federal officials who “thought it was insane.”
    • For Postman, Garza’s departure was “a big deal,” and he felt stakeholders would have the same reaction. Referencing the big changes Garza had managed at WSLCB, Postman said “he's got one more to manage before he goes, and that's his helping to pick his own successor” because “the board's gonna rely heavily on him as we do a national search to find his replacement.” Garza would oversee the search, and Postman anticipated “it's gonna be an interesting time, but we're gonna use the next six months…to find the absolute right person to take Rick's chair; to make sure that they get to work together enough that Rick can do that 25-year download” of his “institutional history.”
    • Postman promised more information on the succession process would be released, “it will be transparent as much as…we can dealing with personnel issues. I want to hear from staff at the LCB, leadership at the LCB, stakeholders,” and lawmakers. Congratulating Garza on an “impressive” career, Postman remarked that “everyone in this agency understands the work you've done through your 25 years here, and then some of us know what you did even in the 15 years prior to that.”

• Chief Information Officer George Williams briefly spoke about a Cannabis Central Reporting System (CCRS) update which would go live the following week, prompting the board to ask about the average time to resolve problems identified in the software.
  • The update and the availability of a test environment was announced in December 2022 and mentioned in passing by Director of Communications Brian Smith who said that “CCRS will sort of move into operational [status] as opposed to continuing on as a project” following the update on January 9th.
    • Find out more from our week ahead coverage on the update.
  • Williams confirmed the CCRS update “is still currently on track for the January 9th go live date” despite there being “some concerns expressed by the integrator community as well as some of the licensee community about the timing of all this. But we did carefully plan this out so we would avoid the holidays as much as possible.” He thanked his staff and integrators for identifying “bugs” in the update, mentioning that “even this morning we are finding things that we can fix and address to make sure that they get corrected before the go live date” (audio - 1m, WSLCB video, TVW video).
  • Postman encouraged licensees and integrators “to come and try to find” any problems with the updates “because this is our window to fix” them. Williams explained that “to date, we’ve had seven integrators and five licensees” try it out and find “edge problems so we can solve them” (audio - <1m, WSLCB video, TVW video).
    • At time of publication, 18 integrators were approved by WSLCB.
  • Postman asked how long most CCRS fixes took to implement. Williams offered the example that a bug identified that morning had a solution within an hour, and implementing it would take “probably a day” (audio - 1m, WSLCB video, TVW video).
  • Postman had Williams affirm the January 9th deadline would be the next major step, and staff would be “making minor advancements” on CCRS in the future (audio - <1m, WSLCB video, TVW video).

• Public comments included remarks on cannabis taxes, combating oversupply, traceability, transparency, along with several members of Black Excellence in Cannabis (BEC) who emphasized their “solution-based” reorientation when it came to social equity.
  • Bailey Hirschburg, Citizen Observer for Cannabis Observer and member of the National Organization for the Reform of Marijuana Laws (NORML, audio - 4m, WSLCB video, TVW video)
    • Laying out his belief that during the approaching legislative session “the agency will be asked to weigh in for or against legislation that would raise cannabis taxes,” Hirschburg noted Vollendroff raised the issue of modifying tax rates based on cannabis concentration in comments on December 13th, and University of Washington Addictions, Drug, and Alcohol Institute (UW ADAI) recommendations to lawmakers included similar suggestions. “I've said before that cannabis consumers are like every other American, and unfortunately for you guys, like every other American we're not fans of higher taxation,” argued Hirschburg.
    • He cited Washington’s higher cost of living, rising inflation, and high cannabis taxes (excise and sales), as possible causes for reports of declining cannabis sales in the previous year. Hirschburg claimed it made “no sense” to have “an agency with a value of ‘customer focus’ agree to any kind of tax increase at a time like this,” particularly when researchers had told board members, “cannabis remains competitively priced and consumers are more likely to get their cannabis” from stores and “pay taxes into the Washington system.”
    • With cannabis “sure to deliver us hundreds of millions of dollars no matter what we do in 2023,” Hirschburg stated he could “understand that there are good intentions in wanting to use price to drive consumer choice, but loyal customers should be rewarded with savings not price hikes in the name of their own health.” Instead of raising tax rates for “products you hope the public won't buy, why not lower excise taxes on products you want them to buy,” he asked, reasoning a tax rate based on product concentration could influence consumer choice “by lowering costs just as easy as by raising” them. Hirschburg called for the board and staff to “keep the consumers' pocketbooks and health in mind during the coming legislative session.”
  • Josh McDonald, Washington Wine Institute Executive Director (audio - 2m, WSLCB video, TVW video)
  • Damian Mims, BEC Executive Treasurer (audio - 2m, WSLCB video, TVW video)
    • Mims said that “the truth is Black and Brown people have not had a fair and equitable opportunity in any industry in this state,” but he also felt “sometimes we get caught up in focusing on the wrongs and not spending enough time on working on making it right.” He commented that the best tools to address problems were values: “teamwork, leadership, hard work, and in my opinion most importantly, faith in a higher power.” Mims viewed the board as a “group sitting at the table, trying to work on making it right,” while he was striving to “focus on those positive voices out there” without forgetting the past. Additionally, “if you are openly and publicly speaking ill of people in support of…Black and Brown equity I really hope it's not a Black or Brown person doing it,” he said, noting it was “time to break the perpetual cycle of tearing down our own kind.”
  • Peter Manning, BEC Co-Founder (audio - 4m, WSLCB video, TVW video).
    • Manning, who last addressed the board on December 7th, reported that BEC members were “happy with LCB." Though they hadn’t felt this way in the past, “we're happy with the leadership that they currently have; we're happy with the direction the LCB is going.” He indicated that Governor Inslee had promised “to bring about drastic changes to the LCB…we recognize those changes, and see ‘em.”
    • Promising that BEC was a “solution-based” group which had “changed our leadership to reflect that,” Manning asserted the organization had “taken on the approach never to attack a person for their personal beliefs, disbeliefs, or personal habits, or whatever.” He stressed that “what matters to us now in the Black and Brown Community is equity, we have been closed out of a cannabis industry for the last eight years.” Manning said, “when I first embarked on this journey, I was criticized and also labeled as a nutcase…but the end result proves my point to be true because I am here before the board talking about social equity.”
    • He claimed to have knowledge that “the stores for the Black and Brown Community, the target date is sometime early April.” Manning argued, “We need to vet the leadership that we have in [groups representing their communities] to see if they speak truth to power.”
      • Deputy Director Toni Hood indicated that a 30-day equity licensing application window could potentially start in March during remarks in December 2022. However, Director of Licensing Becky Smith stressed that a timeline hadn’t been finalized. A March application window would conclude in April, but additional licensing processes (e.g., authorizing licensed premises, financial background checks) would precede store openings.
  • Tyler Conway, BEC member (audio - 1m, WSLCB video, TVW video)
  • Mike Asai, BEC Vice President (audio - 5m, WSLCB video, TVW video)
  • Shawn DeNae Wagenseller, Washington Bud Company Co-Owner, Washington Sun and Craft Growers Association Board Member and Cannabis Alliance Board Member (audio - 5m, WSLCB video, TVW video)
    • Speaking on behalf of her business, Wagenseller talked about overproduction of cannabis which had been reported “state by state,” noting Washington “is not unique to this.” She claimed a “vast imbalance” had emerged because “the demand of the Washington consumer is pretty much maxed out,” and inferred action on the “supply side is the…only option that we have.” Wagenseller explained, “we see through reports that there are over 1,000 licensed producers, yet less than 600 of us are actually doing any form of business transactions.” She advised agency leaders to take action to “reduce canopy” for all licensees or move towards “sunsetting dormant licenses, or allowing full canopy only with proof of percentage of sales,” hoping that the board had “some sway…to implement that imbalance.
      • On January 3rd following an inquiry by Postman, Policy and Rules Manager Kathy Hoffman promised the board a conversation on cannabis canopy would be scheduled for the January 31st board caucus.
    • Turning to the “high THC topic,” Wagenseller said there was “lots of discussion about that.” She indicated that cannabis flower “has a really short shelf life while oils and concentrates have a very, very long shelf life. So a lot of the overproduction is going into concentrates to preserve those cannabinoids” which were then “dumped on the market for very, very cheap.” She’d encountered concentrates that were $10 a gram, alleging that “there is no way” to manufacture that product “for less than three bucks a gram…which is what's happening.” This industry practice “exploits young people and people on limited budgets,” Wagenseller alleged, and felt the agency should be “enforcing the rule that you can't sell below your costs. I don't know how LCB does that, I don't know how you figure that out, but that one thing alone would help correct the issue that we're seeing.”
  • David Busby, OpenTHC CEO (audio - 4m, WSLCB video, TVW video)
    • Following his last comments before the board on December 7th, Busby remarked that he wanted to again talk about CCRS and was “very excited that you guys have ditched that web form and moved to the CSV [comma-separated values] upload.” He reported that his company was “at about 87% success on our testing against that thing which I think is pretty good.”
    • However, he felt as though it was the “third or fourth time now the LCB has dropped a pretty big breaking change onto the industry and done so with a pretty short notice during the holiday season.” Busby cited both the transition to the last traceability vendor near the end of 2019 as well as the launch of CCRS in December 2021, telling the board that this pattern was “pushing work out to everybody else, that's not [WSLCB], during that holiday season, but…maybe we could do things in like, February and March…and not have so much change to the industry” during the fall harvest and holiday season.
    • In “communications with the other software service providers,” he said that “a lot of them are having the same difficulties” as his company. Working in several different state cannabis markets, Busby complained about one performance aspect of the traceability vendor Metrc, and concluded “despite all of my fist shaking…and hollering,” he found CCRS was “actually pretty good.” He also thanked IT staff from the WSLCB “service desk who's been pretty quick with my emails and getting stuff done.”
  • Gregory Foster, Cannabis Observer Founder + Citizen Observer (audio - 4m, WSLCB video, TVW video)
    • Foster mentioned his collaboration with the Washington Cannabis Integrators Alliance (WCIA), but affirmed he wasn’t representing them. He lauded CIO George Williams as the new executive sponsor who was “faced…with limited resources to manage the CCRS project” yet remained open to working with integrators and licensees.
    • Looking “beyond the January 9th time period,” Foster understood there to be no “plans for any further development of CCRS beyond the 2.0 release.” He considered this “understandable” as the system was presented to the Traceability 2.0 work group as an interim “stopgap” for the transition away from MJ Freeway, software “from multiple years ago” originally deployed to mitigate that organization’s failure to launch on time.
    • Foster identified support among stakeholders for “normalizing things to have everything be CSV, to not require this manifest web form is a good step,” but he still thought “it's not…an ideal system.” He warned that “without prioritization of next steps either from LCB leadership, or from the legislature, dedicated budget, dedicated staff would help. And ask your IT team; they will tell you they agree that CCRS is not ideal. We could develop an API pretty simply; it's within reach” but needed the push of leadership support.
  • Christopher King (audio - 5m, WSLCB video, TVW video)
    • “We're gonna usher in a new era in 2023 of transparency and sunshine,” King began, before inquiring whether there had been a “date certain when the finalists will be selected out of those three candidates to monitor and implement the social equity [application] lottery this time.” Unsure, Postman said he’d “get back to him.”
      • On December 13th, a revision on the agency website acknowledged a change in the vendor the agency was contracting with to review and prioritize equity applicants and that the law firm in question Quintairos, Prieto, Wood & Boyer P.A.“informed the LCB that it was no longer providing government contract legal services. It has reassigned its responsibilities as Washington’s third-party reviewer to the Ponder Diversity Group. The Ponder Diversity Group consists entirely of the original QPWB attorneys and staff who have been preparing to serve as Washington’s independent application review and scoring team.”
    • King also mentioned how “nobody's ever explained what happened to the letter that Kevin Shelton sent to Ollie Garrett…within the last couple of years,” alleging there had been “a racketeering scheme, it was under the table” and that “and nobody has explained what the protocol is when getting letters like that.”
    • King mentioned SB 5052, a 2015 law merging the medical and adult use cannabis system, “required a fair and level playing field in terms of the lottery” for licenses. He stated there was no end-date on this requirement, before claiming it “never happened and there's still a compelling governmental interest to go ahead and just give these people these licenses.”
    • Referencing two unlicensed cannabis shops King previously reported to the board during public comment which were subsequently raided by WSLCB Enforcement at the end of August 2022, he insisted “they're back in business. I see the reviews in October after they were shut down and raided.” He knew they were “doing illegal stuff, and you're allowing them to do the things that Blacks can't do.”
  • Ahmed King, BEC member (audio - 5m, WSLCB video, TVW video)
    • King thanked the board, Manning, and Asai, stating he “appreciate[d] everyone here,” and was joining the meeting from “my work van” as he was a cannabis transporter, though he “definitely would like to be working for myself” and “enjoying some of that generational wealth.” He believed BEC was “a great organization that is on the forefront for Black and Brown people when it comes to social equity” in “legal cannabis not only in Washington state but nationwide.”
    • As someone “always raised to continue to push forward,” King saw that things were happening around cannabis equity and called for people to join BEC’s efforts who “have not been affiliated with us, [but] would like to work with us and to create solutions.” He wanted to “extend…the hand to sit down and have a conversation, because again, united we stand divided we fall.”
    • As a delivery driver, King also was of the opinion “when it comes to manifesting and different things…there could be a better way and a better process for everybody.” Suggesting use of an automated clearing house (ACH) system, he also wanted “more delivery drivers protections” as his work could be “pretty dangerous.”