WSLCB - Board Meeting
(August 5, 2020)

Here are some observations from the Wednesday August 5th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

• The Chairperson of the Snoqualmie Indian Tribe offered remarks after the Board signed a new cannabis compact between the Tribe and the State - apparently to the chagrin of the City Attorney for the City of Snoqualmie.
  • At the Tuesday August 4th caucus, the Board finalized a minor revision to another cannabis compact with the Sauk-Suiattle Indian Tribe.
  • As Policy Analyst and Tribal Liaison Brett Cain prepared to introduce the compact, Rushford again publicly wished him well as he transitioned to a position with the Washington State Employment Security Department (ESD), thanking him for “assuring that we can do the best job possible, and for all of your contributions to the work we do.” Cain was similarly grateful, feeling that WSLCB did “important work, and it’s full of great people” (audio - 3m).
  • Cain described how “LCB and staff from the [Washington State] Attorney General’s Office worked closely with attorney Rob Roy Smith to negotiate the provisions of the compact.” He said “tax related provisions of the compact have been reviewed by the [Washington State] Department of Revenue (DOR)” securing tribal approval and de los Angeles’ signature.
  • With the Board’s approval, Cain planned to deliver the compact to Governor Jay Inslee’s office “for his consideration.” Neither Rushford nor Board Member Ollie Garrett had questions and the Board voted to approve the compact.
  • At the beginning of Wednesday’s meeting, Board Chair Jane Rushford announced that Snoqualmie Indian Tribe Chairperson Robert de los Angeles intended to dial in and would be given an opportunity to speak (audio - 1m). Chairman de los Angeles joined the call, sharing how thankful he was to be able to speak for the Tribe. He said the Snoqualmie Tribe had other “long-standing compacts with the State for vending and fuel” and that the cannabis agreement represented “a new chapter” in the government-to-government relationship. He recognized the WSLCB and “efforts of the State in working with us on the agreement,” adding that the Tribe “looked forward to exercising our sovereign rights under the compact for the good of the tribal membership and the entire community.” Rushford said the agency shared “a deep appreciation for our government-to-government relationship” (audio - 2m).
  • Later in the meeting during General Public Comment, City of Snoqualmie City Attorney Bob Sterbank spoke of his city’s “long-standing government-to-government relationship with the Snoqualmie Indian Tribe” on utility services, serving on the Tribe’s impact mitigation committee, and “other important items.” Sterbank regretted that he’d been “unable to even obtain a copy of the compact...to even ascertain whether the City might have comments on it or might wish to address any concerns.” Sterbank found it “extraordinary that an item would be on the board agenda for action” only to find out he’d need to submit a public records request “which was then summarily denied, last night, on the basis that the documents were drafts.” He argued that under state law, “the exemption that applies for draft materials ceases once a document is cited in connection with an action.” He was surprised as it seemed as though “board staff make it impossible for members of the public to see documents that are being presented to the Board for action...it's just simply impossible for people to comment on documents or actions that the Board might take.” Sterbank concluded by asking to “renew my request here, today, to the Board to be provided a copy [of the compact]” (audio - 4m).
    • Rushford thanked Sterbank for his remarks and clarified that “when [public records] requests come in for compacts, tribes are allowed 14 days to seek exemption before releasing those public documents.” Nonetheless, she was appreciative of Sterbank’s “concern and interest” (audio - <1m).
    • On March 14th, 2016, the City Council of Snoqualmie unanimously adopted Ordinance No. 1171 establishing their findings that “the prohibition of marijuana producers, processors, retailers, dispensaries and/or collective gardens, for medical and/or recreational use, will protect public safety, morals, health, and welfare of the City of Snoqualmie and its residents and businesses.” Along with the Mayor and City Clerk, City Attorney Bob Sterbank signed the ordinance. At publication time, section 17.55.025 of the City municipal code retained the unequivocal land use prohibition, a power otherwise only exercised by City officials to ban “regional transmission pipelines carrying hazardous materials that if leaked could have adverse environmental impacts.”

• The Board was presented with proposed rules for the agency’s consultation and education program and hosted a public hearing on the true parties of interest rulemaking project.
  • Agency staff discussed both topics and provided nearly identical rulemaking updates during the prior day’s board caucus.
  • Education and Consultation Program (WSR 19-15-074, audio - 4m). Policy and Rules Manager Kathy Hoffman requested approval to file a CR-102 with proposed rules on the rebranded Voluntary Compliance Program (VCP) rulemaking project. A public hearing had been expected on July 22nd before the project’s timeline was revised on July 8th.
    • Hoffman provided background on the project, indicating the idea for a program “on marijuana enforcement guidelines began in late 2018” though the rulemaking project wasn’t formally opened until July 2019. She said it incorporated the requirements and “framework” in ESSB 5318 which was signed into law earlier that year.
    • Hoffman said the CR-102 proposed a new section (013) of WAC 314-55 for the program which would “provide consultative services to licensees” to help their businesses achieve compliance before resorting to administrative violation notices.
    • WSLCB staff worked “in consultation with several marijuana business owners, industry representatives, and others” through a work group as well as a listen and learn forum hosted by the agency on May 28th. She said staff “shared draft conceptual rules” with stakeholders during the CR-101 phase and received a “substantial amount of meaningful feedback.” The input gathered had been included in a Significant Legislative Rule Analysis and led to changes in the proposed rules.
    • Having no questions for Hoffman, the Board voted to approve the CR-102 which Hoffman planned to file with the Washington State Office of the Code Reviser (OCR) that day. She projected the following schedule:
      • September 16th: public hearing and end of written comment period
      • October 14th: CR-103 with final rules
      • November 14th: effective date
  • True Party of Interest (TPI, WSR 20-14-032, audio - 6m). Hoffman introduced the public hearing on the TPI rulemaking project, which she felt represented the “collaborative efforts of LCB, our licensed community, industry representatives, and many others over the last 18 months.”
    • In October 2018, the Board opened the TPI rulemaking project. The project was revised to include provisions of HB 1794 pertaining to intellectual property, royalties, and licensing agreements which had been signed into law in May 2019.  Hoffman reported that “from June 2019 to January of this year,” WSLCB hosted a TPI work group which "held in excess of 10 meetings." Additionally, the WSLCB hosted a listen and learn forum for the project on May 20th. The Board approved the CR-102’s proposed changes at the June 24th Board Meeting.
    • Reviewing the memorandum, Hoffman outlined some of the proposed changes to WAC 314-55-035, formed after “a great deal of discussion, analysis, and compromise” by those involved. Revisions included an updated section title and structure, new definitions for terms like “control,” the removal of a “spousal vetting requirement,” clarifies who is not considered to by TPI by the agency, circumstances “under which licensees must continue to disclose funds that will be invested in a licensed marijuana business,” and previous amendments to RCW 69.50.395. Finally, the change would create a “new subsection to distinguish the requirements of financiers” compared to TPI.
    • Rushford expressed admiration for Hoffman and staff’s work on an “outstanding collaboration between so many.” Hoffman was similarly grateful for the “Board’s support during the development” of the TPI changes. The hearing was then opened to public testimony.
    • Lukas Hunter, Harmony Farms Director of Compliance and Government Affairs (written comments, audio - 3m). Hunter questioned the “feasibility of recognizing” TPIs as they were “defined in this section.” He argued that businesses changed “much faster than the change request process has been shown to accommodate and far faster than adding” a TPI to a license. Hunter predicted a “bottleneck in Licensing” at the agency as cannabis companies “struggle to disclose all those who meet the proposed definition of control.” He called for further exemptions “to allow non-shareholding members or employees of a license to be exempt from being a true party of interest.” In his experience, Hunter said he’d found many cannabis licensees would be “unable to delegate day-to-day tasks to mid-level managers and senior staff” as they’d be considered TPIs by WSLCB. As a former WSLCB employee, Hunter predicted a “tax” on agency staff attempting to keep up with a “tsunami-sized wave of change requests” around TPI vetting. Overall, he suggested the proposed rules were “not acceptable as we move forward towards a future of open interstate commerce.” Hunter advised the agency to “consider changing their criteria of control to something along the lines of “executive level decision making, focusing on decisions that change the course of where a company is going and eliminating day-to-day operational decisions.”
    • Ezra Eickmeyer, Principle at P&E Strategic Consulting (audio - 4m). Eickmeyer explained that he was representing Producers Northwest, a "small group of producer/processors.” He was in agreement with Hunter’s recommendations and had submitted written comments. Eickmeyer said under his reading of the proposed rules the agency could start “TPI investigations of staff at different management levels” and that the proposed definition of ‘control’ included the undefined term ‘policy’ which could be “interpreted in a multitude of different directions in the field by enforcement officers.” Chief among his concerns was that “we don’t want to open Pandora’s box on businesses all of a sudden having to figure out which employees at what levels they have to start disclosing to LCB, you know, whether those employees have to be vetted before they can be hired and put in the field.” Eickmeyer suggested language in the rule saying “employees, unless they’re also owners, are not included in this.” He added a request to allow out-of-country financiers if WSLCB could obtain the equivalent financial information they were requiring for out-of-state financiers, though Eickmeyer said the issue was “far further down the list” as compared to his concern about employee TPI investigations.

• During General Public Comment, a prevention leader’s critique of the agency’s inclusiveness elicited a reply from staff.
  • Linda Thompson, Greater Spokane Substance Abuse Council Executive Director (GSSAC, audio - 4m). Thompson told the Board she was part of Prevention Voices in Washington State, an informal coalition of “prevention leaders and advocates across the state.” At publication time, Thompson was also a board member of the Washington Association for Substance Abuse and Violence Prevention (WASAVP), cited as a coalition member.
    • Within their group, Thompson said there were "a number of people who are concerned about...loosening of the regulations" in response to the COVID-19 pandemic. She acknowledged those changes were "put into place as an economic help to those businesses who are unable to do their business as normal" but she worried they’d be “made permanent.”
    • Thompson claimed to be “already seeing an impact on impaired driving” in the Spokane area which she argued was partially the result of WSLCB loosening certain rules. Additionally, people were “struggling to stay in recovery” programs utilizing group treatments due to social distancing policies. Though Thompson said the coalition did "recognize and are empathetic" to the plight of restaurants and bars, they opposed policies such as curbside service of alcohol or cannabis becoming permanent.
    • Thompson noted that during staff rulemaking updates, she didn’t “hear that prevention and public health has been at the table of any of these work groups,” although “that may be that we have not offered to come to the table." She asked for more of a role for advocates like herself, claiming that they supported legal cannabis and “want this system to work,” but that "anecdotally" she was aware of cannabis licensees whose “criminal activity in the past or other issues” hadn’t prevented them from obtaining a license. Thompson’s prevention community didn’t oppose cannabis industry success so long as it “stays within regulation and it is controlled for the benefit of the health and well-being of our community.”
      • Just before the conclusion of the meeting, Hoffman responded to Thompson’s remarks by noting that the WSLCB had “engaged with public health actually quite extensively in 2019" during a packaging and labeling (PAL) listen and learn forum “and other rulemaking projects.” She asserted Public Health Education Liaison Sara Cooley Broschart kept prevention views “generally at the table." Hoffman urged the public to track the agency’s rulemaking project announcements through WSLCB’s GovDelivery email service and asked that Thompson reach out with specific comments (audio - 2m).
      • Thompson previously addressed the Board at the January 2019 board meeting in Spokane to advocate for more funding for the prevention community.