WA SECTF - Work Group - TA and Mentorship - Public Meeting
(June 8, 2021) - WA Commerce Presentation

After a presentation on prospective Department of Commerce grant and mentorship programs for equity applicants, work group members and the public delved into potential details.

Here are some observations from the Tuesday June 8th Washington State Legislative Task Force on Social Equity in Cannabis Technical Assistance and Mentorship Work Group (WA SECTF - Work Group - TA and Mentorship) Public Meeting.

My top 3 takeaways:

• The Washington State Department of Commerce (WA Commerce) was given authority to administer a social equity technical assistance grant program to support equity applicants or licensees and compose a roster of cannabis sector mentors who could be paid to provide guidance to them.
  • A 2020 law established a social equity retail license program through the Washington State Liquor and Cannabis Board (WSLCB), the grant program through WA Commerce, and the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF). The task force was required to provide WSLCB and state lawmakers guidance on the equity program, and may make recommendations to WA Commerce representatives about disbursement of the grants. The law set up an appropriation of $1.1 million dollars annually for WA Commerce staff to award assistance grants and included “Connecting social equity applicants with established industry members and tribal marijuana enterprises and programs for mentoring and other forms of support approved by the board.”
    • A second law signed on May 3rd expanded the task force membership, timeline, and required recommendation topics. Additionally, the new law revised the assistance grant program to have WA Commerce staff develop a roster of mentors department officials could contract with to provide mentorship and support to social equity applicants and licensees. Mentors would have to be at least 51% minority or women-owned businesses according to WA SECTF staff.
    • The state biennium operating budget signed on May 18th amended the WA Commerce appropriation in the original law by removing $1.1 million appropriated for the program for fiscal year (FY) 2021 which was not distributed. The funds were carried over into the next biennium by modifying the standing appropriation for spending required under RCW 69.50.540 “to fund the marijuana social equity technical assistance competitive grant program under RCW 43.330.540” in FY 2022 and 2023, an increase from $1.1 million to $1.65 million.
  • To advise WA SECTF on recommendations to WA Commerce, task force members created a Technical Assistance and Mentorship Work Group which first convened on May 11th. Susan Nielsen, Small Business and Rural Programs Services Manager at the WA Commerce Office of Economic Development and Competitiveness was the department’s representative on the work group.

• WA Commerce Policy Advisor Rick Anderson led a presentation on the technical assistance (TA) grants and roster of mentors, reviewing what the department was doing to set up the programs.
  • Tamara Berkley, a cannabis retail licensee and co-lead for the work group, introduced Anderson to speak to that agency’s “roles and responsibilities in administering” the grant program and mentor roster as well as ask questions of work group members. She said work group member and public comments would inform WA Commerce officials’ perspective in order to “make these programs successful and useful” (audio - 1m).
  • Anderson, also the Legislative Reports Coordinator for the department, explained that he was “pinch hitting” for Nelson, and stated that the department had “yet to hire our expert” for the program. He talked about his experience advising WA Commerce Director Lisa Brown, past work in the legislature, and his current post with the Office of Economic Development and Competitiveness. “I am not a cannabis expert,” he admitted, but his intent was to "start an on-going conversation" by communicating what WA Commerce staff "think we know" about the cannabis social equity law. He said staff wanted to meet both the legislative mandate under the law, but also ensure the program really “fulfills your needs” to achieve what WA SECTF members “collectively define as successful” (audio - 16m, presentation).
    • Anderson briefed on WA Commerce broadly, terming it a “diverse” agency operating numerous programs with a focus on four areas:
      • Housing and Community Services
      • Growth Management and Local Infrastructure
      • Economic Development and Business Assistance
        • Anderson stated that this division of the agency had responsibility for the assistance grant program as part of a “broader ecosystem of small business support.”
      • Energy Office
    • Anderson reviewed the funding that was “broken up into fiscal years,” noting that FY 2022 would begin on July 1st, and remarked that there was  $1.65M for FY 2022 and 2023 that had to be spent in those time periods or the money would be reappropriated by lawmakers. WA Commerce was also budgeted money for a full time employee (FTE) to oversee the TA grant program “and we expect that person to be hired in July,” he said, while cautioning that with significant state hiring “going on” their staff had been “swamped.”
    • In addition to WA Commerce, Anderson said the Washington State Department of Health (DOH) had been involved in staffing WA SECTF through the Washington State Governor's Interagency Council on Health Disparities along with WSLCB (“who's really making the big decisions around the license” process). He relayed that WA Commerce officials considered the grant and mentorship portions of the law “a means towards the end of prepping people...to these licenses.”
    • Anderson identified “two different kinds of grants that are available”:
      • TA Grants were “required” and specifically intended as “technical assistance” rather than “financial assistance.” The functions of the program as defined in statute were:
        • Assistance navigating cannabis licensure process
        • Business education and plan development specific to cannabis
        • Regulatory compliance training
        • Financial management training and assistance seeking financing
        • Strengthening a social equity plan
        • Connecting applicants with mentors
      • Roster of Mentors was an “optional section,” Anderson explained, wherein WA Commerce staff were authorized but not required to establish a list of prospective mentors who could be contracted by the department to “provide support for eligible applicants, and license holders.” He acknowledged that language about a “pilot program” had been removed from the legislation. Anderson reported that something representatives in the department wanted to know was whether creation of the mentoring roster needed to precede TA grants.
    • He also reviewed WSLCB social equity plan (SEP) requirements, commenting that they would inform how WA Commerce staff evaluated grant applicants:
      • (i) Eligibility qualifications
      • (ii) Social equity goals
      • (iii) History w/criminal justice system
      • (iv) Workforce composition
      • (v) Neighborhood characteristics
      • “any additional requirements approved by LCB after consultation with Task Force”
    • Anderson found the SEP "equity considerations" weren’t in line with the grant process, which emphasized awards based on "business viability." He advised that any WSLCB rulemaking around the SEP cover whether officials should put “business viability elements into” the plans. Anderson added that the department had been granted rulemaking power to implement the programs but leadership wasn’t sure doing so would be necessary. WSLCB rulemaking would “affect the timing of the grants,” he told the group, as agency rules would have to further define disproportionately impacted areas (DIA) and there was no set timeline in statute to do so. Until applicants and DIAs were defined, WA Commerce staff couldn’t review TA grant applications “unless we can come up with some arrangements.”
    • Anderson said WA SECTF members could also make a “whole list of recommendations,” including on the grant program, and promised WA Commerce staff would be “responsive” to input prior to implementation of the program.
    • Anderson went through the “known considerations” for TA grants:
      • 2022 grants must be distributed in FY 2022
      • 2023 grants must be distributed in FY 2023
      • LCB eligibility criteria must be finalized in rule prior to grant distribution
      • Task Force recommendations (must be/will be) finalized prior to grant distribution. Anderson noted this wasn’t required of WA Commerce representatives, though he believed department staff would be “bending over backwards to take” into account WA SECTF recommendations.
    • Anderson reviewed several unknowns that could impact the process:
      • Relationship between plans and grants
        • Equity considerations v. business viability considerations
      • Timing of decisions/recommendations
        • LCB rules
        • Task Force
      • Needs of Applicants
        • What type of assistance needed?
        • How is it best delivered?
        • Do needs differ across applicants? Anderson identified the differences between grants for equity license applicants and “current license holders” as the top concern.
        • How many applicants are expected?
      • Needs of entities awarded a license
        • What type of assistance is needed?
        • How best delivered?
    • Another distinction was whether mentors should be available for contracting to qualified license holders and if TA grants should be reserved for equity applicants. He felt it was unclear if active license holders needed technical assistance, “or is it maybe more in the realm of financial assistance?” He mentioned that using TA grant dollars for general financial assistance would necessitate an act of the legislature in 2022.

• Anderson asked a series of questions about implementation of a grant program in addition to fielding questions and hearing comments from work group members and the public.
  • Christy Curwick Hoff, lead WA SECTF staffer, began with a question about timing, noting the statute for the grant program required that “technical assistance grant projects need to be completed within a 12-month period of time.” She assumed “the recipients of the grants just have to be identified in the fiscal year” when the money was awarded but wondered if “the projects...need to end within the fiscal year.” Anderson responded that WA Commerce officials knew that FY 2022 grant money must be distributed “out by June 30th of 2022” and that he would find out if awarded grants had to be spent by the end of the FY (audio - 2m). 
  • Anderson’s first question to work group members concerned the “business viability” aspects of the grant process and whether those “elements” should “be formally part” of an applicant’s SEP (audio - 7m). 
    • Raft Hollingsworth, work group co-lead and a cannabis licensee appointed to the task force, said awarding grants along with the issuance of “social equity licenses, and in one step” had been discussed outside of the work group meetings. He felt WA Commerce staff shouldn’t decide which applicants get licenses. Being granted a social equity retail license should confer TA grant eligibility, Hollingsworth argued, as applicants who didn’t have enough capital to get through an application process wouldn’t “be that viable to begin with.” He commented that grants were not “a gift” but should help businesses get “operational for the long-term.”
    • Carmen Rivera, appointed to the task force to represent the Washington State Commission on Hispanic Affairs (CHA), agreed with Hollingsworth and called attention to the “racial equity and inclusion work that the [Department of] Commerce has done,” asking, “who is specifically going to be giving these grants?” Diversity and inclusion in the awarding process was important, she said, as “rarely do systems that do not benefit the most marginalized work for them.” If WA Commerce officials weren’t accustomed to “seeing these businesses as viable because they might be coming from a different lens perspective then we’re setting them up for failure.” Rivera believed WA SECTF members needed “more of a say on who’s...giving this money away.”
    • Ian Eisenberg, Co-Owner of Uncle Ike’s and a work group member, seconded the idea that TA grants should only be awarded after an applicant had secured a license, as “it makes more sense.” Berkley spoke up to say she “totally” agreed with that expectation as well.
    • Anderson said an “implication” of WA SECTF formally making that recommendation was that a “decision about who gets the licenses is likely to take longer than a year” by the time recommendations and rules for WSLCB were finalized. Under such circumstances, he explained that it would be wise for WA SECTF to recommend the “legislature to amend the law so that the full pot of technical assistance money can be spent” in FY 2023.
    • Hollingsworth offered another option. As recommendations were due for a vote by WA SECTF members by September 22nd, he suggested successful equity applicants may not have to “go through their final inspection, which would be the step right before you open...maybe it can happen sometime before that if you’re in...a pre-application period.” He thought the work group might be able to devise a timeline with “a point of viability where your business is more likely to be open than it isn’t. That’s when we can award technical assistance grants.” Hollingsworth speculated that WSLCB might be able to issue applicants some documentation saying “you’ve reached this point.” The only other path he saw was more legislation, which he compared to “a whole other can of worms.”
  • Anderson inquired about types of assistance eligible grant applicants might want or need assuming they’d already completed the WSLCB application process and been granted a retail cannabis license. He asked what the work group members thought would be “most useful” (audio - 15m).
    • Eisenberg noted the difficulty of federal tax filings for cannabis licensees and encouraged grants covering “tax advice or employment law advice.” He said lots of businesses “screw up on your taxes” and warned, “there’s no coming back from that.”
    • Anderson asked about business financing advice, and Eisenberg replied that “everybody in this space operates with credit unions.” Hollingsworth contributed that there would be “no institutional money that’s going to be loaned to any of these businesses” but financing advice could count, he reasoned, as it “could fall under an accountant.”
    • Jim Makoso, CEO of Flowe Technology and Director at Lucid Lab Group, said it was “standard business” among a “few of us operators” to take a "crash course in business 101, cannabis style" and that the practice could be offered to equity applicants or licensees. He suggested drawing attention to banking fees licensees could expect to pay and seconded tax preparation advice.
    • Anderson described creating a “roster of experts around some specific areas” with all successful social equity licensees splitting the budgeted grant money and being offered an “expense account” as well as a “menu” of those providing services that they could choose from. Makoso believed a “crash course checklist” of subjects and hurdles for applicants could be made along with resources or services already used by those in the industry. Eisenberg mentioned the SCORE business mentor program as a potential model for the cannabis industry as it combined business classes, mentorship, and networking. Anderson responded that “low cost” cannabis business advice was a possible voluntary option for the program while leaving the spending of grant money entirely at the discretion of awarded licensees. Makoso noted voluntary classes would also create the opportunity for business service providers to network with potential clients.
    • Berkley offered the view that TA grant dollars should be spent on “cannabis-specific” business needs which had tended to be “more expensive” than other business enterprises.
  • Anderson asked what professionals would be most effective to have as mentors and whether they needed to be cannabis licensees “in the business already,” noting prospective mentors “also have to meet some social equity applicant criteria” (audio - 4m).
    • Paul Brice, Happy Trees Owner, found it “tricky” but applicants had to find mentors they could trust. He valued having a member of a minority community as a mentor but “I think you want to find someone in the industry more.” He sought a balance between “going with your gut and then there’s something about making a wise decision.”
    • Makoso indicated that the statute did address “the nature of the mentors” as being from minority or women-owned businesses but highlighted Eisenberg as a successful cannabis retailer “since the start of it.” He wanted the program at WA Commerce to differentiate between business mentors and “somebody who is providing expertise about a specific professional service.”
    • Eisenberg checked to see if the roster could include non-minority or women-owned companies. Anderson answered that it was for mentors who could be paid through the department and that they would need to be minority or women-owned. Eisenberg remarked, “if you want industry experience you’re going to have [to] rely on quite a few of us that would be free mentors.”
  • Anderson asked for feedback on what a list of business experts providing services should include as compared to a roster of mentors that meet the requirements of the statute (audio - 2m).
    • Berkley asked about the mechanism used to make the money available to grant recipients. Anderson responded the money could be given “two broad ways,” either directly to the recipient, “or, it could be that WA Commerce holds the money, the license holder says” what they wanted it spent on leaving department staff to handle “the invoicing and the auditing.”
    • Eisenberg wondered if grant recipients could spend funds on other business areas. Anderson said “generally, no” as the money was specifically for TA in law. He speculated that an official from the Washington State Office of the Attorney General (WA OAG) could issue an opinion that other business spending strengthened a SEP, but he felt that would rely upon “creative interpretations” (audio - 1m).
    • Douglas Raiford, wanted to know about preparation of an application, saying he’d gone to the WSLCB cannabis licensing web page only to find that it said retail licensing was unavailable. He wanted information to help him start preparing for when agency staff opened an application window and know whether an expunged cannabis conviction on his record would have to be disclosed (audio - 4m). 
    • Makoso inquired about the potential for more money for TA grants “because they’re going to need it.” Anderson anticipated that another legislative session would pass before the department was actually issuing grants, leaving the opportunity for further changes or rolling over money unlikely to be spent before the end of FY 2022 (audio - 2m).
  • Berkley returned to the topic of paid mentors and whether non-minority or women-owned companies could offer business education and guidance. Andersdon replied that not every company providing advice had to qualify as a mentor, and that a service menu for grant recipients could include mentors as one of several business services (audio - 8m).
    • Berkley wondered whether mentors or service providers would be “vetted” by WA Commerce or WSLCB staff and “checked out pretty thoroughly” before being listed by the department. Anderson confirmed.
    • Brice called out that there was only a “handful” of minority-owned cannabis retailers in Washington, including himself, and wondered if there were private work group meetings where policy changes were being discussed or agreed to. While he had “tried to be involved,” Brice was left with the impression that few minority-owned businesses had been included in WA SECTF, and that there would be very few qualified mentors to contract. Anderson advised that if task force members or the public found that “some of these provisions don’t make sense, advocate to change them.” Brice believed that it might be a good idea to open up the roster to any active cannabis licensees wanting to provide mentorship. It was “good to get a little mix-up,” though he expected some social equity applicants would “feel they need some trust” with their mentor and value someone with a background as a minority businessperson. Brice was also amenable to a general cannabis business course, as applicants “don’t understand until they go through it or they get bought.” Anderson thought it was possible to have different mentor groups, one for the roster, and another for other business services who could potentially be paid as well.
  • Eisenberg predicted that successful social equity applicants would have an even more difficult time raising capital for their stores than the first generations of cannabis retailers in the state. “It’s going to cost hundreds of thousands of dollars to open a shop on a bare-bones budget,” he said, explaining that most people looking to invest in Washington cannabis companies already had. Without adequate collateral, small business loans were rare, Eisenberg added, saying WA Commerce could establish “a program to help guarantee these loans.” Anderson didn’t think cannabis businesses had qualified for past loans offered through WA Commerce but he would check with colleagues to see “if we can make that available” to social equity applicants (audio - 2m). 
  • Julius Debro, Co-Owner of Social and Economic Equity and Diversity (SEEDS) for African Americans in the Legal Cannabis Industry, shared ways for helping potential social equity applicants. Officials could organize an online session to talk to possible applicants about “how you can apply, what you need to do, and what the pitfalls are.” Applicants who had been granted a social equity license could also be offered another online meeting. Anderson was supportive of the idea. Work group member Jamie Hoffman, Owner of Craft Elixirs, offered to be a mentor as a woman-owned company (audio - 4m). 
    • Berkley advised those with an interest to sign up for WSLCB updates to learn when the application period would begin.
  • Micah Sherman, Raven Co-Owner and member of the WA SECTF Licensing Work Group, noted their work group was considering the creation of new license types which could be made available to social equity applicants. He asked the group to consider requesting applicants be “co-located” with existing processors as a “mechanism” for mentorship, akin to a "business-development incubator" (audio - 1m).
  • Anzhane Slaughter, a task force staffer from the Washington State Board of Health (SBOH) working as the Manager of WA SECTF, stated that TA grants could be used “connecting applicants with industry members...it even says with tribal cannabis enterprises” and that commenters had mentioned a need to “connect with people that are already established” (audio - 11m).
    • Anderson didn’t know about “expertise tribes developed in cannabis” but said he could “look into that.” He told the group that WA Commerce staff should “start thinking hard” about how to “address the whole financial issues, which are really significant.” Anderson suggested everyone involved should be looking at what assistance was warranted outside of TA grant dollars to help social equity licensees “knock it out of the park” once their businesses opened. “I don’t think we’re done developing legislative policy around this,” he commented.
    • Hollingsworth asked Eisenberg if he’d witnessed waning interest in cannabis business investment, which Eisenberg agreed with “100%,” saying “people have seen it’s not the hugely profitable business they expected. It’s a real business.” Hollingsworth questioned that perspective as “we’re not giving away burdens here. People are going to want to invest, I really believe that.” But Eisenberg was certain the pool of possible investors had shrunk.
    • Brice reported that "the word on the street...is all the minorities who get this license" would get “involved with one of these retailers who already have all the money” and buy out the owner to “sit at home and watch how we run this.” Others pushed back on this perspective, with Debro calling it “insulting” and Eisenberg saying true party of interest rules for cannabis licensees would prohibit that type of exploitation of social equity license holders. Brice said he understood that Zips Cannabis had been “rolling out with a management structure to manage other stores that just aren’t doing well.”
    • Brionne Corbray, a former dispensary owner, was confident he could retain control and manage any cannabis license he was granted, but “every day that we don't get a license is a day we’re further and further behind.” Hollingsworth acknowledged his frustration, knowing it was “not unfounded,” but the purpose of the work group was to give recommendations on grant disbursement and they had to commit to following the process. He stated that, “you ain’t going to find anybody up here who is 100% happy with the LCB,” and told those who wanted a faster resolution “we totally understand your frustration...I’m sorry this is taking so long.”
  • Anderson concluded his questions by asking for the chat log and sharing his gratitude for all the feedback he’d received. The full time employee WA Commerce leaders were preparing to hire to oversee the grant and mentorship programs would be the “go to” person for WA SECTF members going forward, but Anderson said he would “continue to stay involved” (audio - 1m). 
    • The final recommendations from WA SECTF are due December 9, 2022.

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