WSLCB - Board Meeting
(July 7, 2021) - Rulemaking

The board doubled tier 1 canopy, approved proposed changes on criminal history background checks, and switched retail title certificates from an interim policy to a policy statement.

Here are some observations from the Wednesday July 7th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

• The Tier 1 Expansion rulemaking project received its final presentation before the board voted to adopt the changes permanently (audio - 5m, Rulemaking Project).
  • Policy and Rules Manager Kathy Hoffman reviewed the effort, which began in December 2019, saying she’d ask board members to approve a CR-103 to “expand Tier 1 canopy from up to 2,000 square feet (sq. ft) to up to 4,000” sq. ft of permitted “cannabis production space.” The change would also adjust the minimum size of tier 2 facilities to 4,000 sq. ft, she indicated. Hoffman then laid out the background of the project:
    • She established the rulemaking project was started in 2019 “following requests from medical cannabis patients and segments of the industry” wishing to increase the variety of medically compliant cannabis products. Hoffman talked about tier 1 licensees, the “smallest in both number and size” of licensed producers, having raised concerns over the “viability” of their businesses.
    • Acknowledging the project was “delayed somewhat by the state’s response to the COVID-19 pandemic,” Hoffman said agency officials were able to host two listen and learn forums on the topic in June 2020. However, she noted most who attended were “tier 2 and 3 production licensees and representatives, very few tier 1 licensees were in attendance.” As staff “wanted to hear” from this industry segment, she said a survey of those license holders was conducted “in two waves” leading to a report on the survey from staff that was published April 2nd. Hoffman reported that the “most prevalent theme emerging” had been “to allow some measure of tier 1 expansion.”
    • Hoffman highlighted that “tier 1 production canopy represents a little under 2% of total licensed canopy” between the 125 tier 1 licenses “that we estimate are being used.” In the event that “every active tier 1 licensed producer added an additional 2,000 sq. ft to their canopy,” she said the entire tier’s capacity “would represent just a little over 3% of the total active licensed plant canopy...and we don’t anticipate” all tier 1 licensees would expand to their largest permitted capacity.
    • A public hearing on the proposed changes was held on June 9th, Hoffman added, and commenters’ remarks were addressed in the “concise explanatory statement” on the project. She commented that the testimony was “essentially in support of the proposal.” Six written comments were submitted to agency staff, but none resulted in changes to the proposed revisions, added Hoffman. With board approval “the rules would become effective 31 days after today,” on August 7th, she told the group. 
  • Having no questions, Board Chair David Postman commented that the rule changes may not be “the cure all for everything we hear about” but “it’s a step in the right direction.” Board members then voted to adopt the canopy expansion for tier 1 licenses (audio - 1m).

• Policy and Rules Coordinator Jeff Kildahl presented the board a CR-102 with proposed revisions to criminal history background checks conducted during license application and renewal by agency staff (audio - 5m, Rulemaking Project).
  • Kildahl presented the CR-102 to the board, remarking that it changed WAC 314-55-040 on “criminal history background checks.” He asked for approval to file the proposed revisions around “the standards and thresholds for criminal history checks” for cannabis license applicants and licensees. The proposal “moves towards creation of socially equitable conditions for individuals who have been disproportionately impacted by cannabis criminalization,” Kildahl commented, “by revising and more fully describing the background check threshold review process.” The CR-102 also “redesigns the existing criminal history point system” which he said “may have created barriers to entry in the legal cannabis market.”
  • On February 17th, the board approved the CR-101, Kildahl indicated, and a “formal public comment period for the CR-102 ended on March 31st, 2021” without any public feedback submitted. “However, four written comments unrelated to the draft conceptual rules were received after the end of the comment period,” he said, and pertained to “the future availability of cannabis licenses.” Agency staff hosted a listen and learn session on June 1st at which time “attendees shared a small amount of feedback on the draft conceptual rules,” explained Kildahl. Input he cited included:
    • The effect of background check changes “on true parties of interest (TPI) contained in WAC 314-55-035,” 
    • “Possible changes to draft conceptual rule language to expand beyond Washington State Patrol (WSP) and Federal Bureau of Investigation (FBI) background checks only,” 
    • Explicitly stating that “delegated LCB staff will review background check information,”
    • Reorganizing the threshold review section, and “differences between the threshold review and the existing criminal history review,”
    • Concerns over “consideration of active state supervision and active federal supervision status in the threshold review” or applicants still “paying monetary sanctions to Washington Courts,”
    • “Increasing or eliminating the 90-day hold period for applicants with pending criminal convictions, and the basis” for that period.
    • “Appeal rights of a threshold review,”
    • Questioning “the need for fingerprinting each time an applicant submits information for a background check.”
  • Kildahl informed the board that with their approval a “public hearing will be held on August 18th” and a CR-103 to finalize the changes would be presented to board members “on September 1st, 2021, assuming that no substantive changes are made.” Under this timeline, the rule change would become effective “on October 2nd.” The board voted to approve the CR-102 without further discussion.

• The board interim policy (BIP) on Retail Title Certificates was rescinded and subsequently replaced with a policy statement on the topic from agency staff (audio - 3m).
  • Hoffman, who discussed the change a day earlier at the July 6th board caucus, established that the interim policy was created as “local jurisdictions have passed moratoria and placed other prohibitions on the retail sale of cannabis.” Areas under such restrictions “prevented retail licensees from opening,” she said,  which encouraged the board to adopt BIP 04-2018 in April 2018 “to allow retail cannabis licensees to apply for a title certificate.”
  • The certificate holder was excused from having to meet certain requirements, such as having “a qualifying location and fulfilling security requirements,” Hoffman noted. She then relayed that BIP 04-2018 required title certificate holders to “reinstate their license within six months of their jurisdiction allowing retail cannabis licensees to open stores.” The interim policy had been intended to be rescinded once permanent rulemaking was adopted and also required a re-evaluation of the need for title certificates “after four years...or on or before April of 2022,” Hoffman stated. She added that staff had determined “that converting it to a policy statement is appropriate at this time.”
    • In June 2020, Hoffman explained her decision to request the board withdraw the inactive CR-101 on Retail Title Certificate rules. After discussion on the reasons for the withdrawal the board agreed to close the project.
  • Hoffman said “the majority of the new policy statement, PS 21-03, renews the current board interim policy. It primarily removes the title certificate maximum validity date of four years while streamlining and clarifying existing language.” This meant BIP 04-2018 was “no longer necessary,” she concluded, and asked the board to withdraw the policy. Hoffman committed to file the new policy statement with the Washington State Office of the Code Reviser (WA OCR), send public notification, and contact certificate holders directly about the change.
  • Board Member Ollie Garrett brought up the timeline for license reinstatement, asking whether title certificate holders “have to open within six months, or apply to convert the certificate back into a license within six months?” Hoffman told her the licenses had to be reinstated “within six months.” The board then voted to rescind the BIP (audio - 1m).

Information Set