WSLCB - Board Caucus
(July 9, 2024) - Social Equity Program Update

Revisions to the social equity program scoring rubric were shared by staff and board members promised there would be more chances for public input before any changes were adopted.

Here are some observations from the Tuesday July 9th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 4 takeaways:

• Policy and Rules Manager Cassidy West delved into numerous changes made to the SB 5080 draft rules along with an updated timeline for implementation (audio - 10m, video - TVW, Presentation, Rulemaking Project).
  • SB 5080 was signed into law in May 2023 and the WSLCB Board initiated the rulemaking project in November 2023. However, the effort was one of many rulemaking projects to be delayed by Policy and Rules staff.
    • Along with changes to definitions and applicant criteria, the bill also allowed for more retail licenses and “up to 100 cannabis processor licenses immediately,” as well as “up to ten cannabis producer licenses, which must be issued in conjunction with a cannabis processor license” starting in 2025.
    • Staff provided an update on the equity program on April 24th and mentioned a survey by Licensing staff which resulted in multiple responses about the draft rubric. WSLCB leaders then convened a focus group on the implementation on May 15th in which several participants called for revisions to the applicant scoring rubric, particularly favoring those who’d owned medical dispensaries before most were closed down following a change in the law in 2015.
    • A second focus group on May 22nd, held online and in-person at Highline College, proved to be even more contentious, especially around the issue of retail title certificate holders who qualified as equity applicants.
      • Certificate holders previously held licenses which were barred from opening due to local ordinances where they attempted to operate. They had been permitted to activate their licenses under the social equity program if they qualified as equity applicants.
  • During caucus, West told board members the most recent draft of the rules had been changed based on focus group feedback, including:
    • “Updated some definitions to improve clarity,” specifically to “remove some of the ambiguities and make it easier for the applicants to understand the requirements.”
    • The “new definitions and previously undefined terms” of ‘household income’ and ‘social equity registrant’ were incorporated to “enhance clarity and comprehensiveness,” as well as overall “fairness in the process.”
    • “We’ve expanded the list of acceptable documents demonstrating eligibility criteria and qualification, for example affidavits can be used” as proof of a person’s cannabis conviction if “other documentation is not available,” a move to allow “more applicants to qualify for the program.”
    • A new registration process would utilize an online portal instead of the “initial application requirements to reduce barriers” and make the program more “accessible.”
  • West went over some specifics of the next online registration window under development, stating it would be open “for 30 calendar days” with the option for additional time added at the board’s discretion “based on market demand and license availability.”
    • She explained that registrants who met two out of four requirements in statute would have their applications scored, but “no duplicate points if more than one registrant meets the same criteria.”
    • West mentioned that the social equity contractor, “has the discretion to determine the form, manner and timeframe for submitting application materials.” This was a “flexibility” intended to let the vendor “streamline the review process,” she added.
      • On June 26th, WSLCB released a request for proposals (RFP) for the social equity contractor role, with an informational webinar for potential bidders scheduled for Monday July 15th.
    • A “remedy period” would be built into application scoring, West said, and applicants could submit additional documentation to “improve their final score,” a change to “further transparency and fairness in scoring.”
    • Ties among top scoring registrants would be decided through a “double blind lottery” to be conducted by an “independent third party” and not the social equity contractor. “Prior to the legislation, the double blind lottery was used to break a tie amongst applicants with the highest scores in the county,” she said, “but that’s no longer relevant,” since those applying under SB 5080 would be empowered to “move anywhere statewide.”
    • West indicated the approval process differed slightly, including a clearer “withdrawal letter” to further “consistency in communication.” Individuals who had their registration or application withdrawn or denied had the opportunity to appeal the decision within 20 days of notification, she added.
  • To assist registrants in securing financing, West described how they’d be permitted to modify as much as “49% of business interests,” but changes had to be “submitted to the board before applying for the social equity license.” The intent, she stated, was to help the viability of equity licenses.
  • SB 5080 required WSLCB to determine a new “county threshold” for cannabis retail to ensure “adequate access and discourage illegal purchases,” commented West. Thresholds were to be calculated every three years “beginning July 2029, and thresholds will be posted online and made available to the public,” she said. Additionally, 90 days after the application window closes in 2025, West reported that applicants—including those approved under the original 2020 law —would have one-time mobility to relocate anywhere in Washington state.
    • West’s presentation identified Whitney Economics as the firm WSLCB contracted with to determine the thresholds.
  • Retail title certificate holders would be permitted to relocate anywhere in the county to which their license had been assigned, but West shared that they would have to put in a new application to the social equity program in order to take their license to another county. She noted that for the certificate holders “scoring is not required, just qualification” by the program.
  • West mentioned the social equity plan and license fee reimbursement available to all cannabis licensees, but submitting a plan was “no longer required to qualify for the program.”
  • West then addressed remaining stages in SB 5080 implementation:
    • A new survey on the draft rules changes would be opened on Thursday July 11th and closed on the 18th.
    • A CR-102 with proposed rule changes would be presented to board members on July 31st, and a public hearing would be hosted on September 11th.
    • The CR-103 to adopt changes into rule was set to be offered on September 25th, and changes would take effect on October 26th.

• Looking at the social equity program scoring rubric, Licensing Social Equity Manager Aaron Washington laid out the rationale behind staff modifying some scoring criteria while maintaining others (audio - 7m, video - TVW, Presentation).
  • Washington reviewed how staff had arrived at some of the modifications to the scoring rubric, emphasizing the community feedback they’d received and the history of the rubric itself, which was first proposed as part of Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) recommendations before being incorporated into rule.
  • As SB 5080 had expanded the equity program, Washington stated the law also provided agency officials with an opportunity to further modify the rubric based on public responses to the program “and data collected from the applicant experience survey.” He suggested there were minimal qualifying criteria in the initial registration “before being scored under the rubric criteria.” Washington then identified what had changed, and what hadn’t, under the proposed draft rubric.
    • Category 1 was worth 40 points for any amount of time, “even one day,” for living in a disproportionately impacted area (DIA), although the majority of public comments on the topic “suggested there should not be any points for those living in a DIA less than five years.”
    • Category 2 and 2(a) regarded applicant family members with cannabis convictions had been slated to be combined with drug convictions but most public responses were against the change. Cannabis arrests remained the “focus of the program” and would be “scored the highest” under the proposed rubric.
    • Category 3 and 3(a) would be “kept separate using the same considerations” around cannabis and drug convictions used for categories 2 and 2(a).
    • Category 4 on conviction sentencing had been changed to remove home confinement as it was not used as part of sentencing in Washington State, but following public pushback that the punishment had been used for cannabis offenses in other states, consideration of home confinement would be part of application scoring, and “garner 30 points.”
    • Categories 5, 6, and 9 were proposed to be deleted.
      • Regarding categories 5 and 6, input around consideration of household income or loss of employment had been mixed. Points for category 5 had already been lowered from 40 to 15. However, with several responses indicating the difficulty proving this qualification, it was going to be removed entirely.
      • Category 9, related to existing ownership of a cannabis license, was also proposed to be removed.
    • There were significant calls to increase points awarded in category 7 related to past ownership of medical dispensaries. Staff instead advocated for removing language about operating a dispensary, but the category didn’t get additional points. However, with the overall total points in the rubric now lower at 255, the “weight” of points for dispensary ownership were characterized as greater.
    • Category 8, related to applicants who’d previously applied to the equity program but not been prioritized, would be maintained at 15 points.

• Compliance and Adjudications Manager Nicola Reid reviewed the demographics and metrics which informed officials’ decision-making (audio - 5m, video - TVW, Presentation).
  • Reid started off by showing the rubric points as percentages, with variables such as how long an applicant had resided in a DIA or sentencing for a cannabis conviction, and remarked that staff felt “the three weighted criteria” had been kept “in line with the intent” of SB 5080 and the equity program. The largest percentages of points could be awarded for periods of incarceration, convictions, or time residing in a DIA, she indicated. Reid suggested other criteria were more “equally balanced” by awarding a set amount of points with no variability.
  • Turning to applicant demographics, Reid relayed that applicants received an optional anonymous survey which sought to gather information about the “self identified race” of everyone on an application. 641 individuals had responded to this, she noted, and the largest proportion, “47% identified as Black or African American.”
  • Reid also acknowledged that the initial WA SECTF recommended rubric had been changed by WSLCB. Even though this was the second draft of rubric revisions, she cautioned that the document might change again based on the additional survey set to be released on July 11th.
  • Following the caucus, officials published a Medium article, “Additional Updates on Social Equity Rulemaking Timeline.”

• Board members weighed in with their thoughts on the revised rule language, as well as questions for next steps on the project and mobility of equity licenses.
  • Board Member Ollie Garrett voiced her gratitude for the work of staff, recognizing they’d “worked really hard” on the proposal and considered a lot of feedback. She added that responses had varied by topic, with some issues receiving more attention than others, and expressed hope there would be greater participation in the upcoming survey (audio - 1m, video - TVW).
  • Board Chair David Postman reinforced that there were still opportunities for the public to weigh in on the rulemaking project. West commented that as the survey was sent out, written comments on the draft could still be shared through July 18th via Rules@lcb.wa.gov or LicensingSocialEquity@lcb.wa.gov. She added that once the board approved a CR-102 there would be a new public comment period and hearing scheduled (audio - 2m, video - TVW).
  • Board Member Jim Vollendroff offered the view that "greater access and more concentrated [retail] density" could create harms, and that board members needed to be “thoughtful” when it came to approving more equity licenses. West noted this would be part of the license threshold as envisioned in the draft rules. Reid then shared that the agency would also be bound by any local ordinances against cannabis businesses which had been put in place before equity applicants had applied (audio - 1m, video - TVW).
    • A contentious addition to SB 5080 before passage in the Washington State Senate was a process to keep WSLCB from issuance of licenses in places with “pre-existing” ordinances against cannabis businesses. The second round of social equity licensing would be the first where cities and counties could stop licensing altogether.

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