City of Seattle - City Council - Committee - Finance and Housing - Committee Meeting
(April 6, 2022) - WSLCB Panel

WSLCB - Cannabis Social Equity Program - Graph of Retail Licenses Owned by People of Color

Committee members learned the status of the WSLCB equity retail program and asked a few questions as they sought to develop a dedicated social equity program for Seattle.

Here are some observations from the Wednesday April 6th Seattle City Council Finance and Housing Committee (City of Seattle - City Council - Committee - Finance and Housing) Committee Meeting.

My top 4 takeaways:

  • A Washington State Liquor and Cannabis Board (WSLCB) board member and the head of the agency's licensing division went over the history, current efforts, and future of the state equity program with committee members.
    • Board Member Ollie Garrett said that when she joined the board in August 2016, agency leaders were new at regulating cannabis and “didn't know what they didn't know.” One of the things that was missing was “an equity program” (audio - 2m, video).
    • Smith started off by making clear the retail social equity program to be administered by WSLCB leaders was “not accepting applications”; people could “buy a business” with a license but not apply for one at the moment. The purpose of the social equity program was to “increase the number of cannabis retail licenses held by a social equity applicant” which she remarked was intended to reduce “the accumulated harms suffered by individuals, families, and local areas that were subject to severe impacts in the war on drugs.” Smith added that she or her staff had attended “all the task force meetings” (audio - 14m, video, presentation).
      • The law mandating the equity program authorized WSLCB to “reissue retail licenses that have been forfeited, revoked, cancelled or not previously issued,” Smith reported. She observed the agency lacked the power “to increase that number of retail licenses for the program” and that while the program had 40 licenses available, only two were allotted for the city of Seattle. Smith told the committee that rules were being drafted to allow for more mobility for equity licenses within a county, making it possible eight more retail stores could be issued “in King County” and located in Seattle if city zoning permitted.
        • It’s the understanding of Cannabis Observer that the former license of Dank’s Wonder Emporium in Lacey had been included among cancelled licenses due to an alleged traceability violation, but in early June an appeals court ruled that the license had been cancelled in error. The ruling could be further litigated and it’s unclear if the reversed cancellation may impact the total number of available retail equity licenses.
      • Smith noted that WA SECTF recommendations on program implementation had been given to agency officials in January and that staff hosted a Listen and Learn Forum dedicated to draft social equity rules on March 23rd. She acknowledged that agency leaders had accepted “all of the task force recommendations with the exception of the scoring rubric” to which they’d proposed “a race neutral alternative.”
      • Smith pointed to other changes underway at the agency like a social equity webpage and later noted that their website featured “licensing resources” like suggested business structures, “local requirements,” and restrictions.
      • She turned to revisions in rules on the “criminal history” of applicants as a strategy to “reduce unintentional barriers to enter into the legal cannabis market.” Smith admitted agency staff may have done an inadequate job of laying out “all of the background around applying for the criminal history, so folks might have unintentionally [taken] themselves out of applying for a license in the very beginning.” She described rule changes as allowing for checks “without having to do, like, a gotcha" for older or juvenile offenses a person might have left off an application. Smith also believed that the rulemaking project made the internal review process applied to license applications “transparent.” Licensing division staff had “reviewed 16,500 criminal history records” over the prior eight years, and "only 43" were denied licensure based on their criminal history, she added. 
      • Offering an updated graph of “self-identified race of majority or equal interest” retail license holders from August 2021, Smith mentioned that “only two stores in the city of Seattle” were majority owned “by people of color.” She then showed a slide on the self-identified race of producers and processors.
      • Once social equity program rules were in place, Smith anticipated an application process similar to others carried out by her division. “We’ll open a window in the fall of this year, we’re hoping for September of 2022,” she reported, which would stay open “for 30 days.” Equity applicants would then be passed to “a third party contractor” which WSLCB representatives were crafting a request for proposals (RFP) to identify. Smith stated the contractor would “review and score” applicants for prioritization moving forward. With “such a small amount” of licenses available through the program, she expected “quite a few folks” would apply and “we’ll have a double-blind lottery” to figure out “who’s processed, and in what order.” Smith then relayed that applicants passing this stage would receive “a preliminary letter of approval” to help them secure a location and local approval. Applicants at this stage could also work with staff for the Washington State Department of Commerce (WA Commerce) to “look into” possible funding support, such as the cannabis equity technical assistance grant program.
        • The social equity rulemaking project at WSLCB was withdrawn on May 11th, suddenly needing “additional research and analysis to make sure that we align with the intentions” of the program. Agency staff had mentioned that a revised CR-102 would be offered for board approval on June 22nd, and affirmed the window for equity applicants was expected to be delayed.
      • Smith called attention to another recommendation from the task force which agency officials were moving forward on, hiring an “ombudsman" for social equity applicants “to help them through the licensing process.”
      • After social equity rulemaking concluded in the summer, Smith asserted that licensing staff would conduct some educational outreach before the application window began.
  • Committee members posed three questions to the panel about geographic “flexibility,” more taxation, and qualifying criteria for equity applicants.
    • City Councilmember and Vice Chair Lisa Herbold sought confirmation about “the new flexibility, as it relates to the geographic distribution of equity licenses,” specifically whether the two retail licenses allotted to Seattle could end up being moved elsewhere in King County due in part to zoning as well as the “high cost of real estate" in the city (audio - 2m, video). 
      • Smith said this possibility was “absolutely correct," adding that equity applicants didn’t have “a time limit” to find a location once they’d secured the preliminary letter of approval. “They could take a year” or more to find a location.
    • Councilmember Sara Nelson remarked that “the proponent of this proposal, UFCW 21, has begun talking” with city council members about plans for a city equity program. This plan included a tax on cannabis items projected to “generate five to six million dollars a year,” which she estimated would be a tax increase of between $90,000 and $110,000 per store in Seattle. Nelson said, “I’m told by” members of the Craft Cannabis Coalition (CCC) that business owners face taxes of “about 47 to 49% of revenue,” mentioning costs like an FAS licensing fee of $6,000, a 37% excise tax at the state level, and a 10.25% sales and use tax. She asked Garrett about the "barriers and costs" to starting a cannabis business, noting her role as “President of Tabor 100” which focused on African American business development around Seattle: “so I would just like to know what your opinion is” of the UFCW 21 plan for “an additional tax” (audio - 4m, video).
      • City Councilmember and Committee Chair Teresa Mosqueda spoke up to signify the proposal was something being considered by council members and staff of the Seattle mayor’s office. She said there was “a broad coalition” of groups weighing in with the city, including the National Association for the Advancement of Colored People (NAACP), and that the UFCW 21 plan hadn’t been endorsed by either the mayor or city council. Mosqueda stated there wasn’t so much as a “draft law” agreed to thus far.
      • Garrett’s answer was “not on behalf of WSLCB" but as leader of Tabor 100: “anything that increase[s] tax or cost to a small businesses”---which included “100%” of cannabis retailers—could pose “a harm” to a business.
      • Check out the UFCW 21 cannabis equity page.
    • Since race wasn’t a factor the WSLCB application process would likely consider, Mosqueda asked whether “geographic location” was being considered as a way of “defining folks who’ve been disproportionately harmed by the war on drugs,” particularly for Seattle’s “central district” which was targeted in the drug war (audio - 4m, video).
      • Garrett noted some applicants could qualify by having resided in a disproportionately impacted area (DIA) around the state, and the board had also heard about central district residents who were dislocated due to gentrification. She indicated their process had been diligent in “taking those things into consideration.”
      • Smith conveyed that the scoring rubric would consider nine criteria, including having lived in a DIA, with points awarded to the applicant based the length of time they resided there. Other applicant factors being evaluated were having a drug conviction on their record or that of a family member, along with time incarcerated for a drug offense and household income level, she added. Another factor being considered was if the applicant had formally run a medical cannabis “garden between 1998 and 2016, or do you have any previous cannabis business experience that would” make the applicant’s business more “viable.” Lastly, Smith identified applicants having held “or currently hold a state cannabis license, or are you a title certificate holder” would have their prioritization impacted, although the agency’s proposed scoring rubric adds points for applicants who don’t hold a cannabis license. She mentioned that equity applicants would also be asked some things “they won’t receive points for” while also having to create a social equity plan “to enhance a community,” something which was "required by law" for equity applicants only.
  • Committee Chair Teresa Mosqueda concluded the discussion by promising their discussions with staff of the mayor’s office and city departments as well as stakeholders would continue (audio - 1m, video).
    • She expected to “compare notes” with WSLCB representatives to consider their equity applicant criteria in relation to any standards used in a city council proposal on the topic. Mosqueda believed this collaboration would be part of developing an “equity lens, not just in Seattle, but across the state.”
    • Mosqueda assured those listening there would be updates about the committee’s cannabis equity work, including “a possible draft” for a city equity program.
      • At time of publication, none of the Finance and Housing Committee meetings held since April have featured cannabis equity agenda items, according to the council calendar.

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