WA SECTF - Work Group - Licensing - Public Meeting
(September 22, 2021) - Legislative Proposals

The work group reached consensus on recommendations to the task force covering additional social equity retail licenses, license mobility, and a market share metric for equity.

Here are some observations from the Wednesday September 22nd Washington State Legislative Task Force on Social Equity in Cannabis Licensing Work Group (WA SECTF - Work Group - Licensing) public meeting.

My top 3 takeaways:

• Though there was consensus on increasing the number of licensed retail locations for social equity applicants, agreement on the exact number of licenses and the time frame for the Washington State Liquor and Cannabis Board (WSLCB) to accept and process applications was harder to reach.
  • Work group co-lead Monica Martinez, a task force member appointed to represent licensed producers, identified a potential goal of “50% of licensing” in the cannabis sector being majority-held by those who qualified as social equity applicants. “According to National Urban League’s policy position around social equity within the cannabis [sector], at least 50% of licensing provisions should be earmarked for social equity applicants,” she said, noting that benchmark had been used by New York lawmakers in the Social and Economic Equity program in their cannabis legalization law. Martinez believed there were things “that needed to be answered” and “nothing is set in stone.” She introduced work group member Micah Sherman, a task force member appointed to represent licensed processors, to offer “more background to help show some of the pros or cons” of the concept (audio - 2m). 
  • In order to get “recommendations out that can be acted upon” by the full task force, Sherman advised that “50% of all licenses should be held by social equity applicants and that we’ve already established that our recommendation is that all new licenses should be issued to social equity applicants through 2029.” He indicated a “50% goal would basically be a way of measuring the success of all of these efforts,” a “running metric of” the effectiveness of the social equity program. Sherman offered a chart on achieving the benchmark, saying “one possible way that this could play out is a bunch of retail licenses get issued, and then, some new license types get issued, so say...for example delivery or social consumption” would also “work towards this overall 50% goal being met” (audio - 5m).
    • As there were 1,787 cannabis licenses active in the state’s cannabis market, mostly producers and processors, Sherman said the task force would “potentially be shooting for right around 1,800” licenses held by equity applicants. Under this metric, WSLCB staff would “compare all the license types to determine this 50% number,” he remarked.
    • Sherman expressed reservations about “putting all of those licenses into one big pool” while supporting the goal of 50% of the market qualifying as equity applicants. He wondered about recommending “two distinct pools of retail and wholesale licenses” as the existing market had “a restriction from somebody owning a retail license” versus a producer, processor, or producer/processor license. Sheman noted that if the restrictions on vertical integration continued there would be different “pools of wholesale and retail” licenses, and that reaching 50% in these pools meant “two distinct projects that might be moving forward and slightly different schedules.”
  • Work group member Angel Swanson, a retail title certificate holder, suggested that retail, delivery, and social consumption license types might be grouped together and that producers and processor licenses would be a wholesale group, with plans to achieve 50% equity applicants among both categories. Sherman indicated that among “twelve or thirteen hundred producer licenses going right now...about 500 of those 1,200 licenses don’t get utilized because there’s not demand for the material produced from them.” He found the “reality” for cannabis producers “complicated” and worth considering (audio - 9m).
    • Swanson argued the number of licenses the market could support would “balance itself out naturally” and was skeptical about “these complicated calculations...to make 50[%]” when the goal was parity between “White-owned” and “minority-owned” businesses. Sherman wasn’t certain the differing license types had the “same value,” and that each license “pool” needed “distinct considerations.” Believing that “new things on the wholesale side are probably where we’re gonna see businesses succeed, whether it’s equity or not,” Sherman commented that reaching 50% in each license type “hasn’t been the feedback we’ve gotten from a lot of people.” Asked by Sherman, Swanson maintained that she viewed equality in each license type as “the most fair.” Sherman asked if this would even apply to licensed canopy tiers. Swanson said “the main category is fine,” since retailers were at “different levels” based on their locations, speculating that the end result could be “a freer market.”
    • WA SECTF Manager Anzhane Slaughter clarified that “currently there aren’t any social equity licenses, cause it hasn’t been defined yet; they haven’t been issued.” Bringing the legal cannabis market to “50% ownership of social equity” or equal to “whatever number of licenses are currently out there,” was the first step of a social equity process, she reasoned. After reaching that goal, “then, for every sector, any new batch of licenses, that 50% of that batch is reserved for social equity, and 50% is reserved for general applicants.” Swanson gave her understanding that WA SECTF had recommended a goal of reaching the 50% threshold for the existing license types by 2029 at the group’s September 14th meeting.
  • Jim Buchanan, Washington State African American Cannabis Association (WSAACA) President, felt that the state’s African American community “at large” agreed with the goal of half of the cannabis licenses being owned by social equity applicants. However, he’d “gravitated to what Anzhane had just said” about having current and future license types equitably allocated, wanting the number of retail locations lifted by “300 retail licenses, allowing a couple hundred processing licenses, and a couple hundred producer licenses, and then all the other licenses” would go to equity applicants “until we get up to 50%.” After that point, he supported equal splitting of subsequent licenses issued between equity and general applicants (audio - 8m).
    • Sherman sought clarity from Buchanan as to whether it was acceptable to have equity applicants hold half of the total number of cannabis licenses issued by WSLCB “out of any license type that exists now, or might exist in the future.” Buchanan proposed a “bottom” of no less than 300 retail licenses for equity applicants, as well as “200 producer licenses and 200 processing licenses; those are the existing licenses now.” He found it “unrealistic to say that there’s 1,200 processor/producers and that we’re gonna have 1,200 more, because” that would set up equity businesses for failure, speculating that the Washington cannabis market had been “saturated by about 70%.” Having said that, Buchanan was insistent that equity applicants hold some of those license types, but didn’t think it had to be 50% for each type, saying “equality is the 1,800” licenses overall. He felt that having hundreds of licenses of each type coupled with new license types the legislature might authorize, was “what we as a community, as a whole, have agreed to.” 
    • Buchanan wanted to find “resolution” on additional licenses so that the task force could move forward with recommendations to the legislature, believing there would be broad public support for such recommendations. But “equity and equality” in the cannabis sector had to be at the forefront of the group’s work, he remarked, saying it could be done “with the leadership of everybody on here and the task force.”
    • Buchanan participated in previous work group and task force meetings.
  • Andre Felton, Herbal Help Center Owner, suggested that social equity retail licensees be exempted from paying the cannabis excise tax. Work group members indicated the consumer excise tax was collected by retailers rather than a tax on the business (audio - 4m). 
  • Slaughter asked if there was consensus on how many additional retail licenses to advise that WA SECTF recommend, and if “300 sounds like a good starting point...reserved specifically for social equity.” Several work group members agreed (audio - 1m).
  • Pablo Gonzalez, a WA SECTF appointee representing licensed retailers, argued that 300 new retail licenses would “shock the market” and WSLCB staff who “currently take seven or eight months just to process a current license.” He reasoned that the agency would need to be given additional funding to process equity applicants in a timely manner, or it could “take years” (audio - 1m). Speaking as a current retailer, he elaborated to say any equity licensee joining the market would face significant challenges (audio - 7m).
    • Instead, Gonzalez suggested the task force should “support the current minority owned businesses” like his by giving them “more flexibility” around vertical integration. He suggested that 50 additional retail locations “would probably be a better amount, so we can really focus and help them grow” and then ask lawmakers to increase allotted equity licenses as the market acclimated to the new businesses.
    • Claiming a delivery business would involve “way less start-up costs,” Gonzalez pushed for delivery and social consumption licensing to be “primarily” issued to social equity applicants. This would be preferable to “battles” between equity retailers and those already in the market, and contesting with jurisdictions maintaining bans or moratoriums on cannabis operations.
  • Work group member Mike Asai didn’t feel that 300 licenses could be allocated by 2023, but “we should have 300 licenses between now and 2029.” Noting that there were 39 retail licenses already available when the social equity applicant process started, he pointed to WSLCB Licensing staff who told the task force an additional 51 retail locations could be allotted due to population increases at the July 27th task force meeting. Codifying this increase in law would reserve “90 licenses for the social equity program” for issuance in 2022 and 210 more retail licenses could be allocated for the program by 2029 to reach 300 equity retailers (audio - 5m).
  • Estevan Garrido, Former Green2Go Co-Owner, called for vertical integration of cannabis licenses (audio - 2m).
  • Swanson stated the 300 retail locations should be on top of the already available 39 licenses, rather than subtracted from them. She felt that if issuance of the licenses was evenly divided between the years leading up to 2029 the change wouldn’t be “flooding the market too badly.” Moreover, as some of the 39 retail licenses were allocated to jurisdictions with bans or moratoriums, Swanson believed they weren’t “as usable as we would like them to be” (audio - 1m). 
  • Work group member Ollie Garrett, appointed to represent the WSLCB, clarified that the 51 new licenses recommended by agency staff was “based on NOT considering areas that have bans and moratoriums” but instead “if we were to do it the way that it was done in the beginning.” By the time all such jurisdictions were included, she was certain “it would be more than 51.” Sherman asked whether Garrett had seen the more complete estimate, and she replied it was “somewhere” as staff did “have the number” (audio - 4m).
  • Discussing the final wording of the recommendation, Swanson was curious when the 50% goal for equity licenses was intended to be achieved, “are we talking about now?” Slaughter called attention to the fact that state law mandated that additional retail licenses be reserved for social equity applicants through 2029, interpreting the goal of 50% of cannabis licensing being controlled by social equity qualifying owners as applying “forever.” Swanson remained worried that a person “who doesn’t want to see it our way that [our interpretation] isn’t what this says.” Martinez asked if there was agreement from the work group that “we would all like to see half of the industry be owned by social equity individuals” (audio - 9m) 
    • Garrett expected questions from the wider task force like “what do you mean, how did you get to this number” and expected any proposal to be “challenged.” Referencing the chart of prospective license types to reach market equity, she believed that agreement from the work group on “what that should look like” would bolster their recommendation in the eyes of task force members.
    • Sherman pointed to phrasing offered by Buchanan that “50% of total licenses have to be social equity before any licenses are issued to anyone else.” Members found the wording worked to cover any new license type “as they come out” and convey the “overall goal” of cannabis sector equity. Slaughter advised using the words “general applicant” instead of “anyone else” and heard agreement from the work group members that they liked the recommendation language. 
  • Garrett considered the wording around application windows for social equity licenses, asking if “at least two, but no more than three [licensing] windows between 2022 and 2029” would work better. She argued that flexible licensing windows would help WSLCB staff see “if we can reach that number, or if we can’t.” Martinez called for more time to consider how many additional licenses would be issued, and on what schedule, at a future work group meeting (audio - 3m).
  • Martinez proposed that the group’s final recommendation around social equity retail allotment be at least 300 “additional social equity retail licenses should be created and issued over the course of at least two but no more than three licensing windows between 2022 and 2029” (audio - 6m).
    • Slaughter asked if this would limit the task force from making subsequent changes on additional licenses if “we don’t get new license type A, new license type B, and that we only have retail, and producer/processor?” 
    • Garrett advised “at minimum, 300” social equity retail licenses and Sherman called for recommending licenses be “issued with multiple licensing windows instead of the specific numbers.” Members voiced agreement with the revisions and the changed language of the recommendation.

• A recommendation to allow mobility of social equity retail licenses to jurisdictions other than the original allotment was agreed to by the work group, inclusive of some discussion of how to incentivize participation by localities with bans or moratoria.
  • Sherman said that a recommendation on “a way for these licenses to be flexibly located” was a top priority for WA SECTF members and the public. Martinez explained that this would “amend” what the task force had recommended on September 14th around “where retail licenses can be located,” allowing them to be “in any municipality that allows for the siting of additional retail licenses.” Sherman noted that legislative appointees to the task force had taken issue with jurisdictions being “compelled to open up for licensees” and the recommendation as drafted only pertained to equity applicants moving into localities where officials wanted additional retail outlets. Slaughter was curious how this change could impact the WSLCB licensing process. Sherman claimed that the process could be “quite a bit easier” if a law was passed stating that social equity licenses were “not subject to [jurisdictional] restriction” (audio - 3m).
  • Swanson delved into the question of who would qualify to move their license to a different jurisdiction, a subject she had engaged the agency board on over the preceding years. She said that she knew there were five retail title certificate holders who “fit the social equity definition” and asked that their title certificates “fall under this particular piece, that they would be allowed to move those licenses and they’re not left hanging in limbo” (audio - 10m).
    • Garrett asked Swanson if she meant that those with licenses could move localities, or just retail title certificate holders such as herself. Swanson said she meant certificate holders, as they would be equity businesses “that we don’t have to come up with.” Garrett made clear that the existing application process at WSLCB included an applicant indicating “where they want to be located” as a means to help avoid oversaturation of cannabis retail in some places “and not have any going to other areas.” Trying to avoid “unintentional consequences,” she asked how agency officials should respond if equity applicants overwhelmingly picked the same jurisdiction, as she didn’t want WSLCB staff to “set people up for failure.” Asai recognized this as a legitimate concern, recommending that “it should be 12 months for an applicant to be able to find a location” and agreeing that retail title certificate holders like Swanson should also be allowed mobility.
    • Sherman added that the Disproportionately Impacted Communities Work Group (WA SECTF - Work Group - Disproportionately Impacted Communities) reported that this step might only take six months, but Asai compared it to his efforts to get a location for his former dispensary, Emerald City Collective Gardens (ECCG), noting that “the same issues are still there.” Allowing equity licensees a year to assess where they wanted to situate their business could be really helpful, he advised. Sherman conveyed that Disproportionately Impacted Communities work group members were “cognizant of, and making recommendations on” the topic and offered the opinion that the task force recommendations should be as “expansive as possible so it’s as flexible as possible.” He noted that local governments were sure to set their own restrictions, so “restrictions on top of that” weren’t sensible. Garrett saw sense in both Asai and Sherman’s points.
    • Slaughter asked to check with work group members and see if there was consensus on the recommendation for license mobility, but Martinez and Sherman asked to hear public comment on the proposal before a non-binding vote of the group.
  • Buchanan chimed in to say he also backed license mobility, and brought up buffer distances for cannabis businesses which had already been reduced in the City of Seattle, yet still “there’s no place to put them.” He advised reducing the types of locations requiring buffer distance in law, such as “the parks, the playgrounds, the museums,” claiming other legal cannabis jurisdictions didn’t have such buffer restrictions. Without changes in this area, Buchanan believed “we’re just passing something for, for name's sake,” making clear that the legislature was empowered to revise or remove buffer restrictions.
  • Asai shared his view that license mobility within a county wouldn’t be sufficient.
  • The work group prepared their recommendation to the task force, which Martinez summarized as: “all social equity retail licenses and current title certificate holders who fit the social equity definition can be located in any municipality that allows for the siting of additional retail licenses. This would not preempt local restrictions, but simply give flexibility to the licensee to locate said license where they’re able.” After discussing and deciding to include the second sentence as clarification for task force members, the group members unanimously voiced support (audio - 4m).

• The last recommendation to the task force described market share to achieve equity in license allotment, with comments offered on the maximum number of licenses an equity applicant could apply for, judging business viability, and how to schedule application windows.
  • Swanson asked if there should be a limit “on the number of licenses that an applicant can apply for.” Sherman suggested that there was a “prioritization and allocation work group” that was better suited to make recommendations on that point (audio - 2m). 
  • Abinnet Ainalem, a member of the public, commented that a “more dynamic” evaluation of social equity applications could weight business “viability,” and suggested a “rolling” process of accepting applications. She added that a “dashboard” with details around “the want in the market” could help prospective applicants like her make better planning decisions (audio - 5m). 
    • Ainalem didn’t want the task force or WSLCB staff to add “limits on people before they’ve even tried anything,” asking why 300 was chosen as the increase in equity retail licenses rather than evaluating business models and market demand. Sherman responded that he agreed with Ainalem’s input on evaluating business viability, feeling that “we’re putting the cart before the horse in putting a number out there, but it’s basically what’s been requested of us by the task force members and the people that are going to put this legislation into place.” He suggested putting “at least 300 licenses, instead of a hard number.”
    • Asai said he viewed 300 retail locations as an amount that “gets us closer to 50% for social equity licenses,” was a “good” number to present to legislators, and that the number of revoked or forfeited licenses would still be directed to social equity as well “so, obviously we know that numbers going to continue to go up.”
  • Asai pointed to a question raised in the event chatbox about social equity applicants selling their licenses, but Martinez asked the group to return to the matter “at a later date” (audio - 2m).
    • Cannabis Observer Founder Gregory Foster asked, “Cannabis licenses are often sold and assumed by new owners.  Is there current law restricting the sale of social equity (SE) applicant-held licenses, or has there been discussion about restricting sale of ‘SE licenses’?  I've been wondering about this for some time, and the concept of measuring SE-held licenses towards a goal brings those complications to the fore."

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