WA Task Force on Social Equity in Cannabis - Public Meeting
(January 25, 2021) - WSLCB Policy Briefing

WSLCB - Open Retail Allotments (Jan 2021)

An extensive briefing by WSLCB staff on past cannabis business licensing windows provoked a lively Q&A on the prospective social equity program application process.

Here are some observations from the Monday January 25th Washington State Legislative Task Force on Social Equity in Cannabis (WA Task Force on Social Equity in Cannabis) public meeting.

My top 3 takeaways:

  • Task force members wanted a better understanding of how the Washington State Liquor and Cannabis Board (WSLCB) previously handled cannabis business licensing before advising the agency on a new process to vet social equity applicants.
    • One of the task force roles is to advise WSLCB on distribution of “retail licenses that have been forfeited, revoked, or cancelled, or that have not been issued without exceeding the limit on the current licenses” allowed.
    • At the December 2020 task force meeting, questions and criticism of WSLCB prior licensing practices prompted the agency appointee to the task force, Board Member Ollie Garrett, to suggest a briefing by Licensing staff.
  • WSLCB Director of Licensing Becky Smith reviewed a history of adult use and medical cannabis policymaking, the retail license allocation system, local bans and moratoria, requirements to operate a retail shop, and the social equity licensing program.
    • Initiative 502 (audio - 6m, video, presentation). Smith began with an overview of the 1996 medical and the 2012 recreational cannabis ballot initiatives that shaped the state’s early market, noting that Initiative 502 “laid the foundation for application requirements.” She described the original implementation timeline for legal cannabis, which included agency educational seminars to train potential licensees on a process they “had not experienced before.”
      • Smith described 7,000 initial license applications from 2013, including 5,000 for producer and processor licenses and 2,000 for retail store locations, which was “more than I thought we’d receive.” 
      • She emphasized that producers and processors could be located “anywhere in the state of Washington” provided applicants “meet requirements.” With 5,000 production/processing applicants, Smith said that staff had to “step back” to reevaluate “how many we were going to process,” dropping repeat applicants and asking them to pick between three production tier sizes.
      • The 2,000 retail applicants were asked to complete a “pre-screen,” Smith told the group. This included financial vetting for true parties of interest (TPI), age, and residency requirements. She said applicants’ proposed premises had “to meet the 1000 foot distance requirement.” Smith described a required “right to real property” in the form of “a signed intent [to lease] by a landlord” if the applicant didn’t own a business location outright. This left “a lot of work on the retail applicant’s part in order to get into” the WSLCB retail lottery process, Smith acknowledged. She reported that 1,174 applications qualified for the lottery for 334 retail locations, which had been capped based on jurisdiction and population size. For most applicants, their “address really chose their jurisdiction for them,” Smith remarked, adding that 47 jurisdictions didn’t need a lottery as “we didn’t have as many applicants as we did allotments.”
    • SB 5052 (audio - 4m, video). The next licensing opportunity was created by 2015 legislation titled the Cannabis Patient Protection Act, which merged the state’s medical and recreational cannabis systems, Smith explained. The law opened a new six month application window for retailers only and expected WSLCB to “set a number of new licenses based on what was necessary to meet the medical needs” of patients, she observed, including a “three tiered system for prioritizing” the 222 allotments added. Beyond applicant information, Smith said the agency used information from the Washington State Department of Revenue, “Employment Security (Department), and some of the cities to verify priority.”
      • First priority applicants “applied for a marijuana retail license prior to July 1, 2014, operated (or were employed by) a collective garden prior to January 1, 2013, have maintained a state and local business license and have a history of paying state taxes and fees.” Smith said 387 applicants qualified under these criteria and “262 were licensed, 125 were withdrawn, and 50 of which were never assigned.” The licensed businesses exceeded the increased allotment “because there were jurisdictions that in I-502 that nobody applied for” during the initial lottery, she stated.
      • Second priority applicants “operated (or were employed by) a collective garden prior to January 1, 2013, have maintained a state and local business license, and have a history of paying state taxes and fees.” Smith explained that 76 applicants were in this category and the agency acted unilaterally to withdraw their applications. 
      • Third priority applicants “don’t meet the first or second criteria.” Smith told task force members this was “everybody else.” 1,253 applicants in this category all had their applications withdrawn by WSLCB as well. 
    • License Allocations (audio - 8m, video). Smith noted that the WSLCB implementation of legalization and initial assessment of retail allotments featured public engagement efforts in 2013. The Initiative limited allotments “by county” and the “method that we used to determine the retail stores and allocation was established in rule,” she said. Smith clarified that WSLCB staff used population size to allocate most stores to cities, leaving “the remainder at-large throughout the county.”
    • Local Bans and Moratoria (audio - 4m, video). First looking at store allocations in King County, Smith identified at-large county and city allotments, noting that licensees for one couldn’t relocate into the other. She then showed bans and moratoriums throughout the state according to the Municipal Research and Services Center (MRSC) and noted that local governments were allowed to restrict the number of retail stores further than WSLCB’s license cap. “I think it’s important for...the task force to be aware of those limitations,” Smith remarked.
      • She indicated that an opinion from the Washington State Office of the Attorney General (WA OAG) validated local government authority to “ban businesses” as well as “regulate cannabis businesses through zoning, building permits, and occupancy approval.” SB 5052 allowed municipalities greater flexibility “to modify state requirements,” Smith indicated, particularly around buffer distances for any location except for “schools, or parks, or playgrounds.” Seven counties remained “completely zoned out for retailers,” she commented.
      • Smith explained that retail title certificates were created in April 2018 via board interim policy BIP 04-2018. She said that retailers with locations in banned areas were “screened out right away” but regulations required them to “maintain their location, they had to have security, traceability, insurance, and pay the annual [license] fee.” Title certificates permitted a licensee to avoid paying for certain requirements and if “at some point that restriction or ban gets lifted they have the first right to go in and get licensed in that area,” Smith stated. She added that of 46 certificates issued, six had been reinstated between Clark County and the City of Everett, which she called “a lot.”  
        • In 2018, the Board opened rulemaking to make certificates permanent with a projected effective date that September. The project was idle until June 2020 when Policy and Rules Manager Casey Schaufler told board members the BIP was “sufficiently addressing the needs of licensees in local jurisdictions with retail cannabis sales prohibitions.” He asked for withdrawal of the CR-101 on July 8th which the Board approved, closing out the rulemaking project.
        • In September 2020, title certificate holder Angel Swanson and task force Co-Chair Paula Sardinas tried lobbying WSLCB to allow certificate holders to relocate their license to friendlier jurisdictions. 
        • See MRSC’s cannabis web page for information on local regulations.
    • Retail Operational Requirements (audio - 4m, video). Smith reviewed the requirements to maintain a retail license saying stores were “absolutely” expected to be open and operating.
      • She noted “Licensing reviews, on a monthly basis, the sales data reports that come in for cannabis retailers.” Closed retailers were expected to provide documentation to Smith’s staff “to qualify them for an exemption.” When WSLCB began tracking this in 2017, 129 retailers were found to be non-operational. That number had subsequently been lowered to 45 and were mostly due to “local prohibitions” or “permitting issues.”
      • Smith shared the open allotments in the state, distinguishing between allotments in areas with bans or retail caps, and other locations without such restrictions. The social equity program in law directed WSLCB to license equity applicants “who meet the requirements” using “forfeited, revoked, or cancelled” licenses and those that had not been issued, she said. However, Smith noted the law expressly barred an increase in total store allotments by WSLCB absent legislative approval. “Although the Board has the ability to move allotments, we have not done so as of today” as the agency was trying to respect an expectation that allotments “reflect the population.”
      • Of the 36 open allotments, Smith told the task force that only 15 weren’t restricted by local governments. Those potential equity licenses were ready to be issued “once the task force provides us with information on” applicant requirements.
    • Social Equity Program (audio - 10m, video). WSLCB representatives had worked with stakeholders and other agencies on HB 2870, the social equity law, “in response to growing awareness that the existing cannabis laws created unintended barriers for people of color.” She went through some expected qualifications for applicants, including majority ownership of the license by an equity applicant, a social equity plan for the business, “the composition of the...workforce the applicant intends to hire,” and a focus on helping neighborhoods considered “disproportionately impacted areas.”
      • Smith said the task force could help the agency by providing “guidance” for rule development and policies to “fairly implement the law and address the concerns of the public.” Additionally, she communicated that WSLCB staff welcomed broader input from the group to assist with improving equity at the agency.
      • Looking at the agency’s BIPOC engagements, Smith said the events provided a venue to gather feedback which had already resulted in reforms at WSLCB.
        • Potentially changing the criminal history requirements and review process
        • Evaluation of opening producer/processor licensing for social equity purposes
        • Review of barriers in the licensing application process
        • Outreach to areas with bans and moratoriums
        • Development of equity resources and providing staff trainings
    • Smith explained that staff had met with representatives of the Association of Washington Cities (AWC) to connect with cities that may have an interest in ending a ban on cannabis retail. She said all cities with a ban or moratorium were contacted to assess which were “interested in hearing more information” and which remained committed to prohibitive practices. Some government officials expressed interest in more information from WSLCB, Smith stated, but others “were like, ‘Not in my city, not in my town.’”
    • She added that Licensing staff were committed to better “translation services” and more consistency in responses to licensees. “We want to build a relationship and we want to build trust from our communities,” Smith said.
      • During the December 2020 meeting of the WSLCB Alcohol Advisory Council, Smith said the agency made sure “we are providing information in other languages” as a social equity improvement (audio - 5m).
  • A long question and answer session from task force appointees and the public ensued including criminal history considerations, local retail bans, calls for a new canopy survey to assess whether potential equity production and processing licensees could succeed in the state’s cannabis market, and more.
    • Co-Chair Melanie Morgan asked if municipalities with cannabis bans and moratoriums permitted sales of tobacco and alcohol. Smith confirmed all did (audio - 1m, video).
    • Raft Hollingsworth, a task force appointee representing licensed producers, wanted to know if the 15 viable allotments were the only option for retail store siting. Smith responded that they were but task force recommendations could change that, although increasing the total allotments required legislative action (audio - 2m, video).
    • Monica Martinez, another task force appointee representing licensed producers, asked how many applications “were denied for exceeding criminal history points” and if any were approved “exceeding the eight point threshold when prior convictions were cannabis related.” Smith told her that “when we first began licensing, we had the authority and the ability to waive...criminal history that had to do with marijuana related offenses” (audio - 1m, video). 
    • Martinez followed up to ask whether new licenses during the medical merger had gone to individuals already holding cannabis licenses, and Smith confirmed that some had (audio - 1m, video).
    • Martinez also inquired whether title certificate holders were the same as non-operational retail licenses to which Smith replied they were “separate” (audio - 1m, video).
    • Garrett brought up the demographics of retail title certificate holders and Smith responded that 30% were identified as “people of color” (audio - 1m, video).
    • Christopher Poulos supported changing the criminal history point system for applicants and offered to assist the agency in doing so (audio - 1m, video).
    • Pablo Gonzalez asked about the last time the agency had studied cannabis canopy, and whether it could be evaluated again in “the near future.” Smith told him she didn’t know of a schedule for further study but staff had begun considering it (audio - 2m, video). 
    • Jose Barajas later restated the need for a new cannabis canopy study (audio - 1m, video).
    • Morgan asked how many producers and/or processors had failed (audio - 2m, video) and confirmed neither license type could sell directly to the consumer (audio - <1m, video).
    • Gonzalez validated that only processors or producer/processors could sell to retailers because the State’s tiering model constrained wholesale transactions (audio - 1m, video).
    • Carmen Rivera asked if there were demographic data on licensees who had gone out of business, and Smith said there were (audio - 1m, video). Martinez followed up to comment on the difficulties existing producers faced, speculating “small farmers and minority owners are probably the ones that aren’t making it” in the market (audio - 1m, video).
    • A question submitted by “Clay” dealt with what citizens could do if their local government had a cannabis ban or moratorium in place. Smith advised they raise the issue at local, likely virtual, public meetings (audio - 1m, video). He later asked about prioritization for equity applicants compared to retail title certificate holders. Smith said certificate holders were prioritized for municipalities with bans or moratoriums (audio - 1m, video).
    • Edgar Castaneda wondered how community outreach would be conducted due to the coronavirus pandemic, and Smith referenced the agency’s virtual public meeting schedule (audio - 1m, video).
    • A question was raised about reallocating inactive producer and processor licenses to equity applicants. Smith replied that agency staff were “looking at” that but warned it was "a pretty competitive process" amidst 930 active wholesale licenses. She noted WSLCB staff needed more proficiency in supporting new businesses (audio - 1m, video).
    • Michael Gordon (audio - 1m, video).
    • An attendee wanted to know if barriers would be in place to prevent equity licensees from being exploited (audio - 1m, video).
    • Veronica Abraham asked about the 2015 allotment increase (audio - 1m, video).
    • Henry Garrett asked about equity licenses for the Black community and potential mentorship for new businesses. Lead task force staffer Christy Curwick Hoff said the subject would be addressed in a task force work group (audio - 1m, video).
    • A former license applicant named Baljit Bassey asked why some priority one applicants had been withdrawn from consideration. Smith answered that some had requested to be withdrawn. Baljit said his priority one application was withdrawn without his “even being asked” and he found the process difficult and discriminatory (audio - 5m, video).
    • Crystal Oliver, Washington SunGrowers Industry Association (WSIA) Executive Director, commented that cost wasn’t the only obstacle producers faced before asking about “changes in the structure of the marketplace” to make producers more independent. Smith responded that the agency needed and welcomed producer feedback (audio - 1m, video).
    • Hollingsworth then brought up vertical integration, and Smith remarked that a restriction on the practice was in statute and would need legislative change. Hollingsworth said that “not everyone follows those tenants...if you have enough money there's a ways around that” (audio - 1m, video).
    • Jferrich Oba, a former applicant, wanted to know if there was “legislation concerning admitted racism towards Blacks and minorities has taken place within the LCB" (audio - 3m, video).
    • Sami Saad, former Owner of 12green (audio - 3m, video).
    • Adam Powers, a Black Cannabis Commission (BCC) Board Member, asked how WSLCB would be evaluating recommendations from the task force, particularly around retail allotments (audio - 2m, video).
    • Mike Asai of the former Emerald City Collective Garden (ECCG) asked about Seattle allotments (audio - 1m, video) as well as past applicant refunds (audio - 1m, video).
    • Aaron Barfield, Black Excellence in Cannabis (BEC) Co-Founder (audio - 1m, video; audio - 1m, video).
    • Paul Brice, Happy Trees Owner, had a question on prioritization of past applicants (audio - 1m, video).
    • Andre Felton (audio - <1m, video).
    • Wrapping up, Garrett commented on WSLCB’s demographic information on producer and processor ownership (audio - 1m, video) before thanking Smith and assuring her fellow task force members that WSLCB was holding on issuing new licenses “or doing anything that could contradict with what we’re trying to do here as a task force.” She said the agency was “eager to work with the task force and to hear and get recommendations” from the group “in order to move forward” (audio - 2m, video).

Information Set