Righting the cannabis balance
The Sacramento City Council approves new equity program for minority-owned businesses—but is it enough?
Sacramento minority leaders, including the head of the local NAACP chapter, praised the Sacramento City Council for recently approving a social equity program designed to help disadvantaged communities succeed in the commercial cannabis market.
On August 8, the City Council unanimously voted to approve the Cannabis Opportunity Reinvestment and Equity program, but as it stands, the program falls short of Councilman Jay Schenirer’s hope of “becoming a state and national model.”
As cannabis is legalized across the country, state and local governments are starting or considering social equity programs to make up for a disparity in enforcement that occurred when it was illegal. Even though whites consume cannabis at rates at least as high as minorities, according to law enforcement data, the latter were subject to arrests at rates far higher than whites.
A Sacramento Police Department report earlier this year found that African-Americans made up fully one-half of all cannabis-related arrests from 2004 to 2016, when they only accounted for 14 percent of the population.
In response, the city’s social equity program intends to help people with past convictions and residents of communities with a disproportionate percentage of arrests get a leg up in the city’s commercial cannabis market. The program will waive permit fees for minority-run cannabis businesses and give “priority processing” for development plans needing city approval. It will also create a program to provide education, technical assistance and other help for minorities trying to make it in the field.
Social equity programs in Oakland and Los Angeles, just to name a couple, offer those benefits and more. In Oakland, for instance, the city has made the program part of the overall commercial cannabis permitting process, and requires that half of all licenses go to equity applicants.
Malaki Seku-Amen, president and chief executive officer of the California Urban Project, an economic development organization, spearheaded the drive for social equity in Sacramento, but did not comment on the disparities in these programs when he addressed the Sacramento City Council before its August 7 approval of the program. He also declined to answer SN&R’s questions about those disparities.
Seku-Amen has lobbied city officials to approve such a program for nearly a year. Last year, he organized a summit to discuss social equity.
Before voting with the rest of the council in approval of a program this year, Mayor Darrell Steinberg praised Seku-Amen for his tough but realistic negotiations. Steinberg added that the city lacked funding to help with economic development programs such as social equity.
The city has set a goal of having social equity participants controlling 50 percent of the city’s cannabis businesses, compared to Oakland where that is a requirement. Sacramento’s goal will be tough to reach for a number of reasons, all of them tied to money.
As Steinberg alluded to, the Sacramento program offers no direct financial support, other than fee waivers. In Los Angeles, the social equity program brings in private investors to fund start-up costs for equity participants. Investors have an incentive to back the participants because of the built-in advantages they receive over other cannabis businesses.
Similarly, Oakland’s social equity program includes a provision for “incubators"—any cannabis business can get preferential treatment in licensing by providing three years of free rent to an equity participant.
Such incentives could help minorities break into an already well-established Sacramento cannabis market. Take dispensaries. The city has set a cap of 30 for dispensaries and it was reached with existing companies that were operating previously under medical marijuana laws. While the City Council expects to revisit the cap, it’s questionable how many more dispensaries the market can bear, given current sales.
Then there is cannabis manufacturing—the companies that grow marijuana or take parts of the plant and turn into products that can be eaten or otherwise consumed. More than 100 such companies have received formal or tentative city approval, and the city has approved a cap on such businesses in southeast Sacramento and expects to consider another limit in North Sacramento.