(1) A New “Equity Share” Definition & New “Equity Plan” Requirement
DCR recommendations do not give any detail on what will be required of applicants in the new “Equity Plan” requirement. We will have to wait and see on that one. Under the recommendations, the definition of “Equity Share” will be amended to “ensure that those most impacted have unconditional and direct control of their businesses” and will be based on best practices and input from Social Equity Program stakeholders. It is likely that “The 100” who have made it into the next round of application processing will have to revisit their equity agreements to ensure they comply with the newly amended definition.
(2) New Requirements for Round 1 Applicants
The 100 would receive Temporary Approval and be fast tracked to doors open. The Temporary Approval requirements seem to allow these applicants to sidestep public hearings — and given how contentious the process has been, this is a big deal.
Temporary Approval is contingent upon meeting certain requirements, including:
a. Submitting an Equity Plan;
b. Demonstrating compliance with the amended “Equity Share” definition;
c. Passing a pre-inspection; and
d. State authorization.
This does not mean that The 100 would not need to ever appear before their Neighborhood Council, present their application at a Community Meeting, or have a hearing before the Cannabis Commission. Applicants should still expect public hearings at some point down the line, likely in order to secure an Annual License; it just may mean applicants can open doors with Temporary Approval without all those steps.
(3) A Second Bite at the Apple – Priority Processing for Ineligible R1s
For the approximately 700 applicants that didn’t make it into The 100, priority processing would be available to them for future licensing opportunities in LA. That means they would be at the front of the line for one cannabis activity that is not subject to undue concentration. So, for non-volatile manufacturing, distribution and non-storefront delivery.
(4) New Eligibility Criteria for Social Equity Program
For Phase 3 Retail Round 2 and beyond, the DCR wants to “more appropriately target those individuals and communities whose lives were most impacted by the Drug War.” That includes changing the SEP criteria in the following ways:
- Amending the definition of “Low Income;”
- Amending “Disproportionately Impacted Areas” (“DIA”) from zip codes to Police Reporting Districts;
- Must have a minimum 10 years of residency to qualify; and
- Amending the “Social Equity Individual Applicant” definition to mean a natural person who owns no less than 51% Equity Share and meets TWO of these THREE criteria: (1) low income, (2) residency for 10 years in a DIA, and/or (3) cannabis arrest or conviction. This would mean no more “Tier 2s” and 33 ⅓ equity ownership.
(5) Phase 3 Round 2 Processed by Lottery
Round 2 applications would be processed by a lottery. Eligibility to be entered into the lottery depends on verification under the new SEP definition and clearing a background check. If eligible, applicants would be entered into a lottery to decide who can apply for the available retail cannabis licenses. This means applicants can wait to lease property and put off certain startup expenditures until they know they’ve been selected.