At our inaugural Meadowlands 2018, Cat Packer, Nicole Elliott, and Joe Devlin, the cannabis czars for Los Angeles, San Francisco, and Sacramento, got together for the first time to discuss the details of legalization and points for coordination.

Questions for the panel were sourced from a survey we sent to licensed California operators, as well as Meadow partners, community members, and Meadlowands attendees, representing concerns from across the California cannabis industry and community.

In this inaugural Meadowlands regulator panel, we hear from Joe Devlin (Sacramento Cannabis Policy and Enforcement), Cat Packer (Los Angeles Department of Cannabis Regulation), and Nicole Elliot (San Francisco Office of Cannabis), moderated by Isa Perez, Head of Business Development at Meadow. Filmed at Meadowlands on June 16, 2018.

FULL TRANSCRIPT:

ISA: This is going to be a great panel with our local regulators. To begin, if you could help us understand, as regulators how does your office work. Who's your team and sort of how does it really function individually from other cities, 'cause I think everyone kind of thinks you guys rule all but in reality, what are you dealing with on the day to day?

NICOLE: All right, I'll start with me. I hail from Placer County, so I feel at home right now in the forest. I moved to San Francisco in 2006 and started my time in city government in 2009, so I spent over a decade in city hall working for two administrations. First boss was Gavin Newsom and then I worked for the majority of my time in city hall under the late mayor Ed Lee and was tapped to take this position last fall and so I'm really coming at this from a pretty comprehensive understanding of how the government in San Francisco works and quite frankly doesn't work for businesses and so that is definitely I think a positive sort of characteristic that I can bring to the table. Having worked in the mayor's office, I also worked in leading our state and federal contracts as well as helped get a lot of our commissioners appointed so able to really touch all different layers of government from the commissions to the board of supervisors to our state delegation and to our federal delegation and when the office was created last fall, it was tasked with quite frankly proposing the regulatory structure, facilitating the conversation with our legislative branch about what that final product should look like, implementing that structure and then taking public feedback and industry feedback to iterate that structure over time and then to also coordinate the work of all relevant departments of which there are many in San Francisco since we are a city and a county over the course of time. So it's been a journey, and not a boring one. It's been a really fun one over the last seven or eight months.

CAT: I think it's still morning. I was trying to think of good morning, good evening. It's wonderful to escape from the city of Los Angeles for an afternoon enjoying this conversation. I am not originally from government. I joined the City of Los Angeles after serving as a policy coordinator for an organization called the Drug Policy Alliance. The Drug Policy Alliance is a national, non-profit organization that does a lot of drug policy reforms but while I worked for the Drug Policy Alliance, I was their California policy coordinator. I took this role after moving to Los Angeles, just about two years ago, to come and work on Prop 64, the marijuana legalization campaign. I came to California to work on this campaign largely because I had an opportunity to work on a marijuana legalization campaign in Ohio, where I'm from. Originally from Virginia, but moved to Ohio at 16. I don't know if folks in this space are familiar at all with the 2015 Ohio initiative but it wasn't a good initiative. I worked on that campaign and I had an opportunity to learn a lot about the types of people who are engaged in cannabis conversations, the many different stakeholders who are important in this conversation and I realize that there was a lot of interest convergence between many groups who normally would not communicate with one another. We saw law enforcement communicating with public health officers and communities of color talking to drug policy activists and I felt very connected to what I felt as though was a very necessary conversation, not only for Ohio, not only for California but really for society and so I had an opportunity to get involved in what was happening in the city of Los Angeles, through my work previously and I've been with the city of Los Angeles for 10 months now and it has been a wild ride. If folks know anything about the city of Los Angeles, in terms of our cannabis policy, it has often been regarded as the wild west. We have had hundreds if not thousands of cannabis operators for years, for decades and the city has had a very complicated past with cannabis policy. Back in 2007, it said we don't want anymore cannabis businesses and despite a general prohibition, we still had more cannabis businesses than any other location. The city of Los Angeles is often regarded as the cannabis capital and so we know we have a lot of work to do. What I do on a regular basis is very much similar to what my colleagues and peers do here. We coordinate and facilitate a conversation with many different stakeholders, police department, fire department, department of building and safety, lead conversations in communities with community based organizations, with public health organizations, with neighborhood councils, liaisoning with city council, the mayor's office, to try and move this very complicated conversation forward and it's a live experiment. We are often seeing things that need to change on a daily basis but I am very much excited to be a part of the conversation. I think that we're going to do great things in the city of Los Angeles and in the state of California and I'm excited that we kind of have this stage to just show the rest of the world what we can do. It won't happen overnight, but I think spaces like this show that we're making progress.

JOE: So I do that too. Maybe not as well. My name's Joe Devlin with the City of Sacramento and my background is in public policy, both at the state level I work for the assembly for a number of years and then made the jump into local government eight years ago to work for the mayor and council there and help shape some of those policies as they were emerging and then was asked to lead this new office that the council had created to kind of quarterback a lot of this. I think ultimately, my job, in a lot of ways as I view it, is really to kind of help ensure that the cannabis industry wants to help make that transition and make it into… Make it through and in a fashion that ultimately reflects the values of the people of Sacramento and it's kind of like best summary that I've kind of come up with yet.

ISA: It doesn't sound like an easy job, I'm sure no one's jealous. I do like the term live experiment, there's no roadmap. You're just winging it on the fly. It's the first time California's done this right? We're kind of doing everything for the first time. So definitely applaud you guys for being up here but also taking that on. A lot of the questions that came up when we put out the survey and had feedback was really around wanting to do it right. I think everyone here is here because they want to do right by the city and the state level. It's increasingly tougher and tougher for the cannabis industry, as you said, it's been going on for decades. When all of a sudden you had new regulation that happens every few weeks, every few months, you have to keep up with that. There are new taxes. Taxes are something that came up a lot. I'm just going to dive right into it. So anyone can take this first. I know a few of you L.A. for example has a 5% medical tax, 10% rec adult use. Sacramento has 4% and Nicole you can give us an update on, San Francisco's going. But maybe we can start with Cat actually in L.A. When you see the 10% and 5%, what is feedback you've gotten from people locally and how do you see that affecting the viability of businesses who do want to do it right but as you said are competing with a lot of other businesses who are not paying those taxes and not being compliant.

CAT: So anyone who's been to the city of L.A. Knows that L.A. is expensive. It doesn't matter what you're doing. You could be parking. L.A. is expensive and so just want to throw that out there. I think that that frames part of the conversation but part of what the city of L.A. did and our tax structure was passed last March through a local ballot initiative. There are conversations that happen in city hall. A lot of speculative conversations about how much money is going to be generated from the taxes, but the truth is that we don't really know. Folks have made estimates and I think that we look to other jurisdictions of similar size but I think that part of this live experiment is that the state of California, the city of Los Angeles are understanding the size of the market for the first time. A lot of our market that has existed has been underground. A lot of folks who have been operators in the past haven't always been comfortable sharing that they were operators. We are in the city considering a reduction of taxes. So what the city council is doing right now it's two fold. One through ordinance, there would be a reduction of taxes, our adult use tax would go from 10% to 8% and then it would stay at 10% if there was adult use sales with on-site consumption because we are considering allowing consumption spaces in the city. We would lower our medical tax from 5% to 3% and then cultivation, manufacturing, distribution would largely have a .25% tax. This would all be done through ordinance and simultaneously there'd be an introduction of a new tax, a 1% across the board for all gross receipts and this 1% tax is being done through the proposition of a local initiative called the Cannabis Reinvestment Act. And this Cannabis Reinvestment Act, it hasn't qualified for the ballot yet, but it is proposed. City council and the mayor's office and the Department of Cannabis Regulation are working on this right now, would have a 1% gross receipts tax divvied up three different ways. 50% to city council to mitigate impacts in their communities where cannabis businesses were located. 25% to cannabis programming related to equity and enforcement, and then 25% to youth development. So we'd still see a general reduction and a net reduction of taxes through the ordinance even with the new 1% tax but both of these policies are currently being considered by city council. Updates would follow in the next couple of months to see if things qualify for the initiative.

JOE: The city currently has a 4% gross receipts tax. I think over the long term, taxes are going to remain a very important topic. We supported the bill at the state legislature that would have lowered the state tax temporarily on cultivation. It would have been nice if that had survived but this is going to be an ongoing conversation. I think ultimately Sacramento's going to probably have to have an honest conversation about redoing our tax which was a voter approved initiative, especially when it comes to distribution. 4% gross receipts tax on distribution is just really hard and it's going to be a process.

NICOLE: We don't have a cannabis specific tax in San Francisco. I like to say it's because we really, really cared about giving you guys this year to get your operations up and running. There we go. But in all honesty, it's because the board didn't have their stuff together. I'll be honest about it. That's my leading talking point. The board of supervisors does have a measure pending before them, to consider putting on this November's ballot, which does propose a tax. That tax would be as currently drafted, implemented in January, 2020, so it would pause for a year and it would start at 2% and increase up to 10% over the course of time, depending on the activity and depending on the overall revenue. It would increase through board action and only after a market analysis is done and publicly discussed by the board of supervisors. There are a lot of nuances to that. There are a lot of places where that can be trimmed around the edges I think. There's still going to be an epic debate at the board of supervisors about this in the coming weeks and we'll see whether or not there is support for that in general. I think our board of supervisors can definitely, I think, better understand the impacts that that industry's facing right now. I work very hard to help them understand that but by hearing from many of the familiar faces in the audience who I know come from the Bay Area and San Francisco, it is also really helpful for them as well so I would encourage those of you who are from the Bay Area to be very active in that participation. In that conversation, sorry. ISA: Thank you, I mean it's good to hear obviously L.A.'s considering lowering the taxes. Sacramento is open, you see the reason why it's important to think about it and also is it a concern for all of you, that businesses may go to another city that has lower taxes. Have progressive taxes been in the conversation so in other words, not just a flat tax, but depending on how much revenue you make or how small the business you are, you'll get taxed differently than if you were a larger business. Are these conversations that have come up? Is this in consideration at all? NICOLE: That's definitely something that's contemplated in the pending measure. I believe it's the first, I want to say $500,000 is exempt and then it ranges from there, a million to two million I believe. So it's something that San Francisco definitely is considering.

JOE: I think in the future, after it all stabilizes, you could see local jurisdictions trying to be more competitive and more attractive and it becomes like the next enterprise zone of local job creation if you will.

CAT: And I think generally business savvy folks are always going to form shop, so to speak, and important to note that many forms aren't open right now and so over time as many cities and counties who have bans open up, I think there's going to have to be a constant analysis of the market of the various jurisdictions that are regulating not just the tax impacts but fees. Our application inspection process, I think, that folks will figure it out and over time businesses will navigate to spaces that best suit them.

ISA: Thank you. Kind of touching on that point in terms of there aren't necessarily a lot of options right now for operators and where they can actually set up shop, set up businesses on all license types where there is access, it's very limited as well. So in L.A., we know you have a cap for 400 retail locations. There's been a lot of questions on licensing, how many licenses you're going to be giving out. It's one of the largest markets in the world. Is their concern upsetting caps for all three cities but we can start with you Cat, in L.A. 'cause we were just talking about 400 capital so almost 160 of those have gone to pre-ICO dispensaries as well so it doesn't leave a big number for new operators. Is there concern of that not being able to support that large of a market?

CAT: To be completely transparent, I don't think that that concern exists today and the reason why I say that is because the city of Los Angeles is oversaturated with cannabis operators and I don't just say saturated, I do mean oversaturated. If the city grandfathered all of the businesses that were in the city, there'd be no room for new operators and some folks would still have to leave. We want to be able to keep those operators who are going to kind of respect the process and values that exist, but it's also important to note that we're just getting started and I think one of the differences that many local jurisdictions are going to have to struggle through is that we connect on a regular basis. Not just with industry participants, but with community groups and community based organizations as well and for folks in the city of Los Angeles, 9 times out of 10 literally, if you're speaking of or if you know of, if you've passed a cannabis business, that is not a business that's been a part of the city's process or that has been authorized and so as we move forward through this phase licensing process, I think that a cap in a sense is just where we're starting this conversation. I think that for residents for the city of Los Angeles, if there wasn't a cap, if the message to community members were we're going to allow as many businesses in the city as may want to exist, I don't think that that's going to sound attractive to an every day resident to the city of Los Angeles. They know lots of cannabis businesses and many of them haven't embodied the values that various communities want to have and so I think that we do have a real opportunity through this process to have good operators differentiate themselves from the stigma and stereotype that has existed but currently no real concern over the cap.

JOE: We have a cap of, on our current dispensaries, we have 30 dispensaries. We've had a cap on that really since 2010 and one way or another, we've codified that now to a number of 30. Before it was like this convoluted process and we've recently done a cap on the square footage of cultivation within a particular property owner business improvement district, the PEBID, at 2 1/2 million square feet. That's just for one particular PEBID area. Beyond that, we don't have any caps. Initially I was, I think very opposed to this. I've begun to kind of have a slight evolution thinking on this and I'd love to have a policy conversation around not so much… I mean, cap is a potential tool to something but what's the end goal where we want to go? What is the… I don't even like using the word industry but what does the cannabis industry look like at this next revolution of this and is that cap a potential tool to kind of, I think, preserving all the operators that kind of got us up to this point.

NICOLE: In San Francisco we don't have a cap on any activity at this point. However, there will be a conversation about that in December or January by our board of supervisors and we have, obviously we're space constrained in San Francisco, seven by seven, and we have a pretty restrictive green zone. If you look at a map of the city and you look at storefront retail, it's majority on the east side of the city and most of our sort of industrial commercial areas and you see very few on the west side in our commercial corridors and there's a lot of pushback from communities on placing those in the commercial corridors. Looking at two weeks ago, or three weeks ago when we opened applications to our equity program participants, we got 47 applications in a day and 90% of those were for storefront retail on the east side, so that more than really quite frankly doubles the storefront retail locations in San Francisco in a day. So there's going to be some concern, I think, from community members around where we're locating these and whether or not there's an over saturation. We are also coming off of a pretty epic tech boom in San Francisco and there's a concern, I think, broadly both from the government and from the community about ensuring that we have and maintain a diverse economic portfolio so I think that will all be sort of wrapped up in the conversation that we have in December or January about numeric and geographic caps on any type of activity in the industry.

ISA: Thank you. And Nicole you touched on the equity applicants. That was also a huge concern from everyone. What currently's in place in each of your cities as far as the equity program, just kind of an overview but also why is it important to you? Why is it important for the city to have these programs and what has been maybe the biggest challenges of implementing this and kind of having to intersect all these different groups. But, you know, also balancing what you personally find important about each program.

NICOLE: In San Francisco, we learned quite a bit in developing an equity program though the work open did as well as some of the groundwork laid in L.A. in sort of draft form prior to putting in our legislation, the equity program. When we originally proposed that program, it was really important to late Mayor Lee that it be put in the legislation as sort of an acknowledgement but he wanted to see a report done and the board wanted to see a report done and then Supervisor Cohen crafted criteria and that criteria was really contemplating direct involvement with the criminal justice system either by yourself or a direct family member specifically for cannabis related offenses and then additional criteria that acknowledges there are collateral consequences of that involvement. It also creates that criteria so that you may sort of enter the industry as an individual. If you have a certain percentage ownership of an operation, it also creates the opportunity for entities who don't perhaps meet that criteria to incubate somebody onsite/offsite or through the financial equivalent of technical assistance. I think the city of San Francisco is trying to acknowledge that it has itself participated in disenfranchising communities through over policing though its participation in the war on drugs and you've seen our district attorney partner with Code for America to do proactive expungement and to make that expungement easier for people in the community. I'll give him a round of applause. And it's something that San Francisco has done previously. We have a COP program that provides priority housing placement for people that we as a city pushed out through redevelopment in the 60's and 70's. And this policy seeks to prioritize communities who have been disenfranchised and through the war on drugs, it's definitely a progressive policy but it is by no means obviously by nature of having the police proactive. So I think the work that our department's trying to do, or our office is trying to do is to force departments into really think about how institutional policies create an imbalance and how we can be proactive in creating that balance in government. I think probably the biggest challenge is the lack of funding. The city of San Francisco hasn't put any specific funding towards supporting this program other than creating the office and giving that office direction to prioritize social justice in the work that we do and obviously sort of the federal government is a component of that as well but absent that funding, I think it leaves our participants at a loss for the technical assistance that they really need. So trying to fill in those gaps on an ad hoc basis is exceptionally challenging but something that I'm committed to doing.

CAT: There are some folks who were at a panel I did yesterday. I'm going to repeat something I said yesterday and it relates to kind of my sentiment around the city's social equity program. Part of what I found over and over again in this cannabis space is that cannabis itself is impactful, cannabis policy is impactful, cannabis businesses can be impactful and the impacts of all of those things haven't been born across the spectrum the same. Certain communities have experienced those impacts very differently so patients have experienced impacts differently. Communities of color have experienced those impacts differently and part of this social equity conversation is trying to acknowledge and address that impact. I think that most of the equity conversations thus far have focused on economic opportunity and acknowledging the economic opportunity that exists when cities and counties and states legalize and regulate and trying to make sure that those economic opportunities are equitably accessible to communities particularly those communities who previously had experienced criminalization. I think that it's going to be important for this industry in the city, in the state, to be able to address some of those impacts and so part of what the city of Los Angeles has done similar to Oakland, San Francisco, Sacramento is to develop a policy that tries to create access to those economic opportunities but we share the same struggles in the sense that no money to date has been dedicated to the program specifically. I think that just as challenging as it is to kind of build and fly this regulatory plane, there's this equity plane that exists as well that we're trying to build and fly and for me it's just as important. I think that there are many challenging conversations that are going to happen along the way and I don't think that it's fair to kind of piece out different conversations to say that some are more challenging than others. We're doing things that haven't been done before so part of what I think is going to have to happen in the city, absent that infrastructure and funding happening immediately is some type of community industry organizing to try and move the conversation forward and I've seen it happen. I see that it is happening so I appreciate folks who share that sentiment as well.

JOE: I couldn't add anything more to the why it's important. I'll just say that the city program on July 3rd, the council's going to be hearing a fee waiver resolution as well as an attachment that describes the program and provided that they pass that, which I believe they will, we'll be releasing an RFP for the operation of our technical assistance center. Council's committed a million dollars to that, another $250,000 in fee waivers for program participants. I think there's still a big missing piece and that's capital for funding. There may be a tax credit model out there that is worth exploring. But I still think there's still a lot to figure out and how to really make it meaningful.

ISA: Definitely, I mean it's incredibly important and it is tough to hear when funding is one of the toughest challenges. As far as overall in the industry, an interesting question that I was having a discussion with some people on is the equity piece and obviously the war on drugs and the communities that have been affected, expungement clinics, not just as you said, not just really setting up businesses but also helping people in a lot of other ways that they might not even enter the cannabis industry. It's really interesting to me living in San Francisco and Nicole you might have more to say about this but I come from the tech industry, still in the tech industry, technically, but a concern for me with the cannabis industry and a lot of other people I've talked to in the Bay Area is equity is one piece of it but when you think of really including people, to making diversity, what about things that we see in other industries that aren't necessarily federally illegal products, you can't get arrested for having an Apple iPhone, but then you see 2% of tech being people of color. Is there conversation around also bringing in everyone from all different types of backgrounds into the industry? What do you guys think of cities where San Francisco's a huge example but L.A. as well. There's a tech boom there. Sacramento will inevitably see it as well but the city's very expensive, so is that part of the conversation as well as bring towards from other industry but keeping it diverse in other ways and equity being one piece of that?

NICOLE: Yeah, in San Francisco, policymakers care very much about work force. It was contemplated last fall in the conversations and where our legislators and mayor eventually landed was that they wanted to see every operation in San Francisco hire locally and they wanted to see which many of our operators already did, but more so and they also wanted to see operators partner with the city and the non profits that the city supports to employ many of their entry level positions from our marginalized communities so there is definitely an effort to do that. There's quite frankly a mandate to do that. I think our operators are generally supportive of that mandate because this industry, I think, very much believes in that. So we've been sort of lucky to be on that sort of forefront about workforce and how we can be more thoughtful about work for city colleges creating a curriculum to support that proactive education. Obviously labor's getting involved in that conversation as well so it's exciting time I think for work force and this is, other than construction, the first industry where the city's really focused that local preference.

ISA: Joe, okay, we're not all from Sacramento. Something that hits Meadow very close and a lot of operators out there as well is delivery. We talk a lot about retail locations and that's a big sideshow right there. Talk a lot about retail locations, distribution, manufacturing kind of things that have these physical spaces. Delivery's usually a little bit smaller scale, tends to be a little easier entryway for people coming into the industry as far as capital. But everyone's doing a little differently throughout the state. There is the license available to the state. San Francisco has licenses. If you deliver into San Francisco, you have to have a license in San Francisco. L.A., right now, dispensaries can do delivery, there isn't a delivery only license. Sacramento, there is a delivery only license. So given your current state of delivery and also some of the regulations that just passed at the state level, how are you guys reconciling sort of what you're seeing coming down from the state, what you currently have and any improvements that you think can be made from there.

JOE: Delivery's a mess. I mean, just to be real, it's a mess and I'm sure it's not news to you. In Sacramento we had 65 applications come in and like 16 of them were proposed to be in one building. They had like one driveway and one carport and you're like yeah, yeah, no. Add on top of that the probably hundred others still illicit and companies that have no intention of ever probably becoming legal and it gets really, it's really difficult. Most of the delivery companies are operating even if they are applying and some of them aren't operating out of the buildings in which that they should be. They've been operating or they are operating most likely out of where they've been operating, which is probably their garage. It is a low barrier entry in terms of cost and it certainly, I think, important to have around conversations like equity and because it is that low barrier to entry, but it's a bit of a hot mess. I hope it kind of, will all sort itself out over the next little bit, but it's going to be I think kind of regulating delivery is really going to be a mix of a need for enforcement and a bit of time for people to make that transition into a legal/physical space and operating in a legal manner.

CAT: And just to echo that sentiment, I do think that delivery is a hot mess. I think it's one of the things that as a regulator, we're probably going to have one of the larger challenges with, is delivery. We want to know who's operating in the city, if our folks are trying to leave and deliver it to other places, folks from other places are trying to come into the city and deliver, that's activity in the city. Of course we want to be able to tax that activity but we also want to make sure that activity is being done in a manner that's safe for the delivery person themself, for their customers, for folks who are in the community and particularly because a lot of the illicit market engages in delivery. It's just a hot mess overall. I think that there are still many platforms who allow folks to go online and deliver, people are delivering via Craigslist and Facebook and Instagram and so, I mean… And Snapchat. If there's a platform and people who consume cannabis and people who sell cannabis have access to one another, and it's convenient for them, people are using that platform to do this delivery thing and so I do think that we're going to have to have a very intentional conversation with participants, with law enforcement, with regulators, because I think that this is one of those things that is just going to continue to be a challenge and technology will continue to move forward. At some point, you know, people joke about drone delivery but we're almost there with other industries as well and so we're just going to have to figure this out.

NICOLE: I just would echo everything they said and San Francisco, what's unique to San Francisco is that we allow a lot of delivery, our dispensaries and delivery only operators and we have quite a few. We don't allow for operators from outside of San Francisco to deliver in San Francisco. There's not a permit for them to do that. The reason why was certain legislators wanted to preserve the San Francisco market for San Francisco based operations. It's a big question, right, how that works and whether or not you see that domino effect happen in San Jose or Marin. You start to see a disallowance for our operators to come in and deliver in those jurisdictions. So it's a big question. When I think about the number of cars that are on the streets and out there delivering and the challenge regulating not just our operators but enforcing against many operators coming into San Francisco. It's an enormous challenge that's going to take some time to solve. It's a state wide conversation that's needed. I know there was an attempt earlier this year to address that but we need to continue that conversation as a state.

ISA: We'll start wrapping it up, so you touched, you know delivery as you said, a hot mess. How do we make it a little cooler? Enforcement is a huge piece of that. There are definitely delivery operators who want to have a space, who want to show you they're doing it right, who want to pay the taxes, want to attract their drivers. What's tough is that there are a lot of delivery services because it's delivery, just grab a car and do whatever you want, that are not complying with that. They don't want to do it the right way. And obviously, you know, licenses, of all types that happens, so just touch quickly kind of on enforcement in your city, what the relationship has been with your office and what's really being done to crack down on the people who do not want to be in this industry that we're trying to build and really regulate.

JOE: So in Sacramento, one of our, I think, our single biggest challenge as it relates to the illicit market is actually illegal residential cultivation. We've got about 600 homes, give or take. Maybe it's down to 4 or 500 homes that have been gutted completely converted to commercial cannabis. They're putting 4, 6, 800,000 plants in these homes. It's every square inch of it. Blowing up transformers in the backyards, they're pulling so much power and it's organized. If you heard a couple weeks ago, maybe a month ago, DEA, FBI, IRS all came in Sacramento and they busted a whole bunch of homes. They busted 53 in Sacramento, all owned by the same, you know, they believe entity. Do the math on acquiring 53 homes and converting it and it gets in the tens of millions of dollars really, really quickly. So we've been busting those. We've assessed $31 million in penalties on those properties of which we've collected $200,000. It's trending in the right direction. And I have enforcement staff that goes around and inspects our permitted operators. We've shut down illegal commercial cultivation taking place in commercial buildings and we're really now just beginning to I think scratch the surface with some of the more illicit retail outlets. We have farmer's markets kind of popping up and I get it, I understand why they're popping up. I understand where they're coming from. There's not really a permit for that kind of producer to consumer sale through like a farmer's market venue yet. So we've been addressing those and we're really now only beginning to kind of get into okay what are we going to do about illegal delivery?

CAT: Enforcement has been a challenge for the city and it's going to continue to be a challenge for the city. It's a massive undertaking. Just as huge as an undertaking as building this plane while flying it. I think that there's another analogy that's probably appropriate for the city. It's a huge city and so we talk about LAPD and fire department and our city attorney. These are huge entities that have a whole host of priorities and when folks get involved in a process, it becomes political. And so that's important to note. Also, the scale of operations in the city of L.A. is a mammoth. I think that there's a lot of unlawful activity in the city that we're aware about, but there's unlawful activity in the city that we have no idea about. And so it's just a real challenge. I was on Google Maps the other day with some of my team and LAPD and city planning and we were looking at one location and this location had a bunch of green flowers all on the outside and we recognized that as an unlawful dispensary and as we were just kind of doing a panoramic view on Google Maps, I see a sign and I said that's another illegal dispensary right next door and they said "How do you know that? There's no green signage." I said well the sign says Blue Dream. And they said well what does Blue Dream mean? And I said goodness gracious, you know and that's part of what happens when you have folks who aren't speaking in the same language. They saw Blue Dream, thought it was probably an ice cream parlor, you know. I know cannabis so I'm like that is a dispensary right next door and they looked it up and they said oh my gosh, you're right, that's a dispensary. And so we're talking about something that is a huge conversation. This department works and coordinates with LAPD, with city attorney on a regular basis. But important to note that city attorney is its own elected office. Our police department, we just had a new police chief come on board and I'm hoping that the conversation shifts in the city of Los Angeles because we and lots of folks in Southern California have been playing this game of whackamole where you try and shut a person's operation down and either the penalty is… The risk is so low that folks will just kind of pay their way out of situations. Fines previously were like $2500. People could sit there and pay that all day and it really becomes a numbers game. It's one, there are thousands of operators. Are you going to get caught? And then when you get caught, pay your $2500 fine. And keep it moving and that's not going to work anymore. And I don't think that this is something that we can arrest our way out of. I think that we have to figure it out. I do think that there are challenges, real challenges because penalties have been reduced. I know that part of this conversation around legalization and social justice conversations was a reduction of penalties particularly for criminalization but those tools that once were very helpful to law enforcement aren't available any more. Law enforcement tells me that they struggle with civil asset forfeiture. They can't go after properties the same way that they used to. One of the things that the city of L.A. is trying to do is to work with our department of water and power to simply disconnect utilities off that facilities but I think that that's going to be a challenge as well so I think that as this conversation continues, we'll continue to learn. Unless real resources are dedicated and prioritized in a way that makes sense both long term and not just short term, I think that we're going to be here.

NICOLE: In San Francisco last fall we ran an amnesty program with the sort of goal of saying operators, we know you're out there, perhaps we haven't done the best job at creating a pathway for you to be regulated previously so we forgive and just make amends with our tax collector to the 26th of September of 2017 and let's move forward. And we also worked with a lot of people. I know some of the people in the audience here are very aware of this. Who are doing this activity out of their residence or in areas where commercially it's not viable moving forward, and so we asked them to stop doing that activity there and we would allow them access to permits moving forward which we will be doing very shortly. So that, I think, was effective in getting… Well I know it was effective in getting 130 plus operators to come in out of the shadows and work with us and many of those operators are now on temporary permits in San Francisco. With that said, of course, enforcement is a challenge and similar to Cat's comment, we have an elected city attorney as well and we have a relatively new police chief from L.A. as well and so getting people to really focus on this issue and work collaboratively on this issue, I think is a challenge and it's coordinating agencies. The responsibility is on us to sort of get them to focus. But again, it's a challenge, so I think, absent that funding on the state level for enforcement, I think we have a lot of information available to us through the state, through our local industry, and in partnership with the state which I know that Department of Consumer Affairs and BCC has been doing a lot more to coordinate that sort of enforcement activity, at least with San Francisco and I hope we can build on that as a state so that we can collectively work together with the state and with our district attorney, our police department and our city attorneys to be really impactful in this area. It will take some time to sort of finesse those processes but I think that everyone at this table is very committed to seeing that through.

ISA: Last thing I wanted to touch on a little more fun and important to patients, consumers, the public, tourists, people who have private housing or affordable housing where you can't smoke inside, where you live. We just had an event in Sacramento, you mentioned farmer's markets popping up. First one. How did it go Joe and also Cat and Nicole, are you guys open to having more lounges in San Francisco? There's a few but have you been thinking about the tourism that's coming in? Where all these people going to smoke their weed on the streets, at events? I mean, how much of a priority is public consumption and lounges and events for the city of Sacramento, L.A. and San Francisco?

JOE: Shocked at interest about on-site consumption. Sacramento, we're going to be having this conversation, starting this conversation I think probably the latter, at the end of the summer around what that looks like for our city. I think this is going to be a case where every city's going to do on-site consumption a little bit differently 'cause we're, well we're just different cities and have different needs. San Francisco's way more people and apartments, you have way more tourists. So Sacramento allows on-site consumption. Probably going to be mostly for the people that live there 'cause we don't have a high number of tourists. That may not be the case with San Francisco or L.A., you guys get tourists, right? One or two? They drive through Sacramento on their way to Tahoe still. Just kidding, it's really cool if you haven't been. I think we'll get there, I think we'll allow some number of on-site consumption dispensaries, or allow at least some number of our dispensaries to have that. It's a big cultural shift and the general public has a memory of a fruit fly. Every room I walk into is like wait, you know, it's like did I vote for that? I think I did but I'm still really worried about it and you're going to ruin my neighborhood and I think I might like it but can I get a permit? But we'll get there, I think, eventually.

CAT: So particularly our city council president is very interested in making sure that the city of Los Angeles moves forward with having this on-site consumption conversation. It had been interesting for me because I always felt as though I may have been the most liberal in the room and to hear that coming out of our city council president, I said hold on. Let's slow down a little bit in the sense that I think it's important to have these on-site consumption spaces, but I think this is one of those areas, again, where we can't let the cat out of the bag too quickly because I think that there are so many opportunities for this to not happen in an ideal way. I think that part of what we're going to see with this live experiment is a framing of an issue and I think that for certain communities as we continue to shift public policy and shift public opinion, we still need to make sure that we're doing so responsibly. And I think that the state of California and the city of Los Angeles may have an opportunity to show what responsible cannabis consumption looks like. It exists. But I think that politically, as a society, it has been difficult to have those types of conversations. I was just in a space yesterday where I sat in a cannabis crowd. Cannabis can be harmful and folks from the cannabis industry were so upset and someone came up to me afterwards and it was a space where they were regulators and officials convened and they said can you not say, in spaces, that cannabis can be harmful? And I said no.

JOE: We have to have realistic conversations. Lots of things can be harmful and so I think it's going to be important for there to be space created where the folks who were opposed and voted against and the folks who are most enthusiastic and are consuming in the crowd right now, can find spaces to get along. And to do so I think is going to require very intentional thought, very intentional conversations with law enforcement and with parents, with rental car companies and I think that we're going to be begin to have those conversations but I think that part of it is being able to set examples of what responsible cannabis consumption looks like and I think that this industry has that responsibility as well.

NICOLE: I agree with everything Cat said. In San Francisco we have eight consumption lounges, majority of those are open for adult use consumption at this point and the sky has not fallen. So she has a great point and also it is doable and I think in San Francisco we're showing the rest of the state and the nation that it is doable. With that said, those eight consumption lounges were grandfathered and any new consumption is going to occur in a place where standards are higher. And DPH, Department of Public Health is in the process of contemplating those regulations now because the city has made great strides in clean air and they care very much in ensuring that continues. It's a very dense, urban area and when you consume in public, somebody will see you. Somebody will experience that with you and so I think it's really important that we create spaces where people can consume and where everybody who's in that space agrees with what's happening there but also that we're contemplating what that means for the workforce that's in that space as well, that's also important and then just speaking to sort of the broader public consumption and events, that's definitely not something that San Francisco has a regulatory structure in place for at this time. So that is something that we'll be looking at next year. I spent some… You may be all be familiar with Hippie Hill, spent some time there on 4/20 to see what that's like.

ISA: How was it Nicole?

NICOLE: It was intense. But there was a lot that I think we, as a city, learned from that and a lot of areas for improvement so that's something we hope to have in place next year where 4/20's going to take place, I believe, on a Saturday and that's right next to a children's playground. There's just a lot of sort of community engagement that needs to occur before we formally sort of bless that in our city parks. So I'm excited to have that conversation and on the consumption side, happy to share with other jurisdictions what's been done in the city thus far and where we're improving, where we've learned lessons. We're looking at potentially expanding because of the tourism component of San Francisco and because there are a lot of tourists who come in and buy product and then have no where to consume it, I'm looking at sort of consumption lounges within hotels as well, so that's where we're at with that.

JOE: Just to underscore I think both those points, but this is where it potentially gets sideways and Cat's point is like it's politically sensitive. If we all don't do it well, the next city isn't going to do it. So we really need you as industry partners on this and I know everybody wants this but this is, politically, going to be a tricky one.

Sign up for our Meadowlands email list to get updates about the next cannabis industry event.

Sell More Cannabis with Less Work

Book a Call