As cannabis entrepreneurs vie for L.A. licenses, politicians could have big sway

Los Angeles politicians vowed that neighborhoods would not be overrun with marijuana businesses after the city started regulating and licensing pot shops.

They imposed limits on how many pot shops and other cannabis businesses could open in each area, aiming to prevent an “undue concentration” of marijuana enterprises in each part of L.A.

But the City Council also gave itself the power to lift those caps, allowing more cannabis businesses to open in those neighborhoods even after they reach the supposed maximum. And they don’t have to put that decision to a vote.

The system will grant sweeping power to council members to decide which cannabis businesses will have a chance and which will not in coveted areas of Los Angeles, which are rapidly reaching the limited number of shops allowed even before new retailers have had a chance to snap up licenses.

As of October, L.A. had already hit the maximum number of shops allowed in several parts of the city, including Venice, broad swaths of downtown, stretches of the San Fernando Valley and Harbor Gateway, according to the Department of Cannabis Regulation. (The Venice area, for instance, had a cap of four retailers — a calculation based on its population.)

The city already has scores of applicants who want to open more shops in those areas.

None of those requests have been approved yet, but the phenomenon has worried some cannabis entrepreneurs who are clamoring for city licenses at City Hall. Some fear that it will become a path for the politically connected to win licenses and claim coveted storefronts as other would-be-entrepreneurs languish.

“It is a back door,” said Kika Keith, founder of Life Development Group, an advocacy group for applicants in the “social equity” program, which targets communities hit hardest by the criminalization of marijuana. “The only way that you’re able to get in the door to make that happen is if you have a lobbyist or an attorney.”

Those decisions can also be made without a public vote: Under the city rules, requests to open new shops in an area with an “undue concentration” of pot retailers are approved after 90 days if the council doesn’t take action. The process is similar to state rules for granting alcohol licenses, but has spurred criticism among some observers.

It’s “flat out wrong” for the council to allow such shops without making a decision, said Jay Handal, who is chief operating officer of a cannabis company and a board member with the West Los Angeles Sawtelle Neighborhood Council. “It gives the council office plausible deniability. They may have an area where people are saying, ‘We don’t want more of this.’”

Cannabis entrepreneurs have been agitating for city licenses in L.A., which put a limited group of existing shops and their suppliers first in line for approval. So far, more than 300 existing cannabis businesses have gotten city approval, including both retailers and their suppliers, according to a recent presentation by the Department of Cannabis Regulation.

The city is now vetting applications for new shops, a process that has become mired in controversy after some applicants were able to access the application system ahead of time and others struggled with slow internet. Hundreds more people have applied than would be able to get licenses under the neighborhood limits.

Once L.A. reaches those caps in each area, the only way to get approval for a new pot shop in a zone with an “undue concentration” is if the council allows it — or simply fails to act. (The existing shops and their suppliers were not subject to those limits.) Some argue it makes sense for the council to make that call.

“There is a lot of consternation about the council office having too much power” over the process, said Councilman Marqueece Harris-Dawson, who represents parts of South Los Angeles. But he argued that if the city were to rely strictly on an “objective” set of requirements, they “don’t take into account what’s happening on the ground.”

Harris-Dawson said that the neighborhoods he represents are keenly sensitive to concerns about pot shops being packed into the area, in light of its history of an over-concentration of liquor stores. The council office, he said, is in a better position to weigh if another cannabis shop in the neighborhood is a good idea than any fixed checklist of criteria.

Councilman Bob Blumenfield, who represents the western San Fernando Valley, said he was “all for council discretion” on the matter. As their elected representative, “I know my communities better than anyone else in city government” and “am directly accountable to the public,” Blumenfield said.

Under the rules, local neighborhood councils, business improvement districts, and the owners and occupants of nearby properties are also supposed to be notified about such applications in “undue concentration” areas.

Harris-Dawson said he had concerns, however, about the fact that such applications could move forward without a vote. Others see that as a good thing. The system avoids long delays that are costly for cannabis businesses, said Jerred Kiloh, president of the United Cannabis Business Assn., a trade group for the industry.

“This says, ‘You’ve got a timeline to make an educated decision. Make one. And if you don’t, the city is going to make one for you,’” Kiloh said.

Kiloh added that “there are checks and balances beyond that.” Such businesses would still have to be vetted by the Department of Cannabis Regulation for approval before opening — a decision that could be appealed.

And under the rules, anyone seeking to open up a cannabis shop in an area of “undue concentration” must meet the qualifications for the social equity program.

But critics say that leaving the decision about “undue concentration” to the council means that applicants that are politically connected or able to spring for lobbyists could have an edge.

The process “seems to favor well-connected and well-capitalized applicants who can afford to hire lobbyists and professionals to work on their application,” said attorney Aaron Lachant, CEO of the cannabis consulting group MMLG, whose company is representing applicants seeking licenses.

Rashaan Everett, CEO of Good Tree Holdings, lamented that “it’s becoming clearer and clearer that relationships are a prerequisite for success.”

“It’s challenging to compete without those same type of relationships,” said Everett, whose company trains and invests in “social equity” applicants seeking to open cannabis businesses.

Several applicants pointed to 4thMVMT, which assists and finances social equity applicants. The company is headed by Karim Webb, who was recently appointed to the airport commission and feted by Harris-Dawson at a City Hall reception where the councilman presented Webb with a jacket emblazoned with the city seal and the 4thMVMT logo. The company also employs a son of Council President Herb Wesson, who it says works on issues outside L.A.

Harris-Dawson said his esteem for Webb, whom he has known a long time as a business owner and someone active with the California Community Foundation, would not give applicants linked to 4thMVMT a better shot at approval from his office.

He said his office would scrutinize the people who would be directly responsible for operating the shops — not Webb or 4thMVMT as a partner — and ask, “What’s the quality of the operator? What’s their track record?”

Some at City Hall said it was too soon to weigh in on whether the process is a good one. “It’ll probably take six months for most of these issues” to see the light, said Branimir Kvartuc, spokesman for Councilman Joe Buscaino.