Colorado: New State Work Group Holds First Meeting on Cannabis Equity

A new Colorado work group focused on equity in the cannabis industry held a four-hour meeting this week to jumpstart the conversation. 

The Colorado Marijuana Enforcement Division’s work group is focused on the implementation of two bills, HB20-1424, a social equity bill, and HB20-1080, which will loosen residency requirements in the industry. The social equity bill, which Governor Jared Polis signed into law in June, allows a “social equity licensee” to “operate respectively on the premises of” existing cannabis cultivation, manufacturing, and retail businesses, and requires that a social equity licensee maintain at least 51 percent of the beneficial ownership.

The residency bill goes into effect on September 14, while the equity bill is scheduled to take effect January 1, 2021. After these two meetings, the one this week, and another in August, the work group’s recommendations will help inform the final rules. A public hearing is tentatively scheduled for September 22, expected to be held virtually. 

Meanwhile, Denver’s own equity program is in the works, and regulators and stakeholders have hammered out changes for the state’s cannabis industry epicenter during extensive meetings, which Cannabis Wire has covered

The chairs of the state work group, formed mid-July, are Jim Burak, Dominique Mendiola, and Danielle Henry, all from Colorado’s MED. Members of the workgroup include representatives from the Department of Revenue, the Office of the Governor, the City and County of Denver, the City of Aurora, and industry members like LivWell Enlightened Health, MedPharm Holdings, and the Marijuana Industry Group. 

Topics covered during the first meeting included data points needed to define qualification for the equity program, and the data needed to help define a geographic area that was disproportionately affected by the enforcement of cannabis laws. 

One issue that came up several times during Denver’s work group meetings is the need for more capital to help lift equity applicants’ businesses off the ground. This topic emerged several times during Tuesday’s meeting, too. 

“What can we be thinking about for the future, even if it’s not something we can do right now?” asked Dominique Mendiola, of Colorado’s Marijuana Enforcement Division. “We understand the need to have the conversations right now so that we can plan accordingly. And that includes conversations around funding opportunities.”

Mendiola added that the Department is considering various funding mechanisms, including partnerships. 

“I think with other government agencies, in the current environment, it touches on budget constraints that we’re all facing, even private organizations are facing right now.” 

Mendiola also mentioned that the Department has some vacancies, one of which is a policy advisor, which MED is “exploring” as an opportunity to create a position completely focused on the state’s social equity program. This position, Mendiola said, could help establish goals and metrics and monitor progress “so that we can report out information to the public.” 

Teresa Thomson Walsh, with the attorney general’s office, kicked off another topic of discussion, which is how localities will play into the shape that equity takes on a local level, specifically when it comes to how new social equity licensees will work with existing licensees. The workgroup expects that they will need additional input from stakeholders regarding local approval requirements or exceptions to local approval requirements. 

“Given the absence of a specific requirement for localities to pass ordinances or regulations, in the end this is really an issue that the locals will have to address. We imagine that they’ll consider that an accelerator will be paired with or have a contractual relationship with an accelerator endorsed licensee, which will offer the local license,” Thompson said, opening the floor to others. 

(The reference to accelerators is because the social equity bill modified a bill passed by state lawmakers last year, SB 224, which created so-called “accelerator” licenses through which new licensees could co-locate with existing licensees; the social equity bill changed “accelerator licensee” to “social equity licensee.”)  

Arthur Way, of Equitable Consulting, asked if it was possible to “encourage” local jurisdictions in this area. Ross Hoogerhyde, with the Colorado attorney general’s office, said that localities might interpret their own cannabis ordinances in their own ways, and anticipated “challenges” when it comes to local license caps. 

Robin Peterson, with the City of Aurora, told meeting attendees that the City of Aurora is “looking into some kind of program that is citywide,” adding that “we’re going to see how the marijuana piece can fit into that bigger picture. We are starting those conversations. And so I don’t know what it’s going to look like either. But I know that we’re looking at some incentives as well, trying to figure out: what is the best way to do this, but to be fair to the existing licensees that we have already?” 

Jarell Phillip Wall, of Gentleman Quinns, commented that localities with moratoriums could pose issues for equity applicants, and asked if the state would somehow share the locations of moratoriums. Dominique Mendiola of MED responded that this was an area where, perhaps, “there is an opportunity there for us to work with our local partners and identify where there might be more information, we can work together and make it available on our website.” 

Truman Bradley, of the Marijuana Industry Group, said that, from a 20,000 foot view of social equity and trying to remove barriers to entry, it’s important to make it as easy as possible for municipalities, and suggested an opt-out, rather than an opt-in. 

“The less red tape, the less regulation required at the municipal level, in my opinion, the better it’s going to be for social equity applicants,” Bradley said. On this point, Hoogerhyde, of the attorney general’s office, offered a clarification. “The way that I view this is that it is part of the retail marijuana code. There is no opt-in or opt-out ability.” 

On this point, Jordan Wellington, of VS Strategies, told the group that they were getting perhaps too “granular” on the discussion about localities. 

“Local governments can absolutely ban social equity licenses. They can opt out. Local governments could, in theory, adopt an ordinance that states that social equity licensees can’t operate within our jurisdiction,” Wellington said. “They shouldn’t and it would be kind of unspeakable if they did. But in theory, that is possible. So I think there is opt-in and opt-out just through the basic constitutional manner.” Where it becomes more complicated and nuanced is when localities have a moratorium and cannot issue any more licenses, but the accelerator license is shared with existing licensees, he said. 

When the conversation shifted to the definition of a “disproportionately impacted area,” Teresa Thompson Walsh, of the attorney general’s office, said that she thinks that this will be an “important area” for ongoing stakeholder input, adding that other states have created data or looked to their own data for their social equity programs. 

“One of the challenges we face, though, is that many of those states are looking at things like arrests for marijuana possession. And that’s a measure that’s not as meaningful in Colorado because possession is no longer illegal,” Thompson Walsh said, prompting the group to think about how the state could obtain the data to create this definition. Some options include: graduation rates, percentage of minorities in a specific area, unemployment rates, and percentage of people receiving reduced or free lunches. Thompson Walsh added that regulators have had conversations with those in Illinois about how “area” is defined, whether by neighborhood, zip code, or area code. 

There was also discussion about job opportunity zones as a data point, and Sarah Woodson, of the Color of Cannabis, said that this data point falls short. 

“We wanted to make sure that the intent of social equity in the cannabis industry was to repair and restore communities and neighborhoods, people that had been negatively impacted by the war on drugs,” Woodson said. “And so this is why we then proposed language that had the designated impacted area, because in every other city or state that has done a social equity program, this is the language that they’ve always used.” 

Woodson added, “If you were displaced because of the war on drugs, then we want to make sure that we’re considering you.”

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