Article: Cannabis social equity programs leave many California entrepreneurs demoralized, depleted

The very thing that had once torn Ingrid Archie from her daughters and led to her incarceration now made her bubble with unbridled optimism.

It was early 2019, a year after recreational pot sales began in California under Proposition 64, and politicians and activists were proclaiming that Archie and others who grew up in communities disproportionately criminalized by the “war on drugs” could now profit off the legal cannabis industry as entrepreneurs.

Buoyed by that promise — “social equity,” as it became known — Archie, then in her late-30s, began the process of applying for a retail cannabis license. Years earlier, she’d been convicted of possessing pot for sale. Now, she dreamed of opening a holistic community center in South L.A. that would sell edibles, hold homeownership seminars and provide mental health services. Finally, she thought, a pathway to generational wealth for many in her community.

But Archie hit one bureaucratic hurdle after another. Other equity applicants hired attorneys with expertise in navigating the new cannabis regulations, but she couldn’t afford a $10,000 retainer.

“My life was shattered for something that’s now legal, and now I have to jump through hoops?” she said. “I felt demoralized.”

Ingrid Archie stands for a portrait.

While applying for a cannabis license, Ingrid Archie hit one bureaucratic hurdle after another.
(Christina House / Los Angeles Times)

Five years after California voters legalized recreational cannabis for adults, many cities and counties have yet to adopt programs to boost the chances of success for hopeful Black and Latino cannabis entrepreneurs. In places that have, those programs have been plagued by a lack of funding, shifting requirements and severe delays in processing applications, often creating additional hardships and roadblocks instead of removing them.

A Times review of state data found that equity applicants represented only a small fraction — less than 8% — of all people granted cannabis licenses through the end of 2020 in several of the state’s largest jurisdictions.

In addition, local officials around the state created different regulations for licensing cannabis businesses and meeting social equity qualifications. So far, existing medical pot dispensaries and established cannabis chains with vastly more experience and resources are frequently winning out. Even city leaders and officials in charge of clearing a pathway for more inclusion acknowledge the programs have struggled.

As a result, a process intended to atone for past wrongs has, for many, made their lives distinctly harder, shattering their stability, wiping out their life savings and jeopardizing homes and property.

A major impediment was the requirement in Los Angeles and other areas that applicants secure property before applying for licenses. As the process became mired in bureaucratic delays, many were stuck paying thousands of dollars a month on empty buildings, prompting some applicants to refinance homes and borrow from relatives.

“People had dreams and hopes of building generational wealth,” said Bonita Money, founder of the L.A.-based National Diversity and Inclusion Cannabis Alliance. “And it’s done just the opposite. It’s ruining lives at this point.”

In 2018, then-Gov. Jerry Brown signed into law the California Cannabis Equity Act, a measure designed to provide those most harmed by cannabis prohibition “assistance to enter the multibillion-dollar cannabis industry as entrepreneurs or as employees with high-quality, well-paying jobs.”

The law — Senate Bill 1294 — cited state Department of Justice data from 2006 to 2015 showing that Black Californians were five times more likely to be arrested for cannabis felonies than white Californians despite using and selling cannabis at similar rates. During the same period, Latinos were 35% more likely to be arrested for cannabis crimes than white people.

While the law didn’t mandate that cities establish equity programs — and many have not — it paved the way for doling out millions in state funds to those that did. But the ambition of the legislation quickly pushed up against the realities of a limited market already saturated with illegal sales and a few big cannabis companies. Before long, many industry experts say, it became clear that the same people who typically win in other industries — those with the most social, political and economic capital — were winning here too.

Sixteen cities and counties had issued licenses to a combined 203 equity applicants through December 2020, according to a Times review of data in a recent report to state lawmakers. At the same time, 2,355 non-equity applicants got licenses. Many of those went to preexisting medical marijuana dispensaries. Some jurisdictions had not issued a single equity license.

As of early January, officials in Palm Springs and Long Beach said their cities each had one equity cannabis business; San Francisco had 18; Sacramento, 19; and Oakland, 186. And across huge swaths of the state there are no social equity programs, although officials in San Diego are developing one.

In Mendocino County, which has received more than $3 million from the state for equity efforts, no applicant had met all the eligibility criteria, including having a very low income, according to a recent report from the California Cannabis Industry Assn. In Oakland, which created the nation’s first equity program more than four years ago, 63% of equity applicants who responded to a recent survey said the gross receipts of their business the previous year had been less than $50,000. And the city has begun sending delinquent notices to collect on unpaid loans.

The cannabis industry report found that social equity programs were not working as intended and urged the Legislature to create an oversight commission that would include cannabis business owners and community members.

This month, the state’s Department of Cannabis Control began distributing $100 million approved by the Legislature — including $22 million earmarked for Los Angeles — to help businesses transition temporary licenses to annual ones, which will require costly and complex environmental reviews.

In Los Angeles, which has received more than $9 million from the state for its equity program, 1,270 temporary licenses — 358 of them equity — had been granted through mid-January. Some of the licenses are for retail shops, but others are for cultivation, manufacturing and distribution.

Los Angeles’ program has had several widely publicized setbacks, including long delays and several lawsuits, which some industry experts believe could have a chilling effect on similar initiatives across the country.

“A lot of other places were looking to California as a model,” Money said, adding that she believes that watching the delays and complications play out in L.A. has discouraged other jurisdictions.

Los Angeles City Council members Marqueece Harris-Dawson and Curren Price recently called for changes to the city’s licensing practices, including giving the Department of Cannabis Regulation deadlines to review certain applications and update a licensing map on its website that shows pending retail cannabis businesses, as well as schools, libraries and other locations that would disqualify a shop from opening within 700 feet.

In an interview, Harris-Dawson, who represents a stretch of South L.A. that for years was disproportionately targeted for marijuana arrests, said four equity shops in his district have opened to date. Many other applicants, he said, have lost their life savings waiting.

“It’s absolutely infuriating,” he said of the gulf between the promises made to applicants and the current reality. “This is the perfect example of why no one trusts the government.”

Officials in the Department of Cannabis Regulation said in a statement that the agency has already implemented several key components of the city’s equity program.

“It’s growing and adapting to the needs of program participants,” the statement said. The department recently drafted its own recommendations in response to the City Council motion and asked for more resources and staffing. Last month, the city’s Cannabis Regulation Commission, which provides input on L.A.’s cannabis rules, voted in support of the department’s recommendations.
In an interview, Cat Packer, the department’s executive director, acknowledged that there have been growing pains, but said the process has steadily improved.

The department has increased technical and financial assistance for equity applicants, she said, and has sought amendments to the city’s municipal code to refine the process. Equity in the cannabis industry requires bold, immediate and long-term strategies in both the private sector and at every level of government, Packer said.

“I don’t think we’ll soon be saying that we got it right,” she said, “but we should be able to say, ‘We’re relentless about getting it right.’”


The social equity component of cannabis reform laws proved difficult from the start.

Government programs can’t consider race as an eligibility criterion under California law, so local officials crafted imperfect workarounds to determine who would qualify. The program in Los Angeles considers various factors — income, past cannabis arrests and long-term residency in an area with disproportionately high cannabis arrest rates — and has tightened the criteria though the years.

A consulting firm hired by the city identified police reporting districts with disproportionate arrest rates, but the City Council initially chose instead to use ZIP Codes, a less precise option that looped in some affluent and largely white areas, including Los Feliz. They later switched to police reporting districts.

Would-be equity applicants were further hindered in their attempts to obtain capital because the use and possession of cannabis is still illegal under federal law — a complicating factor industrywide, but one that is especially hard to overcome for entrepreneurs already starting from behind.

Unable to get loans from mom-and-pop banks, many hopeful entrepreneurs are left with few options other than relying on predatory investors. One local industry expert described recruiters descending on housing projects in South L.A., offering $7,000 to people with cannabis convictions in exchange for using their name on official paperwork. And risk-averse landlords often doubled rental rates once they learned the building would house a cannabis shop.

Many entrepreneurs have gambled on the process, knowing that, for some, the industry has been lucrative — but that success is far from guaranteed, said Money of the L.A.-based cannabis alliance.

It’s hard to estimate how much a typical legal pot shop in L.A. makes, Money said. It varies depending on location and marketing budget, but anywhere from $2,000 and $20,000 a day is not uncommon. Some businesses, undercut by the cheaper illicit market, make far less and struggle to make much of a profit at all.

“People think you’re a millionaire overnight, and it’s not true,” she said. “People are really just trying to stay afloat.”


Social equity applicant Kika Keith’s dream of opening her own cannabis business began almost as soon as she heard about plans for legalization.

In the spring of 2018, she signed a lease for a shop on Crenshaw Boulevard, a short drive from where she grew up, and was soon locked into $12,000-a-month rent payments — the “cannabis rate,” she calls it, for a space that, if used for another purpose, would’ve rented for about $5,000 a month.

Then she waited and waited on a license.

Kika Keith waits to open her dispensary in L.A.

Kika Keith poses outside her empty dispensary in 2019.
(Allen J. Schaben / Los Angeles Times)

She often struggled to square those stressful days with the sense of boundless opportunity she’d felt right after legalization, when politicians visited South L.A., sowing lofty expectations. Never again in your lifetime, Keith remembers hearing, will Black people have a chance to be at the forefront of a new industry.

Focusing on the social justice component was an effective campaign tactic, Keith said, a way to convince people who weren’t themselves cannabis users that there was a higher purpose in reforming state law and local cannabis measures.

“The deception was so egregious,” said Keith, now 50.

She still vividly recalls the time after she signed her lease and began fine-tuning her application ahead of the day now infamously referred to by many applicants as “the Race.”

The Department of Cannabis Regulation’s licensing application window was set to open at 10 a.m. Sept. 3, 2019. The first 100 eligible equity applications submitted online would win an opportunity for a license.

Knowing it would likely come down to a matter of minutes or seconds, Keith and a group of other applicants rented fast computers. The application window lasted two weeks, but most applications — 656 — came within the first hour. Keith’s was 144.

Frustrated applicants soon began packing into City Hall complaining about glitches, including some people obtaining access before 10 a.m. Mayor Eric Garcetti eventually called for an audit.
Around that same time, Keith’s investor pulled out because of the wait. She cobbled together money from friends and various cannabis groups, but soon fell behind on rent.

Auditors faulted the Department of Cannabis Regulation for “imprecise messaging” and found that more than 200 applicants had accessed the online platform before 10 a.m., including 14 who started their applications early. But the audit ultimately concluded that the city had taken steps to push applicants back to the proper place in line and made “reasonable” efforts to prevent unfairness in the process, leaving the applicants who lost out no better off.

Keith was stunned.

By that point, she and her investors had already shelled out $350,000, largely on rent on an empty building. For the sake of her three daughters, Keith had long strived to live as an optimist — not to be too deeply swayed by things beyond her control. But she felt a heavy weight during that time and wondered how much longer she could hold on to her empty space.

A group she co-founded called the Social Equity Owners and Workers Association sued the city, arguing that the process had been unfair. It ultimately dropped the suit after the city changed its rules in the summer of 2020, replacing the first-come, first-served process with a lottery system in which applicants can secure property after they’ve been selected. The city also tightened eligibility criteria for the lottery round, requiring that applicants have a past cannabis arrest or conviction. As part of a settlement agreement with the cannabis entrepreneurs, the city agreed to process the next 100 applications in line, which included Keith’s submission.

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