Department of Cannabis Regulation News Bulletin
Published November 30, 2018
Established in 2017, the Department of Cannabis Regulation (DCR) is responsible for the administration of the City’s commercial cannabis licensing and regulatory program. Through coordinated efforts with local and state agencies, strengthened engagement with the public and cannabis industry, and the continued support of the City Council and Mayor, DCR aims to promote public health and safety through the responsible and equitable implementation of cannabis policy.
Here, in our November 2018 News Bulletin, we share a variety of updates related to local cannabis laws, commercial cannabis business licensing, and enforcement against unlicensed cannabis businesses.
For more information about the Department of Cannabis Regulation, commercial cannabis licensing and regulation, or cannabis, generally, please visit cannabis.lacity.org and subscribe to our listserv.
City Council Amends Los Angeles Municipal Code regarding DCR and Cannabis
The Los Angeles City Council has recently approved amendments to the City’s commercial cannabis ordinances to improve and clarify the Los Angeles Municipal Code regarding DCR and commercial cannabis activity. You can find these amendments here. In particular, we want to highlight one significant amendment to the City’s commercial cannabis regulations and one pending matter in City Council relating to enforcement against unlicensed cannabis businesses.
EMMD Cannabis Retail Re-location Requests
Since the start of the City’s commercial cannabis regulatory program in January 2018, DCR, consistent with City law, has been allowing Existing Medical Marijuana Dispensaries (EMMDs) to move to new addresses in the City, as long as they met the City’s location restrictions for cannabis businesses. Per the amended ordinance, an EMMD must have submitted a relocation request to DCR by November 30, 2018, if it wanted to move to a new location while it is awaiting a final licensing decision from DCR. For a request submitted between October 19, 2018, and November 30, 2018, DCR must seek and consider the recommendation of the impacted Councilmember before approving the requests.
Utility Shut-Off at Unlicensed Cannabis Businesses
On October 31, 2018, City Council, based upon a motion by Councilwoman Monica Rodriguez, instructed the Chief Legislative Analyst (CLA), in coordination with DCR, LADWP, City Attorney, and LAPD, to report on recommendations to establish a process to shut off the power of businesses found to be engaged in unlicensed cannabis activity. Accordingly, over the last several months, DCR has been working closely with LADWP, LAPD and City Attorney to develop a detailed process for power shut-offs, and it will be working with CLA to present the recommendations to City Council soon.
State Temporary and Provisional Licenses Eligibility
Over the last month, DCR has worked closely with the Los Angeles City Attorney, the Bureau of Cannabis Control, the California Department of Food and Agriculture and the California Department of Public Health, to enable “Phase 2 Priority Processing” applicants to pursue state temporary and provisional licenses before DCR issues Temporary Approval. As a result of this cooperation, since November 15, 2018, DCR has been issuing non-operational local authorization letters to all “Phase 2 Priority Processing” applicants, enabling them to apply for state temporary licenses. “Phase 2 Priority Processing” applicants who receive state temporary licenses will not be authorized to operate before DCR determines that they meet all eligibility requirements for Phase 2, including passing a inspection. DCR’s top priority is the development of a well-regulated licensed market; as such it has committed significant resources to ensure that “Phase 2 Priority Processing” applicants maintain a viable path toward temporary licenses from the state.
Annual License Application Processing
DCR expects to begin accepting annual license applications from Phase 1 applicants in January 2019. Before the applications are accepted, DCR will provide Phase 1 applicants with further direction about what must be submitted as part of the annual license application. After an application is submitted, DCR will vet ownership information and review premises diagrams and operational plans. Next, DCR will send out public notice of the application, hold a community meeting for the applicant’s retail application, and conduct a pre-license inspection of the applicant’s business premises. Then, if the applicant meets all requirements for the licenses applied for, DCR will issue licenses for the non-retail activities and recommend to the Commission that a retail license be issued and the Commission will hold a public hearing to consider the recommendation. Also, before any type of license is issued, DCR or the Commission will have to make all necessary findings required under the California Environmental Quality Act. This general overview does not describe all application requirements and the factors unique to each application will ultimately determine the manner and order in which it is processed and the City’s licensing decision. DCR may deny an application at any time during application processing for one or more of the reasons listed in LAMC Sec. 104.06(a)(1).
DCR expects to begin accepting annual license applications from Phase 2 applicants in Spring 2019. The application process for these applicants will be very similar to the non-retail licensing process for Phase 1 applicants described above, with the addition of the Social Equity Program and its specific program requirements.
Preliminary Eligibility Determinations
DCR has been reviewing evidence applicants submitted to prove they engaged in non-retail commercial cannabis activities prior to 2016 and supplied an EMMD prior to 2017, as required by LAMC Sec. 104.08(a)(1) and (2). DCR will soon begin notifying those applicants that DCR has determined submitted sufficient evidence to satisfy LAMC Sec. 104.08(a)(1) and (2). DCR will also notify applicants that did not submit sufficient evidence and give them an opportunity to submit additional evidence.
These notifications will not go out all at once, so if other applicants are notified before you, it only means that DCR is still reviewing your submissions.
For those Phase 2 applicants who are awaiting inspections: DCR, with the assistance of the Los Angeles Fire Department and civilian inspectors from the Commission Inspection Division (CID), will shortly begin inspecting the business premises of Phase 2 applicants. Recently, DCR sent all Phase 2 applicants who have paid their fees a survey to determine which applicants are ready for an inspection. An applicant is ready for inspection if its business premises (i) is substantially similar to the diagram of the business premises; (ii) is equipped with a video surveillance system, alarm system and commercial grade locks, as required under the City’s regulations; and (iii) is free of fire or life safety violations. An applicant will not receive an inspection until its business premises meets all three of these conditions. DCR will notify an applicant of the date of its inspection. Please be sure to return your survey and make your location(s) available for the date and time set to ensure it’s inspected in a timely manner.
Social Equity Fee Deferral Program
At this time, applicants who applied for a License for Non-Retailer Commercial Cannabis Activity pursuant to Los Angeles Municipal Code (LAMC) Section 104.08 (Phase 2 Priority Processing) and meet the Tier 1 Social Equity Program ownership requirements stated in LAMC Section 104.20(c) may register for the Social Equity Program’s Tier 1 Fee Deferral Program.
Pursuant to LAMC Section 104.20(c), a Tier 1 Social Equity Program Applicant shall meet the following criteria at time of applying for a license: 1. Low Income and prior California Cannabis Conviction; or 2. Low Income and a minimum of five years cumulative residency in a Disproportionately Impacted Area. A Tier 1 Social Equity Applicant shall own no less than a 51 percent equity share of the business that would benefit from the issuance of the License.
If an applicant registers for the Social Equity Program’s Tier 1 Fee Deferral Program, its application will permanently be deemed a Tier 1 Social Equity Program application. That means that under no circumstance will the applicant be eligible for an annual license as a part of Phase 2 Priority Processing other than as a Tier 1 Social Equity Applicant that meets the 51% Equity Share requirements, as well as other requirements, proscribed in LAMC Sec. 104.20. Click here to register for the Social Equity Program’s Tier 1 Fee Deferral Program.
In addition to processing Phase 1 and Phase 2 applications, DCR will be working throughout the remainder of 2018 and early 2019 to prepare for the start of Phase 3 of licensing. For the start of Phase 3 to be successful, DCR must be in a position to process applications according to the processing ratios specified in the City’s Social Equity Program. In general, Tier 1 and Tier 2 Social Equity retailer applications must be processed on a 2:1 ratio with all non-Social Equity retailer applications, and Tier 1, Tier 2 and Tier 3 Social Equity non-retailer applications must be processed on a 1:1 with non-Social Equity non-retail applications. (Please refer to LAMC Sec. 104.20(a) for the exact processing requirements.) To adhere to these processing ratios, DCR will have to be able to verify which applicants meet the requirements to be Tier 1 or Tier 2 Social Equity Applicants. Accordingly, DCR will start Phase 3 by accepting applications for verification of Tier 1 or Tier 2 status, which will require applicants to submit relevant information and evidence relating to prior California Cannabis Arrests or Convictions, residency in a Disproportionately Impacted Area, Low Income status, and all documents and information necessary to prove that the Tier 1 or Tier 2 Equity Share requirement is met. After DCR verifies an applicant is a Tier 1 or Tier 2 Social Equity Applicant, the applicant will have to identify a business premises and submit the information and documents required for the regular annual license application. Once DCR has verified enough Tier 1 or Tier 2 Social Equity Applicants to comply with the processing ratios, it will begin accepting non-Social Equity applications. DCR expects to begin accepting Phase 3 verification applications in Spring 2019. Prior to that, it will provide more information about how applicants may apply for Social Equity status verification.
October 25, 2018 Cannabis Business Seminar
Last month, the California Department of Tax and Fee Administration (CDFTA) held a free Cannabis Business Seminar at the Los Angeles Convention Center. Multiple agencies participated and presented information to those interested in conducting commercial cannabis businesses. Click here to access the agenda and presentation slides.