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Oakland Licensing Plan Builds in Diversity and Reparations

Oakland, Calif., paid big chunk of social-justice debt this week when its city council unanimously approved controversial reparations for blacks and Latinos affected by America’s War on Drugs.

‘Black folks built this city and we demand ownership in the industry,--as owners, not as workers.’
Carroll Fife, Oakland civic activist

Under a first-of-its-kind law originally approved last year, qualified minority applicants with majority ownership in medical cannabis businesses — nurseries, edibles kitchens, testing labs, distributors, dispensaries and others — will receive half of all licenses issued in Oakland, along with zero-interest loans subsidized by $3 million of the city’s cannabis tax revenue. “Black folks built this city and we demand ownership in the industry,” said activist Carroll Fife. “We do that as owners, not as workers.”

Oakland shocked the cannabis world when it approved the reparations in May 2016. The city became the first municipality to offer an institutionalized response to the disproportionate harms of cannabis prohibition—and the disproportionate opportunities that lie in prohibition’s end. Many had spoken out against the over-incarceration of people of color, and their under-representation among legal cannabis business owners. Oakland was the first city to do something about it.

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Regret and infighting followed the passage of that initial reparations program, though. Council members considered scrapping the requirement that 50 percent of permits be issued preferentially They haggled over the minimum length of residency requirements and added a sunset phase for permit preferences. Some issues were still be fixed during last Tuesday’s three-hour meeting, which drew more than 100 public speakers.

After a long night of debate and compromise, the city council finally approved a revised reparations plan.

The ordinances are designed to bring the city in compliance with state laws that will regulate the multibillion-dollar cannabis industry by 2018. Those laws stipulate that all cannabis businesses be licensed in the city in which they operate.

How will it all play out? Here’s a primer on Oakland’s preferential pot program.

What are reparations?

Reparations were conceived in 2015 to address concerns over racial inequity and tokenism in the cannabis industry, whose investors and owners are predominately white.

Oakland’s equity program created methods to help drug war victims enter the state’s legal medical cannabis market with protections that include majority ownership and appropriate responsibilities.

Although the law passed unanimously in May, many council members quickly regretted their votes as imperfections in the law became apparent. Eligibility time periods were extended and a loan program was added. The revised measure was approved unanimously, once again, on Tuesday in a midnight vote preceded by last-minute legislative sausage-making, Oakland’s equity program earmarks 50 percent of all cannabis business permits in the city for drug war victims; authorizes $3 million in zero-interest business loans to low-income blacks and Latinos; and a creates a system by which some applicants can speed the permitting process by donating office space.

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Beneficiaries

Preference will be given to blacks and Latinos arrested and convicted of cannabis-related crimes in Oakland within the past 20 years, and to residents of neighborhoods identified as having had significant numbers of cannabis arrests. Equity permit applicants are required to have lived in one or a combination of six designated neighborhoods for 10 of the past 20 years, and their current income must be below 80 percent of the city’s average median income. Even though some neighborhoods added before this week’s vote are gentrifying, all designated neighborhoods are predominantly black. By extending minimum residency requirements from 2 years to 10 years, the council clearly disfavors newer residents, many of whom are white.

Opposition

Critics of Oakland’s cannabis reparations plan say few people will meet those equity permit qualifications. They predict a crippling bottleneck created by the law’s stipulation that one equity permit must be issued for every general permit issued.

Collateral damage

Yes, it’s possible that some blacks and Latinos currently operating cannabis businesses in Oakland wouldn’t qualify for equity permits and could get caught in a permitting bottleneck.

What’s next

No start date for permitting has been announced, but Jan. 1, 2018, is the deadline by which businesses must have a local license or be operating in good standing with a city in order to continue operating under new state regulations. Oakland’s cannabis permits will be issued in two stages. In the first stage, half of all licenses will be reserved for equity applicants while an assistance program providing zero-interest business loans and technical help to equity applicants will begin raising $3 million in expected cannabis tax revenue. In stage two, after loan funds are raised, there won’t be any restrictions on licensees. City officials said approximately 130 businesses have been operating without a permit.

Drug-war math

In a city whose population is equally represented by three groups that use cannabis at roughly the same rates, 2015 statistics show disproportionate cannabis arrest rates for blacks (77 percent), Latinos (15 percent) and whites (4 percent). “The data shows that for over two decades, black and brown residents were arrested and incarcerated for drug offenses at disparately high rates, while largely white cannabis cultivators, manufacturers and distributors who were not operating entirely above board either, flourished under changing laws designed to accommodate the burgeoning industry,” said Darlene Flynn, director of the city’s newly created Department of Race and Equity.

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Fast-track options

People who are not eligible for an equity permit but want a general permit can speed the process by offering free rent or real estate to an equity applicant.

Is this constitutional?

Maybe there’s no cannabis arrest on your rap sheet. Maybe you live in one of Oakland’s affluent neighborhoods. Maybe you’re Filipino or Scandinavian. What can you do about Oakland’s reparations? You can file a lawsuit. Naresh Channaveerappa, an attorney who represents cannabis businesses, said he believes that preferential treatment is unconstitutional. “Anyone who is harmed by this preferential treatment has legal ground to challenge it,” he said.

What’s the state’s stance?

When cannabis is finally regulated in California in 2018, a cannabis business will need both a city permit and a state license before it can operate.  State law denies licenses to the cannabis convicts Oakland permits. But California’s recreational cannabis law, Proposition 64, the California Adult Use of Marijuana Act, includes a provision for record expungement. A spokeswoman for California’s Bureau of Medical Cannabis Regulation said state regulators will respond case by case and may deny licenses to people who have committed cannabis crimes. Last summer, Oakland’s City Council approved a resolution asking state legislators to expunge cannabis-related criminal records and to remove restrictions excluding people who’ve committed cannabis crimes from participating in the cannabis industry.

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