April 26th, 2023

City Council Cannabis Board outlines inequities

Minority cannabis dispensary owners share challenges

Isaiah Thompson

Despite well-intended measures aimed at promoting greater racial and social equity in Boston’s burgeoning cannabis industry, several city regulations are stifling the ability of Black and Hispanic-owned cannabis businesses to thrive.

That was the message that a panel of local cannabis entrepreneurs, legal experts and members of the city’s Cannabis Board delivered to city officials at a City Council hearing last week.

Among the challenges facing Black and Hispanic cannabis entrepreneurs, panelists said, are the crowding of dispensaries in certain parts of the city, special requirements for those participating in the city’s equity program — including restrictions on a cannabis business owner’s ability to sell his or her license down the road — and the onerous burden of raising sufficient capital to open and maintain a business.

“Black,Brown and BIPOC citizens spent decades being targeted under the failed war on drugs, leaving thousands with criminal records and barriers entering any industry,” noted City Councilor Brian Worrell, who chairs the Council’s committee on Small Business and Professional Licensure. “These folks have spent the last decade watching the very business that led to their incarceration become a largely legal and highly profitable industry.”

“Those who were jailed were left on the sidelines while wealthier, better-connected and often whiter counterparts dominated the industry … None of this comes as a surprise,” said Worrell. “Course correcting will require that we look at all aspects of this industry to reduce barriers of entry for all entrepreneurs, especially those unfairly targeted under previous policies.”

At-large Councilor Julia Mejia, who called the hearing, concurred, saying that “the current model of the cannabis industry lack awareness of existing issues and challenges that need to be addressed to create a more responsible, sustainable and equitable industry.”

“What sometimes may look good on paper, after it gets implemented, has unintended impacts,” Mejia added.

A lawyer who specializes in cannabis law said those factors impact the most profitable sector of the industry.

“The money is really made with brick and mortar stores, and that’s a challenge here,” testified Lesley Delaney Hawkins of Prince Lobel Tye LLP, a member of the firm’s cannabis law practice.

Those retail stores can cost easily over $1 million to open, Hawkins said. That kind of funding can be especially difficult to come by for Black and Hispanic entrepreneurs, who tend to have less access to generational wealth.

“One of the real challenges in this industry is that it’s one thing to give someone a license or [approve] a host-community agreement, but this isn’t opening a coffee shop,” he said. “The amount of regulation and the amount of work that needs to go into building out these establishments far exceeds what I think anyone ever realized.”

Meanwhile, former city councilor Tito Jackson, who recently celebrated the grand opening of his downtown cannabis dispensary, testified crowding in that area is driving down business for those who have managed to cobble together the finances to open.

“The huge ‘green rush’ that folks thought was going to come did come for some folks who opened early, but margins are much slimmer than they were,” he said.

“In the area that I’m in, there are now seven approved dispensaries within about a half-mile radius,” said Jackson, noting that unlike restaurants, which may serve a wide variety of foods, “We actually have generally the same range of products.”

By allowing licensees to locate so close together, despite a general rule meant to create a “buffer zone” around cannabis businesses, “We are negatively affecting businesses owned by people of color,” he said.

Other rules and regulations of the industry have affected the ability of owners to hire a diverse staff, said Tomas Gonzalez, chief of staff for Seed, a dispensary in Jamaica Plain.

“In our industry, 70% of ‘badged’ employees are white,” said Gonzalez, referring to those staff who manage to pass various state screening measures. “Those numbers don’t help our cause and speak to the disparities that already exist.”

Another issue, said several who testified before the Council committee, is the fact that owners approved through the city’s equity program are prohibited from selling their license — a restriction meant to prevent the “flipping” of equity licenses but which, speakers said, gives an unfair advantage to other businesses, notably those not owned by equity applicants.

“I absolutely don’t believe people should be able to flip their license,” Jackson said. But, he argued, city regulations should include a “sunset” provision to allow an equity applicant-owner to sell a license, should they choose to, after a set period of time.

“They should have an opportunity, if they met the qualifications, to potentially make an exit, which would then create an opportunity for wealth to be built in our communities,” he said.

Former council member Mike Ross, also of Prince Lobel Tye LLP, agreed.

“You don’t want to create a door that allows for someone to get their approval, as a Boston-approved social equity applicant, and then flip it a few weeks later — that would be really bad,” Ross acknowledged. “But limiting the social equity applicants and putting restrictions on their license that aren’t in place for the rest of the market puts them at a disadvantage, no question — so that needs to be addressed and resolved.”

Speaking to this latter point, Boston Cannabis Board Chair Kathleen Joyce said, “We have had conversations about ‘sunset’ clauses,” noting that Chief of Economic Opportunity and Inclusion Segun Idowu “is open to these conversations.”

Diversity and racial representation were explicit goals of the 2017 ballot measure that legalized recreational cannabis in Massachusetts, which included language referring to populations, largely Black and Hispanic residents, who have borne the brunt of the nation’s “War on Drugs,” including arrests and incarceration for possession of marijuana.

But progress toward those goals has remained slow, with just 8% of cannabis licenses awarded statewide going to businesses with majority-minority ownership.

Boston has done significantly better than that, thanks largely to a city ordinance that requires that the Boston Cannabis Board award one license to a minority-owned businesses for every business that doesn’t fit that category.

“We have a duty to maintain a one to one ratio of equity to non-equity applicants and we strive to do better than a one-to-one ratio. I’m proud to say that we have no backlog,” Joyce said, referring to the Cannabis Board.

Shekia Scott, who oversees the city’s equity program, said that the city has certified over 40 equity applicants, including multiple locations by the same business owner, although so far only eight are currently operational.

“While this number may seem low, it’s higher than the state’s number,” said Scott, noting that about 38% of Boston’s cannabis businesses are operated by equity applicants.

Speaking to the question of over-crowding, especially downtown, Joyce defended the Board’s decisions thus far, while acknowledging tension over the issue.

“We’ve been criticized publicly. I’ve been criticized privately for allowing too many licenses, specifically in the downtown area and piercing the buffer zone. I stand behind my decision. I believe every vote I’ve taken, I have backed up with facts and not just opinions,” Joyce told the committee.

But, said Joyce, “I am left with a quandary … I can’t force an applicant to submit an application in a neighborhood. These applications come to us organically, and we review them as they come in.”

Noting that the commission is charged with facilitating the opening of over 50 dispensaries, Joyce said a decision to restrict more facilities from opening downtown could backfire.

“That’s something we have to ask ourselves,” said Joyce. “What are the unintended consequences of saying no?”