‘All the advantages are going to the big-money people’: Mass. and Boston inch forward on marijuana equity efforts
Dozens of marijuana advocates and business owners piled into the Boston City Council’s chambers last Tuesday for what was supposed to be a legislative hearing — a chance for officials to get feedback on proposed changes to the city’s cannabis permitting process.
But the session quickly devolved into a cathartic airing of grievances. Frustration with what critics say is a lack of speed, transparency, fairness, and equity in the city’s marijuana industry had clearly reached a boiling point, as the crowd heckled and groaned at remarks by officials, and speaker after speaker railed against City Hall.
“We’re in that limbo phase … We’re trying to hold onto properties, pay lawyers, pay architects, and we are going through an indefinite process where maybe at the end we have a license, maybe we don’t,” said Jon Napoli, the owner of the Hempest clothing store and a member of a state-certified “economic empowerment” group seeking a retail pot license. “Really, all the advantages are going to the big-money people right now.”
The hearing concerned Councilor Kim Janey’s proposal to ensure that locals who suffered during the drug war benefit from the lucrative new recreational pot industry. If passed, the measure would mandate that for two years, officials only give local permits to Boston residents who are black or Hispanic, from certain neighborhoods with high rates of pot arrests, have low incomes, or have a drug conviction or a family member with one.
Of course, getting capital is one of the hardest obstacles for applicants without big investor-backing, as banks aren’t lending because of marijuana’s federal illegality.
While Janey’s proposed ordinance calls for helping entrepreneurs raise funds, it doesn’t outright provide them with capital. But the chairman of the Cannabis Control Commission last weekspilled some details on his idea for solving the problem to the Globe’s editorial board — more on that in a minute.
Council members didn’t vote on Janey’s proposal last week, though each expressed general support for her ideas. And some councilors criticized Mayor Marty Walsh’s administration for what they said was an opaque and achingly slow process that has left dozens of entrepreneurs paying rent on empty properties that may or may not ever host a licensed marijuana establishment.
Two top Walsh officials involved in local marijuana approvals defended their handling of the issue, saying the administration is doing its best and learning as it goes. Walsh, who didn’t attend the hearing, hasn’t directly said whether he supports Janey’s proposal. But after a long period of silence, the mayor late last year adopted equity as his central talking point about legalization, which he strongly opposed in 2016.
“Boston is taking proactive steps to ensure much-needed equity in this new industry,” Walsh wrote in a letter published Thursday by The New York Times. “Boston is a city that pioneers social change, and we are also a city that does things the right way. Our goal is to set a new national standard for equity in the emerging cannabis industry.”
So that’s where Boston stands — nine businesses have received city approval through host community agreements to become licensed, with the recent wave including three firms whose owners were local residents or racial minorities, or both. As slow and opaque as the city has been, at least it’s doing something. Most other cities and towns can’t say the same. Only a handful of others — like Somerville — have passed equity measures. Elsewhere, businesses that lack the backing of wealthy investors face a tough-to-near-impossible road on the local level.
Which is where the state comes in. Local governments don’t have to care about social justice — and, in fact, many appear to be favoring the highest bidders. But under state law, the cannabis commission does have to care — it’s mandated to create a diverse and inclusive industry.
Commission chairman Steven Hoffman came to the Globe’s newsroom last Thursday to chat with the paper’s editorial board. There, he divulged some new tidbits on the social equity issues plaguing the industry. (Interestingly, he said he hasn’t tried cannabis since the Fourth of July a couple years ago, when he smoked a joint in Colorado. “I’m a vodka guy.”)
First, he defended his commission’s slow pace of allowing stores to open, which I reported has led to underwhelming tax collections so far.
“If we had opened 200 stores on day one, it would’ve been really hard” to address a lack of diversity in ownership, Hoffman said, since established businesses would scoop up the prime spots.
Secondly, using perhaps his strongest language yet on the issue, Hoffman criticized municipalities that are making outlandish demands for money when negotiating host community agreements with prospective cannabis operators.
“Some cities and towns are using host community agreements as a way to get more money than the law allows them to, and/or creating obstacles to entry,” Hoffman said. On social equity, he added, “Cities and towns can be part of the solution, but they can also be part of the problem.”
Citing legal ambiguity, the commission has asked the Legislature to give it explicit authority to regulate the contracts. The law limits payments between marijuana businesses and municipalities to 3 percent of annual sales, though many agreements include additional payments that cities and towns insist are not subject to the cap. Those limits were intended to level the playing field for small businesses — but they’re currently unenforced.
“There seems to be clear flouting of these requirements,” Hoffman said. “There are some [municipalities] that are playing games.”
Thirdly, Hoffman revealed that he’s shopping a draft proposal to lawmakers and other officials that calls for the state to offer loans to marijuana entrepreneurs harmed by the war on drugs. The interest-free financing would come from a $10 million bucket and be paid back over a five-year term, he said, with recipients permitted to use 20 percent of each loan to navigate the licensing process, 60 percent to build out their physical facilities, and the remainder held in reserve for unexpected expenses. Business assets, not personal assets, would serve as collateral.
To create the fund, Hoffman suggested diverting a portion of the state’s 10.75 percent excise tax on recreational marijuana sales — though he also said at least one bank that serves recreational operators has offered to pitch in 1 percent of the profits from its cannabis business.
It’s still unclear which agency would administer the loans. The CCC cannot, Hoffman said, as it would be a conflict of interest for the commission to help fund the same companies it’s charged with regulating.
Hoffman said he’s received only supportive responses so far, and hopes it will work.
“I’m new enough to politics that I don’t have a way of assessing the probability of success,” Hoffman said. “But I think getting capital into the hands of the people we’re trying to help is incredibly important.”