Equity is still a missing piece in the legal marijuana retail puzzle
Massachusetts residents want marijuana. That much is clear from the lines outside the state’s new pot stores, and the increasingly loud demands for the state cannabis commission to hurry up and license more establishments. Nearly two years after legalization, Brookline’s new marijuana shop is only the 13th retail outlet in the Commonwealth.
But Massachusetts also wants — or claims to want — social equity in the new industry, so that communities that have been hurt most by decades of marijuana prohibition benefit economically from its legalization.
Now those two imperatives increasingly appear to be on a collision course. It’s become clear that the financial and logistical barriers for “economic empowerment applicants” will take more time and money to overcome. Last year, the state certified more than 120 applicants under the category, which covers people of disadvantaged communities, and gave them priority in licensing. Yet none of the 13 shops belong to an economic empowerment applicant. Rushing to license more stores risks saturating the market before minority entrepreneurs can get off the ground. “If we had opened 200 stores on day one, it would be really hard to fix and get to where we want to honor diversity,” said Steven Hoffman, the chairman of the state’s Cannabis Control Commission, defending the slow pace of openings, in a meeting with the Globe editorial board last week.
A report by the Globe’s Spotlight team shows what the commission, and the minority entrepreneurs it’s supposed to nurture, are up against. Marijuana is big business, and firms appear to be flouting a rule against any one company holding more than three retail licenses. Deep-pocketed companies are circling the retail business in Massachusetts, and they’re ready to meet demand. The commission must keep its guard up and go back to scrutinize the provisional licenses already issued to the big players mentioned in the Spotlight report.
For equity advocates, the near-term future looks bleak. As of last month, the commission had approved 118 provisional licenses for pot business. Of those, nine self-reported as women-owned businesses and two as minority-owned. As of March 7, the pipeline included 305 applications under review by the commission. In that group, only four were economic empowerment applicants, while nearly half had preferable status as medical marijuana license-holders.
Diversity doesn’t seem achievable without some course corrections, and that will have to involve the Legislature. For one, the law included a restriction that should be addressed by Beacon Hill: the priority status given to medical marijuana license-holders to become recreational shops. Not surprisingly, of the 13 shops currently open for recreational sales only one did not hold a medical marijuana license first. That shop, in Uxbridge, also happens to be the first woman-owned small business to enter the space.
Towns and cities need to view diversity as their job too. Host municipalities hold a lot of power in the process. Most municipal bureaucracies have proceeded with extreme caution, with some even creating the sort of red tape that favors the connected. The state could penalize communities for taking excessive amounts of time to approve the applicant by reducing the taxes they can collect.
Then there’s the money, or lack thereof. Startup costs for a marijuana establishment run from $1 million to $5 million. Even in ordinary circumstances, minority entrepreneurs struggle to get loans. In this case, because marijuana remains an illegal substance at the federal level, no bank is currently lending to marijuana businesses anyway. Big Pot doesn’t need financing; Main Street entrepreneurs do.
To get around the money obstacles, the state cannabis commission has a range of options, including a suggestion to withhold local marijuana tax dollars from cities and towns that don’t implement programs to promote social equity, like the one Somerville approved last fall. Boston has been studying its own social equity ordinance and should prioritize its approval.
Perhaps more urgent and consequential is the idea to launch a fund of public and private money that would offer interest-free loans to minority entrepreneurs unable to secure loans. Several sources would feed into the fund: private donations (Hoffman said one of the banks servicing the adult-use cannabis businesses is interested in donating 1 percent of their marijuana-related revenue to the fund); a small percentage of the 10.75 percent excise tax on marijuana; and even part of the 3 percent impact fee that recreational marijuana stores are required to pay in their host community agreements. Such a fund could piggyback on some existing state programs designed to foster minority entrepreneurship.
“We’re working with legislators, we’re working with other state agencies, including housing and economic development, because they have 30 programs in that secretariat that help inner-city economic development and entrepreneurship,” Hoffman said.
Hoffman emphasized that the specifics are up to the Legislature; while he recommended starting at $10 million, he said the number was negotiable. But if the state wants to make good on the law’s social-equity promises, it does need to put money behind them.
Over time, the pressure to issue more licenses — from consumers who want pot, communities that want tax revenue, and deep-pocketed commercial operations — is going to increase. The Legislature should act soon, to make sure the window of opportunity to build an equitable marijuana industry in Massachusetts doesn’t close.