Last Friday, I took some time to speak with Mr. Zachary Knox, an attorney that was sub-contracted by the City of Oakland to provide technical assistance to social equity applicants. His contract has been renewed for a second time, and he is one of the advisors for Cat Packer and the City of Los Angeles for drafting the Social Equity Plan. One of the interesting aspects of the Social Equity Program in Oakland is that the City of Oakland is responsible for providing licensing and technical assistance to Social Equity Applicants. This is good, because as I’ve stated in my previous emails, the City of Los Angeles expects investors to pay for their mistakes during the War on Drugs and the unjust treatment of black and brown communities across California. Let’s remember, the GOVERNMENT ran a campaign against drugs. The GOVERNMENT unfairly targeted African-American and Latino communities for drugs. The GOVERNMENT incarcerated African-Americans and Latinos at a higher rate for cannabis convictions. These problems were not brought on by investors… in fact, many investors faced prison time themselves! Thus, it makes no sense to have them pay for “social equity.”
In fact, this was something Zach Knox agreed with. He said that it was imperative for the City to provide “technical assistance in order to build sustainable Social Equity businesses. You can’t expect a social equity applicant with previous convictions and spotty job history to know how to run a million dollar dispensary.” At the same time, why is it the incubator’s responsibility, in Los Angeles, to ensure a social equity business’ success? On that same topic, I asked Mr. Knox if the program in Oakland was successful, since many have deemed it to have failed. “It’s successful in that many jurisdictions have decided to adopt it: LA, San Fran, Long Beach, New Jersey, Massachusetts.” Indeed, he mentioned that the State of California would be sponsoring a STATEWIDE Social Equity Program under Senate Bill 1294. How this will be implemented across the state is unknown as well as its economic impacts.Moreover, there were only 60 applicants in Oakland before the Social Equity Program took place. Due to Mr. Knox educational efforts, there are more than 1000 applicants with 600 qualified for Social Equity. This exceeded the City’s expectations and thus is considered a success.
There are also several shortcomings to the program, he conceded. First, there was very limited access to capital and access to real estate. Mr. Knox believes that the Cities should be more responsible in providing capital and space for social equity participants. On the other hand, Los Angeles is requiring incubators / investors to provide capital and space for these businesses. Moreover, the City of Oakland cannot provide all of the technical support it has pledged. Indeed, currently the City has a Request for Proposals out for consulting firms wishing to provide services to Social Equity Applicants. “There aren’t many attorneys and consultants who are willing to work for free,” lamented Mr. Knox. Moreover, there was slow buy-in from incubators. I wonder if this will also be the case in Los Angeles. Considering Oakland only required someone to provide a minimum of 1000 sqft, it wouldn’t be surprising if there was little to no buy-in for Los Angeles. In a previous email, I broke down the cost of incubating a business, which is around a total of $250,000 for the two years of incubation in Los Angeles. This should make any business tremble! Especially since this money is going to people who have no proven record of success.
Out of all the equity applicants in Oakland, of course delivery services were the most popular. Why? They require the least amount of start-up capital. Indeed, manufacturing, cultivation, and distribution had very limited amount of Social Equity Applicants in Oakland. Now this begs the question, will the same happen to LA? In other words, it’s much more difficult to find a social equity applicant with the skills to run a manufacturing or cultivation facility than it is to find one to run a basic retail operation. With Phase 2 of LA not including any retail, anyone who provided products to the EEMDs are being FORCED (yes, it’s a strong word, but it definitely feels forced) to join the Social Equity Program in order to receive priority processing. Regardless of the fact that they have been operating for many years, many of them are successful businesses with minority business owners. That does not matter. The City will only allow applicants into Phase 2 who participate as Social Equity Applicants or Social Equity Incubators. So what will happen when not enough social equity applicants apply to be manufacturers and cultivators? We all know the majority of them will go for simple retail or delivery licenses.
Business owners wishing to go into Phase 2 of LA licensing, please contact me so that I may interview you and hear your concerns with the Social Equity Program. I’ve meetings with several of the program designers, so the more voices I can incorporate, the better. Finally, I am keen to continue providing information and analyses as well as lobbying services. If you are a fan of my emails and appreciate the information I have given, please reach out and let’s see how we can work together.