Phase 2 Licensing Workshop Recap; Good News & Better News

Yesterday, the DCR in conjunction with LAFD and LADWP and the OOF held a joint meeting in which they revealed several aspects of Phase 2. There are several important updates, which should be noted on how the City will conduct Phase 2 licensing.

First, Labs will be allowed to apply and to get a temporary license. The City is hoping to get labs up and running soon. The City recognizes the need for labs and the need for businesses to make agreements for goods to be tested. As such, the City is allowing the ten labs in the queue priority processing and the ability to apply for the full license should they wish.

Next, the City explained that it will be looking for three things to qualify someone for Phase 2 licensing at this preliminary stage:

1) Evidence of activity prior to Jan 2016
2) Evidence of providing products to an EEMD prior to Jan 2017
3) An Attestation of Social Equity / Social Equity Qualification documents

The good news is the City is not required Tier 3 incubators to have identified their Social Equity Partners before submitting for Phase 2. Moreover, social equity candidates do NOT need to have a property when submitting for Phase 2. The DCR recognizes that many of the social equity businesses do not have a space, and is thus allowing people to submit an application within the deadline of August 1st – September 14th to qualify for this round of licensing. The City made it clear they would prefer a simple declaration at this time, because a fully executed agreement would have to be scrutinized by the DCR, which has yet to decide upon the minimum requirements. The benefit of having a fully executed agreement is that once the DCR has approved it, you move on directly to the annual license procedure. However, this is not a smart idea, because…

The City has said that there is an interest in establishing a fund that Tier 3 candidates can just pay into. While communicating with the City in the prior week, I was told the fund did not exist. However, yesterday, the City said there are talks for such an action, though it might take months. That being said, it’s best at this point to hold out on any social equity agreements until the City has definitively defined what will be the minimum requirements. In other words, you don’t want to be stuck with a contract and with the responsibility of incubating if you can just pay into a fund. Whether or not a fund happens is not set in stone, but this is an opportunity for businesses to lobby the City to allow for this or to create further benefits for incubators such as reduced taxes.

Next, the City is closely monitoring the cultivation licenses. The City expects these to run out by the end of Phase 2. The City specifically said they do not expect manufacturing or distribution licenses to be gone by Phase 2, and they will have to process an equal amount of general applications once Phase 3 comes into play. To that end, Cat Packer confirmed once more that there will be 310 Social Equity Retail & Delivery license applications processed to keep up the 2:1 ratio written in the regulations. Therefore, if there are indeed 310 retail social equity applicants, there will most likely not be any licenses for general applicants in retail.

What is unclear is whether or not the City will do inspections before giving some sort of approval that will suffice the State Temporary requirements. Many have suggested that simply paying the fee and signing up with the Office of Finance plus getting the approval of qualifications for Phase 2 is enough to get a state temporary. Others believe they must wait 4-6 months for the City to complete inspections, but inspections have not been finished for Phase 1 applicants, which was confusing.

Sergio Ingstrom
Senior Consultant