Los Angeles has advanced a Social Equity Program to provide opportunities and access to people who were disproportionately impacted by the failed War on Drugs, which if you have been keeping up with our posts, you know we recently called it a dangerous, racist monster of decades past. You also must know by now that The Cannabis Corporate Law Firm is strongly committed to providing ACCURATE factual information to the cannabis community. We have seen a good deal of misinformation circulating in this industry, so we wanted to take a moment to provide some clarity with regard to the Social Equity Program in the City of Los Angeles. The image above is taken directly from Los Angeles’ Regulation No. 13, which defines, “Disproportionately Impacted Area,” as Disproportionately Affected Police Reporting Districts (with a high and very high number of cannabis arrest (>1.5 standard deviations from the City Average, which for our statistician followers is significant since typically we will see only 5% of the data reflected outside of 2 standard deviations). For our non-statistic loving followers, the empirical data speaks for itself. Take District 1 MacArthur Park – 427 cannabis arrests compared to the Citywide average of 72.
Los Angeles decided to create a 3 Tier Social Equity Program Structure.
- Tier 1: Low Income (earnings of less than $41,230 annually) and either (a) a cannabis conviction prior to November 8, 2016 that could have been prosecuted as a misdemeanor or citation under current law OR (b) 5 years cumulative residency in a qualifying zip code. 51% ownership by the Social Equity Applicant is required.
- Qualifying zip codes are: 90057, 90037, 90062, 90003, 90061, 90059, 90061, 90001, 90011, 90008, 90016, 90013, 90059, 90002, 90014, 90021, 90044, 90043, 90037, 90058, 90008, 90027, 90033.
- Tier 2: (a) Low Income and 5 years cumulative residency in a qualifying zip code OR (b) 10 years cumulative residency in a qualifying zip code. 33⅓% ownership by the Social Equity Applicant is required.
- Tier 3: Landlords who enter into a Social Equity Agreement with the City of Los Angeles to provide capital, leased space, business, licensing and compliance assistance to Tier 1 and Tier 2 applicants. These landlords are also going to provide access to property for Tier 1 Applicants rent-free with prorated utilities for 2 years (or more), provided that the property meet certain requirements.
- Tier 1: 1. business, licensing and compliance assistance; 2. expedited renewal processing; 3. program site specific conditions; 4. the potential for fee deferrals if the City Council adopts a fee deferral program; and 5. access to an Industry Investment Fund if established.
- Tier 2: 1. business, licensing and compliance assistance; 2. expedited renewal processing; and 3. program site specific conditions.
- Tier 3: 1. expedited renewal processing; and 2. program site specific conditions.
- Tier 1 and 2: a good faith effort to employ 50% of the weekly hourly workforce from the residents living within a 3 mile radius of the cannabis business premises, with 20% Social Equity Workers (same requirements as Tier 1 SEP applicants) and 10% Transitional Workers.
- Tier 3: a good faith effort to employ 50% of the weekly hourly workforce from the residents living within a 3 mile radius of the cannabis business premises, with 30% Social Equity Workers (same requirements as Tier 1 SEP applicants) and 10% Transitional Workers.
Restrictions for All Social Equity Applicants:
- Ownership or control of the entity that obtains the license can only be transferred to another person who qualifies for the same Tier as the original applicant and the transfer must be approved by Los Angeles Department of Cannabis Regulation.
- Prior to license approval, disclosure of any encumbrances or debt with disclosure of the borrower’s and the lender’s responsibilities and liabilities for the debt held by the applicant.
- Bylaws (for corporations) or Operating Agreements (for LLCs) must reflect ownership interest percentages and must be submitted to the by Los Angeles Department of Cannabis Regulation.
- Prior approval by the by Los Angeles Department of Cannabis Regulation for any loans made with disclosure of the source and terms of the loan. If the by Los Angeles Department of Cannabis Regulation believes that the debt may interfere with the applicant’s success, Tier status may be denied.
- Disclosure of any employee or management agreements.
- Disclosure of any options to purchase equity or control in the licensed entity.
If you would like more information on the City of LA’s social equity program or need help in applying for your license with this program, please contact The Cannabis Corporate Law Firm today to ensure your best interests are protected!