The conversation over how to bring equity to Colorado’s cannabis industry reached a major milestone this week, as Colorado’s Marijuana Enforcement Division released proposed permanent rules in a public hearing.
The Division’s work group held meetings in July and August, which Cannabis Wire has covered extensively. The group focused on the implementation of two bills, HB20-1424, a social equity bill, and HB20-1080, which will loosen residency requirements in the industry. The social equity bill, which Governor Jared Polis signed into law in June, allows a “social equity licensee” to “operate respectively on the premises of” existing cannabis cultivation, manufacturing, and retail businesses, and requires that a social equity licensee maintain at least 51 percent of the beneficial ownership.
Joining the meeting were some of the most important names when it comes to cannabis regulation in Colorado: Dominique Mendiola, Kyle Lambert and Kirsten Gregg, deputy directors of the Colorado Department of Revenue Marijuana Enforcement Division; MED co-chair Danielle Henry, who is a policy adviser for the MED; Corey Amend, senior director for the Specialized Business Group within the Department of Revenue; Ross Hoogerhyde, first assistant attorney general in the Colorado Attorney General’s Office, along with other representatives from the attorney general’s office; and Ean Seeb, who owned one of Denver’s first cannabis shops, Denver Relief, and, later, Denver Relief Consulting, and who is now Governor Jared Polis’ adviser on cannabis. Also joining: Jack Reed, with the Colorado Department of Public Safety, along with Kailtin Urso, with the Department of Public Health and Environment.
Before finalizing the proposed rules, the MED plans to “flesh out the details and conduct research in collaboration with stakeholders on these specific proposals.” Another series of stakeholder meetings is expected to be scheduled throughout October. The residency bill went into effect on September 14, while the equity bill is scheduled to take effect January 1, 2021.
The residency requirement, it turns out, has been the topic of much discussion among Colorado cannabis industry stakeholders.
“We’re all aware of legal challenges to residency requirements in other states,” said Hoogerhyde, from the state Attorney General’s office. “Colorado statute still requires that a narrow category of owner still be a Colorado resident, so the rules continue to reflect this requirement to maintain consistency as required by Colorado statute.”
Teresa Thompson Walsh, who works in the attorney general’s office, spoke about the implementation of the social equity legislation. Specifically, Walsh laid out two models for social equity licensees: the “apprentice model,” which involves a shared premises, and the “separate premises” model. Social equity applicants must be Colorado residents and must show that they were never the “beneficial owner” of a license that was subject to discipline that resulted in license revocation.
In addition, social equity applicants have to demonstrate one of the following: they resided for 15 years between 1980 and 2010 in a census tract designated by the Office of Economic Development and International Trade as an opportunity zone, or have resided 15 years between 1980 and 2010 in an area that the census tract designated as a disproportionately impacted area.
Here’s what the state considers in defining a disproportionately impacted area: the percentage of people who are receiving assistance and who fall below the federal poverty threshold; the rate of unemployment; and the high school graduation rate. And, if the census tract falls within the fifteenth percentile for the state in two of the four characteristics listed, that area is designated as a disproportionately impacted area.
Jack Reed, of the Department of Public Safety, said that regulators plan to build out a tool that is “national in scope” that will allow someone to enter an address, place a dot on a map, and learn whether this location qualifies as a disproportionately impacted area.
At a previous stakeholder workgroup meeting, the organization The Color of Cannabis presented feedback they received. On the topic of disproportionately impacted areas, among the comments they received is that all public housing programs be included as criteria, and that regulators look at Colorado data, rather than federal data, because the “intent of the program is to assist Coloradoans that have been disproportionately impacted by the war on drugs.”
Sarah Woodson, of The Color of Cannabis, described how her thinking on data evolved over time.
“Although we were trying to capture the people that were growing up during the height of the war on drugs, living in communities that have now been gentrified, it seems like the data’s not there. So if the data’s not there, then let’s really focus on the person and let’s talk about criteria that specifically is for the person,” Woodson said in August.
At this week’s final presentation, Thompson Walsh said a social equity applicant would qualify if they can show that a family member was arrested and convicted of a cannabis-related offense, or was subject to a civil asset forfeiture related to a cannabis investigation. Finally, social equity applicants would qualify if their household income did not exceed 50% of the state median income in the year prior to application.
“There was significant discussion both in the workgroups and the smaller groups on what should and what would be the appropriate maximum income for social equity applicants,” Thompson Walsh said. Accelerator applicants also cannot have been subject to license revocation or active suspension, and must demonstrate two years operational experience, or an equivalent.
In addition, in late 2019, the MED initiated a fee analysis with a panel to address whether any cannabis industry fees needed updating. However, Mendiola, the deputy director of MED, said that, following guidance and direction from their department leadership, MED has “decided to postpone completion of fee analysis.”
“In light of this decision and with sensitivity to the challenges that businesses are raising in the current environment, the MED is not proposing any new or amended fees in this rulemaking proceeding,” Mendiola said.