Golden Ticket: Here’s your chance to get into the cannabis biz—provided you meet the requirements

Andrés Portela

October was a big month for Prop 207’s Social Equity program, as the Arizona Department of Health Services released its final rules for the program that is intended to redress some of the damage done to disadvantaged communities throughout the decades-long war on drugs.

ADHS dropped the rules in mid-October after an earlier release of Arizona ZIP codes that will be targeted for 26 marijuana establishment licenses to be released early next year.

After ADHS released a draft of the rules in May, social equity has been a hot topic of debate in the cannabis community.

At issue has been the question of how the rules could be set up to avoid “gaming the system” by wealthy owners already in the business, as well as to ensure that applicants don’t just flip their licenses once they win them. One social equity license “golden ticket” is worth an estimated $10-$15 million.

In the final rules, ADHS did away with a loophole that would have allowed a single individual to sponsor an unlimited number of applications and also prohibited an applicant to enter into an agreement to sell their license before it’s been issued. But cannabis advocates think there are still a lot of flaws in the system.

To qualify for a license, individuals must meet three of four criteria. They must have been personally impacted by Arizona’s previous marijuana laws, or having a family member impacted by those laws. Their household income must be at or less than 400% of the federal poverty level for three of the past five years. And they must have resided for three of the past five years in one of 87 zip codes released the first week of October.

Previous versions of the rules required applicants to have marijuana convictions that are qualified to be expunged from their records, but the new rules require the expungement to be complete, which can take up to two months from the time paperwork is submitted. Further, applicants must obtain a marijuana facility agent license before they can apply, which means they cannot have any recent marijuana felonies on their records.

Since the application period for a social equity license is open the first two weeks of December—closing on Dec. 14—the window is likely shut for potential applicants that have not gone through the expungement process. 

According to Arizona NORML Director Mike Robinette, about 80% of the people who have sought help at more than 25 expungement clinics conducted by the nonprofit are unaware the social equity program even exists.

“I have spoken firsthand with scores of people from disproportionately impacted communities about the social equity ownership program,” he stated in an Oct. 8 press release. “Overwhelmingly, these individuals were unaware of the program’s existence. At the average clinic, approximately four out of five people voice surprise about their ability to apply for a license that is uniquely reserved for people like them.”

Despite the work done by NORML and other nonprofits, out of the estimated 190,000 or so individuals qualified to have their cannabis records sealed, there have been very few records that have actually been expunged. Pima County estimates about 60,000 cannabis-related convictions qualify, but by the end of September, Pima County Superior Court reported there had only been 28 petitions filed and only 16 records sealed.

Another significant roadblock to a successful social equity program is the cost to get into an established business sector that requires hundreds of thousands of dollars, possibly up to $1 million, to set up.

Not only is there a $5,000, non-refundable application fee, but the applicant must also navigate an arcane system that includes working with state and community governments on zoning, permits and other minutiae related to setting up shop.

Additionally, there is an investment in obtaining real estate and bringing buildings up to requirements in a heavily regulated business.

While acquiring a license can solve many of the fiscal issues, those who receive a license must be savvy enough to understand the rules and have trustworthy partners to work with.

“A lot of this is going to come down to leverage and trust and making sure you find partners that really do share your goals,” Arizona NORML Communications Director Jon Udell said. “So the path has gotten a lot narrower, but it’s to be determined if a path still exists.”

Solutions to some of the problems that have arisen could be expanding the timeline for applications, reducing the non-refundable application fee and refunding it to those who are not chosen.

Udell also thinks there should be money from the state available to help licensees, who will have about 18 months to get up and running from the time they receive the nod from the state.

“There are a whole lot of expenses they’re going to incur the first 18 months, and these are people at 400% (of) the poverty level or lower, so they often have systemic barriers to accessing private investors,” he said.

Earlier in October, ADHS released its list of ZIP codes identifying “communities disproportionately impacted by the enforcement of previous marijuana laws.”

Of that list, there are eight in the Tucson area, including 85321, 85634, 85757, 85746, 85705, 85713, 85714 and 85706.

Andrés Portela, an up-and-coming social advocate who ran unsuccessfully for Tucson’s Ward 6 seat earlier this year, thinks extending the deadline would be the equivalent of a “BandAid on a bullet wound,” and that more needs to be done to address the underlying issues.

First and foremost, Portela advocates for automatic expungement, so that everyone eligible would be on the same playing field.

“If they’re trying to be very specific about a person who is disproportionately affected by the war on drugs, they need to release data to say who is disproportionately impacted by the war on drugs,” he said of the use of ZIP codes as a determinant. “When we look at the framework of power, the state holds all of the power: They’re the ones who are issuing the licenses, they are the ones who are expunging records. The state needs to do something more for people to be eligible to apply.” 

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