Mayor Seeks to Trim Red Tape for Dispensaries

London Breed’s new legislation aims to give equity owners more control over their cannabis businesses.

It’s been nearly four years since Alexis Bronson began his quest to open up a cannabis shop in San Francisco’s Union Square. 

His dispensary was supposed to take the former home of a John Varvatos store at 152 Geary St. It was to be called Have a Heart and would have been part of a dispensary chain operating throughout California, Washington, and Iowa. But after Have a Heart was hoovered up by the Tempe-based Harvest Health and Recreation and the rights to the store were sold to the controversial bud brand High Times, the whole deal developed a severe case of couchlock.

And so, despite receiving approval from the Planning Commission last year, the storefront remains vacant.

Bronson is one of the city’s cannabis equity applicants. Like similar initiatives that cropped up across the state after California legalized recreational marijuana, San Francisco’s cannabis equity program sought to “lower barriers to cannabis licensing for those hardest hit by the War on Drugs.”

Equity applicants who meet a set of conditions don’t have to pay the hefty $5,000 initial permit fee. They also have the option to partner with cannabis incubator businesses — giving them access to a rent-free space and technical assistance. 

Since the program launched in 2018, the Office of Cannabis has issued 32 permits to equity applicants. Director Marisa Rodriguez tells SF Weekly that the program has become a “force multiplier for social good.”

“Despite the impact of the pandemic on small businesses as a whole, we still saw 11 modern and compliant equity-owned cannabis businesses open, creating local job opportunities and generating sales tax revenue to fund other social services and initiatives in San Francisco,” she says. “The program’s success, even through a public health crisis and economic downtown, underscores the timeliness and impact of cannabis today.” 

But Bronson, who has been selling pot for 40 years, says that while the program is a “godsend,” it still falls short in many ways.

“I think if they had more teeth to reign in these bad operators that it would have helped a lot,” he says, reflecting on his struggle to open the Geary Street shop. “What I’m hearing from a lot of equity applicants is that they’re just giving up and taking payments to be straw CEOs. I’m not in it for that… I want true ownership. I want true accountability.” 

Bronson’s latest roadblock to opening up his shop began last year, just a month after he received Planning Commission approval. While Bronson has a 40 percent stake in the business and is CEO in name, his two other partners hold the other 60 percent. 

After his partners at Have a Heart merged brands with Arizona-based Harvest Health and Recreation, High Times magazine’s parent company, Hightimes Holdings, bought the 152 Geary St. store as part of an $80 million dispensary buying spree. Bronson was left in the dark and is now embroiled in a lawsuit that he says Have a Heart CEO Ryan Kunkel has tried to get him to drop.

“I’m the CEO of my company and nothing has come across the desk of my business, of my company,” Bronson says. 

While he has received substantial grant funding through the program that has helped cover the cost of legal fees, the litigation has forced him to dip into his own pockets and rack up debt. 

But changes to San Francisco’s cannabis equity program that could help applicants like Bronson may be coming soon. 

Last week, Mayor London Breed introduced new legislation to the Board of Supervisors that would modify the Office of Cannabis’ permitting process, something her office says will provide “greater ownership flexibility for cannabis businesses and preserve equity commitments in the program.”

“As San Francisco works to recover from COVID-19, it’s important that we support small businesses, including our cannabis industry,” Breed said in a press release last week. “This legislation helps us make sure the program continues to achieve its goals and ensure that cannabis business owners are supported and have the resources they need to be successful in San Francisco. 

The proposal would prioritize cannabis equity applicants who are sole proprietors. Non-equity cannabis owners who support equity applicants with shared manufacturing space would receive priority, as well. 

Under the mayor’s proposal, cannabis businesses that partner with equity applicants would also be required to make social equity contributions if they reduce an equity applicant’s ownership by 20 percent or more. Social equity contributions include hiring, training, and mentorship to local cannabis equity businesses.

The final rung of the legislation would shorten the time period in which a cannabis business could transfer 50 percent or more of its ownership. Currently, a business has to wait 10 years before making the transfer or else forfeit its permit — a rule instituted by the Board of Supervisors to prevent new owners from immediately selling to Big Canna. Now, Breed is looking to cut that time period down to five years in an effort to give “businesses more flexibility to grow.” 

James Anthony, a long-time cannabis attorney out of Oakland, says the transfer clause hampers equity applicants’ access to investment capital — one of the biggest hurdles for those looking to enter the industry. 

“It is one thing for the government to assist and support equity applicants, and it is another for it to control them and second-guess their business judgment,” Anthony says. “Is the government going to reimburse equity licensees who could sell their businesses for $10 million today if in five years they are bankrupt and the business is worthless and unsalable? Of course not.”

Although Breed is proposing the transfer time clause to be reduced to five years, Anthony says the decision to sell at any time should belong to the equity business owner. Any “such restraint on the salability of a private property business asset is — at least arguably — unconstitutional,” he says. 

For his part, Bronson is also opposed to the clause as it stands — and under the mayor’s proposed amendment. As a 60-year-old cancer survivor, he says he can’t look five or ten years down the road and would like to “see an exit strategy for all [his] hard work.” For him, the current law feels like golden handcuffs, especially as his other Big Cannabis partners have profited in their sales and other business dealings. 

“That is generational wealth,” Bronson says. “That is a home for my family. A good college education for my daughter. That’s the meaning behind that program.”

Grace Hase is a contributing writer. Twitter @grace_hase

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