City of Los Angeles Cannabis Permit Update

Non-Retail Licensing:

Our sources indicate that the application period for non-retail license applications for cultivation, distribution, manufacturing, and laboratory testing will being in early May. It is anticipated that the City will allow roughly 3-4 weeks for applicants to submit their applications once the application is released.

Retail:

Retail licensing in the City of Los Angeles is proceeding in three steps. First Existing Medical Marijuana Dispensaries protected by Prop. D received priority licensing for temporary city approval. Next, the City plans to initiate Social Equity Retail application processing before general retail licensing will begin. Our sources indicate that Social Equity Retail licensing will commence in September, with general retail licensing to follow next winter or early spring of next year.

Social Equity Program:  The City’s social equity program provides priority processing for qualifying social equity applicants.  Tier 1 social equity applicants will receive priority processing for retailer commercial cannabis activity licenses and for microbusiness licenses on a 2:1 ratio with all non-social equity applicants, including those licenses issued to EMMDs otherwise known and Existing Medical Marijuana Dispensaries.  This means that for every retail license issued to a non-social equity applicant, the City must issue two retail licenses to a qualifying social equity applicant.

As of today, the City has issued 138 temporary approvals to engage in commercial cannabis activity to existing medical marijuana dispensaries.  This means that the City must issue at least 276 retail licenses to qualifying social equity applicants before it may issue any additional general retail applicant.  We anticipate that the City will begin accepting social equity retail applications in September.

As for non-retail cannabis uses, social equity applicants will receive priority processing on all non-retail license types on a 1:1 ratio with all non-social equity applicants. It is anticipated that the City will begin accepting non-retail cannabis applications in early summer.

The City Council has recently approved a contract to allow its contractor to expand its Social Equity Report to expand the number of available zip codes for qualifying social equity applicants from the various areas in the San Fernando Valley.

As many of you know, under the current ordinance, a Tier 3 social equity applicant is required to enter into a Social Equity Agreement with the City to provide access to their property with no rent and with prorated utilities for a minimum of two years.  At the urging of numerous investors and Tier 3 applicants, the City is currently considering amending its Social Equity Program requirements to allow Tier 3 applicants to provide a flat fee in lieu of providing space in the licensed premises. The flat fee would be deposited into a separate social equity fund to assist social equity applicants.

Tying down your compliant location remains critically important to the Los Angeles application process. The Puzzle Group has extensive real estate and brokerage experience and is poised to assist all clients to obtain real estate in the Los Angeles market.

Other Cities in Play:

West Hollywood:

The City of West Hollywood is in the process of finalizing its Cannabis Business License Screening Application.  The City Council has approved five types of cannabis business licenses including:

• Eight (8) Adult-Use Retail Business Licenses;
• Eight (8) Consumption Area (smoking, vaping, and ingestion) with on-site adult-use retail sales (sales of products to be consumed on-site) Business Licenses;
• Eight (8) Consumption Area (edible ingestion only) with on-site adult-use retail sales (sales of products to be consumed on-site) Business Licenses;
• Eight (8) Medical-Use Dispensary Business Licenses; and
• Eight (8) Delivery Service Business Licenses (when the physical location of the business is located in West Hollywood).

Applications will be accepted May 2nd through May 31st.

Santa Ana:

The City of Santa Ana is currently preparing for release its Phase 2 Regulatory Safety Permit grading criteria and application for adult-use cannabis retail.  On April 17th, the City Council plans to discuss its draft ordinance which adds distribution, manufacturing, and cultivation to the City’s list of permissible cannabis businesses. The City plans to develop a separate application process for these nonretail uses which combines both the Phase 1 and Phase 2 retail application processes.  Taxes are to be set by operating agreement between the City and each selected applicant.

 San Bernardino:

In response to litigation concerning its prior licensing scheme, the City of San Bernardino has recently updated its cannabis regulations and has issued its draft commercial cannabis business application. The City intends to issue a total of 17 commercial cannabis business licenses for retail, cultivation, testing, manufacturing, microbusinesses, and distribution.  The City intends to issue up to 5 licenses for each of the six license types listed above, not to exceed 17 total commercial cannabis business licenses.

Montebello:

The City of Montebello is currently accepting applications for cultivation, manufacturing, and laboratory testing. Meanwhile, the City has initiated proceedings to amend its zoning code to allow non-storefront delivery retail and distribution.  The application period ends April 18, 2018.

Moreno Valley:

The initial application period to apply for a commercial cannabis business license in the City of Moreno Valley began on April 2nd. To be considered, applications must be submitted by May 11th.  The City intends to permit up to 27 commercial cannabis businesses.  The City has offered to issue up to the following license types: 8 dispensaries; 2 testing facilities; 5 cultivation facilities; 5 manufacturing facilities; 2 microbusinesses; and 2 distribution facilities.

The City Council has directed staff to prepare language for a cannabis tax measure to be considered by the Council for possible inclusion on the November 2018 ballot. Potential tax rates have not been released by the City.

Pasadena:

Pasadena has called a special municipal election for June 5th. The City has placed two measures on the ballot, one ballot measure permits up to 6 adult-use retail cannabis businesses, 4 cultivation facilities, and 4 laboratory testing facilities.  This ballot measure is contingent upon contemporaneous passage of the City’s cannabis tax measure. These tax rates are set at 6% gross receipts for retail, 4% for laboratory testing facilities, and $10/sqft of canopy space for cultivation.

Culver City:

On December 11, 2017, Culver City Council voted to approve an ordinance that allows for the establishment of medicinal and recreational commercial cannabis businesses.  The ordinance allows for the establishment of 3 storefront retail establishments, 5 delivery only retail, 6 manufacturing facilities, 6 distribution facilities, 4 laboratory testing facilities, and 3 indoor commercial cultivation facilities.  On April 4th, the City released its application for a Culver City Commercial Cannabis Business Permits for manufacturing, distribution, cultivation, testing, and delivery-only retail businesses. Storefront retail applications are not yet available but are expected to be available by May 2018.

Due to Culver City’s central location in the Los Angeles Metro Area and the limited number of available licenses, we expect the objective merit-based application process to be extremely competitive.  Locating compliant real estate property should be a primary concern for all potential applicants to the City. The Puzzle Group specializes in obtaining real estate in Culver City and is available to assist any interested parties to locate potential real estate and prepare license applications for those properties.

Chula Vista:

The City of Chula Vista has passed an ordinance authorizing 12 retail licenses, 10 cultivations licenses, and an unlimited number of manufacturing, distributor and testing licenses.  Storefront retail is limited to adult-use only, while all other uses are available as either medical or adult-use. However, please note that the ordinance is only effective upon voter approval of a tax measure submitted to the voters in November 2018.  Once the tax measure is passed, the City anticipates opening licensing on January 1, 2019.

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