Los Angeles vs. legal weed

Business wants to boom, but the city of Los Angeles is, in reality, one of the most contentious, complex, and gridlocked legal-marijuana markets in the United States

Halfway through the summer, Humberto “Junior” Martinez went to visit a friend who owns a legal-marijuana store in LA’s San Fernando Valley. Martinez and the friend both got into the cannabis industry a decade ago, but over time, the vagaries of pot policy in Los Angeles left a wide gap in their fortunes.

“Hey Junior!” the shop owner said when he saw Martinez surveying the shelves of bud from his wheelchair, the result of a 2007 motorcycle accident. “What are you up to these days?”

“Just trying to get legal, man,” Martinez responded.

“Aw, well, don’t worry. You’ll work it out!”

Easy for him to say, Martinez thought. Both men had been running quasi-legal marijuana businesses, paying their taxes and playing nice with the city in the hopes that someday, the government would grant their dispensaries the same protections as any other legitimate store. But now, more than nine months after recreational marijuana sales were legalized in California, Martinez had been left behind, while his friend enjoyed the spoils of owning one of only 169 licensed pot shops in the city of LA.

For Martinez, the situation didn’t feel fair. This wasn’t about entrepreneurial talent, hard work, or following the law. In the end, the factors that allowed his friend’s shop to succeed and left him struggling were largely ones he never would have considered back in 2009: location, bolstered by luck, money, and influence.

In 21st-century Los Angeles, every block seems to boast at least one storefront with the familiar green cross and cheesy wordplay (“High Society Wellness Center”; “The Pottery”), and every parking lot a cloud of pungent stank, left behind by recently vanished tokers. But in the era of legal weed, there is far more going on than can be seen from a passing car.

Only a small fraction of the pot shops peppering the sprawl of the country’s second-largest city are actually legal. LA City Controller Ron Galperin estimates that, beyond the 169 that are licensed, another 1,700 illicit marijuana dispensaries are operating within city limits.

For comparison, Los Angeles has 1,528 licensed liquor stores. Many unlicensed dispensaries check doctor’s recommendations and driver’s licenses, offer pre-packaged edibles, and appear, to passers-by, exactly the same as legal shops.

Los Angeles is widely agreed to be the biggest and most important cannabis economy in the world, with a few million consumers, tens of thousands of workers, and billions of dollars each year in sales. It is also, from a business and government standpoint, one of the most contentious, complex, and gridlocked legal-marijuana markets in the United States.

Most other major California cities began permitting marijuana dispensaries years ago, when only medical was legal, but Los Angeles waited—leaving LA cannabis businesses especially vulnerable to the whims of law enforcement and prosecutors. So while U.S. Attorney General Jeff Sessions’s anti-pot perspective is more likely to garner headlines, the anti-pot actions of LA’s city and district attorneys have had a much greater impact here on the ground.

“In almost every state where they have legal cannabis, you have to have a license from your local government. And this isn’t the same as zoning a liquor store. This is way more complex. It’s hyperlocal,” says Amanda Ostrowitz, the CEO of CannaRegs, a company whose software tracks the intricacies of city and county marijuana regulations as they develop in seven states.

Angry neighbors. Zoning. Buffer requirements. Getting any business property fully permitted in Los Angeles has long involved a byzantine hodgepodge of hoops and approvals and governing bodies—especially when it comes to building projects or controversial industries that might anger NIMBY-oriented homeowners.

There are nearly 100 neighborhood councils where locals can complain about and veto new projects. Civil servants in the Department of City Planning and the Department of Building and Safety also have sway.

When it comes to marijuana, other players include the City Attorney’s Office, the LAPD, the Office of Finance, the Department of Cannabis Regulation, City Council, all of its attendant subcommittees, and the mayor’s office.

What the public considers Los Angeles is actually 88 individual cities and 2,600 square miles of unincorporated county land, each governed by entirely different people and processes—many of which do not allow any legal marijuana businesses at all. The exact vetting process can vary enormously, making it even more inscrutable to anyone who can’t afford to hire the right lobbyists, consultants, and attorneys.

“The more complicated the system, the more people who have money or influence or political power will be the ones who are able to get something to happen , because they know how to play those games,” says Mark Vallianatos, a policy expert and fair housing advocate.

For example, in Woodland Hills, where the median income is around $90,000 and nearly 80 percent of the population is white, the homeowners’ organization sat down with their city councilmember, Bob Blumenfield, in early 2018 to review maps showing where dispensaries would be allowed.

As the first full year of legal marijuana in California winds to a close, local activists and entrepreneurs like Martinez are becoming more and more frustrated. The city’s conversations around pot have largely turned to how to atone for the well-documented racial disparities of marijuana law enforcement, but the delicate process of creating what amounts to reparations for the war on drugs has further stymied the legalization process.

Instead of a flourishing, diverse cannabis industry, LA has seen the ongoing criminalization of most people involved in weed, while the 169 licensed shops remain protected—largely because those shops are owned by folks with more money and influence. Major weed businesses have fled the city for, ahem, greener pastures.

Liliana and Humberto Martinez.

The program that will allow the brand-new Department of Cannabis Regulation to grant additional cannabis business licenses has not even been funded.

Martinez met his wife, Liliana, back in the late 1980s, in high school in the San Fernando Valley, that vast suburban expanse that forms the northern half of Los Angeles. Neither Martinez smoked weed, but many of their friends did. In 1996, Liliana remembers her mother yelling at her for voting “yes” on California state Proposition 215, the statewide ballot initiative that legalized the use of medical cannabis. Back in Mexico, her mother’s brother, a taxi driver, had been killed when he happened to pick up a drug dealer as a passenger, and the association between drugs and violence stuck. But Liliana grew up in LA, away from the cartels: a land of plentiful, nonviolent potheads.

At first, physical marijuana dispensaries were rare in California. Though medical use was legal, sales were not. In 2003, the state passed a law allowing medical marijuana patients to form collectives, where one person could grow weed on behalf of dozens of sick people. Profiting off the sale of pot was still illegal, but entrepreneurs became more emboldened. In 2005, the LAPD counted four weed stores within city limits. In 2006, they counted 98. By the summer of 2007, there were several hundred, and some of the city’s influential neighborhood associations were furious. LA’s City Council passed a moratorium on new dispensaries, including a requirement that existing shops needed to register with the city. About 185 of them did.

Around the same time, Liliana and Humberto got laid off in the recession, and Humberto’s motorcycle accident left him paralyzed from the belly button down. The couple began to look for flexible jobs that would allow him to rest when the muscle spasms came every afternoon. Liliana’s brother suggested owning a marijuana dispensary, and in 2009, after nearly half a year of research, the two bought a shop in the Valley they decided to call California Herbal Providers. The shop had been open since before the city’s moratorium, but had registered two months late. Still, the wording of the moratorium had indicated some late registrants would have a path to legality .

Eventually, in 2008 and 2009, over 800 shops tried to claim they hadn’t known about the registration deadline in time. The city dismissed all of these claims—including the one from Humberto and Liliana’s shop.

Meanwhile, the DEA sent out threatening letters, and the city and the feds raided dispensaries indiscriminately, regardless of who had registered. Several shop owners went to prison—especially people of color. Even though most early weed entrepreneurs had worked on the illicit market, white dispensary owners who had previously been drug dealers were significantly less likely to have been arrested, and law enforcement was looking for people with criminal records. As time went on, the gray area of medical marijuana’s legality only deepened the racial divide.

In the fall of 2009, Humberto and Liliana helped organize a group of dispensaries to sue the city, saying the 2007 moratorium was “unreasonable, discriminatory and overly broad.” They won. The city responded with a new ordinance outlining how certain shops could apply to stay open, but before the details were final, California Herbal Providers was raided by a particularly anti-weed division of the LAPD, and Liliana was arrested. The couple decided to keep the shop closed.

Over the next six years, Los Angeles weed policy would tie itself into and out of knots. A 2010 ordinance that would only allow dispensaries with the exact same managers and ownership since registering in 2007 was thrown out by a judge. A lottery introduced in 2011 never came to fruition. A state court ruled that cities licensing commercial cannabis activity could be liable for violations of federal law, so the city voted to ban dispensaries altogether in 2012—only to overturn the ban a few months later. Finally, in 2013, City Council placed a measure on the ballot that offered limited prosecutorial immunity to 135 shops that had registered with the city at three key points .

Before the moratorium, in 2007; in 2011, for the lottery that never happened; and again in 2011, to pay taxes. Liliana and Humberto’s shop was among the 372 dispensaries that registered to pay taxes in 2011—while they were still figuring out a plea deal.

These shops wouldn’t be legal, per se, but if they followed certain rules, they had a better chance at being left alone than most. All other shops, the measure promised, would be shut down.

Pretty much everyone considers this law a failure.

For every store the city attorney or the LAPD forced to close, two more popped up. Early activists began cashing out, flipping pot shops on the protected list for millions of dollars. The new owners slowly became more and more representative of entrenched groups in power—those who could afford to spend $3 million, or who were much more likely to be able to raise that money.

Meanwhile, Liliana accepted a misdemeanor, a fine, and a year of probation instead of a trial for multiple felonies. The Martinezes decided to mitigate their risk by managing a few dispensaries owned by someone else and turning the California Herbal Providers storefront into an office where doctors wrote recommendations for medical marijuana.

One of the dispensaries the Martinezes were managing got shut down, and then the other. It was now the middle of 2016, and Proposition 64, the law that would legalize adult-use cannabis statewide, was on the ballot in November.

Liliana Martinez looking inside of their dispensary that is now closed down.
Interior of the Martinez’s dispensary.

Even though Proposition 64 was widely expected to pass, the city and county avoided developing a regulatory framework. It was only when a group of shop owners collected enough signatures for their own self-serving ballot measure that the city stepped in to write a better law.

That law passed early last year, and promised priority to the stores that had registered with the city in 2007. But it also promised other businesses could become legal, too, once the priority licenses were processed. Liliana and Humberto were excited: It looked like they were finally going to be able to own and operate a fully legal marijuana store.

A year and a half later, a timeline for that application process has yet to materialize.

“Launching the nation’s largest commercial regulatory program is an extremely complex undertaking,” said Cat Packer, executive director of the Los Angeles Department of Cannabis Regulation. “We are dealing with the challenges of balancing the build-up of city infrastructure while implementing policies that are still evolving. Most importantly, we are taking the time that is needed to get this right.”

On a Saturday morning in early August, a diverse group of LA cannabis activists gathered over coffee in the storefront office of a network of black churches. Many represented entire organizations or groups of stakeholders, such as union workers, veterans, or Latinos. Their modest goal? Fix everything that had gone wrong with marijuana policy in Los Angeles—and quickly.

“We have 18 months to make profound social change or watch this go the way of every other corporate industry in the country,” said Juli Crockett, a compliance director for a high-end marijuana consultancy, who was taking notes on a sparkly laptop.

“You take somewhere like LA that has every extreme of politics, every extreme of physical geography, of density, of cultures, and it becomes unbelievably challenging and convoluted.”
Amanda Ostrowitz, CEO of CannaRegs

Like Crockett, most of the activists present believed that within the next year or two, the newly legal California cannabis market will have settled down, with major players and supply chains established and little room for new businesses to succeed. So the longer the Los Angeles marijuana business licensing process remained at a standstill, the harder they thought it would be to create a significant economic opportunity for anyone other than the wealthy, mostly white folks who have either outlasted LA’s waves of law enforcement crackdowns or who could afford to purchase a protected shop.

According to census estimates from 2017, just over one quarter of LA’s population is white.

The meeting opened with a moment of silence for “all of the bodies claimed by the war on drugs” and some motivational words from one of the organizers, Felicia Carbajal, who wore a black T-shirt that read “Chicana” with a “High Felicia” name tag stuck to the front.

“The city of LA has been intent on limiting and thwarting legal cannabis regulation for years, largely because of opposition from the last two city attorneys. There’s been so much talk and no action,” said Lynne Lyman, the former state director of the Drug Policy Alliance, and one of the primary people responsible for drafting and passing Proposition 64. Lyman is now trying to fix the situation in Los Angeles pro bono, because she believes that until someone does, the work of legalization in California will not be complete.

Because marijuana arrests and sentencing have always fallen disproportionately on people of color, a movement akin to affirmative action for marijuana legalization, called “equity,” has emerged in liberal cities like Oakland and San Francisco. Los Angeles, too, has designed an equity program.

Equity programs are common in cities, but most focus on government contracting for public sector services like waste management. Equity for cannabis tends to be more aggressive, in an attempt to control the ownership of private enterprise for an entire industry.

The program involves matching, one to two, the number of regular marijuana stores with businesses run by entrepreneurs from disadvantaged backgrounds, including those with cannabis convictions on their record and people who grew up in over-policed neighborhoods. So eventually, the next 338 marijuana stores to get processed in Los Angeles will need to have so-called equity applicants as majority owners.

But the program has yet to receive funding from the city—meaning that, in practice, no additional marijuana dispensaries can be authorized, and over a thousand existing ones are breaking the law.

Lyman brought up the unjust way the city had prioritized the pre-2007 shops, allowing them to bypass the equity program’s requirements: “When I see the word ‘grandfathered,’ I think of poll taxes and literacy tests, and I know white people are getting something special.”

The city’s Department of Cannabis Regulation is currently reviewing the equity eligibility of growers and manufacturers, but those businesses need to fulfill much more stringent requirements than the 169 shops. The city will not be able to offer any dispensaries full approval without support from the office of Mayor Eric Garcetti, who proposes the city budget with input and, later, approval from City Council.

Garcetti has been publicly floating the possibility of running for president in 2020. The equity program—and therefore any new cannabis retail licenses in Los Angeles—may not materialize until that same year.

“The current budget allocation for the Department of Cannabis Regulation is appropriate for its first year as a new department of the city,” said Vicki Curry, a spokesperson for Garcetti.

State Assemblymember Reggie Jones-Sawyer, who represents South LA and has been one of the primary California legislators involved in legalization, feels differently. “Not only should [Cat Packer of the Department of Cannabis Regulation] be given carte blanche around funding,” he said, “we should untie her hands so she can get the job done.”

As the activists’ meeting wore on, the list of problems the group felt it needed to solve seemed to multiply and expand. Los Angeles County had banned cannabis businesses entirely. The district attorney was refusing to offer automatic expungement for past cannabis crimes. And the equity program itself was not perfect: Most attendees were concerned that not everyone who should qualify would.

One of the people at the meeting, a formerly homeless Native woman named Christina Lake, had co-founded a topical cannabis company called Loki Lotion. She wasn’t sure yet whether she would be eligible for an equity license, but she had been paying rent on a manufacturing space for nearly a year in order to meet the application requirements. At the same time, in order to avoid breaking the law, she—like the Martinezes—had needed to completely cease operations, and therefore had no income.

“I’ve been essentially asked by my city to starve for eight months,” she said, “and prove over and over that I deserve this.”

Amanda Chicago Lewis writes about marijuana and the war on drugs, with an emphasis on public safety, the influence of special interests, and the ways in which the documented racial disparities of drug law enforcement are being cemented into the details of legalization. She writes a biweekly column for Rolling Stone. Her work has also appeared in GQ, BuzzFeed News, Vice, LA Weekly, Pop-Up Magazine, and the LA Review of Books.


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