Cities across California are creating and expanding equity programs with the help of grant funding from the state.

The California Bureau of Cannabis Control (BCC), state regulatory agency turned recipient of the DEA's wrath, and the Governor's Office of Business and Economic Development (GO-Biz) have issued $40 million to cities and counties across the state to support equity programs. These programs are meant to help people who have been harmed and disproportionately impacted by cannabis prohibition establish businesses in the industry.

In July, the BCC sent a nearly 500-page report to the state legislature that includes documents submitted from city and county officials expressing the need for equity programs and plans for creating them. Cannabis Business Times and Cannabis Dispensary are speaking with recipients of the BCC and GO-Biz funds.

While some of the $40 million flowed as far south as Coachella, Palm Springs and Long Beach, one of the locales it reached wasn’t very far from the state government: the capital. Sacramento received more than $5 million of the funds distributed by the BCC and Go-Biz. It’s not the most any city received but also not the least; Oakland received the most with more than $8 million, and Stockton received the least with an even $60,000.

Sacramento officials, through the Cannabis Opportunity Reinvestment and Equity (CORE) program, work in tandem with state regulators on equity efforts in working to help launch and support equity businesses.

Davina Smith, who started as Sacramento’s cannabis program manager in January, said 13 equity businesses are up and running in the city. Storefront dispensary licenses remain capped at 30 for both the adult-use and medical markets, though Smith said that number could soon increase to 40. For now, the city’s 13 equity businesses are mostly cultivators, manufacturers and delivery dispensaries. Below are some of her thoughts on CORE she shared with CBT and CD.

Cannabis Business Times and Cannabis Dispensary: What have been some of the CORE program's biggest successes, and how have those accomplishments helped applicants and licensees and the city?

Davina Smith: I think 13 is sort of a modest number if you're looking at the outside in. But those 13—those have popped up in the last year and a half, really, since we've had our program going. So, it's really exciting to see people who were impacted by the War on Drugs seeing that there's a place for them in the cannabis space, the regulated cannabis space, and really going for it. The grant funding that the state has offered, as well as the funding that the city has put up, to do programs for our equity members—I think they've been super helpful. We've heard good information and feedback from folks on the experiences they've had.

Our CORE program was funded, initially, by the city council. They awarded contracts to two different facilitators, one of which was the Greater Sacramento Urban League. … The other facilitator was the Sacramento Asian Pacific Chamber of Commerce. Those two entities do classes for people who feel like they need more basic small business knowledge, so how to run a business—how to track budgets, how to create a business plan, a lot of that basic stuff that people may wish to engage in. They're also offered mentoring, information and assistance on filling out state applications, local applications, bringing together people with potential places that a business can locate, finding property owners that would be interested in renting out to cannabis businesses in our city. That's the foundation of our equity program, and the city paid for that.

We've also been lucky enough to get funding from the state—a grant from BCC and then a new grant from GO-Biz. The first grant from BCC we utilized for a reimbursement program. Someone starting up their cannabis businesses has expenses; they give us the receipts and we are reimbursing them up to $25,000 per permit. We started that program [in February]. It looks like just about now we have given out all of the money. We're still going through the last few applications, but if they all check out, then we will [have] given out $1 million in the last few months, which is pretty exciting for us. I think it was definitely something very needed with the advent of COVID-19 and some of the economic impacts that people trying to get in that regulated cannabis space are really feeling.

Then, the second grant we got from GO-Biz we're utilizing to fund a revolving no-interest loan. Our hope for that, really, is that it'll help not just cannabis entrepreneurs who are ready to open a business or expand a current business now, but next year and the year after and the year after. We're really hoping that this will take off and be a success. It's really about social equity folks repaying their loans and then enabling that money, that paid back money, to go out and help another social equity person or that same person a year down the road when all of a sudden they've decided they want to add a distribution permit onto their manufacturing permit or something. That's really our goal is to create this evergreen fund so that the city of Sacramento can always provide loans to our social equity members at favorable terms, 0% money, and then we're looking at a six- or seven-year repayment term to try to keep those payments low.

CBT/CD: How does the CORE program differ from other equity programs in the state?

DS: When we were doing our equity study to determine “Is there a need for a social equity program in the city of Sacramento?”, one of the things that equity study turned up and what drove the categories of individuals and business entities that are able to be classified as a social equity person or entity in our city was that we decided not to look at current income.

Photo courtesy of the City of Sacramento

It seems like in most of our sister cities, that is something that people look at. We thought, since the impacts of the War on Drugs were felt over basically a 15-, 20-year period, we certainly identified certain zip codes within our city that, based off police records and arrest records and things like that, that those realities were occurring. We thought it made sense that the people who are impacted are people who experience that, who lived in those neighborhoods, who were arrested for a cannabis offense, who experienced trying to go to school every day and being patted down by the police for suspected cannabis or other things. That was a reality that we needed to address, and that was what we wanted to look at with our social equity program. So, that's where we focused that. And we didn't really look at, “What are your current financial situations?” We didn't want to penalize people if they were able to succeed after having those experiences. … I think that's one of the primary ways where our equity population differs, is we don't look at current income. We're really looking at previous impacts. … For us, in all honesty, it's a lot of the Black and brown folks that live in neighborhoods that had that police presence during the War on Drugs, and we felt that would be an appropriate place to put our sort of social equity eggs and to redress some of those issues.

CBT/CD: What can other states learn from California with regard to how the state government works with municipalities on equity programs?

DS: I think there are both benefits and detriments to our two-tiered system of state and local approval. I will say that it has been exciting to see the state, really in the last two years, step up on social equity and put their money where their mouths are in that respect. I think they have been good partners, not just in funding our local social equity efforts, but also in just being willing to think about, “How can we best serve our social equity members who may not have the collateral or the financial backing and certainly can't get it from traditional funding sources like banks?” and think about, “Well, can we incubate people? Can we alter the regulations or tweak them a little bit to allow nontraditional business types to kind of come together to share space and resources and make that happen?”

We've been working with the state on that kind of stuff, which is an exciting development and I think another opportunity for our social equity folks trying to get into that marketplace with minimal costs. I think everyone in California acknowledges it's an expensive place to do business, and it's even more expensive if you run a cannabis business. So, trying to lessen those [costs] to the extent possible is of primary importance. And we definitely appreciate the state's willingness to engage with us on that.

CBT/CD: In addition to helping disproportionately impacted communities succeed, how does having programs like CORE and having equity licensees up and running help the cannabis industry succeed?

DS: I think we're in very exciting times, and it really feels like there is a possibility for change in the air when it comes to our Black and brown communities and people who have been disproportionately affected by the War on Drugs and policing and things like that. One of the things [about] having more equity members in the regulated cannabis space, I think, [is] social equity members have sort of always been in the cannabis space. It just seems right and fair for them to be in the regulated cannabis space, even though it's so much more expensive to run a regulated business than an underground business.

I think it also says something about our society, where we're at. I think about cosmetic companies now … I have friends who are African American, and for years, we have talked about the difficulty of them finding makeup shades that match their complexion. Just so you know, I'm white, and I don't have that same difficulty, and we've talked about, “What the heck is going on?” and “There's a huge marketplace here available” and “What will it say when this is actually something you can go to the drugstore and see?” So, I think just that little fix, when you talk about makeup, it started with small entrepreneurs—women, primarily, who realized that this was the market that they could serve, usually making it for themselves and their sisters and cousins and friends and then moving onto a bigger place. Then, all of a sudden, you have the big companies like Revlon and L'Oréal realizing that there's a market here, and this is something that is good to have. And all of a sudden, you're seeing this all over.

It's, a lot of times, I think, those small entrepreneurs that start out and realize this is something that's needed and necessary. [Not only] can they make their mark in that way, but I also think it just adds to the view of our society, that the legal pot business has been overwhelmingly white and male. And that's not what our society is. Our businesses should reflect what our society is, and especially when you look at the history of cannabis, which was so much our Black and brown and Asian communities involved in it. Shouldn't the regulated cannabis marketplace be like that too and be like that too? I'm excited because it does feel like we are on a path to change that, and I'm looking forward to every bit of that change that happens.

This interview has been edited for length and clarity.