It’s been four years since Oakland started the country’s first cannabis equity program, an effort to undo the harms of decades of over-policing and harsh sentencing during the War on Drugs. Black people were especially hurt by the government’s zero-tolerance drug policies. Oakland’s equity program grants cannabis licenses and reduces some permit fees for entrepreneurs who have prior drug convictions, or who have lived for at least 10 years in over-policed parts of Oakland. The program also provides equity businesses with three years of free rent. Hailed as a ground-breaking initiative, the program has also faced criticism for not doing enough to ensure the success of its equity business owners.
In April, California gave Oakland $6.5 million to strengthen its equity cannabis businesses. The city plans to distribute this money directly to businesses and two shared manufacturing kitchens used by equity companies. Other plans are in the works, too. But will this infusion of state support be enough to ensure the equity program’s success, especially as the broader economy struggles under the COVID-19 pandemic?
The Oaklandside interviewed nine equity cannabis business owners and advocates to get their perspective on the program.
A new kind of incubation
Amber Senter and Michaela Toscas are in charge of the two independently-operated manufacturing kitchens, which will be shared by equity businesses to create edible products infused with cannabis, from gummies to brownies. Both hope the kitchens will be up and running by January 2021. Senter is in charge of EquityWorks! Incubator, and Toscas’s is called The Oakland Cannabis Kitchen.
“This is the equity program 2.0,” Senter said. “We saw the wins of the first version and we saw how the program wasn’t doing enough. We continue to push the city of Oakland to move the needle further.” Five years ago, Senter co-founded a non-profit called Supernova Women to advocate for women of color in the cannabis industry, and she runs Breeze Distro and Shady Pines Box Club—two equity cannabis businesses in Oakland.
The rent-free kitchens will allow equity businesses more time to get a license, insurance, and cultivate a brand, before they have to incur major costs like finding a manufacturing space of their own. Senter’s team will provide business mentorship and, through contracts she negotiated, guaranteed space on retail shelves at dispensaries throughout California.
“There’s a number of barriers to entry in cannabis,” Senter said. “This addresses a couple of them—access to real estate and access to technical support. And there’s a shortage of Black and brown consumer-facing brands in cannabis.”
The shared manufacturing kitchens, she said, directly address those barriers and can give small-scale entrepreneurs the leg up they need to get off the ground.
“It helps small businesses operate against these big companies coming in and devastating the small business market,” said Toscas, who provides legal advice to cannabis businesses through her consultancy, Inspire Positive LLC, and runs a cannabis delivery business called Higher Elevation. Her hope is that the shared kitchens, among the first of their kind in the country, can be a model for other cities to follow.
The shared kitchen model also avoids a major pitfall that many people have pointed out in Oakland’s equity program: an incubation process that leaves room for poor treatment of equity businesses by larger cannabis companies. Typically, an equity applicant is “incubated” by a larger non-equity cannabis business, which provides 1,000 square feet of space, a security system, and mentorship.
It sounds like a sweet deal, and it can be. Charles Byrd, who helps run a cultivation and delivery business in Oakland with his sister and nephew, said Cannabis On Fire might not have survived without help from his incubator, NUG.
“With NUG, we landed on the spirit and intent of the incubator experience,” Byrd said. NUG gave Byrd and the other businesses it incubated an outfitted greenhouse ready for cultivation. They also gave Byrd a loan while he waited for city funds to come through. “I can’t say anything but good things about NUG putting that money and resources toward us.”
But not everyone has had a good experience with incubation. Carlton Williams runs an equity business in Oakland called New Life CA and partners with two Oakland nonprofits to give back to his community. He shares a building with seven other equity applicants, all of whom are under the wing of one incubator, Eco Cannabis.
Last year, a dispute about utility payments between Eco-Cannabis and some of the equity businesses escalated. Williams alleges Eco Cannabis “took advantage” of the business owners by overcharging them on utilities. Some tenants made utility payments that the incubator did not account for and which did not show up in their records, according to a letter from an attorney with Oakland’s Equity Technical Assistance Program.
“There were some mistakes made. They weren’t huge mistakes. We’re trying really hard to do the right thing. Sometimes, we don’t get it right. There’s nothing malicious,” said Kevin Ahaesy, CEO of Eco-Cannabis. After the dispute, Eco-Cannabis agreed to separately meter every space so that each business owner would be charged the correct amount, but since then, Ahaesy said some tenants have not paid their utilities.
Several business owners acknowledged that incubation has caused problems. “There is an imbalance of power, an unhealthy dynamic where you have the have-nots depending on the haves,” Senter said.
The two shared kitchens will help small cannabis companies avoid some of the current problems with incubation, but the solution has a limited scope: Together, the kitchens can only fit 12 manufacturing businesses. But there are over 300 existing equity cannabis businesses in Oakland. And as of now, Oakland has only signed a one-year contract for the kitchens. The kitchen spaces won’t be up and running until January and the program ends in June, leaving barely half a year for the equity businesses that can take advantage of the facilities to get off the ground, unless the contract is extended. Toscas and Senter both hope the shared kitchens will become a permanent feature of Oakland’s cannabis landscape, but the program’s expansion will depend on continued state funds.
Direct grants available to equity cannabis businesses
Equity businesses can apply for two new grants: $15,000 emergency grants for businesses that were robbed in lootings that occurred at the same time as the protests and civil unrest in June, and general grants of up to $33,000. Small cannabis companies say the grants are badly needed because of the double whammy of burglaries and depressed sales during COVID-19.
“That money has been taken out of our community because of the effects of the War on Drugs. Any money coming in is going to make a difference,” said Ramon Garcia, who founded Original Equity Group to support equity businesses. He also runs Padre Mu, a cannabis delivery company.
As of October 6 the city had received 144 applications for the emergency and general grants and 12 businesses had received money. Byrd from Cannabis on Fire is one of the business owners who received a check. He applied for the emergency grant as soon as he found out about it in July and finally received his check in the last week of September.
After the June robberies, Byrd said that his incubator NUG was hit hard and considered closing parts of their business, which put Byrd’s business at risk, too. “We’re connected by an umbilical cord to NUG. If they’re going out of business, we end up going out of business,” Byrd said, who is now looking for a new location.
The grant money matters, Byrd said, but it’s nowhere close to enough to revitalize a business. “Fifteen thousand is not enough money to recover if your business is destroyed. It’s not going to get us a new location, but it can be put toward our branding,” he said.
And then there are the business owners who have yet to apply for the general grants, even though they need the money. They plan to, but some business owners found the process, which requires information that they don’t already have, overwhelming. One question on the application asks applicants for their trademark. Williams said he doesn’t have a trademark and he would need to pay a lawyer to get one.
“The people that don’t know how to apply for grants are those who need them the most,” said Garcia, who runs workshops for cannabis business owners to navigate business and bureaucratic processes. “As communities of color, we were oppressed by our government agencies and police. We have no trust in city systems, so why would we have the skill, appetite, or time to navigate those systems?” he said.
Williams is still working on the grant application, but he wishes the process could be simplified for equity business owners who are running small-scale, boot-strapped operations. “I know almost every equity applicant in Oakland. I don’t know anyone who’s gotten any of that money,” Williams said. “I wish there weren’t so many hoops to jump through and more equity applicants could get access.”
Band-Aid in an industry dominated by Big Weed
The equity program has created opportunities, to be sure, but success for small business owners is hard to come by in an over-regulated industry that continues to be dominated by large cannabis companies. Start-up costs, licensing fees, and sky-high taxes all make it difficult for small businesses to thrive. The result is that, as of 2019, an estimated 80 percent of California’s cannabis market remains unregulated.
“The environment is hostile to small businesses. If it’s hostile to small businesses, what chance do you think equity operators have?” said Lanese Martin, who co-founded Hood Incubator to end the drug war and reverse the harm it has done to communities through policy and advocacy work. Hood Incubator also hosts a business accelerator for Black and brown cannabis entrepreneurs.
“The two ideas of equity and current California cannabis regulation are not compatible systems. They don’t even speak the same language,” said John Harlow, who runs an equity cultivation business called Strange Lands. He shares a building with Williams and several other equity program participants. In Harlow’s view, success is so unlikely that he sees the equity program as little more than a publicity stunt that makes the city look good, while setting up East and West Oaklanders to fail.
The city of Oakland does not collect data on the success of its equity program. We can see how many permits have been granted to equity applicants, but we don’t know how those businesses are doing. The city has recently devoted $150,000 to hire an analyst to assess the program.
“I know people who are getting second mortgages on their family properties in West and East Oakland trying to make those businesses work,” said Harlow.
In addition to the new grants, Oakland also offers a no-interest loan program, but requires that applicants start paying back the loan before some have even started generating a profit.
“It’s common knowledge that you don’t start a business unless you have starter funds,” Byrd said. “But you have to be 80% below median income to be a qualifying equity applicant. By definition that means you’re poor. You might have a dream that you’re going to do it, but a dream without qualifications and startup money is just a dream.”
Joshua Chase sees it differently. Chase is also an equity applicant, but admits he is an unusual one. He grew up in East Oakland and ran a cannabis business in Washington for four years. To start the business, he and a group of friends from Santa Clara University ran “a small family and friends fundraiser” that raised $700,000 in loans. When the business didn’t take off the way he hoped, Chase moved back to Oakland to start an equity business here, with a network and four years of experience in recreational cannabis behind him.
“From my perspective, I was given 60% of what I thought I was going to have to cover,” said Chase, who now runs four cannabis businesses in Oakland, including Have A Heart dispensary, a delivery and distribution company, and a second dispensary on the way. Chase also incubates five equity applicants himself and sits on the cannabis regulatory board to advise the city. “Oakland’s equity program is all about perspective. If someone thinks they’re going to get a plug and play successful business, then yes, they’re going to think of it as a failure. But the city of Oakland gave you 60% of what you needed to start your business.”
For the program to truly make a dent in the damage caused by decades of over-policing, advocates say more needs to be done. “Will it help undo the damage caused by the War on Drugs? It’s a start, but no, it’s not enough,” Garcia said.
What’s the future for local, small cannabis companies?
With $6.5 million devoted to the equity program, more plans are in the works. The city is going to provide no-interest loans for a group of equity operators to purchase a property, as opposed to renting. It’s also launching a workforce development grant program to get equity employees hired in cannabis businesses.
Some advocates have also taken matters into their own hands. Through Original Equity Group, Garcia is working on releasing an equity trade certification. Similar to the fair trade stickers and labels consumers see on bags of coffee indicating a product meets specific labor standards, the idea is to identify equity businesses so customers can easily choose equity products.
“People want to know where their money is going. With this identifier, consumers will be able to scan a product and it will show them that it’s certified equity,” Garcia said.
And Martin, of Hood Incubator, said people need to think beyond the equity program to truly start mitigating the harm done by the War on Drugs. The effects of over-policing and harsh sentences, she said go far beyond what can be addressed through entrepreneurship: Whole families lost their income when individuals went to jail, and money spent enforcing harsh drug laws left communities without the essential services they needed to thrive.
“At best, the equity program is only addressing a tiny sliver of the population harmed,” Martin said. That’s why Hood Incubator is launching a campaign in 2021 called Run the Refund to push local governments to identify the costs of the drug war and compensate those harmed by its enforcement in a community-led process.
In the meantime, Oakland’s first group of equity applicants are coming up on three years of incubation. That means their free rent is up and they will need to find a new space, start paying rent, go through a lengthy inspection process, and apply for a license all over again (in Oakland, if you move your business, the previous license doesn’t transfer). That could mean months, if not longer, before many business owners can begin generating income again. Still, many business owners are optimistic, thinking on their feet and developing new plans.
As for Williams, he has secured a new place for New Life CA in Oakland’s green zone, which is located along the city’s industrial waterfront from West Oakland to the San Leandro border. He recently landed an important deal with Eaze (Williams called the company the “Walmart of cannabis”) that earned him a $50,000 grant and a spot for his cannabis on Eaze’s menu. The partnership will get Williams through the move, and he remains focused on his community. He devotes resources to young people by partnering with and raising money for East and West Oakland-based nonprofits such as Fam1st Family Foundation, and he wants other cannabis businesses to do the same.
“I want action from other cannabis businesses, to help give back to the community that we run our businesses in and that we serve. That’s what a real activist is,” Williams said.