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Marijuana dispensary applicants worry ‘staggering’ barriers could shut out potential business owners

Aurora Beacon News

Monday, January 13, 2020  |  Article  |  Sarah Freishtat

Recreational Marijuana

As the state prepares to award marijuana business licenses in the coming months, some applicants are worried barriers remain that could limit who, ultimately, can open a successful business.


They cited the length and complexity of a recent round of dispensary applications and perceived influence by large, out-of-state players. Caps on the number of shops in some suburban towns and others that have opted out of marijuana sales entirely, along with the prospect of product shortages, could mean further challenges for those who do receive licenses, they said.


It’s a concern for some of those promoting social equity applicants, who worry that though the law contains highly-touted equity measures, the process could squeeze out of the industry people of color and those who historically have been affected by marijuana’s criminalization.


“(The) state will have a choice to diversify this industry," said Ron Holmes, co-founder of the Majority-Minority Group, which is helping minority owners submit marijuana business applications. “And hopefully they make the right decisions."


The latest round of dispensary applications recently closed, marking the first time new businesses not already selling medical cannabis could apply to open. Seventy-five licenses are expected to be awarded by May. Those seeking to open other marijuana businesses, including infuser, transporter or craft grower licenses, can begin submitting their applications in mid-February.


The applications include provisions for social equity applicants, who can be awarded extra points on their application if they or a relative have been convicted of a marijuana-related crime that is eligible for expungement now that weed is legal, or if they live in one of the state’s designated “disproportionately impacted areas," which were deemed to have an unusually high marijuana arrest or incarceration rate.

Applicants can also qualify for social equity status if the owners don’t meet this criteria, but more than half of their employees do.


The measures are intended to ensure that “communities historically impacted by the criminalization of cannabis have an opportunity to participate in the legal cannabis industry,” according to the state Department of Commerce and Economic Opportunity.


But some worry there are pitfalls in the social equity provisions.


Alex Perez, an Aurora man who is part of a company that submitted a social equity dispensary application, said the accountants, attorneys, application fees and other resources he needed to craft his application could be cost prohibitive.


 “I don’t see how these poor black and brown folks that are really, truly, social equity … are supposed to do this,” he said. “The resources are staggering that you have to have access to.”


He also worries that down the line some lenders now seeking to back social equity applicants could buy them out entirely, eliminating social equity owners from the business.


The role of large companies in social equity applications is a concern for many. Kenny Myles, a social equity applicant looking to open a dispensary and small, craft growing facility in Aurora, said some investors who wouldn’t otherwise be eligible for social equity status are trying to recruit applicants who are eligible.


Some from out of state tried to recruit him, he said, though he is hopeful he and his business partners can make it through at least the application process on their own.


“If it’s for Illinois, you would hope that if they’re approving applications, they would look for true Illinois representatives to run the business first and foremost, without a machine backing them,” he said.


Social equity applicants will get the same weight whether they have an arrest record, live in a disproportionately impacted area, or if they don’t meet the criteria but qualify because most of their employees do. That, combined with the length and complexity of the application, has caused concern for some people, Holmes said.


“It is a very hard application,” he said. “But also it’s a multi-million dollar application. So balancing that out is really tough.”


Holmes said he has seen improvements already, citing the process to submit questions online during the upcoming round of applications.


Still, he’d like to see more outreach, particularly to disproportionately impacted communities, from the agencies involved in the application and licensing process. Applicants who have business and law degrees as well as those working in the black market face barriers to information, he said.


“The average person that’s on the street corner in the illicit market today doesn’t have access to those same tools,” Holmes said. “And more importantly, some of them might not have access to the same information the government puts out.”


Groups involved with drafting the law said the social equity provisions are not perfect, but they were the best option available and there is room to improve as the process moves forward.


Chris Lindsey, director of government relations for the Marijuana Policy Project, which helped draft Illinois’ law, said it’s hard to enforce strict rules to promote local or minority ownership. Stringent provisions in other states, such as racial ownership quotas, have been struck down by courts, he said.


Instead, among the equity provisions in the Illinois law were guidelines for social equity applicants. Later, the state will study the roll out and examine any disparities, which will help agencies determine whether they need to recalibrate before the next round of applications, he said.


As far as the complexity of the application goes, he said the reality is applicants are seeking to open a business so they need to have the appropriate skills.


“This was designed to make sure minorities have access to that industry,” he said. “It’s not designed to offset the skills needed to succeed in running a business.”


State Rep. Kelly Cassidy, D-Chicago, one of the legalization bill’s chief sponsors, said lawmakers anticipated some equity issues, which is one reason they built the diversity study into the law.


“I’m not going to say to you today or any day that we thought of every dirty trick and (closed) that option," she said, “but we did more than any state has ever done to level this playing field.”

Preliminary numbers made public by the state showed more than 700 applicants sought dispensary licenses in the most recent round, and more than 600 of them identified themselves as qualifying for social equity status.


While Cassidy cited those figures as evidence of the strength of the social equity provisions in the law, Holmes said many of those social equity applicants could have qualified based on their employees.


“My guess is that a lot of those folks are not going to be black or brown, that check those boxes,” he said.


Aside from social equity concerns, applicants are anticipating other challenges. That includes the potential for supply shortages.


For months before weed officially became legal dispensaries anticipated supply shortages, and in the first weeks of legal sales some have stopped selling recreational marijuana because they’ve run out.


Many of the existing growing centers that supply the product are expanding, but even so, would-be recreational dispensary owners must contend with demand for medical marijuana. Dispensaries are required by law to make sure they have enough product for medical patients.


Myles, who also plans to seek a craft growing license, said competition with larger companies might exacerbate the problem. He expected growers with limited recreational supply would be more likely to fill a larger, more profitable order than an order from a small company such as the one he’s seeking to open.


They must also contend with limits on where they can open. Many towns have opted out of marijuana sales, and many of those allowing them have put other limits in place.


Aurora, for example, has capped the number of dispensaries it plans to allow at four — with two set aside for social equity applicants — and will only allow them on the city’s main streets.


That makes competition for the available spots even more fierce, Perez said. His company is eyeing locations in Aurora, but might end up elsewhere in the suburbs if they can’t get to Aurora before the available licenses are gone, he said.


Still, applicants say it’s worth it. Myles said he is excited, and counting the days until he hears back from the state about his application.


Perez said the business, for him, is about representation.


“I’m doing this because we’ve had this image thrust upon us in our communities for decades," he said. "We built this industry decades ago, and now all of a sudden because of legalization people in suits and ties are kicking us to the curb.”