They question whether the state fell short on its social equity efforts now that the list of finalists for weed shop licenses is out.
JOHN PLETZ September 04, 2020 10:35 AM
The first step in the state’s long-awaited effort to diversify the marijuana industry isn’t working out the way some people hoped or expected.
The 75 new licenses for retail marijuana shops will be divided up among just 21 applicants, all of which received perfect scores, according to the Illinois Department of Financial & Professional Regulation. The winners will be chosen by lottery, slated for late this month.
Illinois' legalization of recreational marijuana last year sparked a surge of interest in the industry, with more than 700 groups or individuals applying for licenses. After the state released the list of finalists yesterday, disappointment quickly spread, with some questioning whether the elaborate “social equity” provisions in the state law—designed to ensure that members of communities that have been most affected by crime and poverty resulting from the war on drugs would get a piece of the legal cannabis business—came up short.
"That list is a total disappointment and a punch in the gut to the small business owners who were looking for an opportunity," said state Rep. Chris Welch, D-Hillside, a member of the Illinois Legislative Black Caucus. "Seventy-five licenses are going to 21 applicants. Where is the equity in that? The lottery should not take place until wholesale changes happen. At this moment when our country demands racial equity, the administration has screwed us." Diversifying ownership of the state’s mostly white-male-dominated cannabis industry was the centerpiece of the recreational-marijuana law passed last year and is seen as a template for other states. All 21 finalists are social-equity applicants. The state says 13 of the 21 are majority-owned and controlled by people of color, and 17 of the groups have at least one owner who is a person of color. Sixteen groups include at least one woman owner. The Black Caucus called on “the Governor’s office to slow down this licensing process right now so that we may examine it clearly and make changes where needed in order to be truly equitable before we continue the issuance of any more licenses,” state Rep. Sonya Harper, a Democrat from West Englewood, said in a statement today. “Specifically, there needs to be more transparency in regards to the authenticity of ownership and control by social-equity applicants,” she said in the statement. “We want to know who is being considered social-equity applicants and if they are authentic members of a team with due rights and responsibilities or just ‘names on paper.’” The caucus is asking for changes in the application-scoring system, point allocation structure, tiebreaker policy and overall selection process.
“Additionally, we are considering a change in the amount of licenses one applicant may be able to apply for at one particular time, knowing that a true social equity applicant may not have the means to submit dozens of applications in every district across the state.” Harper said she wants to see the changes before the next round of cannabis licenses, for craft growers, transporters and infusers, is awarded. Those licenses are expected to be awarded after the dispensary licenses, which the state plans to issue later this month. It’s unclear, however, if those changes could be made before the Legislature’s fall veto session in mid-November.
“I’m disappointed. This is disheartening,” state Sen. Cristina Castro, whose district stretches from Elgin to Hoffman Estates, said after hearing from several constituents who didn’t make the cut. “We had quite a few minority-led groups. Many of them paid thousands and thousands of dollars to apply and were incredibly disappointed. The same names won in every region. Given everything going on today in the discussion about social equity, we had a huge opportunity to make a mark. But we failed. I want to see where and how this came about.”
Applicants were allowed to seek multiple licenses in each of 17 regions. Several applicants are seeking licenses in every district. Each license cost $2,500 to submit. "You saw the same names in every region," Welch said. "There's no way for a real social equity applicant to afford to apply for licenses in every region. That shows it was big-money people who made the list. "There’s got to be some legislative solutions. Clearly there were some holes. We have to address it. Every single small-business owner that I helped write a letter of support for, I spoke to them yesterday, and they didn’t get it. This was designed to help small-business people get involved in this process."
Welch said he began getting calls from constituents as soon as the list was announced. "I've never heard people cry like that before. It was devastating."
Ron Holmes, co-founder of consulting firm Majority Minority Group in Chicago, worked with more than 30 applicants, none of which was successful. “The people most impacted by the war on drugs were not successful today. Folks spent a substantial amount of money on this process. They’re going to have to find a way to put their lives back together at a time when the economy isn’t flush with jobs or opportunity.”
Under the Illinois law, those who qualified as social equity applicants would receive an extra 50 points—or 20 percent of the maximum possible score. Applicants could achieve social-equity status if the owners had lived in an area designated as disproportionately impacted by the war on drugs, or if an applicant, or a family member, had been arrested or incarcerated for specific marijuana crimes. Another way to qualify was to hire at least 10 employees, 51 percent of whom lived in a disproportionately impacted area, had been arrested or convicted of a marijuana offense or had a family member who had.
The state said just one of the 21 finalists qualified for social-equity status by hiring employees, rather than ownership.
About 650 of more than 700 applicants that sought dispensary licenses applied as social-equity applicants. An additional five points were available to groups with 51 percent ownership by Illinois residents, veterans and those who filed diversity plans. Applicants could get another two points by submitting “community impact” plans. The 21 finalists each scored the maximum 252 points, according to the state.
The results left applicant B.J. Tregoning wondering if veteran status was the deciding factor. Tregoning, a real estate agent from Niles, was part of a four-member team that included an Army veteran. The 51 percent owner is a teacher from a disproportionately impacted area. “We didn’t think going into this every entity would have had (veteran ownership),” he said. “It’s disappointing. I don’t think they accomplished the goal of spreading wealth and giving people from disproportionately impacted communities a real shot at this.” Edie Moore, an African-American woman and veteran, led two groups that successfully qualified for the lottery. “It’s not over yet for those who made the list,” said Moore, who also is executive director of the Chicago chapter of the National Organization for the Reform of Marijuana Laws. “Hopefully it’s a win for social equity.”
Yesterday's announcement was the latest twist in a process that’s been hampered by timing challenges that started with an application deadline that came just six months after the recreational marijuana law passed. Licenses were supposed to be awarded May 1, but COVID shutdowns caused delays. Another delay came as the state sought approvals for the tie-breaker process.
“It’s hard to believe there were that many ties,” says Michael Mayes, CEO of Quantum 9, a consultant who has worked on applications in several states, including two in the most recent Illinois process. “I didn’t expect all of the licenses to be decided by lottery. I’m completely taken aback by it.”
The Black Caucus meanwhile called on the Pritzker administration "to slow down this licensing process right now so that we may examine it clearly and make changes where needed in order to be truly equitable before we continue the issuance of any more licenses,” state Rep. Sonya Harper, a Democrat from West Englewood, said in a statement today. “Specifically, there needs to be more transparency in regards to the authenticity of ownership and control by social-equity applicants,” she said in the statement. “We want to know who is being considered social-equity applicants and if they are authentic members of a team with due rights and responsibilities or just ‘names on paper.’” Toi Hutchinson, Gov. J.B. Pritzker’s top marijuana adviser and a former senator who helped write the legislation, said, “There’s been no state that has achieved a round of applications where 60 percent identified people of color.” She also said the tie-breaker rules don’t allow for stopping the process. “The statute calls for lottery to happen 10 days after (the list is announced), so there’s no mechanism to stop the lottery. A lawsuit filed Friday asks a federal judge for an injunction to stop it. The Black Caucus is asking for changes in the application-scoring system, point allocation structure, tiebreaker policy and overall selection process.
“Additionally, we are considering a change in the amount of licenses one applicant may be able to apply for at one particular time, knowing that a true social equity applicant may not have the means to submit dozens of applications in every district across the state.” Harper said she wants to see the changes before the next round of cannabis licenses, for craft growers, transporters and infusers, is awarded. Those licenses are expected to be awarded after the dispensary licenses, which the state plans to issue later this month. It’s unclear, however, if those changes could be made before the Legislature’s fall veto session in mid-November.
Hutchinson pointed out that the state’s cannabis law deliberately limited the number of new retail licenses issued in the first round to 75. The state will allow up to 500 retail licenses. The law also requires that a disparity study by March 1 to assess diversity in the industry after the first round of licenses.
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