It’s pretty common knowledge that at times boutique bakers and caterers on a small scale sometimes share the amenities and costs for a commercial kitchen to keep things simple and keep overhead manageable. A new business license in California is in the workings and could allow small-scale start-up cannabis companies to the same thing as the caterers and boutique bakers.
This new license will be issued by the California Department of Public Health and will allow small cannabis business to share spaces for their operations and growings rather than make each small business find and secure its own space. If the license passes then, it could greatly help to cut costs needed in multiple areas of the cannabis industry from cutting back on rent capital to that of operating expenses. The CDPH says this could mean great things for the industry, especially small players such as craft manufacturers that may not have enough initial investment to get off of the ground on their own. So far the license is being called the Type S-License.
Type S licenses became open for applications the 13th of April, but it’s important to remember that there isn’t much point to applying for the license if your business is in a jurisdiction that doesn’t offer the associated permit. One example of a place that doesn’t offer the permit is in Los Angeles where the local Department of Cannabis Regulations prevents it.
In an email, it’s reported that Sarah Armstrong, the director of affairs as Americans For Safe Access, emphasized the importance of this in places such as Los Angeles, where there are sensitive uses and less space available for people. With such a withdrawal of available space, she says that people would have to share some things, including commercial kitchens. She noted that the S license is a great and clever way to allow a bit of flexibility while still keeping up with the regulatory control brought on by the state, where subleasing is illegal under both state and local law.
When the S license came into play, and state regulators released some emergency regulations surrounding the S licenses back in March, many cannabis industry advocates, including Armstrong, decided to take action. They went about it at a local level by submitting letters not only to the City Council in Los Angeles but also to the cities Department of Cannabis Regulations and other departments. The message was clear in every letter; they requested the city follow the states lead in this particular case.
The type S license was designed and brought about as a response to all of the cities and counties demanding for equity programs to be implemented. Many in Los Angeles, without the S license, are concerned though that an important party of the city’s ambitious Social Equity Program will be impossible to achieve. The program was designed and brought up to help mend the gap in the disproportionate consequences of the cities drug war.
Armstrong explained the structure of the Social Equity Program a bit more. She told us that those that are already established growers and businesses in the industry are supposed to share space in their business to applicants of social equity, though this can only be done with the use of a type S license or the equivalent of it.
According to state regulations, there must be one single “primary licensee” who runs and operates each location. For that facility, the licensee is required to get a valid California cannabis manufacturing license for the entire space, which should register it as a facility for shared use. Then any business that wants to use the space for their cannabis business simply needs to apply for their type S license. While there is not a limit or threshold on the number of operators and growers that may use the space, only one singular business or operation is permitted to be in the facility at any given time. This provides a bit of security and allows for the separation regulations that are necessary for compliance with the state track and trace rules.
Adam Spiker, the executive director of the Southern California Coalition which is an industry group, recently sent a letter to city officials. In the letter, he expressed his concerns with that the type S license was necessary. Saying that the city’s social equity mentoring program, which has been designed to happen in a shared facility, was in jeopardy without the license, and wouldn’t be able to move forward without it.
A cannabis attorney by the name of Ariel Clark has noted that as of this moment not a single type S license has been issued anywhere in California. The first announcement of a cannabis equity program in the state was announced in Oakland, and even they have just recently approved the licenses. Other cities in the state like Santa Barbra aren’t even fully on board yet but seem to be leaning towards adopting the licenses into their local rules.
Los Angeles is one big city that everyone seems to be watching, and so far they’ve declined to comment on the topic. It seems like they’ve yet to decide to move forward in even considering the type S license.
Clark is warning the city and letting it be known that a decision should be made by the city soon before the “well capitalized” people of the industry dominate and make the decision for them.
Clark says that she’s talked and met with plenty of people with brilliant ideas for the cannabis industry. You people, men women, veterans and small shops that could add wonderous ventures to the industry. They are all excited about the possibilities and have come up with a plethora of them. Unfortunately, they don’t have the access to the market that they need to make those ideas happen. The type S license could afford them all to find smaller outfits that do have access to the regulated markets that Los Angeles needs.
Spiker noted that the issue regarding programs with reduced costs becoming a goal for not only Oakland’s equity program but also to that of the Los Angels programs is that a very significant barrier is created by the commercial cannabis economy. One big obstacle that businesses face, especially in such densely populated areas as Los Angeles is for a property, which is proving to be a very hot commodity. While assistance could be a possible option for help in the form of reduced fees or low-interest loans, it’s always going to remain a challenge in the cannabis business.
Spiker has stated that the cannabis industry has driven up prices in the property rates, he calls the skyrocketing rents and zoning restrictions a “speculative bubble” and that bubble seems to be triple or quadrupling market rates, which is proving to be a formidable environment for smaller outfits and startups in the cannabis business. While that barrier may or may not seem like a big deal to some, it’s important to keep in mind that it is just the cherry on top of the approximate $100,000 that some business can end up paying in state and local taxes., the costs of hiring attorneys and legal counsel, hiring cannabis experts, and paying licensing fees.
He also mentioned that Los Angeles is making it nearly impossible for cannabis businesses. Without the proper type S license being allowed and letting businesses share the scarce property that is available, the industry won’t do well in Los Angeles.