Cities Should Not License Cannabis Businesses. They Should Support Them.

Recently, the City of Portland announced that it would lower cannabis business licensing fees. Most notably, retail license fees have been reduced from $4,975 to $3,500, in line with other license types. That is still too steep (especially considering the state licensing fees), and although the City has cleaned up its process over the past few years, it’s still redundant, unnecessary and something of a cluster. Like all cities, Portland should stop licensing cannabis businesses.

It’s been over three years since Portland adopted its poorly written Code Chapter 14B.130, which sets forth license procedures and requirements for marijuana businesses. The oppressive fee schedule adopted at that time placed an outsized burden on retailers to cover the cost of administering the Portland Marijuana Policy Program. In the early days, the program was staffed by functionaries at the Office of Neighborhood Involvement (ONI) who shall go unnamed and mostly seemed to follow each other in circles, sometimes passing applicants back and forth with the Bureau of Development Services (BDS). Most of those folks have moved on.

ONI has since been rebranded as the Office of Community & Civic Life (people still call it ONI) and slotted under a different Commissioner. All of this followed from campaign promises made by Portland’s new mayor, who acknowledged that the City’s relationship with marijuana was a mess. For further reading on how bad it got — from credible estimates that local red tape was costing the industry $22 million per month, to disapproving letters penned by Congressional reps — go here, here, here, here, here, here and here. The City’s actions also caused one of my all-time favorite Oregon cannabis rumors: A class action suit would be filed “any day now” by private industry against the City. It’s been a trip.

Three years later, the Marijuana Policy Program is better run, and the lawyers and paralegals in my office get along with everyone there and push licenses through on the regular. But the question remains: What exactly is the point of having a local regulatory program for cannabis businesses? Everything is redundant to what the state is doing, and when it’s not, it’s usually worse. So why do cities think this is a good idea?

Those are complex and provocative discussions, but the motivation by cities may be some combination of the following: 1) licensing cannabis generates revenues; 2) licensing cannabis generates jobs; 3) licensing cannabis is novel; 4) licensing cannabis may appease people who dislike pot businesses; 5) cities may already be licensing alcohol (although to a lesser extent, invariably); 6) other cities are licensing cannabis; and 7) it’s hard for regulators not to regulate things. All in all, it’s a dismal mix.

Unfortunately, there is not much that industry can do when a city decides it wants to license cannabis. In states where legal marijuana markets exist, cities (and counties) have significant leeway in dealing with cannabis businesses. Some cities opt out entirely; others choose to license. Still others take a middle path, charging a variety of fees and taxes to hapless pot businesses but stopping short of licensure. Although fees and taxes are burdensome, those cities tend to avoid the logjams that prevent many businesses from even getting off the ground.

In all, the Portland experience is not unique. Hilary Bricken has been writing on this blog for some time about City of Los Angeles’ convoluted three-phase licensing protocol, for example, and the unintended consequences that come with it. Others have taken a broader survey, chronicling “extortionate” application, permit and license fees from municipalities nationwide. In comparison to some locales, cities like Portland and Los Angeles don’t seem so bad.

It’s also important to remember that cities can do a lot of good for cannabis, if they skip the licensing step and focus on other things. In August, Portland directed $350,000 in funds toward record-clearing and workforce efforts for communities that prohibition has impacted disproportionately. It also dropped another $150,000 to support equitable cannabis initiatives. Both announcements were met with general approval.

Most recently, Portland rolled out a “Social Equity Program”, which modestly reduces licensing fees to qualifying businesses. Before you get too impressed, though, consider: The better move would be dropping the licensing structure altogether.