ICYMI: Los Angeles County Releases Proposed Options for Cannabis Regulation

Happy Fourth of July!

For those in California, the rollout of the state’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA“) has been no picnic. The emergency rules released by the State of California last November (and recently re-adopted) still contain gaps and gray areas and the  “transition period” that allowed for ended on July 1. In addition, the majority of California’s 482 cities and 58 counties have rejected cannabis legalization by banning commercial cannabis activity or by enacting rolling moratoria to give themselves time to see how other cities and counties handle things. Just like any other state that’s navigated adult use and medical cannabis commercial activity, California is going to need more time before its cannabis market stabilizes, and it’s going to take a while before its cities and counties routinely sign on to local regulations. There is though some good news as Los Angeles County finally seems ready to open its doors to local cannabis regulations.

Under MAUCRSA, before you can secure even a temporary license to operate, you must first obtain “local approval.” Local approval is basically affirmative authorization from the city or county in which you plan to operate that it approves your commercial cannabis activity and location. Local approval can take the form of a city or county license, permit, or some other form of authorization. Having the nation’s most populous county on board to regulate and allow for cannabis businesses is a huge step forward for MAUCRSA.

LA County has long banned commercial cannabis activity of any kind. However, back in February 2017, the County decided it would flirt with cannabis regulations. The Interim Director of the Department of Consumer and Business Affairs then released its report on options for regulation (or continued prohibition) of cannabis:

1. Allow and regulate all medical and adult-use commercial cannabis activity in unincorporated areas.
2. Allow and regulate commercial cannabis but limit the types of businesses that can locate in unincorporated areas (e.g.,allow commercial medical cannabis activities only and limit business types to retail only).
3. Continue to prohibit commercial cannabis in unincorporated areas.

For option number 1, the County came up with 8 components that would make up a comprehensive regulatory framework for all license types “that promotes health equity, ensures the health and safety of consumers and people living and working nearby, prevents cannabis businesses from causing blight or becoming nuisances in their communities, takes residents’ concerns into account, and does not promote commercial cannabis activities at the expense of other considerations.” Those components are to:

1. Establish a cannabis commission to oversee the licensing and regulatory enforcement program in conjunction with the existing Office of Cannabis Management.
2. Complete a health impact assessment on the health equity impacts of permitting cannabis businesses in unincorporated areas. This assessment would inform the county regarding the communal impact stemming from regulation and the establishment of cannabis businesses within certain communities.
3. Create permits to allow cannabis stores, delivery services, indoor cultivation, manufacturing, distribution, and testing laboratories in unincorporated areas. Outdoor cultivation would be a no-go.
4. Institute permit caps. In the first two years of the program, there would be no more than 25 cannabis store permits, with no more than 5 store permits per supervisorial district and no more than 2 cannabis store permits in any one unincorporated community. There would also be 25 cannabis delivery-only permits, with no more than 5 delivery-only permits per supervisorial district, 10 cultivation permits, 10 manufacturing permits, 10 distribution permits, and 10 testing laboratory permits.
5. Institute zoning limitations and buffers. Cannabis stores, delivery, and testing laboratories would only be allowed in heavy commercial and manufacturing zones and all other commercial cannabis businesses could only go into manufacturing zones. Stores would be required to locate not less than 1,000 feet from schools (K-12), 600 feet from day cares (including preschools), public parks, public libraries, licensed drug and alcohol treatment centers, and other cannabis stores, and 300 feet from off-site alcohol sales, such as liquor stores. All other commercial cannabis businesses would need to locate not less than 1,000 feet from schools (K-12) and 600 feet from day cares (including preschools), public parks, and public libraries. Maps of where operators could potentially go can be found here.
6. Come up with a social equity program to reduce barriers to entry for those who were disproportionately impacted by the War on Drugs.
7. Create a 15-member stakeholder advisory board to assist the cannabis commission and the board of supervisors.
8. Create a business license category for commercial cannabis businesses (in addition to the required permits). The County is also discussing tax proposals for commercial cannabis activity if it opts to institute comprehensive regulation.

Permit caps in a county that boasts over 10 million residents may are not likely to go over well with those looking for meaningful access to cannabis, especially since most LA County cities have banned cannabis or (like the City of Los Angeles) been slow to write cannabis regulations.

Proposed County Option 2 would limit the types of businesses that could engage in a cannabis business in the County. It might do this by, for example, allowing only medical cannabis but no adult use cannabis, or just by allowing retail and delivery in an effort to curb the gray and black market shops that continue popping up.

County Option 3 would continue the ban on commercial cannabis activity in all portions of unincorporated LA County. Without exception, all of my firm’s California cannabis lawyers see this as unlikely to happen given the time and money the County has already spent analyzing its options and givn how many tax dollars it will lose by not going forward. LA county need only look at its inability to shut down illegal operators to know that its implementing comprehensive (or even limited) regulation will likely help with identifying good versus bad actors. If Los Angeles County wants to succeed with its cannabis regulations it will go with Option 1 and that is exactly what I see it doing.

Editor’s Note: A version of this post originally appeared in an Above the Law column, also by Hilary Bricken.