Denver wants to diversify the marijuana industry. Some say it’s too late.

After legalizing marijuana in 2012, Colorado leaders created rules and regulations to help scores of people who were already lined up to participate in the $2.2 billion retail cannabis market.

While creating cannabis industry regulations, state leaders took a strict stance. They initially prohibited people with drug convictions, such as those who were convicted of drug crimes, from owning dispensaries and marijuana grow houses.

Many entrepreneurs of color were excluded from the market by these early rules, which favored the well-connected and wealthy. Now there’s an effort to open access to all, but some are questioning whether the Denver Social Equity Program is too little, too late, and emerging when space to open a pot shop is challenging, at best.

State leaders’ idea, lobbyist Samantha Walsh said, was to keep an “undesirable element”Out of the industry. The unintended result was that, while well-connected people were able to grow and sell recreational cannabis, many people of colour and those with less resources have been unable to enter the industry.

Denver leaders said they’re working to create a more equitable marketplace, including by limiting new licenses for the next five years to only social equity applicants, such as those who have lived in low-income neighborhoods and who were most negatively impacted by the war on drugs. But social equity applicants attempting to navigate the complex process of identifying a location for their businesses, and getting it licensed, say the city’s super-saturated market is making it impossible to set up a new shop or a grow site.

They claim that the biggest obstacle is the proximity rule, which prohibits a cannabis business from being within 1,000 feet of another or closer to 1,000 feet from schools, daycare centers, recreation centers, or drug treatment centers.

Applicants who have spent thousands of dollars to participate in the city’s social equity program but hit the 1,000-foot wall say city leaders must make changes before participants can be successful.

“Does it matter if there’s grow facilities right next to each other, or manufacturing facilities right next to each other?”Walsh represented Simply Pure dispensary and Black Brown & Red Badged, a trade organization for cannabis entrepreneurs of color. “Look at our entire downtown area. There’s brewery next to brewery next to brewery. There’s bar next to bar next to bar. No one really bats an eye about that.”

Since the city’s social equity program started in June, the city has received 36 applications from social equity applicants who want to own dispensaries, delivery companies, cultivation sites and hospitality businesses. Eric Escudero (director of communications for Denver Department of Excise and Licensing), the regulatory authority responsible for creating and enforcing the city’s cannabis rules, stated that 19 of those applications are still pending, 13 have been approved, and four have been denied.

In the same time, 642 cases were processed by the city. Escudero stated that there are only 113 spots that would likely meet the requirements for a new cannabis business. 

“The idea of, ‘There aren’t locations,’ it’s just not true,” Escudero said. “It’s hard to find a location. But saying there are no locations — it’s just not factually accurate.” 

He said that 70% of Denver is residential and therefore ineligible to commercial uses. This makes it difficult for equity applicants looking for space.

Rayshawne Thomas, February 24, 2022 in Denver. Denver’s social equity applicant program, started in April 2021, aims to create equity for historically underserved people, like those who were arrested at the height of the drug war. The program, however, restricts applicants from obtaining cannabis licences until 2027 depending on certain qualifications. The requirements include living in Colorado for at most 15 years. “disproportionately impacted area”Applicants or their family members have been convicted of marijuana-related offenses and more. Thomas, who had difficulty meeting additional dispensary location requirements opened a cannabis shop in Moffatt in south Colorado. (Olivia Sun, The Colorado Sun via Report for America).

Rayshawne Thomas was born in Montbello, a northeast Denver suburb that was heavily affected by the war against drugs. This government-led initiative aimed to end illegal drug use, distribution, and trade by significantly increasing the prison sentences for those convicted of possessing or dealing illicit drugs. As a child, he witnessed police stop and frisk him and make some arrests for marijuana possession and other petty drug offenses. 

Thomas, a farmer from his family, felt qualified when the Denver Social Equity Program was created. After searching for eight months and spending $5,000, Thomas was denied. Thomas stated that he was looking for a location that would conform to zoning rules and said he knew Denver would not be the right place for his growing business.

He has since applied for his state cultivation licence and recently received a license to operate Growzillas5280 farms, his new growing operation. In the cannabis-friendly San Luis Valley. Although the three-hour drive from his home in Denver to his farm in Moffat puts stress on his vehicles, and networking in a rural area is much harder, Thomas said he’s committed to making his business as successful as possible.

Thomas said that others had told Thomas that the process of finding a Denver address would feel like searching for a needle in an ahaystack. 

“That’s not true,”He said, “it’s like finding water in a desert. I am very persistent and I work hard, so, when I gave up, I knew that it was just not there.”

Denver has 206 cannabis retail stores. They are all located within 1,000 feet of another cannabis business, daycare, school, or drug treatment facility.

The 1,000-foot rule was not waived by city leaders, who refused to change their minds and said that it is in place to reduce youth use of cannabis. 

Many people against legalization had predicted use by kids would skyrocket after pot was legalized in Colorado in 2013, and it became the city’s priority soon after, to prevent that fear from becoming a reality, Escudero said. According to Escudero, studies have shown that youth are more likely than adults to be exposed to marijuana and other drugs. Cannabis advocates insist that cannabis stores should not be located near schools.

If city council members continue to reject pleas for the removal of the 1,000-foot zone rule, cannabis advocates would introduce a ballot initiative that would allow social justice applicants to waive this rule if passed. 

Her organization sent out a petition in late fall that has accumulated over 200,000 signatures More than 500 signaturesrequesting that the city council remove the 1,000-foot restriction on proximity. Her organization also compiled a list that includes around 70 locations in which social equity applicants tried opening new businesses, but were prevented by zoning restrictions.

“My organization is going to move forward, full force, to get this removed,”Woodson stated. “The thing that I’m always trying to get social equity applicants to realize is that we have to change policy ourselves.”

The city has likely felt pressure from Denver’s entrenched marijuana business leaders who likely don’t want increased competition from new cannabis businesses opening nearby. Walsh said that existing business owners would be better able to help social justice applicants get justice through the proposed waiver.

“I had one client where it was like 998 feet from the back of the Denver Rec Center,”She said. “So they weren’t able to secure that location, and then on top of that, even if you do find a place, is that property owner going to rent to you?”She asked. “A lot of the space that they say is open is private commercial real estate that is definitely not interested in leasing to marijuana businesses.”

Felony possession

Michael Diaz-Rivera, then 19, was stopped by police in January 2006. He was charged with felony possession. He was unable to find stable housing and jobs after his felony conviction.

Diaz-Rivera hoped to enter the lucrative marijuana industry when it became legal. He was eager to open a dispensary when the social equity program was established.

“I wanted to start a retail store here in Colorado. It’s the best business model. It’s the one that makes money,”He said. “But as soon as I started to do my research, I realized that the 1,000-foot rule was the main thing that was going to keep me from even finding a location.”

After three months of searching, he decided to apply for a transport and delivery license that was cheaper. This license is not subject to the 1,000 foot zoning restriction. He said that his income is no longer sustainable. He makes about $20 per delivery. Most Colorado customers are accustomed to purchasing weed in stores. He said that home delivery is a great way for delivery companies to create a sustainable revenue stream. Diaz-Rivera now works to form partnerships with dispensary owners in order to keep Better Days Delivery Company afloat.

Michael Diaz Rivera in Denver, Feb. 23, 2022. Denver’s social equity applicant program, started in April 2021, aims to create equity for historically underserved people, like those who were arrested at the height of the drug war. The program, however, restricts applicants from obtaining cannabis licences until 2027 depending on certain qualifications. The requirements include living in Colorado for at most 15 years. “disproportionately impacted area”if the applicant or a relative has been convicted for a marijuana-related crime and more. (Olivia Sun, The Colorado Sun via Report for America).

Existing dispensaries can only use the delivery services of licensed transporters under the Social Equity Program while the Social Equity Program remains in force. Some dispensaries have adhered to the rule while others have not. “waiting it out,”Escudero stated that they do not plan to add a delivery option to the program until 2027. 

Escudero said that this lack of participation is one the most disconcerting aspects of the social equality program. If existing cannabis businesses don’t step up before the program is over, social equity applicants with delivery licenses will go out of business, he said.

“It’s becoming very clear, very quickly, that when presented with the cheaper option, or the easier option, cannabis companies aren’t going to choose the social equity route. They’re going to choose whatever is better for their bottom line,”Peter Marcus, vice president communications at Terrapin Care Station, a national chain that includes cannabis stores, said the statement.

When the program was first announced, many dispensary owners voiced their support for social equity applicants. Escudero says that only 19 of the 206 Denver-area dispensary locations have been granted a permit to have their product delivered in Denver by licensed social equity delivery businesses. 

Benjamin Merriman is another social-equity applicant looking for a cultivation or dispensary licence. He was twice convicted for growing marijuana in his home. Like Diaz-Rivera he has struggled with finding a location to start his new business.

He’s looking for angel investors willing to fund his cultivation business, which would cost somewhere between $3 million to $6 million, depending on the location. The only eligible spot that he’s found, so far, would cost $6 million to purchase, he said. The social equity program’s 1,000 foot-rule feels degrading, he said. “It’s like, ‘Here’s one bone out there for you folks and whoever gets it, we appreciate you, we respect you,”’ he said.

Benjamin Merriman on Feb. 24, 2022, in Denver. Denver’s social equity applicant program, started in April 2021, aims to create equity for historically underserved people, like those who were arrested at the height of the drug war. The program, however, restricts applicants from obtaining cannabis licences until 2027 depending on certain qualifications. The requirements include living in Colorado for at most 15 years. “disproportionately impacted area”The applicant or their family member has been convicted for a marijuana-related offense. (Olivia Sun, The Colorado Sun via Report for America).

Leaders in the city acknowledged that low capital access is another reason why many social equity applicants are unable to participate in the cannabis sector. 

Walsh said her organizations’ biggest priority is ensuring that A new state program for social equityIt is well-funded to support marijuana businesses. It would be used to provide loans for seed capital, ongoing business expenses, technical assistance, grants to support innovation and job growth, and grants for social equity licensees. According to the Colorado General Assembly website, the program is funded with $4,000,000

The new Cannabis Business OfficeAccording to the Colorado Office of Economic Development and International Trade, this will create new opportunities for economic development, local job creation, and community growth for the diverse population of Colorado. Escudero stated that the Cannabis Business Office will provide technical assistance and capital because banks are not allowed to offer financial services to cannabis-business owners. This is because cannabis is still illegal at federal level. 

Denver Economic Development & Opportunity has also received 1% of city cannabis sales tax revenue per year for the next five years for the Cannabis Social Equity Technical Assistance program to reduce barriers to entry into the cannabis industry, and for the Small Business Investment Fund, which aims to level the playing field for small businesses in Denver, such as social equity applicants’ businesses. Cannabis advocates and social equity licensees agree that more funding is needed.

The Social Equity Program was established last year. It included a rule that dispensary owners had to renew their licenses each year and specify how they would advance social equity within the organization. This included encouraging diversity in employment and hiring. City leaders cannot take action to revoke a license if cannabis leaders don’t execute on their stated equity plan. “But we put them on record and anyone can request a copy of those plans to hold organizations accountable,” Escudero said.

“I do wonder what happens to those things,” Marcus said. Terrapin Care Station has a single store in Denver. “We answer them and then they just go somewhere with the city. There’s no repercussions for not following through. Companies aren’t getting fined. They’re not getting penalized. They’re not losing their licenses. So you want to ask, ‘What’s a good way to hold the company’s feet to the fire?’ I would be curious to know, what is our auditing and what are our repercussions for those who are making promises that they’re not keeping?’”

MORE: Social equity applicants must meet at minimum one of these criteria listed on the city’s website. They must have lived in Colorado for at least 15 years between 1980 and 2010, in a ZIP code disproportionately impacted by the War on Drugs; have family member or legal guardian who was arrested for or convicted of a marijuana offense; or have a household income in the year before their application was sent that did not exceed 50% of the state’s median income.

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