Kathy Hochul
Governor, New York
NYS State Capitol Building
Albany, New York 12224
Dear Governor Hochul,
The Seeding Opportunity Initiative is in part New York’s response to redressing the harm done to individuals and communities disproportionately impacted by the unequal enforcement of New York’s marijuana drug laws. It grants conditional retail dispensary licenses to social equity applicants who have prior cannabis-related arrests and convictions and who have a background in owning and operating a successful small business. It created a $200 million fund to support the social equity retail dispensaries. And, under the Farmers First Program, eligible hemp farmers have been awarded conditional adult-use cultivator licenses and will be the first to supply the social equity dispensaries with adult-use recreational cannabis for sale to the general public.
The Seeding Opportunity Initiative is being trumpeted by your team and supporters as a success, perhaps prematurely. There are in fact omissions in the initiative that can seriously undermine its success. The issues threatening its success were brought to the attention of senior officials at the Cannabis Control Board (CCB) and at the Office of Cannabis Management (OCM) during in-person meetings with members of the Cannabis Social Equity Coalition – NYS, to no avail. The responses received have been a mixture of: “This is just the beginning. We will get to those items later.” or “While I have the authority to do so, I choose not to.” These responses are unfortunate. They reflect a misreading or the ignoring of irrefutable evidence from other states that delayed taking action on the omissions described below, or simply refused to take action. After several failed attempts at getting these senior officials to course correct, we have concluded that your direct intervention is necessary to ensure the success of the Seeding Opportunity Initiative. We are, therefore, requesting a meeting with you to collaborate on developing a productive path forward.
Omitted from the Seeding Opportunity Initiative are the following:
Making Conditional Adult-Use Cultivation and Processor Licenses available to small farmer who have been historically underrepresented in farm ownership
Conditional license recipients must be New York farmers who are licensed to grow hemp and have been operating their hemp business for two of the last four years. Of the 223 licenses awarded so far, over 97% were given to White hemp farmers. The limiting of conditional cultivation licenses to licensed hemp farmers resulted in less than 5% of the licenses going to small [distressed] farmers who have been historically underrepresented in farm ownership, namely, Black and Brown farmers. As is clearly stated in Article 4 Section 87, Subdivision 5(e)(ii) of the Marijuana Regulation and Taxation Act (MRTA), priority is to be given to small farm operators who are members of a group that have been historically underrepresented in farm ownership. So far they have been systematically ignored. Continuing to delay their entry into the market will put them at a serious disadvantage in relationship to Registered Organizations (ROs), Multi-State Operators (MSOs) and now hemp farmers.
Making incubator money that provides education, training and capacity building technical assistance available to the social equity population
The bill contained in the Governor’s 2022 fiscal year budget that authorized the creation of the $200 million Social Equity Fund for Retail Cannabis Dispensaries does not permit any of the $200 million to be used to provide incubator training, education or capacity building technical assistance to social equity dispensary applicants or to eventual dispensary owners. All the money is allocated “for the limited purpose of supporting the fixed capital cost associated with establishing adult-use cannabis retail dispensaries for operation by social and economic equity applicants.” As a result, the social equity population will have to wait until tax revenue generated from the sale of adult-use cannabis and registration fees generated from ROs entering the adult-use general market are collected to receive incubator money for education and training. By then it will be too late. Based on research from other states that delayed the Black and Brown social equity access to the specialized knowledge needed to be competitive, the delay allowed the market to be dominated by highly experienced and well funded ROs and MSOs.
Black and Brown social equity applicants are entering this field at a time when every facet, be it cultivation, processing, distribution, retailing or marketing, requires that its practitioners possess specialized knowledge to operate and be successful. And the learning curve is steep.
Modifying the Cannabis Adult-Use Retail Dispensary License (CAURD) requirement that an applicant has to have or had a 10% ownership interest in a business that produced a net profit for 2 years
During the public comment period, OCM received over 600 responses from the public concerning the CAURD license. The vast majority of them requested some modification of the requirement that an applicant have or have had a 10% ownership interest in a business that showed a net profit for 2 years. Despite the significant response from the public for some modification, OCM decided to leave this requirement unchanged.
OCM also received 100 responses from the public on requiring In-Person or Remote Supervision by a Pharmacist at Dispensing Facilities and on requiring Patient Registration by a Physician and the Office of Cannabis Management. Although far less responses were received from the public on these two issues, OCM decided to modify these requirements in response to the comments received.
Establishing a pathway for the “legacy” population to enter the formal economy
Evidence abounds pointing to the legacy population’s desire to enter the formal market. Ignoring them can only lead to animosity and an intense rivalry between formal and informal operators, exacerbating public health concerns as has occurred in states like California, Colorado and Washington.
Leveling the playing field for social equity applicants
ROs have a significant advantage over new applicants. All the ROs are vertically integrated, giving them complete control of the supply chain. This advantage allows them the ability to minimize losses and maximize profits. The ROs only pay 7% tax compared to 13% tax required of all other license holders. The ROs are not subject to the THC Potency Tax on their product sold at their dispensaries. The ROs were licensed in 2015, giving them more than a six (6) year head start over all new applicants. Nine out of the 10 ROs are publicly traded companies with access to substantial resources.
Moreover, the ROs can flood the market with high quality, inexpensive product, posing a significant threat to future Black and Brown license holders. Since the passage of the MRTA, the ten ROs have been extremely busy expanding their production capacity. Please see attached update on the expansion activities undertaken by the ten ROs since the passage of the MRTA.
Taken together, the significant head start, tax advantage, expanded cultivation and processing capacity and substantial resources coupled with an accumulated expertise and fined tuned marketing and branding operation give these ten ROs an unfair advantage over new Black and Brown applicants.
Withholding Support for Senate Bill S9452 – Criminalizing Unlicensed Sellers of Cannabis
Senate Bill S9452 was passed by the New York State Senate and sent to the New York State Assembly. In addition to doubling monetary fines, the bill allows OCM investigators and the Commissioner of Taxation or his or her representative to issue Class E Felonies to people selling cannabis without a license.
As is well known, when criminal sanctions are among the strategies used to gain the public’s compliance to state regulations, rules or laws, criminal sanctions by enforcement agencies are disproportionately imposed on Black and Brown individuals in Black and Brown communities. This bill is a throwback to the bad-old-days and is likely to produce the same inequitable enforcement practices we have seen time and time again.
In sum, an extensive amount of research on social equity programs in states that legalized adult-use recreational cannabis has been done. All the research conducted on the issues outlined above show that omitting Black and Brown applicants or delaying their entry into the market and reverting back to the bad-old-days by criminalizing individuals will seriously impede the success of any initiative hoping to address legitimate social equity concerns. In other states, the only beneficiaries when these issues were ignored or delayed and criminal sanctions were imposed were the ROs, MSOs and the state’s tax revenue, all at the expense of the Black and Brown social equity population.
Your Intervention is Needed
The Cannabis Social Equity Coalition – NYS whole heartedly support the provisions in the MRTA that prioritizes the social equity population. They are a model for the rest of the country. Like you, we are invested in the MRTA’s success. It is for these reasons we are requesting that you meet with us and intervene at this moment.
As a prelude to our meeting, we are sharing with you a general outline of how we can contribute in a meaningful way to developing a useful strategy to include the omitted items outlined above into the Seeding Opportunity Initiative. Please see attached recommendations.
Kindly let us know a time convenient for you to meet via Zoom or in person.
Best regards,
__________________________
Mika’il DeVeaux, Ph.D.
Chairman
cc: Reginald Fluellen, Ph.D.
Senior Consultant
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Recommendations
Conditional Adult-Use Cultivation and Processor Licenses for Small Farmers Who Have Been Historically Underrepresented in Farm Ownership:
Instruct OCM to use its regulatory authority to provide Conditional Cultivation and Processing Licenses to distressed farmers who have been historically underrepresented in farm ownership. As documented in Commissioner Richard Ball’s study on BIPOC farmers, there is substantial number of BIPOC farmers that have been systematically discriminated against and denied access to resources. These farmers should be given the same priority treatment to enter the adult-use recreation cannabis market that was given to the Hemp farmers.
Incubator Money for Education, Training and Capacity Building Technical Assistance:
Incubator support for education, training and capacity building needs to be fast-tracked. This will allow social equity applicant to enter the market early with the expert knowledge needed to be competitive. To fast-track the money needed, an investment fund can be created like the one that raised the initial $200 million to support the acquisition and renovation of dispensary sites. Or the State can fast-track incubator funds by issuing Cannabis Based Municipal Bonds or by accessing funds from the Tobacco Master Settlement Agreement. Incubator funds could also come from the state’s budget. The $5 million the Governor recently allocated from the state’s budget to support cannabis training and education programs at SUNY and CUNY community colleges falls far short of what is needed to prepare social equity applicants for fifty percent (50%) the nine (9) license categories.
Establish a Conditional Adult-Use Retail Dispensary License (CAURD) for Justice Involved youth:
OCM should create a Conditional Adult-Use Dispensary License (CAURD) that facilitate access to business ownership opportunities for justice involved youth engaged in violent behavior as a means to obtain income. The license would provide them with an alternative to crime and violence as a source of income. It would substitute the lore of criminal behavior for monetary gains with an opportunity to gain the skills leading to the legitimate ownership of a formal business. This would not only give them an opportunity to obtain income without resorting to violent criminal behavior, it would allow them to provide gainful employment to their peers (i.e., gang members, etc.).
Pathway for Legacy Population to Join Formal Economy:
The legacy population should be given a conditional license to join the formal economy. After achieving agreed upon benchmarks, the legacy population should be grandfathered into the regular license categories. The benchmarks should include obtaining training, education and capacity building support from approved certification programs. The certification programs should be, at minimum, in business management, regulatory compliance, seed-to-sale tracing and tracking, testing protocols and in wholesale storage and logistics that prepare them for entry into this highly regulated industry.
Leveling the Playing Field for Social Equity Applicants:
Based on Article 4, Section 63, Subdivision 1-a of the MRTA, OCM has the authority to delay ROs from entering the adult-use cannabis market. We suggest OCM delay them for 3 – 5 years. Doing so would give the social equity population an unencumbered period in the market to acquire the necessary experience, expert knowledge and strategic partnerships needed to be competitive and sustainable. ROs have a significant head start and advantage over the social equity population. Delaying their entry into the market for a few years will, to some degree, level the playing field.
Give social equity applicants ten (10) medical marijuana licenses. Article 3, Section 35, Subdivision 9 of the MRTA authorizes OCM to issue new licenses for registered organizations that will serve underserved communities. Identifying suitable Black and Brown social equity applicants to apply for the ten medical marijuana licenses will not be a problem. Assigning ten (10) new registered organizations to social equity applicants will place these new Black and Brown applicants on equal footing with the ten existing registered organizations.
Senate Bill S9452 - Criminalizes Unlicensed Sellers of Cannabis:
Members of the Assembly should be encouraged to vote “no” on the bill. However, if the bill is passed by the Assembly, we recommend the Governor should simply veto the bill.
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Registered Organizations Expansion Activity
Since the Passage of the MRTA
The following is an update on the expansion activity undertaken by the ten ROs since the passage of the MRTA.
Columbia Care: May 2021 - purchased a 34-acre facility in Riverhead, Long Island for $42,500,000. It included a 750,000 sq. ft. greenhouse. The location has over 1,000,000 sq. ft. of cultivation space.
Cresco Labs: March 2022 - bought Columbia Care for $2 billion. In May 2022, received a tax break from the Town of Wawarsing in Ulster County to build a 380,000 sq. ft. cultivation, processing and distribution facility.
Green Thumb: Oct. 2021 - bought a 450,000 sq. ft. cultivation and processing facility priced at $155,000,000 in the Town of Warwick, Orange County. Senator Martucci lobbied Governor Hochul to allow them to move from their small facility in Schenectady, NY to the bigger site in Warwick.
Goodness Growth Holdings (formerly Vireo Health): April 2021 - purchased 96 acres adjacent to its existing facility in Fulton County and added 324,000 sq. ft. of cultivation capacity.
PharaCann: April 2022 - expanding its 127,000 sq. ft. facility another 98,000 sq. ft., totaling 225,000 sq. ft. of cultivation capacity.
iAnthus Holdings (Citiva): Jan. 2022 - bought eight 8 acres in the Town of Warwick, Orange County and plans to build a100,000 sq. ft. greenhouse (60,000 sq. ft. first stage and 38,000 sq. ft. in second stage). This increase will bring their total growing capacity to 128,000 sq. ft.
Etain Labs: March 2022 - sold to RIV for $247,000,000. Planning to expand their current production capacity to 90,000 sq. ft.
Cureleaf: Jan. 2022 - expanded its 72,000 sq. ft. site an additional 100,000 sq. ft., totaling 172,000 sq. ft. cultivation and production facility.
Acreage Holding: Feb. 2022 - building out its 240,000 sq. ft. facility in Syracuse to triple its production in preparation for adult-use recreational market.
MedMen: May 2022 - sold to Ascend Wellness for $88,000,000.
