PASADENA >> The city has come to a fork in the road when it comes to its cannabis retail rollout.

Amid charges of unfairness, alleged unfulfilled promises, changes of business ownership and legal battles, city leaders are poised on Thursday to consider whether that rollout will sift directions.

At stake are millions of future dollars in a red-hot cannabis market, not just for pot retailers, but for local groups, banking on dispensaries’ hiring from communities of color, and social programs that could benefit from cannabis revenue.

At issue for the city’s Education and Technology Committee — composed of City Council members — is whether the city should amend its zoning code to allow more dispensaries to exist in a city that has little space for them under current rules. But that issue also dovetails into a larger question of whether the city should consider creating new social equity criteria that would enable a fresh crop of applicants to apply for those limited retail spaces.

City Councilman John J. Kennedy will be tuning in. He’s not a member of the committee, but his council district will likely be the most affected. It could get three dispensaries, if the code is ammended.

“The discussion has to consider what is the will of the voters,” said Kennedy, whose pushback last month led to a delay in voting on the proposed zoning changes. “One thing that they have said is that there should be no more than one cannabis retailer per district.”

Getting here

It’s been a long and winding road to this point.

Pasadena voters in 2018 resoundingly approved pot dispensaries to legally operate in the city. Ultimately, the city chose six top retail applicants, enabling them to apply for cannabis permits. Under voter-approved Measure CC, the city initially envisioned up to six retail cannabis locations — with the added restriction of no more than one retailer per council district.

Three applicants won permits, but two —  SweetFlower Pasadena, LLC, and The Atrium Group, LLC — can’t move forward to open up because under the city’s zoning code’s distance separation requirements, there’s no room. The rules are designed to protect “sensitive land uses” such as churches, schools and residential neighborhoods.

The city already has withdrawn one applicant, MME Pasadena Retail, Inc. from consideration for a permit because of a change of ownership, prohibited under the city’s rules.

The lack of commercial space around the city has SweetFlower and Atrium pushing for the loosened spacing rules to co-exist in Council District 3 with Harvest of Pasadena LLC.

Harvest won a coveted permit in February — but has yet to open its vacant space on a high-profile corner of West Colorado Boulevard It has been leasing the spot for two years, initially at  $55,000 a month, according to documents in the company’s conditional-use permit application.

The company paid $300,000 in “key money” — the amount paid to secure the lease — according to the documents.

For Kennedy, allowing three dispensaries in his district would “violate the will of the voters and the law.” City staffers also say that voters “reasonably” expected six cannabis retailers in the city when they approved legalized retail. But to not tweak the code would “not be in the best interest of the city,” city planners say.

It’s the fate of those two remaining retailers that brings it back to Thursday’s meeting, where the EdTech committee will consider three options:

• • Make no change to the city’s zoning code, which would essentially cap the number of dispensaries in the city to the three already permitted;
  • Alter the code, which would loosen distancing requirements, increase the number of potential dispensaries in a district and align city’s rules with the less-stringent state code. This would allow SweetFlower and Atrium to move forward in Council District 3. (The state has no distance requirements for separation from such places as churches, libraries and other cannabis retailers. But Pasadena’s code — established long before legal dispensaries began operating — does.); or
  • Lay down new criteria for additional applicants, which would be chosen based on the social equity and community benefits they would provide.

The Planning Department noted in its staff report that the two retailers that are up and running in the rollout have “operated without incident.”

“Given the actual operations of these businesses, it may be appropriate to amend existing regulations to align with state requirements,” the report reads.

Social Equity

The issue of social equity in the local cannabis trade is not unique to Pasadena. But as the EdTech committee prepares to convene, social equity on cannabis looms large in the city’s rollout.

Kennedy said the committee Thursday has the chance to push for more social equity in the city’s cannabis policy.

“That adjustment is as important as providing venues for up to five cannabis operations,” he said.

A year ago, social equity advocates said promises on social equity were flowing. In exchange for permits, retailers were pledging to strive for workforces composed of many workers hired from communities of color. Cannabis retailers offered the promise of community benefits. Equitable ownership and employment had the potential to offset historic disparities shouldered by Latinos and Blacks in an era when cannabis was highly criminalized, they said.

Now, advocates are concerned that such pledges have not gone far enough, nor is there adequate city oversight over how far they go and whether retailers will stick to them, they add.

“I am absolutely not satisfied with the way it’s going,” said Martin Gordon, chairman of the Pasadena Community Coalition, which works with retailers to ensure that businesses make good on their social equity and community benefit pledges, such as hiring from communities of color and using minority-owned supply lines.

Under the social equity option, the committee could consider bringing the city’s permitting criteria more in line with cities such as Oakland, Long Beach and San Francisco. In the case of Long Beach and San Francisco, for example, an applicant can apply as a person, not a business entity.

In anticipation of Thursday’s meeting, advocates are calling for a “Cannabis Equity Permit Program,” with criteria that includes requirements that applicants be Pasadena residents at the time permits were issued, and requiring retailers to maintain a staff comprised of at least 50% Pasadena residents and 25% Pasadena residents in census tracts identified as having high unemployment rates or low household incomes.

Gordon is worried about a city licensing process that would condone a practice under which a pot dealer could be licensed under one set of qualifications and the control of one owner, but then later comes under the control of a different owner.

Such a pattern of mergers and acquisitions in the cannabis industry has Gordon and others concerned that corporate interests, based far from Pasadena, could control the local market, potentially crowding out more local players, including participants from communities of color. Ultimately, he worries that social equity promises could fall off companies’ radar screens.

It’s a process in which cannabis retailers “are able to present yourself as one thing and then sell to somebody else and then say you’re the same person,” said Gordon, when, in fact, authority has been transferred to a whole different entity than what the city originally allowed to receive a permit.

Gordon noted he’s inked a memorandum of understanding with SweetFlower on social equity goals, if the business is ultimately permitted to operate in the city.

Harvest was acquired earlier this month by Trulieve, a huge player in the medical cannabis market in the Northeast and Southeast. Integral Associates, which on June 5, 2019 also received a license to operate in Pasadena, was acquired by Green Thumb Industries, known as GTI, in a $290 million deal announced that same day.

City officials continue to review Harvest, along with any other issues raised. But they also have defended their process, and also issues related to change of ownership.

“The City has been proactive in working to ensure the fairness of the entire licensing process,” read a statement from the city. “When relevant information about any applicant is received, it is carefully reviewed. However, there are complex questions related to vested rights in a permit that has been granted and the extent to which the City can regulate the external marketplace. The city will continue to look at all of these issues, and, above all, protect our residents and businesses.”

Pasadena is certainly not the only city grappling with its cannabis retail rollout. Much concern across the region centers around scoring processes used in ranking applicants.

Seven cannabis companies want a judge to overturn El Monte’s picks for commercial licenses, with some alleging the city made crucial errors in grading applications and others accusing staff of altering the score criteria after the fact to give an edge to applicants making large donations to the city’s general fund.

In Santa Barbara, questions have reportedly emerged over Santa Barbara’s process for allowing shared parking agreements for cannabis dispensaries that are different from what the city requires for businesses everywhere else in the city.  Noozhawk reported that a dispensary applicant won a coveted retail license after city employees rescored one applicant after it submitted an improved parking plan that gave it a huge jump in ranking points.

The scoring process in Pasadena has been a sore spot for City Councilman Tyron Hampton, who chairs the EdTech committee, for three years.

“I’m not satisfied with how the whole darn process has played out,” he said. “We don’t know how the scoring really went down. We’ve got to go back to the drawing board.”

The EdTech committee meeting is at 4 p.m. and will be streamed live at http://pasadena.qranicus.com/mediap/ayer.php?camera id=2&pub/ish id=9 and https://www.pasadenamedia.org/watch/.