The Long Beach City Council this week voted to allow more cannabis dispensaries and delivery-only marijuana businesses, but asked staff to figure out how to pay for the expanded program without raising taxes.

“It could potentially cripple the businesses we’re trying to lift up,” Councilman Al Austin said about the rejected tax increase. “That’s my real concern.”

The city’s social equity program was created in 2018 to allow those who were targeted for cannabis-related crimes to benefit from legalization.

The ordinance will allow eight more dispensaries to operate in Long Beach, exclusive to those who qualify for the equity program.

To decide these new eight business owners, city staff would implement a merit-based lottery, meaning applicants would go through an interview process first and eligible candidates would be picked randomly. But that process was questioned by council members, too, with some asking for a process that does not include a lottery.

To qualify, equity applicants must meet one of the following requirements:

• Had an annual family income 80% or lower than the area median income last year.
• Have a net worth below $250,000.
• Have either lived for three years in a Long Beach census tract where a majority of residents have an income of 80% or lower than the area median income, or were arrested for a cannabis offense before Nov. 8, 2016.
• Is a resident receiving unemployment benefits.

Of the 32 dispensaries in Long Beach, none is owned by equity applicants, according to a staff presentation.

“There is a lack of diversity in the cannabis sector,” said Carlos Zepeda, a local cannabis business owner, at the Tuesday evening, Oct. 12, meeting.

Legalizing delivery-only businesses, meanwhile, could allow more equity applicants to enter the industry since they wouldn’t need to secure property in an area of town zoned for cannabis, according to a staff report. While cannabis can be delivered already in Long Beach, dispensaries run those operations

But under the original proposal, Long Beach would have increase the cannabis business license tax by 0.25%, which the staff report said would support the increased costs of the expansion.

“I am vehemently opposed to the tax increase,” said Elliot Lewis, the CEO of Catalyst Cannabis in Long Beach.

The council agreed — and rejected the tax increase.

Delivery-only Cannabis businesses will instead be taxed the same as medical and adult-use dispensaries, the staff report read, which is 6% of gross receipts for medical sales and 8% of gross receipts for adult-use sales.

Staff, meanwhile, will look for grants and other funding sources to pay for the program’s expansion.