Meadowlands Keynote with Lori Ajax
Before the interview with Lori, we sent out a survey to licensed operators asking them how CA legalization was going so far, and what questions and comments they have for the BCC. The questions we asked were compiled based off your feedback. We’d like to extend a big thank you to everyone who participated and sent in responses. We are very appreciative of the group effort; your expertise and thoughtfulness is evident in the quality and breadth of the questions.
One of our primary goals for Meadowlands was to open the channels of communication and make sure compliance and regulatory information is available to everyone in the community who needs it, not just those who can afford compliance experts. At Meadow, we have spent the past 4 years building a comprehensive retail and point-of-sale dispensary software suite, incorporating every nuance of current California regulations. We know firsthand from experience just how imperative timely and accurate regulatory information is to ensure our partners’ full regulatory compliance and success in the legal market.
Feel free to share widely — we want everyone who did not have the opportunity to attend Meadowlands to have access to this content. We believe in lowering the cost of compliance through free-flowing and accurate information.
Below are the questions and topics we covered in our one-on-one with time stamps:
- We’ve seen the regulators beset on all sides by clamoring voices and interests. To whom are you ultimately responsible? You’ve been through a lot and learn a lot these past couple years. Looking back, what, if anything, would you do differently? (0:43)
- How do you look at and measure success? Do you have a North Star metric for measuring success? (3:57)
- July 1st is 2 weeks away, and products will need to be destroyed. Is there a remediation process? Is there an avenue to donate to compassion? (6:27)
- Can you give us clarification on how tinctures will be handled with alcohol as an ingredient vs alcohol as a residual substance? (10:50)
- There has been a lack of transparency and communication regarding METRC and Track and Trace. There has been a lot of misinformation and assumptions regarding when it will be available. When will the first permitted cultivator receive their RFID tags and trickle down to the rest of the supply chain? (11:35)
- We care a lot about harmony. Is there a way to create more alignment between state and local laws? Are there mechanisms to create incentives for localities to adopt certain regulations? (16:30)
- There is a lot of confusion about the implications of the changes to delivery regulations. Mostly there is a lot of uncertainty around why the state decided to implement new delivery regulations after the public comment period with section 54 and on. Was this the result of lobbying and does the industry need to increase its lobby efforts to affect the changes it wants? (18:36)
- There is an imbalance in the marketplace between illicit and licensed operations. What are your thoughts on how to rectify that and have enforcement without re-criminalization? How do we enforce without putting people in jail? (22:38)
- Licensed operators are hurting; profitability and hiring are down. There is also a lot of confusion around local and state taxes. How do we create economic competitiveness through lower taxes or other mechanisms? (27:45)
- I’m sure you get a lot of the same questions over and over again. Could we create a forum, database, repository or spreadsheet with questions and answers, rather than having to go through Freedom of Information Act requests? How can we get this information in an economically viable way without hiring lawyers and experts? (33:28)
- Is there going to be Emergency Regulations 3.0? Can we expect permanent regulations anytime soon? How long will we have the current Emergency Regulations 2.0? Will there be another public comment period? (37:07)
- What keeps you up at night? (39:13)
- There are concerns of not enough licenses being issued, especially for delivery, and of the potential oversupply of cultivation supply that hurts small growers. What are you doing to keep small operators from being eliminated by a constricted supply chain? How do we make sure there is a place for small businesses and get more licenses issued? (41:22)
- The industry desperately needs access to banking. Has there been any movement toward making that a reality? (45:29)
- Will you ever revisit the edibles dosage limitations? (49:18)
- Is there a way to create more alignment between local regulatory groups; how do we educate local regulators? (51:30)
- Would the Bureau consider creating an accreditation to qualify cannabis investors and capital? (52:40)
- Are you concerned about the amount of plastic being introduced to the industry? Is there something you can do in the final regs to reduce the amount of plastic coming into the supply chain? (54:47)
- As part of your education and outreach efforts, can we have an event for local officials to talk about enforcement and funding? (55:45)
- Why is there so much information required from an adult purchasing cannabis when this same information is not required of the same adult going to a bar to buy alcohol? Is this something we can get rid of? (56:02)
- Nor Cal farms have worked hard the past couple years to prepare for the July 1 deadline with clean, compliant product ready to go to market. Are there any changes you’re considering to the July 1 requirements and, if so, can you educate us on that so we can be prepared? (58:56)
- The was tax bill was not able to go through because it was not revenue-neutral. There are other tax proposals that would potentially create a revenue-neutral taxation situation, similar to income tax. Is that something you would support either for the cultivation or excise tax? (1:00:10)
- You say that you want to increase the number of permitted operations and dole out annual permits as soon as possible to get people on board with track and trace. What’s your position on local municipalities that are withholding general applicant approval in favor of those who have the resources and means to incubate? (1:01:26)
- When will we see guidance for cannabis tourism around tasting rooms and consumption facilities, and what those regulations will look like? (1:02:57)
Thank you for sending us your questions and concerns so that we can seek answers and improvements together. Thank you for pushing this movement forward.
Complete Transcript of the Interview
Our very very special guest, Lori Ajax, thank you for being here. So usually there’s a long intro and I’m going to skip that ’cause everyone knows who Lori is but what I wanted to do was share some thoughts on how we came about this panel. So we sent out a survey to licensed cannabis operators, thank you for those of you that filled it out, I appreciate it. From those questions we distilled down a lot of concerns, a lot of anxiety, a lot of fear, a lot of hope, a lot of everything and we’ve done our best to consolidate it into these questions that we’re going to go one on one with Lori. I think being a public servant is pretty thankless sometimes and tireless and we had some comments, I’d love to share them with you. Good work. Keep up the great work, you are doing the best with the hand that you are dealt. Please remember too many good ideas can be a bad idea. I think with the enormous task at hand, you are doing a great job. You folks are extremely responsive and frankly, it’s a pleasure dealing with you. Thank you, job well done, this is a great start despite all the hurdles, the BCC is really doing its best to accommodate everyone, thank you for listening to us and thank you for your hard work. I mean, it’s really really important. Cool, so we’re going to get this thing started here. So it’s hard to be a public servant, we’ve seen the regulators beset on all sides by clamoring voices and interests, to whom are you ultimately responsible? You’ve been through a lot and learned a lot these last couple of years.
Looking back, what, if anything, would you do differently?
LORI: Well can I at least start off and say I’ve got a couple staff members here, Natasha and Andre way in the back, none of this, I mean it was really nice hearing those things but really, our staff is what makes the Bureau right now and I couldn’t be more proud of ’em and thank you for those comments because it means a lot to them, too. It means a lot to us, I’m just going to say people tell me all the time, I know everybody’s clamoring and complaining and they say don’t take it personal, Lori, and how can I not take it personal ’cause it’s personal to you and so it’s, for me it has to be personal. So I just want you to know that and that’s how the Bureau, in general, feels. So I think that’s important for you to know, even if we don’t agree on things, right? But who do I ultimately report to? Obviously it’s the people of California but, also the administration which is the Governor’s office. So I will always say I have many many bosses, I don’t think people understand. We have a hierarchy where we have the Bureau, we have the Department of Consumer Affairs, we have our cabinet agency, Business Consumer Services and Housing, then the Governor’s office, and then of course the people. So it is, can be challenging because you are striking that balance and do we do that? We try but we know that it doesn’t always, you know, sometimes I felt with the readoption of the emergency regulations, it’s like I don’t think we made anybody happy and it was like oh my god, we really were trying to make people happy. But I think we struck some wins and maybe we missed the mark on some other things.
Yeah, here we go, there’s some wind here. Alright, thank you. So as a CEO, oftentimes your ship is kind of just in this ocean and you’re trying to find out which direction to go so oftentimes we have a North Star metric, something that we know that we can look at and say alright, this is the success that we have or this is where we’re not meeting the bar, how do you look at success for us? How do you see this relative scale on where we’re at and how is it manifesting itself so far?
LORI: Success is very difficult because I think it’s different for everybody here, what success is. I know from the state, it started two and a half years ago when we were just looking at implementing, at that time, the medical cannabis regulations, and then it was both, and then it was oh it’s the July 1st deadline, and then it’s issuing licenses, and now it’s getting our final regs. So for us it’s been a series of small successes where we’re meeting our deadline but in no way do I think, we haven’t achieved success yet on the regulated market in cannabis and I think, because we’re still figuring things out. It would be nice, usually with success you have a constant like the North Star, we have no constant, it just keeps changing and so it makes it very difficult to measure success but I think, when you look at our staff, you see how we care, we want to do the right thing. I think we’ve been successful in those areas, but again I think we have so many people here and throughout California that are struggling to get into this regulated system, the ones that are being regulated are struggling to survive so that’s not success yet, but do I think we can achieve it? Yes, do I have a timetable? No. Which is hard for all of you because you don’t have a constant either, ’cause you’re wondering what the next reg’s going to look like, right? How do you prepare as a business when you’re not even sure what we’re going to put out there? So I think getting through this year is going to be a big hurdle and I, hopefully then, will have some constants where we can do a better job of measuring success.
Yeah, I like that, thank you. July 1, that seemed to be one of the most pressing topics that we crowdsourced here, it’s two weeks away and a lot of the goal of Meadowlands is to kind of recalibrate, realign while we’re here to get some clarity on how we move forward together. One of the biggest things that we’re hearing is the product that needs to be destroyed. How much value is there is undetermined but it’s a lot and some people are asking is there a mediation process? Is there an avenue to donate to compassion? These are, these are areas that are really important to everybody.
Let’s donate it to the people.
Yeah give it back to the people. I don’t know if you have thoughts on that or if there’s a way, we are open to that.
LORI: So I’m going to call him out, I just had a conversation with Jared, a pretty robust conversation on what the heck are you doing, Lori, why aren’t, we’re not ready to transition and in some cases he was telling me he thinks there’s stores with 60% of their product would have to go away.
Yeah, we see that.
LORI: And I told him I didn’t think that. I’m like I didn’t realize that, I was thinking all along people are depleting their product, I thought we were getting to a place where we have the transition coming and probably his most compelling argument to me was I don’t think we can get enough compliant product in the door by July 1st.
Yup, that’s true.
LORI: So here’s the hard part. I’m hearing this yesterday and I said we did not extend the transition period in our emergency regulations, so as of July 1 there’s no mechanism to change it at this point and I said I think we needed to hear this a while ago and that’s nobody’s fault here, it was probably we should have been asking the questions more instead of assuming like everybody’s going along that line ’cause even he and I had, a couple months ago, no it’s a transition period’s not going to get extended. So now we’re faced with a couple weeks from now, what do we do? What are some solutions? I hear giving it to a compassionate care program. Yeah, but then, as a state, then we’re looking at well a lot of that product hasn’t been tested, can we give that, is that something that the state is going to allow? We also have to look at do we…
HUA: If it’s good enough for Jan. 1, it’s good enough for compassion.
LORI: Or do we look at is there a way for the retailers to go backwards through the supply chain because if you see our transition period, if you looked at our document that we came out, we do allow, if the cultivator or manufacturer has title, they can put it through testing so is there a way that we can put things backward through the supply chain without having track and trace. And I think those are some hard conversations we’ve got to talk about very quickly in the next couple weeks, but I think it’s not enough just to hear from a handful of people, I think you have to mobilize and talk to us, your local representative, because I don’t know that, I told Jared, me alone can’t just change and say oh, we’re not going to, you don’t have to go by the regulations so I would be, if you have other solutions out there that we can solve this, we’re always open to hearing that. I think nobody was expecting from the numbers, I wasn’t expecting those numbers.
HUA: Yeah, we felt the same way. One interesting thing is we’re often running so fast to keep going forward but there’s still patches or things or cracks that haven’t been addressed, one thing about July 1 is the issue with tinctures. Alcohol as an ingredient versus alcohol as a residual solvent, and there’s stuff like that that’s just so, like it’s in there but what people really rely on, there isn’t any clarification that kind of remediates that, do you, how do you balance that forward and backward and keep moving that thing forward?
LORI: We’re going to take care of that issue, how about that?
HUA: Perfect.
LORI: I can’t tell you how and when, but we’ve heard ya on that one.
HUA: Thank you. Appreciate it. Alright, so the next topic that was the third most pressing, which you brought up, was track and trace. And there’s been a lack of transparency in communication from Metrc, we built software, we’ve been trying to get in touch with them. At the retail level, when we implement point of sale systems they’re like well what about track and trace, and we’re like well what about track and trace? And so far we’ve gotten a lot of misinformation or assumptions, we think that’s coming later this year or we think it’s coming next year. When do you think the first permanent cultivator receiving of their RFID tag that goes into the ground that then will trickle down to the rest of the supply chain, I’d love to hear, we’d love to hear your thoughts.
LORI: So everybody keeps saying there’s a July 1 deal, that that’s when track and trace is going to start and let me tell you, we do rely heavily on Metrc, who is a state contractor, but they responsible to the state to make sure this gets done and gets done right. It is over California Department of Food and Ag oversees track and trace, but I think it’s important to remember whenever we issue that first annual license, that’s when track and trace, that licensee is going to have to get into track and trace. So whenever that first cultivator license is issued, that will be the first cultivator to actually get the RFID tag and start tagging. So when that’ll be, it’ll probably be very soon and I think, for most of us, we expected to have annuals really shortly start issuing shortly after the first round of temporaries expired. That didn’t happen, and the reason for that is because we knew we had to fix the A and M separate licenses.
HUA: Yeah, thank you for that. That was huge.
LORI: So this was like in April we said we got to do something and I’m going to tell you, we felt very strong, the three regulators, that we couldn’t wait for the final regulations to put that change in because it wouldn’t have become effective until the end of the year. So we figured out we got to do it now and we didn’t want to start issuing annuals to A and M and having you pay the separate license fees so we made the decision to put it, I’m going to tell you most state agency, if for readoption, they would have readopted the same old regs, they wouldn’t have done the changes, we decided let’s put the change in and I got to tell you this story, the biggest hurdle was not writing, it was easy to write, it was the IT part of it, the reconfiguration to do the one license then to merge all those temporary A and M’s, all of that, and Natasha was on our IT team. We brought our systems integrator, you’ll appreciate that, and I said this is what we want to do and he looked at me, I thought he was going to get sick. He goes like what do you mean, we’re almost, we’re coming to the end of the project and I got and we got to do this and I go how long do you think it’ll take? He said six months and I looked at him and I go you’ve got six weeks because this is getting done and I think he was like oh my gosh, this lady’s crazy. You have to be a little crazy to be in this, okay? So it got done, last weekend it got done.
Some of you may know the system went down, everything went really well so now we’re in a position to issue those adult use licenses so that was the delay. I think it was worth the delay, plus you got to operate longer on your temporary, which heck, it’s free still so that’s good. But I think you’re going to find very soon we’re going to start issuing those annuals, those folks will get into track and trace. I think the issue, though, is that you’re still, even those of you in track and trace, you’re going to still be dealing with temporaries that aren’t in track and trace and I think that’s where we’ve got to get some good information out there ’cause I’ll be honest with you, it’s confusing for me like hey what’s the guy that’s in track and trace going to do with the guy that doesn’t have temporary license. So we’re figuring it out and as soon as we figure it out, it’s like anything, if you don’t hear anything from us it’s because we’re trying to figure it out and then we’ll get it out to you. But I think we’re not going to have a lot of meaningful data until we get more people licensed and more people in the system so I think that’s going to take some time over the next six months.
HUA: That’s helpful in that clarity. At Meadow, we care a lot about harmony and with all these different counties having different laws with some that don’t, some do, do you have a way where we can create a little bit more alignment between state and local? And are there mechanisms that can create incentive programs for locals to adopt certain things? Cat was saying they need funding, San Francisco needs funding, there’s a need for capital and one of the things that we’ve been hearing about is okay, can locals create alignment with the state that gets them the funding, perhaps, to implement things that keeps moving this thing forward? What are your thoughts on that?
LORI: Well I don’t know that we have the funding right now, and if you look at that first quarter of tax revenues, I think we’re also struggling. How do we help cities and counties with funding and I think we, I think one, more cities and counties got to allow commercial cannabis activity. And this is not, hey let’s blame, even though it’s, but we’re joking, it’s like everybody wants to blame the state and it’s like oh okay, well we’ll just blame the locals so it’s this like circle, right? But of course we’ve got, I think that’s first because we’re not going to get more revenue with the state unless we can get more state licensees so we first, still, have to get more cities and counties to allow commercial cannabis activity and I think that has got to be our focus. And then I think you work on the harmonization and then, as you get more people in, then you have more funding. I think I agree with you, the state’s got to do more to assist these cities and counties to get their operations running.
HUA: Let’s get mobilized. Shifting gears to on delivery, this was the number four topic. There’s a lot of confusion about the implications of the changes of delivery regulations. Mostly, there’s a lot of uncertainty about why the state decided to do this after the public comment period with Section 54 and on. Was this the result of lobbying and does the industry need to increase lobbying efforts to affect the changes at once? We mentioned earlier, is it the money that we have? Is it a bigger voice? It’s just a little bit of direction and how we can affect change the most with the time that we have.
LORI: So you saw that we came out with some new delivery language in the emergency regulations, it was a lot of us talking to the industry, really wanting the higher level, so going from the 3,000 to 10,000. We also felt that it was important that they have those orders prior from leaving the delivery premises and like so many of our regulations, when we put those out there, we got a lot of public comment and we read those public comments and we listened and we talked, I mean I have other people that I have to respond to when we talk about what we’re changing, and so we did make changes to it. Hopefully trying to encourage more business, more delivery because we’re looking at, we want delivery to work and I know at a local level, I think it’s more difficult for them than it is for the state because when we look at delivery, wherever we license you, like if we license you in the city of Mendocino, that’s where your hub is, that’s where your records are, that’s where your cannabis product is but that allows you to go anywhere in the state to deliver and I know that’s hard for the cities and counties because some of them are banning it, and so I think that’s where the, I think there is, we’ve got the state has their look at delivery and then you look at the locals and the cities and counties but I think what we are trying to do is just listen to what we are hearing from some of these delivery companies and what they needed. If we didn’t strike that right balance, then yes I think you do need to,
I don’t know that you need to go out and get a lobbyist but we need to hear from you during these public comment periods because I think this is a perfect case of us reading those public comments and saying hey we didn’t quite hit the mark on what we had the first time around and that’s, I’m going to tell you, that’s what you want from us. You want us to listen, but you may say, I don’t know that we’re always going to make everybody happy. That’s the hard part. So I don’t know, I don’t know where most of you are on the new delivery readoption, so that’s not very, you don’t like ‘em?
It’s a move forward, I think it was just not having seen the changes before anticipating them, I think that’s what was like okay well how do we… How do you prepare?
HUA: Yeah, how do we prepare?
LORI: We didn’t prepare you for that one.
HUA: And anybody, we’re like okay well so we got that now, and uh alright. I mean the game’s totally changed, it’s insane. But, y’know, it’s just the way of the game, but it’s just part of it.
LORI: So and just so you know, we will take feedback at any point and we can’t talk about what’s going to come out in our regs and I think that’s what’s hard for everybody ’cause you’re not hearing this ahead of time, it’s just like boom and, but it keeps you on your toes.
HUA: Yeah, on my toes. At my kitchen counter like what is going on? Okay so this was the most requested question and I think everyone knows or has thought about it. There’s an imbalance in the marketplace between the illicit and the legal. Six months ago, everyone was same playing field, now it’s a little bit more infighting or they’re not legal, illicit, what’s your thoughts on how to rectify that but without recriminalization, or re-prohibition essentially, of like going after people that are trying to move this thing forward. Enforcement is a topic but there may be other ways than putting people in jail, so we’d be happy to hear that.
LORI: That’s what makes this so complicated ’cause I always say that we have different buckets, right? We have the legal market, the ones that are regulated and then you have the obvious ones that are never going to get regulated, but then in between we still have the collective cooperative model that’s in effect until January 9th of next year, and then we have these other people that are trying to get license with the local jurisdiction, just can’t yet, they’ve got their application in. But they’re really trying to follow whatever they can to make sure to get licensed, and so you have all these buckets and then you have your enforcement people that start coming in and it’s making sure you communicate to them what is going to be our priority ’cause we got to prioritize ’cause there’s so, I mean it is overwhelming, I’ll tell you of the complaints we get on our BCC online complaint, I think we have over 600, 80% of them is on unlicensed activity.
So it’s a lot, so we started off, you’ve heard me, we started off with let’s educate people, let’s make sure they understand that if they’re advertising for commercial cannabis and they’re having adult people come in and buy, that’s commercial cannabis activity and they need to be licensed. And that worked for some of the people, like oh okay, I got to get license, how do I do that? For some of them, they just don’t even want to talk to us and we followed up with many phone calls, I think I’ve told you guys, some people are very happy to hear from us, saying hey we were waiting for you to call me, which I think that’s interesting, they’re waiting for the Bureau to call them to tell them you got to get licensed. But hey if that’s what it takes, we’ll call ’em. And then, call all of ’em. And then others just hang up, like oh gosh immediately. So for us, we’re right now, we have our, the Bureau has enforcement crew that are going out and of course we’re going out to the licensed retailers, we’ve probably visited some of your folks and we get great information from you on who’s out there. But again I’m hearing complaints like well you’re keeping us in line, you’re making sure everything, what are you doing about that black market and so that’s what’s the tough part.
There’s the political end, we’ve got to make sure that our licensees are complying because we want to make sure this works, right? And you don’t want someone who’s creating issues for the community and whatnot, but on the other hand you’re following the rules and here’s this activity just still going on rampant. So we do now have through the Department of Consumer Affairs we have a cannabis enforcement unit and we have sworn officers and we are making sure as we refer complaints to them, we’re prioritizing those complaints on who needs to have enforcement action because we are moving into that next phase. I think we always still educate wherever we can but we’re moving into that next phase of Swiss cheese, swift enforcement, sorry.
So I think that’s where we’re at, and then a lot of it does come with working with the locals ’cause we, I think it’s important that we talk to Nicole and Joe and Cat and say hey here’s who we’re looking at to go after, are they in agreement or are these people that are trying to get licensed? So I think it’s different than any enforcement that I’ve been around because, as most of you know, I regulated alcohol for 22 years. I was a law enforcement officer for 22 years and it wasn’t that, there wasn’t all these different buckets it was like if you had an illegal still, you had an illegal still, you weren’t in the regulated market, it was easy. This isn’t quite so easy but I know for all of you here, you’re struggling to do the right thing and it’s really hard, I said this, being a pioneer in this has not been easy at all ’cause you’re the ones struggling right now.
HUA: So we had some questions that kind of just asked the operators how they’re doing and, on profitability we asked are you less profitable, more profitable, or the same? 88% are in less or the same, only 12%’s making more. We asked are you hiring, yes, no, or just frozen? 83% are not hiring or frozen, 17% were downsizing, which is interesting. Then we asked about do you believe medical is still viable and 55% said no. And transitioning from this topic of enforcement, another way to help operators is to make them more competitive in the marketplace. Economics work and a big concern is taxes. You have a really good handle on what tax revenue needs to come in to fund what you’re doing, we need to figure out how to get more licenses to get the taxes to get the application fees, it’s just this catch 22.
I’m sure you’ve heard, if not, taxes are a huge burden. You look at the excise tax, you have the 60%, you have the bill that Bonta is pushing in to put down 11% but the CDTFA still has the ability of making that 60% markup 100% if they wanted to and then bring it back to where we were. And then you have the confusion around local taxes and sales tax, non-exemptable taxes, taxes that taxes other taxes, right? Like your sales tax needs a tax, the excise tax it needs to tax the local tax but if you’re in San Diego, they’re saying the local tax doesn’t tax the excise tax and then you’re like okay well but if I buy a grinder in San Diego and I have to pay the sales tax, I’m a medical patient, I buy some cannabis, it’s crazy. And it’s all in cash, right?
So maybe it’s not about, so we’d love to hear your thoughts on sort of helping create economic competitiveness through either lower taxes or other mechanisms, I’m hoping that you’ve had conversations that you can share with us and maybe they’re not solutions but maybe they’re just things you’re discussing.
LORI: So I really had high hopes for that Bonta bill ’cause I did feel there needs to be some relief here. I think there’s got to be taxes, it was in Prop 64, I just don’t think any of us realized what that impact would be but I think, for me, when I look at just figuring out the excise tax and the cost of goods and how that is, I’m going to tell you all here, I couldn’t figure it out and when you talk about the local tax and what it’s on, if it’s net revenue, gross revenue, and if we’re going to make it… Yeah I don’t even get that.
Non arms length.
So if even I go ‘gosh this is hard to figure out,’ it’s like anything else, if it’s going to be hard to figure out it’s like your state income tax, your federal income tax, you’re just not going to do it because it’s too complicated or you’re just going to put anything down or it’s not going to be done right so I think if we can’t simplify this, and then on top of that, it’s all cash and it’s hard to get your cash to the taxing authorities. They make it difficult to give you them, here you want to give them your cash and I’m hearing it’s difficult to do that. So I think I look at some of these the first quarter is probably just people are like god this is just too hard and I’ll be honest, I can be a procrastinator and I’d be one of those ones that would wait til the last minute and like oh gosh this is too much, forget it. And that’s not the right way to be, I get it, so I think it’s twofold, can we find relief for you? And then how can we make it easier for you to pay your taxes but when you look at those numbers, I think I’m concerned about the hiring and downsizing, that’s probably I think, out of those, those are the scariest numbers right there. And if we can’t do it through taxes, lowering it because y’know it’s very difficult because it was a Prop 64, then how can we do it in other ways to make sure that you’re putting money into your business and have that money to put into your business so you can expand and grow.
HUA: Yeah, there’s that piece, there’s also one of the costs that everyone’s dealing with is compliance and a fair amount of us spend a lot of time and money paying lawyers, accountants, and more lawyers, the lawyers advisors, consultant, and it’s a lot of it’s because we don’t know if we’re asking the right questions or we’re getting clarification on something. And one of the solutions that we’re thinking about, a lot of this, the Q and A that you guys are, don’t worry about that, the Q and A, there’s some secrets on there, it’s not secret, it’s all legal. Yeah, it was a note that was passed to me but it’s all good. You have this idea of fluid information and I’m sure you guys get a lot of questions like the same thing over and over and over again, it’d be great to have some sort of forum or a database or a repository, even a spreadsheet of here are all the questions that were asked, here are the answers instead of filing a Freedom of Information Act every single time. And because a lot of us, we’re so in our own lane and that when you’re trying to understand who you’re trying to work with and what they have to go through and vet them out, you’re asking different questions that you’re not anticipating, and so how do we lower the compliance barrier of information? How do we get this stuff out where we’re not paying $450 for an hour of time for a lawyer to tell me that no offense to lawyers, I love you guys alright? Just saying, I’m not trying to call you out, I’m just saying you guys cost a lot of money and we’re trying to make this economically viable, okay? But that’s just something, maybe it’s not taxes, maybe it’s like that, so I’d love to hear your thoughts on maybe how we change the balance sheet a little bit for us operators and where can allocate funds.
LORI: I am going to be the first ones that I would, in the beginning I said I don’t want our regs so difficult that people would have to hire outside consultants or attorneys just to figure out, that’s like.
HUA: Who here hires an outside consultant or attorney? Alright, here we go. It’s a lot of language.
LORI: So I was reading your, you had that in your, what you sent to me yesterday and I was reading that and said wow, what a simple idea yet, and probably easy to implement, yet we, you telling me that goes oh yeah we can do a spreadsheet like that, we can easily do that and you guys are probably thinking, I am a blonde right? So I think we absolutely can do that ’cause one of the reasons you saw a lot of clarification language in the regs were based on all those emails we get from BCC and some of ’em we just keep getting the same one, the same one and we realized wow that’s not clear in the regs so we cleared it up. But there is no reason we can’t put those answers out for everybody, and in fact we are so serious about, we send everybody to that BCC email and I still have dedicated staff that are answering those, usually legal staff or that so we give you consistent, correct answers, I just don’t want it going everywhere in the Bureau and somebody saying one thing and you call someone else and they say another. So we absolutely can do that, and I,
HUA: That’d be great, yes.
LORI: I always say, I told Jared this, don’t assume we’re thinking of all this stuff because we’re so focused on getting certain things, sometimes it’s the little stuff that escapes you.
HUA: Well, y’know. Okay, alright, yes, yes that is, yes. So we have a handful of more questions here. One of them was around is there going to be an emergency regulations 3.0? Or is it going to be permanent regulations coming and do you anticipate that coming soon, later? How long do we have these emergency regulations 2.0 and will there be another process of public comment, like how much time do we have to mobilize to get to the next permanent or emergency?
LORI: You got to start mobilizing now.
HUA: Yeah, okay, yeah yeah, well we’re trying to understand the timeline.
LORI: So there is going to, there is no emergency regulations 3.0. At the end of this 180 days, we have no ability to extend them any longer and if we don’t get our permanent regs, there would be no regs which I always say you guys would probably love that. So after this 180 days, they do go away, we have no ability to extend ’em so that’s why you’re going to probably see in the next couple weeks us releasing our final regulations. That’ll kick off a 45 day comment period, it’s not the same as emergency, 45 day comment period where you can respond, we’re going to do reg hearings and then we look at all the comments, we have to respond, we’re required through the California rulemaking process to respond. We don’t have to during emergency, but during regular we do. And then if we make any changes, unlike emergency regs where we could make changes during that 10 day period after comment, during regular rulemaking, we have to notice the public again and it’s based on if it’s substantial changes and it’s another 45 days, if it’s not substantial, it’s more technical clean-up, it’s a 15 day. So this process is very transparent and we’re running out of time, we have 180 days to get this done and so you’re going to see that very soon. So I would suggest that there’s things you want to see, it’s time to mobilize. There you go.
HUA: Alright, you heard that. Okay, what keeps you up at night? ’Cause I don’t know how everybody’s sleeping nowadays but what keeps you up at night?
LORI: Everything, everything, everything. I do not sleep well anymore and I’ve heard you have something for that.
HUA: Yeah, we do. We do, yeah.
LORI: Some day. So it really, everything. I just want you to know our, and this is just not me, my mind is running all the time. I wake up in the middle of the night and I say oh gosh, we got to do this, I got to do this, I feel like at the Bureau we’re just riding by the seat of our pants every day and so, and it’s every day, it’s seven days a week, it doesn’t go away. That’s a good, you know what, I can rest later. It’s just like you guys, you guys are the same thing. I’m sure there’s a lot of things that keep you up at night on how you’re going to make it the next day and I just say we can rest later, we got a lot of work to still get done.
HUA: Yeah, thank you. We appreciate it.
LORI: And by the way, this is the most relaxed I’ve been in a long, long time.
HUA: Yeah nature. Yeah! That’s great.
LORI: I’ve never smiled this much and so much ’cause it’s just so nice and who would have thought, like we were talking about it three years ago I’d be sitting here with people just smoking cannabis and it’s like so normal.
HUA: So normal, this is what we do. It’s just that these hotels don’t allow us to, right? We’re really good people. So we’re making a lot of progress here, we’ve gone through over half of the questions so far and so I think we might even have a little bit of time of Q and A so if you have some questions, we might have a couple call in, just prepare ’em in your mind as we go through, and y’know, keep it classy. Right, alright? Alright so there’s concern that there’s not enough licenses that have been issued for retail, especially delivery. We went from a couple thousand, maybe more, of delivery operators to I think 100 that have been licensed. There’s also a concern of potential oversupply on the cultivation side, especially due to license stacking and the removal of the one-acre cap. It’s hurting a lot of people. What are you doing or thoughts that you have on addressing keeping small operators from being eliminated by a constricted supply chain? We care deeply about the small business, small craft, the grower that has been doing this a while or even the small mom and pop delivery operator that has been serving their collective for eight years that many of the patients now don’t have access or have to drive far away and it’s really a shame. So I’d love to hear your thoughts on getting more licenses.
LORI: So I’m going to tell you, we need more of every license type, not just retail. And then of course there’s a worry, we even look at retailers, how many licenses one person has and whatnot and I think it really is at the cultivation level that you start looking at I think I’ve lost count, over 70 the same business down in the Santa Barbara area. And I think we all look at, gosh wow that happened pretty quick and what is that doing to the small grower, it’s probably really really hurting you and so you, the Bureau does not oversee cultivation so this is something, and I’m sure all of you, that’s where you really do need to mobilize, right? And making sure that we’re interpreting the statute the way I think it was meant, what you passed in Prop 64 and so I think that is making sure you are talking to the regulator, talking to CDFA, and also your legislators in your area because they’ve got to hear from you and they’ve got to understand how it’s hurting you. So I think we’re learning as we go and I know that’s no excuse because as small business say we can’t do this anymore, it’s not enough to say learn faster, state, learn faster. But I think there are certain things that we can work together to get done to make sure we strike a balance because I’m going to say I think there’s room for everybody because as a state, I think there’s room for small, the medium, and the large, but it’s striking that balance. And I’m not sure we’re there, but at the same time we know we’ve got to issue a lot of licenses so there’s that balance, we know we need to get more people in the supply chain, we know that if you’re a cultivator, we need more retailers for your to sell your product to. It is a sort of a back and forth on how we strike that balance and I think it’s going to, a lot of you are going to have the ideas on how we make this happen because we don’t, I don’t want to see the small grower, I mean look at, you come up here, what a beautiful life this is if you’re a small grower up here, I mean we want to preserve that and I’m going to tell you, being a cultivator, and some retailers may disagree with me, getting licensed as a cultivator is very difficult and all the different agencies you have to intersect with so is there a way to consolidate that. And I’m going to tell you, look at the alcohol model for grape growers, look at beer manufacturers and how they grow their hops and I think really as a group you need to start looking at that model and how that works and talking to your state representatives.
HUA: There is a huge supply of working capital and financial resources available to us. The industry desperately needs access to banking. Has there been any movement or what’s going on in conversations and that are happening?
LORI: So there’s a lot of conversations going on, as you know, from the state treasurer to the business oversight that oversights all the banks, and really I think we thought there was movement towards the end of the year. When the federal government rescinded the Cole memo in early January, I think it really just, banks that were ready to do it just sort of pulled back. And that was disappointing. There is, Senator Hertzberg has a bill out for a banking, a semi-public bank. And it’ll be interesting to see how that develops. I just think a lot of it, really being federally illegal is just really makes it really tough on the banking, as all of you know, it’s just how do we do it just as a state alone, and you’ve looked at Colorado and Oregon and Washington, everybody’s trying to figure out the solution so I think it’s mobilizing with our other sister states. I think there’s got to be some movement on the federal level and then seeing how we can get these smaller banks to bank you, I’m going to tell you, you’re going to find this interesting because you probably think well you don’t know how we feel but I’m going to tell you when we moved our operations from we were at under DCA, we have now a new facility in Rancho Cordoba which is just outside Sacramento, and they knew who was coming in when they rented to us, a private building owner, it got to be when we were doing the signage for our Bureau, the landlord said you cannot put Bureau of Cannabis Control. I’m like what are you talking about? They said you can put Department of Consumer Affairs but you can’t put anything cannabis, not on front, not here and the reason why is because they were afraid if when they wanted to sell the building, they were afraid it would discourage buyers from wanting to buy the building. And I know this is a small example of what you go through every day but it was like oh hell no, I’m sorry but it’s legal now. We’re having our name out there. So it says the Bureau of Cannabis Control in several places highlighted.
HUA: Alright.
LORI: But that’s just one example and that was from us at the state where we find this like discrimination ’cause you’re in cannabis and so I hope that we can solve a problem, I want to tell you we’re going to take your cash, by the way, we’ll take your cash, so we’re taking your cash and then, by the way, we are opening an office up north on July 2nd and we’ll take your cash up there too. In Eureka.
HUA: Did your landlord raise the rent on you three times?
LORI: Yes, yes! Yes.
HUA: Alright, just saying.
LORI: Well not three times, but up in Eureka, yes. As soon as they knew what we were doing, it’s like oh now it’s, ‘Well you’ve got the moneys, let’s raise the rent.’ So I have a couple more questions, these are pretty light and then we’ll have some time for some QA.
HUA: So we’re cruIsing, good job. This is for the manufacturers, will you ever revisit the edibles dosage limitation? Edibles limited to 10 milligrams a serving is in SB94, but 100 milligrams per package is not in law and could be removed, at least for products marked for medical use only.
LORI: That is under the Department of Public Health. See everything needs to just, I know. So we, the Bureau does not have control over that. That does fall under the Department of Public Health and so they do need to hear from you. And it is hard for the Bureau to, we’re the lead agency but we don’t tell other agencies what to do, especially when it comes to public health issues where that is not our expertise, we’re gaining more expertise with the laboratories and things with things of that nature that would be something to really.
HUA: Talk to the department about, got it. Will the BCC consider pushing for no cannabis taxes on CBD only products? That contain no THC?
LORI: So we don’t regulate the CBD products that don’t have no THC but you’ve probably gotten, if anybody have asked whether retailers can sell that product, have you seen our answer? We’ve said you cannot sell that product in your retail premises.
HUA: Why?
LORI: Because we need to figure out a way to get that regulated through the normal supply chain using people that are in that supply chain because I really feel all these products really directly compete with what you’re doing and so I think we do need to have a big conversation about these CBD products, where they’re derived from, what’s in them.
HUA: Where’s it derived from, right?
LORI: And maybe at some point we regulate it so everybody in the world isn’t out there putting it out there because we don’t know what’s in a lot of these products.
HUA: Great, I mean that’s like my questions. Fantastic job on that, we have 10 more minutes so we’ll do some Q and A if that’s possible. Okay, I’ll repeat the question. As a cultivator in Oakland dealing with local regulators, you also have the pleasure of dealing with the Department of Building and Planning and the Department of Fire and the department of everybody and no one’s talking to each other, is there a way to create more alignment to enable less conversations between all these multiple regulatory groups? How do we educate the local regulators?
LORI: And this is something the Department of Public Health has talked about and I think that is their goal, to get some guidelines out there ’cause they’re finding that even when they’re starting to do their site inspections, even of CO2 rooms where they’re going that have been licensed by the locals, they’re even finding some issues that, because they just don’t know. And so they found some very serious issues so they understand they got to have some guidance out there because there’s just a lot of people that just don’t know and so excellent point and I do think you’re going to see some guidance coming out probably once we get these regulations out the door, you’re going to start seeing more of that.
HUA: Something that’s really important to this industry is we’re all putting a lot of money and a lot of effort into this and it’s important for us to have mechanisms to bring in investments without bringing businesses to halt. And so some of those mechanisms require us to leverage some equity and so the Bureau has the ability to create license types that are necessary and so the idea, and you mentioned ideas if we come up with them, and so the idea of having almost like an accredited cannabis investor that fast tracks and allows you to negotiate and bring funding in without delaying and stopping the business operations so that we know hey this isn’t mandatory, but if we took funding or some of these people came onto the cap table for some liquidity for the business to grow, not halt that business, allow it to keep expanding at a certain rate because hey these are already pre-accredited, they met whatever requirements and they can fit on the ownership table, is that something you’d consider?
LORI: I’m not a financial person, but you’re intriguing me with that. I would like to hear more and put you probably in touch with some of our legal folks that we can talk to, I’m not sure exactly how that would work but I would be very interested. ’Cause I’m sort of interested where you think that’s halting at getting licensed, why that’s, maybe if you could just expand on that.
So as soon as you accept capital and if it wasn’t through debt, and they actually became owners and took an equity position, your business now has to freeze.
LORI: Got it, I got it, got it. Yes, I think we can work on that, yes. And finding a way that you can continue to operate until they get qualified, yes I think we can work on that.
AUDIENCE QUESTION: Hi Lori, I just want to thank you so much for being so accessible to us and for coming here and answering our questions, we really appreciate that. Are you concerned about the amount of plastic that’s being introduced to the industry? And please, we need to talk about this as a community and if there’s anything you can do in the final regs that would reduce the amount of plastic coming into the supply chain, the earth will thank you. The plastic is honestly more harmful than the cannabis.
LORI: It is, and a lot of the packaging requirements is in statute but we hear this a lot. So I think even with maybe being more, if even with our exit packaging and not, I think everybody thinks that has to be plastic, I don’t think it, it doesn’t have to be. And so maybe it’s just, even the little that we have control of, I think we can do a better job on that. But I do think when it comes to all the packaging, some of that is going to have to be dealt with with a change in statute.
AUDIENCE QUESTION: As part of your education and outreach efforts, how about having an event for local officials and talk about enforcement and funding and all the different things to help them get over it. Secondly, get on the plan. Secondly, I’ve been getting complaints at Cal NORML about well when I go into the adult shop, I have to give them all this information about myself, like why isn’t it just like a bar and I can just go in and use it and I think that that has hampered the program as far as being successful in the first rollout and I wonder, I’ve gotten conflicting responses as to whether, once it’s track and trace, is it because you have to keep people to one ounce at any location in a day or are you going to have to keep that, I think that’s something we need to get rid of.
LORI: So to address the local issue, one of the things that we put in, so our budget we put in for our budget for this next fiscal year which starts on July 1st, we’re waiting, it hasn’t been finally approved but we did put in a unit, just a local liaison unit. We feel the need to really have people that are dedicated to the local jurisdiction in certain areas and they just have somebody they can contact and then they would also be responsible for setting up regional trainings in the area for those locals, and then also assisting people with their applications so these people would be dedicated to anybody here that, so you don’t have to hire a consultant or an attorney, so we can walk you through the state process and then put you in touch with who to go through on the local. So I think that’s going to help. Obviously, once we get the money then we staff up and so that’s going to help a lot on that issue.
And are those staff people like listed on your website so if you’re in a region, you can refer people to them?
LORI: They haven’t been hired yet because they’re not in our budget yet but starting July 1, so you’re going to have to give us a few months to hire the people to get there and then you got to train them.
Taking information about people.
LORI: So I think in our regs right now we require like a first name or they can assign a customer number, but then on the receipt they have to show what cannabis was bought and all of that, I think we need to probably look at the statute and our regs and if you think that’s too onerous for people here to give that information, I think you’re right, we want to look at some day looking at this other than seeing your ID to make sure you’re old enough to buy the product, like in alcohol, do we really need all the rest of that information? I think it’s also hard to track whether people are going from one retailer to the other and going over the daily limit. I’m not sure that we can ever really successfully track that or enforce that.
Nobody’s going to go pay retail an ounce an ounce an ounce here and then take it to the black market, that’s just not financially.
Great question, thanks Ellen.
AUDIENCE QUESTION: Thanks Dave for running this panel and thanks Lori for being here, many of our Norcal farms have worked hard for these last couple years to prepare for the July 1 deadline and we have clean, compliant product ready to go to the market, is there any consideration that you’re thinking about changes to the July requirements? And if so, could you educate us on that so we can be prepared for any changes?
LORI: So as I spoke earlier, right now the July 1 transition period, as of June 30th that transition period goes away and then we move into that second phase of the testing requirements, so as most of you know we didn’t require all of the required testing at the beginning, we had a phased in approach so January 1, you had to do a certain amount of testing, required testing, July 1 is phase 2 and then phase 3 starts the beginning of next year. So that’s still ready to go, I’m going to tell ya the testing’s not going to change, that’s going to come into play on July 1 and one of the things that, obviously we’re going to be talking about pretty heavily in the next couple of weeks, is there a way to do something with all that product at retail?
Again, thank you. The tax bill was not able to go through because it was not revenue neutral, there are other proposals that would potentially create a revenue neutral taxation situation similar to what we have for income tax, right? Is that something that you would support even on the cultivation or the excise tax?
So when it comes to any kind of legislation or bills I’m going to tell you, in my position I’m an appointee of the Brown administration and I’ll say this, we’re not allowed to take positions on bills unless we’re told what that position is. But I’m going to say the administration as a whole has always been very open to ideas to support the industry to make sure they’re successful so even though we can’t come out and support any certain bill, all we can provide is technical assistance which we do quite a bit and so in the sense that, overall do we want to do things that are going to be make the regulating market successful, of course that’s what we want because if you’re not successful, the state has failed right? And so that’s about as far as I can go on that.
Ryan again, come on up.
AUDIENCE QUESTION: Thank you for my second question. I hear you say that you want to increase the number of permitted operations and dole out annual permits as soon as possible to get people on board with the track and trace, with that being said, what’s your position on local municipalities that are withholding general applicant approval in favor of those who have the resources and means to incubate?
LORI: I mean, there’s 483 cities and 58 counties so I can’t comment on any one city or county and exactly what they’re doing at that time. What we do is provide them whatever resources they need from us, really making sure we’re at least telling them where we’re at in the process, educating them on our regulations ’cause I’m going to tell you a lot of, and I’m not talking, the ones that have their comprehensive program in place, they’re all squared away but there’s a lot of jurisdictions that are trying to figure this all out just the way you guys are trying to figure out our regs and we find there’s so much education that still needs to be done from us to them ’cause there’s a lot of rumors that get started in this industry, if I’m going to take away anything, boy please just us an email when you hear stuff because it just goes like completely viral and you’re like where did that come from? So that’s really our focus with the locals is making sure we’re getting them good information and also having a good program in place so we can say hey lookit, it’s working for us.
AUDIENCE QUESTION: My question is about cannabis tourism and how it can support this industry as a whole. I run Emerald Farm Tours and I get calls almost weekly from licensed farmers up here in Mendocino and Humboldt County who are begging me to bring people up to their farm for eco-tourism experiences. Now my question is when and how soon can we see guidance around tasting rooms, around consumption facilities and what those regulations will look like? It’s working really well in San Francisco, maybe if that could be your model, could we get some timeline on that?
LORI: Consumption’s allowed if you have a retail license and that is really, that’s the locals. If the locals allow consumption, then we don’t really have a say in whether they can or can’t do it. So that is really at the local level. When it comes to like tasting rooms and obviously we’re talking about cultivation or maybe even manufacturing, I don’t know, that would have to be a change in legislation and again, you can look at the alcohol model when you look at wineries and breweries and how they’re fully, one license they can sell to a wholesale, they can sell to distributors, retailers, and the consumers but there’s some restrictions on what they can do so I think those are things you got to start looking at, but keep in mind also the alcohol industry didn’t get all these privileges overnight, for a long time there was a lot of the bigger guys, the smaller guys had to get those privileges, it took many many years to get some of the same privileges that the big guys have but I think those are some things we need to start talking about. Somebody, I don’t know if he’s here, I was down in L.A. and somebody was talking about a tourism bus allowing people to consume on a bus that goes around, I think we’ve got to look at all those things. I mean, maybe not right now.
My attorneys are looking into it, for sure.
So I think there’s a lot because we got to figure there’s so many people that are coming to California and we want them to have a good experience here and how do we make it more of a good experience? So I think those are conversations that are going to have to have had but a lot of that’s going to have to be changed out in statute.
Thank you so much.
Hey, what about that panel? Yeah, yeah. That was really really really good. I had a great time. Your peoples. Yeah, you guys are so so so beautiful. Thank you thank you thank you.
