To Whom It May Concern,
Equitable Opportunities Now was founded in 2016 following the passage of Question 4 to advance equitable ownership and employment opportunities for communities harmed by the War on Drugs. Through education, advocacy, and programming, we empower people of color and those harmed by cannabis prohibition to participate and succeed in the regulated Massachusetts cannabis market.
Our 501c3 nonprofit organization was founded by longtime cannabis advocates including Shanel Lindsay, Shaleen Title, Ross Bradshaw, Armani White, and Laury Lucien to advance Question 4’s reparative justice goals. We are the longest-running advocacy organization for social equity cannabis business leaders in Massachusetts and have a track record of success in delivering programming and effective advocacy to support cannabis equity business leaders and workers.
This year, EON teamed up with the Black Economic Council of Massachusetts (BECMA) and cannabis social equity businesses to create the Massachusetts Cannabis Equity Council (MCEC). The Massachusetts Cannabis Equity Council (MCEC) is an advisory committee of cannabis social equity business leaders that provides strategic guidance on EON’s programming and policy initiatives.
On behalf of EON and MCEC, I’d like to express our gratitude to Mayor Wu and her Administration, including Chief Idowu and the OEOI team, Chair Joyce and the BCB team, for your commitment to advancing equity in Boston’s cannabis industry. We appreciate your proactive engagement regarding the important topic, and your emphasis on “hearing from equity applicants and equity businesses that have a Host Community Agreement (HCA) but have not yet opened, and equity businesses that have received a license and/or opened.”
After extensive outreach to the 17 social equity business owners of MCEC with provisional and/or final licenses, and dozens of other equity and general applicants and licensees, it is clear that this is an important, timely, and complex conversation.
After gathering anonymous input from licensed Boston cannabis social equity business leaders, it is clear that this should be the start of a series of stakeholder engagement opportunities. Given the range of opinions on this topic, we urge you to commit to holding additional opportunities for stakeholder input before finalizing any policies on this topic. Given the complexity of these topics, it may be helpful to consider holding informal stakeholder discussions with facilitated group discussions to work through divergent opinions and build consensus.
We urge you to collate, summarize, and publish the public comments you receive on this topic, including the identification of questions for further discussion and themes.
Another point that was frequently raised by those who did not submit comments was that it would be easier to respond to a proposal than react to these questions. It would be helpful if the Administration provided samples of the range of options they are considering related to license transferability.
Of the dozens of operators within and outside of Boston who were offered the opportunity to address these questions, only seven social equity business owners responded, and almost all of them have licenses in Boston. The following is a summary of the themes that emerged from their comments.
Several respondents mentioned that the current prohibition on license transfer, which applies exclusively to equity, actually harms social equity businesses by unfairly limiting who they can sell to relative to non-equity business owners, and this regulatory prohibition effectively devalues equity licenses. There is absolute consensus that we must protect the success of equity businesses who do not want to sell from a market saturated by well-funded multistate operators (MSOs) who will drive a race to the bottom. The City of Boston has a proud record of leadership in advancing equity in the industry, and enabling MSOs to take over the Boston market though unfettered acquisition of the most vulnerable businesses – who are just getting into a position to succeed – would completely undermine that mission.
Another theme that was consistent among respondents was the need to take an all-of-government approach to encourage social equity business owners to want to keep their businesses for the long term.
Policies that would incentivize sales to other equity businesses and encourage the long-term success of businesses owned by Black and Brown people and those harmed by the War on Drugs:
- Creating an advisory committee or working group for ongoing engagement on policy questions and process issues between stakeholders and relevant City personnel from across Boards and Departments
- Waiving of application and licensing fees
- Waiving fees from all city departments
- Waiving local option sales tax on social equity businesses
- Waiving property taxes on properties owned and leased to social equity businesses
- Putting a pause on the licensing of non-equity businesses and conducting a market saturation study
- Implementing a 2:1 equity licensing ratio
- Enabling social equity businesses to access all City small business assistance programs
- Selling and leasing unused City properties to social equity businesses at below-market or market rate
- Waiving community meeting and ZBA process for equity businesses
- Creating a retail finder that highlights and makes it easy to search and filter for equity businesses, including delivery operators
- Providing by-right zoning to social equity businesses
- Convening applicants and licensees to discuss scoring rubric and ensuring it is scored and applied in decisionmaking consistently
- Providing direct technical assistance in navigating every point of contact with BCB, ZBA, and Boston Cannabis Equity Program processes
- Providing direct technical assistance in navigating the ISD permitting process and all city forms and processes
- Enabling applicants to host their own state-mandated community outreach meeting or choose to use the Office of Neighborhood Services
- Increasing investment in grants to equity businesses with a dedicated stream of cannabis revenue
- City and state leaders teaming up to encourage all communities to enable consumer access and economic opportunity, combat clustering, and oppose NIMBYism in the most well-resourced neighborhoods.
While one business indicated that the current prohibition on license transfer, which applies exclusively to equity, actually harms social equity businesses by unfairly limiting who they can sell to relative to non-equity business owners, and this regulatory prohibition effectively devalues equity licenses, another felt that a change in policy would endanger their ability to maintain majority ownership of their business from the other non-equity owners of their ownership group.
Most respondents indicated some level of openness to a change in license transfer policy, but there was a range of opinions and this would be a topic worthy of further discussion and consideration; it would also be helpful for the City to indicate the range of options that it is considering.
- The majority of respondents indicated that they feel equity businesses should have to be held by equity owners for some period including at least one year, 3-5 years, 5+ years.
- One respondent felt that it is premature to change the rule because it would give non-equity owners and investors more leverage in acquiring more of their business before it gets started.
- Another topic for further discussion is whether to only allow transfers to non-equity owners for licenses that are operational.
- One respondent felt that social equity businesses “should be allowed to sell their companies to whomever would pay the most money for it. Limiting the pool of purchasers to only Social Equity companies means that the buying pool is incredibly small and a selling company is unlikely to find a buyer at the asset’s most valuable price. The business itself should decide when the time is right to sell and that choice is taken away by severely limiting who a Social Equity business may sell to.”
- Several respondents indicated concern about how this policy change would impact the City’s 1:1 licensing ratio and felt the City should take steps to encourage meaningful ownership opportunities for the City’s Black and Brown residents and those impacted by cannabis arrests
If the City proceeds with a change in policy related to license transfers from social equity businesses to non-equity owners, there is universal agreement that safeguards that protect the equity owners and the health of the market for other equity businesses is critical.
- Ensure that the folks owning equity in a Social Equity company get their pro rata share of a sale to a non-Social Equity company.
- If the City discovers a sale that isn’t compensating Social Equity participants on a 1:1 basis based on their equity percentage, then that sale should not be approved.
- Consider a mechanism to evaluate the purchase price to ensure it isn’t significantly below market price.
- Track which Social Equity businesses are sold to MSOs (or non-Social Equity businesses) and track the purchase price on a pro-rata basis for each Social Equity owner of the selling business to ensure that folks are getting paid in proportion to their actual ownership.
- Require that a non-Social Equity purchaser make annual contributions to a Social Equity fund (and prohibit the total financial contribution from being deducted from the purchase price paid to the selling Social Equity business) to promote industry participation by other Social Equity participants.
- Require a market study on behalf of social equity businesses within one mile of the equity business for sale paid for by potential non-equity owners for consideration by the BCB
- Create a scorecard for evaluating potential transfers of equity licenses to non-equity owners that includes an analysis of how the proposed translation will impact neighboring equity businesses, the City’s overall equity efforts, and the health of the cannabis industry in the City factoring in the owner’s relative wholesale purchasing power, vertical integration, and track record in other communities.
- Consider tiered levels of scrutiny for license transfers that consider factors like
- If the SE is actively involved with putting together and managing the business, including decision-making authority, the sale rules should be most accommodating.
- If the business is sold to a party who is, or is affiliated with, an original non-SE “partner”, the rules should be stricter and possibly should require a longer period before a sale.
- If the SE is NOT actively involved with putting together and managing the business, including decision-making authority, the sale rules should be the tightest.
Most respondents raised concerns about the critical need to safeguard against abuse with comments like:
- “there are people who are absolutely going to take advantage of any change in ownership requirements for equity applicants”
- “The conundrum for the BCB is balancing between the desire to create wealth for SE participants through ‘exits’ or ‘liquidity events’, as sale transactions are known in financial circles, on the one hand, and predatory transactions where the license is quickly sold (often at the planning stage), where the buyer is simply using the SE as a shill, and paying the SE a fee to go away. The money, in and of itself, will not create long term value for SE communities. Those communities need people who have successfully launched, managed, and sold a business. That experience, coupled with capital, creates future opportunities in disproportionately impacted communities.”
The majority of those who responded did not indicate whether they plan to sell; of those who did, some planned to initially but no longer plan to due to the need to make their business more profitable in a very challenging environment while others planned to as soon as they had a certain amount of month-over-month growth to value their business. One respondent also mentioned that they would decide their sell price by a vote of all of the equity and non-equity members of their ownership group to potentially achieve true generational wealth.
Thank you again very much for the opportunity to offer comments on this important topic. We hope that this will be the first of many opportunities for thoughtful engagement on this topic to ensure any changes strengthen and protect the City’s efforts to encourage equitable participation in the cannabis industry and redress the devastation wrought on communities by the War on Drugs and mass arrests and incarceration.
If we can ever be a resource or partner, please do not hesitate to reach out to EON’s Policy Co-Chairs Armani White (armani@masseon.com) and Kevin Gilnack (kevin@masseon.com).
Thank you,
Shanel Lindsay, Co-Founder, Equitable Opportunities Now
Armani White, Policy Co-Chair, Equitable Opportunities Now
Kevin Gilnack, Policy Co-Chair, Equitable Opportunities Now