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Home My WebLink About11/27/2018 Item 10, Andre Cannabis Retail Evaluation Criteria Sent: Monday, November 26, 2018 2:01 AM To: Codron, Michael <mcodron@slocity.org> Subject: Comments to Council: Cannabis Retail Evaluation Criteria Hi Michael, Thank you for the meeting a few weeks ago. I am sending you a copy of the input that I sent to city council regarding the revised cannabis application criteria in case you want to review it prior to Tuesday's meeting. In our previous meeting you had indicated that raw land development points would not apply to retail, however it is included in the latest draft. Was this an oversight or was a different decision made? Developing a retail establishment on raw land could potentially delay opening for years, depriving the city of needed revenue. Comments to council: Thank you to both council and staff for developing well thought-out criteria for assessing cannabis applications. It will undoubtably make the process more smooth and fair. I have been working with local cannabis operators recently and through that experience have some input to share regarding the latest version of the Cannabis Retail Evaluation Criteria: Merit Criteria 1.0 - Community Benefit (B)  Recommendation: Add points for local cannabis operators who have already have a previous track record of community benefits, charitable giving, etc. A company with a track record of giving back is more likely to be a good community steward than one who simply does it once forced to. Merit Criteria 2.0 - Experience  “Record of compliant current or previous business operations: Applicant has previous record of operating a compliant commercial cannabis (including medical). A compliant business operation does not have a documented history of local or state level violations relating, but not limited to: business code, public safety, environmental impacts, employment, and financial payments. (Up to 30 Points – Deviation Threshold 9 Points)” o Clarify “documented history of violations”. If a business had a minor code enforcement violation in the past and then rectified it, that should not count as a “documented history of violations”. Many businesses in all industries are faced with occasional corrections required by code enforcement. They almost always are resolved without issue. o Recommendation: State that fully resolved code enforcement violations will not disqualify a local operator from these points. Merit Criteria 4.0 - Equity and Labor  “Applicant includes 3 or more primary principals who have earned at or below the median household income at the time of application.” 1 o Of all comments in this email, this is my main concern: "Merit Criteria 2.0 - Experience" requires that 91%+ of the primary principals have operated a compliant cannabis business for 5+ years (to get full points). When combined with the "below median income provision" this potentially shuts out locals who do not have 5+ years cannabis experience from getting equity even if the applicant itself has 5+ years of compliant cannabis operations.  For example, if 3 entry level employees have been working for a local cannabis operator for 3+ years and that operator would like to give them equity in the dispensary to satisfy the "below median income" requirement, they would be unable to get the full points in the "Merit Criteria 2.0 - Experience" category (which are worth more). This is because those 3 individuals would hold 30% interest (since each must be a primary principal, defined at 10%+ equity each) and they only have 3 years of experience instead of 5, as required in the current provision, even though the business itself has 5+. This disincentives giving equity to those below the median income because "Merit Criteria 2.0 - Experience" is worth substantially more points than the "below median income" provision (35 vs. 8).  This is especially important because realistically most cannabis operators who have been in business 5+ years will make above the median income. Raising up those who work in lower wage positions alongside them seems to be in alignment with council's intent.  Council's goal of economically raising people up would be better served by not using the term "primary principal" in this section. That is technically how it was before the latest revisions, since previously "primary principal" was defined as "an owner with at least a 10% ownership share, officer or director." It's now defined as "an individual who has a 10% or greater ownership stake of the applicant business". This previously allowed officers or directors with less than a 10% ownership to qualify for the "below median income" points.  Recommendation: Change “Applicant includes 3 or more primary principals who have earned at or below the median household income at the time of application.” to “Applicant includes 3 or more principals with 2% equity or higher who have earned at or below the median household income at the time of application.” o It would also make sense to break up the criteria item for 1 or 2 primary principals who earn below the median income into two separate criteria items with separate point amounts. I cannot see an operator giving 2 low income people equity if they can only give 1 person equity and still get the same amount of points. This would better incentivize more low income people getting equity.  "Business will allow "labor peace agreement" at 10 or more non-management employees". o The previous criteria require average wages to be 40% higher than median. This seems like it should be one or the other since a labor peace agreement's primary purpose is to ensure fair pay for employees. o Additionally, cannabis businesses are not able to write off employee compensation on both federal and state tax returns, and implementing a labor peace agreement before that changes could have significant negative effects on the business. o A business with 10 employees is still within the size of a "family run business" and a labor peace agreement for an entity that small could impose significant costs. o Recommendation: Raise to 20 employees. Merit Criteria 7.0 - Property Control  "Incomplete purchase or lease agreements do not constitute site control." o Please define "incomplete purchase agreement". Many operators utilize contingent purchase agreements. It is not clear whether that is permitted by this language. Merit Criteria 8.0 - Financial Investment  “Applicant commits to develop raw land that has been zoned for commercial use for a commercial cannabis facility.” 2 o Previous conversations with Michael Codron indicted that this would only apply to manufacturing and cultivation. o If this were to be retained for retail it could give out of town operators a leg up on locals and any retail location on raw land would not open for years. o Recommendation: If the city wants to start generating revenue from cannabis as soon as possible it would be in it's best interest to remove this provision.  Under the 3rd criteria about major improvements it might be good to include "removing visual blight" or something similar to incentivize things like removing oversized signage, etc. Also, I see that only 1 application is allowed per site, which is great, but it is not clear whether successful applicants will still be allowed to move if they are within 1,000 feet of each other. Thank you for considering my comments. -- Nick Andre Kumani Inc. 805-316-0048 ext. 700 nick@kumaniinc.com KumaniInc.com 3