State cannabis law aims to lift up people affected by the war on drugs
Jul. 6—Connecticut's 2021 law legalizing recreational cannabis was meticulously crafted to try to reverse the impacts on people and communities hit hardest by aggressive prosecutions of drug crimes in years past.
But the roll-out, including social equity provisions designed to help people impacted by the so-called war on drugs, has had mixed reviews. The licensing process has benefited giant multi-state cannabis investment firms, which have partnered with Connecticut residents who meet qualifications as cannabis social equity applicants favored in the license process.
Social equity applicants must prove they grew up in a defined Disproportionately Impacted Area, or DIA, in the war on drugs, or have lived in a DIA for at least five of the past 10 years.
They must have incomes no higher than 300% of the current median state household income for the past three years. The U.S. Department of Housing and Urban Development household median income for Connecticut for 2023-24 was $69,255 for an individual and $133,184 for a family of four.
Hence the need for deep-pocket partners.
"It's social equity, but they expect you to have $3 million," said Laurie Zrenda, a medical cannabis pharmacist, referring to the state fee for a cannabis cultivation operation or to convert a medical cannabis facility into a hybrid medical-recreational dispensary.
Cannabis application fees and a portion of cannabis taxes fund the newly created Social Equity Council, a 17-member agency in charge of verifying the qualifications of social equity applicants and their business partners after they were selected in lottery conducted by the University of Connecticut. None of the council's members are currently from southeastern Connecticut.
The council reviewed the lottery winners blindly, without names, but with their financial information, proof of residence, documents showing the social equity individual had the mandated 50% ownership and 65% control of the proposed Connecticut operation.
Council members include residents of DIAs and individuals with past cannabis convictions. The council oversees social equity aspects of the state law, from verifying social equity applications to approving businesses' mandated social equity plans to reinvest in DIA communities.
"Everything we did was brand new," Ginne-Rae Clay, executive director, said. "We had to create criteria to verify who qualifies as a social equity applicant. Who qualifies for the lottery, create programs and services that help the companies and individuals in the communities impacted."
The state Department of Consumer Protection conducts applicants' background checks and handles licensing, fees and regulating cannabis businesses.
Applicants did not need to have past cannabis convictions, Clay said, but those convictions did not hurt them in the background checks. White-collar convictions, such as financial or tax crimes did disqualify applicants.
Connecticut cannabis license holders in all nine categories are listed on the state's licensing website at elicense.ct.gov, and the state maintains a cannabis website, ct.gov/cannabis, with statistics, information on the cannabis law and resources.
As of January, one year after licensing began, 39 final licenses were approved and 94 additional provisional licenses were approved in the nine license categories.
Big businesses set sights on Connecticut social equity applicants
The state's social equity incentives proved a powerful magnet for large out-of-state cannabis investment companies that are providing the capital for retail and cultivators on behalf of the low-income social equity licensees.
Chicago-based Verano is the backer for Norwich's Zen Leaf cannabis retail dispensary at 606 W. Main St. Brittany Hart of Wethersfield is the social equity licensee majority owner. Verano's website states the company has 14 cultivators and more than 140 retail dispensaries across the country.
But Hart said she has yet to see financial benefit from her majority ownership in the Norwich store after one year in operation.
New York City-based Curaleaf, the investor for the Curaleaf Groton CT at 79 Gold Star Highway, backs 145 dispensaries and 18 cultivation operations in 17 states. The Social Equity Council could not provide the name of the equity licensee for the store, and the company did not respond to inquiries for an interview.
The Higher Collective cannabis retail store in New London also is supported by Curaleaf and is one of five independently owned Higher Collective outlets in Connecticut. Tori Garrett, a professional makeup artist, is the social equity owner. Garrett could not be reached to comment. A write-up on Higher Collective's website described her as a lifelong Connecticut resident who witnessed the relief medical cannabis provided her daughter from seizures.
Social equity licensees must own at least 50% of the Connecticut operation, control 65% ― with authority to hire, fire and make operational decisions ― and must remain as majority owner for seven years.
Social equity cannabis businesses do not need to locate in a DIA, and the licensee does not need to live in the community.
One variable the state legislature did not anticipate was in the lottery process, Clay said. State officials expected each applicant to submit one lottery entry along with the fee. But some submitted hundreds, even thousands of requests on behalf of the same social equity applicant. The law does not prohibit applicants from filing more than one applicants.
Cannabis University offered to license applicants
Realizing that social equity applicants may not be versed in legal, financial and business complexities, the council contracted with Oakland, Calif.-based Oaksterdam University, which ran online classes free for Connecticut social equity applicants.
"There's a lot of predatory investors and unscrupulous investors," Clay said. "With this education, the people got to understand what their operating agreements should look like, what they should be looking at. There was legal counsel for them. There was the association of minority cannabis businesses. There's a lot of partners that came with Oaksterdam University."
The council offered loans of up to $500,000 to qualifying social equity applicants for startup costs, and those who completed the Oaksterdam Business of Cannabis Certification could seek a 1.5% discount on the loan interest rate. Kristina Diamond, council communications and legislative program manager, said 19 people received Oaksterdam certification and 12 qualified for the loan discount.
Clay said financial education was critical. Cannabis entrepreneurs cannot get loans from traditional banks insured by the Federal Deposit Insurance Corp., because recreational cannabis is still a federal crime, she said.
The council has come under scrutiny in recent weeks by Gov. Ned Lamont's administration and by the legislature's Black and Puerto Rican caucus, which has asked for a hold on the council's plan to spend its current $34 million in revenues generated from license fees and cannabis taxes.
The Social Equity Council has distributed only $6 million thus far in a pilot program, including $1 million allocated to the Community Foundation of Eastern Connecticut to fund programs in this region's Disproportionately Impacted Areas.
"A big concern for me is making sure eastern Connecticut is getting its share, and that we have a strategic plan to benefit the disproportionately impacted areas in our region," said state Rep. Derell Wilson, D-Norwich, a member of the Black and Puerto Rican Caucus.
Wilson said the caucus also wants to ensure that business development assistance benefits small businesses in DIAs.
Clay said the council was disappointed by the request to pause distribution of the money, but she welcomed the chance to 'meet with the legislators to address their concerns and ensure the community impact funding accomplishes the state's goal.
"It is so important for the council and the legislature to make sure that these funds are having a really, really good impact," Clay said, "and that we're not just putting money out there for the sake of putting money out there."
